-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EaMIxv9WnSGDDtKxxDuUBjdebBkkA7SJPXFUU2OsYGTENUtYiMlpBqjEdCo6g2T8 aemK6xZ0QX3T4U8x3YUWZg== 0000744106-96-000007.txt : 19961202 0000744106-96-000007.hdr.sgml : 19961202 ACCESSION NUMBER: 0000744106-96-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961127 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDDERS CORP /DE CENTRAL INDEX KEY: 0000744106 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 222572390 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21199 FILM NUMBER: 96674007 BUSINESS ADDRESS: STREET 1: 505 MARTINSVILLE RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938-0813 BUSINESS PHONE: 9086048686 MAIL ADDRESS: STREET 1: 505 MARTINSVILLE RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938-0813 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended August 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-8831 FEDDERS CORPORATION (Exact name of Registrant as specified in its charter) Delaware 22-2572390 (State of Incorporation) (I.R.S. Employer Identification No.)
505 Martinsville Road, Liberty Corner, NJ 07938-0813 (Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (908) 604-8686 Securities registered pursuant to Section 12 (b) of the Act: Name of Each Exchange Title of Each Class on Which Registered Common Stock, $1 par value New York Stock Exchange, Inc. Class A Stock, $1 par value New York Stock Exchange, Inc. Convertible Preferred Stock, $1 par value New York Stock Exchange, Inc.
Securities registered pursuant to section 12 (g) of the Act: Title of Each Class None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. As of the close of business on October 31, 1996, there were outstanding 18,989,798 shares of the Registrant's Common Stock, 19,443,856 shares of Class A Stock, 2,266,706 shares of its Class B Stock and 7,643,061 shares of its Convertible Preferred Stock. The approximate aggregate market value (based upon the closing price on the New York Stock Exchange) of these shares held by non-affiliates of the Registrant as of October 31, 1996 was $228,597,399. (The value of a share of Common Stock is used as the value for a share of Class B Stock as there is no established market for Class B Stock and it is convertible into Common Stock on a share-for-share basis.) FEDDERS CORPORATION FORM 10-K ANNUAL REPORT SEPTEMBER 1, 1995 TO AUGUST 31, 1996 TABLE OF CONTENTS
PAGE PART I Item 1. Business 1 Item 2. Properties 9 Item 3. Legal Proceedings 10 Item 4. Submission of Matters to a Vote of Security Holders 11 PART II Item 5. Market for Registrant's Common Equity and Related Matters 14 Item 6. Selected Financial Data 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 8. Financial Statements and Supplementary Data 14 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 14 PART III Item 10. Directors and Executive Officers of the Registrant 15 Item 11. Executive Compensation 16 Item 12. Security Ownership of Certain Beneficial Owners and Management 22 Item 13. Certain Relationships and Related Transactions 26 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 27 PART I ITEM 1. Business (a) General Development of Business Fedders Corporation (the "Company" or the "Registrant") is a holding company which, through its wholly-owned operating subsidiaries, is engaged in the manufacture and sale of a complete line of room air conditioners and dehumidifiers, principally for the residential market. The Company also manufactures, through recently acquired Rotorex Company, rotary compressors principally for use in room air conditioners, and through Melcor Corporation, thermoelectric heating and cooling modules used in a variety of applications in which space and weight are considerations or precise temperature control is required. Based upon industry statistics compiled by a trade association, the Company believes it is the largest manufacturer of room air conditioners in North America. Unless otherwise indicated, all references herein to the "Company" or the "Registrant" include Fedders Corporation and its principal operating subsidiaries, Fedders North America, Inc. ("Fedders NA"), Emerson Quiet Kool Corporation ("EQK"), Columbia Specialties, Inc. ("CSI"), Fedders, Inc., Fedders International, Inc. ("FI"), Rotorex Corporation ("Rotorex") and Melcor Corporation ("Melcor"). EQK, CSI and Fedders, Inc. are wholly owned subsidiaries of Fedders NA. Fedders International has a Mexican sales subsidiary, Fedders de Mexico S.A. de C.V. and a Singapore subsidiary, Fedders Asia Pte. Ltd. ("Fedders Asia"). In November 1995, the Company entered into a joint venture with the Ningbo General Air Conditioner Factory of Ningbo, China, Fedders Xinle Co., Ltd.("Fedders Xinle"), to manufacture and market ductless split room air conditioners as well as window type air conditioners. The Company owns 60% of the joint venture which and through Fedders International, will export approximately 50% of its product to markets outside of China. Fedders Xinle is a majority-owned subsidiary. See note 12 of the Notes to Consolidated Financial statements on page F21 herein for a description of the terms of the transaction. On August 13, 1996, NYCOR, Inc. ("NYCOR") was merged into the Company. See note 13 of the Notes to the Consolidated Financial Statements on page F22 for description of the merger. The Company purchased compressors since 1992 from NYCOR, under a ten year supply agreement. The agreement required NYCOR to provide up to 800,000 compressors per year to the Company which would not allow for significant growth. The merger will provide the Company with a guaranteed supply of compressors to support international growth of room air conditioners. (b) Financial Information About Industry Segments The Company operates in one industry segment. See Note 8 of the Notes to Consolidated Financial Statements at page F19 herein. (c) Narrative Description of Business Room Air Conditioners and Dehumidifiers Products The Company manufactures a complete line of window and through-the- wall room air conditioners, principally for the residential market in models ranging in capacity from 5,000 BTU (British Thermal Units) per hour to 32,000 BTU per hour. Fedders also manufactures through Fedders Xinle, split ductless room air conditioners for international residential and commercial markets from 7,000 to 40,000 BTU. These models comprise product lines marketed by the Company under the brands Fedders, Emerson Quiet Kool and Airtemp. The Company also manufactures products under various private labels. The Company manufactures under the EMERSON QUIET KOOL brand, a line of household dehumidifiers ranging in capacity from 30 to 50 pints per day. Room air conditioners are subject to regulations providing for minimum energy efficiency rating ("EER") requirements. Achieving required EERs results from a combination of an efficient compressor and the design of the air conditioning system using the compressor. Current proposed rule-making by the Energy Department under the National Appliance Energy Conservation Act would have the effect of increasing minimum required EERs. In the event the new regulations are adopted, the efficiency of certain air conditioner models would have to be increased. It is not certain at present if the proposed regulations would be adopted and, if they are, when the requirements would become effective. Regardless of the adoption of these proposed regulations, the Company is continually seeking to improve the efficiency of its air conditioners and compressors in order to remain competitive in the markets it serves. HCFC22 is used as a refrigerant in the Company's air conditioners and dehumidifiers. HCFC22 is currently an acceptable substitute for the CFC refrigerants which have a much more harmful effect on the environment and are currently being phased out of use. The Company does not expect that requirements to ultimately phase out of HCFC refrigerants will have a material effect on its operations or expenditures, since substitutes are currently being developed. Marketing In North America, the Company markets its products to retail chains, retail buying groups and others representing over 10,000 retail outlets. The distribution of appliances and electronics in North America is now principally direct to retailers, in contrast to the early 1980's when distributors accounted for the majority of the Company's business. In recent years the Company's customers have changed their purchasing patterns to minimize inventories. In response, the Company has increased its manufacturing flexibility, thereby improving its capabilities, especially in the area of just-in-time delivery. All Fedders North America sales, marketing, service management are located in a Whitehouse, New Jersey headquarters location. Fedders North America serves many of its customers through regional sales offices and distribution centers. To support and service its customers and ultimate consumer, the Company has a network of third-party service centers throughout the United States and regional parts depots to expedite repairs by local service centers. The Company promotes its Emerson Quiet Kool and Fedders brands of air conditioners through advertising, primarily in trade publications. The Company's future business development activities are focused primarily outside of North America. The Company believes that the market for room air conditioners outside of North America is approximately four times the size of the North American market. Demand for air conditioners outside of North American accelerated in recent years and continues to grow rapidly with the increase in disposable income of populous nations in hot weather climates. The Company has participated in international markets for more than 30 years and has licensees in several countries. The Company expects to increase its participation overseas through strategic alliances primarily under production and joint venture agreements in addition to Fedders Xinle established in Ningbo, China. The Company plans to participate based in part on its expertise, technological capability and well established global sourcing program. The Company is accelerating development activities to further penetrate international markets. This activity should establish greater growth potential than is afforded by the mature U.S. market while reducing its dependence on summer weather in North America. Fedders International is headquartered in Liberty Corner, New Jersey. Fedders International has sales offices in Singapore (Fedders Asia), Miami, Mexico and the United Kingdom. Fedders Asia also does research, development and testing of product for the international market. The Company believes it can compete cost-effectively abroad based on its global sourcing network that currently delivers components from around the world to two U.S. plants and to Fedders Xinle. Fedders International exhibits its products at industry trade shows. Production Fedders currently manufactures its air conditioners in two U.S. owned facilities - a 650,000 square foot facility in Effingham, Illinois and a 232,000 foot facility in Columbia, Tennessee. Both of these factories have earned the highest level of certification, ISO 9001, for their quality management systems under the International Standards Organization. The ISO 9000 program is an internationally recognized benchmark of quality management systems within a production facility. Both factories have sufficient production capacity for domestic needs for the foreseeable future. Fedders also manufactures air conditioners, through Fedders Xinle, in a facility owned by the joint venture in Ningbo, People's Republic of China. Current capacity of the facility is approximately 200,000 air conditioners. It is planned to increase the capacity to 500,000 units over the next few years which will require modest capital expenditures. Rotorex Products Rotorex manufactures and sells a broad line of rotary compressors, principally for use in Fedders room air conditioners, but also sold to other manufacturers of air conditioners and refrigeration products. Rotorex's product line consists of two basic series of compressors, designated as the 39 Frame and 48 Frame, with capacities ranging from 5,100 to 18,5000 BTUs. Models within each series, with specific cooling capacities within the indicated range, are produced by varying the mechanical pump assembly and motor. By varying the motors, Rotorex also creates compressors capable of operating with different voltages for applications in various parts of the world, critical to international growth. Marketing Rotorex compressors are primarily used by the Company. The Company also believes that growth opportunities exist in the international market, particularly in Asia. Currently, Rotorex has three licensees in the People's Republic of China and one in Taiwan. The license agreements require Rotorex to provide technology to the licensees and the licensees to pay royalties to Rotorex based upon sales of finished compressors. Rotorex has a representative office in Beijing and sales offices in Singapore, United Kingdom and United States. Rotorex promotes its products through the use of product literature, catalogs and advertising in the industry publications and exhibits its products at industry and target market trade shows. Production Rotorex currently manufactures all of its compressors in a 200,000 square foot facility owned by the Company in Frederick, Maryland. Rotorex has also obtained the highest level of certification, ISO 9001, for its quality management system. Rotorex recently made several investments to enhance manufacturing efficiencies. Currently, capacity is sufficient to meet compressor requirements of the Company and compressor customers. Melcor Products Melcor manufactures solid state heat pump modules that utilize the Peltier effect to perform the same cooling and heating functions as refrigerant-based compressors and absorption refrigerators. Melcor's modules are typically used in spaces with special requirements, such as limited space, lightweight cooling requirements or a space existing under special environmental conditions. They are also used for precise temperature control by reversing the electric current to cycle from cooling to heating. Melcor's customers are original equipment manufacturers that primarily use the modules for cooling purposes in applications such as refrigerators, laboratory, scientific, medical and restaurant equipment and telecommunications and computer equipment. Melcor's products are sold under the trademarks MELCOR and FRIGICHIP. Marketing Melcor's modules are currently sold by salaried salespeople and a network of sales representative firms located around the world. Melcor advertises its products in a variety of national and international technical and trade publications, principally in the electronics and electro-optical industries, and participates in international trade exhibitions. Production Melcor manufactures its modules in facilities near Lawrence Township, New Jersey, comprising 53,000 square feet. The capacity available is sufficient for its needs in the foreseeable future. Sources and Availability of Raw Materials The most important materials purchased by the Company are steel, copper and aluminum, which are obtained from domestic and foreign suppliers. The Company also purchases from other domestic and foreign manufacturers certain components, including thermostats, compressors, motors and electrical controls, used in its products. The Company endeavors to obtain the lowest possible cost in its purchases of raw materials and components, which must meet specified quality standards, through an active global sourcing program. Following the merger of NYCOR into Fedders, the Company is less dependent upon any one source for major components of its manufactured products. See note 13 of the Notes to the Consolidated Financial Statements on page F22. Patents, Trademarks, Licenses and Concessions Held The Company owns a number of trademarks. While the Company believes that its trademarks, such as, FEDDERS, EMERSON QUIET KOOL, AIRTEMP, ROTOREX, MELCOR and FRIGICHIPS are well known and enhance the marketing of its products, the Company does not consider the successful conduct of its business to be dependent upon such trademarks. The Company aggressively protects its trademark and intellectual property rights worldwide. Seasonality of Business The Company's results of operations and financial condition are almost entirely dependent on the manufacture and sale of room air conditioners and dehumidifiers, the demand for which is highly seasonal. Seasonally low volume sales are not sufficient to offset fixed costs, resulting in seasonal operating losses at certain times of the year. In addition, the Company's working capital needs are seasonal, with the Company's greatest utilization of its lines of credit occurring early in the calendar year. See "Management`s Discussion and Analysis of Results of Operations and Financial Condition," at pages F1 through F3 herein. See also the discussion under "Working Capital Practices." Working Capital Practices The Company regularly reviews working capital components with a view to maintaining the lowest level consistent with requirements of anticipated levels of operations. The Company's sales are predominantly made directly to retailers, who typically require just- in-time delivery, primarily in April through July. Production is weighted towards the retail selling season to minimize borrowing earlier in the fiscal year, although room air conditioners may be produced throughout much of the rest of the year at a lower rate of production. Information with respect to the Company's warranty and return policy is provided in Note 1 of the Notes to Consolidated Financial Statements at page F12 herein. See also the information entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition" at pages F1 through F3 herein. Backlog The Company's fiscal year end (August 31) coincides with the end of the seasonal room air conditioner sales cycle. Accordingly, backlog at this time of the year is insignificant. Competition The Company's competitors include a number of domestic and foreign manufacturers of air conditioners and appliances, including Frigidaire Company, Whirlpool Corporation, Matsushita Electric Industrial Company, Ltd. and Sharp. Many of the Company's competitors are substantially larger and have greater resources than the Company. The Company competes principally on the basis of price, quality and its ability to deliver product and service to its customers on a just-in- time basis. Competitive factors could require price reductions or increased spending on product development, marketing and sales that could adversely affect the Company's profit margins. Research and Development Information with respect to amounts spent on research and development is provided in Note 1 of the Notes to Consolidated Financial Statements at page F12 herein. During fiscal 1996, the Company established a research and design center in Princeton, New Jersey for the development of innovative, non-vapor compression products, that will take advantage of the Company's distribution strengths. Environmental Protection It is the Company's policy to take all practical measures to minimize air and water pollution resulting from its operations. The Company did not make capital expenditures on environmental protection-related items during the year ended August 31, 1996 that are material to its total capital expenditures, earnings and competitive position and does not anticipate making material capital expenditures on such items in the fiscal year ending August 31, 1997. Employees The Company has approximately 3,000 employees, not including 500 joint venture employees in Ningbo, China. The current contracts with two unions representing employees of the Effingham, Illinois plant are scheduled to expire in October 1998. Another union contract representing Rotorex employees expires in August 1997. The Company considers its relations with its employees to be generally satisfactory. International Sales For information with respect to international sales of the Company's products, see Note 8 of the Notes to Consolidated Financial Statements at page F19 herein. Future sales are subject to the risks inherent in such activities, such as foreign regulations, unsettled political conditions and exchange rate fluctuations. Item 2. Properties The Company owns or leases the following primary facilities: Approximate Square Location Principal Function Feet of Floor Area Liberty Corner, Corporate and 25,000 New Jersey International (Leased) Headquarters Effingham, Illinois Manufacturing of 650,000 (Owned) air conditioners Columbia, Tennessee Manufacturing of 232,000 (Owned) air conditioners Frederick, Maryland Manufacturing of 200,000 (Owned) rotary compressors Orangeville, (1) 106,000 Ontario (Owned) Whitehouse, Fedders NA 17,000 New Jersey (Leased) Headquarters Singapore Research and Design 14,600 (Leased) Center Basking Ridge, (2) 7,395 New Jersey (Owned) Lawrence Township, Manufacture of Melcor 15,000 New Jersey (Owned) components Lawrence Township, Assembly of Melcor modules 22,400 New Jersey (Leased) Princeton, New Jersey Research and Design Center 6,000 (Leased) (1) Facility available for sale and currently being leased. (2) Facility available for sale. The Effingham, Illinois facility is subject to a mortgage securing a $4.2 million, 1% promissory note payable over the next 12 years to the State of Illinois. The Company believes that productive capacity at its major manufacturing facilities is adequate to meet production needs in the foreseeable future. Item 3. Legal Proceedings Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Executive Officers of the Registrant First Became an Name and Age Position Held Executive Officer Salvatore Giordano, 86 Chairman of the Board 1945 Sal Giordano, Jr., Vice Chairman, President 1965 58 (1) and Chief Executive Officer Robert L. Laurent, Jr., Executive Vice President, 1989 41 Finance and Administration and Chief Financial Officer Kent E. Hansen, 48 Senior Vice President and 1996 Secretary Gordon Newman, 51 Senior Vice President, 1995 Supply Chain Gary J. Nahai, 45 Vice President and 1993 President, Fedders International, Inc. Sal Giordano III, 37 Vice President and President, 1996 (2) Melcor Corporation Thomas Kroll, 41 Controller 1995 ________________________ (1) Son of Salvatore Giordano (2) Grandson of Salvatore Giordano Business Experience During Last Five Years Messrs. Salvatore Giordano, Sal Giordano, Jr. and Robert L. Laurent, Jr. have been associated in executive capacities with the Company for more than five years. Mr. Hansen was elected to his position in August 1996. Previously he was Vice President, Finance and General Counsel, Chief Financial Officer of NYCOR. Prior thereto, he was Vice President and General Council of the Company from 1990 to 1991. Mr. Newman was elected to his position in April 1995. He joined Fedders Corporation in 1991 as Vice President, Corporate Quality. Prior thereto Mr. Newman was Corporate Director of Quality for Welbilt Corporation. Mr. Nahai was elected to his position in March 1993. Previously he was Vice President of Sales - New York Metro Region and, prior thereto, was Manager of International Sales and Licenses. Mr. Nahai has been with the Company for more than five years. Mr. Sal Giordano III was elected to his position in August 1996. Previously he had the same position with NYCOR, Inc. Mr. Kroll was elected to his position in April 1995. Previously he was Controller of Fedders North America since 1992. Prior thereto he was Controller of Emerson Quiet Kool. PART II Item 5. Market for Registrant's Common Equity and Related Matters The Company's Common, Class A Stock and Convertible Preferred Stock are listed on the New York Stock Exchange. There is no established public trading market for the Company's Class B Stock, as there are restrictions on its transfer. As of October 31, 1996, there were 4,595 holders of Common Stock, 4,625 holders of Class A Stock, 2,438 holders of Convertible Preferred Stock and 15 holders of Class B Stock. For information with respect to the Company's Common Stock, Class A Stock, Convertible Preferred Stock and Class B Stock, see Notes 9 and 10 on pages F18 and F19, which Notes are incorporated herein by reference. Item 6. Selected Financial Data See the table entitled "Selected Financial Data" at page F4, herein. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations See the information entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition" at pages F1 through F3, herein. Item 8. Financial Statements and Supplementary Data The Consolidated Financial Statements of the Company at August 31, 1996 and 1995, and for the years ended August 31, 1996, 1995 and 1994, the notes thereto and the report of the Company's independent auditors thereon are included at pages F5 through F23, herein. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure In May 1995, the Company dismissed Ernst & Young LLP ("E & Y") as its independent accountants. The Company has engaged BDO Seidman, LLP as its new independent accountants. The reports of E & Y on the Company's financial statements for the year ended August 31, 1994 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle. During the last three fiscal years, the Company has not had any disagreements with E & Y on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. PART III Item 10. Directors and Executive Officers of the Registrant Set forth opposite the name of each director is his age, principal occupation for the past five years, the name and principal business of any corporation or other organization in which such employment is carried on and other business directorships held by the nominee or director. The Company is not presently aware of any circumstance which would prevent any nominee from fulfilling his duties as a director of the Company. For additional information with respect to the Company's executive officers, see Page 12 herein. Director Name Principal Occupation and Age Since NOMINEES - THREE YEAR TERM Salvatore Giordano Chairman of the Board of the Company 1945 (1)(2); 86 Howard S. Modlin Partner, Weisman, Celler, Spett & Modlin 1977 (3); 65 William J. Brennan Financial Consultant(1)(4); 68 1980 DIRECTORS - TWO YEARS REMAINING TERM Joseph Giordano President, NYCOR, Inc. (1)(5); 63 1961 Clarence Russel Moll President Emeritus, Widener University 1967 (6); 83 Anthony E. Puleo President, Puleo Tree Co. (7); 61 1994 DIRECTORS - ONE YEAR REMAINING TERM Sal Giordano, Jr. Vice Chairman, President and Chief 1965 Executive Officer of the Company (1)(2); 58 S. A. Muscarnera Retired (8); 56 1982 C. A. Keen Retired (9); 71 1996 (1) Messrs. Sal Giordano, Jr. and Joseph Giordano are sons, and Mr. Muscarnera is the nephew, of Mr. Salvatore Giordano. Messrs. Salvatore Giordano, and Sal Giordano, Jr., were also formerly executive officers and (along with Joseph Giordano, William J. Brennan and S. A. Muscarnera) directors of NYCOR, Inc. (2) Messrs. Salvatore Giordano, Sal Giordano, Jr. and S.A. Muscarnera, have been associated in executive capacities with the Company for more than five years. (3) Principal occupation during the past five years. The law firm of Weisman, Celler Spett & Modlin renders legal services to the Company. Mr. Modlin is also a director of General DataComm Industries, Inc. and Trans-Lux Corporation. (4) Principal occupation during the past five years. Mr. Brennan served as a director of the Company from 1980 to 1987, and was again elected a director in 1989. He is also Chairman of the Board of CSM Environmental Systems, Inc. (5) Principal occupation during the past two years. NYCOR, Inc. was a holding company comprising two operating companies, one manufacturing rotary compressors and the other thermoelectric heating and cooling modules. NYCOR was merged into the Company on August 13, 1996. Mr. Giordano was a Senior Vice President of the Company for more than five years prior to his retirement August 31, 1992. (6) Principal occupation during the past five years. Dr. Moll is also a director of Ironworkers Savings Bank. (7) Principal occupation during the past two and one half years. Puleo Tree Co. is an importer of Christmas items and garden furniture. Prior to that Mr. Puleo was President of Boulderwood Corporation. (8) Mr. Muscarnera was Senior Vice President of Fedders for many years before his retirement on August 31, 1996, with responsibilities in a number of areas during that time, including Secretary, human resources and legal. (9) Mr. Keen was a Vice President of Fedders for more than 20 years until his retirement in August 1992, with responsibilities in a number of areas during that time, including marketing, treasury and international sales and sourcing. Since his retirement he had been a Director of NYCOR. Item 11. Executive Compensation The following information is furnished as to all cash compensation paid by the Company and its subsidiaries during the Fiscal Year to each of the five highest paid executive officers of the Company whose aggregate direct compensation exceeded $100,000. Long-Term Compensation Summary Compensation Table Annual Compensation Awards (a) (b) (c) (d) (g) (i) All Other Fiscal Salary Bonus Options Compensation (1) Name and Principal Position Year $ # $ Salvatore Giordano 1994 252,150 282,045 150,000 15,753 Chairman of the 1995 245,354 520,365 77,314 3,097,691 (2) Board of Directors 1996 268,258 492,660 120,000 22,827 Sal Giordano, Jr. 1994 335,375 282,045 180,000 17,548 Vice Chairman, 1995 341,530 520,365 139,066 32,424 President and 1996 352,007 492,660 120,000 42,514 Chief ExecutiveOfficer Robert L. Laurent, Jr. 1994 209,725 141,023 95,000 8,425 Executive Vice President, 1995 226,489 260,183 50,590 15,281 Finance and Administration 1996 250,000 246,330 30,000 16,003 and Chief Financial Officer S. A. Muscarnera 1994 181,875 141,023 15,000 7,641 Senior Vice President and 1995 191,144 260,183 18,750 16,726 Secretary 1996 186,000 153,956 35,000 13,590 Gordon Newman 1994 100,016 21,456 - 3,205 Senior Vice President, 1995 122,498 48,072 22,782 5,123 Supply Chain 1996 140,000 61,583 10,000 7,570 (1) Includes the Company contribution to savings and investment retirement plans up to the 3% offered to all employees of the Company in 1996, the dollar value of the benefit of premiums paid for split- dollar life insurance policies projected on an actuarial basis which cost is recovered by the Company from the proceeds of such policies (Mr. Sal Giordano, Jr. $17,174; Mr. Robert L. Laurent, Jr. $1,114; Mr. S. A. Muscarnera $3,391; Mr. Gordon Newman $1,523). (2) Includes a special award granted to Mr. Giordano in fiscal 1995, in recognition of over fifty years of extraordinary and exemplary service to the Company as its President or Chairman, overseeing the growth of the Company from a $7,000,000 radiator manufacturer to the leading manufacturer of room air conditioners in North America. Options/SAR Grant Tables The following table sets forth information concerning the grant of stock options and/or stock appreciation rights (SAR's) during the Fiscal Year to the individual executive officers named in the Summary Compensation Table. The table shows the number of options granted to each named executive officer, the number of options granted as a percentage of options granted to all employees during the Fiscal Year, the exercise price of each option, the expiration date for each option, and a presentation of the potential realizable value for each option assuming annual rates of stock appreciation of 5% and 10% over each option term. Options/SAR Grants Last Fiscal Year % of Total Options Granted Exercise or Expira- Options to Employees Base Price tion Name Granted # In Fiscal Year ($/SH) Date 5% ($) 10% ($) Salvatore Giordano 60,000 4.50 10/25/00 74,596 164,838 30,000 (1) 3.25 2/31/98 21,012 45,250 30,000 (1) 1.88 12/31/98 12,122 26,106 120,000 16.0% Sal Giordano, Jr.60,000 4.50 10/25/00 74,596 164,838 30,000 (1) 3.25 12/31/98 21,012 45,250 30,000 (1) 1.88 12/31/98 12,122 26,106 120,000 16.0% Robert L. Laurent, Jr. 30,000 4.0% 4.50 10/25/00 37,298 82,419 S. A. Muscarnera 20,000 4.50 10/25/00 24,865 54,946 50,000 4.87 08/27/01 67,344 148,812 7,500 (1) 3.25 12/31/98 5,253 11,312 7,500 (1) 1.88 12/31/98 3,031 6,526 85,000 11.3% Gordon Newman 10,000 1.3% 4.50 10/25/00 12,433 27,473 (1) Replacement options were issued to take into account the terms of the merger agreement which stated that the employees and directors of NYCOR were to be placed in the same economic position following the merger as they were immediately prior to the date of the execution of the merger Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table The following table sets forth the number of shares exercised during the Fiscal Year, the value realized upon exercise, the number of unexercised options at the end of the Fiscal Year, and the value of unexercised in-the-money options at the end of the Fiscal Year. Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values Value of Unexercised Number of In-the-Money Unexercised Options at Shares Options at FY-end FY-end ($)(1) Acquired on Value (#) Exercisable/ Exercisable/ Name Exercise (#) Realized ($) Unexercisable Unexercisable Salvatore Giordano - - 587,314 E $ 841,165 E 102,686 U 30,000 U Sal Giordano, Jr. - - 658,066 E 879,544 E 997,000 U 2,216,958 U Robert L. Laurent, Jr. - - 350,590 E 482,171 E 30,000 U 15,000 U S. A. Muscarnera - - 258,750 E 387,234 E 70,000 U 16,250 U Gordon Newman - 35,050 22,782 E 11,391 E 10,000 U 5,000 U Compensation Committee Interlocks and Insider Participation The Compensation Committee is comprised of three directors who are not officers or employees of the Company (Howard S. Modlin, William J. Brennan and Anthony E. Puleo). The Committee submitted a plan to the Company's Board of Directors (the "Board") for the Fiscal Year 1996 which was approved by the Board on October 25, 1995. Report of the Compensation Committee on Executive Compensation In determining the total compensation package for the chief executive officer and all other executive officers for the Fiscal Year, the Committee considered several factors including: the performance of the Company; the individual contribution of each executive officer; the need to attract and retain highly qualified executives in the air conditioning industry necessary to build long-term stockholder value; and the need to link a portion of each executive officer's long-term capital accumulation to the growth in the market value of the Company's Stock. Executive compensation was broken down into three major components (i) cash compensation, (ii) incentive bonuses, and (iii) stock options. Cash compensation for the Fiscal Year is shown on the Summary Compensation Table. For the Fiscal Year, the Committee recommended and the Board adopted a modified version of prior years' plans, by establishing significantly lower percentages to apply against consolidated pre-tax income of the Company minus $1,000,000 ("Adjusted Pre-Tax Income"). The awards under the plan are based heavily upon the performance of the Company (the "Executive Plan"). In accordance with the terms of the Executive Plan, the executive officers designed by the Board may receive incentive awards based upon a prescribed formula. The amount of the awards for the Fiscal Year range from 0.13% to 1.0% of Adjusted Pre-Tax Income, compared to 0.5% to 1.5% in prior years. With respect to the individuals named in the Summary Compensation table, the following percentages of Fiscal 1996 Adjusted Pre-Tax Income have been designated: Mr. Salvatore Giordano 1.0% (previously 1.5%); Mr. Sal Giordano, Jr. 1.0% (previously 1.5%); Mr. Robert L. Laurent, Jr. 0.5% (previously 0.75%); Mr. S. A. Muscarnera 0.31% (previously 0.75%); and Mr. Gordon Newman 0.13% (previously under a separate plan). Under the Executive Plan, the following awards were made for Fiscal Year performance: Mr. Salvatore Giordano $492,660 (compared to $520,365 for fiscal 1995); Mr. Sal Giordano, Jr. $492,660 (compared to $520,365 for fiscal 1995); Mr. Robert L. Laurent, Jr. $246,330 (compared to $260,183 in fiscal 1995), Mr. S. A. Muscarnera $153,956 (compared to $260,183 in fiscal 1995), and Mr. Gordon Newman $61,583 (compared to $48,072 in fiscal 1995). As shown, the actual bonus amounts were less in this fiscal year, which was a year of record breaking performance. Respectfully submitted, Compensation Committee Howard S. Modlin - Chairman William J. Brennan Anthony E. Puleo Employment Contract Mr. Salvatore Giordano has an Employment Agreement with the Company, which became effective on March 23, 1993. The material provisions of the Agreement include: (1) an annual base salary of at least $238,000, payable in equal semi-monthly installments; (2) annual participation in all compensatory plans and arrangements of the Company no less favorable than the current fiscal year plans including, but not limited to, a bonus not less than the amount of the latest fiscal year bonus, and continuing eligibility to be awarded stock options; (3) reimbursement for all expenses incurred while on Company related business; and (4) annual consideration for base salary and plan participation increases, if deemed justified by the Company. The Agreement has a stated expiration date of March 23, 2003, but the term of the Agreement automatically extends and has a remaining term of ten years from any point in time, until the term is finally fixed at a period of ten years from an intervening event, as provided in the Agreement, such as permanent disability or death. During the Fiscal Year, the Company amortized the estimated present value of future non- salary benefits payable under the Agreement based upon certain assumptions, in the amount of $356,000. Following the merger of NYCOR into the Company on August 13, 1996, the employment agreement was adjusted to take into account the terms of the merger agreement which stated that the employees and directors of NYCOR were to be placed in the same economic position with respect to salaries and other benefits provided by NYCOR. Item 12. Security Ownership of Certain Beneficial Owners and Management SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF FEDDERS As of October 31, 1996, each director of the Company and all directors and executive officers of the Company owned beneficially the number of shares of the Company's equity securities set forth in the following table. Shares subject to acquisition within 60 days pursuant to stock options are shown separately. Unless otherwise indicated, the owners listed have sole voting and investment power. Fedders Class A Stock has no voting rights except as provided under Delaware Law. Amount Name of and Nature Shares Subject Percent Title Individual or of Beneficial to Acquisition of Class of Class Persons in Group Ownership Within 60 days (15) Owned (16) Common Salvatore Giordano 1,100 (1) 0 Less than 1% Stock Sal Giordano, Jr. 1,100 (1) 0 Less than 1% Joseph Giordano 13,910 (1) 0 Less than 1% Howard S. Modlin 256,800 (2) 0 1.35% Clarence Russel Moll 61,400 (3) 0 Less than 1% William J. Brennan 5,000 0 Less than 1% Anthony E. Puleo 2,000 0 Less than 1% S. A. Muscarnera 55,000 0 Less than 1% C. A. Keen 10,700 Robert L. Laurent, Jr. 115,000 0 Less than 1% All directors and executive officers as a group 525,310 0 2.77% Class A Stock Salvatore Giordano 1,210,815 (4)(5) 647,314 9.25% Sal Giordano, Jr. 694,864 (4)(6)(7) 709,066 6.97% Joseph Giordano 879,689 (4)(7)(8) 301,875 5.98% Howard S. Modlin 224,701 (9) 171,564 2.02% Clarence Russel Moll 29,225 (10) 96,563 Less than 1% William J. Brennan 4,375 144,376 Less than 1% Anthony E. Puleo 0 9,375 Less than 1% S. A. Muscarnera 48,125 278,750 1.66% C. A. Keen 400 127,500 Less than 1% Robert L. Laurent, Jr. 100,625 350,590 2.28% Gordon Newman 0 46,845 Less than 1% All directors and executive officers as a group 2,470,257 3,179,335 24.97% Class B Stock Salvatore Giordano 2,262,566 (11) 0 99.82% (16) Sal Giordano, Jr. 2,262,566 (11) 0 99.82% Joseph Giordano 2,262,566 (11) 0 99.82% All directors and executive officers as a group 2,262,566 0 99.82% Convertible Preferred Stock Salvatore Giordano 1,248,823 (12)(13) 0 16.34% Sal Giordano, Jr. 1,107,317 (12)(14) 0 14.48% Joseph Giordano 839,902 (12)(15) 0 10.99% Howard S. Modlin 84,024 0 1.1% Clarence Russel Moll 30,410 0 Less than 1% William J. Brennan 129,402 0 1.7% S. A. Muscarnera 56,500 0 Less than 1% C. A. Keen 28,000 0 Less than 1% All directors and executive officers as a group 2,040,059 0 26.7% Ownership of Common Stock, Class A Stock, Class B and Convertible Preferred Stock combined, by all directors and executive officers as a group 7,298,192 3,179,335 20.34%
(1) The amount shown includes 1,100 shares which are held by a corporation in which Messrs. Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano are officers, directors and stockholders, and share voting and investment power over such shares. (2) Includes 3,100 shares owned by members of Mr. Modlin's family as to which Mr. Modlin disclaims beneficial ownership. (3) Includes 15,000 shares owned by Dr. Moll's wife, as to which Dr. Moll disclaims beneficial ownership. (4) Includes 190,875 shares which are held by corporations in which Messrs. Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano are officers, directors and stockholders, and share voting and investment power. (5) Includes 117,548 shares held of record by Mr. Giordano's wife, and 148,904 shares held of record by Mr. Giordano's wife in trust for their grandchildren, as to which Mr. Giordano disclaims beneficial ownership. (6) Includes 10,462 shares held of record by Mr. Giordano's wife, as to which Mr. Giordano disclaims beneficial ownership, and 56,328 shares held by Mr. Giordano in trust as trustee for himself. (7) Includes 345,625 shares held in trust, as to which Messrs. Sal Giordano, Jr. and Joseph Giordano share voting and investment power. (8) Includes 56,328 shares held by Mr. Giordano in trust as trustee for himself. (9) Includes 2,713 shares owned by members of Mr. Modlin's family as to which Mr. Modlin disclaims beneficial ownership. (10) Includes 13,125 shares owned by Dr. Moll's wife as to which Dr. Moll disclaims beneficial ownership. (11) Shares owned by Giordano Holding Corporation as to which Messrs. Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano share voting and investment power. (12) Includes 753,757 shares which are held by corporation in which Messrs. Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano are officers, directors and stockholders and share voting and investment power over such shares. (13) Includes 39,264 shares owned by Mr. Giordano's wife, as to which he disclaims beneficial ownership, and 80,201 shares held of record by Mr. Giordano's wife in trust for their grandchildren, as to which Mr. Giordano disclaims beneficial ownership. (14) Includes 7,493 shares held of record by Mr. Giordano's wife; 28,811 shares held of record by Mr. Giordano's wife in trust for their grandchildren, for both of which Mr. Giordano disclaims beneficial ownership, and 14,974 shares held by self as trustee for self. Also includes 2,220 shares which would be realized upon conversion of Fedders Convertible Subordinated Debentures held by Mr. Giordano. (15) Includes 23,200 shares held in trust by Mr. Giordano for his grandchildren for which he disclaims beneficial ownership, and 14,974 shares held by self as trustee for self. (16) The amounts shown are the number of shares held under options exercisable within 60 days. (17) The Fedders Class B Stock is convertible into Fedders Common Stock at any time on a share-for-share basis. In the event that the individuals named as owning Fedders Class B Stock converted their shares into Fedders Common Stock, less than 5% of the class would remain outstanding, and pursuant to the terms of the Fedders Charter, all remaining Fedders Class B Stock and all outstanding Fedders Class A Stock would automatically be converted into Fedders Common Stock. If such conversion took place, and the named individuals exercised all of the options indicated, such individuals and the group would beneficially own the following number of shares constituting the indicated percentage of Fedders Common Stock outstanding: Mr. Salvatore Giordano, 5,370,618 shares constituting 10.96%; Mr. Sal Giordano, Jr., 4,774,913 shares constituting 9.73%; Mr. Joseph Giordano, 4,297,942 shares constituting 8.84%; and all directors and executive officers as a group 10,477,527 shares constituting 20.34%. The share totals for Messrs. Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano include 3,208,204 shares which are held by corporation in which they are officers, directors and stockholders and share voting and investment power over such shares. In the event that the individuals named as owning Fedders Class B Stock also converted their shares of Fedders Convertible Preferred Stock, they would receive Common Stock, as the Class A Stock into which the Fedders Convertible Preferred Stock is currently convertible would no longer exist, and their percentage of ownership of Common Stock would increase in proportion to their holdings of Fedders Convertible Preferred Stock. The same would be true for the conversion of any Fedders Convertible Subordinated Debentures. PRINCIPAL STOCKHOLDERS The following table sets forth information at October 31, 1996 with respect to the beneficial ownership of the Company's voting securities by all persons known by the Company to own more than 5% of the Company's outstanding voting securities. Unless otherwise indicated, the owners listed have sole voting and investment power. Name and Address Amount Beneficially Percent Title of Class of Beneficial Owner (1) Owned of Class [S] [C] [C] [C] Class B Stock Salvatore Giordano 2,262,566 99.82% Joseph Giordano and Sal Giordano, Jr. c/o Fedders Corporation Liberty Corner, NJ 07938 Common Stock Strong Capital 2,185,500 11.51% Management, Inc. (2) 100 Heritage Reserve P. O. Box 2936 Milwaukee, WI 53201 (1) See footnotes (11) and (17) to the previous table for more detailed information with respect to the security ownership of the named individuals. (2) Strong Capital Management, Inc. is an investment advisor registered under Section 203 of the Investment Advisors Act of 1940. The information provided is based upon a Schedule 13G filed by this Stockholder with the Commission on February 13, 1996. Item 13. Certain Relationships and Related Transactions See the information included under Part III. Item 10 herein. PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K Index to Financial Statements and Financial Statement Schedule (a) 1. Financial Statements The following Consolidated Financial Statements of the Company and its subsidiaries are included: Page # Report of Independent Certified Public Accountants F5 Report of Independent Auditors F6 Consolidated Statements of Operations for the years F7 ended August Consolidated Balance Sheets at August 31, 1996 and 1995 F8 Consolidated Statements of Cash Flows for the years ended August 31, 1996, 1995 and 1994 F9-F10 Consolidated Statements of Stockholders' Equity for the years ended August 31, 1996, 1995 and 1994 F11 Notes to Consolidated Financial Statements F12-F23 (a) 2. Financial Statement Schedule Consolidated Schedule for the years ended August 31, 1996 Report of Independent Certified Public Accountants S-1 II. Valuation and Qualifying Accounts S-2 All other schedules have been omitted because of the absence of the conditions under which they are required or because the required information is included in the Consolidated Financial Statements or the Notes thereto. (a) 3. Exhibits (Note: With respect to incorporation by reference to exhibits filed by RTXX Corporation (formerly Rotorex Corporation), reference is hereby made to Commission File No. 1-2150) (3) (i) Restated Certificate of Incorporation, filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for 1984 and incorporated herein by reference. (ii) Amendment to Restated Certificate of Incorporation, filed as Exhibit 4a to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1985 and incorporated herein by reference. (iii) Correction of Restated Certificate of Incorporation, filed as Exhibit 4b to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1985 and incorporated herein by reference. (iv) Amendment of Certificate of Incorporation, filed as Exhibit (3) (i) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1987 and incorporated herein by reference. (v) Amendment of Certificate of Incorporation, filed as Exhibit (3) (ii) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1987 and incorporated herein by reference. (vi) Amendment to Certificate of Incorporation, filed as Exhibit (3) (vi) to the Company's Annual Report on Form 10-K for the year ended August 31, 1992 and incorporated herein by reference. (vii) Amendments to Certificate of Incorporation dated August 13, 1996. (viii) By-Laws, amended through January 16, 1988, filed as Exhibit (3) (vii) to the Company's Annual Report on Form 10-K for 1987 and incorporated herein by reference. (10) (i) Stock Option Plan II, filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for 1984 and incorporated herein by reference. (ii) Stock Option Plan III, filed as Exhibit 10 (iv) to the Company's Annual Report on Form 10-K for 1985 and incorporated herein by reference. (iii) Stock Option Plan IV, filed as Exhibit 10 (iv) to the Company's Annual Report on Form 10-K for 1987 and incorporated herein by reference. (iv) Stock Option Plan V, filed as Exhibit 10 (v) to the Company's Annual Report on Form 10-K for 1988 and incorporated herein by reference. (v) Stock Option Plan VI, filed as Exhibit 10 (vi) to the Company's Annual Report on Form 10-K for 1989 and incorporated herein by reference. (vi) Stock Option Plan VII, filed as Exhibit 10 (vi) to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference. (vii) Stock Option Plan VIII, filed as Annex F tot he Company's Proxy Statement - Prospectus dated May 10, 1996 and incorporated herein by reference. (viii) Employment Contract between The Corporation and Salvatore Giordano dated March 23, 1993 filed as Exhibit 10 (viii) to the Company's Annual Report on Form 10-K 1993 and incorporated herein by reference. (ix) Joint Venture Contract between Ningbo General Air Conditioner Factory and Fedders Investment Corporation for the establishment of Fedders Xinle Co., Ltd., dated July 31, 1995 filed as Exhibit 10 (viii) on the Form 10-K 1996 and incorporated herein by reference. (x) Agreement and Plan of Merger Between Fedders Corporation and NYCOR, Inc. filed as Annex A to the Company's Proxy Statement - Prospectus dated May 10, 1996 and incorporated herein by reference. (11) Statement re computation of per share earnings. (16) (i) Letter referencing change in certifying accountants filed as Exhibit 16 (i) to the Company's Annual Report on Form 10-K 1996 and incorporated herein by reference. (21) Subsidiaries. (23) Consents of BDO Seidman, LLP and Ernst & Young. (27) Financial data schedule. (b) Reports on Form 8-K A report on Form 8-K was filed on August 29, 1996, an 8-KA was filed on October 25, 1996 and are incorporated herein by reference. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. FEDDERS CORPORATION By/s/Robert L. Laurent, Jr. Robert L. Laurent, Jr. Executive Vice President, Finance and Administration and Chief Financial Officer November 27, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/Salvatore Giordano Chairman of the Board November 27, 1996 Salvatore Giordano /s/Salvatore Giordano, Jr. Vice Chairman, November 27, 1996 Salvatore Giordano, Jr. President and Chief Executive Officer and a Director (Principal Executive Officer) /s/Joseph Giordano Director November 27, 1996 Joseph Giordano /s/Howard S. Modlin Director November 27, 1996 Howard S. Modlin /s/Clarence Russel Moll Director November 27, 1996 Clarence Russel Moll /s/William J. Brennan Director November 27, 1996 William J. Brennan /s/Anthony Puleo Director November 27, 1996 Anthony Puleo /s/S.A. Muscarnera Director November 27, 1996 S.A. Muscarnera /s/C.A. Keen Director November 27, 1996 C. A. Keen /s/Robert L. Laurent, Jr. Executive Vice November 27, 1996 Robert L. Laurent, Jr. President, Finance Administration (Principal Financial & Accounting Officer) Management's Discussion and Analysis of Results of Operations and Financial Condition Fedders Corporation recognized record net sales and income in fiscal 1996 after also realizing significant revenue and earnings growth in the two previous years. The growth trend reflects strong relationships with retailers resulting from the Company's concentration on flexible manufacturing to accommodate customers' increasingly seasonal delivery requirements and in fiscal 1996, additional international sales. The Company has taken important steps to take strategic advantage of its experience in room air conditioners within the rapidly growing, international marketplace. In November 1995, the Company entered into a joint venture in Ningbo, China to manufacture air conditioners for sale in the Chinese market and for export. In August 1996, following shareholder approval, NYCOR, Inc. ("NYCOR"), a manufacturer of rotary compressors at Rotorex and thermoelectric modules at Melcor, was merged into the Company. The supply of compressors from Rotorex, as well as its four Asian compressor licensees is strategically important to international growth. Presently, the Company's business is still largely domestic and the business is affected by summer weather in major markets, with product shipped primarily in the second half of the fiscal year. Just-in-time delivery is a requirement of retail leaders in the room air conditioner industry. Cool summer weather in key U.S. markets in fiscal 1996 has increased industry inventories entering fiscal 1997. This is expected to result in a reduction in first half revenues, offset in part by additional international sales of room air conditioners and sales of compressors and thermoelectric modules. This follows favorable weather in the prior three consecutive years that depleted industry inventories at manufacturers and retailers entering fiscal 1996. Manufacturers' shipments of room air conditioners in the U.S. during Fedders' fiscal periods totaled 4.6 million units in 1996, 4.1 million units in 1995 and 3.8 million units in 1994. Results of Operations With Fedders and U.S. industry inventories at minimal levels entering each of the last three fiscal years, Fedders increased its domestic unit sales by 22%, 30% and 55% in 1996, 1995 and 1994, respectively. During these same periods, industry unit shipments in the U.S., excluding Fedders' increased by only 11%, 12% and 27%, respectively. The Company's international sales increased by 90% and 56% in fiscal 1996 and 1995, respectively. The gross profit margin increased to 22.3% in fiscal 1996 from 21.2% in 1995, primarily as a result of efficiency in plant utilization due to higher sales and to somewhat lower commodity prices. The gross profit margin changed little from fiscal 1994 to 1995. However, fiscal 1995 included a favorable $3.5 million reduction in warranty provisions, an outgrowth of continuing improvements in quality, offset in part, by a $2.8 million write down of idle equipment and by inflationary pressure, primarily related to copper. The gross profit margin increased from 17.5% in fiscal 1993 to 21.3% in fiscal 1994 due to efficiencies in plant utilization, due to higher sales and cost reduction. Selling, general and administrative expense decreased to 8.6% of net sales in fiscal 1996 from 9.3% in fiscal 1995 and from 11.0% in fiscal 1994 due to higher sales volumes that was offset in part, in fiscal 1995, by a $2.0 million provision for the implementation of an early retirement program. Net interest expense decreased as a percent of sales to .3% from .6% in fiscal 1995 and 1.8% in fiscal 1994 as long-term debt was decreased and cash-on-hand increased. In fiscal 1996, the Company returned to a full federal tax rate after utilizing its net operating loss carryforwards during fiscal 1995. As a result, the effective tax rate was 38.0% in fiscal 1996 compared with 17.3% in fiscal 1995 and 3% in fiscal 1994. During 1994, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which resulted in a one-time cumulative effect of an accounting change amounting to $1.8 million. Liquidity and Capital Resources Working capital requirements of the Company historically are seasonal with cash balances peaking in August and the greatest utilization of its lines of credit occurring early in the calendar year. The Company's cash flow in 1996 continued strong with cash increasing to $90.3 million at August 31 from $57.7 million a year earlier. Net cash provided by operations in fiscal 1996 amounted to $41.9 million. Accounts receivable changed little from year to year, even with the increase in sales, as August 31 is the low point of the fiscal year. Ending inventories increased by $24.4 million, with $12.3 million of the increase related to the Chinese joint venture and $13.3 million related to Rotorex and Melcor. Excluding the inventories of these acquired entities, inventories decreased by $1.2 million, in a colder than normal summer. Accounts payable, excluding accounts payables from acquired operations, changed little. Accrued expenses increased in fiscal 1995 as a result of higher marketing accruals related to higher sales and in 1996 from acquired operations. Net cash used in investing activities during 1996 included capital expenditures of $7.0 million. Fedders also made an investment in a joint venture to manufacture room air conditioners in Ningbo, China with the Ningbo General Air Conditioner Factory. Fedders has a 60% interest in Fedders Xinle Co., Ltd. which was initially capitalized on November 7, 1995. Fedders' cash contribution to the venture was approximately $8.4 million. The factory's present capacity is 200,000 units and is planned to be increased to 500,000 units by fiscal 1999. The venture is expected to sell 50% of its product in China and export 50%. As discussed, in August 1996, the Company merged with NYCOR. The Company had a supply agreement with NYCOR for the supply of up to 800,000 compressors annually, through the year 2003 (note 2). The Company's rotary compressor requirements were nearly 1.4 million in fiscal 1996 and it will need many more to grow its international business. The merger will provide a guaranteed supply of compressors to support the Company's international growth which will lessen the dependency on weather in the North American market. Net cash used in financing activities amounted to $2.8 million. Fedders Xinle borrowed $10.3 million from a People's Republic of China bank for expansion. The long-term loan is not guaranteed by Fedders or its subsidiaries. Fedders Xinle repaid $4.0 million during fiscal 1996. The Company assumed a total of $28.9 million of debt in its merger with NYCOR. The Company's revolving credit facility of $40.0 million is renewable in December 1997. The credit facility is collateralized by substantially all of the Company's assets. Management believes that the Company's cash, earnings and borrowing capacity are adequate to meet the needs of its operations and long-term credit requirements, including capital expenditures and its debt maturities. Selected Financial Data (a) (Amounts in thousands, except per share data) 1996 1995 1994 1993 1992 Net sales $371,772 $316,494 $231,572 $158,602 $192,365 Gross profit 83,028 67,125 49,263 27,744 25,607 Percent of net sales 22.3 21.2 21.3 17.5 13.3 Operating income (loss) 50,988 37,653 23,905 1,907 (9,392) Percent of net sales 13.7 11.9 10.3 1.2 (4.9) Pre-tax income (loss) 50,266 35,691 19,803 (2,340) (24,965) Percent of net sales 13.5 11.3 8.6 (1.5) (12.7) Net income (loss) $31,158 $ 29,504 $ 20,989(c) $ (1,775) $(24,931)(d) Net income attributable to common stockholders $ 31,007 $ 29,504 $ 20,989 $ (1,775) $(24,931) Net income (loss) per share $ 0.74 $ 0.72 $ 0.53(c) $ (0.05) $ (0.67) Cash dividends declared per share: Preferred $ 0.050 - - - - Common 0.080 $ 0.020 - - - Class A 0.080 0.020 - - - Class B 0.072 0.018 - - - Cash $ 90,295 $ 57,707 $ 34,869 $ 8,553 $ 8,738 Total assets 290,220 136,775 100,653 81,285 179,249 Long-term debt (including current portion) 40,406 5,106 17,943 25,590 89,588 Stockholders' equity 159,751 82,542 49,317 24,229 19,039 Capital expenditures 7,043 9,041(b) 2,634 2,379 3,599 Depreciation and amortization 6,578 7,519 9,374 5,646 14,876 Earnings before interest, taxes, depreciation and amortization 57,796 44,143 32,252 6,317 2,675
(a) The selected financial data should be read in conjunction with "Management's Discussion and Analysis of Results of Operations and Financial Condition, " and the consolidated financial statements and the notes thereto. (b) Includes buyout of $1,750,000 of equipment under lease. (c) In 1994, the Company adopted SFAS 109, "Accounting for Income Taxes," which resulted in income of $1,780,000 or $0.04 per share from the cumulative effect of an accounting change. (d) Includes a net restructuring charge of $3,300,000 for costs associated with the shutdown of the Company's New Jersey production facilities offset in part, by the benefit from the sale of its compressor business. REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF FEDDERS CORPORATION We have audited the accompanying consolidated balance sheets of Fedders Corporation as of August 31, 1996 and 1995, and the related consolidated statements of operations, cash flows and stockholders' equity for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fedders Corporation as of August 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/BDO Seidman, LLP Woodbridge, New Jersey September 30, 1996 REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF FEDDERS CORPORATION We have audited the accompanying consolidated statements of operations, cash flows and stockholders' equity of Fedders Corporation for the year ended August 31, 1994. Our audit also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flow of Fedders Corporation for the year ended August 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 1 to the consolidated financial statements, in 1994 the Company changed its method of accounting for income taxes. /s/Ernst & Young, LLP Metro Park, New Jersey October 6, 1996 Fedders Corporation Consolidated Statements of Operations
(Amounts in thousands, except per share data) Years Ended August 31, 1996 1995 1994 Net sales $371,772 $316,494 $231,572 Costs and expenses: Cost of sales 288,744 249,369 182,309 Selling, general and administrative 32,040 29,472 25,358 320,784 278,841 207,667 Operating income 50,988 37,653 23,905 Minority interest in joint venture 230 - - Interest expense (net of interest income of $1,410, $751 and $223 in 1996, 1995 and 1994, respectively) (952) (1,962) (4,102) Income before income taxes 50,266 35,691 19,803 Federal, state and foreign income taxes 19,108 6,187 594 Income before cumulative effect of an accounting change 31,158 29,504 19,209 Cumulative effect of an accounting change - - 1,780 Net income 31,158 29,504 20,989 Preferred stock dividend requirement 151 - - Net income attributable to common stockholders $ 31,007 $29,504 $20,989 Primary earnings per share: Income before cumulative effect of an accounting change $ 0.74 $ 0.72 $ 0.49 Cumulative effect of an accounting change - - 0.04 Net income per share $ 0.74 $ 0.72 $ 0.53 Dividends per share declared: Preferred $ 0.050 - - Common 0.080 $ 0.020 - Class A 0.080 0.020 - Class B 0.072 0.018 -
See accompanying notes Fedders Corporation - Consolidated Balance Sheets (Amounts in thousands, except share data)
August 31, 1996 1995 ASSETS Current assets: Cash and cash equivalents $ 90,295 $57,707 Accounts receivable (less allowances of $1,952 in 1996 and $872 in 1995) 7,975 8,847 Inventories 53,446 29,020 Deferred income taxes 3,584 2,954 Other current assets 3,366 893 Total current assets 158,666 99,421 Net property, plant and equipment 62,872 29,803 Deferred income taxes 7,364 1,277 Goodwill 58,556 5,517 Other assets 2,762 757 $290,220 $136,775 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,889 $ 590 Accounts payable 16,514 5,591 Income taxes payable 15,391 9,131 Accrued expenses 38,055 27,986 Total current liabilities 71,849 43,298 Long-term debt 38,517 4,516 Other long-term liabilities: Warranty 3,679 3,962 Other 10,816 2,457 Minority interest in joint venture 5,608 - Commitments and contingencies Stockholders' equity: Preferred Stock, $1 par value, 15,000,000 shares authorized, 7,643,061 issued at August 31, 1996 7,643 - Common Stock, $1 par value, 80,000,000 shares authorized, 18,989,798 and 18,988,598 issued at August 31, 1996 and 1995, respectively 18,990 18,989 Class A Stock, $1 par value, 60,000,000 shares authorized, 19,415,916 and 18,831,376 shares issued at August 31, 1996 and 1995, respectively 19,416 18,831 Class B Stock, $1 par value, 7,500,000 shares authorized, 2,266,706 and 2,267,206 issued and outstanding at August 31, 1996 and 1995, respectively 2,267 2,267 Additional paid-in capital 87,728 46,481 Retained earnings (deficit) 23,865 (4,041) Cumulative translation adjustments (158) 15 Total stockholders' equity 159,751 82,542 $290,220 $136,775
See accompanying notes Fedders Corporation - Consolidated Statements of Cash Flows (Amounts in thousands)
Years Ended August 31, 1996 1995 1994 Operating activities: Net income $ 31,158 $29,504 $20,989 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 6,578 7,519 9,374 Tax benefit related to stock options exercised 437 2,900 - Deferred income taxes (1,717) (5,406) (962) Changes in operating assets and liabilities (excluding the effect of the merger): Accounts receivable, net 4,402 3,993 (3,939) Inventories (7,856) (10,972) 1,222 Other current assets (628) (219) 243 Other assets (568) 175 (59) Income taxes payable 6,243 8,373 573 Accounts payable (2,887) 276 141 Accrued expenses 3,784 6,617 4,370 Other long-term liabilities 3,151 1,643 1,687 Other (226) 184 (39) Net cash provided by operations $ 41,871 44,587 33,600 Investing activities: Additions to property, plant and equipment (7,043) (9,041) (2,634) Disposal of property, plant and equipment 535 521 441 Net cash used in investing activities $ (6,508) (8,520) (2,193) Financing activities: Repayments of NYCOR short-term borrowing (3,000) - - Repayments of long-term debt (695) (13,866) (9,229) Proceeds from stock options exercised 1,868 692 4,138 Net proceeds from Fedders Xinle long-term financing 6,299 - - Repayment of Fedders Xinle short-term debt (3,396) - - Cash dividends (3,252) (797) - Expenses related to the NYCOR merger (599) - - Proceeds from notes due on common stock purchases - 742 - Net cash used in financing activities $ (2,775) (13,229) (5,091) Net increase in cash and cash equivalents 32,588 22,838 26,316 Cash and cash equivalents at beginning of year 57,707 34,869 8,553 Cash and cash equivalents at end of year $ 90,295 $57,707 $34,869 Fedders Corporation - Consolidated Statements of Cash Flows (Amounts in thousands)
Years Ended August 31, 1996 1995 1994 Supplemental disclosure: Cash paid (refunded) during the year for: Interest $ 2,249 $ 1,904 $ 3,766 Net income taxes 13,513 492 (1,196) Noncash investing and financing activities: The issuance of 7,643 shares of Convertible Preferred Stock in exchange for all the outstanding shares of Common, Class A and Class B shares of NYCOR $ 47,769 - -
See accompanying notes Fedders Corporation Consolidated Statements of Stockholders' Equity (Amounts in thousands)
Cumu- Notes Add'l Retained lative Due on Class Class Paid- Earnings Trans- Common Trea- Preferred Common A B in (Deficit)Adjust- Stock sury Stock Stock Stock Stock Capital ments Purchases Stock August 31, 1993 - $18,614 - $2,268 $47,571 $(35,128) $(130) - $(8,966) Net income - - - - - 20,989 - - - Stock dividend - - $10,625 - - (10,625) - - - Stock options exercised - 1,028 - - 3,852 - - $(742) - Foreign currency translation - - - - - - (39) - - August 31, 1994 - $19,642 $10,625 $2,268 $51,423 $(24,764) $(169) $(742) $(8,966) Net income - - - - - 29,504 - - - Stock dividend - - 7,984 - - (7,984) - - - Conversion of Class B to Common Stock - 1 - (1) - - - - - Dividends declared - - - - - (797) - - - Stock options exercised - - 222 - 470 - - - - Tax benefit related to stock options exercised - - - - 2,900 - - - - Repayment of common stock notes - - - - - - - 742 - Retirement of treasury stock - (654) - - (8,312) - - - 8,966 Foreign currency translation - - - - - - 184 - - August 31, 1995 - $18,989 $18,831 $2,267 $46,481 $(4,041) $ 15 - - Net income - - - - - 31,158 - - - Issuance of Preferred Stock $7,643 - - - 40,126 - - - - Expenses related to NYCOR merger - - - - (599) - - - - Tax benefit related to stock options exercised - - - - 437 - - - - Conversion of Class B to Common Stock - 1 - - - - - - - Dividends declared - - - - - (3,252) - - - Stock options exercised - - 585 - 1,283 - - - - Foreign currency translation - - - - - - (173) - - August 31, 1996 $7,643 $18,990 $19,416 $2,267 $87,728 $23,865 $(158) - -
See accompanying notes Fedders Corporation Notes to Consolidated Financial Statements (Years ended August 31, 1996, 1995 and 1994; dollar and stock option amounts in tables, except per share market data, are in thousands) 1. Summary of Significant Accounting Policies Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company and all of its wholly-owned and majority- owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Net sales Sales are recorded, at time of shipment, net of provisions for sales allowances, warranty and similar items. Warranty and return policy The Company's warranty policy generally provides five-year coverage for sealed systems including compressors, two-year coverage on motors and one-year coverage on all other parts and labor related to air conditioners sold in North America. The Company's policy is to accrue the estimated cost of warranty coverage and returns at the time the sale is recorded. The policy with respect to sales returns generally provides that a customer may not return inventory except at the Company's option. Foreign currency translation Assets and liabilities of the Company's foreign subsidiaries are translated at the rate of exchange in effect at the end of the period. Net sales and expenses are translated at the average rate of exchange for the period. Translation adjustments are reflected as a separate component of stockholders' equity. Cash and cash equivalents The Company considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. Inventories Inventories are stated at the lower of the first-in, first-out (FIFO) cost or market. The Company reviews inventory periodically for slow-moving and obsolete items. Write downs, which have historically been insignificant, are recorded in the period in which they are identified. Inventories consist of the following at August 31:
1996 1995 Finished goods $21,711 $14,592 Work in process 6,652 2,540 Raw materials and supplies 25,083 11,888 $53,446 $29,020
Property, plant and equipment Replacements, betterments and additions to property, plant and equipment are capitalized at cost. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property, plant and equipment, the cost and related accumulated depreciation are removed from the respective accounts and any gain or loss is reflected in income. Property, plant and equipment at cost consist of the following at August 31:
Estimated Useful Life 1996 1995 Land and improvements - $ 3,830 $ 1,369 Buildings 20 to 30 years 23,915 12,888 Machinery and equipment 5 to 12 years 84,887 53,302 Machinery and equipment under capital lease 12 years 8,191 - Property, plant and equipment - 120,823 67,559 Accumulated depreciation - 57,951 37,756 - $ 62,872 $29,803
Depreciation is provided on the straight-line basis over the estimated useful life of each asset as noted above. Depreciation expense includes a write down of certain idle fixed assets to estimated realizable value amounting to $2,694,000 and $2,860,000 in 1996 and 1995, respectively. Accumulated depreciation includes $297,000 of depreciation related to equipment under capital leases. Goodwill and other assets Other assets consist primarily of intangible assets which, other than goodwill, are amortized over periods from one to eight years using the straight-line method. Goodwill is amortized over 40 years using the straight-line method and recoverability is evaluated periodically based on the expected undiscounted net cash flows of the related businesses. Goodwill and other assets are net of accumulated amortization of $8,640,000 and $8,473,000 at August 31, 1996 and 1995, respectively. Goodwill included $53,192,000 resulting from the merger with NYCOR, Inc. ("NYCOR") on August 13, 1996 (note 13). Accrued expenses Accrued expenses consist of the following at August 31:
1996 1995 Warranty $ 4,019 $ 3,442 Marketing programs 16,345 10,685 Salaries and benefits 7,964 7,143 Other 9,727 6,716 $38,055 $27,986
Income taxes During the first quarter of fiscal 1994, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." The cumulative effect of adopting the new standard as of September 1, 1993 resulted in a tax benefit of $1,780,000. Deferred income taxes are provided to reflect the tax effects of "temporary differences" between assets and liabilities for financial reporting purposes and income tax purposes. Provisions are also made for U.S. income taxes on undistributed earnings of foreign subsidiaries not considered to be indefinitely reinvested (note 7). Research and development costs All research and development costs are charged to expense as incurred and amount to $3,891,000, $2,742,000 and $2,233,000 in 1996, 1995 and 1994, respectively. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Risks and uncertainties Approximately 15% of the Company's employees are covered by a three year collective bargaining agreement, which expires in August 1997. Another 34% of the employees are covered by collective bargaining agreements which expire in October 1998. Effect of new accounting pronouncements In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which establishes accounting standards for, among other things, the impairment of long-lived assets and certain identifiable intangibles. The Company believes that this pronouncement will not have a material effect on the Company's consolidated financial statements. In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based Compensation." The Company is studying SFAS No. 123 but does not currently plan to adopt the fair value based method of accounting for stock options or similar equity instruments. However, the adoption of SFAS No. 123 would not be expected to have a material effect on the Company's consolidated financial statements. Amounts per share Primary earnings per share are computed by dividing net income attributable to common stockholders by the weighted average number of shares of Common, Class A and Class B Stock and other common stock equivalents outstanding during the year: 41,997,000, 41,001,000 and 39,386,000 in 1996, 1995, and 1994, respectively. Fully diluted earnings per share were not materially dilutive and, accordingly, are not presented. Reclassifications Certain items in the 1995 financial statements have been reclassified to conform to the 1996 presentation. 2. Transactions With NYCOR The Company had an agreement with NYCOR for the supply of up to 800,000 compressors annually through 2003 with two renewable options. Purchases from NYCOR, at negotiated market prices, amounted to $53,878,000, $52,381,000 and $52,108,000 in 1996, 1995 and 1994, respectively. Certain officers and directors of the Company were also officers and/or directors of NYCOR and had significant stockholdings in both companies. On August 13, 1996, upon receiving over two-thirds majority approval of all Common and Class B Stockholders, the Company merged with NYCOR. One share of Fedders Convertible Preferred Stock was issued for each share of NYCOR Common, Class A and Class B stock (note 13). 3. Litigation The Company is involved in litigation, both as plaintiff and defendant, incidental to the conduct of its business. It is the opinion of management, after consultation with counsel, that the outcome of such litigation will not have a material adverse effect on the accompanying financial statements. 4. Short-term Borrowing At August 31, 1996 and 1995, the Company had no short-term borrowing under its $40,000,000 revolving credit facility with a commercial finance company. Availability under the facility is based on accounts receivable and inventory and requires maintenance of certain financial covenants. The maximum amount outstanding under the credit facility was $37,877,000 and $21,512,000 during fiscal 1996 and 1995, respectively. The average amount outstanding and average rate of interest charged on outstanding borrowings under the credit facility were $5,596,000 at 9.8% in fiscal 1996 and $4,602,000 at 11% in fiscal 1995. The credit facility is collateralized by substantially all of the Company's assets and is in effect until December 1997. The rate of interest on the facility is at the prime rate plus 1.5%. 5. Long-term Debt The recorded value of long-term debt approximates the fair value based on current rates available to the Company for debt of the same remaining maturities and consists of the following at August 31:
1996 1995 8.5% convertible subordinated debentures $22,806 - Fedders Xinle 15.175% promissory note 6,299 - Promissory note payable to the State of Illinois, interest at 1% 4,196 $4,527 Capital lease obligations and other 7,105 579 40,406 5,106 Less current maturities 1,889 590 $38,517 $4,516
Aggregate amounts of long-term debt, excluding capital leases and other of $7,105,000, maturing in each of the years ended August 31 are: 1997-$335,000, 1998-$338,000, 1999-$342,000, 2000-$346,000, 2001 - $349,000, thereafter $31,591,000. The 8.5% convertible subordinated debentures due in 2012, assumed in connection with the NYCOR merger are convertible into the Company's Convertible Preferred Stock at any time prior to maturity at 2.22 shares per $20 principal amount of debenture (note 13). The $6,299,000 long-term promissory note of Fedders Xinle is payable to a People's Republic of China bank and matures in 2008. The loan is secured by certain joint venture assets and is not guaranteed by the Company or its other subsidiaries. The loan from the State of Illinois has an interest rate of 1%, is to be paid over the next 12 years, and is collateralized by a mortgage on the Illinois facility. 6. Leases Capital Leases Aggregate future minimum rental payments under capital leases assumed primarily in connection with the NYCOR merger (note 13) for the years ended August 31 are as follows: 1997 - $2,288,000, 1998 - $2,017,000, 1999 - $2,139,000, 2000 - $2,162,000, 2001 - $144,000 and thereafter $215,000. The present value of net minimum lease payments is $7,105,000 excluding the interest portion of $1,860,000. Operating Leases The Company leases certain property and equipment under operating leases which expire over the next five years. Most of these operating leases contain one of the following options: (a) the Company may, at the end of the initial lease term, purchase the property at the then fair market value or (b) the Company may renew its lease at the then fair rental value for a period of one month to four years. Minimum payments for operating leases having initial or remaining non-cancelable terms are as follows: $3,896,000, $3,507,000, $3,247,000, $2,016,000 and $1,752,000 in 1997, 1998, 1999, 2000 and 2001, respectively, and total $14,418,000. Total rent expense for all operating leases amounted to $2,025,000, $2,083,000 and $3,559,000 in 1996, 1995 and 1994, respectively. In 1995, an equipment lease expiring in February 1996 was bought out by the Company for $3,000,000, of which $1,250,000 related to the prepayment of rental and interest expense. 7. Income Taxes The provision for income tax (benefit) consists of the following components:
1996 1995 1994 Current: Federal $18,047 $6,258 $396 State 2,253 2,378 198 Foreign 88 57 - 20,388 8,693 594 Charge in lieu of income taxes 437 2,900 - Deferred: Federal (1,530) (4,392) - State (187) (1,014) - (1,717) (5,406) - $19,108 $6,187 $594
In 1996 and prior years, the exercise of stock options to acquire shares of the Company's Common and Class A Stock resulted in a compensation deduction for income tax purposes for which no corresponding expense was required for financial reporting purposes. The tax benefits related to these deductions, which were realized in 1996 and 1995, are reflected as a charge in lieu of income taxes and a credit to additional paid-in capital. Deferred income taxes result from "temporary differences" between assets and liabilities for financial reporting purposes and income tax purposes. The principal temporary differences and carryforwards giving rise to deferred tax assets and liabilities at August 31 are as follows:
1996 1995 Warranty $ 3,065 $2,822 Depreciation 392 (1,826) Employee benefit programs 3,525 1,550 Inventory 1,710 854 Net operating loss carryforwards 7,598 1,500 Other 1,683 1,556 17,973 6,456 Valuation allowance (7,025) (2,225) $10,948 $4,231
Net deferred tax assets include $5,000,000, net of a valuation allowance of $6,584,000, attributable to temporary differences, tax loss, and tax credit carryforwards of NYCOR which the Company expects to utilize over the carryforward periods. The decrease in the deferred tax asset valuation allowance in 1995 resulted from the utilization of net operating loss carry forwards and a change in the Company's estimate of the utilization of temporary differences based primarily on improved operating results. The difference between the United States statutory income tax rate and the consolidated effective income tax rate is due to the following items:
1996 1995 1994 Expected tax at statutory rate $17,593 $12,492 $6,733 Valuation allowance reflected in current income (325) (7,851) (6,799) Alternative minimum tax - - 396 State taxes, less federal income tax benefit 1,343 887 198 Other 497 659 66
$19,108 $6,187 $594 At August 31, 1996, the Company has Canadian net operating loss carryforwards of approximately $726,000 that expire in the years 2002 through 2003, and U.S. net operating loss and tax credit carryforwards related to NYCOR of approximately $17,000,000 and $1,400,00, respectively, which are restricted as to use and expire in the years 2001 through 2011. All prior U.S. net operating loss and credit carryforwards were utilized at August 31, 1995. 8. Segment Information The Company operates in one industry segment and sells its room air conditioners primarily direct to retailers and also through private label arrangements and distributors. One customer accounted for 30% of net sales in 1996, 26% of net sales in 1995 and 28% in 1994. No other customer accounted for more than 10% of net sales in 1996. Two other customers accounted for 10% and 11% of net sales in 1995 and 1994, respectively. International sales were approximately $24,458,000 in 1996, $12,892,000 in 1995 and $8,250,000 in 1994 and were made principally to Canada, Mexico and China. 9. Capital Stock Preferred Stock: On August 13, 1996, 7,643,036 shares of Convertible Preferred Stock ("Preferred Stock") were issued to NYCOR's stockholders on a share-for-share basis in exchange for their Common, Class A and Class B Stock to consummate the merger with NYCOR (notes 2 and 13). The Preferred Stock is convertible into Class A Stock on a share-for-share basis at any time subject to certain adjustments. The Preferred Stock is redeemable in whole or in part, at the sole option of the Company at the price of $6.25 in cash or equivalent value of Class A Stock. The holders of Preferred Stock are entitled to receive upon liquidation, $6.25 per share, plus unpaid dividends to the date of distribution, before any distribution is made on the Common, Class A or Class B Stock. At August 31, 1996, 2,534,000 shares of Preferred Stock are reserved for conversion of the convertible subordinated debentures. Common Stock: Shares of Common Stock are reserved for the conversion of Class A and Class B Stock as indicated herein. At August 31, 1996, 1,050,000 shares of Common Stock are reserved under the Company's stock option plans. Class A Stock: In 1995 and 1994, the Company issued 7,984,000 and 10,625,029 shares, respectively, of Class A Stock through a stock dividend. At August 31, 1996, 10,177,036 shares are reserved for conversion of the Company's Preferred Stock and convertible subordinated debentures. At August 31, 1996, 10,631,000 shares of Class A Stock are reserved under the Company's stock option plans. Class A Stock has rights, including dividend rights, substantially identical to the Common Stock, except that the Class A Stock will not be entitled to vote except to the extent provided under Delaware law. Class A Stock is immediately convertible into Common Stock on a share-for-share basis upon conversion of all of the Class B Stock and accordingly, at August 31, 1996, 40,223,952 shares of Common Stock are reserved for such conversion. Class B Stock: Class B Stock is immediately convertible into Common Stock on a share-for-share basis and accordingly, at August 31, 1996, 2,266,706 shares of Common Stock are reserved for such conversion. Class B Stock has greater voting power, in certain circumstances, ten-to-one, in the election of directors but receives a lower dividend, 90%, if declared, than Common Stock and has limited transferability. Class B Stock also votes separately, as a class, on certain significant issues. 10. Stock Option Plans All stock option plans, as approved by the stockholders, provide for the granting to employees and officers of incentive stock options (as defined under current tax laws) and non-qualified stock options. All of the plans provide for the granting of non-qualified stock options to directors who are not employees. Stock options are exercisable one year after the date of grant and, if not exercised, will expire five years from the date of grant. Certain options are only exercisable at the end of five years. The stock option plan summary is as follows:
1996 1995 1994 Options outstanding beginning of year 4,715 3,903 2,987 Granted 752 403 752 Canceled (30) (300) (109) Exercised (585) (218) (1,028) Options outstanding prior to dividend-related adjustments 4,852 3,788 2,602 Stock dividend-related adjustments(a) - 927 1,301 Options outstanding at end of year 4,852 4,715 3,903 Options exercisable at end of year 3,682 3,336 1,862 Exercise price $1.69 $2.33 $2.90 per share to 4.87 to 4.70 to 5.66
(a) In connection with stock dividends distributed in 1995 and 1994, all Class A options were adjusted to reflect a 25% and 50% increase, respectively. 11. Pension Plans and Other Retirement Benefits The Company maintains a 401(k) defined contribution plan covering all U.S. employees. Company matching contributions under the plan are based on the level of individual participant contributions and amounted to $1,171,000 in 1996, $756,000 in 1995 and $726,000 in 1994. The Company terminated its defined pension plan, that was curtailed in 1993, with no material gain or loss recognized. The Company has an agreement with an officer that has a term of ten years from any point in time and provides for salary during the employment period, a disability program, postretirement benefits and a death benefit in an amount equal to ten times the prior year's compensation, payable by the Company over ten years. Following the merger of NYCOR into the Company on August 13, 1996 (note 13) the agreement was adjusted to take into account the terms of the merger agreement which stated that the employees and directors of NYCOR were to be placed in the same economic position following the Merger as they were immediately prior to the date of the execution of the merger agreement with respect to salaries and all other benefits provided by NYCOR. The estimated present value of future non-salary benefits payable under the agreement has been determined based upon certain assumptions and is being amortized over the expected remaining years of service to the Company. The Company provides a portion of health care and life insurance benefits for retired employees who elect to participate in the Company's plan. During fiscal 1994, the Company adopted SFAS No.106, which requires accrual accounting for all postretirement benefits other than pension. At August 31, 1996 and 1995 postretirement benefits were fully accrued. The effect of adoption in 1994 of SFAS No. 106 was not material. 12. Joint Venture On November 7, 1995, the Company entered into a joint venture with the Ningbo General Air Conditioner Factory ("Ningbo"), Ningbo City, Zheijang Province, People's Republic of China ("P.R.C.") to manufacture room air conditioners in China. The joint venture, Fedders Xinle Co., Ltd., was capitalized with the Company's contribution of approximately $8,400,000 of cash plus know-how for a 60% interest in the joint venture. Ningbo contributed the factory, equipment and other assets valued at $5,600,000 for a 40% interest. The equivalent of approximately $10,300,000 in long-term financing was provided by a P.R.C. bank for the joint venture which is not guaranteed by the Company. Of this long-term financing, $4,000,000 was repaid during fiscal 1996. The financial statements of the joint venture are consolidated herein. 13. Merger On August 13, 1996, the Company merged with NYCOR, a manufacturer of rotary compressors and thermoelectric heating and cooling modules. Considerations consisted of 7,643,000 shares of Convertible Preferred Stock with a total value of approximately $47,769,000. The merger was accounted for using the purchase method, with the consideration allocated to the assets acquired based on their estimated fair values as of the merger date. The purchase price plus the fair value of net liabilities assumed was allocated to goodwill which is being amortized on a straight line basis over 40 years. The Company's consolidated financial statements include the operating results of NYCOR since August 13, 1996. The following table presents the unaudited pro forma results of operations as if these transactions occurred on September 1, 1994. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have actually occurred had the merger been consummated at the beginning of fiscal 1995 or of results which may occur in the future.
(Unaudited) 1996 1995 Net sales $390,349 $329,516 Operating income 42,168 35,747 Net income 23,574 26,472 Income per share: Primary 0.51 0.57 Fully diluted 0.47 0.54
14. Quarterly Financial Data (unaudited) (000's, except per share and market price data)
First Second Third Fourth 1996 1995 1996 1995 1996 1995 1996 1995 Net sales $27,809 $20,125 $88,327 $72,357 $173,868 $145,869 $81,768 $78,143 Gross profit 6,777 4,306 18,005 13,686 37,859 30,489 20,387 18,644(a) Income (loss) before income taxes 554 (1,440) 10,274 6,694 28,200 21,536 11,238 8,901 Net income (loss) $ 343 $(1,217) $6,370 $5,567 $17,430 $17,806 $ 7,015 $7,348 Net income (loss) per share (b) $ 0.01 $ (0.03) $ 0.15 $ 0.13 $ 0.42 $ 0.44 $ 0.16 $ 0.18 Market price per share: Preferred Stock (FJAPr) High - - - - - - 5 7/8 - Low - - - - - - 5 1/8 - Common Stock (FJC) High 6 3/4 6 1/4 6 3/4 6 1/8 7 6 1/8 7 1/4 7 7/8 Low 5 1/4 3 7/8 5 5 6 5 1/4 5 1/2 5 3/8 Class A Stock (FJA) High 5 4 3/8 5 5/8 4 3/4 6 1/4 4 3/4 6 3/8 5 3/8 Low 3 3/4 3 1/4 3 7/8 3 5/8 5 3/8 4 4 7/8 4 1/8
(a) Includes a $3.5 million reduction in warranty provision and a $2.8 million write down of idle equipment. (b) Quarterly earnings per share may not add to earnings per share for the year due to rounding and changes in the number of weighted average shares outstanding. REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Stockholders and Directors Fedders Corporation The audit referred to in our report dated September 30, 1996, relating to the consolidated financial statements of Fedders Corporation, which is contained in Item 8 of this Form 10-K, included the audit of the financial statement schedule listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based upon our audit. In our opinion, such financial statement schedule presents fairly, in all material respects, the information set forth therein. /s/BDO Seidman, LLP Woodbridge, New Jersey September 30, 1996 FEDDERS CORPORATION VALUATION & QUALIFYING ACCOUNTS SCHEDULE II For The Years Ended August 31, 1995, 1994 and 1993 (Amounts in Thousands)
Balance Additions Balance Allowance for at beginning charged to at emd Doubtful Accounts: of period expense Deductions Other of period Year ended: August 31, 1996 $ 872 $580 - $500(1) $1,952 August 31, 1995 $ 744 $286 $ 158 - $ 872 August 31, 1994 $1,078 $666 1,000 - $ 744
Exhibit Index (3) (i) Restated Certificate of Incorporation, filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for 1984 and incorporated hereby reference. (ii) Amendment to Restated Certificate of Incorporation, filed as Exhibit 4a to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1985 and incorporated herein by reference. (iii) Correction of Restated Certificate of Incorporation, filed as Exhibit 4b to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1985 and incorporated herein by reference. (iv) Amendment of Certificate of Incorporation, filed as Exhibit (3) (i) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1987 and incorporated herein by reference. (v) Amendment of Certificate of Incorporation, filed as Exhibit (3) (ii) to the Company's Quarterly Report on Form 10- Q for the quarter ended June 30, 1987 and incorporated herein by reference. (vi) Amendment to Certificate of Incorporation, filed as Exhibit (3) (vi) to the Company's Annual Report on Form 10-K for the year ended August 31, 1992 and incorporated herein by reference. (vii) Amendments to Certification of Incorporation dated August 13, 1996. (viii) By-Laws, amended through January 16, 1988, filed as Exhibit (3) (vii) to the Company's Annual Report on Form 10-K for 1987 and incorporated herein by reference. (10) (i) Stock Option Plan II, filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for 1984 and incorporated herein by reference. (ii) Stock Option Plan III, filed as Exhibit 10 (iv) to the Company's Annual Report on Form 10-K for 1985 and incorporated herein by reference. (iii) Stock Option Plan IV, filed as Exhibit 10 (iv) to the Company's Annual Report on Form 10-K for 1987 and incorporated herein by reference. (iv) Stock Option Plan V, filed as Exhibit 10 (v) to the Company's Annual Report on Form 10-K for 1988 and incorporated herein by reference. (v) Stock Option Plan VI, filed as Exhibit 10 (vi) to the Company's Annual Report on Form 10-K for 1989 and incorporated herein by reference. (vi) Stock Option Plan VII, filed as Exhibit 10 (vi) to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference. (vii) Stock Option Plan VIII, filed as Annex F to the Company's Proxy Statement - Prospectus dated May 10, 1996 and incorporated herein by reference. (viii) Employment Contract between The Corporation and Salvatore Giordano dated March 23, 1993, filed as Exhibit 10 (viii) to the Company's Annual Report on Form 10-K 1993 and incorporated herein by reference. (ix) Joint Venture contract between Ningbo General Air Conditioner Factory and Fedders Investment Corporation for the establishment of Fedders Xinle Co., Ltd., dated July 13, 1995 filed as Exhibit 10 (viii) on Form 10-K 1996 and incorporated herein by reference. (11) Statement re computation of per share earnings. (16) (i) Letter referencing change in certifying accountants filed as Exhibit 16 (i) to the Company's Annual Report on Form 10-K and incorporated herein by reference. (21) Subsidiaries. (23) Consent of BDO Seidman, LLP. (27) Financial data schedule. (b) Reports on Form 8-K A report on Form 8-K was filed on August 29, 1996, an 8-KA was filed on October 25, 1996 and incorporated herein by reference. EX-11 2 FEDDERS CORPORATION COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 For The Years Ended August 31, 1996, 1995 and 1994 (Amounts in thousand except per share data)
1996 1995 1994 Average number of common and common equivalent shares outstanding (1) 41,997 41,001 39,386 Net income $31,158 $29,504 $20,989 Preferred stock dividend 151 - - Net income (loss attributable to common stockholders 31,007 29,504 20,989 Net income (loss) per common share $0.74 $0.72 $0.53 Fully diluted: Average number of common and common equivalent shares outstanding 41,997 41,001 39,386 Additional average number of common shares assuming the conversion of the 5% convertible subordinated debentures due 1996(2) - 388 Additional average number of class A shares assuming the conversion of preferred stock and conversion of the 8.5% subordinated debentures(3) 529 - - Average common and common equivalent shares outstanding 42,526 41,001 39,774 Net income $31,158 $29,504 $20,989 Interest relating to the 5% convertible subordinated debentures due 1996 net of applicable taxes and tax credits - 661 Interest related to the 8.5% convertible subordinated debentures due 2012 63 - - Net income attributable to common stockholders assuming full dilution $31,221 $29,504 $20,328 Net income (loss) per common share $0.73 $0.72 $0.51 Fully diluted income (loss) per share excluding anti-dilutive effect of conversion of debentures $0.73 $0.72 $0.51
(1) Average number of common and common stock equivalents outstanding have been restated to reflect Class A Stock dividend distributed in September 1994 and June 1995. (2) The 5% convertible subordinated debentures due in May 1996 were fully redeemed by the company (see note 5 of the Notes to Consolidated Financial Statements). (3) Average number of shares included in fully diluted calculation are for the period August 13 through August 31, 1996. EX-21 3 Exhibit 21 SUBSIDIARIES State or Other Jurisdiction Name of Incorporation Fedders North America, Inc. (1) Delaware Fedders International, Inc. (1) Delaware Fedders Exporting, Inc. (1) Barbados Fedders Investment Corporation (1) Delaware NYCOR North America (1) Delaware Rotorex International, Inc. (1) Delaware Rotorex Technologies, Inc. (1) Delaware Fedders, Inc. (2) Ontario Emerson Quiet Kool Corporation (2) Delaware Columbia, Specialties, Inc. (2) Delaware Fedders De Mexico S.A. de C.V. (2) Mexico Rotorex Company, Inc. (3) Delaware Melcor Corporation (3) New Jersey Fedders Asia Pte. Ltd. (4) Singapore Fedders Xinle Co. Ltd. (5) - (1) Wholly owned subsidiary of Fedders Corporation (2) Wholly owned subsidiary of Fedders North America, Inc. (3) Wholly owned subsidiary of NYCOR North America (4) Wholly owned subsidiary of Fedders International (5) Majority owned subsidiary of Fedders Investment Corporation EX-23 4 Exhibit 23 Consent of Independent Certified Public Accountants Fedders Corporation Liberty Corner, New Jersey We hereby consent to the incorporation by reference in the Registration Statements (Form S-8 No. 2098475, No. 33-4628, No. 33- 26740, No. 33-31332 and No. 33-55054) pertaining to the Employee Stock Plans of Fedders Corporation of our reports dated September 30, 1996, with respect to the consolidated financial statements and schedule of Fedders Corporation appearing in the Company's Annual Report on Form 10-K for the year ended August 31, 1996. /s/BDO Seidman, LLP Woodbridge, New Jersey November 26, 1996 EX-27 5
5 Financial data scedules should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto. 0000744106 FEDDERS CORPORATION 1,000 YEAR AUG-31-1996 AUG-31-1996 90,925 0 9,927 (1,952) 53,446 158,666 120,823 (57,951) 290,220 71,849 38,517 0 7,643 40,673 111,435 290,220 371,772 371,772 288,744 320,784 (230) 0 952 50,266 19,108 31,158 0 0 0 31,158 0.74 0 Please see Note 6 to the Notes to the Consolidated Financial Statements filed with Form 10-K Please see note 9 to the Notes of the Consolidated Financial Statements filed with Form 10-K. Fully-diluted earnings per share were not materially dilutive and, accordingly, are not presented.
EX-3 6 (3) (VII) CERTIFICATE OF THE POWERS, DESIGNATION, PREFERENCES, RIGHTS AND LIMITATIONS OF CONVERTIBLE PREFERRED STOCK of FEDDERS CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware FEDDERS CORPORATION, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that, pursuant to the authority contained in Article Third of its Restated Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation at its meeting on July 9, 1996 duly adopted a resolution providing for the designation of a series of 10,111,569 shares of Convertible Preferred Stock, which resolution is as follows: RESOLVED, that pursuant to authority conferred upon the Board of Directors by the Restated Certificate of Incorporation, as amended, of the Corporation (hereinafter referred to as the "Certificate of Incorporation"), the Board of Directors does hereby authorize the designation of a series of Preferred Stock, par value $1.00 per share, to be known as the Convertible Preferred Stock and to the extent that the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, are not set forth in the Certificate of Incorporation, does hereby fix and herein state and express such voting powers, designations, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions thereof, as follows (all terms used herein which are defined in the Corporation's Certificate of Incorporation shall have herein the meanings provided therein): (A) DESIGNATION AND SIZE OF ISSUE The distinctive designation of the series shall be "Convertible Preferred Stock" (hereinafter referred to as this "Series"). The number of shares which shall constitute this Series shall be 10,111,569 shares. Each share of this Series shall have a par value of $1.00. (B) DIVIDENDS (1) The annual rate of dividends payable on each share of this Series shall be $0.38125. (2) Dividends shall be payable in cash, quarterly on the first day of April, July, October and January of each year, commencing October 1, 1996 (each such date hereinafter referred to as a "Dividend Payment Date"), except that if such date is not a Business Day (as hereinafter defined), then such dividend shall be payable on the next succeeding calendar day which is a Business Day. The amount of dividends payable on shares of this Series for each full quarterly dividend period shall be computed by dividing by four the annual rate per share set forth in Section (B)(1). Dividends payable on shares of this Series for any period less than a full quarterly period shall be computed on the basis of a 360-day year of twelve 30-day months. Dividends shall be payable to the record holders of shares of this Series as of the close of business on a date, not more than sixty (60) days preceding the payment date thereof, fixed by the Board of Directors of the Corporation. Dividends in arrears may be declared and paid at any time, without reference to any regular Dividend Payment Date, to record holders of shares of this Series as of the close of business on a date, not more than sixty (60) days preceding the payment date thereof, fixed by the Board of Directors of the Corporation. As used in this resolution, the term "Business Day" means a day other than Saturday or Sunday and other than a day on which banking institutions in New York, New York are authorized by law or executive order to close. (3) Dividends payable on shares of this Series shall be cumulative and shall accumulate from the date of issuance of such shares. Accumulations of dividends shall not bear interest. (4) Except as hereinafter provided, so long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock of the Corporation ranking junior to this Series as to dividends and upon liquidation (collectively, the "Junior Stock") shall be declared or paid or set aside for payment, and no other distribution shall be declared or made, upon the Junior Stock or upon any other stock of the Corporation ranking on a parity with this Series as to dividends or upon liquidation, nor shall any Junior Stock nor any other stock of the Corporation ranking on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for Junior Stock of the Corporation), unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid or contemporaneously are declared and paid through the Dividend Payment Date next preceding the payment date of such dividend or distribution or the date of such redemption, purchase or acquisition. When dividends are not paid in full upon the shares of this Series and any other stock of the Corporation ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other stock of the Corporation ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other stock bear to each other. Holders of shares of this Series shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (C) REDEMPTION (1) The Corporation, at the option of the Board of Directors, may redeem at any time or from time to time all or any part of the outstanding shares of this Series. The redemption price for each share of this Series called for redemption shall be $6.25 plus unpaid dividends to the Dividend Payment Date next preceding the date fixed for redemption (the "Redemption Price"). At the option of the Corporation, the Redemption Price may be paid, in whole or in part, in cash or in equivalent value of Class A Stock of the Corporation. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors, and the shares to be redeemed shall be determined by lot or by any other method as may be determined by the Board of Directors in its sole discretion to be equitable. (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the redemption date, to each record holder of the shares to be redeemed, at such holder's address as the same appears on the books of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the total number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the Redemption Price and the form in which the Redemption Price is to be paid; (iv) the place or places where certificates for such shares are to be surrendered for payment of the Redemption Price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; and (vi) the conversion rights of the shares to be redeemed, the period within which conversion rights may be exercised, and the conversion rate at the time applicable. (4) If notice shall have been given as provided in Section (C)(3) and the Corporation shall have provided moneys or an equivalent value of Class A Stock of the Corporation at the time and place specified for the payment of the Redemption Price pursuant to such notice, then from and after the redemption date, dividends on the shares of this Series so called for redemption shall cease to accrue, such shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the Redemption Price without interest) shall cease except that, if the Redemption Price is paid in an equivalent value of Class A Stock of the Corporation, the holders of shares of this Series so redeemed shall have rights as holders of Class A Stock of the Corporation. Upon surrender (in accordance with the notice) of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the Redemption Price. In case fewer than all the shares represented by any such certificate are to be redeemed, a new certificate shall be issued representing the unredeemed shares, without cost to the holder thereof. (5) Any shares of this Series which have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors. (6) Notwithstanding the foregoing provisions of this Section (C), no shares of this Series shall be redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series, unless the full cumulative dividends on all outstanding shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series shall have been paid or contemporaneously are declared and paid through the Dividend Payment Date next preceding the date of such redemption, purchase or other acquisition. (D) CONVERSION RIGHTS (1) Each holder of a share of this Series shall have the right, at any time, or, as to any share of this Series called for redemption, at any time prior to the close of business on the date fixed for such redemption, to convert such share into fully paid and nonassessable shares of Class A Stock of the Corporation at a rate of one share of Class A Stock, subject to adjustment as provided in this Section (D). (2) If any shares of this Series are surrendered for conversion subsequent to the record date preceding a Dividend Payment Date but on or prior to such Dividend Payment Date (except shares called for redemption on a redemption date between such record date and such Dividend Payment Date), the registered holder of such shares at the close of business on such record date shall be entitled to receive the dividend payable on such shares on such Dividend Payment Date notwithstanding the conversion thereof. Except as provided in this Section (D)(2), no adjustments in respect of or payments of dividends on shares surrendered for conversion or any dividend on the Class A Stock issued upon conversion shall be made upon the conversion of any shares of this Series. (3) The Corporation shall not be required, in connection with any conversion of shares of this Series, to issue a fraction of a share of its Class A Stock, but in lieu thereof the Corporation shall, subject to Section (D)(6)(f), make a cash payment (calculated to the nearest cent) equal to such fraction multiplied by the Closing Price per share of the Class A Stock on the last Trading Day prior to the date of conversion. (4) Any holder of shares of this Series electing to convert such shares into Class A Stock shall surrender the certificate or certificates for such shares at the office of the Transfer Agent therefor (or at such other place as the Corporation may designate by notice to the holders of shares of this Series) during regular business hours, duly endorsed to the Corporation or in blank, or accompanied by instruments of transfer to the Corporation or in blank, in form satisfactory to the Corporation, and shall give written notice to the Corporation at such office that such holder elects to convert such shares of this Series. The Corporation shall, as soon as practicable (subject to Section (D)(6)(f) hereof) after such deposit of certificates for shares of this Series, accompanied by the written notice above prescribed and the payment of cash in the amount required by Section (D)(10), issue and deliver at such office to the holder for whose account such shares were surrendered, or to his nominee, certificates representing the number of shares of Class A Stock and the cash, if any, to which such holder is entitled upon such conversion. (5) Conversion shall be deemed to have been made as of the date of surrender of certificates for the shares of this Series to be converted, and the giving of written notice and payment, as prescribed in Section (D)(4); and the person entitled to receive the Class A Stock issuable upon such conversion shall be treated for all purposes as the record holder of such Class A Stock on such date. The Corporation shall not be required to deliver certificates for shares of its Class A Stock while the stock transfer books for such stock or for this Series are duly closed for any purpose, but certificates for shares of Class A Stock shall be issued and delivered as soon as practicable after the opening of such books. (6) The conversion rate shall be adjusted from time to time as follows: (a) In case the Corporation shall, at any time or from time to time while any of the shares of this Series are outstanding, (i) pay a dividend in shares of its Class A Stock, (ii) subdivide its outstanding shares of Class A Stock, or (iii) combine its outstanding shares of Class A Stock into a smaller number of shares, the conversion rate in effect immediately prior to such action shall be adjusted so that the holder of any shares of this Series thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Corporation which such holder would have owned or have been entitled to receive immediately following such action had such shares of this Series been converted immediately prior thereto. An adjustment made pursuant to this Section (D)(6)(a) shall become effective retroactively to immediately after the opening of business on the day following the record date in the case of a dividend and shall become effective immediately after the opening of business on the day following the effective date in the case of a subdivision or combination. If, as a result of an adjustment made pursuant to this Section (D)(6)(a), the holder of any shares of this Series thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall determine the allocation of the adjusted conversion rate between or among shares of such classes of capital stock. (b) In case the Corporation shall, at any time or from time to time while any of the shares of this Series are outstanding, issue rights or warrants to all holders of shares of its Class A Stock entitling them to subscribe for or purchase shares of Class A Stock (or securities convertible into or exchangeable for Class A Stock) at a price per share less than the current market price per share of Class A Stock (as defined in Section (D)(6)(d)), at such record date, the conversion rate shall be adjusted so that it shall equal the rate determined by multiplying the conversion rate in effect immediately prior to the date of issuance of such rights or warrants by a fraction, the numerator of which shall be the number of shares of Class A Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Class A Stock offered for subscription or purchase, and the denominator of which shall be the number of shares of Class A Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such current market price. For the purposes of this Section (D)(6)(b), the issuance of rights or warrants to subscribe for or purchase securities convertible into Class A Stock shall be deemed to be the issuance of rights or warrants to purchase the shares of Class A Stock into which such securities are convertible at an aggregate offering price equal to the aggregate offering price of such securities plus the minimum aggregate amount (if any) payable upon conversion of such securities into shares of Class A Stock; provided, however, that if all of the shares of Class A Stock subject to such rights or warrants have not been issued when such rights or warrants expire, then the conversion price shall promptly be readjusted to the conversion price which would then be in effect had the adjustment upon the issuance of such rights or warrants been made on the basis of the actual number of shares of Class A Stock issued upon the exercise of such rights or warrants. An adjustment made pursuant to this Section (D)(6)(b) shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. (c) In case the Corporation shall, at any time or from time to time while any of the shares of this Series are outstanding, distribute to all holders of shares of its Class A Stock evidences of its indebtedness or securities or assets (excluding cash dividends payable out of consolidated earnings or retained earnings or dividends payable in shares of Class A Stock) or rights or warrants to subscribe for securities of the Corporation or any of its subsidiaries (excluding those referred to in Section (D)(6)(b)), then in each such case the conversion rate shall be adjusted so that it shall equal the rate determined by multiplying the conversion rate in effect immediately prior to the date of such distribution by a fraction, the numerator of which shall be the current market price per share (determined as provided in Section (D)(6)(d)) of the Class A Stock on the record date referred to below, and the denominator of which shall be such current market price per share of the Class A Stock less the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness or securities or assets so distributed or of such subscription rights or warrants applicable to one share of Class A Stock. Such adjustment shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such distribution. (d) For the purpose of any computation under Section (D)(6)(b) and (D)(6)(c), the "current market price" of a share of Class A Stock on any date shall be the average of the daily Closing Prices for 10 consecutive Trading Days before the day in question. (e) The Corporation shall be entitled to make such additional adjustments in the conversion price, in addition to those required by subsections D(6)(a), D(6)(b) and D(6)(c), as shall be necessary in order that any dividend or distribution in shares of stock, subdivision or combination of shares of Common Stock, issuance of rights or warrants, evidences of indebtedness or assets (other than cash dividends payable out of consolidated earnings or retained earnings) referred to above, shall not be taxable to the Stockholders. (f) In any case in which this Section (D)(6) shall require that an adjustment be made retroactively immediately following a record date, the Corporation may elect to defer (but only for five (5) Business Days following the filing of the statement referred to in Section (D)(6)(h)) issuing to the holder of any shares of this Series converted after such record date (i) the shares of Class A Stock and other capital stock of the Corporation issuable upon such conversion over and above (ii) the shares of Class A Stock and other capital stock of the Corporation issuable upon such conversion on the basis of the conversion rate prior to adjustment. (g) Notwithstanding any other provisions of this Section (D)(6), the Corporation shall not be required to make any adjustment of the conversion rate unless such adjustment would require an increase or decrease of at least 1% in such rate. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% in such rate. (h) Whenever an adjustment in the conversion rate is required, the Corporation shall forthwith place on file with its Transfer Agent a statement signed by its Chief Executive Officer, Chief Financial Officer or a Senior Vice President and by its Secretary, Assistant Secretary or Treasurer, stating the adjusted conversion rate determined as provided herein. Such statements shall set forth in reasonable detail such facts as shall be necessary to show the reason and the manner of computing such adjustment. Promptly after the adjustment of the conversion rate, the Corporation shall mail a notice thereof to each holder of shares of this Series. (i) The term "Class A Stock" as used in this resolution means the Corporation's Class A Stock, $1.00 par value, as the same exists at the date of filing of the Certificate of Designation relating to this Series or any other class of stock resulting from successive changes or reclassifications of such Class A Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. In the event that at any time as a result of an adjustment made pursuant to Section (D)(6)(a), the holder of any share of this Series thereafter surrendered for conversion shall become entitled to receive any shares of the Corporation other than shares of its Class A Stock, the conversion rate of such other shares so receivable upon conversion of any share shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Class A Stock contained in subparagraphs (a) through (g) of this Section (D)(6), and the provisions of Section (D)(1) through (5) and (7) through (11) with respect to the Class A Stock shall apply on like or similar terms to any such other shares. (7) In case of (a) any reclassification or change of outstanding shares of Class A Stock issuable upon conversion of shares of this Series (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) or (b) any consolidation or merger of the Corporation with one or more other corporations (other than a consolidation or merger in which the Corporation is the continuing corporation and which does not result in any reclassification or change of outstanding shares of Class A Stock issuable upon conversion of shares of this Series), or (c) any sale or conveyance to another corporation or other entity of all or substantially all of the property of the Corporation, then the Corporation, or such successor corporation or other entity, as the case may be, shall make appropriate provision so that the holder of each share of this Series then outstanding shall have the right to convert such share of this Series into the kind and amount of shares of stock or other securities and property receivable upon such consolidation, merger, sale, reclassification, change or conveyance by a holder of the number of shares of Class A Stock into which such shares of this Series might have been converted immediately prior to such consolidation, merger, sale, reclassification, change or conveyance, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section (D). The provisions of this Section (D)(7) shall apply similarly to successive consolidations, mergers, sales or conveyances. (8) Any shares of this Series which shall at any time have been converted shall, after such conversion, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. The Corporation shall at all times reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the shares of this Series, such number of its duly authorized shares of Class A Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of this Series; provided, however, that nothing contained herein shall preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Class A Stock which are held in the treasury of the Corporation. (9) If any shares of Class A Stock required to be reserved for purposes of conversion of shares of this Series hereunder require registration with or approval of any governmental authority before such shares may be issued upon conversion, the Corporation shall cause such shares to be duly registered or approved, as the case may be. The Corporation will endeavor to list the shares of Class A Stock required to be delivered upon conversion of shares of this Series prior to such delivery upon each national securities exchange upon which the outstanding Class A Stock is listed at the time of such delivery. (10) The Corporation shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Class A Stock on conversion of shares of this Series pursuant hereto. The Corporation shall not, however, be required to pay any tax which is payable in respect of any transfer involved in the issue or delivery of Class A Stock in a name other than that in which the shares of this Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. (11) Before taking any action that would result in the conversion price being less than the then par value of the Class A Stock, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Class A Stock at the conversion price. (12) In the event that all shares of Class A Stock are converted into Common Stock of the Corporation in accordance with Article Third (A)(IV) of the Certificate of Incorporation, all references in this Section (D) to the Class A Stock shall from and after the date of such conversion be deemed references to the Common Stock. (E) VOTING (1) The shares of this Series shall have the following voting rights: (a) If and whenever at any time or times dividends payable on shares of this Series shall have been in arrears and unpaid in an aggregate amount equal to or exceeding the amount of dividends payable thereon for six quarterly dividend periods, then the holders of shares of this Series shall have the right, voting separately as a class with any other series of Preferred Stock so entitled as provided in the certificate of designation of such series, to elect two directors of the Corporation, such directors to be in addition to the number of directors constituting the Board of Directors immediately prior to the accrual of such right, the remaining directors to be elected by the other class or classes of stock entitled to vote therefor at each meeting of stockholders held for the purpose of electing directors. So long as the Corporation's Board of Directors is divided into classes, the two directors of the Corporation so elected by the holders of shares of this Series and of such other series of Preferred Stock so entitled shall be elected to the two classes with the longest remaining terms. (b) Such voting right may be exercised initially either at a special meeting of the holders of the Preferred Stock having such voting right, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting. The right of the holders of this Series to vote for the election of such members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends accumulated on the shares of this Series shall have been paid in full, at which time such voting right of the holders of this Series shall terminate and, if such voting right of the holders of this Series and all other series of Prefer red Stock so entitled shall have terminated, subject to the requirements of the General Corporation Law of Delaware, the term of the directors elected pursuant to Section (E)(l)(a) shall terminate, subject to revesting on the basis set forth in Section (E)(1)(a). (c) At any time when such voting right shall have vested in holders of this Series, and if such right shall not already have been initially exercised, a proper officer of the Corporation shall, upon the written request of the record holders of 10% in number of shares of this Series then outstanding, addressed to the Secretary of the Corporation, call a special meeting of the holders of this Series and of any other class or classes of stock having voting power with respect to the election of such directors. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation or, if none, at a place designated by the Board of Directors. If such meeting is not called by the proper officers of the Corporation within 30 days after the personal service of such written request upon the Secretary of the Corporation, or within 35 days after mailing the same within the United States of America, by registered mail, addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the record holders of 10% in number of shares of this Series then outstanding may designate in writing one of their number to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the same place as is elsewhere provided for in this Section (E)(l)(c) or such other place as is selected by such designated stockholder. Any holder of shares of this Series who would be entitled to vote at such meeting shall have access to the stock books of the Corporation for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this Section (E)(l). Notwithstanding the provisions of this Section (E)(l), no such special meeting shall be called during a period within 90 days immediately preceding the date fixed for the next annual meeting of stockholders. (d) At any meeting held for the purpose of electing directors at which the holders of the Preferred Stock shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of fifty percent (50%) of the then outstanding shares of Preferred Stock having such right shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. At any such meeting or adjournment thereof (i) the absence of a quorum of the holders of the Preferred Stock having such right shall not prevent the election of directors other than those to be elected by the holders of the Preferred Stock, and the absence of a quorum or quorums of the holders of capital stock entitled to elect such other directors shall not prevent the election of directors to be elected by the holders of the Preferred Stock entitled to elect such directors and (ii) except as otherwise required by law, in the absence of a quorum of the holders of any class of stock entitled to vote for the election of directors, a majority of the holders present in person or by proxy of such class shall have the power to adjourn the meeting for the election of directors which the holders of such class are entitled to elect, from time to time, without notice other than announcement at the meeting, until a quorum is present. (e) Any vacancy in the Board of Directors in respect of a director elected by holders of Preferred Stock pursuant to the voting right created under this Section (E)(l) shall be filled by vote of the remaining director so elected, or if there be no such remaining director, by the holders of Preferred Stock entitled to elect such director or directors at a special meeting called in accordance with the procedures set forth in Section (E)(l)(c), or, if no such special meeting is called, at the next annual meeting of stockholders. (f) So long as any shares of this Series remain outstanding, the Corporation shall not, either directly or indirectly or through merger or consolidation with any other corporation, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of at least 66 2/3% in number of shares of this Series then outstanding, (i) amend, alter or repeal any of the provisions of the Certificate of Designation relating to this Series or the Certificate of Incorporation, or authorize any reclassification of the shares of this Series, so as in any such case to affect adversely the preferences, special rights or powers of the shares of this Series or (ii) authorize or create any class of stock ranking prior to or on a parity with the Corporation's authorized class of Preferred Stock as to dividends or distribution of assets on liquidation, create any series of the Corporation's authorized Preferred Stock ranking prior to the Preferred Stock as to dividends or distributions on liquidation or increase the authorized amount of the Corporation's Preferred Stock. (g) In exercising the voting rights set forth in this Section (E)(l), each share of this Series entitled to such voting right shall have equal voting power, notwithstanding any greater or lesser general voting powers of one or more series of Preferred Stock. (2) No consent of holders of shares of this Series shall be required for (i) the creation of any indebtedness of any kind of the Corporation, (ii) the authorization or issuance of any class of stock of the Corporation junior to the shares of this Series as to dividends and upon liquidation, dissolution or winding up of the Corporation or (iii) subject to Section (E)(l)(f), the issuance of any shares of Preferred Stock. (F) LIQUIDATION RIGHTS (1) Upon the dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, before any payment or distribution shall be made on the Junior Stock, the amount of $6.25 per share, plus all accumulated and unpaid dividends to the date of final distribution. (2) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (F). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (F), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section (F)(l), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (G) PRIORITY (1) For purposes of this resolution, any stock of any class or series of the Corporation shall be deemed to rank: (i) Prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, as the case may be, in preference or priority to the holders of shares of this Series; (ii) On a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share or sinking fund provisions, if any, are different from those of this Series, if the holders of such stock are entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (iii) Junior to shares of this Series, either as to dividends or upon liquidation, if such class or series shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, as the case may be, in preference or priority to the holders of shares of such class or series. IN WITNESS WHEREOF, Fedders Corporation has caused this certificate to be signed and attested this 13th day of August, 1996. FEDDERS CORPORATION By/s/S.A. Muscarnera S. A. Muscarnera Title: Senior Vice President Attest:/s/Robert N. Edwards Robert N. Edwards Assistant Secretary CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF FEDDERS CORPORATION The undersigned hereby certifies as follows: 1. The name of the corporation is Fedders Corporation (the "Corporation"). 2. The Certificate of Incorporation of the Corporation is hereby amended by striking the first paragraph of Article THIRD thereof and by substituting in lieu thereof the following: THIRD. The authorized number of shares of stock of all classes which the Corporation shall have authority to issue is 162,500,000, consisting of 80,000,000 shares of Common Stock having a par value of $1.00 per share, 60,000,000 shares of Class A Stock having a par value of $1.00 per share, 7,500,000 shares of Class B Stock having a par value of $1.00 per share and 15,000,000 shares of Preferred Stock having a par value of $1.00 per share. 3. The amendment of the Certificate of Incorporation of the Corporation herein certified was duly adopted pursuant to the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the undersigned has executed this Certificate this 13th day of August, 1996. Attest /s/Robert N. Edwards /s/S.A. Muscarnera Robert N. Edwards S.A. Muscarnera Assistant Secretary Senior Vice President CERTIFICATE OF MERGER OF NYCOR, INC. INTO FEDDERS CORPORATION Pursuant to Section 251 of the General Corporation Law of the State of Delaware, the undersigned corporation, which is organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the General Corporation Law), DOES HEREBY CERTIFY THAT: FIRST: The constituent corporations are NYCOR, Inc., a Delaware corporation, and Fedders Corporation, a Delaware corporation. SECOND: The Agreement and Plan of Merger, dated November 30, 1995, as amended by Amendment No. 1 dated March 15, 1996 and Amendment No. 2 dated as of April 10, 1996 (as so amended, the Merger Agreement), between NYCOR, Inc. and Fedders Corporation has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 251 of the General Corporation Law of the State of Delaware. THIRD: The surviving corporation is Fedders Corporation, which will continue its existence as said surviving corporation. FOURTH: the Certificate of Incorporation of Fedders Corporation, as now in force and effect, shall continue to be the Certificate of Incorporation of said surviving corporation without any change effected as a result of the merger, until such Certificate of Incorporation may be amended and changed pursuant to the provisions of the General Corporation Law. FIFTH: The executed Merger Agreement is on file at the principal place of business of Fedders Corporation, 505 Martinsville Road, Liberty Corner, New Jersey 07938. SIXTH: A copy of the Merger Agreement will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation. SEVENTH: This Certificate of Merger shall be effective at 2:00 p.m. on August 13, 1996. IN WITNESS WHEREOF, the undersigned has caused this instrument to be duly executed by its authorized officers. Dated August 13, 1996 FEDDERS CORPORATION By:/s/S.A. Muscarnera S. A. Muscarnera Senior Vice President and Secretary [SEAL] Attest: By:/s/Robert N. Edwards Robert N. Edwards Assistant Secretary CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF FEDDERS CORPORATION The undersigned hereby certifies as follows: 1. The name of the corporation is Fedders Corporation (the "Corporation"). 2. The Certificate of Incorporation of the Corporation is hereby amended by striking Article THIRD thereof and by substituting in lieu thereof the following: THIRD. The aggregate number of shares of stock of all classes which the Corporation shall have authority to issue is 102,500,000, consisting of 60,000,000 shares of Common Stock having a par value of $1.00 per share, 30,000,000 shares of Class A Stock having a par value of $1,000 per share, 7,500,000 shares of Class B Stock having a par value of $1.00 per share and 5,000,000 shares of Preferred Stock having a par value of $1.00 per share. The powers, preferences and the relative, participating, optional and other rights and the qualifications, limitations and restrictions thereof, of each class of stock, and the express grant of authority to the Board of Directors to fix by resolution the designations and the powers, preferences and rights of each share of Preferred Stock and the qualifications, limitations and restrictions thereof which are not fixed by this Certificate of Incorporation, are as follows: A. COMMON STOCK, CLASS A STOCK AND CLASS B STOCK. I. Dividends, etc. Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Certificate of Incorporation, as amended from time to time, holders of Common Stock, Class A Stock and Class B Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation as may be declared thereon by the Board of Directors from time to timeout of assets or funds of the Corporation legally available therefor, provided, that in the case of cash dividends, if at any time a cash dividend is paid on the Common Stock, a cash dividend of equal amount shall be paid on the Class A Stock and a cash dividend will also be paid on the Class B Stock in an amount per share of Class B Stock equal to 90% of the amount of the cash dividend paid on each share of the Common Stock (rounded down, if necessary, to the nearest one-hundredth of a cent), and provided, further, that in the case of dividends or other distributions payable in stock of the Corporation other than Preferred Stock, including distributions pursuant to stock splits or divisions of stock of the Corporation other than Preferred Stock, which occur after the initial issuance of shares of Class A Stock and Class B Stock by the Corporation, unless the dividend or distribution is solely of shares of Class A Stock, in which case a dividend or distribution payable solely in shares of Class A Stock may be made with respect to shares of Common Stock, Class A Stock and Class B Stock, only shares of Common Stock shall be distributed with respect to Common Stock, only shares of Class A Stock and only shares of Class B Stock shall be distributed with respect to Class B Stock, in each case, in an amount per share equal to the amount per share paid with respect to the Common Stock, and that, in the case of any combination, reclassification or subdivision of the Common Stock, the shares of Class A Stock and Class B Stock shall also be combined, reclassified or subdivided so that the number of shares of Class A Stock and Class B Stock outstanding immediately following such combination, reclassification or subdivision shall bear the same relationship to the number of shares outstanding immediately prior to such combination, reclassification or subdivision as the number of shares of Common Stock outstanding immediately following such combination, reclassification or subdivision bears to the number of shares of Common Stock outstanding immediately prior to such combination, reclassification or subdivision. II. Voting. (a) At every meeting of the stockholders, every holder of Common Stock shall be entitled to one (1) vote in person or by proxy for each share of Common Stock standing in his name on the transfer books of the Corporation and every holder of Class B Stock shall be entitled to one (1) vote in person or by proxy for each share of Class B Stock standing in his name on the transfer books of the Corporation, except that each holder of Class B Stock shall be entitled to ten (10) votes per share on the election of any directors of any stockholders' meeting (i) if more than 15% of the shares of Common Stock outstanding on the record date for such meeting are beneficially owned by a person or group of persons acting in concert (unless such person or group is also the beneficial owner of a majority of the shares of Class B Stock on such record date), or (ii) if a nomination for the Board of Directors is made by a person or group of persons acting in concert (other than the Board of Directors), provided that such nomination is not made by one or more holders of Class B Stock, acting in concert with each other, who beneficially own more than 15% of the shares of Class B Stock outstanding on such record date. The holders of Class A Stock shall not be entitled to vote at any meeting of the stockholders or otherwise, except as may be specifically required by applicable law. (b) The provisions of this Certificate of Incorporation shall not be modified, revised, altered or amended, repealed or rescinded in whole or in part, without (i) the affirmative vote of the holders of a majority of the shares of the Common Stock and of a majority of the shares of the Class B Stock, each voting separately as a class, and (ii) additionally with respect to Article Eighth the vote required by Article Eighth. (c) The Corporation may not effect or consummate: (1) any merger or consolidation of the Corporation with or into any other corporation; (2) any sale, lease, exchange or other disposition of all or substantially all of the assets of the Corporation to or with any other person; or (3) any dissolution of the Corporation; unless and until such transaction is authorized by the vote, if any, required by Article Eighth of this Certificate of Incorporation and by Delaware law; and unless and until such transaction is authorized by a majority of the votes entitled to be cast by the shares of Common Stock and of Class B Stock entitled to vote, each voting separately as a class, but the foregoing shall not apply to any merger or other transaction described in the preceding subparagraphs (1) and (2) if the other party to the merger or other transaction is a Subsidiary of the Corporation. For purposes of this paragraph (c) a "Subsidiary" is any corporation more than 50% of the voting securities of which are owned directly or indirectly by the Corporation; and a "person" is any individual, partnership, corporation or entity. (d) Following the initial issuance of shares of Class B Stock, the Corporation may not effect the issuance of any additional shares of Class B Stock (except in connection with stock splits and stock dividends) unless and until such issuance is authorized by the holders of a majority of the voting power of the shares of Common Stock and of Class B Stock entitled to vote, each voting separately as a class. (e) Every reference in this Certificate of Incorporation to a majority or other proportion of shares of stock shall refer to such majority or other proportion of the votes entitled to be cast by such shares. (f) Except as may be otherwise required by law or by this Article Third the holders of Common Stock and Class B Stock shall vote together as a single class, subject to any voting rights which may be granted to holders of Preferred Stock. III. Transfer. (a) No person holding shares of Class B Stock of record (hereinafter called a "Class B Holder") may transfer, and the Corporation shall not register the transfer of, such shares of Class B Stock, as Class B Stock, whether by sale, assignment, gift, bequest, appointment or otherwise, except to a Permitted Transferee and any purported transfer of shares not permitted hereunder shall result in the conversion of such shares into Common Stock as provided by subsection (d) of this Section III. A Permitted Transferee shall mean, with respect to each person from time to time shown as the record holder of shares of Class B Stock: (i) In the case of a Class B Holder who is a natural person: (A) The spouse of such Class B Holder, any lineal descendant of a parent of such Class B Holder, and any spouse of such lineal descendant (which lineal descendants, their spouses, the Class B Holder, and his or her spouse are herein collectively referred to as "Class B Holder's Family Members"); (B) The trustee of a trust (including a voting trust) principally for the benefit of such Class B Holder and/or one or more of his or her Permitted Transferees described in each subclause of this clause (i) other than this subclause (B), provided that such trust may also grant a general or special power of appointment to one or more of such Class B Holder's Family Members and may permit trust assets to be used to pay taxes, legacies and other obligations of the trust or of the estates of one or more of such Class B Holder's Family Members payable by reason of the death of any of such Class B Holder's Family Members; (C) Any organization contributions to which are deductible for federal income, estate or gift tax purposes or any split-interest trust described in Section 4947 of the Internal Revenue Code, as it may from time to time be amended (hereinafter called a "Charitable Organization"); (D) A corporation, if a majority of the beneficial ownership of outstanding capital stock of such corporation which is entitled to vote for the election of directors is owned by, or a partnership if a majority of the beneficial ownership of the partnership is held by, the Class B Holder or his or her Permitted Transferees determined under this clause (i), provided that if by reason of any change in the ownership of such stock or partnership interests, such corporation or partnership would no longer qualify as a Permitted Transferee, all shares of Class B Stock then held by such corporation or partnership shall, upon the election of the Corporation given by written notice to such corporation or partnership, without further act on anyone's part, be converted into shares of Common Stock effective upon the date of the giving of such notice, and stock certificates formerly representing such shares of Class B Stock shall thereupon and thereafter be deemed to represent the like number of shares of Common Stock; and (E) The estate of such Class B Holder. (ii) In the case of a Class B Holder holding the share of Class B Stock in question as trustee pursuant to a trust (other than a Charitable Organization or a trust described in clause (iii) below), "Permitted Transferee" means (A) any person transferring Class B Stock to such trust and (B) any Permitted Transferee of any such transferor determined pursuant to clause (i) above. (iii) In the case of a Class B Holder holding the shares of Class B Stock in question as trustee pursuant to a trust (other than a Charitable Organization) which was irrevocable on the date of initial issuance to such Class B Holder (hereinafter in this Section III called the "Record Date"). "Permitted Transferee" means (A) any person to whom or for whose benefit principal may be distributed either during or at the end of the term of such trust whether by power of appointment or otherwise and (B) any Permitted Transferee of any such person determined pursuant to clause (i) above. (iv) In the case of a Class B Holder which is a Charitable Organization holding record and beneficial ownership of the shares of Class B Stock in question, "Permitted Transferee" means any Class B Holder. (v) In the case of a Class B Holder which is a corporation or partnership (other than a Charitable Organization) acquiring record and beneficial ownership of the shares of Class B Stock in question upon its initial issuance by the Corporation, "Permitted Transferee" means (A) any partner of such partnership, or stockholder of such corporation, on the Record Date, (B) any person transferring such shares of Class B Stock to such corporation or partnership, and (C) any Permitted Transferee of any such person, partner, or stockholder referred to in subclauses (A) and (B) of this clause (v), determined under clause (i) above. (vi) In the case of a Class B Holder which is a corporation or partnership (other than a Charitable Organization or a corporation or partnership described in clause (v) above) holding record and beneficial ownership of the shares of Class B Stock in question, "Permitted Transferee" means (A) any person transferring such shares of Class B Stock to such corporation or partnership and (B) any Permitted Transferee of any such transferor determined under clause (i) above. (vii) In the case of a Class B Holder which is the estate of a deceased Class B Holder, or which is the estate of a bankrupt or insolvent Class B Holder, which holds record and beneficial ownership of the shares of Class B Stock in question, "Permitted Transferee" means a Permitted Transferee of such deceased, bankrupt or insolvent Class B Holder as determined pursuant to clause (i), (ii), (iii), (iv), (v) or (vi) above, as the case may be. (b) Notwithstanding anything to the contrary set forth herein, any Class B Holder may pledge such Class B Holder's shares of Class B Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares shall not be transferred to or registered in the name of the pledgee and shall remain subject to the provisions of this Section III. In the event of foreclosure or other similar action by the pledgee, such pledged shares of Class B Stock may only be transferred to a Permitted Transferee of the pledgor or converted into shares of Common Stock, as the pledgee may elect. (c) For purposes of this Section III: (i) The relationship of any person that is derived by or through legal adoption shall be considered a natural one. (ii) Each joint owner of shares of Class B Stock shall be considered a "Class B Holder" of such shares. (iii) A minor for whom shares of Class B Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Class B Holder of such shares. (iv) Unless otherwise specified, the term "person" means both natural persons and legal entities. (v) Without derogating from the election conferred upon the Corporation pursuant to subclause (D) of clause (i) above, each reference to a corporation shall include any successor corporation resulting from merger or consolidation and each reference to a partnership shall include any successor partnership resulting from the death or withdrawal of a partner. (d) Any transfer of shares of Class B Stock not permitted hereunder shall result in the conversion of the transferee's shares of Class B Stock into shares of Common Stock, effective the date on which certificates representing such shares are presented for transfer on the books of the Corporation. The Corporation may, in connection with preparing a list of stockholders entitled to vote at any meeting of stockholders, or as a condition to the transfer or the registration of shares of Class B Stock on the Corporation's books, require the furnishing of such affidavits or other proof as it deems necessary to establish that any person is the beneficial owner of shares of Class B Stock or is a Permitted Transferee. (e) At any time when the number of outstanding shares of Class B Stock as reflected on the stock transfer books of the Corporation falls below 5% of the aggregate number of the issued and outstanding shares of the Common Stock and Class B Stock of the Corporation, or the Board of Directors and the holders of a majority of the outstanding shares of Class B Stock approve the conversion of all of the Class B Stock into Common Stock, then, immediately upon the occurrence of either such event, the outstanding shares of Class B Stock shall be converted into shares of Common Stock. In the event of such a conversion, certificates formerly representing outstanding shares of Class B Stock shall thereupon and thereafter be deemed to represent the like number of shares of Common Stock. (f) Shares of Class B Stock shall be registered in the names of the beneficial owners thereof and not in "street" or "nominee" name. For this purpose, a "beneficial owner" of any shares of Class B Stock shall mean a person who, or an entity which, possesses the power, either singly or jointly, to direct the voting or disposition of such shares. The Corporation shall note on the certificates for shares of Class B Stock the restrictions on transfer and registration of transfer imposed by this Section III. IV. Conversion Rights. (a) Subject to the terms and conditions of this Section IV, all outstanding shares of Class A Stock shall be converted into fully paid and nonassessable shares of Common Stock, immediately and without any action on the part of the holder of such stock, in the event the Class B Stock is converted into Common Stock in accordance with the provisions of subsection (e) of Section III of this Article Third. Upon conversion, the shares of Common Stock issued shall be subject to the same dividends or distributions theretofore declared but not paid or issued on the Class A Stock immediately prior to conversion but the Corporation shall not make any payment or adjustment on account of any dividends or distributions declared but not paid or issued on the Common Stock on such conversion. In the event of such conversion, certificates formerly representing shares of Class A Stock shall thereupon and thereafter be deemed to represent the like number of shares of Common Stock. (b) Subject to the terms and conditions of this Section IV, each share of Class B Stock shall be convertible at any time or from time to time, at the option of the respective holder thereof, at the office of any transfer agent for Class B Stock, and at such other place or places, if any, as the Board of Directors may designate, or, if the Board of Directors shall fail so to designate, at the principal office of the Corporation (attention of the Secretary of the Corporation), into one (1) fully paid and nonassessable share of Common Stock. Upon conversion, the Corporation shall make no payment or adjustment on account of dividends accrued or in arrears on Class B Stock surrendered for conversion or on account of any dividends on the Common Stock issuable on such conversion. Before any holder of Class B Stock shall be entitled to convert the same into Common Stock, he shall surrender the certificate or certificates for such Class B Stock at the office of said transfer agent (or other place as provided above), which certificate or certificates, if the Corporation shall so request, shall be duly endorsed to the Corporation or in blank or accompanied by proper instruments of transfer to the Corporation or in blank (such endorsements or instruments of transfer to be in form satisfactory to the Corporation), and shall give written notice to the Corporation at said office that he elects so to convert said Class B Stock in accordance with the terms of this Section IV, and shall state in writing therein the name or names in which he wishes the certificate or certificates for Common Stock to be issued. Every such notice of election to convert shall constitute a contract between the holder of such Class B Stock and the Corporation, whereby the holder of such Class B Stock shall be deemed to subscribe for the amount of Common Stock which he shall be entitled to receive upon such conversion, and, in satisfaction of such subscription, to deposit the Class B Stock to be converted and to release the Corporation from all liability thereunder, and thereby the Corporation shall be deemed to agree that the surrender of the certificate or certificates therefor and the extinguishment of liability thereon shall constitute full payment of such subscription for Common Stock to be issued upon such conversion. The Corporation will as soon as practicable after such deposit of a certificate or certificates for Class B Stock, accompanied by the written notice and the statement above prescribed, issue and deliver at the office of said transfer agent (or other place as provided above) to the person for whose account such Class B Stock was so surrendered, or to his nominee or nominees, a certificate or certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid. Subject to the provisions of subsection (d) of this Section IV, such conversion shall be deemed to have been made as of the date of such surrender of the Class B Stock to be converted; and the person or persons entitled to receive the Common Stock issuable upon conversion of such Class B Stock shall be treated for all purposes as the record holder or holders of such Common Stock on such date. (c) The issuance of certificates for shares of Common Stock upon conversion of shares of Class A Stock and Class B Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of the share or shares of Class A Stock or Class B Stock converted, the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid. (d) The Corporation shall not be required to convert Class B Stock, and no surrender of Class B Stock shall be effective for that purpose, while the stock transfer books of the Corporation are closed for any purpose; but the surrender of Class B Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such Class B Stock was surrendered. (e) The Corporation covenants that it will at all times reserve and keep available, solely for the purpose of issue upon conversion of the outstanding shares of Class A Stock and Class B Stock, such number of shares of Common Stock as shall be issuable upon the conversion of all such outstanding shares, provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Class A Stock and Class B Stock by delivery of shares of Common Stock which are held in the treasury of the Corporation. The Corporation covenants that if any shares of Common Stock required to be reserved for purposes of conversion hereunder require registration with or approval of any governmental authority under any federal or state law before such shares of Common Stock may be issued upon conversion, the Corporation will use its best efforts to cause such shares to be duly registered or approved, as the case may be. The Corporation will endeavor to list the shares of Common Stock required to be delivered upon conversion prior to such delivery upon each national securities exchange, if any, upon which the outstanding Common Stock is listed at the time of such delivery. The Corporation covenants that all shares of Common Stock which shall be issued upon conversion of the shares of Class A Stock and Class B Stock, will, upon issue, be fully paid and nonassessable and not entitled to any pre-emptive rights. V. Liquidation Rights. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of each series of Preferred Stock shall be entitled to receive, out of the net assets of the Corporation, an amount for each share equal to the amount fixed and determined by the Board of Directors in any resolution or resolutions providing for the issuance of any particular series of Preferred Stock, plus an amount equal to all dividends accrued and unpaid on shares of such series to the date fixed for distribution, and no more, before any of the assets of the Corporation shall be distributed or paid over to the holders of Common Stock or Class A Stock. After payment in full of said amounts to the holders of Preferred Stock of all series, the remaining assets and funds of the Corporation shall be divided among and paid ratably to the holders of Common Stock and Class A Stock (including those persons who shall become holders of Common Stock by reason of converting their shares of Class B Stock). If, upon such dissolution, liquidation or winding up, the assets of the Corporation distributable as aforesaid among the holders of Preferred Stock of all series shall be insufficient to permit full payment to them of said preferential amounts, then such assets shall be distributed among such holders, first in the order of their respective preferences, and second, as to such holders who are next entitled to such assets and who rank equally with regard to such assets, ratably in proportion to the respective total amounts which they shall be entitled to receive as provided in this Section V. A merger or consolidation of the Corporation with or into any other corporation or a sale or conveyance of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to stockholders) shall not be deemed to be a voluntary or involuntary liquidation or dissolution or winding up of the Corporation within the meaning of this Section V. VI. Change of Control. In the event of a merger or consolidation of the Corporation with or into another entity (whether or not the Corporation is the surviving entity), the holders of Class A Stock shall be entitled to receive the same per share consideration in such merger or consolidation as is received by the holders of Common Stock, if any. B. PREFERRED STOCK. The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article Third, to provide for the issuance of the preferred shares in series, and by filing a certificate pursuant to the General Corporation Law of Delaware, to establish the number of shares to be included in each such series, and to fix the designations, relative rights, preferences and limitations of the shares of each such series. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following: (a) The number of shares constituting that series and the distinctive designations of that series; (b) The dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends of shares of that series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law and, if so, the terms of such voting rights; (d) Whether that series shall have conversion privileges and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; (e) Whether or not the shares of that series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; (h) Any other relative rights, preferences and limitations of that series. Dividends on outstanding preferred shares shall be declared and paid, or set apart for payment, before any dividends shall be declared and paid, or set apart for payment, on the common shares with respect to the dividend period. Any and all such shares issued, and for which the full consideration has been paid or delivered shall be deemed fully paid stock and the holder of such shares shall not be liable for any further call or assessment or any other payment thereon." 3. The amendment of the Certificate of Incorporation of the Corporation herein certified was duly adopted pursuant to the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the undersigned has executed this Certificate this 21st day of April, 1992. Attest /s/ Kent E. Hansen /s/ S.A. Muscarnera Kent E. Hansen S.A. Muscarnera Assistant Secretary Senior Vice President CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF FEDDERS CORPORATION Fedders Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), does hereby certify as follows: 1. The Certificate of Incorporation of the Corporation is hereby amended by adding thereto a new Article ELEVENTH which reads in its entirety as follows: ELEVENTH. The Board of Directors of the Corporation shall have the power to amend the By-Laws of the Corporation." 2. This Amendment was duly adopted by a vote of the stockholders of the Corporation in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, Fedders Corporation has caused this Certificate to be signed and attested by its duly authorized officers this 31st day of July, 1987. FEDDERS CORPORATION Attest: /s/ Joseph Giordano By:/s/ C. A. Keen Joseph Giordano C. A. Keen Assistant Secretary Vice President and Treasurer CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF FEDDERS CORPORATION Fedders Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), does hereby certify as follows: 1. The Certificate of Incorporation of the Corporation is hereby amended by adding thereto a new Article TENTH which reads in its entirety as follows: "TENTH. A director of the Corporation shall not personally be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation law, or (iv) for any transaction from which the director derived an improper personal benefit." 2. This Amendment was duly adopted by a vote of the stockholders of the Corporation in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, Fedders Corporation has caused this Certificate to be signed and attested by its duly authorized officers this 26th day of June, 1987. FEDDERS CORPORATION Attest: /s/ Joseph Giordano By:/s/ C.A. Keen Joseph Giordano C. A. Keen Assistant Secretary Vice President and Treasurer CERTIFICATE OF THE POWERS, DESIGNATION, PREFERENCES, RIGHTS AND LIMITATIONS OF $1.75 Convertible Exchangeable Preferred Stock of FEDDERS CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware FEDDERS CORPORATION, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that, pursuant to the authority contained in Article Third of its Restated Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation at its meeting on January 27, 1987 and the Executive Committee of such board at its meeting on March 19, 1987 duly adopted a resolution providing for the issuance of a series of 1,725,000 shares of $1.75 Convertible Exchangeable Preferred Stock, which resolution is as follows: RESOLVED, that pursuant to authority conferred upon the Board of Directors by the Restated Certificate of Incorporation, as amended, of the Corporation (hereinafter called the "Certificate of Incorporation"), the Board of Directors does hereby authorize the issuance of a series of Preferred Stock, par value $1.00 per share, to be known as the $1.75 Convertible Exchangeable Preferred Stock and to the extent that the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, are not set forth in the Certificate of Incorporation, does hereby fix and herein state and express such voting powers, designations, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions thereof, as follows (all terms used herein which are defined in the Corporation's Certificate of Incorporation shall have herein the meanings provided therein): (A) DESIGNATION AND SIZE OF ISSUE The distinctive designation of the series shall be "$1. 75 Convertible Exchangeable Preferred Stock" (hereinafter referred to as this "Series"). The number of shares which shall constitute this Series shall be 1,725,000 shares. Each share of this Series shall have a par value of $1.00. (B) DIVIDENDS (1) The annual rate of dividends payable on each share of this Series shall be $1.75. (2) Dividends shall be payable in cash, quarterly on the first day of March, June, September and December of each year, commencing June 1, 1987 (each such date hereinafter referred to as a "Dividend Payment Date"), except that if such date is not a Business Day (as hereinafter defined), then such dividend shall be payable on the next succeeding calendar day which is a Business Day. The amount of dividends payable on shares of this Series for each full quarterly dividend period shall be computed by dividing by four the annual rate per share set forth in Section (B)(1). Dividends payable on shares of this Series for any period less than a full quarterly period shall be computed on the basis of a 360-day year of twelve 30-day months, Dividends shall be payable to the record holders of shares of this Series as of the close of business on a date, not more than sixty (60) days preceding the payment date thereof, fixed by the Board of Directors of the Corporation. Dividends in arrears may be declared and paid at any time, without reference to any regular Dividend Payment Date, to record holders of shares of this Series as of the close of business on a date, not more than sixty (60) days preceding the payment date thereof, fixed by the Board of Directors of the Corporation. As used in this resolution, the term "Business Day" means a day other than Saturday or Sunday and other than a day on which banking institutions in New York, New York are authorized by law or executive order to close. (3) Dividends payable on shares of this Series shall be cumulative and shall accumulate from March 27, 1987. Accumulations of dividends shall not bear interest. (4) Except as hereinafter provided, so long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock of the Corporation ranking junior to this Series as to dividends and upon liquidation (collectively, the "Junior Stock")) shall be declared or paid or set aside for payment, and no other distribution shall be declared or made, upon the Junior Stock or upon any other stock of the Corporation ranking on a parity with this Series as to dividends or upon liquidation, nor shall any Junior Stock nor any other stock or the Corporation ranking on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for Junior Stock of the Corporation), unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid or contemporaneously are declared and paid through the last Dividend Payment Date. When dividends are not paid in full upon the shares of this Series and any other stock of the Corporation ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other stock of the Corporation ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other stock bear to each other. Holders of shares of this Series shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (C) REDEMPTION (1) The Corporation, at the option of the Board of Directors, may, subject to the provisions of Sections (C)(2) and (C)(8) hereof, redeem at any time or from time to time all or any part of the outstanding shares of this Series. The redemption price for each share of this Series called for redemption during the periods set forth below shall be the amount set forth opposite such period. If Redeemed During the Twelve-Month Redemption Period Beginning March 1, Price Per Share 1987 $26.750 1988 26.575 1989 26.400 1990 26.225 1991 26.050 1992 25.875 1993 25.700 1994 25.525 1995 25.350 1996 25.175 and $25 if redeemed on or after March 1, 1997 together in each case with accumulated and unpaid dividends to the date fixed for redemption. (2) Notwithstanding the provisions of Section (C)(1) above, the Corporation may not redeem any shares of this Series prior to March 1, 1990 unless the Closing Price (as determined in Section (C)(3)) of the Corporation's Common Stock shall have equaled or exceeded 140% of the then applicable conversion price per share (as fixed or determined in accordance with Section (D)) for at least twenty (20) Trading Days (as hereinafter defined) within thirty (30) consecutive Trading Days ending within five Trading Days prior to the date notice of redemption is given. For purposes of this resolution, Trading Day means, so long as the Common Stock is listed or admitted to trading on the New York Stock Exchange (or any successor to such Exchange), a day on which the New York Stock Exchange (or such successor) is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on such Exchange, a day on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a day on which any New York Stock Exchange member firm is open for the transaction of business. (3) For purposes of this resolution, the Closing Price of the Corporation's Common Stock shall be the last sale price as shown on the Composite Tape of the New York Stock Exchange, or, in case no such sale takes place on such day, the average of the closing bid and asked prices on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if it is not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors of the Corporation for such purpose (other than the Corporation or a subsidiary thereof). (4) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors, and the shares to be redeemed shall be determined by lot or by any other method as may be determined by the Board of Directors in its sole discretion to be equitable. (5) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the redemption date, to each record holder of the shares to be redeemed, at such holder's address as the same appears on the books of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the total number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; and (vi) the conversion rights of the shares to be redeemed, the period within which conversion rights may be exercised, and the conversion rate at the time applicable. (6) If notice shall have been given as provided in Section (C)(5) and the Corporation shall have provided moneys at the time and place specified for the payment of the redemption price pursuant to such notice, then from and after the redemption date, dividends on the shares of this Series so called for redemption shall cease to accrue, such shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price without interest) shall cease. Upon surrender (in accordance with the notice) of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price set forth in Section (C)(1). In case fewer than all the shares represented by any such certificate are to be redeemed, a new certificate shall be issued representing the unredeemed shares, without cost to the holder thereof. (7) Any shares of this Series which have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors. (8) Notwithstanding the foregoing provisions of this Section (C), unless the full cumulative dividends on all outstanding shares of this Series and any other Preferred Stock ranking on a parity with this Series shall have been paid or contemporaneously are declared and paid through the last Dividend Payment Date, no shares of this Series shall be redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series. (D) CONVERSION RIGHTS (1) Each holder of a share of this Series shall have the right, at any time, or, as to any share of this Series called for redemption or exchange, at any time prior to the close of business on the date fixed for such redemption or exchange, to convert such share into fully paid and nonassessable shares of Common Stock of the Corporation at a rate of 2.632 shares of Common Stock for each share of this Series, subject to adjustment as provided in this Section (D). For purposes of this resolution, except as the context may otherwise require, the relationship between the "conversion rate" and the "conversion price" shall be established by formula such that the conversion price shall equal $25 divided by the conversion rate. (2) If any shares of this Series are surrendered for conversion subsequent to the record date preceding a Dividend Payment Date but on or prior to such Dividend Payment Date (except shares called for redemption on a redemption date between such record date or Dividend Payment Date), the registered holder of such shares at the close of business on such record date shall be entitled to receive the dividend payable on such shares on such Dividend Payment Date notwithstanding the conversion thereof. Except as provided in this Section (D)(2), no adjustments in respect of or payments of dividends on shares surrendered for conversion or any dividend on the Common Stock issued upon conversion shall be made upon the conversion of any shares of this Series. (3) The Corporation shall not be required, in connection with any conversion of shares of this Series, to issue a fraction of a share of its Common Stock, but in lieu thereof the Corporation shall, subject to Section (D)(6)(f), make a cash payment (calculated to the nearest cent) equal to such fraction multiplied by the Closing Price of the Common Stock on the last Trading Day prior to the date of conversion. (4) Any holder of shares of this Series electing to convert such shares into Common Stock shall surrender the certificate or certificates for such shares at the office of the Transfer Agent therefor (or at such other place as the Corporation may designate by notice to the holders of shares of this Series) during regular business hours, duly endorsed to the Corporation or in blank, or accompanied by instruments of transfer to the Corporation or in blank, in form satisfactory to the Corporation, and shall give written notice to the Corporation at such office that such holder elects to convert such shares of this Series. The Corporation shall, as soon as practicable (subject to Section (D)(6)(f) hereof) after such deposit of certificates for shares of this Series, accompanied by the written notice above prescribed and the payment of cash in the amount required by Section (D)(2), issue and deliver at such office to the holder for whose account such shares were surrendered, or to his nominee, certificates representing the number of shares of Common Stock and the cash, if any, to which such holder is entitled upon such conversion. (5) Conversion shall be deemed to have been made as of the date of surrender of certificates for the shares of this Series to be converted, and the giving of written notice and payment, as prescribed in Section (D)(2) and (D)(4); and the person entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such Common Stock on such date. The Corporation shall not be required to deliver certificates for shares of its Common Stock while the stock transfer books for such stock or for this Series are duly closed for any purpose, but certificates for shares of Common Stock shall be issued and delivered as soon as practicable after the opening of such books. (6) The conversion rate shall be adjusted from time to time as follows: (a) In case the Corporation shall, at any time or from time to time while any of the shares of this Series are outstanding, (i) pay a dividend in shares of its Common Stock, (ii) subdivide its outstanding shares of Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares, the conversion price and the conversion rate in effect immediately prior to such action shall be adjusted so that the holder of any shares of this Series thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Corporation which such holder would have owned or have been entitled to receive immediately following such action had such shares of this Series been converted immediately prior thereto. An adjustment made pursuant to this Section (D)(6)(a) shall become effective retroactively to immediately after the opening of business on the day following the record date in the case of a dividend and shall become effective immediately after the opening of business on the day following the effective date in the case of a subdivision or combination. If, as a result of an adjustment made pursuant to this Section (D)(6)(a), the holder of any shares of this Series thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall determine the allocation of the adjusted conversion price and/or conversion rate between or among shares of such classes of capital stock. (b) In case the Corporation shall, at any time or from time to time while any of the shares of this Series are outstanding, issue rights or warrants to all holders of shares of its Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share less than the current market price per share of Common Stock (as defined in Section (D)(6)(d)), at such record date, the conversion rate shall be adjusted so that it shall equal the rate determined by multiplying the conversion rate in effect immediately prior to the date of issuance of such rights or warrants by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and the denominator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such current market price. For the purposes of this Section (D)(6)(b), the issuance of rights or warrants to subscribe for or purchase securities convertible into Common Stock shall be deemed to be the issuance of rights or warrants to purchase the shares of Common Stock into which such securities are convertible at an aggregate offering price equal to the aggregate offering price of such securities plus the minimum aggregate amount (if any) payable upon conversion of such securities into shares of Common Stock; provided, however, that if all of the shares of Common Stock subject to such rights or warrants have not been issued when such rights or warrants expire, then the conversion price shall promptly be readjusted to the conversion price which would then be in effect had the adjustment upon the issuance of such rights or warrants been made on the basis of the actual number of shares of Common Stock issued upon the exercise of such rights or warrants. An adjustment made pursuant to this Section (D)(6)(b) shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. (c) In case the Corporation shall, at any time or from time to time while any of the shares of this Series are outstanding, distribute to all holders of shares of its Common Stock evidences of its indebtedness or securities or assets (excluding cash dividends payable out of consolidated earnings or retained earnings or dividends payable in shares of Common Stock) or rights or warrants to subscribe for securities of the Corporation or any of its subsidiaries (excluding those referred to in Section (D)(6)(b)), then in each such case the conversion rate shall be adjusted so that it shall equal the rate determined by multiplying the conversion rate in effect immediately prior to the date of such distribution by a fraction, the numerator of which shall be the current market price per share (determined as provided in Section (D)(6)(d)) of the Common Stock on the record date referred to below, and the denominator of which shall be such current market price per share of the Common Stock less the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness or securities or assets so distributed or of such subscription rights or warrants applicable to one share of Common Stock. Such adjustment shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such distribution. (d) For the purpose of any computation under Section (D)(6)(b) and (D)(6)(c), the current market price of a share of Common Stock on any date shall be the average of the daily Closing Prices for 10 consecutive Trading Days before the day in question. (e) The Corporation shall be entitled to make such additional adjustments in the conversion price, in addition to those required by subsections D(6)(a), D(6) (b) and D(6)(c), as shall be necessary in order that any dividend or distribution in shares of stock, subdivision or combination of shares of Common Stock, issuance of rights or warrants, evidences of indebtedness or assets (other than cash dividends payable out of consolidated earnings or retained earnings) referred to above, shall not be taxable to the Stockholders. (f) In any case in which this Section (D)(6) shall require that an adjustment be made retroactively immediately following a record date, the Corporation may elect to defer (but only for five (5) Business Days following the filing of the statement referred to in Section (D)(6)(h)) issuing to the holder of any shares of this Series converted after such record date (i) the shares of Common Stock and other capital stock of the Corporation issuable upon such conversion over and above (ii) the shares of Common Stock and other capital stock of the Corporation issuable upon such conversion on the basis of the conversion rate prior to adjustment. (g) Notwithstanding any other provisions of this Section (D)(6), the Corporation shall not be required to make any adjustment of the conversion rate unless such adjustment would require an increase or decrease of at least 1% in such rate. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% in such rate. (h) Whenever an adjustment in the conversion rate is required, the Corporation shall forthwith place on file with its Transfer Agent a statement signed by its Chief Executive Officer, Chief Administrative and Financial Officer, Chief Operating Officer or a Senior Vice President and by its Secretary, Assistant Secretary or Treasurer, stating the adjusted conversion rate determined as provided herein. Such statements shall set forth in reasonable detail such facts as shall be necessary to show the reason and the manner of computing such adjustment. Promptly after the adjustment of the conversion rate, the Corporation shall mail a notice thereof to each holder of shares of this Series. (i) The term "Common Stock" as used in this resolution means the Corporation's Common Stock, $1.00 par value, as the same exists at the date of filing of the Certificate of Designation relating to this Series or any other class of stock resulting from successive changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. In the event that at any time as a result of an adjustment made pursuant to Section (D)(6)(a), the holder of any share of this Series thereafter surrendered for conversion shall become entitled to receive any shares of the Corporation other than shares of its Common Stock, the conversion rate of such other shares so receivable upon conversion of any share shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in subparagraphs (a) through (g) of this Section (D)(6), and the provisions of Section (D)(1) through (5) and (7) through (11) with respect to the Common Stock shall apply on like or similar terms to any such other shares. (7) In case of (a) any reclassification or change of outstanding shares of Common Stock issuable upon conversion of shares of this Series (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination), or (b) any consolidation or merger of the Corporation with one or more other corporations (other than a consolidation or merger in which the Corporation is the continuing corporation and which does not result in any reclassification or change of outstanding shares of Common Stock issuable upon conversion of shares of this Series), or (c) any sale or conveyance to another corporation or other entity of all or substantially all of the property of the Corporation, then the Corporation, or such successor corporation or other entity, as the case may be, shall make appropriate provision so that the holder of each share of this Series then outstanding shall have the right to convert such share of this Series into the kind and amount of shares of stock or other securities and property receivable upon such consolidation, merger, sale, reclassification, change or conveyance by a holder of the number of shares of Common Stock into which such shares of this Series might have been converted immediately prior to such consolidation, merger, sale, reclassification, change or conveyance, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section (D). The provisions of this Section (D)(7) shall apply similarly to successive consolidations, mergers, sales or conveyances. (8) Any shares of this Series which shall at any time have been converted shall, after such conversion, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. The Corporation shall at all times reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the shares of this Series, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of this Series; provided, however, that nothing contained herein shall preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. (9) If any shares of Common Stock required to be reserved for purposes of conversion of shares of this Series hereunder require registration with or approval of any governmental authority before such shares may be issued upon conversion, the Corporation shall cause such shares to be duly registered or approved, as the case may be. The Corporation will endeavor to list the shares of Common Stock required to be delivered upon conversion of shares of this Series prior to such delivery upon each national securities exchange upon which the outstanding Common Stock is listed at the time of such delivery. (10) The Corporation shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of shares of this Series pursuant hereto. The Corporation shall not, however, be required to pay any tax which is payable in respect of any transfer involved in the issue or delivery of Common Stock in a name other than that in which the shares of this Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of such tax, or has established, to the satisfaction of the Corporation, that such' tax has been paid. (11) Before taking any action that would result in the conversion price being less than the then par value of the Common Stock, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at the conversion price. (E) EXCHANGE FOR DEBENTURES (1) The shares of this Series are exchangeable in whole, but not in part, at the sole option of the Corporation, at any time on and after March 1, 1989, on any Dividend Payment Date, into the Corporation's 7% Convertible Subordinated Debentures Due 2012 (the "Debentures") described in the Corporation's Registration Statement on Form S-2 (Registration No. 33-12248) as filed with the Securities and Exchange Commission (the "Registration Statement"); provided, that on or prior to the date fixed for exchange (the "Exchange Date") the Corporation shall have paid to the holders of outstanding shares of this Series and of Preferred Stock ranking on a parity with this Series all accumulated and unpaid dividends to the Exchange Date. Holders of outstanding shares of this Series shall be entitled to receive $25 principal amount of Debentures in exchange for each share of this Series held on the Exchange Date. (2) In the event the Corporation shall exchange shares of this Series, notice of such exchange shall be given by first class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the Exchange Date, to each record holder of shares of this Series, at such holder's address as the same appears on the books of the Corporation. Each such notice shall state: (a) the Exchange Date; (b) the place or places where certificates for such shares are to be surrendered for exchange into Debentures; (c) that dividends on the shares to be exchanged will cease to accumulate on the Exchange Date; and (d) the period within which conversion rights may be exercised and the conversion rate at the time applicable. Prior to giving notice of intention to exchange, the Corporation shall have executed and delivered with The First National Bank of Boston, as trustee, shall have qualified under the Trust Indenture Act of 1939, an Indenture (the "Indenture") in substantially the form filed as an exhibit to the Registration Statement with such changes therein as may be required by law or usage and shall have caused to be delivered to the Trustee an opinion of counsel acceptable to the Trustee to the effect that (i) the Debentures have been duly authorized by the Corporation; the Debentures (assuming that they bear the facsimile signature of the Chief Executive Officer, the Chief Administrative and Financial Officer, the Chief Operating Officer or a Senior Vice President of the Corporation under its corporate seal reproduced thereon and have been attested by the facsimile signature of its Secretary, Assistant Secretary or Treasurer and have been authenticated by the Trustee in accordance with the provisions of the Indenture) have been duly issued and delivered by the Corporation and constitute valid and binding obligations of the Corporation entitled to the benefits of the Indenture, except as the enforceability thereof may be limited by bankruptcy, insolvency, or other similar laws relating to or affecting the enforcement of creditors' rights generally and by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law; (ii) the Indenture has been authorized, executed and delivered by the Corporation and (assuming due authorization, execution and delivery by the Trustee) constitutes a legal, valid and binding agreement of the Corporation, enforceable against the Corporation in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, or other similar laws relating to or affecting the enforcement of creditors' rights generally and by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law; (iii) the Common Stock initially issuable upon conversion of the Debentures has been duly authorized and such Common Stock has been duly reserved for issuance upon such conversion; and (iv) the issuance of the Debentures and the Common Stock initially issuable upon conversion of the Debentures and the compliance by the Corporation with all of the provisions of the Debentures and the Indenture will not conflict with or result in any breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Corporation is a party or by which the Corporation is bound or to which any of the property or assets of the Corporation is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or the By-Laws of the Corporation or of any applicable order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Corporation; and, to the best of such counsel's knowledge, no consent, approval, authorization, order, registration or qualification of or with any court or any such regulatory authority or other governmental agency or body will be required for the issuance on the part of the Corporation of the Debentures or the shares of Common Stock issuable upon conversion of the Debentures or the consummation by the Corporation of the other transactions contemplated by the Indenture, except such as have been obtained and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws. The Corporation shall cause the Debentures to be authenticated on the Dividend Payment Date on which the exchange is effective, and the Corporation shall pay interest on the Debentures at the rate and on the dates specified in the Indenture from the Exchange Date. (3) Notice having been mailed as aforesaid, from and after the Exchange Date (unless the Corporation shall default in issuing debentures in exchange for shares of this Series or in making the final dividend payment on the Exchange Date), dividends on the shares of this Series shall cease to accumulate, such shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the Debentures) shall cease. Upon surrender (in accordance with the notice provided for above in Section (E) (2)) of the certificates for any shares of this Series so exchanged (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be exchanged by the Corporation into Debentures as aforesaid. (4) All shares of this Series which have been exchanged shall, after such exchange, have the status of authorized but unissued shares of preferred stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (F) VOTING (1) The shares of this Series shall have the following voting rights: (a) If and whenever at any time or times dividends payable on shares of this Series shall have been in arrears and unpaid in an aggregate amount equal to or exceeding the amount of dividends payable thereon for six quarterly dividend periods, then the holders of shares of this Series shall have the right, voting separately as a class with any other series of Preferred Stock so entitled as provided in the certificate of designation of such series, to elect two directors of the Corporation, such directors to be in addition to the number of directors constituting the Board of Directors immediately prior to the accrual of such right, the remaining directors to be elected by the other class or classes of stock entitled to vote therefor at each meeting of stockholders held for the purpose of electing directors. So long as the Corporation's Board of Directors is divided into classes, the two directors of the Corporation so elected by the holders of shares of this Series and of such other series of Preferred Stock so entitled shall be elected to the two classes with the longest remaining terms. (b) Such voting right may be exercised initially either at a special meeting of the holders of the Preferred Stock having such voting right, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting. The right of the holders of this Series to vote for the election of such members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends accumulated on the shares of this Series shall have been paid in full, at which time such voting right of the holders of this Series shall terminate and, if such voting right of the holders of this Series and all other series of Preferred Stock so entitled shall have terminated, subject to the requirements of the General Corporation Law of Delaware, the term of the directors elected pursuant to Section (F)(l)(a) shall terminate, subject to revesting on the basis set forth in Section (F)(l)(a). (c) At any time when such voting right shall have vested in holders of this Series, and if such right shall not already have been initially exercised, a proper officer of the Corporation shall, upon the written request of the record holders of 10% in number of shares of this Series then outstanding, addressed to the Secretary of the Corporation, call a special meeting of the holders of this Series and of any other class or classes of stock having voting power with respect to the election of such directors. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation or, it none, at a place designated by the Board of Directors. If such meeting is not called by the proper officers of the Corporation within 30 days after the personal service of such written request upon the Secretary of the Corporation, or within 35 days after mailing the same within the United States of America, by registered mail, addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the record holders of 10% in number of shares of this Series then outstanding may designate in writing one of their number to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the same place as is elsewhere provided for in this Section (F)(l)(c) or such other place as is selected by such designated stockholder. Any holder of the Preferred Stock who would be entitled to vote at such meeting shall have access to the stock books of the Corporation for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this Section (F)(1). Notwithstanding the provisions of this Section (F)(1), no such special meeting shall be called during a period within 90 days immediately preceding the date fixed for the next annual meeting of stockholders. (d) At any meeting held for the purpose of electing directors at which the holders of the Preferred Stock shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of fifty percent (50%) of the then outstanding shares of Preferred Stock having such right shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. At any such meeting or adjournment thereof (i) the absence of a quorum of the holders of the Preferred Stock having such right shall not prevent the election of directors other than those to be elected by the holders of the Preferred Stock, and the absence of a quorum or quorums of the holders of capital stock entitled to elect such other directors shall not prevent the election of directors to be elected by the holders of the Preferred Stock entitled to elect such directors and (ii) except as otherwise required by law, in the absence of a quorum of the holders of any class of stock entitled to vote for the election of directors, a majority of the holders present in person or by proxy of such class shall have the power to adjourn the meeting for the election of directors which the holders of such class are entitled to elect, from time to time, without notice other than announcement at the meeting, until a quorum is present. (e) Any vacancy in the Board of Directors in respect of a director elected by holders of Preferred Stock pursuant to the voting right created under this Section (F)(1) shall be filled by vote of the remaining director so elected, or if there be no such remaining director, by the holders of Preferred Stock entitled to elect such director or directors at a special meeting called in accordance with the procedures set forth in Section (F)(l)(c), or, if no such special meeting is called, at the next annual meeting of stockholders. (f) So long as any shares of this Series remain outstanding, the Corporation shall not, either directly or indirectly or through merger or consolidation with any other corporation, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of at least 66 2/3% in number of shares of this Series then outstanding, (i) amend, alter or repeal any of the provisions of the Certificate of Designation relating to this Series or the Certificate of Incorporation, or authorize any reclassification of the shares of this Series, so as in any such case to affect adversely the preferences, special rights or powers of the shares of this Series or (ii) authorize or create any class of stock ranking prior to or on a parity with the Corporation's authorized class of Preferred Stock as to dividends or distribution of assets on liquidation, create any series of the Corporation's authorized Preferred Stock ranking prior to the Preferred Stock as to dividends or distributions on liquidation or increase the authorized amount of the Corporation's Preferred Stock. (g) In exercising the voting rights set forth in this Section (F)(l), each share of Preferred Stock entitled to such voting right shall have equal voting power, notwithstanding any greater or lesser general voting powers of one or more series of Preferred Stock. (2) No consent of holders of shares of this Series shall be required for (i) the creation of any indebtedness of any kind of the Corporation, (ii) the authorization or issuance of any class of stock of the Corporation junior to the shares of this Series as to dividends and upon liquidation, dissolution or winding up of the Corporation or (iii) subject to Section (F)(l)(f), the issuance of any shares of Preferred Stock. (G) LIQUIDATION RIGHTS (1) Upon the dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to this Series upon liquidation, the amount of $25 per share, plus all accumulated and unpaid dividends to the date of final distribution. (2) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (G). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (G), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section (G)(l), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (H) PRIORITY (1) For purposes of this resolution, any stock of any class or series of the Corporation shall be deemed to rank: (i) Prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, as the case may be, in preference or priority to the holders of shares of this Series; (ii) On a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, Dividend Payment Dates, or redemption or liquidation prices per share or sinking fund provisions, if any, are different from those of this Series, if the holders of such stock are entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (iii) Junior to shares of this Series, either as to dividends or upon liquidation, if such class or series shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, as the case may be, in preference or priority to the holders of shares of such class or series. (I) CERTAIN RESTRICTIONS (1) So long as any shares of this Series are outstanding, the Corporation will not, and will not permit any Subsidiary to, directly or indirectly, create, incur, assume or suffer to be created, incurred, assumed or to exist or become effective any consensual encumbrance or restrictions on the ability of any Subsidiary to (i) pay any dividends or make any other distributions on such Subsidiary's capital stock; (ii) pay any indebtedness owed to the Corporation or any other Subsidiary; or (iii) make any loans or advances or transfer any of its property or assets to the Corporation or any other Subsidiary. (2) So long as any shares of this Series are outstanding, the Corporation will not, directly or indirectly, (a) declare or pay any dividend or make any distribution in respect of Common Stock or any other class of capital stock of the Corporation ranking junior to shares of this Series as to dividends and upon liquidation (other than a dividend or distribution payable in shares of capital stock of the Corporation), or (b) make or permit any Subsidiary to make any payment on account of the purchase, redemption or other acquisition or retirement of any Common Stock or any other class of capital stock of the Corporation ranking junior to shares of this Series upon liquidation, dissolution or winding up of the Corporation or warrants, rights or options to purchase or acquire any such capital stock, unless after giving effect, as if paid, to the proposed dividend, distribution or payment, the aggregate amount of all such dividends, distributions and payments (the amount of any such payment, if other than cash, to be determined by the Board of Directors, whose determination shall be conclusive) declared or made after the date hereof does not exceed the sum of (w) the aggregate net proceeds, including the fair market value of property other than cash (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive), received by the Corporation from the issuance or sale after December 31, 1986 of shares of its capital stock (other than the shares of this Series) or of warrants, rights or options to purchase or acquire any such capital stock; plus (x) the aggregate principal amount of any indebtedness of the Corporation which is converted into shares of its capital stock, subsequent to December 31, 1986 (other than any conversion of Debentures); plus (or minus, in the case of a Consolidated Net Loss) (y) 75% of the Consolidated Net Income (but 100% of a Consolidated Net Loss) of the Corporation for the period (taken as one accounting period) from December 31, 1986 to the date of the proposed dividend, distribution or payment; plus (z) $10,000,000. The provisions of this Section shall not be deemed to prohibit (A) the payment of regular dividends on, or the making of mandatory sinking fund payments in respect of, any shares of capital stock of the Company issued in connection with the acquisition, other than in the ordinary course of business, of any property or assets (other than cash or securities of the Company or its Subsidiaries) where such capital stock ranks senior to the Company's Common Stock and junior to the shares of this Series as to dividends or upon liquidation, but all payments made for such purposes shall be taken into account in any computation under this Section, (B) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of this provision or (C) the retirement of shares of any class of capital stock of the Corporation in exchange for (including any such exchange pursuant to exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares or scrip), or out of the proceeds to be received from the substantially concurrent sale of, other shares of capital stock of the Corporation and no such retirement or the proceeds of any such sale or exchange shall be included in any computation under this Section. For purposes of this Section (I)(2), (i) "Consolidated Net Income (Loss)" for any period means the consolidated net income (loss) of the Corporation and its consolidated Subsidiaries as determined in accordance with generally accepted accounting principles adjusted by excluding (a) net extraordinary gains or net extraordinary losses, as the case may be, during such period and (b) net gains or losses in respect of dispositions of assets other than in the ordinary course of business, and (ii) "Subsidiary" means a corporation a majority of the voting stock of which is at the time owned, directly or indirectly, by the Corporation. IN WITNESS WHEREOF, Fedders Corporation has caused this certificate to be signed and attested this 24th day of March, 1987. FEDDERS CORPORATION By:/s/ Salvatore Giordano Salvatore Giordano Title: Chairman Attest:/s/ Joseph Giordano Joseph Giordano Asst. Secretary CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF FEDDERS CORPORATION FEDDERS CORPORATION, a corporation organized and existing under the laws of the State of Delaware, does hereby certify as follows: 1. The present name of the corporation (hereinafter called the "Corporation") is Fedders Corporation, which is the name under which the Corporation was originally incorporated. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State on April 4, 1984. A Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on January 2, 1985. 2. This Certificate of Amendment amends the Certificate of Incorporation, as amended by the addition of 30,000,000 shares of a new class of capital stock to be denominated Class B Stock. 3. The text of Article "THIRD" of the Certificate of Incorporation, as heretofore amended, is further amended hereby as follows: Article THIRD of the Certificate of Incorporation is hereby amended to read in its entirety as follows: THIRD: The aggregate number of shares of stock of all classes which the Corporation shall have authority to issue is 65,000,000, consisting of 30,000,000 shares of Common Stock having a par value of $1.00 per share, 30,000,000 shares of Class B Stock having a par value of $1.00 per share and 5,000,000 shares of Preferred Stock having a par value of $1.00 per share. The powers, preferences and the relative, participating, optional and other rights and the qualifications, stock, and the express grant of authority to the Board of Directors to fix by resolution the designations and the powers, preferences and rights of each share of Preferred Stock and the qualifications, limitations and restrictions thereof which are not fixed by this Certificate of Incorporation, are as follows: A. COMMON STOCK AND CLASS B STOCK I. Dividends, etc. Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Certificate of Incorporation, as amended from time to time, holders of Common Stock and Class B Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor, provided that in the case of cash dividends, if at any time a cash dividend is paid on the Common Stock, a cash dividend will also be paid on the Class B Stock in an amount per share of Class B Stock equal to 90% of the amount of the cash dividends paid on each share of the Common Stock (rounded down, if necessary, to the nearest one-hundredth of a cent), and provided, further, that in the case of dividends or other distributions payable in stock of the Corporation other than Preferred Stock, including distributions pursuant to stock splits or divisions of stock of the Corporation other than Preferred Stock, which occur after the initial issuance of shares of Class B Stock by the Corporation, only shares of Common Stock shall be distributed with respect to Common Stock and only shares of Class B Stock in an amount per share equal to the amount per share paid with respect to the Common Stock shall be distributed with respect to Class B Stock, and that, in the case of any combination or reclassification of the Common Stock, the shares of Class B Stock shall also be combined or reclassified so that the number of shares of Class B Stock outstanding immediately following such combination or reclassification shall bear the same relationship to the number of shares outstanding immediately prior to such combination or reclassification as the number of shares of Common Stock outstanding immediately following such combination or reclassification bears to the number of shares of Common Stock outstanding immediately prior to such combination or reclassification. II. Voting: (a) At every meeting of the stockholders every holder of Common Stock shall be entitled to one (1) vote in person or by proxy for each share of Common Stock standing in his name on the transfer books of the Corporation and every holder of Class B Stock shall be entitled to one (1) vote in person or by proxy for each share of Class B Stock standing in his name on the transfer books of the Corporation, except that each holder of Class B Stock shall be entitled to ten (10) votes per share on the election of any directors at any stockholders' meeting (i) if more than 15% of the shares of Common Stock outstanding on the record date for such meeting are beneficially owned by a person or group of persons acting in concert (unless such person or group is also the beneficial owner of a majority of the shares of Class B Stock on such record date), or (ii) if a nomination for the Board of Directors is made by a person or group of persons acting in concert (other than the Board of Directors), provided that such nomination is not made by one or more holders of Class B Stock, acting in concert with each other who beneficially own more than 15% of the shares of Class B Stock outstanding on such record date. (b) The provisions of this Certificate of Incorporation shall not be modified, revised, altered or amended, repealed or rescinded in whole or in part, without (i) the affirmative vote of the holders of a majority of the shares of the Common Stock and of a voting majority of the shares of the Class B Stock, each voting separately as a class, and (ii) additionally with respect to Article Eighth, the vote required by Article Eighth. (c) The Corporation may not effect or consummate: (1) any merger or consolidation of the Corporation with or into any other corporation; (2) any sale, lease, exchange or other disposition of all or substantially all of the assets of the Corporation to or with any other person; or (3) any dissolution of the Corporation; unless and until such transaction is authorized by the vote, if any, required by Articles Eighth and Ninth of this Certificate of Incorporation and by Delaware law; and unless and until such transaction is authorized by a majority of the voting power of the shares of Common Stock and of Class B Stock entitled to vote, each voting separately as a class, but the foregoing shall not apply to any merger or other transaction described in the preceding subparagraphs (1) and (2) if the other party to the merger or other transaction is a Subsidiary of the Corporation. For purposes of this paragraph (c) a "Subsidiary" is any corporation more than 50% of the voting securities of which are owned directly or indirectly by the Corporation; and a "person" is any individual, partnership, corporation or entity. (d) Following the initial issuance of shares of Class B Stock, the Corporation may not effect the issuance of any additional shares of Class B Stock (except in connection with stock splits and stock dividends) unless and until such issuance is authorized by the holders of a majority of the voting power of the shares of Common Stock and of Class B Stock entitled to vote, each voting separately as a class. (e) Every reference in this Certificate of Incorporation to a majority or other proportion of shares of stock shall refer to such majority or other proportion of the votes of such shares of stock. (f) Except as may be otherwise required by law or by this Article Third the holders of Common Stock and Class B Stock shall vote as a single class, subject to any voting rights which may be granted to holders of Preferred Stock. III. Transfer. (a) No person holding shares of Class B Stock of record (hereinafter called a "Class B Holder") may transfer, and the Corporation shall not register the transfer of, such shares of Class B Stock, as Class B Stock, whether by sale, assignment, gift, bequest, appointment or otherwise, except to a Permitted Transferee and any attempted transfer of shares not permitted hereunder shall be converted into Common Stock as provided by subsection (d) of this Section III. A Permitted Transferee shall mean, with respect to each person from time to time shown as the record holder of shares of Class B Stock: (i) In the case of a Class B Holder who is a natural person; (A) The spouse of such Class B Holder, any lineal descendant of a parent of such Class B Holder, and any spouse of such lineal descendant (which lineal descendants, their spouses, the Class B Holder, and his or her spouse are herein collectively referred to as "Class B Holder's Family Members"); (B) The trustee of a trust (including a voting trust) principally for the benefit of such Class B Holder and/or one or more of his or her permitted Transferees described in each subclause of this clause (i) other than this subclause (B), provided that such trust may also grant a general or special power of appointment to one or more of such Class B Holder's Family Members and may permit trust assets to be used to pay taxes, legacies and other obligations of the trust or of the estates of one or more of such Class B Holder's Family Members payable by reason of the death of any of such Family Members; (C) Any organization contributions to which are deductible for federal income, estate or gift tax purposes or any split-interest trust described in Section 4947 of the Internal Revenue Code, as it may from time to time be amended (hereinafter called a "Charitable Organization"); (D) A corporation if a majority of the beneficial ownership of outstanding capital stock of such corporation which is entitled to vote for the election of directors is owned by, or a partnership if a majority of the beneficial ownership of the partnership is held by, the Class B Holder of his or her Permitted Transferees determined under this clause (i), provided that if by reason of any change in the ownership of such stock or partnership interest, such corporation or partnership would no longer qualify as a Permitted Transferee, all shares of Class B Stock then held by such corporation or partnership would no longer qualify as a Permitted Transferee, all shares of Class B Stock then held by such corporation or partnership shall, upon the election of the Corporation given by written notice to such corporation or partnership, without further act on anyone's part, be converted into shares of Common Stock effective upon the date of the giving of such notice, and stock certificates formerly representing such shares of Class B Stock shall thereupon and thereafter be deemed to represent the like number of shares of Common Stock; and (E) The estate of such Class B Holder. (ii) In the case of a Class B Holder holding the shares of Class B Stock in question as trustee pursuant to a trust (other than a Charitable Organization or a trust described in clause (iii) below), "Permitted Transferee" means (A) any person transferring Class B Stock to such trust and (B) any Permitted Transferee of any such transferor determined pursuant to clause (i) above. (iii) In the case of a Class B Holder holding the shares of Class B Stock in question as trustee pursuant to a trust (other than a Charitable Organization) which was irrevocable on the record date (hereinafter in this Section III called the "Record Date") for determining the persons to whom the Class B Stock is first issued by the Corporation, "Permitted Transferee" means (A) any person to whom or for whose benefit principal may be distributed either during or at the end of the term of such trust whether by power of appointment or otherwise and (B) any Permitted Transferee of any such person determined pursuant to clause (i) above. (iv) In the case of a Class B Holder which is a Charitable Organization holding record and beneficial ownership of the shares of Class B Stock in question, "Permitted Transferee" means any Class B Holder. (v) In the case of a Class B Holder which is a corporation or partnership other than a Charitable Organization; acquiring record and beneficiary ownership of the shares of Class B Stock in question upon its in initial issuance by the Corporation, "Permitted Transferee" means (A) any partner of such partnership, or stockholder of such corporation, on the Record Date, (B) any person transferring such shares of Class B Stock to such corporation or partnership, and (C) any Permitted Transferee of any such person, partner, or stockholder referred to in subclauses (A) and (B) of this clause (v), determined under clause (i) above. (vi) In the case of a Class B Holder which is a corporation or partnership (other than a Charitable Organization or a corporation or partnership described in clause (v) above) holding record and beneficial ownership of the shares of Class B Stock in question, "Permitted Transferee" means (a) any person transferring such shares of Class B Stock to such corporation or partnership and (b) any Permitted Transferee of any such transferor determined under clause (i) above. (vii) In the case of a Class B Holder which is the estate of a deceased Class B Holder, or which is the estate of a bankrupt or insolvent Class B Holder, which holds record and beneficial ownership of the shares of Class B Stock in question, "Permitted Transferee" means a Permitted Transferee of such deceased, bankrupt or insolvent Class B Holder as determined pursuant to clause (i), (ii), (iii), (iv), (v) or (vi) above, as the case may be. (b) Notwithstanding anything to the contrary set forth herein, any Class B Holder may pledge such Holder's share of Class B Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares shall not be transferred to or registered in the name of the pledgee and shall remain subject to the provisions of this Section III. In the event of foreclosure of other similar action by the pledgee, such pledged shares of Class B Stock may only be transferred to a Permitted Transferee of the pledgor or converted into shares of Common Stock, as the pledgee may elect. (c) For purposes of this Section III: (i) The relationship of any person that is derived by or through legal adoption shall be considered a natural one. (ii) Each joint owner of shares of Class B Stock shall be considered a "Class B Holder" of such shares. (iii) A minor for whom shares of Class B Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Class B Holder of such shares. (iv) Unless otherwise specified, the term "person" means both natural persons and legal entities. (v) Without derogating from the election conferred upon the Corporation pursuant to subclause (D) of clause (i) above, each reference to a corporation shall include any successor corporation resulting from merger or consolidation and each reference to a partnership shall include any successor partnership resulting from the death or withdrawal of a partner. (d) Any transfer of shares of Class B Stock not permitted hereunder shall result in the conversion of the transferee's shares of Class B Stock into shares of Common Stock, effective the date on which certificates representing such shares are presented for transfer on the books of the Corporation. The Corporation may, in connection with preparing a list of stockholders entitled to vote at any meeting of stockholders, or as a condition to the transfer or the registration of shares of Class B Stock on the Corporation's books, require the furnishing of such affidavits or other proof as it deems necessary to establish that any person is the beneficial owner of shares of Class B Stock or is a Permitted Transferee. (e) At any time when the number of outstanding shares of Class B Stock as reflected on the stock transfer books the Corporation falls below 5% of the aggregate number of the issued and outstanding shares of the Common Stock and Class B Stock of the Corporation, or the Board of Directors and the holders of a majority of the outstanding shares of Class B Stock approve the conversion of all of the Class B Stock into Common Stock, then, immediately upon the occurrence of either such event, the outstanding shares of Class B Stock shall be converted into shares of Common Stock. In the event of such a conversion, certificates formerly representing outstanding shares of Class B Stock shall thereupon and thereafter be deemed to represent the like number of shares of Common Stock. (f) Shares of Class B Stock shall be registered in the names of the beneficial owners thereof and not in "street" or "nominee" name. For this purpose, a "beneficial owner" of any shares of Class B Stock shall mean a person who, or an entity which, possesses the power, either singly or jointly, to direct the voting or disposition of such shares. The Corporation shall note on the certificates for shares of Class B Stock the restrictions on transfer and registration of transfer imposed by this Section III. IV. Conversion Rights. (a) Subject to the terms and conditions of this Section IV, each share of Class B Stock shall be convertible at any time or from time to time, at the option of the respective holder thereof, at the office of any transfer agent for Class B Stock, and at such other place or places, if any, as the Board of Directors may designate, or, if the Board of Directors shall fail so to designate, at the principal office of the Corporation (attention of the Secretary of the Corporation), into one (1) fully paid and nonassessable share of Common Stock. Upon conversion, the Corporation shall make no payment or adjustment on account of dividends accrued or in arrears on Class B Stock surrendered for conversion or on account of any dividends on the Common Stock issuable on such conversion. Before any holder of Class B Stock shall be entitled to convert the same into Common Stock, he shall surrender the certificate or certificates for such Class B Stock at the office of said transfer agent (or other place as provided above), which certificate or certificates, if the Corporation shall so request, shall be duly endorsed to the Corporation or in blank or accompanied by proper instruments of transfer to the Corporation or in blank) (such endorsements or instruments of transfer to be in form satisfactory to the Corporation), and shall give written notice to the Corporation at said office that he elects so to convert said Class B Stock in accordance with the terms of this Section IV, and shall state in writing therein the name or names in which he wishes the certificate or certificates for Common Stock to be issued. Every such notice of election to convert shall constitute a contract between the holder of such Class B Stock and the Corporation, whereby the holder of such Class B Stock shall be deemed to subscribe for the amount of Common Stock which he shall be entitled to receive upon such conversion, and, in satisfaction of such subscription, to deposit the Class B Stock to be converted and to release the Corporation from all liability thereunder, and thereby the Corporation shall be deemed to agree that the surrender of the certificate or certificates therefor and the extinguishment of liability thereon shall constitute full payment of such subscription for Common Stock to be issued upon such conversion. The Corporation will as soon as practicable after such deposit of a certificate or certificates for Class B Stock, accompanied by the written notice and the statement above prescribed, issue and deliver at the office of said transfer agent (or other place as provided above) to the person for whose account such Class B Stock was so surrendered, or to his nominee or nominees, a certificate or certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid. Subject to the provisions of subsection (c) of this Section IV, such conversion shall be deemed to have been made as of the date of such surrender of the Class B Stock to be converted; and the person or persons entitled to receive the Common Stock issuable upon conversion of such Class B Stock shall be treated for all purposes as the record holder or holders of such Common Stock on such date. (b) The issuance of certificates for shares of Common Stock upon conversion of shares of Class B Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of the share of shares of Class B Stock converted, the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid. (c) The Corporation shall not be required to convert Class B Stock, and no surrender of Class B Stock shall be effective for that purpose, while the stock transfer books of the Corporation are closed for any purpose; but the surrender of Class B Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such Class B Stock was surrendered. (d) The Corporation covenants that it will at all times reserve and keep available, solely for the purpose of issue upon conversion of the outstanding shares of Class B Stock, such number of shares of Common Stock as shall be issuable upon the conversion of all such outstanding shares, provided that nothing contained herein shall be construed to preclude the corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Class B Stock by delivery of shares of Common Stock which are held in the treasury of the Corporation. The Corporation covenants that if any shares of Common Stock, required to be reserved for purposes of conversion hereunder, required registration with or approval of any governmental authority under any federal or state law before such shares of Common Stock may be issued upon conversion, the Corporation will use its best efforts to cause such shares to be duly registered or approved, as the case may be. The Corporation will endeavor to list the shares of Common Stock required to be delivered upon conversion prior to such delivery upon each national securities exchange, if any, upon which the outstanding Common Stock is listed at the time of such delivery. The Corporation covenants that all shares of Common Stock which shall be issued upon conversion of the shares of Class B Stock, will, upon issue, be fully paid and nonassessable and not entitled to any preemptive rights. V. Liquidation Rights. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of each series of Preferred Stock shall be entitled to receive, out of the net assets of the Corporation, an amount for each share equal to the amount fixed and determined by the Board of Directors in any resolution or resolutions providing for the issuance of any particular series of Preferred Stock, plus an amount equal to all dividends accrued and unpaid on shares of such series to the date fixed for distribution, and no more, before any of the assets of the Corporation shall be distributed or paid over to the holders of Common Stock. After payment in full of said amounts to the holders of Preferred Stock of all series, the remaining assets and funds of the Corporation shall be divided among and paid ratably to the holders of Common Stock (including those persons who shall become holders of Common Stock by reasons of converting their shares of Class B Stock). If, upon such dissolution, liquidation or winding up, the assets of the Corporation distributable as aforesaid among the holders of Preferred Stock of all series shall be insufficient to permit full payment to them of said preferential amounts, then such assets shall be distributed among such holders, first in the order of their respective preferences, and second, as to such holders who are next entitled to such assets and who rank equally with regard to such assets, ratably in proportion to the respective total amounts which they shall be entitled to receive as provided in this Section V. A merger or consolidation of the Corporation with or into any other corporation or a sale or conveyance of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to stockholders) shall not be deemed to be a voluntary or involuntary liquidation or dissolution or winding up of the Corporation within the meaning of this Section V. B. Preferred Stock. The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article Third, to provide for the issuance of the preferred shares in series, and by filing a certificate pursuant to the General Corporation Law of Delaware, to establish the number of shares to be included in each such series, and to fix the designations, relative rights, preferences and limitations of the shares of each such series. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following: (a) The number of shares constituting that series and the distinctive designations of that series; (b) The dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law and, if so, the terms of such voting rights; (d) Whether that series shall have conversion privileges and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; (e) Whether or not the shares of that series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary of involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; (h) Any other relative rights, preferences and limitations of that series. Dividends on outstanding preferred shares shall be declared and paid, or set apart for payment, before any dividends shall be declared and paid, or set apart for payment, on the common shares with respect to the dividend period. Any and all such shares issued, and for which the full consideration has been paid or delivered shall be deemed fully paid stock and the holder of such shares shall not be liable for any further call or assessment or any other payment thereon. 4. The capital of the Corporation will not be reduced under or by reason of this amendment. 5. This amendment was duly adopted by a vote of the stockholders in accordance with Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said FEDDERS CORPORATION has caused this certificate to be signed by its President and attested by its Secretary, and its corporate seal to be hereunto affixed this 23rd day of May, 1985. /s/ S. Giordano, Jr. S. Giordano, Jr. President /s/ Howard S. Modlin Attest: Howard S. Modlin Secretary [CORPORATE SEAL] CERTIFICATE OF CORRECTION OF RESTATED CERTIFICATE OF INCORPORATION OF FEDDERS CORPORATION It is hereby certified that: 1. The name of the corporation (hereinafter called the "Corporation") is FEDDERS CORPORATION. 2. The Restated Certificate of Incorporation of the Corporation, which was filed by the Secretary of State of Delaware on January 2, 1985, is hereby corrected. 3. The inaccuracy to be corrected in said instrument is as follows: The reinsertion of Article NINTH which was inadvertently omitted from the Restated Certificate of Incorporation as previously filed. 4. The portion of the instrument in corrected form is as follows: "NINTH: The affirmative vote of two-thirds (2/3) of the outstanding stock of the Corporation entitled to vote for a merger or consolidation shall be required for the approval of any merger or consolidation to which the corporation is a party or for any sale, lease, exchange or other disposition by the Corporation of all or substantially all of its assets." Signed and attested to on May 23, 1985. /s/ S. Giordano, Jr. S. Giordano, Jr. President Attest: /s/ Howard S. Modlin Howard S. Modlin Secretary RESTATED CERTIFICATE OF INCORPORATION of FEDDERS CORPORATION The name of the corporation (hereunder referred to as the "Corporation") is FEDDERS CORPORATION. The certificate of incorporation was filed in the office of the Secretary of State of Delaware on the 4th day of April, 1984. The 999 shares of common stock of the Corporation outstanding immediately prior to the time this restated certificate of incorporation is filed with the Secretary of State of Delaware shall be and they hereby are, upon such filing, automatically split and changed (without any further act of the Corporation or its stockholders) into fully paid and non-assessable shares of common stock of the Corporation, with a par value of $1.00 per share, and the amount of capital of the Corporation is increased to an amount equal to the aggregate par value of the shares of common stock of the Corporation outstanding after giving effect to such stock split and change. To reflect such stock split and change, each certificate representing shares of common stock of Fedders Corporation, a New York Corporation ("Fedders NY"), issued and outstanding immediately prior to the effectiveness of the merger of Fedders of Delaware, Inc. into Fedders NY shall represent a like number of shares of common stock of the Corporation and the holder of each such certificate shall be entitled to receive a new certificate or certificates of the Corporation representing said number of shares of common stock of the Corporation, so that upon the filing of this restated certificate of incorporation each holder or record of a certificate representing theretofore issued and outstanding common stock of Fedders NY will have or be entitled to new certificates representing in the aggregate a like number of shares of common stock of the Corporation, with a par value of $1.00 per share. The certificate for the 999 shares of common stock of the Corporation owned of record by Fedders NY on the date of the filing of this restated certificate of incorporation shall thereupon be cancelled. The certificate of incorporation is hereby restated to read as follows: CERTIFICATE OF INCORPORATION of FEDDERS CORPORATION FIRST: The name of the corporation shall be FEDDERS CORPORATION. SECOND: The purpose for which the Corporation is formed are as follows: (a) To design, manufacture, buy, sell, distribute, at wholesale or retail, import and export, rent and lease, repair and maintain, dispose of, and generally deal in all kinds of air-conditioning apparatus, equipment and appliances, refrigeration apparatus, equipment and appliances, heating apparatus, equipment and appliances, gas and electric stoves and ranges, automatic clothes- washing machines and clothes drying machines of all kinds and for all purposes, automobile radiators and other components of all kinds, sheetmetal specialties, and all other devices of any kind or nature used in conjunction therewith, or incidental or accessory thereto. (b) To design, create, manufacture, product, export, import, purchase, acquire, sell, dispose of, and generally deal in and with materials, articles, machinery, apparatus, equipment, appliances, supplies, goods and other personal property of every kind and description, tangible or intangible, and to engage in any mercantile, commercial manufacturing or trading business of any character. (c) To acquire, by purchase or otherwise, own, hold, lease, mortgage, sell, or otherwise, dispose of, and generally deal in and with rights and interests in real and personal property of every kind and description. (d) To acquire, sell or otherwise dispose of, deal in and with, and grant and obtain licenses for all kinds of intangible property, including patent rights, improvements thereon, inventions, discoveries, formulas and processes, copyrights, trademarks, trade names and designs. (e) To the extent permitted by law, to promote, finance, underwrite and assist, financially or otherwise, and to assume and guarantee the obligations of any individual, corporation or other entity, and to purchase or otherwise acquire, hold, own, sell or otherwise dispose of securities and obligations of every nature and kind of any issuer, whether or not incorporated. (f) To do all and everything necessary, suitable or proper for the accomplishment of any of the purposes or the attainment of any of the objects hereinbefore set forth, either alone or in association with other corporations, firms or individuals, and to do every other act or acts, thing or things, incidental or appurtenant to or arising out of or connected with the aforesaid businesses or any part or parts thereof. (g) To engage in any lawful act or activity for which Corporation may be organized under the General Corporation Law of Delaware. THIRD: The aggregate number of shares of stock which the Corporation shall have authorized to issue is 35,000,000, consisting of 30,000,000 shares of common stock having a par value of $1.00 per share, and 5,000,000 shares of preferred stock having a par value of $1.00 per share. The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article THIRD, to provide for the issuance of the preferred shares in series, and by filing a certificate pursuant to the General Corporation Law of Delaware, to establish the number of shares of be included in each such series, and to fix the designations, relative rights, preferences and limitations of the shares of each such series. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following: (a) The number of shares constituting that series and the distinctive designations of that series; (b) The dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law and, if so, the terms of such voting rights; (d) Whether that series shall have conversion privileges and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; (e) Whether or not the shares of that series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary of involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; (h) Any other relative rights, preferences and limitations of that series. Dividends on outstanding preferred shares shall be declared and paid, or set apart for payment, before any dividends shall be declared and paid, or set apart for payment, on the common shares with respect to the dividend period. Any and all such shares issued, and for which the full consideration has been paid or delivered shall be deemed fully paid stock and the holder of such shares shall not be liable for any further call or assessment or any other payment thereon. FOURTH: The duration of such Corporation shall be perpetual. FIFTH: The name and mailing address of the Corporation's Registered Agent and Office in the State of Delaware are: The Prentice-Hall Corporation System, Inc. 229 South State Street in the City of Dover, County of Kent, Delaware 19901. SIXTH: Directors shall be divided into three classes, each class to be determined by the directors prior to the election of a particular class. In the event that at any time or from time to time the number of directors is increased, the newly created directorships resulting therefrom shall be filled by a vote of the majority of the directors in office immediately prior to such increase and directors so elected shall serve until the term of such class expires. In conformity with the statute, the initial First Class directors shall be elected to a term of one year, Second Class directors to a term of two years, and Third Class directors to a term of three years, and at each subsequent annual meeting, the successors to directors whose term shall expire that year shall be elected to a term of three years. SEVENTH: No holder of shares of the Corporation of any class, now or hereafter authorized, shall have any preferential or preemptive right to subscribed for, purchase or receive any shares of the Corporation of any class, now or hereafter authorized, or any options or warrants for such shares, or any rights to subscribe for or purchase such shares, or any securities convertible into or exchangeable for such shares, which may at any time be issued, sold or offered for sale by the Corporation. EIGHTH: The following provisions shall apply in addition to any other affirmative vote required by law or this certificate of incorporation: SECTION I CERTAIN BUSINESS COMBINATIONS The affirmative vote of the holders of not less than four-fifths of the outstanding shares of Voting Stock (as hereinafter defined) held by stockholders other than the Acquiring Person (as hereinafter defined) with which or by or on whose behalf, directly or indirectly, a Business Combination (as hereinafter defined) is proposed, voting as a single class, shall be required for the approval or authorization of such Business Combination. Notwithstanding the foregoing, the four-fifths voting requirement shall not be applicable if such Business Combination is approved by the Corporation's Board of Directors prior to the Acquiring Person becoming such or if the cash or fair market value of the property, securities or other consideration to be received per share by holders of shares of each class of Voting Stock in such Business Combination as of the date of consummation thereof is an amount not less than the higher of (a) the Highest Per Share Price or the Highest Equivalent Price (as these terms are hereinafter defined) paid by such Acquiring Person in acquiring any of its holdings of Voting Stock, and (b) the Fair Market Price (as hereinafter defined) of such class of Voting Stock determined on the date the proposal for such Business Combination was first publicly announced, and such consideration shall be in the same form and of the same kind as the consideration paid by such Acquiring Person in acquiring the shares of the Voting Stock already acquired by it. If the Acquiring Person had paid for shares of Voting Stock with varying forms of consideration, the form of consideration to be received by the holders of Voting Stock shall be the form used to acquire the largest number of shares of Voting Stock acquired by such Acquiring Person. SECTION II DEFINITIONS For purposes of this Article EIGHTH: 1. Business Combination. The term "Business Combination" shall mean (a) any merger or consolidation of the Corporation or a subsidiary of the Corporation with or into an Acquiring Person, (b) any sale, lease, exchange, transfer or other disposition, including, without limitation, a mortgage or any other security device, in a single transaction or related series of transactions, of all or any Substantial Part (as hereinafter defined) of the assets either of the Corporation (including without limitation any voting securities of a subsidiary) or of a subsidiary of the Corporation to an Acquiring Person, (c) any merger or consolidation of an Acquiring Person with or into the Corporation or a subsidiary of the Corporation, (d) any sale, lease, exchange, transfer or other disposition, including without limitation a mortgage or other security device, in a single transaction or related series of transactions, of all or any Substantial Part of the assets of an Acquiring Person to the Corporation or a subsidiary of the Corporation, (e) the issuance of any securities of the Corporation or a subsidiary of the Corporation to an Acquiring Person, (f) any recapitalization, merger or consolidation that would have the effect of increasing the voting power of an Acquiring Person, (g) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed, directly or indirectly, by or on behalf of an Acquiring Person, (h) any merger or consolidation of the Corporation with a subsidiary of the Corporation proposed by or on behalf of an Acquiring Person, unless the surviving or consolidated corporation, as the case may be, has a provision in its certificate of incorporation substantially identical to this Article TWELFTH, (i) any agreement, contract or other arrangement provided for any of the transactions described in this definition of Business Combination, and (j) any other transaction with an Acquiring Person which requires the approval of the stockholders of the Corporation under the Business Corporation Law of New York. A person who is an Acquiring Person as of (x) the time any definitive agreement relating to a Business Combination is entered into, (y) the record date for the determination of stockholders entitled to notice of and to vote on a Business Combination, or (z) immediately prior to the consummation of a Business Combination, shall be deemed an Acquiring Person for purposes of this definition. 2. Acquiring Person. The term "Acquiring Person" shall mean and include any individual, corporation (other than the Corporation), partnership or other person or entity which, together with its Affiliates and Associates (as defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect at April 30, 1984, collectively, and as so in effect, the "Exchange Act"), and with any other individual, corporation (other than the Corporation), partnership or other person or entity with which it or they have any agreement, arrangement or understanding with respect to acquiring, holding, voting or disposing of Voting Stock, Beneficially Owns (as described in Rule 13d-3 of the Exchange Act) in the aggregate 5% or more of the outstanding Voting Stock of the Corporation. A person or entity, its Affiliates and Associates and all such other persons or entities with whom they have any such agreement, arrangement or understanding shall be deemed a single Acquiring Person for purposes of this Article EIGHTH. For purposes of this Article, the Board of Directors shall have the power to determine, on the basis of information known to the Board, if and when there is an Acquiring Person. Any such determination shall be conclusive and binding for all purposes of this Article. 3. Substantial Part. The term "Substantial Part" shall mean an amount equal to more than 10% of the fair market value of the total consolidated assets of the Corporation and its subsidiaries taken as a whole as of the end of its most recent fiscal year ended prior to the time the determination is being made. 4. Rights to Acquire. Without limitation, any share of Voting Stock of the Corporation that any Acquiring Person has the right to acquire at any time (notwithstanding that Rule 13d-3 of the Exchange Act deems such shares to be beneficially owned only if such right may be exercised within 60 days) pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed to be Beneficially Owned by the Acquiring Person and to be outstanding for purposes of Paragraph 2 of this Section II. 5. Other Consideration to be Received. For the purposes of Section I of this Article EIGHTH, the term "other consideration to be received" shall include, without limitation, Common Stock, Preferred Stock or other capital of the Corporation retained by its existing stockholders other than the Acquiring Person with which or by or on whose behalf, directly or indirectly, a Business Combination has been proposed or other parties to such Business Combination in the event of a Business Combination in which the Corporation is the surviving corporation. 6. Voting Stock. The term "Voting Stock" shall mean all of the outstanding shares of capital stock of the Corporation entitled to vote in elections of directors (considered for this purpose as one class), and each reference to a percentage of shares of Voting Stock shall refer to such percentage of the votes entitled to be cast by such shares. 7. Time of Acquisition. An Acquiring Person shall be deemed to have acquired shares of the Voting Stock of the Corporation at the time when such Acquiring Person became the Beneficial Owner thereof. The price paid by an Acquiring Person for such shares held by a person or entity at the time it became part of such Acquiring Person shall be deemed to be the higher of (a) the price paid upon the acquisition thereof by such person or entity and (b) the market price of the shares in question at the time when such person or entity became part of such Acquiring Person. 8. Highest Per Share Price; Highest Equivalent Price. The terms "Highest Per Share Price" and "Highest Equivalent Price" as used in this Article EIGHTH shall mean the following: If there is only one class of capital stock of the Corporation issued and outstanding, the Highest Per Share Price shall mean the highest per share price that can be determined to have been paid at any time by the Acquiring Person by or on whose behalf, directly or indirectly, the Business Combination has been proposed for any share or shares of that class of capital stock. If there is more than one class of capital stock of the Corporation issued and outstanding, the Highest Equivalent Price shall mean, with respect to each class and series of capital stock of the Corporation, the highest per share price equivalent of the highest price that can be determined to have been paid at any time by such Acquiring Person for any share or shares of any class or series of capital stock of the Corporation. In determining the Highest Per Share Price and Highest Equivalent Price, all purchases by an Acquiring Person shall be taken into account regardless of whether the shares were purchased before or after the Acquiring Person became an Acquiring Person. Also, the Highest Per Share Price and the Highest Equivalent Price shall include any brokerage commissions, transfer taxes and soliciting dealers' fees paid by the Acquiring Person with respect to the shares of capital stock of the Corporation acquired by the Acquiring Person. The Highest Per Share Price and the Highest Equivalent Price shall be appropriately adjusted to take into account stock dividends, subdivisions, combinations and reclassifications. 9. Fair Market Price. The term "Fair Market Price" shall mean for any class of Voting Stock the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such class of Voting Stock on the Composite Tape for New York Stock Exchange-listed stocks, or, if such class of Voting Stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such class of Voting Stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such class of Voting Stock is listed, or, if such class of Voting Stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such class of Voting Stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock. SECTION III AMENDMENT The provisions set forth in this Article EIGHTH may not be amended, altered, changed or repealed in any respect unless such action is approved by the affirmative vote of the holders of not less than four-fifths of the outstanding shares of Voting Stock of the Corporation at a meeting of the stockholders duly called for the consideration of such amendment, alteration, change or repeal, provided, however, that if such action has been proposed, directly or indirectly, on behalf of an Acquiring Person, it must also be approved by the affirmative vote of the holders of not less than four-fifths of the outstanding shares of Voting Stock held by the stockholders other than such Acquiring Person. IN WITNESS WHEREOF, this restated certificate of incorporation having been duly adopted by the Board of Directors and the sole stockholder of Fedders Corporation entitled to vote in accordance with sections 141(f), 228, 242 and 245 of the General Corporation Law of Delaware, we have signed and attested this certificate this 31st day of December, 1984. Fedders Corporation By:/s/ Salvatore Giordano, Jr. Salvatore Giordano, Jr. President /s/ S. A. Muscarnera Secretary STATE OF NEW JERSEY ) ) ss.: COUNTY OF SOMERSET ) BE IT REMEMBERED that, on December 31, 1984, before me, a Notary Public duly authorized by law to take acknowledgment of deeds, personally came Salvatore Giordano, Jr., of FEDDERS CORPORATION, who duly signed the foregoing instrument before me and acknowledged that such signing is his act and deed, that such instrument as executed is the act and deed of said corporation, and that the facts stated therein are true. GIVEN under my hand on December 31st, 1984. /s/ Marlene M. Volpe Notary Public Marlene M. Volpe Notary Public of New Jersey My Commission Expires April 15, 1989 -----END PRIVACY-ENHANCED MESSAGE-----