-----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, WwKyf1eGBN3+m5mHdvUlNbsQrqQzUKfBRQQB+90DfhC2PtsCIY9aRVLjrywgAuAT 0+ng2fr/kIavZQGpro9KEA== 0000950123-99-006553.txt : 19990716 0000950123-99-006553.hdr.sgml : 19990716 ACCESSION NUMBER: 0000950123-99-006553 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19990715 GROUP MEMBERS: FEDDERS CORP /DE GROUP MEMBERS: TI ACQUISITION CORP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TRION INC CENTRAL INDEX KEY: 0000099802 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL & COMMERCIAL FANS & BLOWERS & AIR PURIFYING EQUIP [3564] IRS NUMBER: 250922753 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-13180 FILM NUMBER: 99664914 BUSINESS ADDRESS: STREET 1: 101 MCNEILL RD STREET 2: P O BOX 760 CITY: SANFORD STATE: NC ZIP: 27331-0760 BUSINESS PHONE: 9197752201 MAIL ADDRESS: STREET 1: 101 MCNEIL ROAD STREET 2: 101 MCNEIL ROAD CITY: SANFORD STATE: NC ZIP: 27331-0760 FILED BY: 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: SC 14D1 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 SC 14D1 1 SCHEDULE 14D-1 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ TRION, INC. (NAME OF SUBJECT COMPANY) TI ACQUISITION CORP. FEDDERS CORPORATION (BIDDERS) COMMON STOCK, PAR VALUE $0.50 PER SHARE (TITLE OF CLASS OF SECURITIES) 896726 10 6 (CUSIP NUMBER OF CLASS OF SECURITIES) ------------------------ ROBERT N. EDWARDS, ESQ. FEDDERS CORPORATION WESTGATE CORPORATE CENTER 505 MARTINSVILLE ROAD LIBERTY CORNER, N.J. 07938-0013 TELEPHONE: (908) 604-8686 FACSIMILE: (908) 604-8576 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS) COPY TO: MARK C. SMITH, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 919 THIRD AVENUE NEW YORK, NY 10022 TELEPHONE: (212) 735-3000 FACSIMILE: (212) 735-2000 ------------------------ CALCULATION OF FILING FEE - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Transaction Valuation* $41,556,740 Amount of Filing Fee $8,553.11 - --------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------
* Estimated for purposes of calculating the amount of the filing fee only. The filing fee calculation assumes the purchase of 7,552,771 shares of common stock, $0.50 par value per share (the "Shares"), of Trion, Inc. at a price of $5.50 per Share in cash, without interest. The filing fee calculation is based on the 7,161,247 Shares outstanding as of July 15, 1999 and assumes the issuance prior to the consummation of the Offer (as defined herein) of 391,524 Shares upon the exercise of outstanding options. The amount of the filing fee calculated in accordance with Regulation 240.0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the value of the transaction. [ ] Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: Not applicable. Form or Registration No.: Not applicable. Filing Party: Not applicable. Date Filed: Not applicable. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 14D-1 CUSIP NO. 896726 10 6 - --------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS S.S. or I.R.S. Identification Nos. of Above Persons TI Acquisition Corp. 52-2180720 - --------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - --------------------------------------------------------------------------- 3. SEC USE ONLY - --------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF - --------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f) [ ] - --------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Pennsylvania - --------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON none - --------------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ] - --------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) - --------------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON CO - ---------------------------------------------------------------------------
2 3 14D-1 CUSIP NO. 896726 10 6 - --------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS S.S. or I.R.S. Identification Nos. of Above Persons Fedders Corporation 22-2572390 - --------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - --------------------------------------------------------------------------- 3. SEC USE ONLY - --------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF - --------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f) [ ] - --------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON none - --------------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ] - --------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) - --------------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON CO - ---------------------------------------------------------------------------
3 4 TENDER OFFER This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to the offer by TI Acquisition Corp., a Pennsylvania corporation ("Purchaser") and an indirect wholly owned subsidiary of Fedders Corporation, a Delaware corporation ("Parent"), to purchase all of the outstanding shares of common stock, par value $0.50 per share (the "Shares"), of Trion, Inc., a Pennsylvania corporation (the "Company"), at $5.50 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 15, 1999 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal, a copy of which is attached hereto as Exhibit (a)(2) (which, as amended or supplemented from time to time, together constitute the "Offer"). ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Trion, Inc. and the address of its principal executive offices is P.O. Box 760, 101 McNeill Road, Sanford, North Carolina, 27331-0760. The telephone number of the Company at such location is (919) 775-2201. (b) The information set forth in the "INTRODUCTION" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in "Price Range of the Shares; Dividends" of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d), (g) This Statement is being filed by Purchaser and Parent. The information set forth in the "INTRODUCTION" and "Certain Information Concerning Parent and Purchaser" of the Offer to Purchase is incorporated herein by reference. The name, business address, present principal occupation or employment, the material occupations, positions, offices or employments for the past five years and citizenship of each director and executive officer of Parent and Purchaser and the name, principal business and address of any corporation or other organization in which such occupations, positions, offices and employments are or were carried on are set forth in Schedule I to the Offer to Purchase and incorporated herein by reference. (e)-(f) During the last five years neither Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent, any of the persons listed in Schedule I to the Offer to Purchase (i) have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)(1) Other than the transactions described in Item 3(b) below, neither Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent, any of the persons listed in Schedule I to the Offer to Purchase have entered into any transaction with the Company, or any of the Company's affiliates which are corporations, since the commencement of the Company's third full fiscal year preceding the date of this Statement, the aggregate amount of which was equal to or greater than one percent of the consolidated revenues of the Company for (i) the fiscal year in which such transaction occurred or (ii) the portion of the current fiscal year which has occurred if the transaction occurred in such year. (a)(2) Other than the transactions described in Item 3(b) below, neither Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent, any of the persons listed in Schedule I of the Offer to Purchase have entered into any transaction since the commencement of the Company's third full fiscal year preceding the date of this Statement with the executive officers, directors or affiliates of the Company which are not corporations, in which the aggregate amount involved in such transaction or in a series of similar transactions, 4 5 including all periodic installments in the case of any lease or other agreement providing for periodic payments or installments, exceeded $40,000. (b) The information set forth in the "INTRODUCTION," "Certain Information Concerning Parent and Purchaser," "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements" and "Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in the "INTRODUCTION" and "Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS. (a)-(e) The information set forth in the "INTRODUCTION," "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements" and "Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth in the "INTRODUCTION" and "Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations" of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth in the "INTRODUCTION," "Certain Information Concerning Parent and Purchaser" and "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements" of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the "INTRODUCTION," "Source and Amount of Funds," "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements," "Plans for the Company; Other Matters" and "Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in "Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. Not applicable. ITEM 10. ADDITIONAL INFORMATION. (a) Except as disclosed in Items 3 and 7 above, there are no present or proposed material contracts, arrangements, understandings or relationships between Purchaser or Parent, or to the best knowledge of Purchaser and Parent, any of the persons listed in Schedule I of the Offer to Purchase, and the Company, or any of its executive officers, directors, controlling persons or subsidiaries. (b)-(c) The information set forth in the "INTRODUCTION," "Conditions to the Offer" and "Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. 5 6 (d) The information set forth in "Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations" and "Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (e) None. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, to the extent not otherwise incorporated herein by reference, is incorporated herein by reference. ITEM 11. MATERIALS TO BE FILED AS EXHIBITS. (a)(1) -- Offer to Purchase dated July 15, 1999. (a)(2) -- Letter of Transmittal. (a)(3) -- Notice of Guaranteed Delivery. (a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) -- Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) -- Press Release of Parent and the Company dated July 13, 1999. (a)(8) -- Press Release of Parent dated July 15, 1999. (a)(9) -- Summary Advertisement. (b) -- None. (c)(1) -- Agreement and Plan of Merger, dated as of July 12, 1999, by and among Parent, Purchaser and the Company. (c)(2) -- Stock Option Agreement, dated as of July 12, 1999, by and between Parent and the Company. (c)(3) -- Shareholder Agreements, dated as of July 12, 1999 by and between Director Shareholders, Parent and Purchaser. (c)(4) -- Confidentiality Agreement, dated as of February 25, 1999, by and between Parent and the Company. (c)(5) -- Employment Agreement between Parent and Steven L. Schneider dated July 12, 1999. (c)(6) -- Employment Agreement between the Company and Calvin J. Monsma dated July 12, 1999. (d) -- None. (e) -- Not applicable. (f) -- None.
6 7 SIGNATURE After due inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: July 15, 1999 TI ACQUISITION CORP. BY: /s/ ROBERT L. LAURENT, JR. ------------------------------------ Name: Robert L. Laurent, Jr. Title: Executive Vice President FEDDERS CORPORATION BY: /s/ ROBERT L. LAURENT, JR. ------------------------------------ Name: Robert L. Laurent, Jr. Title: Executive Vice President 7 8 INDEX TO EXHIBITS
EXHIBIT - ------- (a)(1) -- Offer to Purchase, dated July 15, 1999. (a)(2) -- Letter of Transmittal. (a)(3) -- Notice of Guaranteed Delivery. (a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) -- Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) -- Press Release of Parent and the Company dated July 13, 1999. (a)(8) -- Press Release of Parent dated July 15, 1999. (a)(9) -- Summary Advertisement. (b) -- None (c)(1) -- Agreement and Plan of Merger, dated as of July 12, 1999, by and among Parent, Purchaser and the Company. (c)(2) -- Company Option Agreement, dated as of July 12, 1999, by and between Parent and the Company. (c)(3) -- Shareholder Agreements, dated as of July 12, 1999 by and between Director Shareholders, Parent and Purchaser. (c)(4) -- Confidentiality Agreement, dated as of February 25, 1999, by and between Parent and the Company. (c)(5) -- Employment Agreement between Parent and Steven L. Schneider dated July 12, 1999. (c)(6) -- Employment Agreement between the Company and Calvin J. Monsma dated July 12, 1999. (d) -- None. (e) -- Not Applicable. (f) -- None.
EX-99.A.1 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF TRION, INC. AT $5.50 NET PER SHARE BY TI ACQUISITION CORP., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF FEDDERS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED. THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED AS OF JULY 12, 1999, BY AND AMONG FEDDERS CORPORATION ("PARENT"), TI ACQUISITION CORP. ("PURCHASER") AND TRION, INC. (THE "COMPANY"). THE BOARD OF DIRECTORS OF THE COMPANY BY A UNANIMOUS VOTE OF THOSE PRESENT AT THE MEETING APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (EACH AS DEFINED HEREIN), AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S SHAREHOLDERS AND RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN) THAT NUMBER OF SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY PARENT OR PURCHASER (IF ANY), REPRESENTS AT LEAST EIGHTY PERCENT (80%) OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT. THE OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 14. ------------------------ IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's Shares (as defined herein) should either (i) complete and sign the enclosed Letter of Transmittal (or a facsimile thereof) in accordance with the Instructions in the Letter of Transmittal, have such shareholder's signature thereon guaranteed (if required by Instruction 1 to the Letter of Transmittal), mail or deliver the Letter of Transmittal (or a facsimile thereof) and any other required documents to the Depositary (as defined herein) and either deliver the certificates for such Shares to the Depositary or tender such Shares pursuant to the procedure for book-entry transfer set forth in Section 3 of this Offer to Purchase or (ii) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Any shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee to tender such Shares. Any shareholder who desires to tender Shares and whose certificates evidencing such Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer on a timely basis, or who cannot deliver all required documents to the Depositary prior to the expiration of the Offer, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3 of this Offer to Purchase. Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be directed to the Information Agent or to the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the other tender offer materials may also be obtained from brokers, dealers, commercial banks or trust companies. ------------------------ The Dealer Manager for the Offer is: TM Capital Corp. Logo July 15, 1999 2 TABLE OF CONTENTS INTRODUCTION................................................ 1 THE OFFER................................................... 4 1. Terms of the Offer................................... 4 2. Acceptance for Payment and Payment................... 5 3. Procedures for Tendering Shares...................... 6 4. Withdrawal Rights.................................... 8 5. Certain U.S. Federal Income Tax Consequences......... 9 6. Price Range of the Shares; Dividends................. 10 7. Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations.......................................... 10 8. Certain Information Concerning the Company........... 11 9. Certain Information Concerning Parent and Purchaser.............................................. 13 10. Sources and Amount of Funds.......................... 14 11. Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements........................................... 14 12. Plans for the Company; Other Matters................. 28 13. Dividends and Distributions.......................... 30 14. Conditions to the Offer.............................. 30 15. Certain Legal Matters................................ 32 16. Fees and Expenses.................................... 35 17. Miscellaneous........................................ 36 SCHEDULE I INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER...................................... I-1 ANNEX A Text of Subchapter 25E of the Pennsylvania Business Corporation Law........................................... A-1
i 3 To the Holders of Common Stock of Trion, Inc.: INTRODUCTION TI Acquisition Corp., a Pennsylvania corporation ("Purchaser") and an indirect wholly owned subsidiary of Fedders Corporation, a Delaware corporation ("Parent"), hereby offers to purchase all outstanding shares of common stock, par value $0.50 per share (the "Shares"), of Trion, Inc., a Pennsylvania corporation (the "Company"), at a price of $5.50 per Share, net to the seller in cash, without interest (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, as amended or supplemented from time to time, collectively constitute the "Offer"). Tendering shareholders of record who tender Shares directly will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. Shareholders who hold their Shares through a bank or broker should check with such institution as to whether they charge any service fees. Purchaser will pay all fees and expenses of TM Capital Corp. ("TM Capital"), which is acting as the Dealer Manager (in such capacity, the "Dealer Manager"), American Stock Transfer and Trust Company which is acting as the Depositary (in such capacity, the "Depositary") and D.F. King & Co., Inc. ("DF King"), which is acting as Information Agent (in such capacity, the "Information Agent"), incurred in connection with the Offer and in accordance with the terms of the agreements entered into between Purchaser and/or Parent and each such person. See Section 16. THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD OF DIRECTORS") BY A UNANIMOUS VOTE OF THOSE PRESENT AT THE MEETING APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S SHAREHOLDERS AND RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. Harris Williams & Co. ("Harris Williams"), financial advisor to the Company, has delivered to the Company Board of Directors its opinion, dated as of July 12, 1999 (the "Financial Advisor Opinion"), to the effect that, as of such date and based upon and subject to certain assumptions and matters stated therein, the consideration to be received by the holders of Shares (other than Parent and its affiliates if at all) in the Offer and the Merger was fair, from a financial point of view, to such holders. A copy of the Financial Advisor Opinion is attached as an exhibit to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which has been filed by the Company with the Securities and Exchange Commission (the "Commission") in connection with the Offer and which is being mailed to holders of Shares herewith. Holders of Shares are urged to, and should, read the Financial Advisor Opinion carefully. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY PARENT OR PURCHASER (IF ANY), REPRESENTS AT LEAST 80% OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 14. As used in this Offer to Purchase, "fully diluted basis" takes into account the exercise of all outstanding options and other rights and securities exercisable into Shares. The Company has represented and warranted to Parent and Purchaser that, as of July 12, 1999, there were 7,161,247 Shares issued and outstanding and 391,524 Shares were issuable pursuant to the exercise of outstanding options (the "Company Options"). The Merger Agreement provides, among other things, that the Company will not, without the prior written consent of Parent, change the authorized or issued capital stock of the Company or any subsidiary of the Company, grant any stock option or right to purchase shares of capital stock of the Company or any subsidiary of the Company, or issue any security 4 convertible into such capital stock. See Section 11. Based on the foregoing and assuming the issuance of 391,524 Shares issuable upon the exercise of outstanding Options, Purchaser believes that the Minimum Condition will be satisfied if 6,042,217 Shares are validly tendered and not withdrawn prior to the Expiration Date. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 12, 1999 (the "Merger Agreement"), by and among Parent, Purchaser and the Company. Pursuant to the Merger Agreement and the Pennsylvania Business Corporation Law, as amended (the "PBCL"), as soon as practicable after the completion of the Offer and satisfaction or waiver, if permissible, of all conditions to the consummation of the Merger, including the purchase of Shares pursuant to the Offer (sometimes referred to herein as the "consummation" of the Offer) and the approval and adoption by the shareholders of the Company of (i) an amendment to section 6 of the Company's articles of incorporation (the "Articles Amendment") which amendment will delete the requirement in the Company's articles of incorporation that a merger of the Company with an existing shareholder or its affiliates receive the approval of a majority of the shares not held by such shareholder and its affiliates, and (ii) the Merger Agreement (if required by applicable law), Purchaser will be merged with and into the Company (the "Merger") and the Company will be the surviving corporation in the Merger (the "Surviving Corporation"). At the effective time of the Merger (the "Effective Time"), each Share then outstanding, other than Shares held by (i) the Company or any of its subsidiaries, (ii) Parent or any of its subsidiaries including Purchaser, and (iii) shareholders who properly perfect their dissenters' rights under the PBCL, will be converted into the right to receive $5.50 in cash or any higher price per Share paid in the Offer (the "Merger Consideration"), without interest. The Merger Agreement is more fully described in Section 11. The Company has entered into a Stock Option Agreement, dated as of July 12, 1999 (the "Company Option Agreement"), with Parent and Purchaser pursuant to which the Company has granted to Parent an irrevocable option (the "Stock Option") to purchase up to the number of fully paid and nonassessable Shares equal to 19.9% of the Shares issued and outstanding immediately prior to the grant of the Stock Option, at a purchase price of $5.50 per Share, exercisable upon the occurrence of certain events. The Company Option Agreement is described more fully in Section 11 below. Parent and Purchaser have entered into Shareholder Agreements dated as of July 12, 1999 (the "Shareholder Agreements"), with the directors of the Company (the "Director Shareholders"), pursuant to which each of such Director Shareholders has agreed, among other things, (1) to tender to Purchaser pursuant to the Offer at $5.50 per share, all Shares beneficially owned by such Director Shareholder (719,764 Shares in the aggregate) which will result in the Parent and its affiliates beneficially owning 10.1% of the outstanding Shares, (2) to grant to Parent an option exercisable under certain circumstances to purchase the Shares beneficially owned by such Director Shareholder, and (3) to vote all Shares beneficially owned by such Director Shareholder in favor of the Merger Agreement and against all other acquisition proposals. See Section 11 below. The Merger Agreement provides that, upon the purchase by Purchaser of at least a majority of the Shares pursuant to the Offer and from time to time thereafter, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board of Directors so that the percentage of Parent's nominees on the Company Board of Directors equals the percentage of outstanding Shares beneficially owned by Parent and its affiliates. The Company will, at such time, upon the request of Purchaser promptly use its best efforts to take all action necessary to cause such persons designated by Parent to be elected to the Company Board of Directors, if necessary, by increasing the size of the Company Board of Directors or securing resignations of its incumbent directors or both. Under Section 1924 of the PBCL, if a corporation owns at least 80% of the outstanding shares of each class of another corporation, the corporation owning such stock can effect a "short-form" merger with that corporation without any action or vote on the part of the other shareholders of such other corporation (a "short-form merger") if its board of directors adopts the merger. If the Minimum Condition is satisfied and Purchaser purchases at least 80% of the outstanding Shares, then under the PBCL, the Merger could be approved without any action or vote on the part of Company's other shareholders. However, section 6 of the 2 5 Company's articles of incorporation provides that a merger or consolidation of the Company with any person (or any affiliate of such person) that owns any shares of any class of equity security of the Company requires the approval of a majority of the voting securities of the Company not owned by such person and its affiliates. The Company's articles of incorporation provides that section 6 thereof may be amended by the affirmative vote of 80% of the voting securities of the Company entitled to vote thereon at a meeting called for that purpose. If the Minimum Condition is satisfied and Purchaser purchases at least 80% of the outstanding Shares, Purchaser will be able to effect the Articles Amendment and delete section 6 from the Company's articles of incorporation without any action or vote on the part of the other shareholders of the Company. Following the approval of the Articles Amendment, Purchaser will be able to effect a short-form merger without any further action or vote on the part of the other shareholders of the Company. Parent presently intends to effect a short-form merger if permitted to do so under the PBCL. The Merger Agreement is more fully described in Section 11. Although under the terms of the Merger Agreement, Parent and Purchaser may waive the Minimum Condition, they do not currently intend to do so and Parent and Purchaser may terminate the Merger Agreement if the Minimum Condition is not satisfied. In addition, the Merger Agreement provides that Purchaser may extend the Offer if the Shares tendered and not withdrawn pursuant to the Offer are less than 80% of the outstanding Shares. Even if Parent and Purchaser waive the Minimum Condition and they do not own 80% of the outstanding Shares, following consummation of the Offer, Parent and Purchaser could seek to purchase additional shares in the open market or otherwise in order to reach the 80% threshold required to approve the Articles Amendment and employ a short-form merger under the PBCL. The per share consideration paid for any Shares so acquired may be greater or less than that paid in the Offer. See Section 12. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 3 6 THE OFFER 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date, and not withdrawn in accordance with Section 4. The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Wednesday, August 11, 1999, unless and until Purchaser, in accordance with the terms of the Merger Agreement, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. In the Merger Agreement, Parent and Purchaser have agreed that if all conditions to Purchaser's obligation to accept for payment and pay for Shares pursuant to the Offer are not satisfied on the scheduled Expiration Date, Purchaser may, in its sole discretion, extend the Offer. The Offer is conditioned upon the satisfaction of the Minimum Condition, the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the other conditions set forth in Section 14. If such conditions are not satisfied prior to the Expiration Date, Purchaser reserves the right, subject to the terms of the Merger Agreement and subject to complying with applicable rules and regulations of the Commission, to (i) decline to purchase any Shares tendered in the Offer and terminate the Offer and return all tendered Shares to the tendering shareholders, (ii) waive any or all conditions to the Offer and, to the extent permitted by applicable law, purchase all Shares validly tendered, (iii) extend the Offer and, subject to the right of shareholders to withdraw Shares until the Expiration Date, retain all Shares which have been tendered during the period or periods for which the Offer is extended or (iv) amend the Offer. The Merger Agreement requires Purchaser to accept for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer if all conditions to the Offer are satisfied on the Expiration Date. However, if, immediately prior to the scheduled Expiration Date, all conditions to the Offer are not satisfied, Purchaser may, at its own discretion, extend the Offer. Any extension, amendment or termination of the Offer will be followed as promptly as practicable by public announcement thereof, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. Without limiting the obligation of Purchaser under such Rules or the manner in which Purchaser may choose to make any public announcement, Purchaser currently intends to make announcements by issuing a press release to the Dow Jones News Service. If Purchaser extends the Offer, or if Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its purchase of, or payment for, Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in Section 4. However, the ability of Purchaser to delay the payment for Shares which Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by, or on behalf of, holders of securities promptly after the termination or withdrawal of the Offer. If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer, Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. In a public release, the Commission has stated its view that an offer must 4 7 remain open for a minimum period of time following a material change in the terms of the Offer and that waiver of a material condition, such as the Minimum Condition, is a material change in the terms of the Offer. The release states that an offer should remain open for a minimum of five (5) business days from the date a material change is first published, or sent or given to security holders and that, if material changes are made with respect to information not materially less significant than the offer price and the number of shares being sought, a minimum of 10 business days may be required to allow adequate dissemination and investor response. The requirement to extend the Offer will not apply to the extent that the number of business days remaining between the occurrence of the change and the then-scheduled Expiration Date equals or exceeds the minimum extension period that would be required because of such amendment. If, prior to the Expiration Date, Purchaser increases the consideration offered to holders of Shares pursuant to the Offer, such increased consideration will be paid to all holders whose Shares are purchased in the Offer whether or not such Shares were tendered prior to such increase. The Company has provided Purchaser with the Company's shareholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares and will be furnished to brokers, dealers, banks and similar persons whose names, or the names of whose nominees, appear on the shareholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and will pay for, as soon as practicable after the Expiration Date, all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 4. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to Purchaser and not withdrawn, if, as and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance for payment of such Shares. Payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from Purchaser and transmitting payment to tendering shareholders. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a timely Book Entry Confirmation (as defined below) with respect thereto), (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined below) and (iii) any other documents required by the Letter of Transmittal. Accordingly, payment may be made to tendering shareholders at different times if delivery of the Shares and other required documents occur at different times. The per share consideration paid to any holder of Shares pursuant to the Offer will be the highest per share consideration paid to any other holder of such Shares pursuant to the Offer. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any applicable law. If Purchaser is delayed in its acceptance for payment of, or payment for, Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer (including such rights as are set forth in Sections 1 and 14) (but subject to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 4. 5 8 If any tendered Shares are not purchased pursuant to the Offer for any reason, or if certificates are submitted representing more Shares than are tendered, certificates evidencing Shares not tendered or not accepted for purchase will be returned to the tendering shareholder, or such other person as the tendering shareholder shall specify in the Letter of Transmittal, as promptly as practicable following the expiration, termination or withdrawal of the Offer. In the case of Shares delivered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility (as defined below) pursuant to the procedures set forth in Section 3, such Shares will be credited to such account maintained at the Book-Entry Transfer Facility as the tendering shareholder shall specify in the Letter of Transmittal, as promptly as practicable following the expiration, termination or withdrawal of the Offer. If no such instructions are given with respect to Shares delivered by book-entry transfer, any such Shares not tendered or not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated in the Letter of Transmittal as the account from which such Shares were delivered. Purchaser reserves the right to transfer or assign, in whole or, from time to time, in part, to one or more of its affiliates, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR TENDERING SHARES. Valid Tender. For Shares to be validly tendered pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either certificates evidencing tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered to the Depositary pursuant to the procedures for book-entry transfer set forth below and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (ii) the tendering shareholder must comply with the guaranteed delivery procedures described below. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and any other required documents must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. 6 9 THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (i) if the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in the Book Entry Transfer Facility's systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution" and, collectively, "Eligible Institutions"). In all other cases, all signatures on Letters of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or certificates for Shares not tendered or not accepted for payment are to be returned, to a person other than the registered holder of the certificates surrendered, then the tendered certificates for such Shares must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instruction 5 to the Letter of Transmittal. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's certificates for Shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such shareholder's tender may be effected if all the following conditions are met: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for (or a Book-Entry Confirmation with respect to) such Shares, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the Nasdaq National Market (the "Nasdaq National Market"), operated by the National Association of Securities Dealers, Inc. (the "NASD"), is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary, transmitted by telegram or mailed to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering shareholder and Purchaser upon the terms and subject to the conditions of the Offer. Appointment. By executing the Letter of Transmittal as set forth above (including delivery through an Agent's Message), the tendering shareholder will irrevocably appoint designees of Purchaser as such shareholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full 7 10 power of substitution, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by Purchaser and with respect to any and all non-cash dividends, distributions, rights, other Shares or other securities issued or issuable in respect of such Shares on or after July 12, 1999 (collectively, "Distributions"). All such proxies will be considered coupled with an interest in the tendered Shares. Such appointment will be effective if, as and when, and only to the extent that, Purchaser accepts for payment Shares tendered by such shareholder as provided herein. All such powers of attorney and proxies will be irrevocable and will be deemed granted in consideration of the acceptance for payment by Purchaser of Shares tendered in accordance with the terms of the Offer. Upon such appointment, all prior powers of attorney, proxies and consents given by such shareholder with respect to such Shares (and any and all Distributions) will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given by such shareholder (and, if given, will not be deemed effective). The designees of Parent will thereby be empowered to exercise all voting and other rights with respect to such Shares (and any and all Distributions), including, without limitation, in respect of any annual or special meeting of the Company's shareholders (and any adjournment or postponement thereof), actions by written consent in lieu of any such meeting or otherwise, as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares (and any and all Distributions), including voting at any meeting of shareholders. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser, in its sole discretion, which determination will be final and binding. Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form or the acceptance for payment of which, or payment for which, may, in the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right, in its sole discretion, subject to the provisions of the Merger Agreement, to waive any defect or irregularity in any tender of Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of Purchaser, Parent, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Subject to the terms of the Merger Agreement, Purchaser's interpretation of the terms and conditions of the Offer in this regard (including the Letter of Transmittal and the instructions thereto) will be final and binding. Backup Withholding. Under the "backup withholding" provisions of federal income tax law, unless a tendering registered holder, or its assignee (in either case, the "Payee"), satisfies the conditions described in Instruction 10 of the Letter of Transmittal or is otherwise exempt, the cash payable as a result of the Offer may be subject to backup withholding tax at a rate of 31% of the gross proceeds. To prevent backup withholding, each Payee should complete and sign the Substitute Form W-9 provided in the Letter of Transmittal. See Instruction 10 to the Letter of Transmittal. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4 or as provided by applicable law, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by Purchaser pursuant to the Offer, may also be withdrawn at any time after September 12, 1999. To be effective, a written or telegraphic notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been 8 11 tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tendered Shares may not be rescinded, and any Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, which determination will be final and binding. None of Purchaser, Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 5. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES. The following is a general summary of certain U.S. federal income tax consequences of the Offer and the Merger relevant to a beneficial holder of Shares whose Shares are tendered and accepted for payment pursuant to the Offer or whose Shares are converted to cash in the Merger (a "Holder"). The discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), regulations issued thereunder, judicial decisions and administrative rulings, all of which are subject to change, possibly with retroactive effect. The following does not address the U.S. federal income tax consequences to all categories of Holders that may be subject to special rules (e.g., holders who acquired their Shares pursuant to the exercise of employee stock options or other compensation arrangements with the Company, holders who perfect their appraisal rights under the PBCL, foreign holders, insurance companies, tax-exempt organizations, dealers in securities and persons who have acquired the Shares as part of a straddle, hedge, conversion transaction or other integrated investment), nor does it address the federal income tax consequences to persons who do not hold the Shares as "capital assets" within the meaning of Section 1221 of the Code (generally, property held for investment). Holders should consult their own tax advisors regarding the U.S. federal, state, local and foreign income and other tax consequences of the Offer and the Merger. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local and foreign income and other tax laws. In general, a Holder who sells Shares pursuant to the Offer or receives cash in exchange for Shares pursuant to the Merger will recognize gain or loss for federal income tax purposes equal to the difference, if any, between the amount of cash received and the Holder's adjusted tax basis in the Shares sold pursuant to the Offer or surrendered for cash pursuant to the Merger. Gain or loss will be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) tendered pursuant to the Offer or surrendered for cash pursuant to the Merger. Such gain or loss will be long-term capital gain or loss if the Holder has held the Shares for more than one (1) year at the time of the consummation of the Offer or the Merger. Capital gains recognized by an individual investor (or an estate or certain trusts) upon a disposition of a Share that has been held for more than one year generally will be subject to a maximum tax rate of 20% or, in the case of a Share that has been held for one year or less, will be subject to tax at ordinary income rates. Certain limitations apply to the use of capital losses. 9 12 6. PRICE RANGE OF THE SHARES; DIVIDENDS. The Shares are traded through the Nasdaq National Market under the symbol "TRON". The following table sets forth, for each of the fiscal quarters indicated, the high and low reported sales price per Share on the Nasdaq National Market.
HIGH LOW ----- ----- Fiscal Year Ended December 31, 1997 First Quarter ended March 31, 1997........................ $6.25 $3.88 Second Quarter ended June 30, 1997........................ 5.38 3.50 Third Quarter ended September 30, 1997.................... 5.50 3.94 Fourth Quarter ended December 31, 1997.................... 5.88 4.13 Fiscal Year Ended December 31, 1998 First Quarter ended March 31, 1998........................ $6.88 $4.56 Second Quarter ended June 30, 1998........................ 6.88 5.00 Third Quarter ended September 30, 1998.................... 6.88 3.25 Fourth Quarter ended December 31, 1998.................... 4.88 2.50 Fiscal Year Ending December 31, 1999 First Quarter ended March 31, 1999........................ $4.63 $2.75 Second Quarter ended June 30, 1999........................ 4.94 3.38 Third Quarter through July 14, 1999....................... 5.38 4.50
On July 12, 1999, the last full trading day prior to the public announcement of the execution of the Merger Agreement, the last reported closing sales price of the Shares on the Nasdaq National Market was $4.81 per Share. On July 14, 1999, the last full trading day prior to the commencement of the Offer, the last reported sales price of the Shares on the Nasdaq National Market was $5.31 per Share. Shareholders are urged to obtain a current market quotation for the Shares. The Company issued a $0.02 cash dividend each quarter from February 1997 through May 1998. In addition, under the terms of the Merger Agreement, the Company is not permitted to declare or pay dividends with respect to the Shares without the prior written consent of Parent; Parent does not intend to consent to any such declaration or payment. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. Market for the Shares. The purchase of Shares by Purchaser pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which, depending upon the number of Shares so purchased, could adversely affect the liquidity and market value of the remaining Shares held by shareholders. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or less than the Offer Price. Nasdaq Quotation. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NASD for continued inclusion on the Nasdaq National Market, which requires that an issuer have at least 500,000 publicly held shares, held by at least 300 round lot shareholders, with a market value of at least $1,000,000, have at least two market makers, have a minimum bid price of $1 and have either (A) net tangible assets of at least $2,000,000; (B) a market capitalization of at least $35,000,000; or (C) net income of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. If the Nasdaq National Market was to cease to publish quotations for the Shares, it is possible that the Shares would continue to trade in the over-the-counter market and that price or other quotations would be reported by other sources. The extent of the public market for such Shares and the availability of such quotations would depend, however, upon such factors as the number of 10 13 shareholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or lesser than the Offer Price. Exchange Act Registration. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its shareholders and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement pursuant to Section 14(a) in connection with shareholders' meetings and the related requirement of furnishing an annual report to shareholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or Rule 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated. Margin Regulations. The Shares are presently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which status has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding stock exchange listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. In addition, if registration of the Shares under the Exchange Act were terminated, the Shares would no longer constitute "margin securities." Parent currently intends to seek delisting of the Shares from the Nasdaq National Market and the termination of the registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such delisting and termination are met. If the Nasdaq National Market listing and the Exchange Act registration of the Shares are not terminated prior to the Merger, then the Shares will be delisted from the Nasdaq National Market and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. General. The information concerning the Company contained in this Offer to Purchase, including that set forth below under the caption "Selected Financial Information," has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. None of Parent, Purchaser or the Dealer Manager assumes responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Parent, Purchaser or the Dealer Manager. The Company is engaged in the design, manufacture, distribution and sale of equipment to improve indoor air quality. The Company sells its products for use in residences, commercial facilities, industrial facilities, hospitals, restaurants, general manufacturing, ships and submarines. The Company uses a range of technologies to collect airborne contaminants, including high efficiency particulate arrestance and ultra low particulate arrestance filtration technologies, electrostatic precipitators and media filtration to eliminate airborne pollutants and micron size contaminants. Selected Financial Information. Set forth below is certain consolidated financial information with respect to the Company, excerpted or derived from the Company's Annual Reports on Form 10-K for the 11 14 fiscal years ended December 31, 1998 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, each as filed with the Commission pursuant to the Exchange Act. More comprehensive financial information is included in such reports and in other documents filed by the Company with the Commission. The following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information (including any related notes) contained therein. Such reports, documents and financial information may be inspected and copies may be obtained from the Commission in the manner set forth below. TRION, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION
THREE MONTHS ENDED (UNAUDITED) FISCAL YEARS ENDED --------------------- ------------------------------------------ MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1998 1998 1997 1996 --------- --------- ------------ ------------ ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Net sales.................................. $14,857 $15,981 $57,214 $65,150 $62,401 Income (loss) before income taxes.......... 646 417 (2,178) 2,713 1,614 Net income (loss).......................... 435 271 (1,196) 2,051 1,112 Earnings (loss) per share: Basic.................................... 0.06 0.04 (0.17) 0.29 0.16 Diluted.................................. 0.06 0.04 (0.17) 0.29 0.16 BALANCE SHEET DATA: Total assets............................... $37,887 $39,201 $39,201 $42,192 $40,796 Total liabilities.......................... 16,019 17,660 17,660 19,325 19,754 Total Shareholders' equity................. 21,868 21,541 21,541 22,867 21,042
Other Financial Information. During the course of the discussions between Parent and the Company that led to the execution of the Merger Agreement, the Company provided Parent with certain information about the Company and its financial performance which is not publicly available. The information provided included financial projections for the Company as an independent company (i.e., without regard to the impact to the Company of a transaction with Parent), which information is summarized as set forth below:
FISCAL YEAR ENDED ----------------- DECEMBER 31, 1999 ----------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales................................................... $61,080 Operating income............................................ 3,907 Net income.................................................. 1,747 Earnings per share.......................................... 0.24
- --------------- The foregoing information was prepared by the Company solely for internal use and not for publication or with a view to complying with the published guidelines of the Commission regarding projections or with the guidelines established by the American Institute of Certified Public Accountants and are included in this Offer to Purchase only because they were furnished to Parent. The foregoing information is "forward-looking" and inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company, including industry performance, general business and economic conditions, changing competition, adverse changes in applicable laws, regulations or rules governing environmental, tax or accounting matters and other matters. Although the Company has informed Parent and Purchaser that it believes the assumptions used in preparing this information were reasonable when made, such assumptions are inherently subject to significant uncertainties and contingencies which are impossible to predict and beyond the 12 15 Company's control. One cannot predict whether the assumptions made in preparing the foregoing information will be accurate, and accordingly, there can be no assurance, and no representation or warranty is made, that actual results will not vary materially from those described above. The inclusion of this information should not be regarded as an indication that Parent, Purchaser, the Company or anyone who received this information considered it a reliable prediction of future events, and this information should not be relied on as such. None of Parent, Purchaser, the Dealer Manager, or the Company assumes any responsibility for the validity, reasonableness, accuracy or completeness of the projections, and the Company has made no representation to Parent or Purchaser regarding the financial information described above. The projections have not been adjusted to reflect the effects of the Merger. Available Information. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interests of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such information should be obtainable by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a website on the internet at http://www.sec.gov that contains reports, proxy statements and other information relating to the Company which have been filed via the Commission's EDGAR System. 9. CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER. Parent and Purchaser. Parent is a Delaware corporation and is a publicly traded company. Fedders North America, Inc., a wholly owned subsidiary of Parent, manufactures and sells air conditioners and dehumidifiers, principally for use in the U.S. residential market. The Company's products are marketed under the FEDDERS, EMERSON QUIET KOOL and AIRTEMP brand names primarily to national and regional retail chains, home improvement centers and buying groups, as well as distributors and, under private label, to retailers and other original equipment manufacturers, including other room air conditioner manufacturers. Through Fedders International, Parent is investing much of its planning and resources to penetrate the much larger and rapidly growing international market for room air conditioners. Purchaser is a newly incorporated Pennsylvania corporation organized in connection with the Offer and the Merger and has not carried on any activities other than in connection with the Offer and the Merger. All of the outstanding capital stock of Purchaser is owned indirectly by Parent. Until immediately prior to the time Purchaser purchases Shares pursuant to the Offer, it is not anticipated that Purchaser will have any significant assets or liabilities or engage in any significant activities other than those incident to its formation and capitalization and the transactions contemplated by the Offer and the Merger. The principal offices of Parent and Purchaser are located at 505 Martinsville Road, Liberty Corner, New Jersey 07938-0813. The telephone number of Parent and Purchaser at such location is (908) 604-8686. For certain information concerning the executive officers and directors of Parent and Purchaser, see Schedule I. Except as set forth in this Offer to Purchase, none of Purchaser, Parent or, to the best knowledge of Purchaser or Parent, any of the persons listed on Schedule I, or any associate or majority owned subsidiary of any of the foregoing, beneficially owns or has a right to acquire any Shares, and none of Purchaser, Parent or, to the best of knowledge of Purchaser or Parent, any of the persons or entities referred to above, or any of the respective executive officers, directors or subsidiaries of any of the foregoing, has effected any transaction in the Shares during the past sixty (60) days. 13 16 Except as set forth in this Offer to Purchase, none of Purchaser or Parent has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, none of Purchaser, Parent, any of their respective affiliates, or, to the best knowledge of Purchaser or Parent, any of the persons listed on Schedule I, has had, since January 1, 1996 any business relationships or transactions with the Company or any of its executive officers, directors or affiliates that would be required to be reported under the rules of the Commission. Except as set forth in this Offer to Purchase, since January 1, 1996 there have been no contacts, negotiations or transactions between Purchaser, Parent, any of their respective affiliates or, to the best knowledge of Purchaser or Parent, any of the persons listed on Schedule I, and the Company or its affiliates concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. Available Information. Parent is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning Parent's directors and officers, their remuneration, options granted to them, the principal holders of Parent's securities and any material interests of such persons in transactions with Parent is required to be disclosed in proxy statements distributed to Parent's stockholders and filed with the Commission. Purchaser is a privately-held company and is generally not subject to the informational filing requirements of the Exchange Act, and is generally not required to file reports, proxy statements and other information with the Commission relating to its businesses, financial condition and other matters. Pursuant to Rule 14d-3 under the Exchange Act, Parent and Purchaser have filed with the Commission the Schedule 14D-1, together with exhibits, including this Offer to Purchase and the Merger Agreement, which provides certain additional information with respect to the Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such information should also be obtainable (i) by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661 and (ii) by accessing the Commission's website on the internet at http://www.sec.gov. 10. SOURCES AND AMOUNT OF FUNDS. The Offer is not conditioned upon any financing arrangements. The total amount of funds required by Purchaser to consummate the Offer and the Merger, including the fees and expenses of the Offer and the Merger, is estimated to be approximately $48 million. Purchaser will obtain all such funds from Parent in the form of capital contributions and/or loans. Parent will provide such funds through available cash on hand. 11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE MERGER AGREEMENT AND CERTAIN OTHER AGREEMENTS. Contacts with the Company; Background of the Offer. One of Parent's strategic objectives has been the acquisition of domestic non-room air conditioner businesses that are counter-seasonal or non-seasonal to the room air conditioner business. On August 14, 1998, the Company entered into a merger agreement with McLeod Russel Holdings PLC ("McLeod Russel") providing for the acquisition of all of the outstanding stock of the Company at a price of $7.27 per share. On October 15, 1998, the Company and McLeod Russel announced that they had mutually terminated the merger agreement. On November 4, 1998, the Company announced that the Company Board of Directors had determined not to pursue a sale of the Company pending year-end results but that the 14 17 Company Board of Directors would consider unsolicited expressions of interest it might receive from third parties. On November 10, 1998, Sal Giordano, Jr., Vice Chairman and Chief Executive Officer of Parent, sent a letter to Steven L. Schneider, President and Chief Executive Officer of the Company, indicating Parent's possible interest in acquiring the Company. The Company's financial advisor, Harris Williams communicated to Parent that the Company was reviewing its alternatives and would respond in due course. On February 3, 1999, the Company announced its results for the 1998 fiscal year. Also on that day, Mr. Giordano, Jr. sent another letter to Mr. Schneider and the Company Board of Directors, reiterating Parent's interest in acquiring the Company. On February 25, 1999, Parent and the Company signed the Confidentiality Agreement (as hereinafter defined) and on March 4, 1999, Parent retained TM Capital as its financial advisor in connection with the proposed acquisition of the Company. On March 17, 1999, the Company Board of Directors announced it had decided to pursue strategic alternatives, including the possible sale of the Company. The Company also announced that it had retained Harris Williams as its financial advisor. On March 29, 1999, Harris Williams provided Parent with a descriptive memorandum regarding the Company and requested expressions of interest by April 13, 1999. On April 13, 1999, Parent provided a preliminary expression of interest in acquiring the Company for a cash price in the range of $5.50 per share. On May 5, 1999, Mr. Giordano, Jr. and Mr. Robert L. Laurent, Jr., Executive Vice President, Acquisitions and Alliances of Parent and representatives of TM Capital met with Mr. Schneider, Mr. Calvin Monsma and other members of management of the Company and representatives of Harris Williams at the Company's Sanford, North Carolina facility. The parties discussed the Company's business, Parent's and the Company's common strategies and various synergistic opportunities between the two companies. On May 12, 1999, Harris Williams requested that Parent submit a proposal for the acquisition of the Company by June 2, 1999. On May 19, 1999, members of Parent's management and the Company's management visited the Company's Envirco subsidiary in Albuquerque, New Mexico. On May 24 and May 25, 1999, members of Parent's senior management and representatives of TM Capital conducted a due diligence review of certain information regarding the Company in a data room at the offices of the Company's counsel in Raleigh, North Carolina. From May 24, 1999 through July 8, 1999, members of Parent's management and its representatives continued to conduct a due diligence review of information regarding the Company. In a letter dated June 2, 1999 from Mr. Robert L. Laurent, Jr. of Parent to the Company, Parent indicated to the Company that it was prepared to consider the acquisition of 100% of the common stock of the Company at a price of $5.50 in cash per share, subject to the satisfactory completion of Parent's due diligence and the negotiation of definitive documentation. On June 8, 1999, Harris Williams contacted Parent and TM Capital to request an increase in the price proposed by Parent. On June 9, 1999, Parent indicated to Harris Williams that it might be prepared to offer $5.65 per share, subject to the satisfactory completion of its due diligence and the negotiation of definitive documentation. On June 11, 1999, Mr. Giordano, Jr. met with Mr. Schneider for further discussions about a potential transaction. From June 9 through July 8, 1999, members of senior management of Parent, its financial and legal advisors and senior members of the Company's management and its financial and legal advisors conducted negotiations regarding the terms of a proposed tender offer and merger and members of Parent's management and its representatives conducted further due diligence. On July 8, 1999, after completion of Parent's due diligence, TM Capital notified Harris Williams orally and on July 9, 1999 Mr. Giordano, Jr. delivered a letter to the Company Board of Directors, in each case communicating Parent's offer to purchase all of the outstanding shares of common stock of the Company at a 15 18 purchase price of $5.50 in cash upon the terms and conditions set forth in the Merger Agreement previously negotiated by the parties and their respective counsel. Also on July 9, 1999, representatives of Parent and representatives of the Company discussed via telephone the results of Parent's due diligence investigation and Parent's rationale for its proposed $5.50 per share price. On July 12, 1999, Harris Williams called TM Capital to inform Parent that the Company Board of Directors (by a unanimous vote of those directors present) accepted Parent's proposal, authorized the execution of the Merger Agreement and the Company Option Agreement and agreed to recommend that the Company's shareholders accept the Offer and tender their shares pursuant thereto. The Merger Agreement, the Company Option Agreement and the Shareholder Agreements were all executed on July 12, 1999 and Parent and the Company issued a joint press release announcing the Offer and the execution of the Merger Agreement. On July 15, 1999, pursuant to the terms of the Merger Agreement, Parent and Purchaser commenced the Offer. Purpose of the Offer and the Merger. The purpose of the Offer and the Merger is to enable Parent to acquire control of, and the entire equity interest in, the Company. Upon consummation of the Merger, the Company will become an indirect wholly owned subsidiary of Parent. The Offer is being made pursuant to the Merger Agreement and is intended to increase the likelihood that the Merger will be effected. The purpose of the Merger is to acquire all of the outstanding Shares not purchased pursuant to the Offer. Merger Agreement The following is a summary of certain provisions of the Merger Agreement. This summary is not a complete description of the terms and conditions of the Merger Agreement and is qualified in its entirety by reference to the full text of the Merger Agreement, which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement may be examined, and copies obtained, as set forth in Sections 8 and 9 of this Offer to Purchase. The Offer. The Merger Agreement provides for the making of the Offer as provided in this Offer to Purchase. The Company Board of Directors. The Merger Agreement provides that Parent shall be entitled to designate a number of directors, rounded up to the next whole number, of the Company Board of Directors equal to the product of the total number of directors on the Company Board of Directors (giving effect to the directors designated by Parent) multiplied by a fraction of which the numerator shall be the number of Shares which Parent and its subsidiaries (including Purchaser) beneficially own at that time, and the denominator shall be the total number of Shares then outstanding. The Directors so designated by Parent shall take office immediately after (i) the purchase of and payment for any Shares by Parent or any of its subsidiaries as a result of which Parent and its subsidiaries owns beneficially at least a majority of then outstanding Shares and (ii) compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, whichever shall occur later. In furtherance thereof, the Company shall, upon request of Parent, use its best efforts promptly either to increase the size of the Company Board of Directors or to secure the resignations of such number of its incumbent directors, or both, as is necessary to enable such designees of Parent to be so elected or appointed to the Company Board of Directors, and the Company shall take all actions available to the Company to cause such designees of Parent to be so elected or appointed. At such time, the Company shall, if requested by Parent, also take all action necessary to cause persons designated by Parent to constitute the same percentage (rounded up to the next whole number) as is on the Company Board of Directors of (i) each committee of the Company Board of Directors, (ii) each board of directors (or similar body) of each of the Company's subsidiaries and (iii) each committee (or similar body) of each such board. The Merger Agreement provides that the Company will promptly take, at its expense, all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under the prior paragraph, including mailing to shareholders the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be elected or appointed to the 16 19 Company Board of Directors immediately after the purchase of and payment for any Shares by Parent or any of its subsidiaries as a result of which Parent and its subsidiaries own beneficially at least a majority of then outstanding Shares. Parent or Purchaser will supply the Company all information with respect to either of them and their nominees, officers, directors and affiliates required to be disclosed by Section 14(f) and Rule 14f-1. The provisions of the Merger Agreement related to these Commission filings are in addition to and shall not limit any rights which Purchaser, Parent or any of their Affiliates may have as a holder or beneficial owner of Shares as a matter of law with respect to the election of directors or otherwise. The term "Affiliate" has the meaning as set forth in Rule 12b-2 of the Exchange Act. The Merger Agreement provides that in the event that Parent's designees are elected or appointed to the Company Board of Directors, until the Effective Time, the Company Board of Directors shall have at least two directors who were directors as of the date of the Merger Agreement and who are not employees of the Company ("Independent Directors"), provided that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall be entitled to designate persons to fill such vacancies who shall be deemed to be Independent Directors or, if no Independent Director then remains, the other directors shall designate two persons to fill such vacancies who shall not be shareholders, affiliates or associates of Parent or Purchaser, and such persons shall be deemed to be Independent Directors. In the event that Parent's designees constitute a majority of the directors on the Company Board of Directors, the affirmative vote of a majority of the Independent Directors shall be required after the acceptance for payment of Shares pursuant to the Offer and prior to the Effective Time, to (a) amend or terminate the Merger Agreement by the Company, (b) exercise or waive any of the Company's rights, benefits or remedies hereunder if such exercise or waiver materially and adversely affects holders of Shares other than Parent or Purchaser, or (c) take any other action under or in connection with the Merger Agreement if such action materially and adversely affects holders of Shares other than Parent or Purchaser; provided, that if there shall be no such directors, such actions may be effected by unanimous vote of the entire Company Board of Directors. The Merger. The Merger Agreement provides that, upon the terms and subject to the conditions thereof and in accordance with the PBCL, Purchaser will be merged with and into the Company and the separate corporate existence of Purchaser will thereupon cease, and the Company will be the surviving corporation in the Merger. At the Effective Time of the Merger, each Share then outstanding, other than Shares held by (i) the Company, (ii) Parent or any of its wholly owned subsidiaries including Purchaser, and (iii) shareholders who properly perfect their dissenters' rights under the PBCL, will be converted into the right to receive $5.50 in cash or any higher price per Share paid in the Offer, without interest. Options. The Merger Agreement provides that immediately prior to the Effective Time, each holder of a Company Option will be entitled to receive from the Company, and shall receive, except as discussed below, in settlement of each Company Option an option to purchase shares of Parent's Class A Stock (a "Parent Option"). All Company Options shall terminate as of the Effective Time. Parent shall grant, as of the Effective Time, to the holder of any Company Option, a Parent Option. With respect to such Parent Options (i) the number of shares of Parent Class A Stock subject to such Parent Option will be determined by multiplying the number of shares constituting the Company Option by the Option Exchange Ratio (as defined below), rounding any fractional share up to the nearest whole share, and (ii) the exercise price per share of such Parent Option will be determined by dividing the exercise price per share applicable to the Company Option by the Option Exchange Ratio, and rounding the exercise price thus determined up to the nearest whole cent. Except as provided above, the converted or substituted Parent Options shall be subject to the same terms and conditions (including, without limitation, expiration date, vesting and exercise provisions) as were applicable to the Company Options immediately prior to the Effective Time; provided, however, that (i) all Company Options shall vest and become fully exercisable immediately prior to the Effective Time and (ii) any Company Option that qualifies as an incentive stock option (an "ISO") under Section 422 of the Code, shall, to the extent permitted by applicable law, be adjusted so that the resulting Parent Option qualifies as an ISO. The term "Option Exchange Ratio" means (x) the Offer Price divided by (y) the average of the closing prices of Parent Class A Stock on the New York Stock Exchange during the ten trading days preceding the fifth trading day prior to the date of the closing of Merger (the "Closing Date"). Each holder of 17 20 a Company Option that does not qualify as an ISO shall also have the right (which right shall be exercised at least 5 days prior to the Closing Date by written notice to Company) to elect, in lieu of the right to acquire a Parent Option, to convert, at the Effective Time, all or a portion of his or her Company Options which have not been exercised and which have not expired prior to the Effective Time into the right to receive an amount equal to the product of (i) the excess, if any, of the Offer Price (excluding any interest, regardless of when paid) over the exercise price per Share of such Company Option and (ii) the number of shares constituting such Company Option less any applicable withholding taxes. The Merger Agreement provides that, except as may be otherwise agreed to by Parent and the Company, all stock option plans established by the Company or any of its subsidiaries shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of Company or any its subsidiaries shall be deleted, terminated and of no further force or effect as of the Effective Time. If and to the extent necessary or required by the terms of the plans governing Company Options or pursuant to the terms of any Company Option granted thereunder, prior to the Effective Time, the Company shall (i) obtain the consent of each holder of outstanding Company Options and (ii) amend the terms of the applicable plan under which the Company Option was granted, in each case as is necessary to give effect to the foregoing treatment of such Company Options. Representations and Warranties. In the Merger Agreement, the Company has made customary representations and warranties to Parent and Purchaser with respect to, among other things, corporate organization, good standing, authority to enter into the Merger Agreement and the Company Option Agreement, shareholder vote required to approve the Merger, capitalization and ownership of Shares, subsidiaries, filings with the Commission and financial statements, books and records, owned and leased real property, encumbrances, condition of assets, accounts receivable, inventory, no undisclosed liabilities, taxes, no material adverse change, employee benefits, compliance with all legal requirements, governmental authorizations, legal proceedings, orders, absence of certain changes and events, applicable contracts, no defaults, insurance, environmental matters, employees, labor relations, compliance, intellectual property assets, certain payments, relationship with related persons, brokers or finders, receipt of the financial advisor opinion, Year 2000, products liability, recalls and information in tender offer documents and proxy statement. In the Merger Agreement, each of Parent and Purchaser has made customary representations and warranties to the Company with respect to, among other things, corporate organization, authority to enter into the Merger Agreement and the Company Option Agreement, no pending legal or governmental proceeding, brokers or finders, and information in tender offer documents and proxy statement. Operation of the Business. The Merger Agreement provides that after the date of the Merger Agreement and prior to the Effective Time, and except (i) as set forth in a schedule to the Merger Agreement or (ii) as agreed to in writing by Parent, the Company will: (a) conduct the business of the Company and its subsidiaries only in the ordinary course of business (including managing the working capital of the Company and its subsidiaries in accordance with past practice and custom); (b) use its best efforts to preserve intact the current business organization of the Company and its subsidiaries, keep available the services of the current officers, employees and agents of the Company and its subsidiaries and maintain the relations and good will with suppliers, customers, landlords, creditors, employees, agents and others having business relationships with the Company and its subsidiaries; (c) inform Parent concerning operational matters of the Company or any of its subsidiaries of a material nature; and (d) otherwise report periodically to Parent concerning the status of the business, operations and finances of the Company and its subsidiaries. 18 21 Negative Covenants. The Merger Agreement provides that after the date of the Merger Agreement and prior to the Effective Time and except as expressly contemplated by the Merger Agreement or in a schedule thereto or as agreed to in writing by Parent: (a) the Company will not take any action or fail to take any action as a result of which certain specified changes or events occur or are reasonably likely to occur; (b) neither the Company nor its subsidiaries will permit any insurance policy naming it as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent, except policies providing coverage for losses not in excess of $50,000; (c) neither the Company nor any of its subsidiaries will enter into any contract or transaction relating to the purchase of assets other than in the ordinary course of business consistent with prior practices; (d) neither the Company nor any of its subsidiaries will pay, repurchase, discharge or satisfy any of its claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice, of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its consolidated subsidiaries; (e) neither the Company nor any of its subsidiaries will adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries (other than the Merger); (f) neither the Company nor any of its subsidiaries will (i) change any of the accounting methods used by it unless required by GAAP or (ii) make any election relating to taxes, change any election relating to taxes already made, adopt any accounting method relating to taxes, change any accounting method relating to taxes unless required by GAAP, enter into any closing agreement relating to taxes, settle any claim or assessment relating to taxes or consent to any claim or assessment relating to taxes or any waiver of the statute of limitations for any such claim or assessment; (g) neither the Company nor any of its subsidiaries will take, or agree to commit to take, any action that would or is reasonably likely to result in any of the conditions to the Offer or to the Merger not being satisfied, or would make any representation or warranty of the Company contained herein inaccurate in any respect at, or as of any time prior to, the Effective Time, or that would materially impair the ability of the Company, Parent, Purchaser or the holders of Shares to consummate the Offer or the Merger in accordance with the terms of the Merger Agreement or materially delay such consummation; and (h) neither the Company nor any of its subsidiaries will enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing. Shareholders' Meetings. Following the acceptance for payment and purchase of Shares by Purchaser pursuant to the Offer, the Company shall take all action necessary in accordance with the PBCL, the Company's articles of incorporation and by-laws (the "By-laws") and the Exchange Act to effect the Articles Amendment. The Articles Amendment requires the approval of at least 80% of the voting securities of the Company entitled to vote thereon at a meeting called for that purpose. If the Minimum Condition is satisfied and Purchaser purchases at least 80% of the outstanding Shares, Purchaser will be able to effect the Articles Amendment and delete section 6 from the Company's articles of incorporation without any action or vote on the part of the other shareholders of the Company. The Merger Agreement provides that in order to effect the Articles Amendment, the Company will, in accordance with applicable law, (i) duly call, give notice of, convene and hold a special meeting of its shareholders as promptly as practicable following the acceptance for payment and purchase of Shares by the Purchaser pursuant to the Offer for the purpose of considering and taking action upon the approval of the Articles Amendment; (ii) if required, prepare and file with the Commission a preliminary proxy or information statement relating to the Articles Amendment and use its best efforts to obtain and furnish the information required to be included by the Commission in such proxy 19 22 statement and, after consultation with Parent, respond promptly to any comments made by the Commission with respect to such proxy statement and cause a definitive proxy or information statement, including any amendment or supplement thereto to be mailed to the Company's shareholders; (iii) include in the proxy statement the recommendation of the Company Board of Directors that shareholders of the Company vote in favor of the approval of the Articles Amendment; and (iv) use its best efforts to solicit proxies in favor of the Articles Amendment from holders of Shares and take all other action necessary or, in the reasonable opinion of Parent, advisable to secure any vote or consent of shareholders required by the PBCL, the Company's articles of incorporation and the By-laws to effect the Articles Amendment. Following approval of the Articles Amendment and if the Minimum Condition has been satisfied and Purchaser purchases at least 80% of the outstanding Shares, then at the election of the Purchaser, a short-form merger could be effected without any action or vote on the part of the other shareholders of the Company. In the event that Purchaser does not acquire 80% of the outstanding Shares, then a shareholder vote will be required to approve the Merger. Pursuant to the Merger Agreement, if required by applicable law in order to consummate the Merger, the Company will (i) duly call, give notice of, convene and hold a special meeting of its shareholders as promptly as practicable following the acceptance for payment and purchase of Shares by Purchaser pursuant to the Offer for the purpose of considering and taking action upon the approval of the Merger and the adoption of the Merger Agreement; (ii) prepare and file with the Commission a preliminary proxy or information statement relating to the Merger and the Merger Agreement and use its best efforts to obtain and furnish the information required to be included by the Commission in the proxy statement and, after consultation with Parent, to respond promptly to any comments made by the Commission with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement, including any amendment or supplement thereto to be mailed to its shareholders, provided that no amendment or supplement to such proxy or information statement will be made by the Company without consultation with Parent and its counsel; (iii) include in the proxy statement the recommendation of the Company Board of Directors that shareholders of the Company vote in favor of the approval of the Merger and the adoption of the Merger Agreement; and (iv) use its best efforts to solicit from holders of Shares proxies in favor of the Merger and take all other action necessary or, in the reasonable opinion of Parent, advisable to secure any vote or consent of shareholders required by the PBCL, the Company's articles of incorporation and the By-laws to effect the Merger. No Solicitation. Pursuant to the Merger Agreement, the Company has agreed that it will not (and the Company will cause the representatives of the Company, each of its subsidiaries and each affiliate of the Company, not to), directly or indirectly, encourage, solicit, participate in or initiate discussions or negotiations with, or provide any information to, any Person or group (other than Parent, any of its affiliates or representatives) concerning any proposal or offer to acquire all or a substantial part of the business or properties of the Company or any of its subsidiaries or any capital stock of the Company or any of its subsidiaries, whether by merger, tender offer, exchange offer, sale of assets or similar transactions involving the Company or any subsidiary, division or operating or principal business unit of the Company (such proposal or offer hereinafter referred to as an "Acquisition Proposal"). However, nothing shall prohibit the Company or the Company Board of Directors from (i) taking and disclosing to the Company's shareholders a position with respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or (ii) making such disclosure to the Company's shareholders as, in the good faith judgment of the Company Board of Directors, after receiving advice from outside counsel, is required under applicable law, provided that the Company may not, except as detailed below, withdraw or modify, or propose to withdraw or modify, its position with respect to the Offer or the Merger or approve or recommend, or propose to approve or recommend any Acquisition Proposal, or enter into any agreement with respect to any Acquisition Proposal. Upon execution of the Merger Agreement, the Company will immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. Notwithstanding the foregoing, prior to the time of acceptance of Shares for payment pursuant to the Offer, the Company may furnish information concerning its business, properties or assets to any corporation, partnership, person or other entity or group pursuant to appropriate confidentiality agreements, and may negotiate and participate in discussions and negotiations with such entity or group concerning an Acquisition Proposal if: (x) such entity or group has submitted a Superior Proposal (as defined below); and 20 23 (y) in the opinion of the Company Board of Directors such action is required to discharge the Company Board of Director's fiduciary duties to the Company's shareholders under applicable law, determined only after receipt of a written opinion from independent legal counsel to the Company that the failure to provide such information or access or to engage in such discussions or negotiations would cause the Company Board of Directors to violate its fiduciary duties to the Company's shareholders under applicable law. The term "Superior Proposal" means an unsolicited bona fide proposal by a Person (as defined in the Merger Agreement) to acquire, directly or indirectly, for consideration consisting of cash and/or securities, all of the Shares then outstanding or all or substantially all of the assets of the Company or to acquire, directly or indirectly, the Company by merger or consolidation, and otherwise on terms which the Company Board of Directors determines in good faith to be more favorable to the Company's shareholders than the Offer and the Merger (based on the advice of the Company's independent financial advisor that the value of the consideration provided for in such proposal is superior to the value of the consideration provided for in the Offer and the Merger), which is not subject to the receipt of any necessary financing, and which, in the good faith reasonable judgment of the Company Board of Directors, is reasonably likely to be consummated. The Company has further agreed to immediately notify Parent of the existence of any proposal, discussion, negotiation or inquiry received by the Company, and the Company will immediately communicate to Parent the terms of any proposal, discussion, negotiation or inquiry which it may receive (and will immediately provide to Parent copies of any written materials received by the Company in connection with such proposal, discussion, negotiation or inquiry) and the identity of the party making such proposal or inquiry or engaging in such discussion or negotiation. The Company will promptly provide to Parent any non-public information concerning the Company provided to any other party which was not previously provided to Parent. The Company will keep Parent informed of the status and details of any such Acquisition Proposal and of any amendments or proposed amendments to any Acquisition Proposal and will promptly (but in no case later than 24 hours) notify Parent of any determination by the Company Board of Directors that a Superior Proposal has been made. Pursuant to the Merger Agreement, except as set forth below, neither the Company Board of Directors nor any committee thereof will (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Purchaser, the approval or recommendation by such Board of Directors or any such committee of the Offer, the Merger Agreement or the Merger, (ii) approve or recommend or propose to approve or recommend, any Acquisition Proposal or (iii) enter into any agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the time of acceptance for payment of Shares pursuant to the Offer, the Company Board of Directors may withdraw or modify its approval or recommendation of the Offer, the Merger Agreement or the Merger, approve or recommend a Superior Proposal, or enter into an agreement with respect to a Superior Proposal, in each case at any time after the fifth business day following Parent's receipt of written notice from the Company advising Parent that the Company Board of Directors has received a Superior Proposal which it intends to accept, specifying the material terms and conditions of such Superior Proposal, identifying the person making such Superior Proposal, but only if the Company will have caused its financial and legal advisors to negotiate with Parent to make such adjustments in the terms and conditions of the Merger Agreement as would enable the Company to proceed with the transactions contemplated herein on such adjusted terms. Insurance and Indemnification. For three (3) years after the Effective Time, Parent and Purchaser will maintain officers' and directors' liability insurance covering the persons who are presently covered by the Company's officers' and directors' liability insurance policies with respect to actions and omissions occurring prior to the Effective Time, on terms which are not materially less favorable than the terms of such current insurance in effect for the Company on the date hereof provided, however, that in no event will Parent or the surviving corporation in the Merger be required to expend in excess of 120% of the annual premium currently paid by the Company for such coverage; and provided further, that, if the premium for such coverage exceeds such amount, Parent or the surviving corporation in the Merger shall purchase a policy with the greatest coverage available for such 120% of the aggregate annual premiums paid by the Company in 1999. For three (3) years after the Effective Time, Parent and Purchaser will maintain the rights to indemnification of officers and directors provided for in the By-laws as in effect on the date hereof, 21 24 with respect to indemnification for acts and omissions occurring prior to the Effective Time, including without limitation, the transactions contemplated by the Merger Agreement. Conditions to the Merger. The respective obligation of each party to effect the Merger will be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any and all of which may be waived in whole or in part by the Company, Parent or Purchaser, as the case may be, to the extent permitted by applicable law: (i) the Merger Agreement shall have been approved and adopted by the requisite vote of the holders of Shares, if required by applicable law, in order to consummate the Merger; (ii) no statute, rule or regulation shall have been enacted or promulgated by any Governmental Body (as defined below) which prohibits the consummation of the Merger; and there shall be no order or injunction of a court of competent jurisdiction in effect precluding consummation of the Merger; (iii) Parent, Purchaser or their affiliates shall have purchased Shares pursuant to the Offer; and (iv) the applicable waiting period under the HSR Act shall have expired or been terminated. "Governmental Body" shall mean any: (a) nation, state, county, city, town, village, district or other jurisdiction of any nature; (b) federal, state, local, municipal, commonwealth, possession, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); or (d) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature. The obligations of Parent and Purchaser to consummate the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Parent and Purchaser, to the extent permitted by applicable law: (i) all actions required by the Company with respect to the Company stock option plans, including obtaining the consent of each holder of a Company Option and amending the terms of the plans have been taken; (ii) all of the representations and warranties of the Company shall be true in all material respects on the date of the Merger Agreement and as of the Effective Time; (iii) the Company shall have complied in all material respects with its obligations under the terms of the Merger Agreement; and (iv) the Articles Amendment shall have been approved by the holders of the requisite number of shares required by the PBCL and the Company's articles of incorporation. Termination. The Merger Agreement, and any related transactions may be terminated or abandoned at any time prior to the Effective Time, whether before or after shareholder approval: (a) By the mutual written consent of Parent and the Company; provided, however, that if Parent shall have a majority of the directors pursuant to the applicable provisions of the Merger Agreement, such consent of the Company may only be given if approved by the Independent Directors or if there are no Independent Directors, then by a unanimous vote of the entire Company Board of Directors. (b) By either of Parent or the Company: (i) if (x) the Offer shall have expired without any Shares being purchased pursuant thereto or (y) Purchaser shall not have accepted for payment any Shares pursuant to the Offer by December 31, 1999; provided, however, that the right to terminate the Merger Agreement under this clause (b) (i) shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of Purchaser to purchase the Shares pursuant to the Offer on or prior to such date; or (ii) if any Governmental Body shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use their reasonable efforts to lift), which permanently restrains, enjoins or otherwise prohibits the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree, ruling or other action shall have become final and non-appealable. (c) By the Company: (i) if Parent, Purchaser or any of their affiliates shall have failed to commence the Offer on or prior to five (5) business days following the date of the initial public announcement of the Offer; provided, that the Company may not terminate the Merger Agreement pursuant to this clause (c) (i) if the Company is at such time in material breach of its obligations under the Merger Agreement; (ii) in connection with entering into a definitive agreement in accordance with the applicable provisions of the Merger Agreement, provided that the Company has complied with all provisions thereof, as described above under "No Solicitation" and that the Company makes simultaneous payment to Parent of the Termination Fee (as defined and discussed below); or (iii) if Parent or 22 25 Purchaser shall have terminated the Offer or the Offer expires without Parent or Purchaser, as the case may be, purchasing any Shares pursuant thereto; provided that the Company may not terminate the Merger Agreement under this clause (c)(iii) if the Company is in material breach of the Merger Agreement or the Company Option Agreement. (d) By Parent: (i) if, due to an occurrence, not involving a breach by Parent or Purchaser of their obligations under the Merger Agreement, which makes it impossible to satisfy any of the conditions set forth in Section 14 below, Parent, Purchaser, or any of their affiliates shall have failed to commence the Offer on or prior to the fifth business day following the date of the initial public announcement of the Offer; (ii) (A) if, prior to the purchase of Shares by Purchaser pursuant to the Offer, the Company Board of Directors shall have withdrawn, modified or changed in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger or shall have recommended an Acquisition Proposal or (B) there shall have been a material breach under any provision of the Merger Agreement summarized under "No Solicitation" above, including but not limited to the Company having executed an agreement in principle or definitive agreement relating to an Acquisition Proposal or similar business combination with a person or entity other than Parent, Purchaser or their affiliates; (iii) if prior to the purchase of Shares pursuant to the Offer, the Company shall have breached any representation, warranty, covenant or other agreement contained in the Merger Agreement which would give rise to the failure of a condition set forth in Section 14 below; (iv) any Person or "group" (as defined in Section 13(d)(3) of the Exchange Act), other than Parent, Purchaser or their affiliates or any group of which any of them is a member, shall have acquired beneficial ownership (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 15% or more of the Shares or any such Person or group shall have announced its intention to acquire 15% or more of the Shares and the Company Board of Directors has failed to recommend against acceptance of such announcement (including by taking no position with respect to such announcement); (v) if the Company receives an Acquisition Proposal from any Person (other than Parent or Purchaser), and the Company Board of Directors takes a neutral position or makes no recommendation with respect to such Acquisition Proposal after a reasonable amount of time (and in no event more than five (5) business days following such receipt) has elapsed for the Company Board of Directors to review and make a recommendation with respect to such Acquisition Proposal; or (vi) if Parent or Purchaser shall have terminated the Offer in accordance with the terms of the Merger Agreement without Parent or Purchaser purchasing any Shares thereunder, provided that Parent or Purchaser is not in material breach of the Merger Agreement. Termination Fee; Expenses. Pursuant to the Merger Agreement, if (x) the Company enters into an agreement which accepts or implements a Superior Proposal; (y) the Company terminates or abandons the Merger Agreement, the Offer, the Merger and the transactions contemplated thereby (the "Transactions"), in connection with a termination of the Merger Agreement pursuant to clause (c)(ii) under the heading "Termination" above; or (z) Parent terminates or abandons the Transactions pursuant to clauses (d)(ii), (iv) or (v) under the heading "Termination" above, then the Company will pay to Parent an amount equal to $2 million (the "Termination Fee"). The Termination Fee will be paid in same day funds concurrently with the execution of an agreement referred to in clause (x) above or any termination or abandonment referred to in clauses (y) or (z) above, whichever occurs first. If the Merger Agreement is terminated by Parent pursuant to clause (d)(iii) under the heading "Termination" above and at the time of such termination, (i) the Company has not paid the Termination Fee, and (ii)Parent is not in material breach of the Merger Agreement, then the Company will pay to Parent, at the time of termination, an amount equal to Parent's actual and reasonably documented out-of-pocket fees and expenses incurred by Parent and Purchaser in connection with the Transactions including, without limitation, the fees and expenses payable to all banks, investment banking firms, and other financial institutions and Persons and their respective agents and counsel incurred in connection with acting as Parent's or Purchaser's financial advisor with respect to, or arranging or committing to provide or providing any financing for, the transactions (the "Expenses"). In addition, if (a) the Merger Agreement is terminated by Parent pursuant to clauses (d)(i), (iii) or (vi) under the heading "Termination" above and prior thereto there shall have been publicly announced another Acquisition Proposal, (b) the Merger Agreement is terminated by the Company pursuant to clause (c)(iii) under the heading "Termination" above and prior thereto there shall have been publicly announced another Acquisition 23 26 Proposal or (c) either the Company or Parent terminates or abandons the Transactions pursuant to clause (b)(i) under the heading "Termination" above and prior thereto there shall have been publicly announced another Acquisition Proposal, and, in each such case, at the time of such termination (i) the Company has not paid the Termination Fee, and (ii) Parent is not in material breach of the Merger Agreement and within 12 months after such termination the Company shall enter into an agreement with respect to an Acquisition Proposal, then concurrently with the consummation of the transactions contemplated by such agreement the Company will pay an amount equal to the difference between the Termination Fee and the Expenses, previously paid (if any). Company Option Agreement The following is a summary of certain provisions of the Company Option Agreement. This summary is not a complete description of the terms and conditions of the Company Option Agreement and is qualified in its entirety by reference to the full text of the Company Option Agreement, which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Company Option Agreement may be examined, and copies obtained, in the manner set forth in Sections 8 and 9 of this Offer to Purchase. Grant of Option. The Company Option Agreement provides for the grant by the Company to Parent of an irrevocable option (the "Stock Option") to purchase up to 19.9% of the number of Shares (the "Option Shares") issued at the time of the grant of the Stock Option, at a price of $5.50 per Share (the "Exercise Price"), payable in cash in accordance with the terms of the Company Option Agreement. Exercise of Option. The Company Option Agreement provides that the Stock Option may be exercised by Parent, in whole or in part, at any time or from time to time after the Merger Agreement becomes terminable pursuant to a Triggering Event (as defined below). For the purposes of the Company Option Agreement, "Triggering Event" means any termination of the Merger Agreement which entitles Parent to the Termination Fee under the Merger Agreement. Cash Payment. If, at any time during the period commencing on the occurrence of a Triggering Event and ending on the termination of the Stock Option in accordance with the provisions of the Company Option Agreement, Parent sends to the Company a notice indicating Parent's election to exercise its right (the "Cash-Out Right") described in this paragraph, then the Company shall pay to Parent, in exchange for the cancellation of the Stock Option with respect to such number of Option Shares as Parent specifies an amount in cash equal to the amount by which (A) the highest of (i) the price per share of the Shares at which a tender offer or exchange offer therefor has been made, (ii) the highest price per share of the Shares to be paid by any third party pursuant to an agreement with the Company, (iii) the highest closing price per Share within the six-month period immediately preceding the date Parent sent to the Company its notice to exercise its right and (iv) in the event of a sale of all or a substantial portion of the Company's assets, the sum of the price paid in such sale for such assets and the current market value of the remaining assets of the Company divided by the number of Shares outstanding at the time of such sale, exceeds (B) the Exercise Price, multiplied by the number of shares for which the Stock Option is then exercised. If the aggregate amount received by Parent from (i) the Termination Fee and Expenses pursuant to the applicable provisions of Merger Agreement, (ii) amounts from the sale or other disposition of the Option Shares, and (iii) amounts paid pursuant to the Company Option Agreement as described in the above paragraph, are in excess of the sum of (A) $2,000,000 plus (B) the aggregate amounts paid by Parent to purchase any Option Shares, then Parent, at its sole election, shall either (1) reduce the number of Option Shares, (2) deliver to the Company for cancellation Option Shares previously purchased by Parent, (3) pay cash to the Company or (4) any combination thereof, so that the amount received by Parent pursuant to clauses (i), (ii) and (iii) above shall not exceed the sum of the amounts in clauses (A) and (B) above after taking into account the foregoing actions. Termination of Option. The Company Option Agreement provides that the Stock Option will terminate upon the earlier of: (i) the purchase of Shares pursuant to the Offer; (ii) twelve months after the date on which a Triggering Event occurs; or (iii) the termination of the Merger Agreement in accordance with its terms prior to the occurrence of a Triggering Event, unless, in the case of clauses (ii) and (iii), Parent could 24 27 be entitled to receive the Termination Fee following such time of termination upon the occurrence of certain events, in which case the Stock Option will not terminate until the later of (x) twelve months following the time such fees become payable and (y) the expiration of the period in which Parent has such right to receive the Termination Fee. Registration Rights. The Company Option Agreement provides that Parent, within three years, may, by written notice to the Company, request that the Company register under the Securities Act all or any part of the Shares beneficially owned by Parent in order to permit the sale or other disposition of such securities pursuant to (a) a shelf registration or (b) a bona fide, firm commitment underwritten public offering. Adjustment upon Changes in Capitalization. The Company Option Agreement provides that in the event of any change in the Shares by reason of stock dividends, stock splits, reverse stock splits, mergers (other than the Merger), recapitalizations, combinations, exchange of shares or similar transaction, the type and number of shares or securities subject to the Stock Option, and the Exercise Price per share, will be adjusted appropriately and proper provision will be made so that Parent will receive upon exercise of the Stock Option the number and class of shares or other securities or property that Parent would have received with respect to the Shares if the Stock Option had been exercised immediately prior to such event or the record date therefor, as applicable. The Shareholder Agreements Concurrently with the execution and delivery of the Merger Agreement, each of the Director Shareholders entered into a Shareholder Agreement pursuant to which each Director Shareholder has agreed to tender in the Offer all Shares beneficially owned by such Director Shareholder (719,764 Shares in the aggregate) which will result in the Parent and its affiliates beneficially owning 10.1% of the outstanding Shares. Each Shareholder Agreement provides that, within five business days of the commencement of the Offer, each Director Shareholder will tender to the Depositary all of the Shares required to be tendered pursuant to the applicable Shareholder Agreement. Subject to applicable law, a Director Shareholder may not withdraw any Shares so tendered by him; provided, however, that a Director Shareholder may decline to tender his Shares, or may withdraw Shares tendered by him, if the Purchaser amends the Offer to (a) reduce the Offer Price to less than $5.50 per Share in cash; (b) reduce the number of Shares subject to the Offer; (c) change the form of consideration payable for Shares pursuant to the Offer; or (d) amend or modify any term or condition of the Offer in a manner adverse to the shareholders of the Company. Under the Shareholder Agreements, each Director Shareholder grants to Parent an option to purchase the Shares beneficially owned by such Director Shareholder at a purchase price per Share of $5.50 or such higher price as may be offered in the Offer. Provided all waiting periods under the HSR Act and the rules and regulations thereunder applicable to the purchase of Shares pursuant an option shall have expired or been terminated and there shall otherwise be no legal restriction on the exercise of an option, an option may be exercised by Parent in whole or in part at any time prior to the date 60 days after the Expiration Date or termination of the Offer if (a) the Director Shareholder who granted such option fails to comply with any of his obligations under his Shareholder Agreement or withdraws a tender of its Shares in violation of the provisions of his Shareholder Agreement or (b) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer described in Section 14 (other than as a result of any action or inaction on the part of the Parent or the Purchaser which constitutes a breach of the Merger Agreement). Under the Shareholder Agreements the Purchaser may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms set forth in the Offer, and may allow the option to expire without exercising the option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer or pursuant to the exercise of the option, they shall be returned to the applicable Director Shareholders whereupon they shall continue to be held by such Director Shareholder subject to the terms of the applicable Shareholder Agreement. 25 28 Each of the Director Shareholders have agreed in the Shareholder Agreements (a) to revoke any and all previous proxies granted by such Director Shareholders with respect to the Shares beneficially owned by such Director Shareholders and, for so long as the Merger Agreement remains in effect; (b) to vote the number of Shares beneficially owned by such Director Shareholder, in favor of the Articles Amendment, the Merger Agreement, the Merger and the transactions contemplated thereby, and (c) to oppose and vote such number of Shares against any Acquisition Proposal. The Director Shareholders have further agreed not to solicit, initiate or knowingly encourage any Acquisition Proposal. Each Shareholder Agreement will expire and be of no further force or effect if (a) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser fails to promptly accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer or (b) the Purchaser amends the Offer to (i) reduce the Offer Price to less than $5.50 per Share in cash; (ii) reduce the number of Shares subject to the Offer; (iii) change the form of consideration payable for Shares pursuant to the Offer; or (iv) amend or modify any term or condition of the Offer in a manner adverse to the shareholders of the Company. Each Shareholder Agreement will also terminate upon the earlier of (i) the close of business on March 1, 2000 or (ii) the Effective Time. In the case of the Shareholder Agreement of Mr. Grant R. Meyers, the parties thereto have acknowledged that a portion of the Shares subject to such agreement are pledged to various persons and Mr. Meyer's obligations under his Shareholder Agreement are subject to any applicable restrictions in the pledge agreements with such persons. Confidentiality Agreement The following is a summary of certain provisions of the Confidentiality Agreement entered into on February 25, 1999 by Parent and the Company (the "Confidentiality Agreement"). This summary is not a complete description of the terms and conditions of the Confidentiality Agreement and is qualified in its entirety by reference to the full text of the Confidentiality Agreement, which is incorporated by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Confidentiality Agreement may be examined, and copies obtained, as set forth in Sections 8 and 9 of this Offer to Purchase. Pursuant to the terms of the Confidentiality Agreement, the Company and Parent agreed to provide, among other things, for the confidential treatment of their discussions regarding a possible business combination and the exchange of certain confidential information concerning the Company. Parent further agreed that, without the prior written consent of the Company, Parent would not hire any employee of the Company for a period of two years beginning as of February 25, 1999. Employment Agreements The following is a summary of certain provisions of the employment agreements entered into on July 12, 1999 between Parent and Steven L. Schneider (the "Schneider Agreement") and the Company and Calvin J. Monsma (the "Monsma Agreement" and together with the Schneider Agreement, the "Employment Agreements"). This summary is not a complete description of the terms and conditions of the Employment Agreements and is qualified in its entirety by reference to the full text of the Employment Agreements, which are incorporated by reference and copies of which have been filed with the Commission as exhibits to the Schedule 14D-1. The Employment Agreements may be examined, and copies obtained, as set forth in Sections 8 and 9 of this Offer to Purchase. As a condition to Parent's entering into the Merger Agreement, on July 12, 1999, Parent and the Company entered into the Employment Agreements. Schneider Agreement. The Schneider Agreement replaces and supercedes Schneider's existing employment agreement with the Company, including the change of control provisions thereof. The effectiveness of the Schneider Agreement is conditioned upon the consummation of the Offer. Pursuant to the Schneider Agreement, Schneider will serve as a Senior Vice President of Parent and as Chairman and Chief Executive 26 29 Officer of Parent's Indoor Air Quality unit until August 31, 2002. The Schneider Agreement will be automatically extended for an additional year as of August 31, 2002 and on each anniversary thereof unless either party gives written notice of termination at least 180 days prior to any such date. The Agreement provides for a base salary of $214,000 per year (the "Schneider Base Salary"), subject to review and adjustment by the Board of Directors of Parent or the compensation committee of Parent. Schneider's compensation will also include an annual discretionary incentive bonus equal to 50% of the Schneider Base Salary based on the performance of the Indoor Air Quality unit and certain individual performance targets established by the chief executive officer of Parent. In addition, Schneider will receive as incentive compensation an amount equal to 1/4% of the total purchase price of acquisitions of businesses included in the Indoor Air Quality unit. Pursuant to the Schneider Agreement, at the Effective Time, Schneider will be granted options to purchase 100,000 shares of the Class A Stock of Parent at an exercise price equal to the closing price of the Class A Stock on such date. The Schneider Agreement provides that one third of the options will vest each year on the anniversary date of the Schneider Agreement. In the event of Schneider's death, disability or resignation or discharge by Parent other than a termination without "cause" (as defined in the Schneider Agreement) or resignation with "good reason" (as defined in the Schneider Agreement), Parent will pay Schneider: (i) all accrued obligations including the Schneider Base Salary through the date of termination, and (ii) all accrued benefits under Parent's retirement, incentive or other benefit plans. In the event of a termination without cause or resignation with good reason, (i) Parent will pay Schneider all accrued obligations including the Schneider Base Salary through the date of termination; (ii) Parent will pay Schneider a lump sum equal to the balance of the Schneider Base Salary and any incentive compensation then in effect for the remainder of the term of the Schneider Agreement; (iii) an amount equal to the maximum contributions that could have been made by Parent on Schneider's behalf to all defined contribution plans of Parent on the same basis as in effect on the date of termination of the Schneider Agreement for the remainder of the term of the Schneider Agreement shall be paid to the trustees of such plan(s); however, in the event any such plan(s) will not allow such payment, Parent will pay to Schneider a lump sum in cash equal to the total amount not accepted by such plan(s); (iv) Schneider shall be entitled to receive all benefits accrued by him under the retirement, incentive or other benefit plans in which Schneider was participating; (v) Parent will pay all premiums under COBRA for Schneider and his dependents if they elect coverage and (vi) in the event Schneider is so terminated or resigns during the initial three year term of the Schneider Agreement, any unvested Parent stock options granted Schneider pursuant to the Schneider Agreement shall vest immediately and Schneider shall have 30 days to exercise such options. Monsma Agreement. The Monsma Agreement replaces and supercedes Monsma's existing change of control agreement with the Company. The effectiveness of the Monsma Agreement is conditioned upon the consummation of the Offer. Pursuant to the Monsma Agreement, Monsma will serve as a Vice President and Chief Financial Officer of the Company until August 31, 2002. The Monsma Agreement will be automatically extended for an additional year as of August 31, 2002 and on each anniversary thereof unless either party gives written notice of termination at least 90 days prior to any such date. The Agreement provides for a base salary of $113,400 per year (the "Monsma Base Salary"), subject to review and adjustment by the Company. Monsma's compensation will also include an annual discretionary bonus equal to 35% of the Monsma Base Salary which will be based on the performance of the Company and certain individual performance targets established by the chief executive officer of Parent's Indoor Air Quality unit. In addition, Monsma will receive as incentive compensation an amount equal to 1/8% of the total purchase price of acquisitions of businesses by the Company. Pursuant to the Monsma Agreement, at the Effective Time, Monsma will be granted options to purchase 25,000 shares of the Class A Stock of Parent at an exercise price equal to the closing price of the Class A Stock on such date. The Monsma Agreement provides that one third of the options will vest each year on the anniversary date of the Monsma Agreement. 27 30 In the event of Monsma's death, disability or resignation or discharge by the Company other than a termination without "cause" (as defined in the Monsma Agreement) or resignation with good reason (as defined in the Monsma Agreement), the Company will pay Monsma: (i) all accrued obligations including the Monsma Base Salary through the date of termination, and (ii) all accrued benefits under the Company's retirement, incentive or other benefit plans. In the event of a termination without cause or resignation with good reason, (i) the Company will pay Monsma all accrued obligations including the Monsma Base Salary through the date of termination; (ii) the Company will pay Monsma a lump sum equal to the balance of the Monsma Base Salary and any incentive compensation then in effect for the remainder of the term of the Monsma Agreement; (iii) an amount equal to the maximum contributions that could have been made by the Company on Monsma's behalf to all defined contribution plans of the Company on the same basis as in effect on of the date of termination of the Monsma Agreement for the remainder of the term of the Monsma Agreement shall be paid to the trustees of such plan(s); however, in the event any such plan(s) will not allow such payment, the Company will pay to Monsma a lump sum in cash equal to the total amount not acceptable by such plan(s); (iv) Monsma shall be entitled to receive all benefits accrued by him under the retirement, incentive or other benefit plans in which Monsma was participating; (v) the Company will pay all premiums under COBRA for Monsma and his dependents if they elect coverage and (vi) in the event Monsma is so terminated or resigns during the initial three year term of the Monsma Agreement, any unvested Parent stock options granted Monsma pursuant to the Monsma Agreement shall vest immediately and Monsma shall have 30 days to exercise such options. 12. PLANS FOR THE COMPANY; OTHER MATTERS. Plans for the Company If, as and to the extent that Purchaser acquires control of the Company, Parent and Purchaser intend to conduct a detailed review of the Company and its assets, corporate structure, capitalization, operations, properties, policies, management and personnel and to consider and determine what, if any, changes would be desirable in light of the circumstances which then exist. Such changes could include, among other things, changes in the Company's business, corporate structure, articles of incorporation, By-laws, capitalization, management or dividend policy. Following consummation of the Merger, Parent currently intends to effect a merger (the "Reincorporation Merger") of the Company with a subsidiary of Parent that is incorporated in the State of Delaware as a result of which the Company will be incorporated in the State of Delaware. The Merger Agreement provides that, upon the purchase of and payment for any Shares by Parent or any of its subsidiaries pursuant to the Offer, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board of Directors to the product of the total number of directors on such Company Board of Directors (giving effect to the directors designated by Parent pursuant to this sentence) multiplied by an amount of which the numerator is the number of Shares which Parent and its subsidiaries own and the denominator is the total number of Shares outstanding. See Section 11. Assuming the Minimum Condition is satisfied and Purchaser purchases Shares pursuant to the Offer, Parent intends to promptly exercise such rights by causing the Company to elect to the Company Board of Directors Messrs. Sal Giordano, Jr., Robert Laurent, Jr., Michael Giordano, Kent Hanson, Steven Schneider and Calvin Monsma. Information with respect to such directors is contained in Schedule I hereto and in the Information Statement required by Rule 14f-1 under the Exchange Act included as Annex I to the Schedule 14D-9. The Merger Agreement provides that the directors of Purchaser and the officers of the Company at the Effective Time of the Merger will, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation. Purchaser or an affiliate of Purchaser may, following the consummation or termination of the Offer, seek to acquire additional Shares through open market purchases, privately negotiated transactions, a tender offer or exchange offer or otherwise, upon such terms and at such prices as it shall determine, which may be more or less than the price to be paid pursuant to the Offer. Purchaser and its affiliates also reserve the right to dispose of any or all Shares acquired by them, subject to the terms of the Merger Agreement. 28 31 Except as disclosed in this Offer to Purchase, and except for the Reincorporation Merger and as may be effected in connection with the integration of operations referred to above, neither Parent nor Purchaser has any present plans or proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, relocation of operations, or sale or transfer of a material amount of assets, involving the Company or any of its subsidiaries, or any material changes in the Company's capitalization, corporate structure, business or composition of its management or the Company Board of Directors. Appraisal Rights. Notwithstanding anything in the Merger Agreement to the contrary, any issued and outstanding Shares held by persons who object to the Merger and comply with all the provisions of the PBCL concerning the right of holders of Shares to dissent from the Merger and require appraisal of their Shares ("Dissenting Shareholder") will not be converted into the right to receive the Offer Price, without interest, pursuant to the Merger Agreement, but will be converted into the right to receive such consideration as may be determined to be due to such Dissenting Shareholder pursuant to the PBCL; provided, however, that the Shares outstanding immediately prior to the Effective Time and held by a Dissenting Shareholder who will, after the Effective Time, withdraw his demand for appraisal or lose his right of appraisal, in either case pursuant to the PBCL, will be deemed to be converted as of the Effective Time into the right to receive the Offer Price, payable to the holder thereof, without interest. The Company will give Parent (i) prompt notice of any written demands for appraisal of the Shares received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to any such demands. The Company will not, without the prior written consent of Parent, voluntarily settle or compromise any such demands. In addition to the appraisal rights discussed above, shareholders also have certain rights ("Subchapter 25E Rights") under Subchapter 25E of the PBCL ("Subchapter 25E") which will become applicable prior to the Effective Time in the event that the Purchaser (or a group of related persons, or any other person or group of related persons) were to acquire Shares representing at least 20% of the voting power of the Company, in connection with the Offer or otherwise (a "Control Transaction"). In such event, shareholders of the Company would have the right to demand "fair value" of such shareholders' Shares and to be paid such fair value upon compliance with the requirements of Subchapter 25E. Under Subchapter 25E, "fair value" may not be less than the highest price per share paid by the controlling person or group at any time during the 90-day period ending on and including the date of the Control Transaction, plus an increment, if any, representing any value, including, without limitation, any proportion of value payable for acquisition of control of the Company, that may not be reflected in such price. Purchaser believes that the Offer Price represents fair value of the Shares within the meaning of Subchapter 25E. Subchapter 25E Rights would attach immediately upon consummation of a Control Transaction and require that any shareholder seeking such appraisal must make a demand for fair value within a reasonable time after the notice to shareholders that a Control Transaction has occurred is given by the controlling person or group in accordance with Subchapter 25E, which time period may be specified in such notice, as well as comply with the other procedures of Subchapter 25E. Subchapter 25E Rights are available only with respect to shares of a registered corporation held by a shareholder after the occurrence of a Control Transaction; accordingly, Subchapter 25E Rights would not be available with respect to any Shares tendered in the Offer and accepted for payment. The foregoing summary of rights under Subchapter 25E is qualified in its entirety by reference to the full text of Subchapter 25E, which is attached hereto as Annex A. THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS UNDER THE PBCL DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY SHAREHOLDERS DESIRING TO EXERCISE ANY APPRAISAL RIGHTS AVAILABLE UNDER THE PBCL. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE PBCL. Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer in which Purchaser seeks to acquire the remaining Shares not held by it. Purchaser believes, however, that Rule 13e-3 will not be applicable to the Merger because it is anticipated that the Merger would be effected within one year following consummation of the Offer and in the Merger shareholders would receive the same price per Share as paid in 29 32 the Offer. If Rule 13e-3 were applicable to the Merger, it would require, among other things, that certain financial information concerning the Company, and certain information relating to the fairness of the proposed transaction and the consideration offered to minority shareholders in such a transaction, be filed with the Commission and disclosed to minority shareholders prior to consummation of the transaction. 13. DIVIDENDS AND DISTRIBUTIONS. As described above, the Merger Agreement provides that from the date of the execution of the Merger Agreement until the Effective Time, without the prior written consent of Parent, the Company will not: (a) change the authorized or issued capital stock of the Company or any subsidiary of the Company; (b) grant any stock option or right to purchase shares of capital stock of the Company or any subsidiary of the Company; (c) issue any security convertible into such capital stock; (d) grant any registration rights with respect to such capital stock; (e) purchase, redeem, retire or otherwise acquire any shares of any such capital stock (nor shall any subsidiary of the Company do so); or (f) declare or pay any dividend or other distribution or payment in respect of shares of any such capital stock. 14. CONDITIONS TO THE OFFER. Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) Purchaser's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement), Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any tendered Shares, and may terminate or amend the Offer as to any Shares not then paid for, if (i) any applicable waiting period under the HSR Act has not expired or terminated, (ii) the Minimum Condition has not been satisfied, or (iii) at any time on or after the date of the Merger Agreement and before the Expiration Date, any of the following events shall occur or shall be determined by Purchaser to have occurred: (a)(i) there shall be threatened, instituted or pending any suit, action or proceeding by any Governmental Body or (ii) there shall be instituted or pending any suit, action or proceeding before any court which in the good faith judgement of Parent and Purchaser is likely to result in any change or effect (or any development that, insofar as can reasonably be foreseen, is likely to result in any change or effect) that is materially adverse to the business, properties, assets, prospects, financial condition or results of operations of the Company and its subsidiaries taken as a whole or the ability of the Company to consummate the Merger Agreement, the Company Option Agreement, the Offer, the acquisition of shares pursuant to the Offer, the Shareholder Agreements, the Company Option Agreement and the Merger (a "Material Adverse Effect" or "Material Adverse Change"), in each case of (i) or (ii), (A) seeking to prohibit or impose any limitations on Parent's or Purchaser's ownership or operation (or that of any of their respective subsidiaries or Affiliates) of all or a material portion of their or the Company's businesses or assets, or to compel Parent or Purchaser or their respective subsidiaries and Affiliates to dispose of or hold separate any material portion of the business or assets of the Company or Parent and their respective subsidiaries, in each case taken as a whole, (B) challenging the acquisition by Parent or Purchaser of any Shares under the Offer or pursuant to the Company Option Agreement or the Shareholder Agreements seeking to restrain, prohibit or delay the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by the Merger Agreement, the Company Option Agreement or the Shareholder Agreements, or seeking to obtain from the Company, Parent or Purchaser any damages that are material in relation to the Company and its subsidiaries taken as a whole, (C) seeking to impose material limitations on the ability of Parent or Purchaser, or rendering Parent or Purchaser unable, to accept for payment, pay for or purchase some or all of the Shares pursuant to the Offer and the Merger, (D) seeking to impose limitations on the ability of Purchaser or Parent effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by it on all matters properly presented to the Company's 30 33 shareholders, (E) seeking to restrict any future business activity by Parent or Purchaser, including, without limitation, requiring the prior consent of any person or entity (including any Governmental Body) to future transactions by Parent or Purchaser, or (F) which otherwise is reasonably likely to have a Material Adverse Effect on the Company or, as a result of the Transactions, Parent and its subsidiaries; or (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Body, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (A) through (F) of paragraph (a) above; or (c) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the NYSE or on the Nasdaq (excluding (A) suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions and (B) limitations on price fluctuations in effect on the date of the Merger Agreement), or (ii) a declaration of a banking moratorium by federal or state authorities or any suspension of payments in respect of banks in the United States (whether or not mandatory) imposed by federal or state authorities on the extension of credit by lending institutions in the United States; or (d) there shall have occurred any Material Adverse Change (or any development that, insofar as reasonably can be foreseen, is reasonably likely to result in any Material Adverse Change); or (e) the Company Board of Directors or any committee thereof (i) shall have withdrawn, modified or changed in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger, (ii) shall have recommended the approval or acceptance of an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, Purchaser or their Affiliates, (iii) shall have executed an agreement in principle or definitive agreement relating to an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, Purchaser or their Affiliates or (iv) upon request of Purchaser, shall fail to reaffirm its approval or recommendation of the Offer, the Merger Agreement, or the Merger; or (f) the Company shall have breached or failed to perform any of its agreements under the Company Option Agreement or breached any of its representations and warranties in such agreement or such agreement shall not be valid, binding and enforceable, except for such breaches or failures or failures to be valid, binding and enforceable that do not materially and adversely affect the benefits expected to be received by Parent and Purchaser under the Merger Agreement or the Company Option Agreement; or (g) any Person or "group" (as defined in Section 13(d)(3) of the Exchange Act), other than Parent, Purchaser or their affiliates or any group of which any of them is a member, shall have acquired beneficial ownership (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 15% or more of the Shares or any such Person or group shall have announced its intention to acquire 15% or more of the Shares and the Company Board of Directors has failed to recommend against acceptance of such announcement (including by taking no position with respect to such announcement); or (h) any of the representations and warranties of the Company set forth in the Merger Agreement that are qualified as to materiality shall not be true and correct and any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case as of the date of the Merger Agreement and as of the scheduled expiration of the Offer; or (i) the Company shall have breached or failed to perform or to comply with any obligation, agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement; except, in each case where the failure to perform or comply with such obligations, agreements or covenants, does not, individually or in the aggregate, have a Material Adverse Effect on the Company or a Material Adverse Effect on the ability of the Company to consummate the Offer or the Merger; or 31 34 (j) all consents necessary to the consummation of the Offer or the Merger including, without limitation, consents from parties to loans, contracts, leases or other agreements and consents from governmental agencies, whether federal, state or local shall not have been obtained, other than consents the failure to obtain which would not have a Material Adverse Effect; or (k) the Employment Agreements shall not be in full force and effect and either Schneider or Monsma shall have denied or disaffirmed his obligation under his respective Employment Agreement; and (l) the Merger Agreement shall have been terminated in accordance with its terms; which in the reasonable good faith judgment of Parent or Purchaser, in any such case, and regardless of the circumstances (including any action or inaction by Parent or Purchaser) giving rise to such condition makes it inadvisable to proceed with the Offer and/or with such acceptance for payment of or payment for Shares. The foregoing conditions are for the sole benefit of Parent and Purchaser, may be waived by Parent or Purchaser, in whole or in part, at any time and from time to time in the sole discretion of Parent or Purchaser. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 15. CERTAIN LEGAL MATTERS. General. Except as described in this Section 15, based on information provided by the Company, neither the Company, Purchaser nor Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the acquisition of Shares by Parent or Purchaser pursuant to the Offer, the Merger or otherwise or any approval or other action by any governmental, administrative or regulatory agency or authority, domestic or foreign, that would be required prior to the acquisition of Shares by Purchaser pursuant to the Offer, the Merger or otherwise. Should any such approval or other action be required, Purchaser and Parent presently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws." While, except as otherwise described in this Offer to Purchase, Purchaser does not presently intend to delay the acceptance for payment of, or payment for, Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of, or other substantial conditions complied with, in the event that such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, Purchaser could decline to accept for payment, or pay for, any Shares tendered. See Section 14 for certain conditions to the Offer, including conditions with respect to governmental actions. State Takeover Laws. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, shareholders, executive offices or places of business in such states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquirer from voting on the affairs of a target corporation without prior approval of the remaining shareholders, provided that such laws were applicable only under certain conditions. The Pennsylvania Takeover Disclosure Law ("PTDL") purports to regulate certain attempts to acquire a corporation which (1) is organized under the laws of Pennsylvania or (2) has its principal place of business and substantial assets located in Pennsylvania. In Crane Co. v. Lam, 509 F. Supp. 782 (E.D. Pa. 1981), the 32 35 United States District Court for the Eastern District of Pennsylvania preliminarily enjoined, on grounds arising under the United States Constitution, enforcement of at least the portion of the PTDL involving the pre-offer waiting period thereunder. Section 8(a) of the PTDL provides an exemption for any offer to purchase securities as to which the board of directors of the target company recommends acceptance to its shareholders, if at the time such recommendation is first communicated to shareholders the offeror files with the Pennsylvania Securities Commission ("PSC") a copy of the Schedule 14D-1 and certain other information and materials, including an undertaking to notify security holders of the target company that a notice has been filed with the PSC which contains substantial additional information about the offering and which is available for inspection at the PSC's principal office during business hours. The Company Board of Directors by the unanimous vote of those present at the meeting has approved the transactions contemplated by the Merger Agreement and recommended acceptance of the Offer and the Merger to the Company's shareholders. While reserving and not waiving its right to challenge the validity of the PTDL or its applicability to the Offer, Purchaser is making a Section 8(a) filing with the PSC in order to qualify for the exemption from the PTDL. Pursuant to Section 10 of the PTDL, Purchaser will submit the appropriate $100 notice filing fee along with the Section 8(a) filing. Additional information about the Offer has been filed with the PSC pursuant to the PTDL and is available for inspection at the of the PSC office at Eastgate Office Building, 1010 North 7th Street, Harrisburg, PA 17102-1410, during business hours. Chapter 25 of the PBCL contains other provisions relating generally to takeovers and acquisitions of certain publicly owned Pennsylvania corporations such as the Company that have a class or series of shares entitled to vote generally in the election of directors of the Corporation registered under the Exchange Act (a "registered corporation"). The following discussion is a general and highly abbreviated summary of certain features of such chapter, is not intended to be complete or to completely address potentially applicable exceptions or exemptions, and is qualified in its entirety by reference to Chapter 25 of the PBCL. In addition to other provisions not applicable to the Offer or the Merger, Subchapter 25D of the PBCL includes provisions requiring approval of a merger of a registered corporation with an "interested shareholder" in which the "interested shareholder" is treated differently from other shareholders, by the affirmative vote of the shareholders entitled to cast at least a majority of the votes that all shareholders other than the interested shareholder are entitled to cast with respect to the transaction without counting the votes of the interested shareholder. This disinterested shareholder approval requirement is not applicable to a transaction (i) approved by a majority of disinterested directors, (ii) in which the consideration to be received by shareholders is not less than the highest amount paid by the interested shareholder in acquiring his shares, or (iii) effected without submitting the merger to a vote of shareholders as permitted in Section 1924(b)(1)(ii) of the PBCL. Purchaser currently believes that the disinterested shareholder approval requirement of Subchapter 25D will not be applicable to the contemplated Merger because of prior approval of the disinterested members of the Company Board of Directors. Shareholders will also have certain rights under Subchapter 25E of the PBCL which will become applicable prior to the Effective Time in the event of a Control Transaction. In such event, shareholders of the Company would have the right to demand "fair value" of such shareholders' Shares and to be paid such fair value upon compliance with the requirements of Subchapter 25E. Under Subchapter 25E, "fair value" may not be less than the highest price per share paid by the controlling person or group at any time during the 90-day period ending on and including the date of the Control Transaction, plus an increment, if any, representing any value, including, without limitation, any proportion of value payable for acquisition of control of the Company, that may not be reflected in such price. Purchaser believes that the Offer Price represents fair value of the Shares within the meaning of Subchapter 25E. Subchapter 25E Rights would attach immediately upon consummation of a Control Transaction and require that any shareholder seeking such appraisal must make a demand for fair value within a reasonable time after the notice to shareholders that a Control Transaction has occurred is given by the controlling person or group in accordance with Subchapter 25E, which time period may be specified in such notice, as well as comply with the other procedures of Subchapter 25E. Subchapter 25E Rights are available only with respect to shares of a registered corporation held by a shareholder after the occurrence of a Control Transaction; accordingly, Subchapter 25E Rights would not be available with respect to any Shares tendered in the Offer and accepted for payment. The foregoing summary of rights under 33 36 Subchapter 25E is qualified in its entirety by reference to the full text of Subchapter 25E, which is attached hereto as Annex A. Subchapter 25F of the PBCL prohibits under certain circumstances certain "business combinations," including mergers and sales or pledges of significant assets, of a registered corporation with an "interested shareholder" for a period of five years. Subchapter 25F exempts, among other things, business combinations approved by the board of directors prior to a shareholder becoming an interested shareholder and transactions with interested shareholders who beneficially owned shares with at least 15% of the total voting power of a corporation on March 23, 1988 and remain so. The Company has represented to the Purchaser that Subchapter 25F is not applicable to the contemplated Merger. Subchapter 25G of the PBCL, relating to "control-share acquisitions," prevents under certain circumstances the owner of a control-share block of shares of a registered corporation from voting such shares unless a majority of both the "disinterested" shares and all voting shares approve such voting rights. Failure to obtain such approval may result in a forced sale by the control-share owner of the control-share block to the corporation at a possible loss. The Company has opted out of Subchapter 25G in the By-laws and has represented to the Purchaser that Subchapter 25G is not applicable to the transactions contemplated by the Merger Agreement. Subchapter 25H of the PBCL, relating to disgorgement by certain controlling shareholders of a registered corporation following attempts to acquire control, provides that under certain circumstances any profit realized by a controlling person from the disposition of shares of the corporation to any person (including to the corporation under Subchapter 25G or otherwise) will be recoverable by the corporation. The Company has opted out of Subchapter 25H in the By-laws and has represented to the Purchaser that Subchapter 25H is not applicable to the transactions contemplated by the Merger Agreement. Subchapter 25I of the PBCL entitles "eligible employees" of a registered corporation to a lump sum payment of severance compensation under certain circumstances if the employee is terminated, other than for willful misconduct, within 90 days before voting rights lost as a result of a control-share acquisition are restored by a vote of disinterested shareholders. Subchapter 25J of the PBCL provides protection against termination or impairment under certain circumstances of "covered labor contracts" of a registered corporation as a result of a "business combination transaction" if the business operation to which the covered labor contract relates was owned by the registered corporation at the time voting rights are restored by shareholder vote after a control-share acquisition. The Company has represented to Purchaser that Subchapters 25I and 25J are not applicable to the transactions contemplated by the Merger Agreement. Section 2504 of the PBCL provides that the applicability of Chapter 25 of the PBCL to a registered corporation having a class or series of shares entitled to vote generally in the election of directors registered under the Exchange Act or otherwise satisfying the definition of a registered corporation under Section 2502(l) of the PBCL shall terminate immediately upon the termination of the status of the corporation as a registered corporation. Purchaser intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of the registration of the Shares are met. Except for the filing pursuant to Section 8(a) of the PTDL described above, neither Purchaser nor Parent has currently complied with any state takeover statute or regulation; however Purchaser intends to comply with Subchapter 25E of the PBCL to the extent it is applicable upon consummation of the Offer. Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, Purchaser may not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. 34 37 Antitrust. The Offer and the Merger are subject to the HSR Act, which provides that certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC") and certain waiting period requirements have been satisfied. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the fifteenth day after the date Parent's form was filed unless early termination of the waiting period is granted. However, the DOJ or the FTC may extend the waiting period by requesting additional information or documentary material from Parent or the Company. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the tenth day after substantial compliance by Parent with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the DOJ or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. The Purchaser will not accept for payment Shares tendered pursuant to the Offer unless and until the waiting period requirements imposed by the HSR Act with respect to the Offer have been satisfied. See Section 14. The FTC and the DOJ frequently scrutinize the legality under the Antitrust Laws of transactions such as Purchaser's acquisition of Shares pursuant to the Offer and the Merger. At any time before or after Purchaser's acquisition of Shares, the DOJ or the FTC could take such action under the Antitrust Laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of Shares pursuant to the Offer or otherwise seeking divestiture of Shares acquired by Purchaser or divestiture of substantial assets of Parent or its subsidiaries. Private parties, as well as state governments, may also bring legal action under the Antitrust Laws under certain circumstances. Based upon an examination of information provided by the Company relating to the businesses in which Parent and the Company are engaged, Parent and Purchaser believe that the acquisition of Shares by Purchaser will not violate the Antitrust Laws. Nevertheless, there can be no assurance that a challenge to the Offer or other acquisition of Shares by Purchaser on antitrust grounds will not be made or, if such a challenge is made, of the result. See Section 14 for certain conditions to the Offer, including conditions with respect to litigation and certain government actions. As used in this Offer to Purchase, "Antitrust Laws" shall mean and include the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other Federal and state statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade. 16. FEES AND EXPENSES. TM Capital is serving as Dealer Manager in connection with the Offer and has provided certain financial advisory services to Purchaser and Parent in connection with the Offer and the Merger pursuant to an engagement letter, dated March 3, 1999 (the "Engagement Letter") and a Dealer Manager Agreement, dated July 15, 1999 (the "Dealer Manager Agreement"). Pursuant to the Engagement Letter, Parent has agreed to pay a fee of approximately $525,000 for a tender offer or merger between Parent and the Company be consummated, $100,000 of which is payable upon the initiation of the Offer. Parent has also agreed to reimburse TM Capital for its reasonable out-of-pocket expenses, including the legal fees incurred in connection with its engagement; however, such expenses shall not exceed $10,000 without prior notification of Parent. Parent has agreed to indemnify TM Capital and certain related persons against certain liabilities and expenses, including certain liabilities under the federal securities laws. Purchaser and Parent have retained DF King to serve as the Information Agent and American Stock Transfer and Trust Company to serve as the Depositary in connection with the Offer. The Information Agent 35 38 may contact holders of Shares by personal interview, mail, telephone, telex, telegraph and other methods of electronic communication and may request brokers, dealers, commercial banks, trust companies and other nominees to forward the Offer materials to beneficial holders. The Information Agent and the Depositary will each receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities in connection with their services, including certain liabilities and expenses under the federal securities laws. Except as set forth above, neither Parent nor Purchaser will pay any fees or commissions to any broker or dealer or other person or entity in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding the Offer materials to their customers. 17. MISCELLANEOUS. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares pursuant thereto, Purchaser shall make a good faith effort to comply with such statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) holders of Shares in such state. In any jurisdiction the securities, blue sky or other laws of which require the Offer to be made by a licenced broker or dealer, the Offer is being made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers licenced under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Purchaser and Parent have filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with exhibits, furnishing certain additional information with respect to the Offer. In addition, the Company has filed with the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, setting forth its recommendation with respect to the Offer and the reasons for its recommendation and furnishing certain additional related information. Such Schedules and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the same manner set forth in Sections 8 and 9 of this Offer to Purchase (except that such material will not be available at the regional offices of the Commission). TI Acquisition Corp. July 15, 1999 36 39 SCHEDULE I INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets forth the name and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of each director and executive officer of Parent. Unless otherwise indicated, each such person is a citizen of the United States of America and the business address of each such person is c/o Fedders Corporation, 505 Martinsville Road, Liberty Corner, NJ 07983. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Parent. Unless otherwise indicated, each such person has held his or her present occupation as set forth below, or has been an executive officer at Parent for the past five years.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- -------------------------------------------------- SALVATORE GIORDANO Mr. Giordano has been Chairman of the Board of Parent Director since 1945 since 1945. SAL GIORDANO, JR. Mr. Giordano, Jr. has been Vice Chairman, President and Director since 1965 Chief Executive Officer of Parent since 1988. WILLIAM J. BRENNAN Mr. Brennan has been a director of Parent from 1980 to Director since 1980 1987. He was reelected as a director in 1989. Mr. Brennan is Chairman of Parent's Finance Committee and a member of the Audit and Compensation Committees. Mr. Brennan is also a director of CSM Environmental Systems, Inc. DAVID C. CHANG Dr. Chang has been a director of Parent since 1998. Dr. Director since 1998 Chang has been President of the Polytechnic University for the last four years. Prior to that, Dr. Chang was Dean of the College of Engineering and Applied Sciences at Arizona State University. Dr. Chang is a member of the Finance and Nominating Committees. JOSEPH GIORDANO Mr. Giordano has been a director of Parent since 1961. Mr. Director since 1961 Giordano was a Senior Vice President of Parent until his retirement on August 31, 1992, and President of NYCOR, Inc. until its merger into Parent on August 13, 1996. Mr. Giordano is a member of the Executive and Finance Committees. C.A. KEEN Mr. Keen has been a director of Parent since 1996. Mr. Director since 1996 Keen was a Vice President of Parent 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. He was also a director of NYCOR, Inc. until its merger into Parent on August 13, 1996. HOWARD S. MODLIN Mr. Modlin is a member of the law firm of Weisman, Cellar, Director since 1977 Spett & Modlin, P.C., which renders legal services to Parent from time to time. Mr. Modlin is also a director of General DataComm Industries, Inc. and Trans-Lux Corporation. Mr. Modlin is Chairman of the Compensation Committee and a member of the Executive and Audit Committees.
I-1 40
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- -------------------------------------------------- CLARENCE R. MOLL Dr. Moll is President Emeritus of Widener University. Dr. Director since 1967 Moll has been a director of Parent since 1967. Dr. Moll is also a director of Ironworkers' Savings Bank. Dr. Moll is Chairman of the Audit Committee. S.A. MUSCARNERA Mr. Muscarnera has been a director of Parent since 1982. Director since 1982 Mr. Muscarnera was Senior Vice President and Secretary of Parent until his retirement on August 31, 1996. Mr. Muscarnera served in various capacities with Parent for over 39 years, including human resources and legal. Mr. Muscarnera is a member of the Audit and Finance Committees. ANTHONY E. PULEO Mr. Puleo has been a director of Parent since 1994. Mr. Director since 1994 Puleo's principal occupation for the past two and one half years has been as President of Puleo Tree Co., an importer of Christmas items and garden furniture. Prior to that, Mr. Puleo was President of Boulderwood Corporation. Mr. Puleo is a member of the Compensation and Nominating Committees. ROBERT L. LAURENT, JR. Mr. Laurent, Jr. has been Executive Vice President, Acquisitions and Alliances of Parent since January 1999. Prior to that he had been Executive Vice President, Finance and Administration and Chief Financial Officer of Parent since 1993. Mr. Laurent joined Parent in 1980 and has served as internal auditor, plant controller, corporate controller and Vice President, Finance. MICHAEL GIORDANO Mr. Giordano has been Vice President and Chief Financial Officer of Fedders North America, Inc. and Parent since July 1, 1999. Mr. Giordano also served as Senior Vice President of Fedders International, Inc. from 1998 until being elected to his current position. Mr. Giordano joined the Fedders organization in 1990 and has held various positions with Parent and certain subsidiaries including: Assistant Director of Sourcing, Sales Manager, Director of Sales and Marketing, Vice President of Sales and Managing Director of the Singapore office of Fedders International, Inc. MICHAEL B. ETTER Mr. Etter has been Chairman and Chief Executive Officer of the air conditioning unit of Parent since May 1, 1999. Mr. Etter is also a Senior Vice President of Parent. Mr. Etter rejoined Fedders North America, Inc. in 1977 after a brief break in service and has served in various capacities with Fedders North America, Inc. including: Vice President, Purchasing; Vice President, Materials Management; and Vice President, Materials Management/Global Purchasing. He served as Vice President of Global Purchasing for Parent from December 1997 until May 1999. KENT E. HANSEN Mr. Hansen was elected Senior Vice President and Secretary of Parent in August 1996. Previously he was Vice President, Finance, General Counsel and Chief Financial Officer of NYCOR, Inc. Prior thereto, he was Vice President and General Counsel of Parent from 1989 to 1992.
I-2 41
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- -------------------------------------------------- GERALD C. SENION Mr. Senion has been Group Vice President of Parent and Chief Operating Officer of Fedders North America since July 1997. He was elected to the position of President of Fedders North America in September 1998. Prior to joining Parent, Mr. Senion was employed by Frigidaire Corporation for approximately 20 years, most recently as Group Vice President of the Frigidaire Home Products Company, Home Comfort Division and the Electrolux Global Home Comfort Products Division. GARY J. NAHAI Mr. Nahai was elected Vice President of Parent and President of Fedders International, Inc. in April 1993. Prior thereto he held various sales and marketing positions with Parent for more than 20 years. GORDON NEWMAN Mr. Newman was elected Vice President of Parent and President of Rotorex Companies, Inc. in January 1997. He joined Parent in 1991 as Vice President, Corporate Quality. Prior thereto Mr. Newman was Corporate Director of Quality for Welbilt Corporation. SAL GIORDANO III Mr. Sal Giordano III was elected Vice President of Parent in August 1996. He has been President of Melcor since 1995 and was Vice President of Business Planning and Development of NYCOR, Inc. from 1992 to August, 1996. ROBERT N. EDWARDS Mr. Edwards joined Parent in 1992 as Senior Counsel. He was promoted to General Counsel of Parent in 1994 and Vice President in 1995. Prior to joining Parent, Mr. Edwards was Vice President, General Counsel and Secretary of Information Science, Incorporated, a manufacturer of computer software. THOMAS A. KROLL Mr. Kroll was elected Controller of Parent in April 1995. Previously he was Controller of Fedders North America since 1992. Prior thereto he was Controller of Emerson Quiet Kool. NANCY DIGIOVANNI Ms. DiGiovanni was elected Treasurer of Parent in October 1998. Previously she was Assistant Treasurer of Parent since 1989. Prior thereto she held various cash management positions with Parent.
I-3 42 2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets forth the name and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of each director and executive officer of Purchaser. Unless otherwise indicated, each such person is a citizen of the United States of America and the business address of each such person is c/o TI Acquisition Corp., 505 Martinsville Road, Liberty Corner, NJ 07983. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Parent. Unless otherwise indicated, each such person has held his present occupation as set forth below, or has been an executive officer at Parent, or the organization indicated, for the past five years.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- -------------------------------------------------- SAL GIORDANO, JR. Chief Executive Officer of Purchaser. See Part I of this Schedule. ROBERT L. LAURENT, JR. Executive Vice President of Purchaser. See Part I of this Schedule. MICHAEL GIORDANO Vice President of Purchaser. See Part I of this Schedule. KENT E. HANSEN Treasurer and Secretary of Purchaser. See Part I of this Schedule. ROBERT N. EDWARDS Assistant Secretary of Purchaser. See Part I of this Schedule.
I-4 43 ANNEX A PENNSYLVANIA BUSINESS CORPORATION LAW OF 1988 CHAPTER 25 SUBCHAPTER E. CONTROL TRANSACTIONS 2541 APPLICATION AND EFFECT OF SUBCHAPTER. -- (a) General rule. -- Except as otherwise provided in this section, this subchapter shall apply to a registered corporation unless: (1) the registered corporation is one described in section 2502(1)(ii) or (2) (relating to registered corporation status): (2)the bylaws, by amendment adopted either: (i) by March 23, 1984; or (ii) on or after March 23, 1988, and on or before June 21, 1988; and, in either event, not subsequently rescinded by an article amendment, explicitly provide that this subchapter shall not be applicable to the corporation in the case of a corporation which on June 21, 1988, did not have outstanding one or more classes or series of preference shares entitled, upon the occurrence of a default in the payment of dividends or another similar contingency, to elect a majority of the members of the board of directors (a bylaw adopted on or before June 21, 1988, by a corporation excluded from the scope of this paragraph by the restriction of this paragraph relating to certain outstanding preference shares shall be ineffective unless ratified under paragraph (3)); (3) the bylaws of which explicitly provide that this subchapter shall not be applicable to the corporation by amendment ratified by the board of directors on or after December 19, 1990, and on or before March 19, 1991, in the case of a corporation: (i) which on June 21, 1988, had outstanding one or more classes or series of preference shares entitled, upon the occurrence of a default in the payment of dividends or another similar contingency, to elect a majority of the members of the board of directors; and (ii) the bylaws of which on that date contained a provision described in paragraph (2); or (4) the articles explicitly provide that this subchapter shall not be applicable to the corporation by a provision included in the original articles, by an article amendment adopted prior to the date of the control transaction and prior to or on March 23, 1988, pursuant to the procedures then applicable to the corporation, or by an article amendment adopted prior to the date of the control transaction and subsequent to March 23, 1988, pursuant to both: (i) the procedures then applicable to the corporation; and (ii) unless such proposed amendment has been approved by the board of directors of the corporation, in which event this subparagraph shall not be applicable, the affirmative vote of the shareholders entitled to cast at least 80% of the votes which all shareholders are entitled to cast thereon. A reference in the articles or bylaws to former section 910 (relating to right of shareholders to receive payment for shares following a control transaction) of the act of May 5, 1933 (P.L. 364, No. 106), known as the Business Corporation Law of 1933, shall be a reference to this subchapter for the purposes of this section. See section 101(c) (relating to references to prior statutes). (b) Inadvertent transactions. -- This subchapter shall not apply to any person or group that inadvertently becomes a controlling person or group if that controlling person or group, as soon as practicable, divests itself of a sufficient amount of its voting shares so that it is no longer a controlling person or group. (c) Certain subsidiaries. -- This subchapter shall not apply to any corporation that on December 23, 1983, was a subsidiary of any other corporation. 2542 DEFINITIONS. -- The following words and phrases when used in this subchapter shall have the meanings given to them in this section unless the context clearly indicates otherwise: "Control transaction." The acquisition by a person or group of the status of a controlling person or group. "Controlling person or group." A controlling person or group as defined in section 2543 (relating to controlling person or group). "Fair value." A value not less than the highest price paid per share by the controlling person or group at any time during the 90-day period ending on and including the date of the control transaction plus an increment representing any value, including, without limitation, any proportion of any value payable for acquisition of control of the corporation, that may not be reflected in such price. A-1 44 "Partial payment amount." The amount per share specified in section 2545 (c)(2) (relating to contents of notice). "Subsidiary." Any corporation as to which any other corporation has or has the right to acquire, directly or indirectly, through the exercise of all warrants, options and rights and the conversion of all convertible securities, whether issued or granted by the subsidiary or otherwise, voting power over voting shares of the subsidiary that would entitle the holders thereof to cast in excess of 50% of the votes that all shareholders would be entitled to cast in the election of directors of such subsidiary, except that a subsidiary will not be deemed to cease being a subsidiary as long as such corporation remains a controlling person or group within the meaning of this subchapter. "Voting shares." The term shall have the meaning specified in section 2552 (relating to definitions). 2543 CONTROLLING PERSON OR GROUP. -- (a) General rule. -- For the purpose of this subchapter, a "controlling person or group" means a person who has, or a group of persons acting in concert that has, voting power over voting shares of the registered corporation that would entitle the holders thereof to cast at least 20% of the votes that all shareholders would be entitled to cast in an election of directors of the corporation. (b) Exceptions generally. -- Notwithstanding subsection (a): (1) A person or group which would otherwise be a controlling person or group within the meaning of this section shall not be deemed a controlling person or group unless, subsequent to the later of March 23, 1988, or the date this subchapter becomes applicable to a corporation by bylaw or article amendment or otherwise, that person or group increases the percentage of outstanding voting shares of the corporation over which it has voting power to in excess of the percentage of outstanding voting shares of the corporation over which that person or group had voting power on such later date, and to at least the amount specified in subsection (a), as the result of forming or enlarging a group or acquiring, by purchase, voting power over voting shares of the corporation. (2) No person or group shall be deemed to be a controlling person or group at any particular time if voting power over any of the following voting shares is required to be counted at such time in order to meet the 20% minimum: (i) Shares which have been held continuously by a natural person since January 1, 1983, and which are held by such natural person at such time. (ii) Shares which are held at such time by any natural person or trust, estate, foundation or other similar entity to the extent the shares were acquired solely by gift, inheritance, bequest, devise or other testamentary distribution or series of these transactions, directly or indirectly, from a natural person who had acquired the shares prior to January 1, 1983. (iii) Shares which were acquired pursuant to a stock split, stock dividend, reclassification or similar recapitalization with respect to shares described under this paragraph that have been held continuously since their issuance by the corporation by the natural person or entity that acquired them from the corporation or that were acquired, directly or indirectly, from such natural person or entity, solely pursuant to a transaction or series of transactions described in subparagraph (ii), and that are held at such time by a natural person or entity described in subparagraph (ii). (iv) Control shares as defined in section 2562 (relating to definitions) which have not yet been accorded voting rights pursuant to section 2564(a) (relating to voting rights of shares acquired in a control-share acquisition). (v) Shares, the voting rights of which are attributable to a person under subsection (d) if: (A) the person acquired the option or conversion right directly from or made the contract, arrangement or understanding or has the relationship directly with the corporation; and (B) the person does not at the particular time own or otherwise effectively possess the voting rights of the shares. (vi) Shares acquired directly from the corporation or an affiliate or associate, as defined in section 2552 (relating to definitions), of the corporation by a person engaged in business as an underwriter of securities who acquires the shares through his participation in good faith in a firm commitment underwriting registered under the Securities Act of 1933. (3) In determining whether a person or group is or would be a controlling person or group at any particular time, there shall be disregarded voting power arising from a contingent right of the holders of one or more classes or series of preference shares to elect one or more members of the board of directors upon or during the continuation of a default in the payment of dividends on such shares or another similar contingency. (c) Certain record holders. -- A person shall not be a controlling person under subsection (a) if the person holds voting power, in good faith and not for the purpose of circumventing this subchapter, as an agent, A-2 45 bank, broker, nominee or trustee for one or more beneficial owners who do not individually or, if they are a group acting in concert, as a group have the voting power specified in subsection (a), or who are not deemed a controlling person or group under subsection (b). (d) Existence of voting power. -- For the purposes of this subchapter, a person has voting power over a voting share if the person has or shares, directly or indirectly, through any option, contract, arrangement, understanding, conversion right or relationship, or by acting jointly or in concert or otherwise, the power to vote, or to direct the voting of, the voting share. 2544 RIGHT OF SHAREHOLDERS TO RECEIVE PAYMENT FOR SHARES. -- Any holder of voting shares of a registered corporation that becomes the subject of a control transaction who shall object to the transaction shall be entitled to the rights and remedies provided in this subchapter. 2545 NOTICE TO SHAREHOLDERS. -- (a) General rule. -- Prompt notice that a control transaction has occurred shall be given by the controlling person or group to: (1) Each shareholder of record of the registered corporation holding voting shares. (2) To the court, accompanied by a petition to the court praying that the fair value of the voting shares of the corporation be determined pursuant to section 2547 (relating to valuation procedures) if the court should receive pursuant to section 2547 certificates from shareholders of the corporation or an equivalent request for transfer of uncertificated securities. (b) Obligations of the corporation. -- If the controlling person or group so requests, the corporation shall, at the option of the corporation and at the expense of the person or group, either furnish a list of all such shareholders to the person or group or mail the notice to all such shareholders. (c) Contents of notice. -- The notice shall state that: (1) All shareholders are entitled to demand that they be paid the fair value of their shares. (2) The minimum value the shareholder can receive under this subchapter is the highest price paid per share by the controlling person or group within the 90-day period ending on and including the date of the control transaction, and stating that value. (3) If the shareholder believes the fair value of his shares is higher, that this subchapter provides an appraisal procedure for determining the fair value of such shares, specifying the name of the court and its address and the caption of the petition referenced in subsection (a)(2), and stating that the information is provided for the possible use by the shareholder in electing to proceed with a court-appointed appraiser under section 2547. There shall be included in, or enclosed with, the notice a copy of this subchapter. (d) Optional procedure. -- The controlling person or group may, at its option, supply with the notice referenced in subsection (c) a form for the shareholder to demand payment of the partial payment amount directly from the controlling person or group without utilizing the court-appointed appraiser procedure of section 2547, requiring the shareholder to state the number and class or series, if any, of the shares owned by him, and stating where the payment demand must be sent and the procedures to be followed. 2546 SHAREHOLDER DEMAND FOR FAIR VALUE. -- (a) General rule. -- After the occurrence of the control transaction, any holder of voting shares of the registered corporation may, prior to or within a reasonable time after the notice required by section 2545 (relating to notice to shareholders) is given, which time period may be specified in the notice, make written demand on the controlling person or group for payment of the amount provided in subsection (c) with respect to the voting shares of the corporation held by the shareholder, and the controlling person or group shall be required to pay that amount to the shareholder pursuant to the procedures specified in section 2547 (relating to valuation procedures). (b) Contents of demand. -- The demand of the shareholder shall state the number and class or series, if any, of the shares owned by him with respect to which the demand is made. (c) Measure of value. -- A shareholder making written demand under this section shall be entitled to receive cash for each of his shares in an amount equal to the fair value of each voting share as of the date on which the control transaction occurs, taking into account all relevant factors, including an increment representing a proportion of any value payable for acquisition of control of the corporation. (d) Purchases independent of subchapter. -- The provisions of this subchapter shall not preclude a controlling person or group subject to this subchapter from offering, whether in the notice required by section A-3 46 2545 or otherwise, to purchase voting shares of the corporation at a price other than that provided in subsection (c), and the provisions of this subchapter shall not preclude any shareholder from agreeing to sell his voting shares at that or any other price to any person. 2547 VALUATION PROCEDURES. -- (a) General rule. -- If, within 45 days (or such other time period, if any, as required by applicable law) after the date of the notice required by section 2545 (relating to notice to shareholders), or, if such notice was not provided prior to the date of the written demand by the shareholder under section 2546 (relating to shareholder demand for fair value), then within 45 days (or such other time period, if any, required by applicable law) of the date of such written demand, the controlling person or group and the shareholder are unable to agree on the fair value of the shares or on a binding procedure to determine the fair value of the shares, then each shareholder who is unable to agree on both the fair value and on such a procedure with the controlling person or group and who so desires to obtain the rights and remedies provided in this subchapter shall, no later than 30 days after the expiration of the applicable 45-day or other period, surrender to the court certificates representing any of the shares that are certificated shares, duly endorsed for transfer to the controlling person or group, or cause any uncertificated shares to be transferred to the court as escrow agent under subsection (c) with a notice stating that the certificates or uncertificated shares are being surrendered or transferred, as the case may be, in connection with the petition referenced in section 2545 or, if no petition has theretofore been filed, the shareholder may file a petition within the 30-day period in the court praying that the fair value (as defined in this subchapter) of the shares be determined. (b) Effect of failure to give notice and surrender certificates. -- Any shareholder who does not so give notice and surrender any certificates or cause uncertificated shares to be transferred within such time period shall have no further right to receive, with respect to shares the certificates of which were not so surrendered or the uncertificated shares which were not so transferred under this section, payment under this subchapter from the controlling person or group with respect to the control transaction giving rise to the rights of the shareholder under this subchapter. (c) Escrow and notice. -- The court shall hold the certificates surrendered and the uncertificated shares transferred to it in escrow for, and shall promptly, following the expiration of the time period during which the certificates may be surrendered and the uncertificated shares transferred, provide a notice to the controlling person or group of the number of shares so surrendered or transferred. (d) Partial payment for shares. -- The controlling person or group shall then make a partial payment for the shares so surrendered or transferred to the court, within ten business days of receipt of the notice from the court, at a per-share price equal to the partial payment amount. The court shall then make payment as soon as practicable, but in any event within ten business days, to the shareholders who so surrender or transfer their shares to the court of the appropriate per-share amount received from the controlling person or group. (e) Appointment of appraiser. -- Upon receipt of any share certificate surrendered or uncertificated share transferred under this section, the court shall, as soon as practicable but in any event within 30 days, appoint an appraiser with experience in appraising share values of companies of like nature to the registered corporation to determine the fair value of the shares. (f) Appraisal procedure. -- The appraiser so appointed by the court shall, as soon as reasonably practicable, determine the fair value of the shares subject to its appraisal and the appropriate market rate of interest on the amount then owed by the controlling person or group to the holders of the shares. The determination of any appraiser so appointed by the court shall be final and binding on both the controlling person or group and all shareholders who so surrendered their share certificates or transferred their shares to the court, except that the determination of the appraiser shall be subject to review to the extent and within the time provided or prescribed by law in the case of other appointed judicial officers. See 42 Pa.C.S. Sections 5105(a)(3) (relating to right to appellate review) and 5571(b) (relating to appeals generally). (g) Supplemental payment. -- Any amount owed, together with interest, as determined pursuant to the appraisal procedures of this section shall be payable by the controlling person or group after it is so determined and upon and concurrently with the delivery or transfer to the controlling person or group by the court (which shall make delivery of the certificate or certificates surrendered or the uncertificated shares transferred to it to A-4 47 the controlling person or group as soon as practicable but in any event within ten business days after the final determination of the amount owed) of the certificate or certificates representing shares surrendered or the uncertificated shares transferred to the court, and the court shall then make payment, as soon as practicable but in any event within ten business days after receipt of payment from the controlling person or group, to the shareholders who so surrendered or transferred their shares to the court of the appropriate per-share amount received from the controlling person or group. (h) Voting and dividend rights during appraisal proceedings. -- Shareholders who surrender their shares to the court pursuant to this section shall retain the right to vote their shares and receive dividends or other distributions thereon until the court receives payment in full for each of the shares so surrendered or transferred of the partial payment amount (and, thereafter, the controlling person or group shall be entitled to vote such shares and receive dividends or other distributions thereon). The fair value (as determined by the appraiser) of any dividends or other distributions so received by the shareholders shall be subtracted from any amount owing to such shareholders under this section. (i) Powers of the court. -- The court may appoint such agents, including the transfer agent of the corporation, or any other institution, to hold the share certificates so surrendered and the shares surrendered or transferred under this section, to effect any necessary change in record ownership of the shares after the payment by the controlling person or group to the court of the amount specified in subsection (h), to receive and disburse dividends or other distributions, to provide notices to shareholders and to take such other actions as the court determines are appropriate to effect the purposes of this subchapter. (j) Costs and expenses. -- The costs and expenses of any appraiser or other agents appointed by the court shall be assessed against the controlling person or group. The costs and expenses of any other procedure to determine fair value shall be paid as agreed to by the parties agreeing to the procedure. (k) Jurisdiction exclusive. -- The jurisdiction of the court under this subchapter is plenary and exclusive and the controlling person or group and all shareholders who so surrendered or transferred their shares to the court shall be made a party to the proceeding as in an action against their shares. (l) Duty of corporation. -- The corporation shall comply with requests for information, which may be submitted pursuant to procedures maintaining the confidentiality of the information, made by the court or the appraiser selected by the court. If any of the shares of the corporation are not represented by certificates, the transfer, escrow or retransfer of those shares contemplated by this section shall be registered by the corporation, which shall give the written notice required by section 1528(f) (relating to uncertificated shares) to the transferring shareholder, the court and the controlling shareholder or group, as appropriate in the circumstances. (m) Payment under optional procedure. -- Any amount agreed upon between the parties or determined pursuant to the procedure agreed upon between the parties shall be payable by the controlling person or group after it is agreed upon or determined and upon and concurrently with the delivery of any certificate or certificates representing such shares or the transfer of any uncertificated shares to the controlling person or group by the shareholder. (n) Title to shares. -- Upon full payment by the controlling person or group of the amount owed to the shareholder or to the court, as appropriate, the shareholder shall cease to have any interest in the shares. 2548 COORDINATION WITH CONTROL TRANSACTION. -- (a) General rule. -- A person or group that proposes to engage in a control transaction may comply with the requirements of this subchapter in connection with the control transaction, and the effectiveness of the rights afforded in this subchapter to shareholders may be conditioned upon the consummation of the control transaction. (b) Notice. -- The person or group shall give prompt written notice of the satisfaction of any such condition to each shareholder who has made demand as provided in this subchapter. A-5 48 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each shareholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary, at the applicable address set forth below: The Depositary for the Offer is: AMERICAN STOCK TRANSFER AND TRUST COMPANY Attention: Reorganization Department 718-921-8200 By Mail: By Hand: By Hand or Overnight Courier: 40 Wall Street 40 Wall Street 40 Wall Street 46th Floor 46th Floor 46th Floor New York, New York 10005 New York, New York 10005 New York, New York 10005
Any questions or requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the other tender offer materials may be directed to the Information Agent at the address and telephone number set forth below. Shareholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: D.F. King & Co., Inc. 77 Water Street New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 All Others Call Toll-Free: 1-800-769-6414 The Dealer Manager for the Offer is: TM CAPITAL CORP One Battery Park Plaza, 35th Floor New York, New York 10004 (212) 809-1360 (Call Collect) EX-99.A.2 3 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF TRION, INC. PURSUANT TO THE OFFER TO PURCHASE DATED JULY 15, 1999 OF TI ACQUISITION CORP. AN INDIRECT WHOLLY OWNED SUBSIDIARY OF FEDDERS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: AMERICAN STOCK TRANSFER AND TRUST COMPANY Attention: Reorganization Department 718-921-8200 By Mail: By Hand: By Overnight Courier: 40 Wall Street 40 Wall Street 40 Wall Street 46th Floor 46th Floor 46th Floor New York, New York 10005 New York, New York 10005 New York, New York 10005
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used by shareholders of Trion, Inc., if certificates for Shares (as such term is defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in Instruction 2 below) is utilized, if delivery of Shares is to be made by book-entry transfer to an account maintained by the Depositary at a Book-Entry Transfer Facility (as defined in and pursuant to the procedures set forth in Section 3 of the Offer to Purchase). Shareholders who deliver Shares by book-entry transfer are referred to herein as "Book-Entry Shareholders" and other shareholders who deliver shares are referred to herein as "Certificate Shareholders." Shareholders whose certificates for Shares are not immediately available or who cannot deliver either the certificates for, or a Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to, their Shares and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. 2 [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution Account Number Transaction Code Number [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s) Window Ticket Number (if any) Date of Execution of Notice of Guaranteed Delivery Name of Institution which Guaranteed Delivery If delivered by Book-Entry Transfer, check box: [ ] Account Number Transaction Code Number
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES SHARE REPRESENTED BY NUMBER CERTIFICATE SHARE OF SHARES NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2) ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Total Shares - ------------------------------------------------------------------------------------------------------------------------ (1) Need not be completed by Book-Entry Shareholders. (2) Unless otherwise indicated, it will be assumed that all Shares represented by Share certificates delivered to the Depositary are being tendered hereby. See Instruction 4. - ------------------------------------------------------------------------------------------------------------------------
2 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to TI Acquisition Corp., a Pennsylvania corporation ("Purchaser") and an indirect wholly owned subsidiary of Fedders Corporation, a Delaware corporation ("Parent"), the above-described shares of common stock, par value $0.50 per share (the "Shares"), of Trion, Inc., a Pennsylvania corporation (the "Company"), pursuant to Purchaser's offer to purchase all of the outstanding Shares at a price of $5.50 per Share, net to the seller in cash, without interest thereon (the "Offer Price") upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 15, 1999, and in this Letter of Transmittal (which, together with any amendments or supplements thereto or hereto, collectively constitute the "Offer"). The undersigned understands that Purchaser reserves the right to transfer or assign, in whole at any time, or in part from time to time, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. Receipt of the Offer is hereby acknowledged. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 12, 1999 (the "Merger Agreement"), by and among Parent, Purchaser and the Company. Upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms of any such extension or amendment), subject to, and effective upon, acceptance for payment of, and payment for, the Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all non-cash dividends, distributions, rights, other Shares or other securities issued or issuable in respect thereof on or after July 12, 1999 (collectively, "Distributions")) and irrevocably constitutes and appoints the Depositary the true and lawful Agent and attorney-in-fact of the undersigned with respect to such Shares (and all Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares (and any and all Distributions), or transfer ownership of such Shares (and any and all Distributions) on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Shares (and any and all Distributions) for transfer on the books of the Company, and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any and all Distributions), all in accordance with the terms of the Offer. By executing this Letter of Transmittal, the undersigned hereby irrevocably appoints Sal Giordano, Jr., Robert L. Laurent, Jr., Michael Giordano, Kent E. Hansen and Robert N. Edwards in their respective capacities as officers of Purchaser, and any individual who shall thereafter succeed to any such office of Purchaser, and each of them, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote at any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof or otherwise in such manner as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, and to otherwise act as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, all of the Shares (and any and all Distributions) tendered hereby and accepted for payment by Purchaser. This appointment will be effective if and when, and only to the extent that, Purchaser accepts such Shares for payment pursuant to the Offer. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall, without further action, revoke any prior powers of attorney and proxies granted by the undersigned at any time with respect to such Shares (and any and all Distributions), and no subsequent powers of attorney, proxies, consents or revocations may be given by the undersigned with respect thereto (and, if given, will not be deemed effective). Purchaser reserves the right to require that, in order for Shares or other securities to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser must be able to exercise full voting, 3 4 consent and other rights with respect to such Shares (and any and all Distributions), including voting at any meeting of the Company's shareholders. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions, that the undersigned owns the Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that the tender of the tendered Shares complies with Rule 14e-4 under the Exchange Act, and that when the same are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby or deduct from such purchase price, the amount or value of such Distribution as determined by Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. The undersigned understands that the valid tender of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms or conditions of any such extension or amendment). Without limiting the foregoing, if the price to be paid in the Offer is amended in accordance with the terms of the Merger Agreement, the price to be paid to the undersigned will be the amended price notwithstanding the fact that a different price is stated in this Letter of Transmittal. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, Purchaser may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated under "Special Payment Instructions," please issue the check for the purchase price of all Shares purchased and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of all Shares purchased and/or return any certificates for Shares not tendered or not accepted for payment (and any accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered." In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and/or return any certificates evidencing Shares not tendered or not accepted for payment (and any accompanying documents, as appropriate) in the name(s) of, and deliver such check and/or return any such certificates (and any accompanying documents, as appropriate) to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please credit any Shares tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that Purchaser has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares from the name of the registered holder thereof if Purchaser does not accept for payment any of the Shares so tendered. 4 5 [ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE BEEN LOST, DESTROYED OR STOLEN AND SEE INSTRUCTION 11. NUMBER OF SHARES REPRESENTED BY LOST, DESTROYED OR STOLEN CERTIFICATES: ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares accepted for payment is to be issued in name of someone other than the undersigned, if certificates for Shares not tendered or not accepted for payment are to be issued in the name of someone other than the undersigned or if Shares tendered hereby and delivered by book-entry transfer that are not accepted for payment are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue check and/or Share certificate(s) to: Name ---------------------------------------------------- (PLEASE PRINT) Address -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE SUBSTITUTE FORM W-9) Credit Shares delivered by book-entry transfer and not purchased to the Book-Entry Transfer Facility account. ------------------------------------------------------------ (ACCOUNT NUMBER) ------------------------------------------------------------ ------------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment is to be sent to someone other than the undersigned or to the undersigned at an address other than that shown under "Description of Shares Tendered." Mail check and/or Share certificates to: Name ---------------------------------------------------- (PLEASE PRINT) Address -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE SUBSTITUTE FORM W-9) ------------------------------------------------------------ 5 6 SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF STOCKHOLDER(S)) Dated: - --------------------------- , 1999 (Must be signed by registered holder(s) exactly as name(s) appear(s) on the Share certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s) ------------------------------------------------------------------------ (PLEASE PRINT) Name of Firm -------------------------------------------------------------------- Capacity (full title) ------------------------------------------------------------ (SEE INSTRUCTION 5) Address------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number --------------------------------------------------- Taxpayer Identification or Social Security Number -------------------------------- (SEE SUBSTITUTE FORM W-9) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature ---------------------------------------------------------------- Name(s) ------------------------------------------------------------------------ (PLEASE PRINT) Title--------------------------------------------------------------------------- Name of Firm --------------------------------------------------------------------- Address------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ----------------------------------------------------- 6 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in any of the Book-Entry Transfer Facilities' systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered herewith, unless such registered holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (b) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by shareholders of the Company either if Share certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if delivery of Shares is to be made by book-entry transfer pursuant to the procedures set forth herein and in Section 3 of the Offer to Purchase. For a stockholder validly to tender Shares pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees or an Agent's Message (in connection with book-entry transfer) and any other required documents, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date and either (i) certificates for tendered Shares must be received by the Depositary at one of such addresses prior to the Expiration Date or (ii) Shares must be delivered pursuant to the procedures for book-entry transfer set forth herein and in Section 3 of the Offer to Purchase and a Book-Entry Confirmation must be received by the Depositary prior to the Expiration Date or (b) the tendering stockholder must comply with the guaranteed delivery procedures set forth herein and in Section 3 of the Offer to Purchase. Shareholders whose certificates for Shares are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot comply with the book-entry transfer procedures on a timely basis may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth herein and in Section 3 of the Offer to Purchase. Pursuant to such guaranteed delivery procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, must be received by the Depositary prior to the Expiration Date and (iii) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all tendered Shares), together with a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents must be received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the Nasdaq National Market is open for business. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against the participant. The signatures on this Letter of Transmittal cover the Shares tendered hereby. THE METHOD OF DELIVERY OF THE SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. THE SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY 7 8 MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted, and no fractional Shares will be purchased. All tendering shareholders, by executing this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein under "Description of Shares Tendered" is inadequate, the number of Shares tendered and the Share certificate numbers with respect to such Shares should be listed on a separate signed schedule attached hereto. 4. PARTIAL TENDERS. (Not applicable to shareholders who tender by book-entry transfer). If fewer than all the Shares evidenced by any Share certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In any such case, new certificate(s) for the remainder of the Shares that were evidenced by the old certificates will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date or the termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any Share certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of the authority of such person so to act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of Share certificates or separate stock powers are required unless payment or certificates for Shares not tendered or not accepted for payment are to be issued in the name of a person other than the registered holder(s). Signatures on any such Share certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares evidenced by certificates listed and transmitted hereby, the Share certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the Share certificates. Signature(s) on any such Share certificates or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6, Purchaser will pay all stock transfer taxes with respect to the transfer and sale of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Shares purchased is to be made to, or if certificates for Shares not tendered or not accepted for payment are to be registered in the name of, any person other than the registered holder(s), or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such other person) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share certificates evidencing the Shares tendered hereby. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS; WIRE TRANSFERS. If a check for the purchase price of any Shares accepted for payment is to be issued in the name of, and/or Share certificates for Shares not accepted for payment or not tendered are to be issued in the name of and/or returned to, a person other than the signer of this Letter of Transmittal or 8 9 if a check is to be sent, and/or such certificates are to be returned, to a person other than the signer of this Letter of Transmittal, or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Any stockholder(s) delivering Shares by book-entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder(s) may designate in the box entitled "Special Payment Instructions." If no such instructions are given, any such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above as the account from which such Shares were delivered. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent at its address and phone number set forth below, or from brokers, dealers, commercial banks or trust companies. 9. WAIVER OF CONDITIONS. Subject to the Merger Agreement, Purchaser reserves the absolute right in its sole discretion to waive, at any time or from time to time, any of the specified conditions of the Offer, in whole or in part, in the case of any Shares tendered. 10. BACKUP WITHHOLDING. In order to avoid "backup withholding" of federal income tax on payments of cash pursuant to the Offer, a shareholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such shareholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 in this Letter of Transmittal and certify, under penalties of perjury, that such TIN is correct and that such shareholder is not subject to backup withholding. Backup withholding is not an additional income tax. Rather, the amount of the backup withholding can be credited against the federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the shareholder upon filing an income tax return. The shareholder is required to give the Depositary the TIN (i.e., social security number or employer identification number) of the record owner of the Shares. If the Shares are held in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering shareholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the shareholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% on all payments made prior to the time a properly certified TIN is provided to the Depositary. However, such amounts will be refunded to such shareholder if a TIN is provided to the Depositary within 60 days. Certain shareholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign shareholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 11. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any certificate(s) representing Shares has been lost, destroyed or stolen, the shareholder should promptly notify the Depositary by checking the box immediately preceding the special payment/special delivery instructions and indicating the number of Shares lost. The shareholder will then be instructed as to the steps that must be taken in order to replace the Share certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen Share certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY 9 10 PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE, OR THE TENDERING SHAREHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY. IMPORTANT TAX INFORMATION Under Federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payer) with such shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN is his social security number. If a tendering shareholder is subject to backup withholding, such shareholder must cross out item (2) of the Certification box on the Substitute Form W-9. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such shareholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding. Certain shareholders (including, among others, all corporations, and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that shareholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Depositary. Exempt shareholders, other than foreign individuals, should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9 below, and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a stockholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of such shareholder's correct TIN by completing the form contained herein certifying that the TIN provided on Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN). WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the social security number or employer identification number of the record owner of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, such stockholder should write "Applied For" in the space provided for in the TIN in Part 1, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price until a TIN is provided to the Depositary. 10 11 - -------------------------------------------------------------------------------- PAYER'S NAME: - --------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN THE BOX AT ------------------------------- FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number DEPARTMENT OF THE TREASURY (If awaiting TIN write INTERNAL REVENUE SERVICE "Applied For") OR ------------------------------- Employer Identification Number (If awaiting TIN write "Applied For") ------------------------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER PART 2 -- CERTIFICATE -- Under penalties of perjury, I certify that: IDENTIFICATION NUMBER ("TIN") (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. --------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax returns. However, if after being notified by the IRS that you are subject to backup withholding, you receive another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). (Also see instructions in the enclosed Guidelines). SIGNATURE ------------------------------------------------------ DATE -----------,1999 --------------------------------------------------------------------------------------- PART 3 -- Awaiting TIN [ ] - ------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me, and either (1) I have mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer Identification Number to the Depositary by the time of payment, 31% of all reportable payments made to me thereafter will be withheld, but that such amounts will be refunded to me if I then provide a certified Taxpayer Identification Number to the Depositary within sixty (60) days. Signature - -------------------------------------------- Date ------------------------, 1999 11 12 Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal and other tender offer materials may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below: The Information Agent for the Offer is: D.F. KING & CO., INC. 77 WATER STREET NEW YORK, NEW YORK 10005 BANKS AND BROKERS CALL COLLECT: (212) 269-5550 ALL OTHERS CALL TOLL FREE: 1-800-769-6414 The Dealer Manager for the Offer is: [TM Capital Corp. Logo] ONE BATTERY PARK PLAZA, 35(TH) FLOOR NEW YORK, NEW YORK 10004 (212) 809-1360 12 EX-99.A.3 4 NOTICE OF GUARANTEED DELIERY 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF TRION, INC. TO TI ACQUISITION CORP. AN INDIRECT WHOLLY OWNED SUBSIDIARY OF FEDDERS CORPORATION (NOT TO BE USED FOR SIGNATURE GUARANTEES) This Notice of Guaranteed Delivery, or a form substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates representing shares of Common Stock, par value $0.50 per share (the "Shares"), of Trion, Inc., a Pennsylvania corporation, are not immediately available, if the procedure for book-entry transfer cannot be completed prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), or if time will not permit all required documents to reach the Depositary prior to the Expiration Date. Such form may be delivered by hand or mailed to the Depositary. See Section 3 of the Offer to Purchase. The Depositary for the Offer is: AMERICAN STOCK TRANSFER AND TRUST COMPANY Attention: Reorganization Department 718-921-8200 By Mail: By Hand: By Overnight Courier: 40 Wall Street 40 Wall Street 40 Wall Street 46th Floor 46th Floor 46th Floor New York, New York 10005 New York, New York 10005 New York, New York 10005
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. 2 Ladies and Gentlemen: The undersigned hereby tenders to TI Acquisition Corp., a Pennsylvania corporation ("Purchaser") and an indirect wholly owned subsidiary of Fedders Corporation, a Delaware corporation, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated July 15, 1999 and the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares set forth below of common stock, par value $0.50 per share (the "Shares"), of Trion, Inc., a Pennsylvania corporation, pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. ------------------------------------------------------ Number of Shares: --------------------------------- Certificate Nos. (if available): ------------------------------------------------------ ------------------------------------------------------ Check box if Shares will be tendered by book-entry transfer: Account Number: ---------------------------------- Dated: --------------------------------------- , 1999 - ------------------------------------------------------ ------------------------------------------------------ Name(s) of Record Holder(s): ------------------------------------------------------ ------------------------------------------------------ PLEASE PRINT Address(es): --------------------------------------- ------------------------------------------------------ ------------------------------------------------------ ZIP CODE Area Code and Tel. No.: ------------------------------------------------------ ------------------------------------------------------ Signature(s): --------------------------------------- ------------------------------------------------------ - ------------------------------------------------------ 2 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEES) The undersigned, a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program, guarantees to deliver to the Depositary either certificates representing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's accounts at The Depository Trust Company, in each case with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message, and any other documents required by the Letter of Transmittal, within three trading days (as defined in the Offer to Purchase) after the date hereof. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. Name of Firm: ---------------------------------- --------------------------------------------------- AUTHORIZED SIGNATURE Address: ----------------------------------------- Name: ------------------------------------------- PLEASE PRINT --------------------------------------------------- Title -------------------------------------------- ZIP CODE Area Code and Tel. No.: ----------------------- Dated: ------------------------------------ , 1999
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.A.4 5 LETTER TO BROKERS, DEALERS 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF TRION, INC. AT $5.50 NET PER SHARE BY TI ACQUISITION CORP. AN INDIRECT WHOLLY OWNED SUBSIDIARY OF FEDDERS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED. July 15, 1999 To: Brokers, Dealers, Commercial Banks, Trust Companies And Other Nominees: We have been appointed by TI Acquisition Corp., a Pennsylvania corporation ("Purchaser") and an indirect wholly owned subsidiary of Fedders Corporation, a Delaware corporation ("Parent"), to act as Dealer Manager in connection with Purchaser's offer to purchase all outstanding shares of common stock, par value $0.50 per share (the "Shares"), of Trion, Inc., a Pennsylvania corporation (the "Company"), at $5.50 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated July 15, 1999 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer") enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) that number of Shares which, when added to the Shares beneficially owned by Parent or Purchaser (if any), represents at least eighty percent (80%) of the Shares outstanding on a fully diluted basis on the date Shares are accepted for payment. The Offer is also subject to the other conditions in the Offer to Purchase. See Section 14 of the Offer to Purchase. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. Offer to Purchase dated July 15, 1999; 2. Letter of Transmittal for your use in accepting the Offer and tendering Shares and for the information of your clients; 3. Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares and all other required documents cannot be delivered to the Depositary, or if the procedures for book-entry transfer cannot be completed, by the Expiration Date (as defined in the Offer to Purchase); 4. A letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 5. A letter to stockholders of the Company from Steven L. Schneider, President and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 dated July 15, 1999, which has been filed by the Company with the Securities and Exchange Commission; 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. A return envelope addressed to American Stock Transfer and Trust Company (the "Depositary"). 2 Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and pay for Shares which are validly tendered prior to the Expiration Date and not theretofore properly withdrawn when, as and if Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment pursuant to the Offer. Payment for Shares purchased pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for such Shares, or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, pursuant to the procedures described in Section 3 of the Offer to Purchase, (ii) a properly completed and duly executed Letter of Transmittal (or a properly completed and manually signed facsimile thereof) or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry transfer and (iii) all other documents required by the Letter of Transmittal. Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager, the Depositary and the Information Agent as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for customary mailing and handling costs incurred by them in forwarding the enclosed materials to their customers. Purchaser will pay or cause to be paid all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer of Shares, and any other required documents, should be sent to the Depositary, and certificates representing the tendered Shares should be delivered or such Shares should be tendered by book-entry transfer, all in accordance with the Instructions set forth in the Letter of Transmittal and in the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents or to complete the procedures for delivery by book-entry transfer prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Very truly yours, TM CAPITAL CORP. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE INFORMATION AGENT, THE DEPOSITARY, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.A.5 6 LETTER TO CLIENTS 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF TRION, INC. AT $5.50 NET PER SHARE BY TI ACQUISITION CORP. AN INDIRECT WHOLLY OWNED SUBSIDIARY OF FEDDERS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED. July 15, 1999 To: Our Clients: Enclosed for your consideration are the Offer to Purchase dated July 15, 1999 and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") in connection with the offer by TI Acquisition Corp., a Pennsylvania corporation ("Purchaser") and an indirect wholly owned subsidiary of Fedders Corporation, a Delaware corporation ("Parent"), to purchase for cash all outstanding shares of common stock, par value $0.50 per share (the "Shares"), of Trion, Inc., a Pennsylvania corporation (the "Company"). We are the holder of record of Shares held for your account. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. The enclosed Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is invited to the following: 1. The offer price is $5.50 per Share, net to you in cash without interest. 2. The Offer is being made for all outstanding Shares. 3. The Board of Directors of the Company by a unanimous vote of those present at the meeting approved the Merger Agreement (as defined in the Offer to Purchase) and the transactions contemplated thereby, including the Offer and the Merger (each as defined in the Offer to Purchase), and determined that the Offer and the Merger are fair to, and in the best interest of, the Company's shareholders and recommends that the shareholders accept the Offer and tender their Shares pursuant to the Offer. 4. The Offer and withdrawal rights expire at 12:00 Midnight, New York City time, on Wednesday, August 11, 1999, unless the Offer is extended. 5. The Offer is conditioned upon, among other things, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) that number of Shares which, when added to the Shares beneficially owned by Parent or Purchaser (if any), represents at least eighty percent (80%) of the Shares outstanding on a fully diluted basis on the date Shares are accepted for payment. The Offer is also subject to the other conditions in the Offer to Purchase. See Section 14 of the Offer to Purchase. 6. Any stock transfer taxes applicable to the sale of Shares to Purchaser pursuant to the Offer will be paid by Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Except as disclosed in the Offer to Purchase, Purchaser is not aware of any state in which the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. In any jurisdiction in which the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form set forth on the reverse side of this letter. An envelope to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the reverse side of this letter. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF TRION, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase dated July 15, 1999 and the related Letter of Transmittal in connection with the Offer by TI Acquisition Corp., a Pennsylvania corporation and an indirect wholly owned subsidiary of Fedders Corporation, a Delaware corporation, to purchase all outstanding shares of common stock, par value $0.50 per share (the "Shares"), of Trion, Inc., a Pennsylvania corporation. This will instruct you to tender the number of Shares indicated below (or if no number is indicated below, all Shares) held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to be Tendered:* - ------------------------------------- Shares Dated: - --------------------------------- , 1999---------------------------------------- ---------------------------------------- SIGNATURE(S) ---------------------------------------- PRINT NAME(S) ---------------------------------------- ---------------------------------------- ADDRESS(ES) ---------------------------------------- AREA CODE AND TELEPHONE NUMBER ---------------------------------------- TAX ID OR SOCIAL SECURITY NUMBER - --------------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. EX-99.A.6 7 GUIDELINES FOR CERTIFICATION OF TAXPAYER ID NUMBER 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen, i.e. 00-0000000. The table below will help determine the number to give the payer. - ------------------------------------------------------------ GIVE THE FOR THIS TYPE OF ACCOUNT SOCIAL SECURITY NUMBER OF-- - ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, any one of the individuals(2) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(2) 4. Custodian account of a minor The minor(3) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent minor, or incompetent person person(4) 7. a. The usual revocable savings The grantor- trust account (grantor is also trustee(1) trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under State law - ------------------------------------------------------------ - ------------------------------------------------------------ GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF-- - ------------------------------------------------------------ 8. Sole proprietorship account The owner(5) 9. A valid trust, estate, or pension The legal entity trust (do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title)(1) 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club, or other tax- The organization exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------
(1) List first and circle the name of the legal trust, estate, or pension trust. (2) List first and circle the name of the person whose number you furnish. (3) Circle the minor's name and furnish the minor's social security number. (4) Circle the ward, minor's or incompetent person's name and furnish such person's social security number. (5) Show the name of the owner. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you don't have a TIN or you don't know your number, obtain Internal Revenue Service Form SS-5, Application for Social Security Number Card or Form SS-4, Application for Employer Identification Number at your local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under Section 501(A) or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A state, the District of Columbia, a possession of the United States or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt interest dividends under section 852). - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. Exempt payees described above should file Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to properly include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an underpayment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.A.7 8 PRESS RELEASE OF PARENT 1 FEDDERS TO ACQUIRE TRION, INC. Liberty Corner, NJ and Sanford, NC - July 13, 1999 - Fedders Corporation (NYSE: FJA & FJC), a global air conditioning company, and Trion, Inc. (NASDAQ: TRON), a world leader in the indoor air quality industry, jointly announced today that they entered into a definitive agreement providing for Fedders' acquisition of Trion at a price of $5.50 per share in cash for all outstanding shares of Trion's common stock. The Agreement has been approved by the Boards of Directors of both Trion and Fedders. Under the Agreement, a newly-formed wholly-owned subsidiary of Fedders will commence a cash tender offer to purchase all of the outstanding shares of Trion for $5.50 per share. Trion has approximately 7.2 million shares of common stock outstanding. The tender offer will commence as soon as practicable, but not later than July 19, 1999, and is expected to close in August 1999. The tender offer is conditioned upon the tender of 80.0% of the shares of Trion common stock outstanding on a fully diluted basis, certain regulatory filings and other customary conditions. The Agreement also provides for the merger of a wholly-owned subsidiary of Fedders into Trion following the tender offer. Following the merger Trion will continue its business as a wholly-owned subsidiary of Fedders. Each of Trion's directors, who collectively own 10.1% of Trion's outstanding common stock, has entered into a definitive agreement with Fedders pursuant to which each director has agreed, among other things, to tender his shares pursuant to the cash tender offer and to grant to Fedders an option to purchase such shares at a purchase price of $5.50 per share, exercisable upon the occurrence of certain events. In addition, Trion and Fedders have entered into a stock option agreement pursuant to which Trion has granted to Fedders an irrevocable option to purchase up to 19.9% of Trion's outstanding common stock at a purchase price of $5.50 per share, exercisable upon the occurrence of certain events. Trion manufactures and sells a broad line of high-performance products that improve indoor air quality in cleanrooms, industrial/commercial and residential environments. Their extensive line of products includes electronic air cleaners, HEPA & ULPA filters, humidifiers and dust collectors. Trion's sales were $57.2 million in 1998. The indoor air quality industry is estimated to exceed $3.0 billion. Consistent, long-term industry growth is expected. As governments tighten regulations regarding levels of emissions released into the workplace and environment, and as air pollution continues 2 to be a significant health issue, the global demand for indoor air quality products is expected to increase. Commenting on the acquisition, Fedders Chief Executive Officer, Sal Giordano, Jr., said "Fedders' acquisition of Trion is strategically important to the growth of both companies. Trion's line of indoor air quality products is complementary to Fedders' existing product line of air conditioners and dehumidifiers. Many of the products, including air cleaners and humidifiers, are counter-seasonal to air conditioner and dehumidifier sales. Trion's presence in England will strengthen Fedders' position in Europe, while Fedders' presence in Asia, where it has its international headquarters in Singapore and a manufacturing facility in Ningbo, China, will enable Trion to grow there." Steven L. Schneider, President and Chief Executive Officer of Trion, said "The Trion team is looking forward to becoming an important part of Fedders. We expect Fedders' extensive experience with Big Box retailers to help grow our household air cleaner business and we anticipate deriving significant benefits from their global sourcing capabilities for all of our products." TM Capital Corp. served as financial advisor to Fedders Corporation in connection with this transaction and Harris Williams & Co. served as financial advisor to Trion, Inc. ### This news release includes forward-looking statements that are covered under the "Safe-Harbor" clause of the Private Securities Litigation Reform Act of 1995. Such statements are based upon current expectations and assumptions. Actual results may differ materially from those currently anticipated as a result of known and unknown risks and uncertainties including, but not limited to, weather and economic, political, market and industry conditions. Such factors are described in Fedders' and Trion's SEC filings, including their most recently filed annual reports on Form 10-K. In particular, statements in this news release pertaining to Fedders' acquisition of Trion, growth of the indoor air quality industry, Fedders' position in Europe strengthening as a result of Trion's presence in England, Trion's growing in Asia as a result of Fedders' presence in Asia, growing Trion's air cleaner business and Trion deriving significant benefits from Fedders' global sourcing capabilities constitute forward-looking statements. The companies disclaim any obligation to update any forward-looking statements to incorporate developments after this news release. Visit the Fedders investor information website at www.FEDDERS.com to access additional information on Fedders including annual reports, SEC filings and special reports. Contacts: Fedders - Judy Katz (908) 604-8686 Trion - Calvin Monsma (919) 775-2201 2 EX-99.A.8 9 PRESS RELEASE 1 FEDDERS CORPORATION ANNOUNCES COMMENCEMENT OF TENDER OFFER FOR TRION, INC. Liberty Corner, NJ - July 15, 1999 - Fedders Corporation (NYSE: FJA & FJC), a global air conditioning company, announced today that TI Acquisition Corp., an indirect wholly owned subsidiary, has commenced a cash tender offer to purchase all of the outstanding shares of Trion, Inc. (NASDAQ: TRON) at a price of $5.50 per share. The offer is being made pursuant to the previously announced merger agreement among Fedders Corporation, TI Acquisition Corp. and Trion, Inc. The offer is conditioned upon the tender of at least 80.0% of the shares of Trion common stock outstanding on a fully diluted basis, certain regulatory filings and other customary conditions. The offer and withdrawal rights are scheduled to expire at 12:00 mid night, New York City time, on Wednesday, August 11, 1999, unless the offer is extended. TM Capital Corp. is acting as the Dealer Manager and D.F. King & Co., Inc. is acting as the Information Agent in connection with the offer. Trion, a world leader in the indoor air quality industry, manufactures and sells a broad line of high-performance products that improve indoor air quality in cleanrooms, industrial/commercial and residential environments. Their extensive line of products includes electronic air cleaners, HEPA & ULPA filters, humidifiers and dust collectors. Visit the Fedders investor information website at www.FEDDERS.com to access additional information on Fedders including annual reports, SEC filings and special reports. This press release is neither an offer to purchase nor a solicitation of an offer to sell securities. The tender offer is made only through the Offer to Purchase and the related Letter of Transmittal which is being mailed to stockholders today. Additional copies can be obtained by contacting the Dealer Manager at (212) 809-1360 (call collect) or the Information Agent at (800) 769-1414. EX-99.A.9 10 SUMMARY ADVERTISEMENT 1 This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase, dated July 15, 1999, and the related Letter of Transmittal, and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction or any administrative or judicial action pursuant thereto. In any jurisdiction where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of TI Acquisition Corp. by TM Capital Corp. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All of the Outstanding Shares of Common Stock of Trion, Inc. at $5.50 Net Per Share by TI Acquisition Corp. an indirect wholly owned subsidiary of Fedders Corporation TI Acquisition Corp., a Pennsylvania corporation ("Purchaser") and an indirect wholly owned subsidiary of Fedders Corporation, a Delaware corporation ("Parent"), is offering to purchase all of the outstanding shares of Common Stock, par value $.50 per share (the "Shares"), of Trion, Inc., a Pennsylvania corporation (the "Company"), at a price of $5.50 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated July 15, 1999 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) that number of Shares which, when added to the Shares beneficially owned by Parent or Purchaser (if any), represents at least 80% of the Shares outstanding (on a fully diluted basis) on the date Shares are accepted for payment. The Offer is also subject to the other conditions set forth in the Offer to Purchase. See Section 14 of the Offer to Purchase. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 12, 1999 (the "Merger Agreement"), by and among Parent, Purchaser and the Company. The Merger Agreement provides that, as soon as practicable after the completion of the Offer and satisfaction or waiver, if permissible, of all conditions contained in the Merger Agreement, and in accordance with the Pennsylvania Business Corporation Law (the "PBCL"), Purchaser will be merged with and into the Company (the "Merger"). Following the consummation of the Merger, the Company will continue as the surviving corporation and will be an indirect wholly owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each Share then outstanding (other than Shares held by the Company or any of its subsidiaries, Parent or any of its subsidiaries, including Purchaser, and other than Shares held by shareholders, if any, who properly perfect their dissenters' rights under the PBCL) will be converted into the right to receive $5.50 in cash (or such higher price paid pursuant to the Offer) without interest thereon. In connection with the execution of the Merger Agreement, Parent and the Company have entered into a Stock Option Agreement, dated as of July 12, 1999, pursuant to which the Company has granted to Parent an irrevocable option to purchase, upon the occurrence of certain conditions, up to the number of Shares equal to 19.9% of the Shares outstanding on the date thereof. Parent and Purchaser have entered into Shareholder Agreements dated as of July 12, 1999, with the directors of the Company (the "Director Shareholders"), pursuant to which each of such Director Shareholders has agreed, among other things, (1) to tender to Purchaser pursuant to the Offer at $5.50 per share, all Shares beneficially owned by such Director Shareholder (719,764 Shares in the aggregate) 2 which will result in the Parent and its affiliates beneficially owning 10.1% of the outstanding Shares; (2) to grant to Parent an option exercisable under certain circumstances to purchase the Shares beneficially owned by such Director Shareholder and (3) to vote all Shares beneficially owned by such Director Shareholder in favor of the Merger Agreement and against all other acquisition proposals. The Board of Directors of the Company by a unanimous vote of those present at the meeting approved the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and determined that the Offer and the Merger are fair to, and in the best interests of, the Company's Shareholders and recommendS that its Shareholders accept the Offer and tender their Shares pursuant to the Offer. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to Purchaser and not withdrawn as, if and when Purchaser gives oral or written notice to the Depositary (as defined in the Offer to Purchase) of its acceptance for payment of such Shares. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from Purchaser and transmitting payment to tendering shareholders. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase)), (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and (iii) any other documents required by the Letter of Transmittal. The per Share consideration paid to any shareholder pursuant to the Offer will be the highest per Share consideration paid to any other shareholder pursuant to the Offer. Under no circumstances will interest be paid on the purchase price to be paid by Purchaser for such Shares, regardless of any extension of the Offer or any delay in making such payment. The term "Expiration Date" shall mean 12:00 Midnight New York City time, on Wednesday, August 11, 1999, unless and until Purchaser (in accordance with the terms of the Merger Agreement), shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. Subject to the applicable rules and regulations of the Securities and Exchange Commission and to applicable law, Purchaser expressly reserves the right in its sole discretion (subject to the terms of the Merger Agreement), at any time and from time to time, to extend for any reason the period of time during which the Offer is open, including the occurrence of any of the events specified in Section 14 of the Offer to Purchase, by giving oral or written notice of such extension to the Depositary. Any such extension will be followed by a public announcement thereof by no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering shareholder to withdraw such shareholder's Shares. Without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser will have no obligation to publish, advertise or otherwise communicate any such announcement other than by issuing a press release to the Dow Jones News Service or otherwise as may be required by applicable law. Except as otherwise provided below, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment pursuant to the Offer, may also be withdrawn at any time after September 12, 1999, or such later time as may apply if the Offer is extended. For a withdrawal to be effective, a written or telegraphic notice of withdrawal must be timely received by the Depositary at one of its addresses set forth in the Offer to Purchase. Any such notice of withdrawal must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates evidencing such Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered for the account of an Eligible Institution (as defined in the Offer to Purchase), the 3 signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 of the Offer to Purchase at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will he final and binding. The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6 under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided Purchaser with the Company's shareholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other relevant documents will be mailed to record holders of Shares whose names appear on the shareholder list and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's shareholder lists, or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the related Letter of Transmittal contain important information that should be read carefully before any decision is made with respect to the Offer. Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer documents may be directed to the Information Agent or the Dealer Manager (each as defined in the Offer to Purchase), at their respective addresses and telephone numbers set forth below, and copies will be furnished promptly at Purchaser's expense. Neither Parent nor Purchaser will pay any fees or commissions to any broker or dealer or other person other than the Dealer Manager and the Information Agent for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: D.F. King & Co., Inc. 77 Water Street New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 All Others Call Toll-Free: 1-800-769-6414 The Dealer Manager for the Offer is: TM Capital Corp. One Battery Park Plaza, 35th Floor New York, New York 10004 (212) 809-1360 (Call Collect) July 15, 1999 EX-99.C.1 11 AGREEMENT AND PLAN OF MERGER 1 AGREEMENT AND PLAN OF MERGER BY AND AMONG FEDDERS CORPORATION TI ACQUISITION CORP. AND TRION, INC. DATED AS OF JULY 12, 1999 2 Table of Contents
Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION.......................................................Page 2 Section 1.1 Definitions...............................................Page 2 ARTICLE II THE OFFER AND MERGER.................................................................Page 13 Section 2.1 The Offer.................................................Page 13 Section 2.2 Company Actions...........................................Page 14 Section 2.3 Directors.................................................Page 16 Section 2.4 The Merger................................................Page 18 Section 2.5 Effective Time............................................Page 18 Section 2.6 Closing...................................................Page 18 Section 2.7 Directors and Officers of the Surviving Corporation.......Page 19 Section 2.8 Subsequent Actions........................................Page 19 Section 2.9 Shareholders' Meetings....................................Page 19 Section 2.10 Merger Without Meeting of Shareholders....................Page 21 ARTICLE III CONVERSION OF SECURITIES.............................................................Page 22 Section 3.1 Conversion of Capital Stock...............................Page 22 Section 3.2 Exchange of Certificates..................................Page 22 Section 3.3 Dissenting Shares.........................................Page 24 Section 3.4 Company Stock Option Plans................................Page 25 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................Page 26 Section 4.1 Organization and Good Standing............................Page 26 Section 4.2 Authority; Board Approvals; No Conflict...................Page 26 Section 4.3 Vote Required.............................................Page 29
3 Section 4.4 Capitalization and Ownership of Shares....................Page 29 Section 4.5 Subsidiaries and Investments..............................Page 30 Section 4.6 SEC Reports and Financial Statements......................Page 31 Section 4.7 Books and Records.........................................Page 32 Section 4.8 Title to Properties; Leases; Encumbrances.................Page 32 Section 4.9 Condition and Sufficiency of Assets.......................Page 33 Section 4.10 Accounts Receivable.......................................Page 34 Section 4.11 Inventory.................................................Page 34 Section 4.12 No Undisclosed Liabilities................................Page 34 Section 4.13 Taxes.....................................................Page 34 Section 4.14 No Material Adverse Change................................Page 35 Section 4.15 Employee Benefits.........................................Page 35 Section 4.16 Compliance with Legal Requirements; Governmental Authorizations.......................................................................Page 37 Section 4.17 Legal Proceedings; Orders.................................Page 39 Section 4.18 Absence of Certain Changes and Events.....................Page 40 Section 4.19 Applicable Contracts; No Defaults.........................Page 42 Section 4.20 Insurance.................................................Page 45 Section 4.21 Environmental Matters.....................................Page 47 Section 4.22 Employees.................................................Page 48 Section 4.23 Labor Relations; Compliance...............................Page 49 Section 4.24 Intellectual Property Assets..............................Page 50 Section 4.25 Certain Payments..........................................Page 50 Section 4.26 Relationship with Related Persons.........................Page 51 Section 4.27 Brokers or Finders........................................Page 51 Section 4.28 Opinion of Financial Advisor..............................Page 51 Section 4.29 Year 2000.................................................Page 51 Section 4.30 Products Liability; Recalls...............................Page 53 Section 4.31 Information in Schedule 14D-9.............................Page 53 Section 4.32 Information in Proxy Statement. ..............................Page 54 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PARENT AND PURCHASER.................................................................Page 54 Section 5.1 Organization and Valid Existence..........................Page 54 Section 5.2 Authority; No Conflict....................................Page 55 Section 5.3 Certain Proceedings.......................................Page 56 Section 5.4 Brokers or Finders........................................Page 56
ii 4 Section 5.5 Information in Offer Document. ..........................Page 56 Section 5.6 Information in Proxy Statement. ..........................Page 56 ARTICLE VI COVENANTS............................................................................Page 57 Section 6.1 Access and Investigation..................................Page 57 Section 6.2 Operation of the Businesses of the Company................Page 57 Section 6.3 Negative Covenant. .......................................Page 58 Section 6.4 Reasonable Efforts........................................Page 59 Section 6.5 Notification; Updating of Schedules.......................Page 60 Section 6.6 No Solicitation of Competing Transaction..................Page 61 Section 6.7 Publicity.................................................Page 63 Section 6.8 Employee Arrangements.....................................Page 63 Section 6.9 Officers' and Directors' Insurance; Indemnification.......Page 64 Section 6.10 Takeover Statutes.........................................Page 64 Section 6.11 Form S-8..................................................Page 65 ARTICLE VII CONDITIONS...........................................................................Page 65 Section 7.1 Conditions to Each Party's Obligation to Effect the Merger....................................................Page 65 Section 7.2 Conditions to Parent's and Purchaser's Obligations to Effect the Merger.........................................Page 66 ARTICLE VIII TERMINATION..........................................................................Page 66 Section 8.1 Termination...............................................Page 66 Section 8.2 Effect of Termination.....................................Page 68 Section 8.3 Interpretation............................................Page 69
iii 5 ARTICLE IX MISCELLANEOUS........................................................................Page 70 Section 9.1 Fees and Expenses.........................................Page 70 Section 9.2 Amendment and Modification................................Page 71 Section 9.3 Nonsurvival of Representations and Warranties.............Page 71 Section 9.4 Notices...................................................Page 72 Section 9.5 Counterparts..............................................Page 73 Section 9.6 Entire Agreement; No Third Party Beneficiaries............Page 73 Section 9.7 Severability..............................................Page 73 Section 9.8 Governing Law.............................................Page 73 Section 9.9 Enforcement...............................................Page 74 Section 9.10 Time of Essence...........................................Page 74 Section 9.11 Extension; Waiver.........................................Page 74 Section 9.12 Assignment................................................Page 74 Annex A Certain Conditions of the Offer..............................................A-1 Annex B Articles of Incorporation of TI Acquisition Corp.............................B-1
iv 6 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of July 12, 1999, by and among Fedders Corporation ("Parent"), a Delaware corporation, TI Acquisition Corp. ("Purchaser"), a Pennsylvania corporation and an indirect wholly owned subsidiary of Parent and Trion, Inc. ("Company"), a Pennsylvania corporation. WHEREAS, the Board of Directors of each of Parent, Purchaser and the Company has approved, and deems it advisable and in the best interests of its respective shareholders to consummate, the acquisition of the Company by Parent upon the terms and subject to the conditions set forth herein; WHEREAS, the Company, Parent and Purchaser desire to make certain representations, warranties, covenants and agreements in connection with the Offer (as hereinafter defined) and the Merger (as hereinafter defined); WHEREAS, as a condition and inducement to Parent's and Purchaser's entering into this Agreement and incurring the obligations set forth herein, each of the Director Shareholders (as hereinafter defined), concurrently herewith, is entering into a Shareholder Agreement dated as of the date hereof, with Parent and Purchaser, pursuant to which the Director Shareholders are agreeing, among other things, to tender the Shares (as hereinafter defined) held by them in the Offer and to grant Parent an option to purchase such Shares and to make certain agreements with respect to the voting of such Shares, all upon the terms and subject to the conditions set forth in the Shareholder Agreements (as hereinafter defined); WHEREAS, as a condition and inducement to Parent's and Purchaser's entering into this Agreement and incurring the obligations set forth herein, (i) Calvin J. Monsma ("Monsma"), concurrently herewith, is entering into an amended and restated employment agreement dated as of the date hereof with the Company (the "Monsma Employment Agreement"); and (ii) Steven L. Schneider ("Schneider" and, together with Monsma, the "Employees"), concurrently herewith, is entering into an amended and restated employment agreement dated as of the date hereof with Parent (the "Schneider Employment Agreement" and, together with the Monsma Employment Agreement, the "Employment Agreements"); WHEREAS, as a condition and inducement to Parent's and Purchaser's entering into this Agreement and incurring the obligations set forth herein, the Page 1 7 Company, concurrently herewith, is entering into a stock option agreement, dated as of the date hereof (the "Stock Option Agreement"), with Parent pursuant to which the Company has granted Parent an option to purchase up to 19.9% of the issued and outstanding Shares as of the date hereof, upon the terms and subject to the conditions, set forth in the Stock Option Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth herein, intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.1 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context clearly requires otherwise: "Acquisition Proposal" shall mean any proposal or offer to acquire all or a substantial part of the business or properties of the Company or any Company Subsidiary or any capital stock of the Company or any Company Subsidiary, whether by merger, tender offer, exchange offer, sale of assets or similar transactions involving the Company or any Subsidiary, division or operating or principal business unit of the Company. "Affiliate" shall have the meaning set forth in Rule 12b-2 of the Exchange Act. "Agreement" or "this Agreement" shall mean this Agreement and Plan of Merger, together with the Exhibits and Appendices hereto and the Schedules. "Applicable Contract" shall mean any contract (a) under which the Company or any Subsidiary has or may acquire any rights to receive no less than $75,000 in any twelve (12) month period following the date of this Agreement, or (b) under which the Company or any Subsidiary has or may become subject to any obligation or liability to pay to any other party to such Contract no less than $75,000 in any twelve (12) month period following the date of this Agreement. "Articles" shall have the meaning as set forth in Section 2.9. Page 2 8 "Articles Amendment" shall mean the proposal to amend the Articles of Incorporation of the Company to delete section 6 thereof. "Articles Amendment Proxy Statement" shall have the meaning set forth in Section 2.9 hereof. "Best Efforts" shall mean the efforts that a prudent Person desirous of achieving a result would use in similar circumstances to ensure that such result is achieved as expeditiously as possible. "Board Fraction" shall mean a fraction, the numerator of which shall be the number of Shares which Parent and its Subsidiaries beneficially own at the time of calculation of the Board Fraction, and the denominator of which shall be the total number of Shares then outstanding. "By-laws" shall have the meaning as set forth in Section 2.9. "Cash Amount" shall have the meaning as set forth in 3.4(d). "Certificate" shall mean a certificate which immediately prior to the Effective Time represented Shares which were converted pursuant to Section 3.1 into the right to receive the Merger Consideration. "Closing" shall mean the closing referred to in Section 2.6. "Closing Date" shall mean the date on which the Closing occurs. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Company" shall mean Trion, Inc., a Pennsylvania corporation. "Company Board of Directors" shall mean the board of directors of the Company. "Company Option" shall mean an option to purchase Shares which has been granted by the Company and which is outstanding at the Effective Time. "Company SEC Documents" shall mean each form, report, schedule, statement and other document required to be filed by the Company since June 1, 1996 Page 3 9 under the Exchange Act or the Securities Act, including any amendment to such document, whether or not such amendment is required to be so filed. "Company Subsidiary" shall mean each Person which is a Subsidiary of the Company. "Computer Programs" shall mean: (i) any and all computer software programs, including all source and object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) billing, reporting, engineering and other management information systems, (iv) all descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, (v) all content contained on any Internet site(s), and (vi) all documentation, including user manuals and training materials, relating to any of the foregoing. "Confidentiality Agreement" shall mean a letter agreement dated February 25, 1999 between the Company and Parent. "Consent" shall mean any approval, consent, ratification, waiver, filing with, registration or other authorization (including any Governmental Authorization). "Contract" shall mean any written agreement, contract, obligation, promise or undertaking that is legally binding. "Defect" shall mean a defect, whether in design, manufacture, processing, or otherwise, including, without limitation, any dangerous propensity associated with any reasonably foreseeable use of a Product, or the failure to warn of the existence of any defect, or dangerous propensity. Page 4 10 "Director Shareholder" shall mean Hugh E. Carr, Joseph W. Deering, Seddon Goode, Jr., James E. Heins, F. Trent Hill, Grant R. Meyers, Steven L. Schneider and Samuel J. Wornom III. "Dissenting Shares" shall mean any Shares as to which the holder thereof has demanded appraisal with respect to the Merger in accordance with the PBCL and as of the Effective Time has neither effectively withdrawn nor lost his right to such appraisal. "Effective Time" shall mean the date on which the articles of merger referred to in Section 2.5 is duly filed with the Secretary of State of the Commonwealth of Pennsylvania or such other time as is agreed upon by the parties and specified in such articles of merger. "Employee" shall have the meaning set forth in the introduction hereof. "Employment Agreements" shall have the meaning as set forth in the introduction hereto. "Encumbrance" shall mean any mortgage, charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership. "Environmental Laws" shall have the meaning set forth in Section 4.21(a) hereof. "Expenses" shall have the meaning as set forth in Section 9.1. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Financial Statements" shall mean the financial statements of the Company included in the Company SEC Documents. Page 5 11 "GAAP" shall mean United States generally accepted accounting principles. "Governmental Authorization" shall mean any written approval, consent, license, permit, waiver or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement. "Governmental Body" shall mean any: (a) nation, state, county, city, town, village, district or other jurisdiction of any nature; (b) federal, state, local, municipal, commonwealth, possession, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); (d) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature. "Hazardous Material" shall mean and includes petroleum (including, without limitation, gasoline, crude oil, fuel oil, diesel oil, lubricating oil, sludge, oil refuse, oil mixed with wastes and any other petroleum-related product), flammable explosives, radioactive materials, any substance defined or designated (a) as a "hazardous substance" under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601), as amended from time to time, and any regulations promulgated thereunder or (b) as a "hazardous waste" under the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901), as amended from time to time, and any regulations promulgated thereunder, and (c) any other waste, pollutant or contaminant. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Improvements" shall have the meaning set forth in Section 4.8. Page 6 12 "Independent Directors" shall mean directors of the Company who are directors on the date hereof, but who are not employees of the Company. "Intellectual Property Assets" is defined in Section 4.24(a) hereof. "Interim Financial Statements" shall mean the unaudited interim consolidated balance sheet of the Company as of March 31, 1999 and the related unaudited statements of income, changes in Stockholder's equity and cash flow for the three month period then ended, including in each case the notes thereto. "Key Employee" shall mean any employee of the Company or any Subsidiary to whom the Company or any Subsidiary has agreed to pay or expects to pay an annual salary (including commission payments) of not less than $75,000. "Knowledge" shall mean, with respect to a particular fact or other matter, that the directors, officers or employees having responsibility for the subject matter at issue of such Person are actually aware of such fact or other matter. "Legal Requirement" shall mean any federal, state or local statute, ordinance, regulation, administrative order or principle of common law. "Material Adverse Change" or "Material Adverse Effect" shall mean any change or effect (or any development that, insofar as can reasonably be foreseen, is likely to result in any change or effect) that is materially adverse to the business, properties, assets, prospects, financial condition or results of operations of the Company and its Subsidiaries taken as a whole or the ability of the Company to consummate the Transactions. "Merger" shall mean the merger of Purchaser into the Company referred to in Section 2.4. "Merger Consideration" shall mean an amount of cash equal to the Offer Price, which amount shall not include interest, regardless of when paid. "Minimum Condition" shall mean the condition that, pursuant to the Offer, there shall have been validly tendered and not withdrawn prior to the expiration of the Offer, not less than that number of Shares which, together with the Shares owned by Parent and Purchaser on the date hereof, constitutes at least 80% of the Shares outstanding on a fully diluted basis (after giving effect to the conversion or exercise of Page 7 13 all outstanding options, warrants and other rights and securities exercisable or convertible into Shares, whether or not exercised or converted at the time of determination). "Nasdaq" shall mean the Nasdaq Stock Market Inc. "Notices" shall have the meaning set forth in Section 4.30 hereof. "NYSE" shall mean the New York Stock Exchange. "Occurrence" shall mean any accident, happening or event which is caused or allegedly caused by any alleged hazard or alleged defect in manufacture, design, materials or workmanship including, without limitation, any alleged failure to warn or any breach of express or implied warranties or representations with respect to, or any such accident, happening or event otherwise involving, a product (including any parts or components) which results or is alleged to have resulted in injury or death to any person or damage to or destruction of property, or other consequential damages, at any time. "Offer" shall mean the cash tender offer to be made by Purchaser pursuant to Section 2.1 to acquire any and all shares of the issued and outstanding common stock, $0.50 par value, of the Company at the Offer Price. "Offer Documents" shall mean the Offer to Purchase and a form of letter of transmittal and summary advertisement filed as exhibits to the Schedule 14D-1, together with any amendments and supplements thereto. "Offer Price" shall mean $5.50 per Share net to the seller in cash, or such increased amount, if any, as Purchaser may offer to pay as contemplated by Section 2.1(a). "Offer to Purchase" shall mean the offer to purchase included in the Schedule 14D-1 filed with the SEC pursuant to Section 2.1(b). "Option Exchange Ratio" shall mean (x) the Offer Price divided by (y) the average of the closing prices of Parent Common Stock on the NYSE during the ten trading days preceding the fifth trading day prior to the Closing Date. Page 8 14 "Order" shall mean any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Body or by any arbitrator. "Organizational Documents" shall mean (a) the articles or certificate of incorporation and the bylaws or code of regulations of a corporation; (b) the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (d) any charter or similar document adopted or filed in connection with the creation, formation or organization of a Person; (e) the articles of organization and the operating agreement of a limited liability company; and (f) any amendment to any of the foregoing. "Parent" shall mean Fedders Corporation, a Delaware corporation. "Parent Option" shall mean an option to purchase shares of Parent Common Stock. "Parent Common Stock" shall mean shares of Class A Stock, par value $1.00 per share, of Parent. "Paying Agent" shall mean the bank or trust company designated by Parent to act as agent for the holders of the Shares pursuant to Section 3.2(a). "PBCL" shall mean the Pennsylvania Business Corporation Law. "Person" shall mean any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or Govern mental Body. "Plan" shall mean a plan, program, agreement, arrangement or program required to be included in the Schedule pursuant to Section 4.16(a). "Proceeding" shall mean any action, arbitration, audit, hearing, investigation, demand, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator. Page 9 15 "Product" shall mean any product designed, manufactured, shipped, sold, marketed, distributed and/or otherwise introduced into the stream of commerce by or on behalf of the Company or any of its past or present Subsidiaries. "Proprietary Rights Agreement" shall have the meaning set forth in Section 4.22 hereof. "Proxy Statement" shall mean the proxy statement to be filed by the Company with the SEC pursuant to Section 2.9(d)(ii), together with all amendments and supplements thereto and including the exhibits thereto. "Purchaser Common Stock" shall mean common stock, par value $1.00 per share, of Purchaser. "Purchaser" shall mean TI Acquisition Corp., a Pennsylvania corporation which is an indirect wholly owned subsidiary of Parent. "Real Property" shall have the meaning set forth in Section 4.8 hereof. "Recalls" shall have the meaning set forth in Section 4.30 hereof. "Related Person" shall mean (i) with respect to a particular individual: (a) each other member of such individual's Family; (b) any Person that is directly or indirectly controlled by such individual or one or more members of such individual's Family; (c) any Person in which such individual or members of such individual's Family hold (individually or in the aggregate) a Material Interest; and (d) any Person with respect to which such individual or one or more members of such individual's Family serves as a director, officer, partner, executor or trustee (or in a similar capacity); and (ii) with respect to a specified Person other than an individual: Page 10 16 (a) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (b) any Person that holds a Material Interest in such specified Person; (c) each Person that serves as a director, officer, partner, manager, executor or trustee of such specified Person (or in a similar capacity); (d) any Person in which such specified Person holds a Material Interest; (e) any Person with respect to which such specified Person serves as a general partner, manager or a trustee (or in a similar capacity); and (f) any Related Person of any individual described in clause (b) or (c). For purposes of this definition, (a) the "Family" of an individual includes (i) the individual, (ii) the individual's spouse, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree, and (iv) any other natural person who resides with such individual, and (b) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least 10% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 10% of the outstanding equity securities or equity interests in a Person. "Representative" shall mean, with respect to a particular Person, any director, officer, partner, manager, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors. "Schedule" shall mean the schedule of this date herewith prepared and signed by the Company and delivered to Purchaser simultaneously with the execution hereof. Page 11 17 "Schedule 14D-l" shall mean the Schedule 14D-1 filed by Purchaser with the SEC pursuant to Section 2.1(b), together with all amendments and supplements thereto and including the exhibits thereto. "Schedule 14D-9" shall mean the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company with the SEC pursuant to Section 2.2(b), together with all amendments and supplements thereto and including the exhibits thereto. "SEC" shall mean the United States Securities and Exchange Commission. "Securities Act" shall have the meaning set forth in Section 4.4. "Shares" shall mean shares of common stock, par value $0.50, issued by the Company. "Shareholder Agreements" shall mean the agreements, dated as of the date hereof, among a Director Shareholder, Parent and Purchaser, pursuant to which each Director Shareholder has agreed, among other things, to tender the Shares held by such Director Shareholder in the Offer and to grant Parent an option to purchase such Shares and to make certain agreements with respect to the voting of such Shares upon the terms and subject to the conditions set forth therein. "Stock Option Agreement" shall have the meaning set forth in the introduction hereto. "Subsidiary" shall mean, with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which (a) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries or (b) such party or any other Subsidiary of such party is a general partner (excluding any such partnership where such party or any Subsidiary of such party does not have a majority of the voting interest in such partnership). "Subsidiary Board of Directors" shall mean the board of directors of a Subsidiary. Page 12 18 "Superior Proposal" shall mean an unsolicited bona fide proposal by a Person to acquire, directly or indirectly, for consideration consisting of cash and/or securities, all of the Shares then outstanding or all or substantially all of the assets of the Company or to acquire, directly or indirectly, the Company by merger or consolidation, and otherwise on terms which the Company Board of Directors determines in good faith to be more favorable to the Company's shareholders than the Offer and the Merger (based on the advice of the Company's independent financial advisor that the value of the consideration provided for in such proposal is superior to the value of the consideration provided for in the Offer and the Merger), which is not subject to the receipt of any necessary financing, and which, in the good faith reasonable judgment of the Company Board of Directors, is reasonably likely to be consummated. "Surviving Corporation" shall mean the successor or surviving corporation in the Merger. "Tax" or "Taxes" shall mean all taxes, charges, fees, duties, levies, penalties or other assessments imposed by any federal, state, local or foreign govern mental authority, including, but not limited to, income, gross receipts, excise, property, sales, gain, use, license, custom duty, unemployment, capital stock, transfer, franchise, payroll, withholding, social security, minimum estimated, and other taxes, and shall include interest, penalties or additions attributable thereto; and "Tax Return" shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Termination Fee" shall mean the sum of $2,000,000 in U.S. currency. "Title IV Plan" shall mean a Plan that is subject to Section 302 or Title IV of ERISA or Section 412 of the Code. "Transactions" shall have the meaning set forth in Section 2.2 hereof ARTICLE II THE OFFER AND MERGER Section 2.1 The Offer. Page 13 19 (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.1 and none of the events set forth in Annex A shall have occurred and be existing, as promptly as practicable (but in no event later than five (5) business days after the public announcement of the execution of this Agreement), Purchaser shall commence (within the meaning of Rule 14d-2 promulgated under the Exchange Act) a cash tender offer to acquire any and all Shares at the Offer Price. Subject to the Minimum Condition and subject to the other conditions set forth in Annex A hereto, Purchaser shall use reasonable efforts to consummate the Offer in accordance with its terms and to accept for payment and pay for Shares tendered pursuant to the Offer as soon as Purchaser is legally permitted to do so under applicable law. The Offer shall be made by means of the Offer to Purchase and shall be subject to the Minimum Condition and the other conditions set forth in Annex A hereto and shall reflect, as appropriate, the other terms set forth in this Agreement. If on the initial scheduled expiration date of the Offer, which shall be 20 business days after the date the Offer is commenced, all conditions to the Offer will not have been satisfied or waived, Purchaser may, from time to time, in its sole discretion, extend the expiration date. In addition, Purchaser may increase the amount it offers to pay per Share in the Offer, and the Offer may be extended to the extent required by law in connection with such increase, in each case without the consent of the Company. (b) As soon as practicable on the date the Offer is commenced, Parent and Purchaser shall file with the SEC a tender offer statement on Schedule 14D-1 with respect to the Offer. The Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a form of letter of transmittal and summary advertisement. (c) Parent and Purchaser will take all steps necessary to cause the Offer Documents to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. Parent and Purchaser, on the one hand, and the Company, on the other hand, will promptly correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect, and Purchaser will take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. Section 2.2 Company Actions. Page 14 20 (a) The Company hereby approves of and consents to the Offer and represents that the Company Board of Directors, at a meeting duly called and held, has by the unanimous vote of all directors present (i) determined that each of the Agreement, the Stock Option Agreement, the Offer and the Merger are fair to and in the best interests of the shareholders of the Company, (ii) approved this Agreement, the Stock Option Agreement, the Offer, the acquisition of Shares pursuant to the Offer, the Shareholder Agreements, the Stock Option Agreement and the Merger (collectively, the "Transactions"), (iii) approved the Articles Amendment, directed that the Articles Amendment be submitted to a vote of the shareholders and resolved to recommend that the shareholders of the Company approve the Articles Amendment, (iv) received the opinion of Harris Williams & Co., financial advisor to the Company, to the effect that the Offer Price to be received by holders of Shares pursuant to the Offer and the Merger Consideration pursuant to the Merger is fair to the shareholders of the Company from a financial point of view, (v) resolved to recommend that the shareholders of the Company accept the Offer, tender their Shares thereunder to Purchaser and approve and adopt this Agreement, the Articles Amendment and the Merger, (vi) determined to waive any rights the Company may have under any agreement or otherwise to object to the transfer to Purchaser in the Offer of all Shares held by the Director Shareholders pursuant to the Shareholder Agreements, (vii) consented to the transfer to Purchaser of all such Shares, (viii) duly authorized the Transactions prior to Parent or Purchaser becoming an "interested shareholder" as defined in Section 2553 of the PBCL and (ix) approved the Transactions in such manner as to avoid the application of Subchapter F of Chapter 25 of the PBCL. The Company has taken all necessary corporate action so that no "business combination," "fair price," "control share acquisition" or "moratorium" statute or other similar statute or regulation of any state "blue sky" or securities law statute (including, without limitation, the provisions of Section 2538 and Subchapters F, G, H, I and J of Chapter 25 of the PBCL (each, a "Takeover Statute"), but excluding the provisions of Subchapter D of Chapter 15 of the PBCL and Subchapter E of Chapter 25 of the PBCL or any applicable anti-takeover provision in the Articles (except for Section 6 thereof) or By-laws is applicable to the Company or the Transactions. None of the aforesaid actions by the Company Board of Directors has been amended, rescinded or modified. As soon as practicable on the date the Offer is commenced, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9, which shall contain the recommendation referred to in Section 4.2(b). At the time the Offer Documents are first mailed to the shareholders of the Company, the Company shall mail or cause to be mailed to the shareholders of the Company such Schedule 14D-9 together with such Offer Documents. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be disseminated to holders of the Shares, as and to the extent required by applicable federal securities laws. Each of the Page 15 21 Company, on the one hand, and Parent and Purchaser, on the other hand, agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false and misleading in any material respect and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. Parent and its counsel shall be given the opportunity to review the Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees to provide Parent, Purchaser and their counsel with any comments, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments or other communications. (b) In connection with the Offer, the Company will promptly furnish or cause to be furnished to Purchaser mailing labels, security position listings and any available listing, or computer file containing the names and addresses of all recordholders of the Shares as of a recent date, and shall furnish Purchaser with such additional information (including, but not limited to, lists of holders of the Shares, updated, and their addresses, mailing labels and lists of security positions) and assistance as Purchaser or its agents may reasonably request in communicating the Offer to the record and beneficial holders of the Shares. Except for such steps as are necessary to disseminate the Offer Documents, Parent and Purchaser shall hold in confidence the information contained in any of such labels and lists and the additional information referred to in the preceding sentence, will use such information only in connection with the Offer, and, if this Agreement is terminated, will upon request of the Company deliver or cause to be delivered to the Company all copies of such information then in its possession or the possession of its agents or representatives. Section 2.3 Directors. (a) Parent shall be entitled to designate such number of directors, rounded up to the next whole number, of the Company as is equal to the product of the total number of directors on such Company Board of Directors (giving effect to the directors designated by Parent pursuant to this sentence) multiplied by the Board Fraction. The Directors so designated by Parent shall take office immediately after (i) the purchase of and payment for any Shares by Parent or any of its Subsidiaries as a result of which Parent and its Subsidiaries owns beneficially at least a majority of then outstanding Shares and (ii) compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, whichever shall occur later. In furtherance thereof, the Company shall, upon request of the Parent, use its best efforts promptly either to Page 16 22 increase the size of its Board of Directors or to secure the resignations of such number of its incumbent directors, or both, as is necessary to enable such designees of Parent to be so elected or appointed to the Company Board of Directors, and the Company shall take all actions available to the Company to cause such designees of Parent to be so elected or appointed at such time. At such time, the Company shall, if requested by Parent, also take all action necessary to cause persons designated by Parent to constitute the same Board Fraction of (i) each committee of the Company Board of Directors, (ii) each board of directors (or similar body) of each Company Subsidiary and (iii) each committee (or similar body) of each such board. (b) The Company shall promptly take, at its expense, all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder in order to fulfill its obligations under Section 2.3(a), including mailing to shareholders the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be elected or appointed to the Company Board of Directors immediately after the purchase of and payment for any Shares by Parent or any of its Subsidiaries as a result of which Parent and its Subsidiaries owns beneficially at least a majority of then outstanding Shares. Parent or Purchaser will supply the Company all information with respect to either of them and their nominees, officers, directors and Affiliates required to be disclosed by such Section 14(f) and Rule 14f-1. The provisions of this Section 2.3 are in addition to and shall not limit any rights which Purchaser, Parent or any of their Affiliates may have as a holder or beneficial owner of Shares as a matter of law with respect to the election of directors or otherwise. (c) In the event that Parent's designees are elected or appointed to the Company Board of Directors, until the Effective Time, the Company Board of Directors shall have at least two directors who are Independent Directors, provided that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, any remaining Independent Directors (or Independent Director, if there be only one remaining) shall be entitled to designate persons to fill such vacancies who shall be deemed to be Independent Directors for purposes of this Agreement or, if no Independent Director then remains, the other directors shall designate two persons to fill such vacancies who shall not be shareholders, Affiliates or associates of Parent or Purchaser, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Notwithstanding anything in this Agreement to the contrary, in the event that Parent's designees constitute a majority of the directors on the Company Board of Directors, the affirmative vote of a majority of the Independent Directors shall be required after the acceptance for payment of Shares pursuant to the Offer and prior to the Effective Time, to (a) amend or terminate this Agreement by the Company, (b) Page 17 23 exercise or waive any of the Company's rights, benefits or remedies hereunder if such exercise or waiver materially and adversely affects holders of Shares other than Parent or Purchaser, or (c) take any other action under or in connection with this Agreement if such action materially and adversely affects holders of Shares other than Parent or Purchaser; provided, that if there shall be no such directors, such actions may be effected by unanimous vote of the entire Company Board of Directors. Section 2.4 The Merger. Subject to the terms and conditions of this Agreement, at the Effective Time, the Company and Purchaser shall consummate a merger pursuant to which (a) Purchaser shall be merged with and into the Company and the separate corporate existence of Purchaser shall thereupon cease, (b) the Company shall be the successor or surviving corporation in the Merger and shall continue to be governed by the laws of the Commonwealth of Pennsylvania, and (c) the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger, except as set forth in this Section 2.4. Pursuant to the Merger, (x) the articles of incorporation of the Company shall be amended in its entirety to read as set forth in Annex B, and, as so amended, shall be the articles of incorporation of the Surviving Corporation until thereafter amended as provided by law and such articles of incorporation, and (y) the by-laws of Purchaser, as in effect immediately prior to the Effective Time, shall be the by-laws of the Surviving Corporation until thereafter amended as provided by law, by such articles of incorporation or by such by-laws. The Merger shall have the effects specified in the PBCL. Section 2.5 Effective Time. Parent, Purchaser and the Company will cause the articles of merger to be executed and filed on the Closing Date (or on such other date as Parent and the Company may agree) with the Secretary of the Common wealth of Pennsylvania as provided in the PBCL. The Merger shall become effective on the date and at the time when such articles of merger is duly filed with the Secretary of State of the Commonwealth of Pennsylvania or such other time as is agreed upon by the parties and specified in such articles of merger. Section 2.6 Closing. The closing of the Merger shall take place at 10:00 a.m. on a date to be agreed upon by the parties, and if such date is not agreed upon by the parties, the Closing shall occur on the second business day after satisfaction or waiver of all of the conditions set forth in Article VI, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York. Page 18 24 Section 2.7 Directors and Officers of the Surviving Corporation. The directors of Purchaser and the officers of the Company at the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the articles of incorporation and the by-laws of the Surviving Corporation. If, at the Effective Time, a vacancy shall exist on the Company Board of Directors or in any office of the Surviving Corporation, such vacancy may thereafter be filled in the manner provided by law. Section 2.8 Subsequent Actions. If at any time after the Effective Time, the Surviving Corporation will consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Purchaser acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either the Company or Purchaser, all such deeds, bills of sale, instruments of conveyance, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. Section 2.9 Shareholders' Meetings. (a) Following the acceptance for payment and purchase of Shares by Purchaser pursuant to the Offer, the Company shall take all action necessary in accordance with the PBCL, the Company's articles of incorporation (the "Articles") and by-laws (the "By-laws") and the Exchange Act to effect the Articles Amendment. The Articles Amendment shall require the approval of at least 80% of the voting securities of the Company entitled to vote thereon. In order to effect the Articles Amendment, the Company, acting through the Company Board of Directors shall, in accordance with applicable law: (i) duly call, give notice of, convene and hold a special meeting of its shareholders as promptly as practicable following the acceptance for payment and purchase of Shares by Purchaser pursuant to the Offer for the Page 19 25 purpose of considering and taking action upon the approval of the Articles Amendment; (ii) if required, prepare and file with the SEC a preliminary proxy or information statement relating to the Articles Amendment and use its Best Efforts to obtain and furnish the information required to be included by the SEC in such proxy statement and, after consultation with Parent, to respond promptly to any comments made by the SEC with respect to such proxy statement and cause a definitive proxy or information statement (the "Articles Amendment Proxy Statement"), including any amendment or supplement thereto to be mailed to its shareholders; (iii) include in the Articles Amendment Proxy Statement the recommendation of the Company Board of Directors that shareholders of the Company vote in favor of the approval of the Articles Amendment; and (iv) use its Best Efforts to solicit proxies in favor of the Articles Amendment from holders of Shares and shall take all other action necessary or, in the reasonable opinion of Parent, advisable to secure any vote or consent of shareholders required by the PBCL, the Articles and the By-laws to effect the Articles Amendment. (b) Parent will provide the Company with the information concerning Parent and Purchaser required to be included in the Articles Amendment Proxy Statement. (c) Parent shall vote, or cause to be voted, in favor of the approval of the Articles Amendment all Shares owned by Parent, Purchaser or any of Parent's other Subsidiaries. (d) If required by applicable law in order to consummate the Merger, the Company, acting through the Company Board of Directors, shall, in accordance with applicable law: (i) duly call, give notice of, convene and hold a special meeting of its shareholders as promptly as practicable following the acceptance for payment and purchase of Shares by Purchaser pursuant to the Offer for the purpose of considering and taking action upon the approval of the Merger and the adoption of this Agreement; Page 20 26 (ii) prepare and file with the SEC a preliminary proxy or information statement relating to the Merger and this Agreement and use its best efforts to obtain and furnish the information required to be included by the SEC in the Proxy Statement (as hereinafter defined) and, after consultation with Parent, to respond promptly to any comments made by the SEC with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement, including any amendment or supplement thereto to be mailed to its shareholders, provided that no amendment or supplement to such Proxy or information statement will be made by the Company without consultation with Parent and its counsel; (iii) include in the Proxy Statement the recommendation of the Company Board of Directors that shareholders of the Company vote in favor of the approval of the Merger and the adoption of this Agreement; and (iv) use its best efforts to solicit from holders of Shares proxies in favor of the Merger and shall take all other action necessary or, in the reasonable opinion of Parent, advisable to secure any vote or consent of shareholders required by the PBCL, the Articles and the By-laws to effect the Merger. (e) Parent will provide the Company with the information concerning Parent and Purchaser required to be included in the Proxy Statement. (f) Parent shall vote, or cause to be voted, in favor of the approval of the Merger and the approval and adoption of this Agreement: (i) all shares of capital stock of Purchaser, and (ii) all Shares owned by Parent, Purchaser or any of Parent's other Subsidiaries. Section 2.10 Merger Without Meeting of Shareholders. Notwithstanding Section 2.9, in the event that Parent, Purchaser and any other Subsidiaries of Parent shall acquire at least 80% of the outstanding Shares, pursuant to the Offer or otherwise, sufficient to enable Purchaser or the Company to cause the Merger to become effective without a meeting of shareholders of the Company, the parties hereto shall, at the request of Parent and subject to Article VII, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, Page 21 27 without a meeting of shareholders of the Company, in accordance with Section 1924 of the PBCL. ARTICLE III CONVERSION OF SECURITIES Section 3.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the Merger and without any further action on the part of the holders of any Shares or holders of Purchaser Common Stock: (a) Purchaser Common Stock. Each issued and outstanding share of Purchaser Common Stock shall be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. (b) Cancellation of Treasury Stock and Parent-Owned Stock. Each Share owned by the Company as treasury stock and each Share owned by Parent, Purchaser or any other wholly owned Subsidiary of Parent (other than shares in trust accounts, managed accounts, custodial accounts and the like that are beneficially owned by third parties) shall be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Conversion of Shares. Each issued and outstanding Share (other than Shares to be cancelled in accordance with Section 3.1(b) and other than any Dissenting Shares) shall be converted into the right to receive the Merger Consideration, payable to the holder thereof, without interest, upon surrender of the certificate formerly representing such Share in the manner provided in Section 3.2. From and after the Effective Time, all such converted Shares shall no longer be outstanding and shall be deemed to be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect to such shares except the right to receive the Merger Consideration therefor, without interest, upon the surrender of such certificate in accordance with Section 3.2. Section 3.2 Exchange of Certificates. (a) Paying Agent. Parent shall designate a bank, trust company or other Person, reasonably acceptable to the Company, to act as agent for the holders of the Shares in connection with the Merger to receive in trust the funds to which holders Page 22 28 of the Shares shall become entitled pursuant to Section 3.1(c). At the Effective Time, Parent or Purchaser shall deposit, or cause to be deposited, with the Exchange Agent for the benefit of holders of Shares the aggregate consideration to which such holders shall be entitled at the Effective Time pursuant to Section 3.1(c). Such funds shall be invested as directed by Parent or the Surviving Corporation pending payment thereof by the Paying Agent to holders of the Shares. Earnings from such investments shall be the sole and exclusive property of Purchaser and the Surviving Corporation, and no part of such earnings shall accrue to the benefit of holders of Shares. (b) Exchange Procedures. As soon as reasonably practicable after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a Certificate or Certificates, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions not inconsistent with this Agreement as Parent may specify) and (ii) instructions for use in effecting the surrender of Certificates in exchange for payment of the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly represented by such Certificate, and the Certificate so surrendered shall forthwith be cancelled. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such payment shall have paid any transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such tax either has been paid or is not applicable. Until surrendered as contemplated by this Section 3.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration in cash as contemplated by this Section 3.2. (c) Transfer Books; No Further Ownership Rights in the Shares. At the Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of the Shares on the records of the Company. From and after the Effective Time, the holders of Certificates evidencing ownership of the Shares outstanding immediately prior to the Effective Time Page 23 29 shall cease to have any rights with respect to such Shares, except as otherwise provided for herein or by applicable law. (d) Termination of Fund; No Liability. At any time following six (6) months after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any earnings received with respect thereto) which had been made available to the Paying Agent and which have not been disbursed to holders of Certificates, and thereafter such holders shall be entitled to look only to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) and only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, without any interest thereon. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Section 3.3 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, Shares that are issued and outstanding immediately prior to the Effective Time and that are held by Shareholders who (i) have not voted such shares in favor of the Merger and (ii) have delivered timely a written demand for appraisal of such shares in the manner provided in Chapter 15 of the PBCL shall not be cancelled and converted into the right to receive the Merger Consideration, unless and until such Shareholder shall have failed to perfect, or effectively shall have withdrawn or lost, such Shareholder's right to appraisal and payment under the PBCL, but rather, such Shareholders shall be entitled to payment of the fair value of their shares determined and payable in accordance with the provisions of Chapter 15, Subchapter D of the PBCL. If such Shareholder shall have so failed to perfect, or effectively shall have withdrawn or lost such right, the Shares owned by such Shareholder shall thereupon be deemed to have been canceled and converted as described in Section 3.1 at the Effective Time, and each Share owned by such Shareholder shall represent solely the right to receive the Merger Consideration, without interest. From and after the Effective Time, no Shareholder who has demanded appraisal rights as provided in Chapter 15, Subchapter D of the PBCL shall be entitled to vote his or her Shares for any purpose or to receive payment of dividends or other distributions with respect to such shares (except payment of dividends or other distribution payable to Shareholders of record at a date which is prior to the Effective Time). The Company shall give Parent prompt notice of all written demands received Page 24 30 by it for appraisal of Shares and shall not settle or compromise any such demand without the prior written consent of Parent. Section 3.4 Company Stock Option Plans. (a) Immediately prior to the Effective Time, each holder of a Company Option will be entitled to receive from the Company, and shall receive, except as provided in Section 3.4(d) hereof, in settlement of each Company Option a Parent Option. All Company Options shall terminate as of the Effective Time. Parent shall grant, as of the Effective Time, to the holder of any Company Option, a Parent Option. With respect to such Parent Options (i) the number of shares of Parent Common Stock subject to such Parent Option will be determined by multiplying the number of Shares constituting the Company Option by the Option Exchange Ratio, rounding any fractional share up to the nearest whole share, and (ii) the exercise price per share of such Parent Option will be determined by dividing the exercise price per share applicable to the Company Option by the Option Exchange Ratio, and rounding the exercise price thus determined up to the nearest whole cent. Except as provided above, the converted or substituted Parent Options shall be subject to the same terms and conditions (including, without limitation, expiration date, vesting and exercise provisions) as were applicable to the Company Option immediately prior to the Effective Time; provided, however, that (i) all Company Options shall vest and become fully exercisable immediately prior to the Effective Time and (ii) any Company Option that qualifies as an incentive stock option under Code Section 422 (an "ISO") shall, to the extent permitted by applicable Legal Requirements, be adjusted as provided in Code Section 424(a) so that the resulting Parent Option qualifies as an ISO. (b) Except as may be otherwise agreed to by Parent and the Company, all stock option plans established by the Company or any of its Subsidiaries shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any Company Subsidiary shall be deleted, terminated and of no further force or effect as of the Effective Time. (c) If and to the extent necessary or required by the terms of the plans governing Company Options or pursuant to the terms of any Company Option granted thereunder, prior to the Effective Time, the Company shall (i) obtain the consent of each holder of outstanding Company Options and (ii) amend the terms of the applicable Option Plan, in each case as is necessary to give effect to the foregoing treatment of such Company Options. Page 25 31 (d) Without limiting the foregoing, each holder of a Company Option shall have the right (which right shall be exercised at least 5 days prior to the Closing Date by written notice to the Company) to elect, in lieu of the provisions of Section 3.4(a), to convert, at the Effective Time, all or a portion of his or her Company Options which have not been exercised and which have not expired prior to the Effective Time into the right to receive the Cash Amount (the "Cash Election Right"). The Cash Amount shall be equal to the product of (i) the excess, if any, of the Merger Consideration over the exercise price per Share of such Company Option and (ii) the number of shares constituting such Company Option, less any applicable withholding taxes. Notwithstanding the foregoing, the Cash Election Right shall not be offered to any holder of a Company Option that qualifies as an ISO. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent and Purchaser as follows: Section 4.1 Organization and Good Standing. (a) Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation with full corporate power and authority to conduct its business as it is now being conducted, to own, lease or use the properties and assets that it purports to own. lease, or use, to execute and deliver this Agreement and the other agreements contemplated hereby to which the Company or any Company Subsidiary is a party and to perform all of its obligations hereunder and thereunder and under the Applicable Contracts. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which either the ownership, the lease or the use of properties owned, leased or used by it or the nature of activities conducted by it require such qualification. (b) The Company has delivered to Parent true and correct copies of the Organizational Documents of the Company and its Subsidiaries, as currently in effect. Section 4.2 Authority; Board Approvals; No Conflict Page 26 32 (a) The Company has the requisite corporate power and authority to enter into this Agreement and the Stock Option Agreement and to consummate the transactions contemplated by the Stock Option Agreement and, subject to approval of this Agreement by the holders of a majority of the outstanding Shares, to consummate the Merger contemplated by this Agreement. The execution, delivery and performance of this Agreement, the Stock Option Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action in respect thereof on the part of the Company, including the approval of the Merger by the Company Board of Directors, subject to the approval of the shareholders of the Company with respect to the Merger to the extent required by applicable law. This Agreement and the Stock Option Agreement have been duly executed and delivered by the Company and constitute the legal, valid and binding obligation of the Company, enforceable against it in accordance with their terms. Upon the execution and delivery by the Company of the other agreements contemplated hereby to which it is a party, such other agreements will constitute the legal, valid and binding obligations of the Company enforceable against it in accordance with their respective terms. (b) The Company Board of Directors, at a meeting duly called and held, has by the unanimous vote of all directors present (i) determined that each of the Agreement, the Stock Option Agreement, the Offer and the Merger are fair to and in the best interests of the shareholders of the Company, (ii) approved the Transactions, (iii) approved the Articles Amendment, directed that the Articles Amendment be submitted to a vote of the shareholders and resolved to recommend that the shareholders of the Company approve the Articles Amendment, (iv) received the opinion of Harris Williams & Co., financial advisor to the Company, to the effect that the Offer Price to be received by holders of Shares pursuant to the Offer and the Merger Consideration pursuant to the Merger is fair to the shareholders of the Company from a financial point of view, (v) resolved to recommend that the shareholders of the Company accept the Offer, tender their Shares thereunder to Purchaser and approve and adopt this Agreement, the Articles Amendment and the Merger, (vi) determined to waive any rights the Company may have under any agreement or otherwise to object to the transfer to Purchaser in the Offer of all Shares held by the Director Shareholders pursuant to the Shareholder Agreements, (vii) consented to the transfer to Purchaser of all such Shares, (viii) duly authorized the Transactions prior to Parent or Purchaser becoming an "interested shareholder" as defined in Section 2553 of the PBCL and (ix) approved the Transactions in such manner as to avoid the application of Subchapter F of Chapter 25 of the PBCL. The Company has taken all necessary corporate action so that no "business combina- Page 27 33 tion," "fair price," "control share acquisition" or "moratorium" statute or other similar statute or regulation of any state "blue sky" or securities law statute (including, without limitation, the provisions of Section 2538 and Subchapters F, G, H, I and J of Chapter 25 of the PBCL (each, a "Takeover Statute"), but excluding the provisions of Subchapter D of Chapter 15 of the PBCL and Subchapter E of Chapter 25 of the PBCL or any applicable anti-takeover provision in the Articles (except for Section 6 thereof) or Bylaws is applicable to the Company or the Transactions. None of the aforesaid actions by the Company Board of Directors has been amended, rescinded or modified. (c) Except as set forth in Schedule 4.2(c), neither the execution and delivery of this Agreement or the other agreements contemplated hereby nor the consummation or performance of any of the Transactions or other transactions contemplated by such agreements will, directly or indirectly (with or without notice or lapse of time): (i) contravene, conflict with or result in a violation of (A) any provision of the Organizational Documents of the Company or any Company Subsidiary, or (B) any resolution adopted by the board of directors or the shareholders of the Company or any Company Subsidiary; (ii) contravene, conflict with or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Company or any Company Subsidiary or the shareholders of the Company, or any of the assets owned or used by any of them, may be subject; (iii) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Company or any Company Subsidiary or that otherwise relates to the business of, or any of the assets owned or used by, the Company or any Company Subsidiary; (iv) cause Parent, Purchaser or the Company or any Company Subsidiary to become subject to, or to become liable for the payment of, any Tax; Page 28 34 (v) contravene, conflict with or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under (with or without notice or lapse of time, or both), or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Applicable Contract; or (vi) result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by the Company or any Company Subsidiary, except for Encumbrances that are imposed or created as a result of the performance by Parent and/or Purchaser of their respective obligations under this Agreement or the Stock Option Agreement. (d) Except as set forth in Schedule 4.2(d), the Company is not and will not be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement, the Stock Option Agreement, or the consummation or performance of any of the Transactions. Section 4.3 Vote Required. Except as set forth in Schedule 4.3, the affirmative vote of the holders of a majority of the outstanding Shares is the only vote of the holders of any class or series of the Company's capital stock necessary to approve the Merger. No vote of any class or series of the Company's capital stock is necessary to approve any of the Transactions other than the Merger and the Articles Amendment. Section 4.4 Capitalization and Ownership of Shares. The authorized capital stock of the Company consists of 20,000,000 shares of common stock, $0.50 par value per share. As of the date hereof, (i) 7,161,247 shares of common stock were issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable, (ii) zero (0) shares of common stock were held in the treasury of the Company or by Company Subsidiaries, (iii) 3,000 shares of common stock were reserved for issuance under the 1995 Non-Employee Director Stock Plan, (iv) 222,524 shares of common stock were reserved for issuance pursuant to stock options granted and outstanding under the Company 1985 Stock Incentive Plan and the Company 1995 Stock Incentive Plan (the "Stock Option Plans") and (v) 169,000 shares of common stock were reserved for issuance pursuant to options granted under agreements entered into other than pursuant to the Stock Option Plans. All shares of common stock subject to issuance as specified above are accounted for in Schedule 4.4 and, all outstanding shares of capital stock of the Company are, and all shares which may be issued upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be, when so issued, duly authorized, validly issued, fully paid and Page 29 35 nonassessable. Other than as set forth in the second sentence hereof or in Schedule 4.4, there are no outstanding Contracts, subscriptions, options, warrants, puts, calls, agreements, understandings, claims or other commitments or rights of any type relating to the issuance, sale, repurchase or transfer by the Company of any securities of the Company, nor are there outstanding or reserved for issuance, shares of capital stock or other voting securities of the Company or any securities which are convertible into or exchangeable for any shares of capital stock of the Company, and neither the Company nor any of its Subsidiaries has any obligation of any kind to sell or issue any additional securities or to pay for, repurchase or otherwise acquire any securities of the Company. There are no voting trusts or other agreements or understandings to which the Company or any Company Subsidiary is a party with respect to the voting of the capital stock of the Company or any of the Company Subsidiaries. The Company has no agreement, arrangement or understandings to register any securities of the Company or any of its Subsidiaries under the United States Securities Act of 1933, as amended (the "Securities Act"), or under any state securities law and has not granted registration rights to any person or entity (other than agreements, arrangements or understandings with respect to registration rights that are no longer in effect as of the date of this Agreement). Section 4.5 Subsidiaries and Investments. (a) Except as set forth in Schedule 4.5(a), neither the Company nor any Company Subsidiary owns, directly or indirectly, any capital stock of or other equity interest in, or in a control position (alone or in combination with others) with respect to, any Person; and neither the Company nor any Company Subsidiary has any Contract to acquire by any means, directly or indirectly, any equity securities or other securities or similar interest of any Person or any direct or indirect equity or other ownership interest in any business. Schedule 4.5(a) sets forth a true and complete list of (i) the name and jurisdiction of incorporation of each Company Subsidiary, (ii) the jurisdictions in which each Company Subsidiary is duly qualified or licensed to do business as a foreign corporation, (iii) the authorized capital stock of each Company Subsidiary, (iv) the number of shares of each class of capital stock outstanding of each Company Subsidiary, (v) the number of shares of each class and percentage of outstanding voting stock of each Company Subsidiary owned by the Company, and (vi) the names, addresses and titles of the directors and officers of each Company Subsidiary. Except as set forth in Schedule 4.5(a), no capital stock or any other security (including any debt security) of any Company Subsidiary is held by any person other than the Company. All of the issued and outstanding shares of capital stock of each Company Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable. None of the issued and outstanding shares of capital stock of the Page 30 36 Company Subsidiaries or other securities of the Company Subsidiaries was issued in violation of any preemptive rights or any provision of any Company Subsidiary's articles of incorporation or the Securities Act or any other Legal Requirement. (b) No Company Subsidiary has any outstanding securities convertible into or evidencing the right to purchase or subscribe for any shares of capital stock of such Company Subsidiary, and no Company Subsidiary has any outstanding or authorized subscriptions, options, warrants, calls, rights, commitments or other agreements of any character relating to, or obligating such Company Subsidiary to issue any shares of, its capital stock or any securities convertible into or evidencing the right to purchase or subscribe for any shares of such stock. There are no Contracts, commitments, understandings or arrangements relating to the issuance, sale or transfer of any shares of capital stock of any Company Subsidiary or other securities of the Company or the acquisition by any Company Subsidiary of any of its securities. (c) Except as set forth in Schedule 4.5(c), the Company is not subject to any obligation or requirement to provide funds to, or make any investment in (whether in the form of a loan, capital contribution or otherwise) any Person. Section 4.6 SEC Reports and Financial Statements. The Company has filed with the SEC, and has heretofore made available to Parent, true and complete copies of, the Company SEC Documents. As of their respective dates or, if amended, as of the date of the last such amendment filed prior to the date hereof, the Company SEC Documents, including, without limitation, any financial statements or schedules included therein (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. None of the Company Subsidiaries is required to file any forms, reports or other documents with the SEC. The Financial Statements have been prepared from, and are in accordance with, the books and records of the Company and its consolidated Subsidiaries, comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited consolidated quarterly financial statements, as permitted by the instructions to Form 10Q promulgated pursuant to the Exchange Act) applied on a consistent basis during the period involved (except as may be stated in the notes thereto) and fairly present the consolidated financial position and the consolidated results of Page 31 37 operations and cash flows (and changes in financial position, if any) of the Company and its consolidated Subsidiaries as of the times and for the periods referred to therein. No financial statements of any other Person are required by GAAP to be included in the financial statements of the Company and its Subsidiaries. Section 4.7 Books and Records. The books of account, minute books, stock record books and other records of the Company and its Subsidiaries, all of which have been made available to Parent, are substantially complete and correct and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. Except as set forth in Schedule 4.7, the minute books of the Company and its Subsidiaries contain accurate and substantially complete records of all meetings held of, and corporate action taken by, the shareholders, the Company Board of Directors and standing committees of the Company Board of Directors and Company Subsidiary Board of Directors, and no meeting of any such shareholders of the Company, Company Board of Directors or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Company and its Subsidiaries. Section 4.8 Title to Properties; Leases; Encumbrances. (a) Schedule 4.8 contains a complete and accurate list of all real property owned or leased by the Company and its Subsidiaries (the "Real Property") and all leaseholds and other interests therein owned by the Company and its Subsidiaries. Except as set forth in Schedule 4.8, the buildings, structures and improvements included within the Real Property (collectively, the "Improvements") comply with (or, if not in compliance, are not required to be in compliance unless a building permit or similar Governmental Authorization is sought) all applicable restrictions, building ordinances and zoning ordinances and all regulations of the applicable health and fire departments, and no alteration, repair, improvement or other work has been performed in respect to such Improvements within the last 120 days, other than in the ordinary course of business. Except as set forth in Schedule 4.8, the Real Property and its continued use, occupancy and operation as currently used, occupied and operated does not constitute a nonconforming use under any law, code, ordinance, rule, regulation or order affecting the Real Property, and the continued existence, use, occupancy and operation of each Improvement, and the right and ability to repair such Improvement in the event of casualty, is not dependent on any special permit, exception, approval or variance except, in each case where such nonconforming use or dependency could not have a Material Page 32 38 Adverse Effect on the Company. There is no condemnation proceeding pending or threatened with respect to any of the Real Property. (b) Each of the Company and its Subsidiaries owns and has good and marketable title to all the properties and assets (whether real, personal or mixed and whether tangible or intangible) that it purports to own located in the facilities owned or operated by it or reflected as owned in the books and records of the Company and its Subsidiaries, including all of the properties and assets reflected in the Financial Statements (except for assets held under capitalized leases and equipment leased pursuant to industrial development bond financing disclosed or not required to be disclosed in Schedule 4.8 and personal property sold since the date of the Financial Statements, as the case may be, in the ordinary course of business), and all of the properties and assets purchased or otherwise acquired by the Company and its Subsidiaries since the date of the most recent audited Financial Statements (except for personal property acquired and sold since the date of the most recent audited Financial Statements in the ordinary course of business), which subsequently purchased or acquired properties and assets (other than inventory and short-term investments) are listed in Schedule 4.8. (c) Except as set forth on Schedule 4.8, all properties and assets reflected in the Financial Statements are free and clear of all Encumbrances except (a) security interests shown in the Financial Statements as securing specified liabilities or obligations, with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists, (b) security interests incurred in connection with the purchase of property or assets after the date of the Interim Financial Statements (such security interests being limited to the property or assets so acquired), with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists, (c) liens for current taxes and assessments not yet due and payable, and (d) security interests of record as recorded in the jurisdictions set forth in Schedule 4.8. Schedule 4.8(c) sets forth the locations of all of the properties and assets owned by the Company and its Subsidiaries, and describes the owner of such properties and assets in each such jurisdiction. Section 4.9 Condition and Sufficiency of Assets. Except as set forth in Schedule 4.9, the equipment of the Company and its Subsidiaries is in good operating condition and repair and is adequate for the uses to which it is being put, and none of such equipment is in need of maintenance or repairs except for ordinary routine maintenance and repairs that are not in the aggregate material in nature or cost. The equipment of the Company and its Subsidiaries is sufficient for the continued conduct Page 33 39 of the business of the Company and its Subsidiaries after the Effective Time in substantially the same manner as conducted prior to the Effective Time. Section 4.10 Accounts Receivable. Schedule 4.10 contains a complete and accurate list of all accounts receivable that are reflected in the Financial Statements or on the accounting records of the Company as of March 31, 1999 (the "Accounts Receivable"), which list sets forth the aging of such Accounts Receivable. All Accounts Receivable of the Company and its Subsidiaries as of the Effective Time represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. Unless paid prior to the Effective Time, the Accounts Receivable are or will be as of the Effective Time current and collectible net of any reserves shown in the Financial Statements or on the accounting records of the Company as of the Effective Time (which reserves will not exceed $400,000 as of such date), without resort to legal proceedings. Section 4.11 Inventory. All inventory of the Company and its Subsidiaries, whether or not reflected in the Financial Statements, consists of a quality usable and salable in the ordinary course of business, except for obsolete and slow-moving items and items of below-standard quality, all of which have been written off or written down to net realizable value in the Financial Statements in accordance with GAAP or on the accounting records of the Company and its Subsidiaries as of the Effective Time, as the case may be. Section 4.12 No Undisclosed Liabilities. Except as set forth in Schedule 4.12, neither the Company nor any Company Subsidiary has any liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent or otherwise) except for liabilities or obligations reflected or reserved against by the Company and its Subsidiaries in the Financial Statements and current liabilities incurred in the ordinary course of business since the respective dates thereof which would not have a Material Adverse Effect on the Company. Section 4.13 Taxes. The Company and its Subsidiaries have filed or caused to be filed on a timely basis all Tax Returns that are or were required to be filed by or with respect to them, pursuant to applicable Legal Requirements. The Company and its Subsidiaries have delivered or made available to Parent copies of, and Schedule 4.13 contains a complete and accurate list of, all such Tax Returns filed since January 1, 1996. The Company and its Subsidiaries have paid, or made provision for the payment of, all Taxes that have or may have become due pursuant to those Tax Returns or otherwise, or pursuant to any assessment received by the Company and its Page 34 40 Subsidiaries, except such Taxes, if any, as are listed in Schedule 4.13 and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the Financial Statements. The Company shall have no obligation for the payment of any Taxes not yet due and payable prior to the Effective Time in excess of such Taxes accrued on its books and records in accordance with GAAP. Neither the Company nor any Company Subsidiary has received written notice of any claim made by an authority in a jurisdiction where neither the Company nor any Company Subsidiary files Tax Returns that the Company or any Company Subsidiary is or may be subject to taxation by that jurisdiction. Section 4.14 No Material Adverse Change. Since December 31, 1998 there has not been any Material Adverse Change or Material Adverse Effect. Neither the Company nor any of its Subsidiaries has taken any of the actions prohibited by Section 6.2 or otherwise acted in such a way as to impair, prevent or impede the consummation of the Transactions. Section 4.15 Employee Benefits. (a) Schedule 4.15(a) sets forth a complete and correct list of each "employee benefit plan", as such term is defined in section 3(3) of ERISA, and each written bonus, incentive or deferred compensation, severance, termination, retention, change of control, stock option or other equity-based, performance or other employee or retiree benefit or compensation plan, program, arrangement, agreement, policy or understanding that provides or may provide benefits or compensation in respect of any employee or independent contractor or under which any employee or independent contractor is or may become eligible to participate or derive a benefit and that is or has been maintained or established by the Company or its Subsidiaries or any other trade or business, whether or not incorporated, which, together with the Company or its Subsidiaries, is treated as a single employer under section 414 of the Code (such other trades and businesses hereinafter referred to as the "Plan Related Persons"), or to which the Company or any Plan Related Person contributes or is or has been obligated or required to contribute or with respect to which the Company may have any liability (collectively, the "Plans"). With respect to each such Plan, the Company has provided Parent with complete and correct copies of, (i) such Plan, if written, or a description of such Plan if not written, and (ii) to the extent applicable to such Plan, all trust agreements, insurance contracts or other funding arrangements, the two most recent actuarial and trust reports, the two most recent Forms 5500 required to have been filed with the IRS and all schedules thereto, the most recent IRS determination letter, all current summary plan descriptions, any actuarial study of any post-employment life or Page 35 41 medical benefits provided under any such Plan, if any, statements or other communications regarding withdrawal or other multi-employer plan liabilities, if any, and all amendments and modifications to any such document. Except as set forth on Schedule 4.15(a), the Company has not communicated to any Employee or any independent contractor any intention or commitment to modify any Plan or to establish or implement any other employee, retiree or independent contractor benefit or compensation plan or arrangement. Except as set forth on Schedule 4.15(a), neither the Company, nor any of its Subsidiaries, has any unwritten Plans. (b) Each Plan intended to be qualified under section 401(a) of the Code, and the trust (if any) forming a part thereof, has received a favorable determination letter from the IRS as to its qualification under the Code and to the effect that each such trust is exempt from taxation under section 501(a) of the Code, and nothing has occurred since the date of such determination letter that could reasonably be expected to adversely affect such qualification or tax-exempt status. (c) (i) Neither the Company nor any Related Person has incurred (either directly or indirectly, including as a result of an indemnification obligation) any material liability under or pursuant to Title I or IV of ERISA or the penalty, excise Tax or joint and several liability provisions of the Code relating to employee benefit plans. All material contributions and premiums required to have been paid by the Company and each Related Person to any employee benefit plan (within the meaning of Section 3(3) of ERISA) (including each Plan) under the terms of any such plan or its related trust, insurance contract or other funding arrangement, or pursuant to any Legal Requirement have been paid within the time prescribed by any such plan, agreement or Legal Requirement. (ii) Each of the Plans has been operated and administered in all material respects in compliance with its terms, all Legal Requirements except for any failures so to comply that, individually and in the aggregate, could not reasonably be expected to result in a material liability or obligation on the part of the Company or, following the Closing, Parent or any of its affiliates. There are no pending or, to the Knowledge of the Company, threatened claims by or on behalf of any of the Plans, by any employee or independent contractor or otherwise involving any such Plan or the assets of any Plan (other than routine claims for benefits). Page 36 42 (iii) No Plan is a "multi-employer plan" within the meaning of section 4001(a)(3) or section 3(37) of ERISA. No Plan is a "multiple employer plan" within the meaning of section 4064 of ERISA. (iv) With respect to each Title IV Plan, the present value of accrued benefits under such plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such plan's actuary with respect to such plan did not exceed, as of its latest valuation date, then current value of the assets of such plan allocable to such accrued benefits. (v) No Title IV Plan or any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each Title IV Plan ended prior to the Closing Date. All contributions required to be made with respect to any Plan on or prior to the Closing Date have been timely made. (d) Except as set forth on Schedule 4.15(d), no payment required to be made to any employee associated with the Company or its Subsidiaries as a result of the Merger under any contract or otherwise will, if made, constitute an "excess parachute payment" within the meaning of Section 280G of the Code. (e) Neither the Company nor any of its Subsidiaries is a party to any Contract, agreement or other arrangement which could result in the payment of amounts that could be nondeductible by reason of Section 162(m) of the Code. Section 4.16 Compliance with Legal Requirements; Governmental Authorizations. (a) Except as set forth in Schedule 4.16(a): (i) each of the Company and its Subsidiaries is, and at all times since December 31, 1998 has been, in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets; (ii) no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) may constitute or result in a violation by the Company or any Company Subsidiary of, or a failure on the part of the Page 37 43 Company or any Company Subsidiary to comply with, any Legal Requirement, or (B) may give rise to any obligation on the part of the Company or any Company Subsidiary or Parent to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and (iii) neither the Company nor any Subsidiary has received, at any time since December 31, 1998, any written notice or to the Knowledge of the Company any oral communication from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement, or (B) any actual, alleged, possible or potential obligation on the part of the Company or any Company Subsidiary to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. (b) Schedule 4.16(b) contains a complete and accurate list of each Governmental Authorization that is held by the Company and its Subsidiaries or that otherwise relates to the business of, or to any of the assets owned or used by, the Company and its Subsidiaries. Each Governmental Authorization listed or required to be listed in Schedule 4.16(b) is valid and in full force and effect. Except as set forth in Schedule 4.16(b): (i) each of the Company and its Subsidiaries is, and at all times since December 31, 1998 has been, in full compliance with all of the terms and requirements of each Governmental Authorization identified or required to be identified in Schedule 4.16(b); (ii) no event has occurred or circumstance exists that may (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Governmental Authorization listed or required to be listed in Schedule 4.16(b), or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any Governmental Authorization listed or required to be listed in Schedule 4.16(b); (iii) neither the Company nor any Subsidiary has received, at any time since December 31, 1998, any written notice or to the Knowledge of the Company any other communication from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any Governmental Page 38 44 Authorization, or (B) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of or modification to any Governmental Authorization; and (iv) since December 31, 1998, all applications required to have been filed for the renewal of the Governmental Authorizations listed or required to be listed in Schedule 4.16(b) have been duly filed on a timely basis with the appropriate Governmental Bodies, and all other filings required to have been made with respect to such Governmental Authorizations have been duly made on a timely basis with the appropriate Governmental Bodies. The Governmental Authorizations listed in Schedule 4.16(b) collectively constitute all of the Governmental Authorizations necessary to permit the Company and its Subsidiaries to lawfully conduct and operate their respective businesses in the manner they currently conduct and operate such businesses and to permit the Company and its Subsidiaries to own and use their respective assets in the manner in which they currently own and use such assets. Section 4.17 Legal Proceedings; Orders. (a) Except as set forth in Schedule 4.17(a) there is no pending Proceeding: (i) that has been commenced by or against the Company or any Company Subsidiary or that otherwise relates to or may affect the business of, or any of the assets owned or used by, the Company or any Company Subsidiary; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the Transactions. To the Knowledge of the Company, (1) no such Proceeding has been threatened, and (2) no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding. The Company has delivered to Parent copies of all pleadings, correspondence and other documents relating to each Proceeding listed in Schedule 4.17(a). The Proceedings listed in Schedule 4.17(a) will not have a Material Adverse Effect on the Company. (b) Except as set forth in Schedule 4.17(b): Page 39 45 (i) there is no Order to which the Company or any Company Subsidiary, or any of the assets owned or used by the Company or any Company Subsidiary, is subject; (ii) none of the shareholders of the Company is subject to any Order that relates to the business of, or any of the assets owned or used by, the Company or any Company Subsidiary; and (iii) no officer, director, or to the Knowledge of the Company, no agent or employee of the Company or any Company Subsidiary is subject to any Order that prohibits such officer, director, agent or employee from engaging in or continuing any conduct, activity or practice relating to its business. (c) Except as set forth in Schedule 4.17(c): (i) each of the Company and its Subsidiaries is, and at all times since December 31, 1998 has been, in full compliance with all of the terms and requirements of each Order to which it, or any of the assets owned or used by it, is or has been subject; (ii) no event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which the Company or any Company Subsidiary, or any of the assets owned or used by the Company or any Company Subsidiary, is subject; and (iii) neither the Company nor any Company Subsidiary has received, at any time since December 31, 1998, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible or potential violation of, or failure to comply with, any term or requirement of any Order to which the Company or any Company Subsidiary, or any of the assets owned or used by the Company or any Company Subsidiary, is or has been subject. Section 4.18 Absence of Certain Changes and Events. Except as set forth in Schedule 4.18, and except as otherwise consented to by Parent and Purchaser and confirmed to the Company in writing, since December 31, 1998, the Company has conducted its businesses only in the ordinary course of business and there has not been any: Page 40 46 (a) change in the authorized or issued capital stock of the Company or any Company Subsidiary; grant of any stock option or right to purchase shares of capital stock of the Company or any Company Subsidiary; issuance of any security convertible into such capital stock; grant of any registration rights with respect to such capital stock; purchase, redemption, retirement or other acquisition by the Company or any Company Subsidiary of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of any such capital stock; (b) amendment to the Organizational Documents of the Company or any Company Subsidiary; (c) increase by the Company or any Company Subsidiary of any bonuses, salaries or other compensation to any shareholder, director, officer or employee or entry into any employment, severance or similar Contract with any director, officer, or employee; (d) except in the ordinary course of business, adoption of, or increase in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement or other employee benefit plan for or with any employees of the Company or any Company Subsidiary; (e) damage to or destruction or loss of any asset or property of the Company or any Company Subsidiary materially and adversely affecting the properties, assets, business, or financial condition of the Company or any Company Subsidiary, taken as a whole; (f) entry into, termination of or receipt of notice of termination of (i) any license, joint venture, credit or similar agreement, (ii) any distributorship, dealer or sales representative or similar agreement that was responsible for more than $1,000,000 of sales in the fiscal year ended December 31, 1998, or (iii) any Contract or transaction involving a total remaining commitment by or to the Company or any Company Subsidiary in excess of $100,000; (g) except in the ordinary course of business, sale, lease or other disposition of any asset or property of the Company or any Company Subsidiary or Encumbrance on any material asset or property of the Company or any Company Page 41 47 Subsidiary, including the sale, lease or other disposition of any of the Intellectual Property Assets; (h) cancellation or waiver of any claims or rights with a value to the Company or any Company Subsidiary in excess of $50,000; (i) change in the accounting methods used by the Company or any Company Subsidiary; (j) incurrence, assumption or guarantee of the indebtedness of the Company or any Company Subsidiary; (k) issuance or sale of any shares of capital stock of the Company or any Company Subsidiary, or making of any other changes in the capital structure of the Company or any Company Subsidiary; (l) writing-off as uncollectible of any notes or accounts receivable, except writeoffs in the ordinary course of business charged to applicable reserves, none of which individually or in the aggregate is material; writing-off, writing-up or writing-down of any other material asset of the Company or any Company Subsidiary; or altering of its customary time periods for collection of accounts receivable or payments of accounts payable; (m) making of any loan, advance or capital contributions to or investment in any Person; (n) terminating or closing of any material facility, business or operation of the Company or any Company Subsidiary; or (o) agreement, whether oral or written, by the Company or any Company Subsidiary to do any of the foregoing. Section 4.19 Applicable Contracts; No Defaults. (a) Schedule 4.19(a) contains a complete and accurate list, and the Company has delivered to Parent complete copies, of: (i) each Applicable Contract; Page 42 48 (ii) each lease, rental or occupancy agreement, license, installment and conditional sale agreement and other Applicable Contract affecting the ownership of, leasing of, title to, use of or any leasehold or other interest in, any real or personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments per item of less than $100,000 for any twelve (12) month period following the date of this Agreement); (iii) each licensing agreement or other Applicable Contract with respect to patents, trademark, copyrights or other intellectual property, including agreements with current or former employees, consultants or contractors regarding the appropriation or the non-disclosure of any of the Intellectual Property Assets; (iv) each joint venture or partnership agreement and each other Applicable Contract (however named) involving a sharing of profits, losses, costs or liabilities by the Company or any Company Subsidiary with any other Person; (v) each power of attorney that is currently effective and outstanding; and (vi) each amendment, supplement and modification (whether oral or written) in respect of any of the foregoing. Schedule 4.19(a) sets forth the date and parties to the Applicable Contracts, copies of which have been previously delivered to Parent or Purchaser. (b) Except as set forth in Schedule 4.19(b): (i) none of the shareholders of the Company (and no Related Person of any of the shareholders of the Company) has or may acquire any rights under, or may become subject to any obligation or liability under, any Applicable Contract that relates to the business of, or any of the assets owned or used by, the Company or any Company Subsidiary; and (ii) neither the Company nor any Company Subsidiary nor any officer, director, agent, employee, consultant or contractor of the Company or any Company Subsidiary is bound by any Applicable Contract that purports Page 43 49 to limit the ability of the Company or any Company Subsidiary or any such officer, director, agent, employee, consultant or contractor to engage in or continue any conduct, activity or practice relating to the business of the Company or any Company Subsidiary. (c) Except as set forth in Schedule 4.19(c), each Applicable Contract identified or required to be identified in Schedule 4.19(a) is in full force and effect and is valid and enforceable in accordance with its terms. (d) Except as set forth in Schedule 4.19(d): (i) each of the Company and its Subsidiaries is, and at all times since December 31, 1998 has been, in substantial compliance with all applicable terms and requirements of each Applicable Contract under which the Company and any Company Subsidiary has or had any obligation or liability or by which the Company and any Company Subsidiary or any of the assets owned or used by the Company and any Company Subsidiary is or was bound; (ii) to the Knowledge of the Company, each other Person that has or had any obligation or liability under any Applicable Contract under which the Company or any Company Subsidiary has or had any rights is, and at all times since December 31, 1998 has been, in full compliance with all applicable terms and requirements of such Applicable Contract; (iii) no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a violation or breach of, or give the Company or any Company Subsidiary or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Applicable Contract; and (iv) neither the Company nor any Company Subsidiary has given to or received from any other Person, at any time since December 31, 1998, any written notice or other communication regarding any actual, alleged, possible or potential violation or breach of or default under, any Applicable Contract. (e) Except as set forth in Schedule 4.19(e), there are no renegotiations of, attempts to renegotiate or outstanding rights to renegotiate, or rights to reclaim or Page 44 50 have repaid, any material amounts paid or payable to the Company or any Company Subsidiary under current or completed Applicable Contracts with any Person and no such Person has made written demand for such renegotiation. (f) The Applicable Contracts relating to the provision of products or services by the Company and its Subsidiaries have been entered into in the ordinary course of business. Section 4.20 Insurance. (a) The Company has delivered to Parent: (i) true and complete copies of all policies of insurance to which the Company or any Company Subsidiary is a party or under which the Company or any Company Subsidiary, or any director of the Company or any Company Subsidiary, is or has been covered at any time since December 31, 1998; (ii) true and complete copies of all pending applications for policies of insurance; and (iii) since December 31, 1998, any statement by the auditor of the financial statements of the Company and its Subsidiaries with regard to the adequacy of such entity's coverage or of the reserves for claims. (b) Schedule 4.20(b) describes: (i) any self-insurance arrangement by or affecting the Company or any Company Subsidiary, including any reserves established thereunder; (ii) any contract or arrangement, other than a policy of insurance, for the transfer or sharing of any risk by the Company or any Company Subsidiary; and (iii) all obligations of the Company or any Company Subsidiary to third parties with respect to insurance (including such obligations under leases and service agreements) and identifies the policy under which such coverage is provided. Page 45 51 (c) Schedule 4.20(c) sets forth, by year, for the current policy year and each of the two preceding policy years: (i) a summary of the loss experience under each policy of insurance, to the extent available from the insurance company; (ii) a statement describing each claim under any general liability or workers' compensation insurance policy for an amount in excess of $50,000, which sets forth: (A) the name of the claimant; (B) a description of the policy by insurer, type of insurance and period of coverage; and (C) the amount and a brief description of the claim; and (iii) a statement describing the loss experience for all claims that were self-insured, including the number and aggregate cost of such claims (or similar statement prepared on behalf of the Company or any Subsidiary by its third party administrator). (d) Except as set forth in Schedule 4.20(d): (i) all policies to which the Company or any Company Subsidiary is a party or that provide coverage to the Company or any Company Subsidiary or any director or officer of the Company or any Company Subsidiary: (A) are valid, outstanding and enforceable; (B) are to the Knowledge of the Company issued by an insurer that is financially sound and reputable; (C) will continue in full force and effect following the consummation of the Transactions; and Page 46 52 (D) do not provide for any retrospective premium adjustment or other experience-based liability on the part of the Company; and (ii) with respect to current insurance policies, neither the Company nor any Company Subsidiary has received (A) any refusal of coverage or any notice that a defense will be afforded with reservation of rights, or (B) any notice of cancellation or any other indication that any insurance policy is no longer in full force or effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder; (iii) each of the Company and its Subsidiaries has paid all premiums due and has otherwise performed all of its obligations under each policy to which the Company or any Company Subsidiary is a party or that provides coverage to the Company or any Company Subsidiary or any director thereof, and (iv) each of the Company and its Subsidiaries has given notice to the applicable insurer of all claims that may be insured thereby. Section 4.21 Environmental Matters. (a) Except as set forth in Schedule 4.21(a), (i) each of the Company and its Subsidiaries is, and at all times has been, in full compliance with all applicable federal, state and local laws and regulations, orders, and ordinances relating to the protection of human health or the environment ("Environmental Laws"); (ii) none of the Company or any Company Subsidiary, or any shareholder of the Company, has received any notice or communication (written or oral), whether from a Governmental Body, citizens group, employee or otherwise, that alleges that the Company or any Company Subsidiary is not or may not be in such full compliance; and (iii) to the Knowledge of the Company, there are no circumstances, incidents, conditions or events that may prevent or interfere with such full compliance in the future. Each of the Company and its Subsidiaries has all necessary Governmental Authorizations or other authorizations to comply with such Environmental Laws, and all such Governmental Authorizations and other authorizations are identified in Schedule 4.21(a). Except as identified in Schedule 4.21(a), the Company has provided to Parent all assessments, reports, data, results of investigations or audits, and other information that is in the possession of or reasonably available to the Company regarding environmental matters pertaining to or the environmental condition of the business of the Company and its Subsidiaries, or the Page 47 53 compliance (or noncompliance) by the Company or any Company Subsidiary with any Environmental Laws. (b) Except as set forth in Schedule 4.21(b), there are no past or present actions, activities, circumstances, conditions, events or incidents that could form the basis of any Proceeding, Order or third party claim against the Company or any Company Subsidiary based on any Environmental Law or common law. (c) Except as set forth in Schedule 4.21(c), there has been no release or threatened release of any Hazardous Materials (except in compliance with all Environmental Laws) at or from any properties or assets now or previously owned or operated by the Company or any Company Subsidiary or at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used or processed from or by the Company or any Company Subsidiary. Section 4.22 Employees. (a) Schedule 4.22(a) contains a complete and accurate list of the following information for each Key Employee or director of the Company and its Subsidiaries, including each Key Employee on leave of absence or layoff status: (i) employer, name and job title; (ii) current compensation (including commissions and bonuses, if any) paid or payable and any change in compensation since the Interim Financial Statements; (iii) vacation and sick leave accrued, (iv) service credited for purposes of vesting and eligibility to participate under the following plans of the Company or any Company Subsidiary: pension, retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus, stock option, cash bonus, employee stock ownership (including investment credit or payroll stock ownership), severance pay, insurance, medical, welfare or vacation plan, other Pension Plan or Welfare Plan or any other employee benefit plan or any Plan for the benefit of directors; and (v) contracts or other agreements to which such Key Employee or director is a party, including but not limited to any employment, confidentiality, noncompetition, consulting or proprietary rights agreement. (b) No Key Employee or director of the Company or any Company Subsidiary is a party to, or is otherwise bound by, any contract, agreement or arrangement, including any employment, confidentiality, noncompetition or proprietary rights agreement, between such employee or director and any other Person ("Proprietary Rights Agreement") that in any way materially adversely affects or will affect (i) the performance of such person's duties as an employee or director of the Company or any Page 48 54 Company Subsidiary, or (ii) the ability of the Company or any Company Subsidiary to conduct its business, including any Proprietary Rights Agreement with the Company, its Subsidiaries, or the shareholders of the Company by any such employee or director. Except as set forth in Schedule 4.22(b) to the Knowledge of the Company, no director, officer or other Key Employee of the Company or any Company Subsidiary has communicated his intention to, or the Knowledge of the Company or any Company Subsidiary intends to terminate his employment with the Company or any Company Subsidiary. (c) Schedule 4.22(c) contains a complete and accurate list of the following information for each retired employee of the Company and its Subsidiaries or their dependents receiving benefits or scheduled to receive benefits in the future: name, pension benefit, pension option election, retiree medical insurance coverage, retiree life insurance coverage, and other benefits. Section 4.23 Labor Relations; Compliance. Schedule 4.23 contains a complete and accurate list of all collective bargaining or other labor contracts to which the Company or any Subsidiary is, or at any time since December 31, 1998 has been, a party. Since December 31, 1998, there has not been, and there is not currently, pending or existing, and there is not and has not been threatened, (a) any strike, slowdown, picketing, work stoppage or employee grievance pending; (b) any Proceeding against or affecting the Company or any Company Subsidiary relating to the alleged violation of any Legal Requirement pertaining to labor relations or employment matters, including any charge, claim, action or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission, the United States Department of Labor or any comparable Governmental Body, any organizational activity or any other labor or employment dispute against or affecting the Company or any Company Subsidiary or their premises; (c) any application for certification of a collective bargaining agent; or (d) any organizational activity by its employees. To the Knowledge of the Company, no event has occurred or circumstance exists that could provide the basis for any work stoppage or other labor dispute. There is no lockout of any employees by the Company or any Company Subsidiary, and no such action is contemplated by the Company or any Company Subsidiary. The Company and its Subsidiaries have complied in all material respects with all Legal Requirements relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, employee leave, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health and plant closings. Neither the Company nor any Company Subsidiary is liable for the payment of any compensation, damages, Page 49 55 taxes, fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing Legal Requirements. Section 4.24 Intellectual Property Assets. (a) Schedule 4.24(a) identifies all patents, trademarks, copyrights, service marks and trade names of the Company and its Subsidiaries, and all pending applications for any of the foregoing, and all permits, grants and licenses (the "Intellectual Property Assets") owned by or running to or from the Company or any Company Subsidiary or used in the conduct of their operations. Except as set forth on Schedule 4.24(a), there are no Intellectual Property Assets necessary in order to operate the business of the Company and its Subsidiaries as currently conducted or being developed. The Company and its Subsidiaries own all right, title and interest to their Intellectual Property Assets, and each Intellectual Property Asset owned or used by the Company and its Subsidiaries immediately prior to the Effective Time will be owned or available for use by the Company and its Subsidiaries on identical terms and conditions immediately subsequent to the Effective Time. (b) Each of the Company and its Subsidiaries owns or has the right to use without charge all necessary or desirable Intellectual Property Assets, trade secrets, know-how, processes, designs and other technology or information utilized in its business as currently conducted or being developed, and to the Knowledge of the Company, such use by the Company and its Subsidiaries does not infringe upon, misappropriate, isolate or otherwise come into conflict with any patent, trademark, copyright, service mark, trade name or any other intellectual property rights of any other Person. Except as set forth on Schedule 4.24(a), none of the Company or the shareholders of the Company has ever received any charge, complaint, claim, demand or notice alleging any such interference, infringement, misappropriation or violation. Section 4.25 Certain Payments. Since December 31, 1998, none of the Company, any Company Subsidiary, or any director, officer, agent or employee of the Company or any Subsidiary, or the shareholders of the Company or any other Person associated with or acting for or on behalf of the Company or any Company Subsidiary, has directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback or other payment to any Person, private or public, regardless of form, whether in money, property or services (i) to obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured, (iii) to obtain special concessions or for special concessions already obtained, for or in respect of the Company or any Company Subsidiary, or (iv) in violation of any Legal Requirement; or (b) Page 50 56 established or maintained any fund or asset that has not been recorded in the books and records of the Company or any Company Subsidiary. Section 4.26 Relationship with Related Persons. Except as set forth in Schedule 4.26, none of the shareholders or any Related Person of the shareholders of the Company or the Company or any Company Subsidiary has, or has had, any interest in any property (whether real, personal or mixed and whether tangible or intangible), used in or pertaining to the business of the Company or any Company Subsidiary. None of the shareholders of the Company or any Related Person of the shareholders of the Company or the Company or any Company Subsidiary owns, or has owned (of record or as a beneficial owner), an equity interest or any other financial or profit interest in, a Person that has (i) had business dealings or a material financial interest in any transaction with the Company or any Company Subsidiary, or (ii) engaged in competition with the Company or any Company Subsidiary with respect to any line of the products or services of the Company or any Company Subsidiary in any market currently served by the Company or any Company Subsidiary. Except as set forth in Schedule 4.26, none of the shareholders of the Company or any Related Person of any of the shareholders of the Company or the Company is a party to any Contract with, or has any claim or right against, the Company or any Company Subsidiary. Section 4.27 Brokers or Finders. Except as set forth in Schedule 4.27, none of the Company or any Company Subsidiary, or any of the shareholders of the Company, or any of their respective agents has incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. The Company has delivered to Parent true and correct copies of any written Contracts, and summarized the terms of any oral agreements, with all of such parties set forth on Schedule 4.27. Section 4.28 Opinion of Financial Advisor. The Company has received the opinion of Harris Williams & Co., to the effect that, as of the date of this Agreement, the consideration to be received in the Offer and the Merger by the Company's shareholders is fair to the Company's shareholders from a financial point of view, and a complete and correct signed copy of such opinion has been, or promptly upon receipt thereof will be, delivered to Parent. The Company has been authorized by Harris Williams & Co. to permit the inclusion of such opinion in its entirety in the Offer Documents and the Schedule 14D-9 and the Proxy Statement. Section 4.29 Year 2000. Page 51 57 Except as set forth on Schedule 4.29: (a) all of the Computer Programs, computer firmware, computer hardware (whether general or special purpose) and other similar or related items of automated, computerized and/or software system(s) that are material to the Company or by any of its Subsidiaries in the conduct of their respective businesses will not malfunction, will not cease to function, will not generate incorrect data, and will not provide incorrect results when processing, providing, and/or receiving (i) date-related data into and between the twentieth and twenty-first centuries and (ii) date-related data in connection with any valid date in the twentieth and twenty-first centuries, except in each case for failures that individually or in the aggregate, have not resulted and could not reasonably be expected to result in a Material Adverse Effect on the Company or its Subsidiaries; (b) all of the products and services sold, licensed, rendered or otherwise provided by the Company or by any of its Subsidiaries in the conduct of their respective businesses will not malfunction, will not cease to function, will not generate incorrect data and will not produce incorrect results when processing, providing and/or receiving (i) date-related data into and between the twentieth and twenty-first centuries and (ii) date-related data in connection with any valid date in the twentieth and twenty-first centuries, except in each case for failures that individually or in the aggregate, have not resulted and could not reasonably be expected to result in a Material Adverse Effect on the Company or its Subsidiaries; and neither the Company nor any of its Subsidiaries is or shall be subject to claims or liabilities arising from their failure to do so; (c) neither the Company nor any of its Subsidiaries has made other representations or warranties regarding the ability of any product or service sold, licensed, rendered or otherwise provided by the Company or by any of its Subsidiaries in the conduct of their respective businesses to operate without malfunction, to operate without ceasing to function, to generate correct data and to produce correct results when processing, providing and/or receiving (i) date-related data into and between the twentieth and twenty-first centuries and (ii) date-related data in connection with any valid date in the twentieth and twenty-first centuries; and (d) to the Knowledge of the Company and its Subsidiaries, there is no supplier or any third party with whom the Company or its Subsidiaries has a material business relationship, that has Computer Programs, computer firmware, computer hardware (whether general or special purpose) and other similar or related items of Page 52 58 automated, computerized and/or software system(s), the operation of which relates in a material way to the products or services provided by the Company or its Subsidiaries or which are received from the third party, that will malfunction, will cease to function, will generate incorrect data or will produce incorrect results when processing, providing and/or receiving (i) date-related data into and between the twentieth and twenty-first centuries and (ii) date-related data in connection with any valid date in the twentieth and twenty-first centuries, except in each case for failures that individually or in the aggregate, have not resulted and could not reasonably be expected to result in a Material Adverse Effect on the Company or its Subsidiaries. Section 4.30 Products Liability; Recalls. (a) Except as set forth in Schedule 4.30, (i) there is no notice, demand, claim, action, suit, inquiry, hearing, proceeding, notice of violation or investigation of a civil, criminal or administrative nature (collectively, "Notices") pending or threatened before any Governmental Body in which a Product is alleged to have a Defect or relating to or resulting from any alleged failure to warn or from any alleged breach of express or implied warranties or representations; (ii) to the Knowledge of the Company, no valid basis exists for any such demand, claim, action, suit, inquiry, hearing, proceeding, notice of violation or investigation; (iii) no demand, claim, action, suit, inquiry, hearing, proceeding, notice of violation or investigation referred to in clause (i) or (ii) of this Section 4.30 would, if adversely determined, have, individually or in the aggregate, a Material Adverse Effect on the Company; (iv) to the Knowledge of the Company, there has not been any Occurrence; (v) there has not been any recall, rework, retrofit or post-sale warning (collectively, "Recalls") of any Product, or any investigation or consideration of or decision made by any person or entity concerning whether to undertake or not to undertake any Recalls and the Company has received no Notices from any Governmental Body or any other person with respect to the foregoing; and (vi) to the Knowledge of the Company, there are no material Defects in design, manufacturing, materials, or workmanship, including, without limitation, any failure to warn, or any breach of express or implied warranties or representations, which involve any Product. (b) Schedule 4.30 sets forth all Notices received by the Company or its Subsidiaries since November 1, 1995 and the amount of the reserves provided therefor. Section 4.31 Information in Schedule 14D-9. The information supplied by the Company expressly for inclusion in the Offer Documents and the Schedule 14D-9 will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The Page 53 59 Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published or sent or given to the Company's shareholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to statements made therein based on information furnished by Parent or Purchaser for inclusion in the Schedule 14D-9. Section 4.32 Information in Proxy Statement. Each of the Proxy Statement and the Articles Amendment Proxy Statement, if any, will not, at the respective dates each is mailed to Company shareholders and at the respective times of the meetings of Company shareholders to be held in connection with the Merger or the Articles Amendment, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to statements made therein based on information furnished by Parent or Purchaser for inclusion in the Proxy Statement or the Articles Amendment Proxy Statement, as the case may be. Each of the Proxy Statement and the Articles Amendment Proxy Statement will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PARENT AND PURCHASER Each of Parent and Purchaser represents and warrants to the Company as follows: Section 5.1 Organization and Valid Existence. Each of Parent and Purchaser is a corporation duly organized and validly existing under the laws of its state of incorporation with full corporate power and authority to execute and deliver this Agreement and the other agreements contemplated hereby to which Parent and Purchaser is a party and to perform all of its obligations hereunder and thereunder. At the Effective Time, Purchaser will be a corporation duly organized and validly existing under the laws of Delaware. Page 54 60 Section 5.2 Authority; No Conflict. (a) The execution and delivery of this Agreement, the Stock Option Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Parent and Purchaser, including approval of the Merger by the respective Board of Directors of each of Parent and Purchaser. This Agreement and the Stock Option Agreement have been duly executed and delivered by Parent and Purchaser and constitute the legal, valid and binding obligations of Parent and Purchaser, enforceable against them in accordance with their terms. Upon execution and delivery by Parent and Purchaser of the other agreements contemplated hereby to which it is or they are a party, such other agreements will constitute the legal, valid and binding obligations of Parent and Purchaser, as the case may be, enforceable against them in accordance with their respective terms. (b) Neither the execution and delivery of this Agreement, the Stock Option Agreement or the other agreements contemplated hereby nor the consummation or performance of any of the Transactions or other transactions contemplated by such agreements will, directly or indirectly (with or without notice or lapse of time): (i) contravene, conflict with or result in a violation of (A) any provision of the Organizational Documents of Parent or Purchaser, or (B) any resolution adopted by the board of directors or the shareholders of Parent or Purchaser; (ii) contravene, conflict with or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which Parent or Purchaser, or any of the assets owned or used by any of them, may be subject; (iii) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Parent or Purchaser or that otherwise relates to the business of, or any of the assets owned or used by, Parent or Purchaser. Page 55 61 (c) Except as set forth in Schedule 5.2(c), or as may be required under the applicable requirements of the Securities Act, the Exchange Act, the HSR Act, any applicable state securities or "blue sky" laws and the PBCL, Parent and Purchaser are not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement, the Stock Option Agreement or the consummation or performance of any of the Transactions. (d) Except as set forth in Schedule 5.2(d), no Proceeding has been commenced by or against Parent or Purchaser that relates to or may affect the business of, or any of the assets owned or used by Parent or Purchaser. Section 5.3 Certain Proceedings. There is no pending Proceeding that has been commenced against Parent or Purchaser and that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the Transactions. To the Knowledge of Parent and Purchaser, no such Proceeding has been threatened. Section 5.4 Brokers or Finders. Except as set forth on Schedule 5.4, Parent, Purchaser and their officers and agents, have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. Section 5.5 Information in Offer Document. The Offer Documents will comply as to form in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published or sent or given to the Company's shareholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or Purchaser with respect to information furnished by the Company expressly for inclusion in the Offer Documents. Section 5.6 Information in Proxy Statement. None of the information furnished by Parent or Purchaser expressly for inclusion in the Proxy Statement will, at the date mailed to shareholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. Page 56 62 ARTICLE VI COVENANTS Section 6.1 Access and Investigation. Between the date of this Agreement and the Effective Time, the Company will, and will cause its Representatives to, (a) afford Parent, Purchaser and their respective Representatives reasonable access to the personnel, properties, operations, contracts, books and records and other documents and data of the Company and its Subsidiaries; (b) furnish Parent, Purchaser and their respective Representatives with copies of all such contracts, books and records and other existing documents and data as they may reasonably request; (c) furnish Parent, Purchaser and their respective Representatives with a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of the federal securities laws and (d) furnish Parent, Purchaser and their respective Representatives with such additional financial, operating and other data and information as they may reasonably request. Access shall include the right to conduct such environmental studies as Parent, in its reasonable discretion, shall deem appropriate. Section 6.2 Operation of the Businesses of the Company. Except as set forth in Schedule 6.2 or as agreed to in writing by Parent, between the date of this Agreement and the Effective Time, the Company will: (a) conduct the business of the Company and its Subsidiaries only in the ordinary course of business (including managing the working capital of the Company and its Subsidiaries in accordance with past practice and custom); (b) use its Best Efforts to preserve intact the current business organization of the Company and its Subsidiaries, keep available the services of the current officers, employees and agents of the Company and its Subsidiaries and maintain the relations and good will with suppliers, customers, landlords, creditors, employees, agents and others having business relationships with the Company and its Subsidiaries; (c) inform Parent concerning operational matters of the Company or any Subsidiary of a material nature; and (d) otherwise report periodically to Parent concerning the status of the business, operations and finances of the Company and its Subsidiaries. Page 57 63 Section 6.3 Negative Covenant. Between the date of this Agreement and the Effective Time, and except (i) as expressly contemplated by this Agreement, (ii) as set forth on Schedule 6.3, or (iii) as agreed in writing by Parent: (a) the Company will not take any action or fail to take any action as a result of which any of the changes or events listed in Section 4.18 hereof (as modified by Schedule 4.18) occurs or is reasonably likely to occur; (b) neither the Company nor any Company Subsidiary shall permit any insurance policy naming it as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent, except policies providing coverage for losses not in excess of $ 50,000; (c) neither the Company nor any of its Subsidiaries shall enter into any contract or transaction relating to the purchase of assets other than in the ordinary course of business consistent with prior practices; (d) neither the Company nor any Company Subsidiary shall pay, repurchase, discharge or satisfy any of its claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice, of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its consolidated Subsidiaries; (e) neither the Company nor any of its Subsidiaries will adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any Company Subsidiary (other than the Merger); (f) neither the Company nor any Company Subsidiary will (i) change any of the accounting methods used by it unless required by GAAP or (ii) make any election relating to Taxes, change any election relating to Taxes already made, adopt any accounting method relating to Taxes, change any accounting method relating to Taxes unless required by GAAP, enter into any closing agreement relating to Taxes, settle any claim or assessment relating to Taxes or consent to any claim or assessment relating to Taxes or any waiver of the statute of limitations for any such claim or assessment; Page 58 64 (g) neither the Company nor any of its Subsidiaries will take, or agree to commit to take, any action that would or is reasonably likely to result in any of the conditions to the Offer set forth in Annex A or any of the conditions to the Merger set forth in Article VII not being satisfied, or would make any representation or warranty of the Company contained herein inaccurate in any respect at, or as of any time prior to, the Effective Time, or that would materially impair the ability of the Company, Parent, Purchaser or the holders of Shares to consummate the Offer or the Merger in accordance with the terms hereof or materially delay such consummation; and (h) neither the Company nor any of its Subsidiaries will enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing. Section 6.4 Reasonable Efforts. (a) Upon the terms and subject to the conditions set forth in this Agreement, including without limitation Section 6.5 hereto, each of the parties agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer and the Merger, and the other Transactions, including (i) the preparation and filing with the SEC of the Offer Documents, the Schedule 14D-9, the information required to be distributed to the shareholders of the Company pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder as is necessary to enable Parent's designees to be elected to the Company Board or Directors pursuant to Section 2.3 hereof, the preliminary Proxy Statement and the Proxy Statement and all necessary amendments or supplements thereto; (ii) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from any Governmental Body and the making of all necessary registrations and filings (including filings with any Governmental Body, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Body, (iii) the obtaining of all necessary consents, approvals or waivers from third parties, (iv) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of any of the Transactions, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Body vacated or reversed, and (v) the execution and delivery of any additional instruments necessary to consummate the Transactions and to fully carry out the purposes of this Agreement. Notwithstanding the foregoing, or any other covenant herein contained, in connection with the receipt of any necessary Page 59 65 approvals under the HSR Act, neither the Company nor any of its Subsidiaries shall be entitled to divest or hold separate or otherwise take or commit to take any action that limits Parent's or Purchaser's freedom of action with respect to, or their ability to retain, the Company or any of its Subsidiaries or any material portions thereof or any of the businesses, product lines, properties or assets of the Company or any of its Subsidiaries, without Parent's prior written consent. (b) Prior to the Closing, each party shall promptly consult with the other parties hereto with respect to, provide any necessary information with respect to, and provide the other parties (or their respective counsel) with copies of, all filings made by such party with any Governmental Body or any other information supplied by such party to a Governmental Body in connection with this Agreement, the Merger and the other Transactions. Each party hereto shall promptly inform the other of any communication from any Governmental Body regarding any of the Transactions. If any party hereto or Affiliate thereof receives a request for additional information or documentary material from any such Governmental Body with respect to any of the Transactions, then such party shall endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and after consultation with the other parties, an appropriate response in compliance with such request. To the extent that transfers, amendments or modifications of permits (including environmental permits) are required as a result of the execution of this Agreement or consummation of any of the Transactions, the Company shall use its best efforts to effect such transfers, amendments or modifications. (c) The Company and Parent shall file as soon as practicable notifications under the HSR Act and respond as promptly as practicable to any inquiries received from the Federal Trade Commission and the Antitrust Division of the Department of Justice for additional information or documentation and respond as promptly as practicable to all inquiries and requests received from any State Attorney General or other Governmental Body in connection with antitrust matters. Concurrently with the filing of notifications under the HSR Act or as soon thereafter as practicable, the Company and Parent shall each request early termination of the HSR Act waiting period. Notwithstanding the foregoing, nothing in this Agreement shall be deemed to require Parent or Purchaser to commence any litigation against any entity in order to facilitate the consummation of any of the Transactions or to defend against any litigation brought by any Governmental Body seeking to prevent the consummation of any of the Transactions. Section 6.5 Notification; Updating of Schedules. Page 60 66 (a) Between the date of this Agreement and the Effective Time, the Company will promptly notify Parent and Purchaser in writing if any of the Company's representations or warranties contained in this Agreement becoming untrue or inaccurate in any material respect (including receiving knowledge of any fact, event or circumstance which may cause any representation qualified as to Knowledge to be or become untrue or inaccurate in any material respect); provided, however, that no such notification shall affect the representations and warranties of the parties or the conditions to the obligations of the parties under this Agreement. (b) Between the date of this Agreement and the Effective Time, the Company will promptly notify Parent and Purchaser of the failure by the Company to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by them under this Agreement; provided, however, that no such notification shall affect the covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. (c) Between the date of this Agreement and the Effective Time, the Company shall keep up to date all of the Schedules, and shall notify Parent and Purchaser of any changes or additions or events which may, after the lapse of time, cause any material change or addition in any of such Schedules, whether or not such material changes or additions relate to matters that are permitted under this Agreement; provided, however, that no such updates shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. Section 6.6 No Solicitation of Competing Transaction. (a) Neither the Company nor any Company Subsidiary or Affiliate of the Company shall (and the Company shall cause the Representatives of the Company, each Company Subsidiary and each Affiliate of the Company, not to), directly or indirectly, encourage, solicit, participate in or initiate discussions or negotiations with, or provide any information to, any Person or group (other than Parent, any of its Affiliates or representatives) concerning any Acquisition Proposal, except that nothing contained in this Section 6.6 or any other provision hereof shall prohibit the Company or the Company Board of Directors from (i) taking and disclosing to the Company's shareholders a position with respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or (ii) making such disclosure to the Company's shareholders as, in the good faith judgment of the Company Board of Directors, after receiving advice from outside counsel, is required Page 61 67 under applicable law, provided that the Company may not, except as permitted by Section 6.6(b), withdraw or modify, or propose to withdraw or modify, its position with respect to the Offer or the Merger or approve or recommend, or propose to approve or recommend any Acquisition Proposal, or enter into any agreement with respect to any Acquisition Proposal. Upon execution of this Agreement, the Company will immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. Notwithstanding the foregoing, prior to the time of acceptance of Shares for payment pursuant to the Offer, the Company may furnish information concerning its business, properties or assets to any corporation, partnership, person or other entity or group pursuant to appropriate confidentiality agreements, and may negotiate and participate in discussions and negotiations with such entity or group concerning an Acquisition Proposal if: (x) such entity or group has submitted a Superior Proposal; and (y) in the opinion of the Company Board of Directors such action is required to discharge the Company Board of Director's fiduciary duties to the Company's shareholders under applicable law, determined only after receipt of a written opinion from independent legal counsel to the Company that the failure to provide such information or access or to engage in such discussions or negotiations would cause the Company Board of Directors to violate its fiduciary duties to the Company's shareholders under applicable law. The Company will immediately notify Parent of the existence of any proposal, discussion, negotiation or inquiry received by the Company, and the Company will immediately communicate to Parent the terms of any proposal, discussion, negotiation or inquiry which it may receive (and will immediately provide to Parent copies of any written materials received by the Company in connection with such proposal, discussion, negotiation or inquiry) and the identity of the party making such proposal or inquiry or engaging in such discussion or negotiation. The Company will promptly provide to Parent any non-public information concerning the Company provided to any other party which was not previously provided to Parent. The Company will keep Parent informed of the status and details of any such Acquisition Proposal and of any amendments or proposed amendments to any Acquisition Proposal and will promptly (but in no case later than 24 hours) notify Parent of any determination by the Company Board of Directors that a Superior Proposal has been made. Page 62 68 (b) Except as set forth below in this subsection (b), neither the Company Board of Directors nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Purchaser, the approval or recommendation by such Board of Directors or any such committee of the Offer, this Agreement or the Merger, (ii) approve or recommend or propose to approve or recommend, any Acquisition Proposal or (iii) enter into any agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the time of acceptance for payment of Shares pursuant to the Offer, the Company Board of Directors may withdraw or modify its approval or recommendation of the Offer, this Agreement or the Merger, approve or recommend a Superior Proposal, or enter into an agreement with respect to a Superior Proposal, in each case at any time after the fifth business day following Parent's receipt of written notice from the Company advising Parent that the Company Board of Directors has received a Superior Proposal which it intends to accept, specifying the material terms and conditions of such Superior Proposal, identifying the person making such Superior Proposal, but only if the Company shall have caused its financial and legal advisors to negotiate with Parent to make such adjustments in the terms and conditions of this Agreement as would enable the Company to proceed with the transactions contemplated herein on such adjusted terms. Section 6.7 Publicity. The initial press release with respect to the execution of this Agreement shall be a joint press release acceptable to Parent and the Company. Thereafter, so long as this Agreement is in effect, neither the Company, Parent nor any of their respective Affiliates shall issue or cause the publication of any press release or other announcement with respect to the Merger, this Agreement or the other Transactions without prior consultation with the other party, except as may be required by law or by any listing agreement with a national securities exchange or trading market. Section 6.8 Employee Arrangements (a) Parent and Purchaser hereby acknowledge and agree that the employment agreements and severance agreements set forth on Schedule 6.9(a) constitute binding obligations of the Company and Parent and Purchaser will honor such agreements after the Effective Time in accordance with their terms as in effect on the date hereof. (b) For a period of one (1) year following the Effective Time, Parent and Purchaser shall continue to maintain employee benefit plans, programs and policies for the employees of the Company which, in the aggregate, provide benefits that are Page 63 69 substantially comparable to those provided to such employees under the plans, programs and policies maintained for such employees by the Company as of the date hereof; provided, however, that the aggregate cost per employee of maintaining such benefits does not increase by more than five percent (5%) during such period. Section 6.9 Officers' and Directors' Insurance; Indemnification. (a) For three (3) years after the Effective Time, Parent and Purchaser shall maintain officers' and directors' liability insurance covering the persons who are presently covered by the Company's officers' and directors' liability insurance policies (copies of which have been delivered to Parent) with respect to actions and omissions occurring prior to the Effective Time, on terms which are not materially less favorable than the terms of such current insurance in effect for the Company on the date hereof provided, however, that in no event shall Parent or the Surviving Corporation be required to expend in excess of 120% of the annual premium currently paid by the Company for such coverage; and provided further, that, if the premium for such coverage exceeds such amount, Parent or the Surviving Corporation shall purchase a policy with the greatest coverage available for such 120% of the aggregate annual premiums paid by the Company in 1999 (which the Company represents will be approximately $47,000 on an annualized basis for 1999). (b) For three (3) years after the Effective Time, Parent and Purchaser shall maintain the rights to indemnification of officers and directors provided for in the Company's bylaws as in effect on the date hereof, with respect to indemnification for acts and omissions occurring prior to the Effective Time, including without limitation, the transactions contemplated by this Agreement. Section 6.10 Takeover Statutes. If any "business combination," "fair price," "control share acquisition" or "moratorium" statute or other similar statute or regulation or any state "blue sky" or securities law statute shall become applicable to the transactions contemplated hereby, the Company and the Company Board of Directors shall, to the extent consistent with applicable law, grant such approvals and take such actions as are reasonably necessary so that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to minimize the effects of such statute or regulations on the transactions contemplated hereby; provided, that this Section 6.10 shall not require the Company to seek to amend its Articles of Incorporation to opt out of Subchapter E of Chapter 25 of the PBCL. Page 64 70 Section 6.11 Form S-8. As soon as practicable following the Effective Time, Parent shall file with the SEC a registration statement on an appropriate form or a post-effective amendment to a previously filed registration statement under the Securities Act, with respect to the shares of Parent Common Stock issuable in respect of Company Options. Section 6.12 Assistance. The Company agrees to provide, and will cause its Subsidiaries and its and their respective officers, employees, counsel and accountants to provide, to Parent and any of its Subsidiaries all reasonable necessary cooperation in connection with the arrangement of any financing to be consummated including without limitation any of the following, the execution and delivery of any requested certificates, documents (including without limitation any "comfort" letters from auditors and opinions of counsel) or financial information as may be reasonably requested by Parent or any of its Subsidiaries in connection with the financing. Parent agrees to reimburse the Company for its reasonable out-of-pocket costs incurred in connection with such cooperation. ARTICLE VII CONDITIONS Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any and all of which may be waived in whole or in part by the Company, Parent or Purchaser, as the case may be, to the extent permitted by applicable law: (a) Shareholder Approval. This Agreement shall have been approved and adopted by the requisite vote of the holders of the Shares, if required by applicable law, in order to consummate the Merger; (b) Statutes; Court Orders. No statute, rule or regulation shall have been enacted or promulgated by any Governmental Body which prohibits the consummation of the Merger; and there shall be no order or injunction of a court of competent jurisdiction in effect precluding consummation of the Merger; (c) Purchase of Shares in Offer. Parent, Purchaser or their Affiliates shall have purchased Shares pursuant to the Offer; and Page 65 71 (d) HSR Approval. The applicable waiting period under the HSR Act shall have expired or been terminated. Section 7.2 Conditions to Parent's and Purchaser's Obligations to Effect the Merger. The obligations of Parent and Purchaser to consummate the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Parent and Purchaser, to the extent permitted by applicable law. (a) Compliance with Obligations. All actions contemplated by Section 3.4 shall have been taken; (b) Representations and Warranties. The representations and warranties of the Company set forth in Article IV shall be true in all material respects on the date of this Agreement and as of the Effective Time; (c) Covenants. The Company shall have complied in all material respects with its obligations under the terms of this Agreement; and (d) Articles Amendment. The Articles Amendment shall have been approved by the holders of the requisite number of shares required by the PBCL and the Articles. ARTICLE VIII TERMINATION Section 8.1 Termination. The Transactions may be terminated or abandoned at any time prior to the Effective Time, whether before or after shareholder approval thereof: (a) Subject to Section 2.3(c), by the mutual written consent of Parent and the Company; (b) By either of the Company or Parent: (i) if (x) the Offer shall have expired without any Shares being purchased pursuant thereto or (y) Purchaser shall not have accepted for payment any Shares pursuant to the Offer by December 31, 1999; provided, Page 66 72 however, that the right to terminate this Agreement under this Section 8.1(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of Purchaser to purchase the Shares pursuant to the Offer on or prior to such date; or (ii) if any Governmental Body shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use their reasonable efforts to lift), which permanently restrains, enjoins or otherwise prohibits the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree, ruling or other action shall have become final and non-appealable. (c) By the Company: (i) if Parent, Purchaser or any of their Affiliates shall have failed to commence the Offer on or prior to five business days following the date of the initial public announcement of the Offer; provided, that the Company may not terminate this Agreement pursuant to this Section 8.1(c)(i) if the Company is at such time in material breach of its obligations under this Agreement; (ii) in connection with entering into a definitive agreement as permitted by Section 6.6(b), provided the Company has complied with all provisions thereof, including the notice provisions therein, and that the Company makes simultaneous payment to Parent of funds as required by Section 9.1(b); (iii) if Parent or Purchaser shall have terminated the Offer or the Offer expires without Parent or Purchaser, as the case may be, purchasing any Shares pursuant thereto; provided that the Company may not terminate this Agreement pursuant to this Section 8.1(c)(ii) if the Company is in material breach of this Agreement or the Stock Option Agreement. (d) By Parent: (i) if, due to an occurrence, not involving a breach by Parent or Purchaser of their obligations hereunder, which makes it impossible to satisfy any of the conditions set forth in Annex A hereto, Parent, Purchaser, or any of their Affiliates shall have failed to commence the Offer on or prior to the fifth business day following the date of the initial public announcement of the Offer; Page 67 73 (ii) (A) if, prior to the purchase of Shares by Purchaser pursuant to the Offer, the Company Board of Directors shall have withdrawn, modified or changed in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, this Agreement or the Merger or shall have recommended an Acquisition Proposal or (B) there shall have been a material breach of Section 6.6, including but not limited to the Company having executed an agreement in principle or definitive agreement relating to an Acquisition Proposal or similar business combination with a person or entity other than Parent, Purchaser or their Affiliates; (iii) if prior to the purchase of Shares pursuant to the Offer, the Company shall have breached any representation, warranty, covenant or other agreement contained in this Agreement which would give rise to the failure of a condition set forth in Annex A hereto; (iv) any Person or "group" (as defined in Section 13(d)(3) of the Exchange Act), other than Parent, Purchaser or their affiliates or any group of which any of them is a member, shall have acquired beneficial ownership (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 15% or more of the Shares or any such Person or group shall have announced its intention to acquire 15% or more of the Shares and the Company Board of Directors has failed to recommend against acceptance of such announcement (including by taking no position with respect to such announcement); (v) if the Company receives an Acquisition Proposal from any Person (other than Parent or Purchaser), and the Company Board of Directors takes a neutral position or makes no recommendation with respect to such Acquisition Proposal after a reasonable amount of time (and in no event more than five business days following such receipt) has elapsed for the Company's Board of Directors to review and make a recommendation with respect to such Acquisition Proposal; or (vi) if Parent or Purchaser shall have terminated the Offer in accordance with the terms of this Agreement without Parent or Purchaser purchasing any Shares thereunder; provided that Parent or Purchaser is not in material breach of this Agreement. Section 8.2 Effect of Termination. In the event of the termination or abandonment of the Transactions by any party hereto pursuant to the terms of this Page 68 74 Agreement, written notice thereof shall forthwith be given to the other party or parties specifying the clause of Section 8.1 hereof pursuant to which such termination or abandonment of the Transactions is made, and there shall be no liability hereunder on the part of the Parent or the Company except (A) for fraud or for breach of this Agreement prior to such termination or abandonment of the Transactions and (B) as set forth in Section 9.1. Section 8.3 Interpretation. (a) When a reference is made in this Agreement to a section or article, such reference shall be to a section or article of this Agreement unless otherwise clearly indicated to the contrary. (b) Whenever the words "include", "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation." (c) The words "hereof", "herein" and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of this Agreement unless otherwise specified. (d) The plural of any defined term shall have a meaning correlative to such defined term, and words denoting any gender shall include all genders. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. (e) A reference to any party to this Agreement or any other agreement or document shall include such party's successors and permitted assigns. (f) A reference to any legislation or to any provision of any legislation shall include any modification or re-enactment thereof, any legislative provision substituted therefor and all regulations and statutory instruments issued thereunder or pursuant thereto. (g) The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no Page 69 75 presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. ARTICLE IX MISCELLANEOUS Section 9.1 Fees and Expenses. (a) Except as specifically provided to the contrary in this Agreement, including Section 9.1(b), (c) or (d), whether or not the Transactions are consummated, all costs and expenses incurred in connection with this Agreement and the consummation of the Transactions shall be paid by the party incurring such expenses. (b) If (i) the Company shall enter into an agreement which accepts or implements a Superior Proposal; (ii) the Company shall terminate or abandon the Transactions pursuant to Section 8.1(c)(ii); or (iii) Parent shall terminate or abandon the Transactions pursuant to Section 8.1(d)(ii), (iv) or (v); then the Company shall pay to Parent an amount equal to the Termination Fee. (c) If this Agreement is terminated by Parent pursuant to Section 8.1(d)(iii) and at the time of such termination, (i) the Company has not paid the Termination Fee to Parent pursuant to any other provision of this Agreement and (ii) Parent is not in material breach of this Agreement, then the Company shall pay to Parent, at the time of termination, an amount equal to Parent's actual and reasonably documented out-of-pocket fees and expenses incurred by Parent and Purchaser in connection with the Offer, the Merger, this Agreement and the consummation of the Transactions including, without limitation, the fees and expenses payable to all banks, investment banking firms, and other financial institutions and Persons and their respective agents and counsel incurred in connection with acting as Parent's or Purchaser's financial advisor with respect to, or arranging or committing to provide or providing any financing for, the Transactions (the "Expenses"). Page 70 76 (d) In addition, if (i) this Agreement is terminated by Parent pursuant to Section 8.1(d)(i), (iii) or (vi) and prior thereto there shall been publicly announced another Acquisition Proposal; (ii) this Agreement is terminated by the Company pursuant to Section 8.1(c)(iii) and prior thereto there shall have been publicly announced another Acquisition Proposal; or (iii) either the Company or Parent terminates or abandons the Transactions pursuant to 8.1(b)(i) and prior thereto there shall have been publicly announced another Acquisition Proposal and, in each such case, at the time of such termination, (i) the Company has not paid the Termination Fee to Parent pursuant to any other provision of this Agreement and (ii) Parent is not in material breach of this Agreement and within 12 months after such termination the Company shall enter into an agreement with respect to an Acquisition Proposal, then concurrently with the consummation of the transactions contemplated by such agreement, the Company shall pay an amount equal to the difference between the Termination Fee and the Expenses, previously paid (if any). The Termination Fee shall be paid in same day funds concurrently with the execution of an agreement referred to in subsection (b)(i) above or any termination or abandonment referred to in subsections (b)(ii) or (b)(iii) above, whichever shall first occur. Section 9.2 Amendment and Modification. Subject to applicable law and Section 2.3, this Agreement may be amended, modified and supplemented in any and all respects, whether before or after any vote of the shareholders of the Company contemplated hereby, by written agreement of the parties hereto, by action taken by their respective Boards of Directors (which in the case of the Company shall include approvals as contemplated in Section 2.3(c)), at any time prior to the Closing Date with respect to any of the terms contained herein; provided, however, that after the approval of this Agreement by the shareholders of the Company, no such amendment, modification or supplement shall reduce the amount or change the form of the Merger Consideration. Section 9.3 Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Effective Time. Page 71 77 The foregoing sentence shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. Section 9.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by an overnight courier service, such as Federal Express, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Purchaser, to: Fedders Corporation Westgate Corporate Center 505 Martinsville Road Liberty Corner, NJ 07938-0813 Attention: General Counsel Telephone No.: (908) 604-8686 Telecopy No.: (908) 604-8576 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: Mark C. Smith Telephone No.: (212) 735-3000 Telecopy No.: (212) 735-2000 and if to the Company, to: Trion, Inc. 101 McNeil Road Sanford, NC 27331-0760 Attention: President Telephone No.: (919) 775-2201 Facsimile No.: (919) 774-8536 Page 72 78 with a copy to: Smith Helms Mulliss & Moore, L.L.P. 201 North Tryon Street Charlotte, North Carolina 28202 Attention: John B. Yorke Telephone No.: (704) 343-2000 Facsimile No.: (704) 334-8467 Section 9.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties. Section 9.6 Entire Agreement; No Third Party Beneficiaries. This Agreement, the Stock Option Agreement, the Shareholder Agreements, and the Confidentiality Agreement (including the documents and the instruments referred to herein and therein): (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof, and (b) except as provided in Sections 3.4 and 6.9 are not intended to confer upon any person other than the parties hereto and thereto any rights or remedies hereunder. Section 9.7 Severability. Any term or provision of this Agreement that is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction or other authority declares that any term or provision hereof is invalid, void or unenforceable, the parties agree that the court making such determination shall have the power to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. Section 9.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts of law thereof. Page 73 79 Section 9.9 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the Transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement or any of the Transactions contemplated by this Agreement in any court other than a Federal or state court sitting in the State of Delaware. Section 9.10 Time of Essence. Each of the parties hereto hereby agrees that, with regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. Section 9.11 Extension; Waiver. At any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the proviso of Section 9.2, waive compliance by the other parties with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. Section 9.12 Assignment. Neither this Agreement not any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written content of the other parties, except that Purchaser may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject to the preceding sentence, this Agreement will be binding upon, inure Page 74 80 to the benefit of and be enforceable by the parties and their respective successors and assigns. Page 75 81 IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. FEDDERS CORPORATION By /s/ Robert L. Laurent __________________________________ Name: Robert L. Laurent Title: Executive Vice President TI ACQUISITION CORP. By /s/ Robert L. Laurent __________________________________ Name: Robert L. Laurent Title: Executive Vice President TRION, INC. By /s/ Steven L. Scheider _________________________________ Name: Steven L. Scheider Title: President and Chief Executive Officer 82 Annex A Certain Conditions of the Offer. Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) Purchaser's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Agreement), Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any tendered Shares, and may terminate or amend the Offer as to any Shares not then paid for, if (i) any applicable waiting period under the HSR Act has not expired or terminated, (ii) the Minimum Condition has not been satisfied, or (iii) at any time on or after the date of the Agreement and prior to the expiration of the Offer, any of the following events shall occur or shall be determined by Purchaser to have occurred: (a) (i) there shall be threatened, instituted or pending any suit, action or proceeding by any Governmental Body or (ii) there shall be instituted or pending any suit, action or proceeding before any court which in the good faith judgement of Parent and Purchaser is likely to result in a Material Adverse Effect, in each cases of (i) or (ii), (A) seeking to prohibit or impose any limitations on Parent's or Purchaser's ownership or operation (or that of any of their respective Subsidiaries or Affiliates) of all or a material portion of their or the Company's businesses or assets, or to compel Parent or Purchaser or their respective Subsidiaries and Affiliates to dispose of or hold separate any material portion of the business or assets of the Company or Parent and their respective Subsidiaries, in each case taken as a whole, (B) challenging the acquisition by Parent or Purchaser of any Shares under the Offer or pursuant to the Stock Option Agreement or the Shareholders Agreement, seeking to restrain, prohibit or delay the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by this Agreement, the Stock Option Agreement or the Shareholders Agreement, or seeking to obtain from the Company, Parent or Purchaser any damages that are material in relation to the Company and its Subsidiaries taken as a whole, (C) seeking to impose material limitations on the ability of Parent or Purchaser, or rendering Parent or Purchaser unable, to accept for payment, pay for or purchase some or all of the Shares pursuant to the Offer and the Merger, (D) seeking to impose limitations on the ability of Purchaser or Parent effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by it on all matters properly presented to the Company's shareholders, (E) seeking to restrict any future business activity by Parent or Purchaser, including, A-1 83 without limitation, requiring the prior consent of any person or entity (including any Governmental Body) to future transactions by Parent or Purchaser, or (F) which otherwise is reasonably likely to have a Material Adverse Affect on the Company or, as a result of the Transactions, Parent and its Subsidiaries; or (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Body, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (A) through (F) of paragraph (a) above; or (c) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the NYSE or on the Nasdaq (excluding (A) suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions and (B) limitations on price fluctuations in effect on the date of this Agreement), or (ii) a declaration of a banking moratorium by federal or state authorities or any suspension of payments in respect of banks in the United States (whether or not mandatory) imposed by federal or state authorities on the extension of credit by lending institutions in the United States; or (d) there shall have occurred any Material Adverse Change (or any development that, insofar as reasonably can be foreseen, is reasonably likely to result in any Material Adverse Change); or (e) the Company Board of Directors or any committee thereof (i) shall have withdrawn, modified or changed in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, this Agreement or the Merger, (ii) shall have recommended the approval or acceptance of an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, Purchaser or their Affiliates, (iii) shall have executed an agreement in principle or definitive agreement relating to an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, Purchaser or their Affiliates or (iv) upon request of Purchaser, shall fail to reaffirm its approval or recommendation of the Offer, the Merger Agreement, or the Merger; or (f) the Company shall have breached or failed to perform any of its agreements under the Stock Option Agreement or breached any of its representa- A-2 84 tions and warranties in such agreement or such agreement shall not be valid, binding and enforceable, except for such breaches or failures or failures to be valid, binding and enforceable that do not materially and adversely affect the benefits expected to be received by Parent and Purchaser under the Merger Agreement or the Stock Option Agreement; or (g) any Person or "group" (as defined in Section 13(d)(3) of the Exchange Act), other than Parent, Purchaser or their affiliates or any group of which any of them is a member, shall have acquired beneficial ownership (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 15% or more of the Shares or any such Person or group shall have announced its intention to acquire 15% or more of the Shares and the Company Board of Directors has failed to recommend against acceptance of such announcement (including by taking no position with respect to such announcement); or (h) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality shall not be true and correct and any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case as of the date of this Agreement and as of the scheduled expiration of the Offer; or (i) the Company shall have breached or failed to perform or to comply with any obligation, agreement or covenant of the Company to be performed or complied with by it under this Agreement; except, in each case where the failure to perform or comply with such obligations, agreements or covenants, do not, individually or in the aggregate, have a Material Adverse Effect on the Company or a Material Adverse Effect on the ability to consummate the Offer or the Merger; or (j) all consents necessary to the consummation of the Tender Offer or the Merger including, without limitation, consents from parties to loans, contracts, leases or other agreements and consents from governmental agencies, whether federal, state or local shall not have been obtained, other than consents the failure to obtain which would not have a Material Adverse Effect on the Company and its Subsidiaries, taken as a whole; or (k) the Employment Agreements shall not be in full force and effect and either Employee shall have denied or disaffirmed his obligation under his respective Employment Agreement; and A-3 85 (l) this Agreement shall have been terminated in accordance with its terms; which in the reasonable good faith judgment of Parent or Purchaser, in any such case, and regardless of the circumstances (including any action or inaction by Parent or Purchaser) giving rise to such condition makes it inadvisable to proceed with the Offer and/or with such acceptance for payment of or payment for Shares. The foregoing conditions are for the sole benefit of Parent and Purchaser, may be waived by Parent or Purchaser, in whole or in part, at any time and from time to time in the sole discretion of Parent or Purchaser. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. A-4 86 ANNEX B Microfilm Number _________ Filed with the Department of State on ___________ Entry Number _____________ _________________________________________________ Secretary of the Commonwealth ARTICLES OF INCORPORATION-FOR PROFIT DSCB:15-1306/2102/2303/2702/2903/7102a (Rev 90) Indicate type of domestic corporation (check one): X Business-stock (15 Pa. C.S.Section 1306) Management (15 Pa. C.S.Section 2702) - --- --- Business-nonstock (15 Pa. C.S.Section 2102) Professional (15 Pa. C.S.Section 2903) - --- --- Business-statutory close (15 Pa. C.S.Section 2303) Cooperative (15 Pa. C.S. Section 7102A) - --- ---
In compliance with the requirements of the applicable provisions of 15 Pa. C.S. (relating to corporations and unincorporated associations) the undersigned, desiring to incorporate a corporation for profit hereby state(s) that: 1. The name of the corporation is Trion, Inc. 2. The (a) address of the corporation's initial registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is: (a) One Commerce Sq., 417 Walnut St., Harrisburg, PA 17101 Dauphin ----------------------------------------------------------------- Number and Street City State Zip County (b) c/o: CT Corporation System ----------------------------------------------------------- Name of Commercial Registered Office Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. 3. The corporation is incorporated under the provision of the Business Corporation Law of 1988. 4. The aggregate number of shares authorized is: 1,000 (other provisions, if any, attach 8 1/2 x 11 sheet) 5. The name and address, including street and number, if any, of each incorporator is: Name Address Lynn Buckley One Rodney Square, Wilmington, DE 19801 -------------- ---------------------------------------- -------------- ---------------------------------------- 6. The specific effective date, if any, is ------------------------------ month day year hour, if any 7. Any additional provisions of the articles, if any, attach an 8 1/2 x 11 sheet. B-1 87 8. Statutory close corporations only: Neither the corporation nor any shareholder shall make an offering of any of its shares of any class that would constitute a "public offering" within the meaning of the Securities Act of 1933 (15 U.S.C. Section 77a et seq.). 9. Cooperative corporations only: (Complete and strike out inapplicable term) The common bond of membership among its members/shareholders is --------------------------------------------------------------------- IN TESTIMONY WHEREOF, the incorporator(s) has (have) signed these Articles of Incorporation this day of July, 1999. ---- - ---------------------------------- ---------------------------------------- (Signature) (Signature) B-2 EX-99.C.2 12 COMPANY OPTION AGREEMENT 1 STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated as of July 12, 1999 (the "Agreement"), between Trion, Inc., a Pennsylvania corporation ("Issuer"), and Fedders Corporation, a Delaware corporation ("Grantee"). WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), providing for, among other things, upon the terms and subject to the conditions thereof, the merger of TI Acquisition Corp., an indirect wholly owned subsidiary of the Grantee, with and into Issuer (the "Merger"); and WHEREAS, as a condition and inducement to Grantee's willingness to enter into the Merger Agreement, Grantee has requested that Issuer agree, and Issuer has agreed, to grant Grantee the Option (as defined below). NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, Issuer and Grantee agree as follows: Capitalized terms used but not defined herein have the meanings set forth in the Merger Agreement. 1. Grant of Option. (a) Upon the terms and subject to the conditions set forth herein, Issuer hereby grants to Grantee an unconditional, irrevocable option (the "Option") to purchase up to 1,425,088 shares (the "Option Shares") of Issuer's common stock, par value $0.50 per share ("Issuer Common Stock"), at a price of $5.50 per share (the "Purchase Price"), subject to adjustment as set forth herein. (b) In the event that any additional shares of Issuer Common Stock are either (i) issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or otherwise cease to be outstanding after the date of the Agreement, the number of Option Shares shall be increased or deceased, as appropriate, so that, after such events, the number of Option Shares equals 19.9% of the number of shares of Issuer Common Stock then issued and outstanding, without giving effect to any shares subject to or issued pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in this Agreement 2 shall be deemed to authorize Issuer or Grantee to breach any provision of the Merger Agreement. 2. Exercise of Option. (a) Grantee may exercise the Option, with respect to any or all of the Option Shares at any time and from time to time, subject to the provisions of Section 2(c), after the Merger Agreement becomes terminable under circumstances which entitle Grantee to receive the Termination Fee under Section 9.1 of the Merger Agreement (a "Triggering Event") except that (i) subject to the last sentence of this Section 2(a), the Option will terminate and be of no further force and effect upon the earliest to occur of (A) the purchase of shares of Issuer Common Stock pursuant to the Offer, (B) twelve months after the date on which a Triggering Event occurs and (C) termination of the Merger Agreement in accordance with its terms prior to the occurrence of a Triggering Event, unless, in the case of clauses (B) and (C), the Grantee could be entitled to receive the Termination Fee following such time or termination upon the occurrence of certain events, in which case the Option will not terminate until the later of (x) twelve months following the time such fees become payable and (y) the expiration of the period in which the Grantee has such right to receive the Termination Fee and (ii) any purchase of Option Shares upon exercise of the Option will be subject to compliance with the HSR Act and the obtaining or making of any consents, approvals, orders, notifications or authorizations, the failure of which to have obtained or made would have the effect of making the issuance of Option Shares illegal (the "Regulatory Approvals") and no preliminary or permanent injunction or other order by any court of competent jurisdiction prohibiting or otherwise restraining such issuance shall be in effect. Notwithstanding the termination of the Option, Grantee will be entitled to purchase the Option Shares if it has exercised the Option in accordance with the terms hereof prior to the termination of the Option. (b) In the event that Grantee wishes to exercise the Option, it will send to Issuer a written notice (an "Exercise Notice"; the date of which being herein referred to as the "Notice Date") to that effect specifying (i) the number of Option Shares, if any, Grantee wishes to purchase pursuant to this Section 2(b), (ii) the number of Option Shares, if any, with respect to which Grantee wishes to exercise its Cash-Out Right (as defined herein) pursuant to Section 6(c), (iii) the denominations of the certificate or certificates evidencing the Option Shares which Grantee wishes to purchase pursuant to this Section 2(b) and (iv) a date not earlier than three business days nor later than 60 business days from the Notice Date for the closing (an "Option Closing") of such purchase (an "Option Closing Date"). Any Option Closing will be at an agreed location and time in New York, New York on the applicable Option Closing Date or at such later date as may be necessary so as to comply with clause (ii) of Section 2(a). 2 3 (c) Notwithstanding anything to the contrary contained herein, any exercise of the Option and purchase of Option Shares shall be subject to compliance with applicable laws and regulations, which may prohibit the purchase of all the Option Shares specified in the Exercise Notice without first obtaining or making certain Regulatory Approvals. In such event, if the Option is otherwise exercisable and Grantee wishes to exercise the Option, the Option may be exercised in accordance with Section 2(b) and Grantee shall acquire the maximum number of Option Shares specified in the Exercise Notice that Grantee is then permitted to acquire under the applicable laws and regulations, and if Grantee thereafter obtains the Regulatory Approvals to acquire the remaining balance of the Option Shares specified in the Exercise Notice, then Grantee shall be entitled to acquire such remaining balance. Issuer agrees to use its reasonable best efforts to assist Grantee in seeking the Regulatory Approvals. In the event (i) Grantee receives official notice that a Regulatory Approval required for the purchase of any Option Shares will not be issued or granted or (ii) such Regulatory Approval has not been issued or granted within six months of the date of the Exercise Notice, Grantee shall have the right to exercise its Cash-Out Right (as defined herein) pursuant to Section 6(c) with respect to the Option Shares for which such Regulatory Approval will not be issued or granted or has not been issued or granted. (d) If the aggregate amounts received by Grantee from (i) the Termination Fee and Expenses pursuant to Section 9.1 of the Merger Agreement, (ii) amounts from the sale or other disposition of the Option Shares, and (iii) amounts paid pursuant to Section 6(c) hereof, exceeds the sum of (A) $2,000,000 plus (B) the aggregate amounts paid by Grantee to purchase any Option Shares (the sum of the amounts in Section 2(d)(A) and 2(d)(B) being hereinafter referred to as the "Maximum Profit"), then Grantee, at its sole election, shall either (1) reduce the number of Option Shares, (2) deliver to the Issuer for cancellation Option Shares previously purchased by Grantee (valued, for the purposes of this Section 2(d) at the average closing sale price per share of Issuer Common Stock (or if there is no sale on such date then the average between the closing bid and ask prices on any such day) as reported as reported on the Nasdaq National Market (or, if not listed on the Nasdaq National Market, as reported on any other national securities exchange or national securities quotation system on which the Issuer Common Stock is listed or quoted, as reported in The Wall Street Journal (Northeast edition), or, if not reported thereby, any other authoritative source) for the twenty consecutive trading days preceding the day on which the amount received by Grantee pursuant to clauses (d)(i), (ii) and (iii) above exceeds the Maximum Profit), (3) pay cash to the Issuer or (4) any combination thereof, so that the amount received by Grantee pursuant to clauses (d)(i), (ii) and (iii) above shall not exceed the Maximum Profit after 3 4 taking into account the foregoing actions. Notwithstanding any other provision of this Agreement, nothing in this Agreement shall affect the ability of Grantee to receive nor relieve Issuer's obligation to pay a fee pursuant to Section 9.1 of the Merger Agreement. 3. Payment and Delivery of Certificates. (a) At any Option Closing, Grantee will pay to Issuer in same day funds by wire transfer to a bank account designated in writing by Issuer an amount equal to the Purchase Price multiplied by the number of Option Shares to be purchased at such Option Closing. (b) At any Option Closing, simultaneously with the delivery of same day funds as provided in Section 3(a), Issuer will deliver to Grantee a certificate or certificates representing the Option Shares to be purchased at such Option Closing, which Option Shares will be free and clear of all liens, claims, charges and encumbrances of any kind whatsoever. If at the time of issuance of Option Shares pursuant to an exercise of the Option hereunder, Issuer shall have issued any securities similar to rights under a shareholder rights plan, then each Option Share issued pursuant to such exercise will also represent such a corresponding right with terms substantially the same as and at least as favorable to Grantee as are provided under any Issuer shareholder rights agreement or any similar agreement then in effect. (c) Certificates for the Option Shares delivered at an Option Closing will have typed or printed thereon a restrictive legend which will read substantially as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE." It is understood and agreed that the above legend will be removed by delivery of substitute certificate(s) without such reference if such Option Shares have been sold in compliance with the registration and prospectus delivery requirements of the Securities Act, such Option Shares have been sold in reliance on and in accordance with Rule 144 under the Securities Act or Grantee has delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel in form and substance reasonably satisfactory to Issuer and its counsel, to the effect that such legend is not required for purposes of the Securities Act. 4 5 4. Representations and Warranties of Issuer. Issuer hereby represents and warrants to Grantee as follows: (a) Corporate Authorization. Issuer has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer, and no other corporate proceedings on the part of Issuer are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Issuer, and assuming this Agreement constitutes a valid and binding agreement of Grantee, this Agreement constitutes a valid and binding agreement of Issuer, enforceable against Issuer in accordance with its terms (except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, or by principles governing the availability of equitable remedies). (b) Authorized Stock. Issuer has taken all necessary corporate and other action to authorize and reserve and, subject to the expiration or termination of any required waiting period under the HSR Act, to permit it to issue, and, at all times from the date hereof until the obligation to deliver Option Shares upon the exercise of the Option terminates, shall have reserved for issuance, upon exercise of the Option, shares of Issuer Common Stock necessary for Grantee to exercise the Option, and Issuer will take all necessary corporate action to authorize and reserve (and shall at all times maintain, free from pre-emptive rights, sufficient authorized and reserved shares) for issuance all additional shares of Issuer Common Stock or other securities which may be issued pursuant to Section 6 upon exercise of the Option. The shares of Issuer Common Stock to be issued upon due exercise of the Option, including all additional shares of Issuer Common Stock or other securities which may be issuable upon exercise of the Option or any other securities which may be issued pursuant to Section 6, upon issuance pursuant hereto, will be duly and validly issued, fully paid and nonassessable, and will be delivered free and clear of all liens, claims, charges and encumbrances of any kind or nature whatsoever, including without limitation any preemptive rights of any stockholder of Issuer. 5. Representations and Warranties of Grantee. Grantee hereby represents and warrants to Issuer that: 5 6 (a) Corporate Authorization. Grantee has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Grantee, and no other corporate proceedings on the part of Grantee are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Grantee, and assuming this Agreement constitutes a valid and binding agreement of Issuer, this Agreement constitutes a valid and binding agreement of Grantee, enforceable against Grantee in accordance with its terms (except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, or by principles governing the availability of equitable remedies). (b) Purchase Not For Distribution. Any Option Shares or other securities acquired by Grantee upon exercise of the Option will not be, and the Option is not being, acquired by Grantee with a view to the public distribution thereof. Neither the Option nor any of the Option Shares will be offered, sold, pledged or otherwise transferred except in compliance with, or pursuant to an exemption from, the registration requirements of the Securities Act. 6. Adjustment upon Changes in Capitalization, Etc. (a) In the event of any changes in Issuer Common Stock by reason of a stock dividend, stock split, reverse stock split, merger, recapitalization, combination, exchange of shares, or similar transaction, the type and number of shares or securities subject to the Option, and the Purchase Price therefor, will be adjusted appropriately, and proper provision will be made in the agreements governing such transaction, so that Grantee will receive upon exercise of the Option the number and class of shares or other securities or property that Grantee would have received with respect to Issuer Common Stock if the Option had been exercised immediately prior to such event or the record date therefor, as applicable. (b) Without limiting the parties' relative rights and obligations under the Merger Agreement, in the event that the Issuer enters into an agreement (i) to consolidate with or merge into any person, other than Grantee or one of its subsidiaries, and Issuer will not be the continuing or surviving corporation in such consolidation or merger, (ii) to permit any person, other than Grantee or one of its subsidiaries, to merge into Issuer and Issuer will be the continuing or surviving corporation, but in connection with such merger, the shares of Issuer Common Stock outstanding immediately prior to the consummation of such merger will be changed into or exchanged for stock or other 6 7 securities of Issuer or any other person or cash or any other property, or the shares of Issuer Common Stock outstanding immediately prior to the consummation of such merger will, after such merger represent less than 50% of the outstanding voting securities of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Grantee or one of its subsidiaries, then, and in each such case, the agreement governing such transaction will make proper provision so that the Option will, upon the consummation of any such transaction and upon the terms and condition set forth herein, be converted into, or exchanged for, an option with identical terms appropriately adjusted to acquire the number and class of shares or other securities or property that Grantee would have received in respect of Issuer Common Stock if the Option had been exercised immediately prior to such consolidation, merger, sale, or transfer, or the record date therefor, as applicable and make any other necessary adjustments. (c) If, at any time during the period commencing on the occurrence of a Triggering Event and ending on the termination of the Option in accordance with Section 2, Grantee sends to Issuer an Exercise Notice indicating Grantee's election to exercise its right (the "Cash-Out-Right") pursuant to this Section 6(c), then Issuer shall pay to Grantee, on the Option Closing Date, in exchange for the cancellation of the Option with respect to such number of Option Shares as Grantee specifies in the Exercise Notice, an amount in cash (the "Cash-Out Price") equal to the amount by which (A) the highest of (i) the price per share of Issuer Common Stock at which a tender offer or exchange offer therefor has been made, (ii) the highest price per share of Issuer Common Stock to be paid by any third-party pursuant to an agreement with the Issuer, (iii) the highest closing price within the six month period immediately preceding the Notice Date per share of Issuer Common Stock as reported on the Nasdaq National Market (or, if not listed on the Nasdaq National Market, as reported on any other national securities exchange or national securities quotation system on which the Issuer Common Stock is listed or quoted, as reported in The Wall Street Journal (Northeast edition), or, if not reported thereby, any other authoritative source) and (iv) in the event of a sale of all or a substantial portion of Issuer's assets, the sum of the price paid in such sale for such assets and the current market value of the remaining assets of Issuer as determined by a nationally recognized investment banking firm selected by the Grantee, and reasonably acceptable to the Issuer, divided by the number of shares of Issuer Common Stock outstanding at the time of such sale exceeds (B) the Purchase Price, multiplied by the number of shares for which this Option is then exercised. In determining the Cash-Out Price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm selected by the Grantee and reasonably acceptable to the Issuer. Grantee will cooperate with the valuation work 7 8 of any investment banking firm selected pursuant to this Section 6(c). Notwithstanding the termination of the Option, Grantee will be entitled to exercise its rights under this Section 6(c) if it has exercised such rights in accordance with the terms hereof prior to the termination of the Option. 7. Registration Rights. (a) At any time and from time to time within three years of the date hereof, Grantee may by written notice (a "Registration Notice") to Issuer request Issuer to register under the Securities Act all or part of any Issuer Common Stock beneficially owned by Grantee (collectively, the "Registrable Securities") in order to permit the sale or other disposition of such securities pursuant to, at the option of Grantee, (i) a shelf registration or (ii) a bona fide, firm commitment underwritten public offering in which Grantee shall have the right, including with respect to any takedown off the shelf, to select the managing underwriter, which shall be reasonably acceptable to the Issuer, and shall effect as wide a distribution of such Registrable Securities as is reasonably practicable and shall use reasonable efforts to prevent any person or group from purchasing through such offering shares representing more than 3% of the shares of Issuer Common Stock then outstanding on a fully-diluted basis. (b) Issuer shall use reasonable best efforts to effect, as promptly as practicable, the registration under the Securities Act of the Registrable Securities requested to be registered in the Registration Notice and to keep such registration statement current; provided, however, that (i) Grantee shall not be entitled to more than an aggregate of two effective registration statements hereunder and (ii) Issuer will not be required to file any such registration statement during any period of time (not to exceed 40 days after a Registration Notice in the case of clause (A) below or 90 days after a Registration Notice in the case of clauses (B) and (C) below) when (A) Issuer is in possession of material non-public information which it reasonably believes would be detrimental to be disclosed at such time and, based upon the advice of outside securities counsel to Issuer, such information would have to be disclosed if a registration statement were filed at that time; (B) Issuer would be required under the Securities Act to include audited financial statements for any period in such registration statement and such financial statements are not yet available for inclusion in such registration statement; or (C) Issuer determines, in its reasonable judgment, that such registration would interfere with any financing, acquisition or other material transaction involving Issuer; provided that the filing of such registration statement may not be delayed more than an aggregate of 90 days after the Registration Notice. If the consummation of the sale of any Registrable Securities pursuant to a registration hereunder does not occur within 90 days 8 9 after the filing with the SEC of the initial registration statement therefor, the provisions of this Section shall again be applicable to any proposed registration, it being understood that Grantee shall not be entitled to more than an aggregate of two effective registration statements hereunder. Issuer will use reasonable best efforts to cause each such registration statement to become effective, to obtain all consents or waivers of other parties which are required therefor, and to keep such registration statement effective for such period not in excess of 180 calendar days from the day such registration statement first becomes effective as may be reasonably necessary to effect such sale or other disposition. Issuer shall use reasonable best efforts to cause any Registrable Securities registered pursuant to this Section to be qualified for sale under the securities or blue sky laws of such jurisdictions as Grantee may reasonably request and shall continue such registration or qualification in effect in such jurisdictions; provided, however, that Issuer shall not be required to qualify to do business in, or consent to general service of process in, any jurisdiction. (c) If Issuer effects a registration under the Securities Act of Issuer Common Stock for its own account or for any other stockholders of Issuer (other than on Form S-4 or Form S-8, or any successor form), it will allow Grantee the right to participate in such registration, and such participation will not affect the obligation of Issuer to effect demand registration statements for Grantee under this Section 7, except that, if the managing underwriters of such offering advise Issuer in writing that in their opinion the number of shares of Issuer Common Stock requested to be included in such registration exceeds the number which can be sold in such offering, Issuer will include that portion of the shares requested to be included therein equal to the product obtained by multiplying (i) the number of shares which the underwriter has informed the Issuer can be included in the offering and (ii) the percentage obtained by dividing (x) the total number of shares of Issuer Common Stock held by Grantee and (y) the total number of shares of Issuer outstanding. (d) The registration rights set forth in this Section are subject to the condition that Grantee shall provide Issuer with such information with respect to Grantee Registrable Securities, the plan for distribution thereof, and such other information with respect to Grantee as, in the reasonable judgment of counsel for Issuer, is necessary to enable Issuer to include in a registration statement all material facts required to be disclosed with respect to a registration hereunder. (e) A registration effected under this Section shall be effected at Issuer's expense, except for underwriting discounts and commissions and the fees and expenses of Grantee's counsel, and Issuer shall provide to the underwriters such documentation 9 10 (including certificates, opinions of counsel and "comfort" letters from auditors) as are customary in connection with underwritten public offerings and as such underwriters may reasonably require. In connection with any registration, Grantee and Issuer agree to enter into an underwriting agreement reasonably acceptable to each such party, in form and substance customary for transactions of this type. (f) In connection with a registration effected under this Section 7, Issuer shall indemnify and hold harmless Grantee, its affiliates and controlling persons and their respective officers, directors, agents and representatives from and against any and all losses, claims, damages, liabilities and expenses (including, without limitation, all out-of-pocket expenses, investigation expenses, expenses incurred with respect to any judgement and fees and disbursements of counsel and accountants) arising out of or based upon any statements contained in, or omissions or alleged omissions from, each registration statement (and related prospectus) filed pursuant to this Section 7; provided, however, that Issuer shall not be liable in any such case to any such persons to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement contained in, or omission or alleged omission from, such registration statement or prospectus in reliance upon, and in conformity with, written information furnished to Issuer specifically for use in the preparation thereof by Grantee. (g) In connection with a registration effected under this Section 7, Grantee shall indemnify and hold harmless Issuer, its affiliates and controlling persons and their respective officers, directors, agents and representatives from and against any and all losses, claims, damages, liabilities and expenses (including, without limitation, all out-of-pocket expenses, investigation expenses, expenses incurred with respect to any judgement and fees and disbursements of counsel and accountants) arising out of or based upon any statements contained in, or omissions or alleged omissions from, each registration statement (and related prospectus) filed pursuant to this Section 7 that arises out of or is based upon an untrue statement contained in, or omission or alleged omission from, such registration statement or prospectus in reliance upon, and in conformity with, written information furnished to Issuer specifically for use in the preparation thereof by Grantee. 8. Listing. If Issuer Common Stock or any other securities to be acquired upon exercise of the Option are then listed on the Nasdaq (or any other national securities exchange or national securities quotation system), Issuer, upon the request of Grantee, will promptly file an application to list the shares of Issuer Common Stock or other securities to be acquired upon exercise of the Option on the Nasdaq (and any such other 10 11 national securities exchange or national securities quotation system) and will use reasonable efforts to obtain approval of such listing as promptly as practicable. 9. Miscellaneous. (a) Expenses. Except as otherwise provided in the Merger Agreement, each of the parties hereto will pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. (b) Amendment. This Agreement may not be amended, except by an instrument in writing signed on behalf of each of the parties. (c) Extension; Waiver. Any agreement on the part of a party to waive any provision of this Agreement, or to extend the time for performance, will be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise will not constitute a waiver of such rights. (d) Entire Agreement; No Third-Party Beneficiaries. This Agreement and the Merger Agreement (i) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement, and (ii) are not intended to confer upon any person other than the parties any rights or remedies in respect of this Agreement. (e) Counterparts. This Agreement may be executed in two or more counter parts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties. (f) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts or choice of law thereof or of any other jurisdiction. (g) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given upon receipt, and shall be given to the parties at the following addresses or telecopy numbers (or at such other address or telecopy number for a party as shall be specified by like notice): 11 12 If to Grantee, to: Fedders Corporation 505 Martinsville Road Liberty Corner, NJ 07938 Attention: General Counsel Telecopy: (908) 604-8576 Telephone: (908) 604-8686 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: Mark C. Smith, Esq. Telecopy: (212) 735-2000 If to Issuer, to: Trion, Inc. 101 McNeil Road Sanford, NC 27331-0760 Attention: President Telecopy: (919) 774-8536 with a copy to: Smith Helms Mulliss & Moore, L.L.P. 201 North Tryon Street Charlotte, North Carolina 28202 Attention: John B. Yorke Telecopy.: (704) 334-8467 Telephone: (704) 343-2000 (h) Assignment. Except as set forth herein, neither this Agreement, the Option nor any of the rights, interests, or obligations under this Agreement may be assigned, transferred or delegated, in whole or in part, by operation of law or otherwise, by Issuer without the prior written consent of Grantee. Any assignment, transfer or delegation in violation of the preceding sentence will be void. Subject to the first and second 12 13 sentences of this Section 9(h), this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. (i) Further Assurances. In the event of any exercise of the Option by Grantee, Issuer and Grantee will execute and deliver all other documents and instruments and take all other action that may be reasonably necessary in order to consummate the transactions provided for by such exercise. (j) Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the Transactions, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iii) agrees that it will not bring any action relating to this Agreement or any of the Transactions in any court other than a Federal or state court sitting in the State of Delaware. 13 14 IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the day and year first written above. TRION, INC. By: /s/ Steven L. Schneider --------------------------- Name: Steven L. Schneider Title: President & Chief Executive Officer FEDDERS CORPORATION By: /s/ Robert L. Laurent, Jr. --------------------------- Name: Robert L. Laurent, Jr. Title: Executive Vice President EX-99.C.3 13 SHAREHOLDER AGREEMENTS 1 SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated as of July 12, 1999 (this "Agreement"), among Fedders Corporation, a Delaware corporation (the "Parent"), TI Acquisition Corp., a Pennsylvania corporation and an indirect wholly owned subsidiary of the Parent ("Purchaser"), and Hugh E. Carr (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement the Parent, Purchaser and Trion, Inc., a Pennsylvania corporation (the "Company"), have entered into an Agreement and Plan of Merger dated as of the date hereof (such Agreement and Plan of Merger, as amended from time to time, the "Merger Agreement"), which provides, among other things, that Purchaser shall make the Offer (as defined in the Merger Agreement) to purchase at a price of $5.50 per share, net to the sellers in cash, all of the issued and outstanding shares of the Company's Common Stock, par value $0.50 per share (the "Company Common Stock"), and shall merge with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement (any term used herein without definition shall have the definition ascribed thereto in the Merger Agreement); WHEREAS, the Stockholder owns beneficially and of record shares of Company Common Stock (such shares of Company Common Stock being collectively referred to herein as the "Stockholder Shares"); and WHEREAS, as a condition to the willingness of the Parent and Purchaser to enter into the Merger Agreement, and as an inducement to them to do so, the Stockholder has agreed for the benefit of the Parent and Purchaser to tender the Stockholder Shares and any other shares of Company Common Stock at any time during the term of this Agreement held by the Stockholder, pursuant to the Offer, to vote all the Stockholder Shares and any other shares of Company Common Stock owned by the Stockholder in favor of the Merger, and to grant to Parent an option to acquire all Stockholder Shares and all other shares of Company Common Stock owned by the Stockholder under certain circumstances, all on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereby agree as follows: ARTICLE I Tender Offer and Option SECTION 1.1. Tender of Shares. (a) Within five business days of the commencement by Purchaser of the Offer, the Stockholder shall tender to the Depository designated in the Offer to Purchase (the "Offer to Purchase") distributed by Purchaser in connection with the Offer (i) a letter of transmittal with respect to the Stockholder Shares and any other shares of Company Common 2 Stock held by the Stockholder (whether or not currently held by the Stockholder; the Stockholder Shares, together with any shares acquired by the Stockholder in any capacity after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the "Shares")), complying with the terms of the Offer to Purchase, (ii) the certificates representing the Shares, and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer to Purchase. (b) The Stockholder shall not, subject to applicable law, withdraw the tender effected in accordance with Section 1.1(a); provided, however, that the Stockholder may decline to tender, or may withdraw, any and all Shares owned by the Stockholder if the Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the stockholders, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). The Stockholder shall give Purchaser at least two business days' prior notice of any withdrawal of Shares owned by the Stockholder pursuant to the immediately preceding proviso. SECTION 1.2. Option. (a) The Stockholder hereby irrevocably grants Parent an option (the "Option"), exercisable only upon the events and subject to the conditions set forth herein, to purchase any or all of the Shares at a purchase price per share equal to $5.50 (or such higher per share price as may be offered by Purchaser in the Offer). (b) Subject to the conditions set forth in Section 1.3 and the termination provisions of Section 6.7, Parent may exercise the Option in whole or in part at any time prior to the date 60 days after the expiration or termination of the Offer (such sixtieth day being herein called the "Option Expiration Date") if (x) the Stockholder fails to comply with any of its obligations under this Agreement or withdraws the tender of the Shares except under the circumstances set forth in the proviso to Section 1.1(b) (but the Option shall not limit any other right or remedy available to the Parent or Purchaser against the Stockholder for breach of this Agreement) or (y) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer set forth in Annex A to the Merger Agreement (other than as a result of any action or inaction of the Parent or Purchaser which constitutes a breach of the Merger Agreement). Upon the occurrence of any of such circumstances, Purchaser shall be entitled to exercise the Option and (subject to Section 1.3) Parent shall be entitled to purchase the Shares and the Stockholder shall sell the Shares to Parent. Parent shall exercise the Option by delivering written notice thereof to the Stockholder (the "Notice"), specifying the number of Shares to be purchased and the date, time and place for the closing of such purchase which date shall not be less than three business days nor more than five business days from the date the Stockholder receives the Notice and in no event shall such date be later than the Option Expiration Date. The closing of the purchase of Shares pursuant to this Section 1.2 (the "Closing") shall take place on the date, at the time and at 2 3 the place specified in such notice; provided, that if at such date any of the conditions specified in Section 1.3 shall not have been satisfied (or waived), Parent may postpone the Closing until a date within five business days after such conditions are satisfied (but not later than the Option Expiration Date). (c) At the Closing, the Stockholder will deliver to Parent (in accordance with Parent's instructions) the certificates representing the Shares owned by the Stockholder and being purchased pursuant to Section 1.2(c), duly endorsed or accompanied by stock powers duly executed in blank. At such Closing, Parent shall deliver to the Stockholder, by bank wire transfer of immediately available funds, an amount equal to the number of Shares being purchased from the Stockholder as specified in the Notice multiplied by $5.50 (or such higher per share price as may be offered by Parent in the Offer). SECTION 1.3. Conditions to Option. The obligation of Parent to purchase the Shares at the Closing is subject to the following conditions: (a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such purchase shall have expired or been terminated; and (b) there shall be no preliminary or permanent injunction or other order, decree or ruling issued by any Governmental Body, nor any statute, rule, regulation or order promulgated or enacted by any Governmental Body prohibiting, or otherwise restraining, such purchase. SECTION 1.4. No Purchase. Purchaser and Parent may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms and conditions set forth in the Offer to Purchase, and may allow the Option to expire without exercising the Option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer to Purchase or pursuant to the exercise of the Option, they shall be returned to the Stockholder, whereupon they shall continue to be held by the Stockholder subject to the terms and conditions of this Agreement. ARTICLE II Consent and Voting The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares owned by the Stockholder. By entering into this Agreement, the Stockholder hereby consents to the Merger Agreement and the transactions contemplated thereby, including the Merger. So long as the Merger Agreement is in effect, the Stockholder hereby agrees (i) to vote all Shares now or hereafter owned by such Stockholder or execute a consent or proxy and not revoke any proxy, vote 3 4 or consent, in favor of the Articles Amendment, the Merger Agreement, the Merger and the transactions contemplated thereby, and (ii) to oppose any Acquisition Proposal and to vote all Shares now or hereafter owned by such Stockholder, or execute a consent or proxy, against any Acquisition Proposal. ARTICLE III Representations, Warranties and Covenants of the Stockholder The Stockholder represents, warrants and covenants to the Purchaser that: SECTION 3.1. (a) Ownership. As of the date hereof the Stockholder is the sole, true, lawful and beneficial owner of 197,263 Shares and that there are no restrictions on voting rights or rights of disposition pertaining to such Shares. The Stockholder will convey good and valid title to the Shares owned by the Stockholder and being acquired pursuant to the Offer, the Merger or the exercise of the Option, as the case may be, free and clear of any and all liens, restrictions, security interests or any encumbrances whatsoever (collectively, "Liens"). None of the Shares owned by the Stockholder is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares. (b) Transfer of the Shares. (i) Until this Agreement is terminated, the Stockholder shall not directly or indirectly offer to sell, sell short, transfer (including gift), assign, pledge or otherwise dispose of or transfer (each, a "Transfer") any interest in or encumber with any Lien any of the Shares, (ii) enter into any contract, option, put, call, "collar" or other agreement or understanding with respect to any Transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares; or (v) take any other action with respect to the Shares that would in any way restrict, limit or interfere with the performance of its obligations hereunder. (c) The Stockholder agrees to place the following legend on any and all certificates evidencing the Shares: THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT SHAREHOLDER AGREEMENT, DATED AS OF JULY 12, 1999, BY AND AMONG PARENT, PURCHASER AND STOCKHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. 4 5 SECTION 3.2. Authority and Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within the Stockholder's power and authority, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Stockholder or to a loss of any benefit of the Stockholder under, any provision of applicable law or regulation or any agreement, judgment, injunction, order, decree, or other instrument binding on the Stockholder or result in the imposition of any Lien on any assets of the Stockholder. If the Stockholder is married and the Shares constitute community property or otherwise are owned or held in a manner that requires spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly consented to and delivered by the Stockholder's spouse or the person giving such approval, enforceable against such spouse or person in accordance with its terms. SECTION 3.3. Binding Effect. This Agreement has been duly executed and delivered by the Stockholder and is the valid and binding agreement of the Stockholder, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 3.4. Total Shares. The Stockholder Shares owned by the Stockholder are the only shares of Company Common Stock beneficially owned as of the date hereof by the Stockholder and the Stockholder has no option to purchase or right to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any other securities of the Company. SECTION 3.5. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder, except as otherwise disclosed in the Merger Agreement. ARTICLE IV Representations and Warranties of the Parent and Purchaser The Parent and Purchaser represent and warrant to the Stockholder: SECTION 4.1. Corporate Power and Authority; Noncontravention. The Parent and Purchaser have all requisite corporate power and authority to enter into this Agreement and to 5 6 perform their obligations hereunder. The execution, delivery and performance by the Parent and Purchaser of this Agreement and the consummation by the Parent and Purchaser of the transactions contemplated hereby (i) have been duly authorized by all necessary corporate action on the part of the Parent and Purchaser, (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Exchange Act), or (iii) do not and will not contravene or constitute a default under, the certificate of incorporation or by-laws of Parent or Purchaser or any provision of applicable law or regulation or any, judgment, injunction, order, decree, material agreement or other material instrument binding on the Parent or Purchaser. SECTION 4.2. Binding Effect. This Agreement has been duly executed and delivered by the Parent and Purchaser and is a valid and binding agreement of the Parent and Purchaser, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.3. Acquisition for Purchaser's Account. Any Shares to be acquired upon consummation of the Offer, or upon exercise of the Option will be acquired by Parent for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act and the rules and regulations promulgated thereunder. ARTICLE V Additional Agreements SECTION 5.1. Agreements of Stockholder. The Stockholder hereby covenants and agrees that: (a) No Solicitation. The Stockholder shall not directly or indirectly (i) solicit, initiate or knowingly encourage (or authorize any person to solicit, initiate or encourage) any Acquisition Proposal, or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise knowingly cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek the foregoing. The Stockholder shall promptly advise the Purchaser of the terms of any communications it or any of its affiliates may receive relating to any Acquisition Proposal (including, without limitation, the identify of the party making any such Acquisition Proposal). (b) Adjustment upon Changes in Capitalization or Merger. In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalization, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure of the Company which would have the effect of diluting or changing Parent and Purchaser's rights hereunder, the number and kind of shares or securities subject to this Agreement and 6 7 the price set forth herein at which Shares may be purchased from the Stockholder pursuant to the Offer or the exercise of the Option shall be appropriately and equitably adjusted so that Parent and Purchaser shall receive pursuant to the Offer or the exercise of the Option the number and class of shares or other securities or property that Parent or Purchaser, as the case may be, would have received in respect of the Shares purchasable pursuant to the Offer or the exercise of the Option if such purchase had occurred immediately prior to such event. ARTICLE VI Miscellaneous SECTION 6.1. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.2. Further Assurances. The Parent, Purchaser and the Stockholder will execute and deliver or cause to be executed and delivered all further documents and instruments and use its reasonable best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby and by the Merger Agreement. SECTION 6.3. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.4. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will not be compensable by money damages. The parties therefore agree that this Shareholder Agreement shall be specifically enforceable and that specific enforcement and injunctive relief shall be available to the Parent, Purchaser or the Stockholder for any breach by the other party or parties of any agreement, covenant or representation hereunder. SECTION 6.5. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. SECTION 6.6. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares pursuant 7 8 to Section 1.2 hereof. None of the representations and warranties contained in this Agreement shall survive the acceptance for payment and payment for the Shares pursuant to the Offer. SECTION 6.7. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. Notwithstanding anything herein to the contrary, this Agreement shall expire and be of no further force or effect if (i) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser breaches any obligation of Purchaser under the Merger Agreement to accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer upon expiration of the Offer or (ii) Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). This Agreement will also terminate upon the earlier of (i) the close of business on March 1, 2000, or (ii) the Effective Time. SECTION 6.8. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may assign its rights and obligations to another wholly-owned subsidiary of the Parent which is the assignee of Purchaser's rights under the Merger Agreement; and provided further that except as set forth in the prior clause, a party may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be null and void. SECTION 6.9. Governing Law. This Agreement shall be construed in accordance with and governed by the law of Delaware without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effects as if the signatures thereto and thereof were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 6.11. Stockholder Capacity. The Stockholder signs solely in its capacity as the record holder and beneficial owner of the Shares and nothing herein shall limit or affect any actions taken by the Stockholder in his or her capacity as an officer, director, partner, employee or affiliate of the Company and no such actions shall be deemed a breach of this Agreement. SECTION 6.12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other 8 9 conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. To the extent that any provision of this Agreement and the Merger Agreement conflict, the provisions of the Merger Agreement shall control. 9 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. FEDDERS CORPORATION By: /s/ Robert L. Laurent, Jr. -------------------------------- Name: Robert L. Laurent, Jr. -------------------------------- Title: Executive Vice President -------------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07938 Attn: General Counsel TI ACQUISITION CORP. By: /s/ Robert L. Laurent, Jr. -------------------------------- Name: Robert L. Laurent, Jr. -------------------------------- Title: Executive Vice President -------------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07983-0813 Attn: General Counsel /s/ Hugh E. Carr (SEAL) -------------------------------- Hugh E. Carr Address for Notices: 1508 Von Cannon Circle Sanford, NC 27330 11 SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated as of July 12, 1999 (this "Agreement"), among Fedders Corporation, a Delaware corporation (the "Parent"), TI Acquisition Corp., a Pennsylvania corporation and an indirect wholly owned subsidiary of the Parent ("Purchaser"), and Joseph W. Deering (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement the Parent, Purchaser and Trion, Inc., a Pennsylvania corporation (the "Company"), have entered into an Agreement and Plan of Merger dated as of the date hereof (such Agreement and Plan of Merger, as amended from time to time, the "Merger Agreement"), which provides, among other things, that Purchaser shall make the Offer (as defined in the Merger Agreement) to purchase at a price of $5.50 per share, net to the sellers in cash, all of the issued and outstanding shares of the Company's Common Stock, par value $0.50 per share (the "Company Common Stock"), and shall merge with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement (any term used herein without definition shall have the definition ascribed thereto in the Merger Agreement); WHEREAS, the Stockholder owns beneficially and of record shares of Company Common Stock (such shares of Company Common Stock being collectively referred to herein as the "Stockholder Shares"); and WHEREAS, as a condition to the willingness of the Parent and Purchaser to enter into the Merger Agreement, and as an inducement to them to do so, the Stockholder has agreed for the benefit of the Parent and Purchaser to tender the Stockholder Shares and any other shares of Company Common Stock at any time during the term of this Agreement held by the Stockholder, pursuant to the Offer, to vote all the Stockholder Shares and any other shares of Company Common Stock owned by the Stockholder in favor of the Merger, and to grant to Parent an option to acquire all Stockholder Shares and all other shares of Company Common Stock owned by the Stockholder under certain circumstances, all on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereby agree as follows: 12 ARTICLE I Tender Offer and Option SECTION 1.1. Tender of Shares. (a) Within five business days of the commencement by Purchaser of the Offer, the Stockholder shall tender to the Depository designated in the Offer to Purchase (the "Offer to Purchase") distributed by Purchaser in connection with the Offer (i) a letter of transmittal with respect to the Stockholder Shares and any other shares of Company Common Stock held by the Stockholder (whether or not currently held by the Stockholder; the Stockholder Shares, together with any shares acquired by the Stockholder in any capacity after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the "Shares")), complying with the terms of the Offer to Purchase, (ii) the certificates representing the Shares, and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer to Purchase. (b) The Stockholder shall not, subject to applicable law, withdraw the tender effected in accordance with Section 1.1(a); provided, however, that the Stockholder may decline to tender, or may withdraw, any and all Shares owned by the Stockholder if the Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the stockholders, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). The Stockholder shall give Purchaser at least two business days' prior notice of any withdrawal of Shares owned by the Stockholder pursuant to the immediately preceding proviso. SECTION 1.2. Option. (a) The Stockholder hereby irrevocably grants Parent an option (the "Option"), exercisable only upon the events and subject to the conditions set forth herein, to purchase any or all of the Shares at a purchase price per share equal to $5.50 (or such higher per share price as may be offered by Purchaser in the Offer). (b) Subject to the conditions set forth in Section 1.3 and the termination provisions of Section 6.7, Parent may exercise the Option in whole or in part at any time prior to the date 60 days after the expiration or termination of the Offer (such sixtieth day being herein called the "Option Expiration Date") if (x) the Stockholder fails to comply with any of its obligations under this Agreement or withdraws the tender of the Shares except under the circumstances set forth in the proviso to Section 1.1(b) (but the Option shall not limit any other right or remedy available to the Parent or Purchaser against the Stockholder for breach of this Agreement) or (y) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer set forth in Annex A to the Merger Agreement (other than as a result of any action or inaction of the Parent or Purchaser which constitutes a breach of the Merger Agreement). 2 13 Upon the occurrence of any of such circumstances, Purchaser shall be entitled to exercise the Option and (subject to Section 1.3) Parent shall be entitled to purchase the Shares and the Stockholder shall sell the Shares to Parent. Parent shall exercise the Option by delivering written notice thereof to the Stockholder (the "Notice"), specifying the number of Shares to be purchased and the date, time and place for the closing of such purchase which date shall not be less than three business days nor more than five business days from the date the Stockholder receives the Notice and in no event shall such date be later than the Option Expiration Date. The closing of the purchase of Shares pursuant to this Section 1.2 (the "Closing") shall take place on the date, at the time and at the place specified in such notice; provided, that if at such date any of the conditions specified in Section 1.3 shall not have been satisfied (or waived), Parent may postpone the Closing until a date within five business days after such conditions are satisfied (but not later than the Option Expiration Date). (c) At the Closing, the Stockholder will deliver to Parent (in accordance with Parent's instructions) the certificates representing the Shares owned by the Stockholder and being purchased pursuant to Section 1.2(c), duly endorsed or accompanied by stock powers duly executed in blank. At such Closing, Parent shall deliver to the Stockholder, by bank wire transfer of immediately available funds, an amount equal to the number of Shares being purchased from the Stockholder as specified in the Notice multiplied by $5.50 (or such higher per share price as may be offered by Parent in the Offer). SECTION 1.3. Conditions to Option. The obligation of Parent to purchase the Shares at the Closing is subject to the following conditions: (a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such purchase shall have expired or been terminated; and (b) there shall be no preliminary or permanent injunction or other order, decree or ruling issued by any Governmental Body, nor any statute, rule, regulation or order promulgated or enacted by any Governmental Body prohibiting, or otherwise restraining, such purchase. SECTION 1.4. No Purchase. Purchaser and Parent may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms and conditions set forth in the Offer to Purchase, and may allow the Option to expire without exercising the Option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer to Purchase or pursuant to the exercise of the Option, they shall be returned to the Stockholder, whereupon they shall continue to be held by the Stockholder subject to the terms and conditions of this Agreement. 3 14 ARTICLE II Consent and Voting The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares owned by the Stockholder. By entering into this Agreement, the Stockholder hereby consents to the Merger Agreement and the transactions contemplated thereby, including the Merger. So long as the Merger Agreement is in effect, the Stockholder hereby agrees (i) to vote all Shares now or hereafter owned by such Stockholder or execute a consent or proxy and not revoke any proxy, vote or consent, in favor of the Articles Amendment, the Merger Agreement, the Merger and the transactions contemplated thereby, and (ii) to oppose any Acquisition Proposal and to vote all Shares now or hereafter owned by such Stockholder, or execute a consent or proxy, against any Acquisition Proposal. ARTICLE III Representations, Warranties and Covenants of the Stockholder The Stockholder represents, warrants and covenants to the Purchaser that: SECTION 3.1. (a) Ownership. As of the date hereof the Stockholder is the sole, true, lawful and beneficial owner of 13,584Shares and that there are no restrictions on voting rights or rights of disposition pertaining to such Shares. The Stockholder will convey good and valid title to the Shares owned by the Stockholder and being acquired pursuant to the Offer, the Merger or the exercise of the Option, as the case may be, free and clear of any and all liens, restrictions, security interests or any encumbrances whatsoever (collectively, "Liens"). None of the Shares owned by the Stockholder is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares. (b) Transfer of the Shares. (i) Until this Agreement is terminated, the Stockholder shall not directly or indirectly offer to sell, sell short, transfer (including gift), assign, pledge or otherwise dispose of or transfer (each, a "Transfer") any interest in or encumber with any Lien any of the Shares, (ii) enter into any contract, option, put, call, "collar" or other agreement or understanding with respect to any Transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares; or (v) take any other action with respect to the Shares that would in any way restrict, limit or interfere with the performance of its obligations hereunder. (c) The Stockholder agrees to place the following legend on any and all certificates evidencing the Shares: 4 15 THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT SHAREHOLDER AGREEMENT, DATED AS OF JULY 12, 1999, BY AND AMONG PARENT, PURCHASER AND STOCKHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. SECTION 3.2. Authority and Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within the Stockholder's power and authority, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Stockholder or to a loss of any benefit of the Stockholder under, any provision of applicable law or regulation or any agreement, judgment, injunction, order, decree, or other instrument binding on the Stockholder or result in the imposition of any Lien on any assets of the Stockholder. If the Stockholder is married and the Shares constitute community property or otherwise are owned or held in a manner that requires spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly consented to and delivered by the Stockholder's spouse or the person giving such approval, enforceable against such spouse or person in accordance with its terms. SECTION 3.3. Binding Effect. This Agreement has been duly executed and delivered by the Stockholder and is the valid and binding agreement of the Stockholder, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 3.4. Total Shares. The Stockholder Shares owned by the Stockholder are the only shares of Company Common Stock beneficially owned as of the date hereof by the Stockholder and the Stockholder has no option to purchase or right to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any other securities of the Company. SECTION 3.5. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder, except as otherwise disclosed in the Merger Agreement. 5 16 ARTICLE IV Representations and Warranties of the Parent and Purchaser The Parent and Purchaser represent and warrant to the Stockholder: SECTION 4.1. Corporate Power and Authority; Noncontravention. The Parent and Purchaser have all requisite corporate power and authority to enter into this Agreement and to perform their obligations hereunder. The execution, delivery and performance by the Parent and Purchaser of this Agreement and the consummation by the Parent and Purchaser of the transactions contemplated hereby (i) have been duly authorized by all necessary corporate action on the part of the Parent and Purchaser, (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Exchange Act), or (iii) do not and will not contravene or constitute a default under, the certificate of incorporation or by-laws of Parent or Purchaser or any provision of applicable law or regulation or any, judgment, injunction, order, decree, material agreement or other material instrument binding on the Parent or Purchaser. SECTION 4.2. Binding Effect. This Agreement has been duly executed and delivered by the Parent and Purchaser and is a valid and binding agreement of the Parent and Purchaser, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.3. Acquisition for Purchaser's Account. Any Shares to be acquired upon consummation of the Offer, or upon exercise of the Option will be acquired by Parent for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act and the rules and regulations promulgated thereunder. ARTICLE V Additional Agreements SECTION 5.1. Agreements of Stockholder. The Stockholder hereby covenants and agrees that: (a) No Solicitation. The Stockholder shall not directly or indirectly (i) solicit, initiate or knowingly encourage (or authorize any person to solicit, initiate or encourage) any Acquisition Proposal, or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise knowingly cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek the foregoing. The Stockholder shall promptly advise the Purchaser of the terms of any communications it or any of its affiliates may receive relating 6 17 to any Acquisition Proposal (including, without limitation, the identify of the party making any such Acquisition Proposal). (b) Adjustment upon Changes in Capitalization or Merger. In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalization, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure of the Company which would have the effect of diluting or changing Parent and Purchaser's rights hereunder, the number and kind of shares or securities subject to this Agreement and the price set forth herein at which Shares may be purchased from the Stockholder pursuant to the Offer or the exercise of the Option shall be appropriately and equitably adjusted so that Parent and Purchaser shall receive pursuant to the Offer or the exercise of the Option the number and class of shares or other securities or property that Parent or Purchaser, as the case may be, would have received in respect of the Shares purchasable pursuant to the Offer or the exercise of the Option if such purchase had occurred immediately prior to such event. ARTICLE VI Miscellaneous SECTION 6.1. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.2. Further Assurances. The Parent, Purchaser and the Stockholder will execute and deliver or cause to be executed and delivered all further documents and instruments and use its reasonable best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby and by the Merger Agreement. SECTION 6.3. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.4. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will not be compensable by money damages. The parties therefore agree that this Shareholder Agreement shall be specifically enforceable and that specific enforcement 7 18 and injunctive relief shall be available to the Parent, Purchaser or the Stockholder for any breach by the other party or parties of any agreement, covenant or representation hereunder. SECTION 6.5. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. SECTION 6.6. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares pursuant to Section 1.2 hereof. None of the representations and warranties contained in this Agreement shall survive the acceptance for payment and payment for the Shares pursuant to the Offer. SECTION 6.7. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. Notwithstanding anything herein to the contrary, this Agreement shall expire and be of no further force or effect if (i) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser breaches any obligation of Purchaser under the Merger Agreement to accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer upon expiration of the Offer or (ii) Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). This Agreement will also terminate upon the earlier of (i) the close of business on March 1, 2000, or (ii) the Effective Time. SECTION 6.8. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may assign its rights and obligations to another wholly-owned subsidiary of the Parent which is the assignee of Purchaser's rights under the Merger Agreement; and provided further that except as set forth in the prior clause, a party may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be null and void. SECTION 6.9. Governing Law. This Agreement shall be construed in accordance with and governed by the law of Delaware without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effects as if the signatures 8 19 thereto and thereof were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 6.11. Stockholder Capacity. The Stockholder signs solely in its capacity as the record holder and beneficial owner of the Shares and nothing herein shall limit or affect any actions taken by the Stockholder in his or her capacity as an officer, director, partner, employee or affiliate of the Company and no such actions shall be deemed a breach of this Agreement. SECTION 6.12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. To the extent that any provision of this Agreement and the Merger Agreement conflict, the provisions of the Merger Agreement shall control. 9 20 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. FEDDERS CORPORATION By: /s/ Robert L. Laurent, Jr. -------------------------------- Name: Robert L. Laurent, Jr. -------------------------------- Title: Executive Vice President Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07938 Attn: General Counsel TI ACQUISITION CORP. By: /s/ Robert L. Laurent, Jr. -------------------------------- Name: Robert L. Laurent, Jr. -------------------------------- Title: Executive Vice President -------------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07983-0813 Attn: General Counsel /s/ Joseph W. Deering (SEAL) --------------------------------- Joseph W. Deering Address for Notices: 1100 Ridgeway Road Dayton, OH 45419-3031 21 SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated as of July 12, 1999 (this "Agreement"), among Fedders Corporation, a Delaware corporation (the "Parent"), TI Acquisition Corp., a Pennsylvania corporation and an indirect wholly owned subsidiary of the Parent ("Purchaser"), and Seddon Goode, Jr. (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement the Parent, Purchaser and Trion, Inc., a Pennsylvania corporation (the "Company"), have entered into an Agreement and Plan of Merger dated as of the date hereof (such Agreement and Plan of Merger, as amended from time to time, the "Merger Agreement"), which provides, among other things, that Purchaser shall make the Offer (as defined in the Merger Agreement) to purchase at a price of $5.50 per share, net to the sellers in cash, all of the issued and outstanding shares of the Company's Common Stock, par value $0.50 per share (the "Company Common Stock"), and shall merge with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement (any term used herein without definition shall have the definition ascribed thereto in the Merger Agreement); WHEREAS, the Stockholder owns beneficially and of record shares of Company Common Stock (such shares of Company Common Stock being collectively referred to herein as the "Stockholder Shares"); and WHEREAS, as a condition to the willingness of the Parent and Purchaser to enter into the Merger Agreement, and as an inducement to them to do so, the Stockholder has agreed for the benefit of the Parent and Purchaser to tender the Stockholder Shares and any other shares of Company Common Stock at any time during the term of this Agreement held by the Stockholder, pursuant to the Offer, to vote all the Stockholder Shares and any other shares of Company Common Stock owned by the Stockholder in favor of the Merger, and to grant to Parent an option to acquire all Stockholder Shares and all other shares of Company Common Stock owned by the Stockholder under certain circumstances, all on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereby agree as follows: 22 ARTICLE I Tender Offer and Option SECTION 1.1. Tender of Shares. (a) Within five business days of the commencement by Purchaser of the Offer, the Stockholder shall tender to the Depository designated in the Offer to Purchase (the "Offer to Purchase") distributed by Purchaser in connection with the Offer (i) a letter of transmittal with respect to the Stockholder Shares and any other shares of Company Common Stock held by the Stockholder (whether or not currently held by the Stockholder; the Stockholder Shares, together with any shares acquired by the Stockholder in any capacity after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the "Shares")), complying with the terms of the Offer to Purchase, (ii) the certificates representing the Shares, and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer to Purchase. (b) The Stockholder shall not, subject to applicable law, withdraw the tender effected in accordance with Section 1.1(a); provided, however, that the Stockholder may decline to tender, or may withdraw, any and all Shares owned by the Stockholder if the Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the stockholders, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). The Stockholder shall give Purchaser at least two business days' prior notice of any withdrawal of Shares owned by the Stockholder pursuant to the immediately preceding proviso. SECTION 1.2. Option. (a) The Stockholder hereby irrevocably grants Parent an option (the "Option"), exercisable only upon the events and subject to the conditions set forth herein, to purchase any or all of the Shares at a purchase price per share equal to $5.50 (or such higher per share price as may be offered by Purchaser in the Offer). (b) Subject to the conditions set forth in Section 1.3 and the termination provisions of Section 6.7, Parent may exercise the Option in whole or in part at any time prior to the date 60 days after the expiration or termination of the Offer (such sixtieth day being herein called the "Option Expiration Date") if (x) the Stockholder fails to comply with any of its obligations under this Agreement or withdraws the tender of the Shares except under the circumstances set forth in the proviso to Section 1.1(b) (but the Option shall not limit any other right or remedy available to the Parent or Purchaser against the Stockholder for breach of this Agreement) or (y) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer set forth in Annex A to the Merger Agreement (other than as a result of any action or inaction of the Parent or Purchaser which constitutes a breach of the Merger Agreement). 2 23 Upon the occurrence of any of such circumstances, Purchaser shall be entitled to exercise the Option and (subject to Section 1.3) Parent shall be entitled to purchase the Shares and the Stockholder shall sell the Shares to Parent. Parent shall exercise the Option by delivering written notice thereof to the Stockholder (the "Notice"), specifying the number of Shares to be purchased and the date, time and place for the closing of such purchase which date shall not be less than three business days nor more than five business days from the date the Stockholder receives the Notice and in no event shall such date be later than the Option Expiration Date. The closing of the purchase of Shares pursuant to this Section 1.2 (the "Closing") shall take place on the date, at the time and at the place specified in such notice; provided, that if at such date any of the conditions specified in Section 1.3 shall not have been satisfied (or waived), Parent may postpone the Closing until a date within five business days after such conditions are satisfied (but not later than the Option Expiration Date). (c) At the Closing, the Stockholder will deliver to Parent (in accordance with Parent's instructions) the certificates representing the Shares owned by the Stockholder and being purchased pursuant to Section 1.2(c), duly endorsed or accompanied by stock powers duly executed in blank. At such Closing, Parent shall deliver to the Stockholder, by bank wire transfer of immediately available funds, an amount equal to the number of Shares being purchased from the Stockholder as specified in the Notice multiplied by $5.50 (or such higher per share price as may be offered by Parent in the Offer). SECTION 1.3. Conditions to Option. The obligation of Parent to purchase the Shares at the Closing is subject to the following conditions: (a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such purchase shall have expired or been terminated; and (b) there shall be no preliminary or permanent injunction or other order, decree or ruling issued by any Governmental Body, nor any statute, rule, regulation or order promulgated or enacted by any Governmental Body prohibiting, or otherwise restraining, such purchase. SECTION 1.4. No Purchase. Purchaser and Parent may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms and conditions set forth in the Offer to Purchase, and may allow the Option to expire without exercising the Option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer to Purchase or pursuant to the exercise of the Option, they shall be returned to the Stockholder, whereupon they shall continue to be held by the Stockholder subject to the terms and conditions of this Agreement. 3 24 ARTICLE II Consent and Voting The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares owned by the Stockholder. By entering into this Agreement, the Stockholder hereby consents to the Merger Agreement and the transactions contemplated thereby, including the Merger. So long as the Merger Agreement is in effect, the Stockholder hereby agrees (i) to vote all Shares now or hereafter owned by such Stockholder or execute a consent or proxy and not revoke any proxy, vote or consent, in favor of the Articles Amendment, the Merger Agreement, the Merger and the transactions contemplated thereby, and (ii) to oppose any Acquisition Proposal and to vote all Shares now or hereafter owned by such Stockholder, or execute a consent or proxy, against any Acquisition Proposal. ARTICLE III Representations, Warranties and Covenants of the Stockholder The Stockholder represents, warrants and covenants to the Purchaser that: SECTION 3.1. (a) Ownership. As of the date hereof the Stockholder is the sole, true, lawful and beneficial owner of 82,858 Shares and that there are no restrictions on voting rights or rights of disposition pertaining to such Shares. The Stockholder will convey good and valid title to the Shares owned by the Stockholder and being acquired pursuant to the Offer, the Merger or the exercise of the Option, as the case may be, free and clear of any and all liens, restrictions, security interests or any encumbrances whatsoever (collectively, "Liens"). None of the Shares owned by the Stockholder is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares. (b) Transfer of the Shares. (i) Until this Agreement is terminated, the Stockholder shall not directly or indirectly offer to sell, sell short, transfer (including gift), assign, pledge or otherwise dispose of or transfer (each, a "Transfer") any interest in or encumber with any Lien any of the Shares, (ii) enter into any contract, option, put, call, "collar" or other agreement or understanding with respect to any Transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares; or (v) take any other action with respect to the Shares that would in any way restrict, limit or interfere with the performance of its obligations hereunder. (c) The Stockholder agrees to place the following legend on any and all certificates evidencing the Shares: 4 25 THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT SHAREHOLDER AGREEMENT, DATED AS OF JULY 12, 1999, BY AND AMONG PARENT, PURCHASER AND STOCKHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. SECTION 3.2. Authority and Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within the Stockholder's power and authority, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Stockholder or to a loss of any benefit of the Stockholder under, any provision of applicable law or regulation or any agreement, judgment, injunction, order, decree, or other instrument binding on the Stockholder or result in the imposition of any Lien on any assets of the Stockholder. If the Stockholder is married and the Shares constitute community property or otherwise are owned or held in a manner that requires spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly consented to and delivered by the Stockholder's spouse or the person giving such approval, enforceable against such spouse or person in accordance with its terms. SECTION 3.3. Binding Effect. This Agreement has been duly executed and delivered by the Stockholder and is the valid and binding agreement of the Stockholder, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 3.4. Total Shares. The Stockholder Shares owned by the Stockholder are the only shares of Company Common Stock beneficially owned as of the date hereof by the Stockholder and the Stockholder has no option to purchase or right to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any other securities of the Company. SECTION 3.5. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder, except as otherwise disclosed in the Merger Agreement. 5 26 ARTICLE IV Representations and Warranties of the Parent and Purchaser The Parent and Purchaser represent and warrant to the Stockholder: SECTION 4.1. Corporate Power and Authority; Noncontravention. The Parent and Purchaser have all requisite corporate power and authority to enter into this Agreement and to perform their obligations hereunder. The execution, delivery and performance by the Parent and Purchaser of this Agreement and the consummation by the Parent and Purchaser of the transactions contemplated hereby (i) have been duly authorized by all necessary corporate action on the part of the Parent and Purchaser, (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Exchange Act), or (iii) do not and will not contravene or constitute a default under, the certificate of incorporation or by-laws of Parent or Purchaser or any provision of applicable law or regulation or any, judgment, injunction, order, decree, material agreement or other material instrument binding on the Parent or Purchaser. SECTION 4.2. Binding Effect. This Agreement has been duly executed and delivered by the Parent and Purchaser and is a valid and binding agreement of the Parent and Purchaser, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.3. Acquisition for Purchaser's Account. Any Shares to be acquired upon consummation of the Offer, or upon exercise of the Option will be acquired by Parent for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act and the rules and regulations promulgated thereunder. ARTICLE V Additional Agreements SECTION 5.1. Agreements of Stockholder. The Stockholder hereby covenants and agrees that: (a) No Solicitation. The Stockholder shall not directly or indirectly (i) solicit, initiate or knowingly encourage (or authorize any person to solicit, initiate or encourage) any Acquisition Proposal, or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise knowingly cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek the foregoing. The Stockholder shall promptly advise the Purchaser of the terms of any communications it or any of its affiliates may receive relating 6 27 to any Acquisition Proposal (including, without limitation, the identify of the party making any such Acquisition Proposal). (b) Adjustment upon Changes in Capitalization or Merger. In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalization, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure of the Company which would have the effect of diluting or changing Parent and Purchaser's rights hereunder, the number and kind of shares or securities subject to this Agreement and the price set forth herein at which Shares may be purchased from the Stockholder pursuant to the Offer or the exercise of the Option shall be appropriately and equitably adjusted so that Parent and Purchaser shall receive pursuant to the Offer or the exercise of the Option the number and class of shares or other securities or property that Parent or Purchaser, as the case may be, would have received in respect of the Shares purchasable pursuant to the Offer or the exercise of the Option if such purchase had occurred immediately prior to such event. ARTICLE VI Miscellaneous SECTION 6.1. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.2. Further Assurances. The Parent, Purchaser and the Stockholder will execute and deliver or cause to be executed and delivered all further documents and instruments and use its reasonable best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby and by the Merger Agreement. SECTION 6.3. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.4. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will not be compensable by money damages. The parties therefore agree that this Shareholder Agreement shall be specifically enforceable and that specific enforcement 7 28 and injunctive relief shall be available to the Parent, Purchaser or the Stockholder for any breach by the other party or parties of any agreement, covenant or representation hereunder. SECTION 6.5. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. SECTION 6.6. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares pursuant to Section 1.2 hereof. None of the representations and warranties contained in this Agreement shall survive the acceptance for payment and payment for the Shares pursuant to the Offer. SECTION 6.7. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. Notwithstanding anything herein to the contrary, this Agreement shall expire and be of no further force or effect if (i) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser breaches any obligation of Purchaser under the Merger Agreement to accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer upon expiration of the Offer or (ii) Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). This Agreement will also terminate upon the earlier of (i) the close of business on March 1, 2000, or (ii) the Effective Time. SECTION 6.8. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may assign its rights and obligations to another wholly-owned subsidiary of the Parent which is the assignee of Purchaser's rights under the Merger Agreement; and provided further that except as set forth in the prior clause, a party may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be null and void. SECTION 6.9. Governing Law. This Agreement shall be construed in accordance with and governed by the law of Delaware without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effects as if the signatures 8 29 thereto and thereof were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 6.11. Stockholder Capacity. The Stockholder signs solely in its capacity as the record holder and beneficial owner of the Shares and nothing herein shall limit or affect any actions taken by the Stockholder in his or her capacity as an officer, director, partner, employee or affiliate of the Company and no such actions shall be deemed a breach of this Agreement. SECTION 6.12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. To the extent that any provision of this Agreement and the Merger Agreement conflict, the provisions of the Merger Agreement shall control. 9 30 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. FEDDERS CORPORATION By: /s/ Robert L. Laurent, Jr. -------------------------------- Name: Robert L. Laurent, Jr. -------------------------------- Title: Executive Vice President -------------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07938 Attn: General Counsel TI ACQUISITION CORP. By: /s/ Robert L. Laurent, Jr. -------------------------------- Name: Robert L. Laurent, Jr. -------------------------------- Title: Executive Vice President -------------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07983-0813 Attn: General Counsel /s/ Seddon Goode, Jr. (SEAL) -------------------------------- Seddon Goode, Jr. Address for Notices: University Research Park Suite 1980 Two First Union Center Charlotte, NC 28282 31 SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated as of July 12, 1999 (this "Agreement"), among Fedders Corporation, a Delaware corporation (the "Parent"), TI Acquisition Corp., a Pennsylvania corporation and an indirect wholly owned subsidiary of the Parent ("Purchaser"), and James E. Heins (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement the Parent, Purchaser and Trion, Inc., a Pennsylvania corporation (the "Company"), have entered into an Agreement and Plan of Merger dated as of the date hereof (such Agreement and Plan of Merger, as amended from time to time, the "Merger Agreement"), which provides, among other things, that Purchaser shall make the Offer (as defined in the Merger Agreement) to purchase at a price of $5.50 per share, net to the sellers in cash, all of the issued and outstanding shares of the Company's Common Stock, par value $0.50 per share (the "Company Common Stock"), and shall merge with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement (any term used herein without definition shall have the definition ascribed thereto in the Merger Agreement); WHEREAS, the Stockholder owns beneficially and of record shares of Company Common Stock (such shares of Company Common Stock being collectively referred to herein as the "Stockholder Shares"); and WHEREAS, as a condition to the willingness of the Parent and Purchaser to enter into the Merger Agreement, and as an inducement to them to do so, the Stockholder has agreed for the benefit of the Parent and Purchaser to tender the Stockholder Shares and any other shares of Company Common Stock at any time during the term of this Agreement held by the Stockholder, pursuant to the Offer, to vote all the Stockholder Shares and any other shares of Company Common Stock owned by the Stockholder in favor of the Merger, and to grant to Parent an option to acquire all Stockholder Shares and all other shares of Company Common Stock owned by the Stockholder under certain circumstances, all on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereby agree as follows: 32 ARTICLE I Tender Offer and Option SECTION 1.1. Tender of Shares. (a) Within five business days of the commencement by Purchaser of the Offer, the Stockholder shall tender to the Depository designated in the Offer to Purchase (the "Offer to Purchase") distributed by Purchaser in connection with the Offer (i) a letter of transmittal with respect to the Stockholder Shares and any other shares of Company Common Stock held by the Stockholder (whether or not currently held by the Stockholder; the Stockholder Shares, together with any shares acquired by the Stockholder in any capacity after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the "Shares")), complying with the terms of the Offer to Purchase, (ii) the certificates representing the Shares, and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer to Purchase. (b) The Stockholder shall not, subject to applicable law, withdraw the tender effected in accordance with Section 1.1(a); provided, however, that the Stockholder may decline to tender, or may withdraw, any and all Shares owned by the Stockholder if the Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the stockholders, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). The Stockholder shall give Purchaser at least two business days' prior notice of any withdrawal of Shares owned by the Stockholder pursuant to the immediately preceding proviso. SECTION 1.2. Option. (a) The Stockholder hereby irrevocably grants Parent an option (the "Option"), exercisable only upon the events and subject to the conditions set forth herein, to purchase any or all of the Shares at a purchase price per share equal to $5.50 (or such higher per share price as may be offered by Purchaser in the Offer). (b) Subject to the conditions set forth in Section 1.3 and the termination provisions of Section 6.7, Parent may exercise the Option in whole or in part at any time prior to the date 60 days after the expiration or termination of the Offer (such sixtieth day being herein called the "Option Expiration Date") if (x) the Stockholder fails to comply with any of its obligations under this Agreement or withdraws the tender of the Shares except under the circumstances set forth in the proviso to Section 1.1(b) (but the Option shall not limit any other right or remedy available to the Parent or Purchaser against the Stockholder for breach of this Agreement) or (y) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer set forth in Annex A to the Merger Agreement (other than as a result of any action or inaction of the Parent or Purchaser which constitutes a breach of the Merger Agreement). 2 33 Upon the occurrence of any of such circumstances, Purchaser shall be entitled to exercise the Option and (subject to Section 1.3) Parent shall be entitled to purchase the Shares and the Stockholder shall sell the Shares to Parent. Parent shall exercise the Option by delivering written notice thereof to the Stockholder (the "Notice"), specifying the number of Shares to be purchased and the date, time and place for the closing of such purchase which date shall not be less than three business days nor more than five business days from the date the Stockholder receives the Notice and in no event shall such date be later than the Option Expiration Date. The closing of the purchase of Shares pursuant to this Section 1.2 (the "Closing") shall take place on the date, at the time and at the place specified in such notice; provided, that if at such date any of the conditions specified in Section 1.3 shall not have been satisfied (or waived), Parent may postpone the Closing until a date within five business days after such conditions are satisfied (but not later than the Option Expiration Date). (c) At the Closing, the Stockholder will deliver to Parent (in accordance with Parent's instructions) the certificates representing the Shares owned by the Stockholder and being purchased pursuant to Section 1.2(c), duly endorsed or accompanied by stock powers duly executed in blank. At such Closing, Parent shall deliver to the Stockholder, by bank wire transfer of immediately available funds, an amount equal to the number of Shares being purchased from the Stockholder as specified in the Notice multiplied by $5.50 (or such higher per share price as may be offered by Parent in the Offer). SECTION 1.3. Conditions to Option. The obligation of Parent to purchase the Shares at the Closing is subject to the following conditions: (a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such purchase shall have expired or been terminated; and (b) there shall be no preliminary or permanent injunction or other order, decree or ruling issued by any Governmental Body, nor any statute, rule, regulation or order promulgated or enacted by any Governmental Body prohibiting, or otherwise restraining, such purchase. SECTION 1.4. No Purchase. Purchaser and Parent may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms and conditions set forth in the Offer to Purchase, and may allow the Option to expire without exercising the Option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer to Purchase or pursuant to the exercise of the Option, they shall be returned to the Stockholder, whereupon they shall continue to be held by the Stockholder subject to the terms and conditions of this Agreement. 3 34 ARTICLE II Consent and Voting The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares owned by the Stockholder. By entering into this Agreement, the Stockholder hereby consents to the Merger Agreement and the transactions contemplated thereby, including the Merger. So long as the Merger Agreement is in effect, the Stockholder hereby agrees (i) to vote all Shares now or hereafter owned by such Stockholder or execute a consent or proxy and not revoke any proxy, vote or consent, in favor of the Articles Amendment, the Merger Agreement, the Merger and the transactions contemplated thereby, and (ii) to oppose any Acquisition Proposal and to vote all Shares now or hereafter owned by such Stockholder, or execute a consent or proxy, against any Acquisition Proposal. ARTICLE III Representations, Warranties and Covenants of the Stockholder The Stockholder represents, warrants and covenants to the Purchaser that: SECTION 3.1. (a) Ownership. As of the date hereof the Stockholder is the sole, true, lawful and beneficial owner of 10,682 Shares and that there are no restrictions on voting rights or rights of disposition pertaining to such Shares. The Stockholder will convey good and valid title to the Shares owned by the Stockholder and being acquired pursuant to the Offer, the Merger or the exercise of the Option, as the case may be, free and clear of any and all liens, restrictions, security interests or any encumbrances whatsoever (collectively, "Liens"). None of the Shares owned by the Stockholder is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares. (b) Transfer of the Shares. (i) Until this Agreement is terminated, the Stockholder shall not directly or indirectly offer to sell, sell short, transfer (including gift), assign, pledge or otherwise dispose of or transfer (each, a "Transfer") any interest in or encumber with any Lien any of the Shares, (ii) enter into any contract, option, put, call, "collar" or other agreement or understanding with respect to any Transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares; or (v) take any other action with respect to the Shares that would in any way restrict, limit or interfere with the performance of its obligations hereunder. (c) The Stockholder agrees to place the following legend on any and all certificates evidencing the Shares: 4 35 THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT SHAREHOLDER AGREEMENT, DATED AS OF JULY 12, 1999, BY AND AMONG PARENT, PURCHASER AND STOCKHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. SECTION 3.2. Authority and Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within the Stockholder's power and authority, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Stockholder or to a loss of any benefit of the Stockholder under, any provision of applicable law or regulation or any agreement, judgment, injunction, order, decree, or other instrument binding on the Stockholder or result in the imposition of any Lien on any assets of the Stockholder. If the Stockholder is married and the Shares constitute community property or otherwise are owned or held in a manner that requires spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly consented to and delivered by the Stockholder's spouse or the person giving such approval, enforceable against such spouse or person in accordance with its terms. SECTION 3.3. Binding Effect. This Agreement has been duly executed and delivered by the Stockholder and is the valid and binding agreement of the Stockholder, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 3.4. Total Shares. The Stockholder Shares owned by the Stockholder are the only shares of Company Common Stock beneficially owned as of the date hereof by the Stockholder and the Stockholder has no option to purchase or right to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any other securities of the Company. SECTION 3.5. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder, except as otherwise disclosed in the Merger Agreement. 5 36 ARTICLE IV Representations and Warranties of the Parent and Purchaser The Parent and Purchaser represent and warrant to the Stockholder: SECTION 4.1. Corporate Power and Authority; Noncontravention. The Parent and Purchaser have all requisite corporate power and authority to enter into this Agreement and to perform their obligations hereunder. The execution, delivery and performance by the Parent and Purchaser of this Agreement and the consummation by the Parent and Purchaser of the transactions contemplated hereby (i) have been duly authorized by all necessary corporate action on the part of the Parent and Purchaser, (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Exchange Act), or (iii) do not and will not contravene or constitute a default under, the certificate of incorporation or by-laws of Parent or Purchaser or any provision of applicable law or regulation or any, judgment, injunction, order, decree, material agreement or other material instrument binding on the Parent or Purchaser. SECTION 4.2. Binding Effect. This Agreement has been duly executed and delivered by the Parent and Purchaser and is a valid and binding agreement of the Parent and Purchaser, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.3. Acquisition for Purchaser's Account. Any Shares to be acquired upon consummation of the Offer, or upon exercise of the Option will be acquired by Parent for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act and the rules and regulations promulgated thereunder. ARTICLE V Additional Agreements SECTION 5.1. Agreements of Stockholder. The Stockholder hereby covenants and agrees that: (a) No Solicitation. The Stockholder shall not directly or indirectly (i) solicit, initiate or knowingly encourage (or authorize any person to solicit, initiate or encourage) any Acquisition Proposal, or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise knowingly cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek the foregoing. The Stockholder shall promptly advise the Purchaser of the terms of any communications it or any of its affiliates may receive relating 6 37 to any Acquisition Proposal (including, without limitation, the identify of the party making any such Acquisition Proposal). (b) Adjustment upon Changes in Capitalization or Merger. In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalization, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure of the Company which would have the effect of diluting or changing Parent and Purchaser's rights hereunder, the number and kind of shares or securities subject to this Agreement and the price set forth herein at which Shares may be purchased from the Stockholder pursuant to the Offer or the exercise of the Option shall be appropriately and equitably adjusted so that Parent and Purchaser shall receive pursuant to the Offer or the exercise of the Option the number and class of shares or other securities or property that Parent or Purchaser, as the case may be, would have received in respect of the Shares purchasable pursuant to the Offer or the exercise of the Option if such purchase had occurred immediately prior to such event. ARTICLE VI Miscellaneous SECTION 6.1. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.2. Further Assurances. The Parent, Purchaser and the Stockholder will execute and deliver or cause to be executed and delivered all further documents and instruments and use its reasonable best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby and by the Merger Agreement. SECTION 6.3. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.4. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will not be compensable by money damages. The parties therefore agree that this Shareholder Agreement shall be specifically enforceable and that specific enforcement 7 38 and injunctive relief shall be available to the Parent, Purchaser or the Stockholder for any breach by the other party or parties of any agreement, covenant or representation hereunder. SECTION 6.5. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. SECTION 6.6. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares pursuant to Section 1.2 hereof. None of the representations and warranties contained in this Agreement shall survive the acceptance for payment and payment for the Shares pursuant to the Offer. SECTION 6.7. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. Notwithstanding anything herein to the contrary, this Agreement shall expire and be of no further force or effect if (i) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser breaches any obligation of Purchaser under the Merger Agreement to accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer upon expiration of the Offer or (ii) Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). This Agreement will also terminate upon the earlier of (i) the close of business on March 1, 2000, or (ii) the Effective Time. SECTION 6.8. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may assign its rights and obligations to another wholly-owned subsidiary of the Parent which is the assignee of Purchaser's rights under the Merger Agreement; and provided further that except as set forth in the prior clause, a party may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be null and void. SECTION 6.9. Governing Law. This Agreement shall be construed in accordance with and governed by the law of Delaware without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effects as if the signatures 8 39 thereto and thereof were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 6.11. Stockholder Capacity. The Stockholder signs solely in its capacity as the record holder and beneficial owner of the Shares and nothing herein shall limit or affect any actions taken by the Stockholder in his or her capacity as an officer, director, partner, employee or affiliate of the Company and no such actions shall be deemed a breach of this Agreement. SECTION 6.12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. To the extent that any provision of this Agreement and the Merger Agreement conflict, the provisions of the Merger Agreement shall control. 9 40 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. FEDDERS CORPORATION By: /s/ Robert L. Laurent, Jr. ----------------------------- Name: Robert L. Laurent, Jr. ----------------------------- Title: Executive Vice President ----------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07938 Attn: General Counsel TI ACQUISITION CORP. By: /s/ Robert L. Laurent, Jr. ----------------------------- Name: Robert L. Laurent, Jr. ----------------------------- Title: Executive Vice President ----------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07983-0813 Attn: General Counsel /s/ James E. Heins (SEAL) ------------------------------------------------- James E. Heins Address for Notices: 1600 Morganton Road, L-13 Pinehurst, NC 28374 41 SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated as of July 12, 1999 (this "Agreement"), among Fedders Corporation, a Delaware corporation (the "Parent"), TI Acquisition Corp., a Pennsylvania corporation and an indirect wholly owned subsidiary of the Parent ("Purchaser"), and F. Trent Hill, Jr. (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement the Parent, Purchaser and Trion, Inc., a Pennsylvania corporation (the "Company"), have entered into an Agreement and Plan of Merger dated as of the date hereof (such Agreement and Plan of Merger, as amended from time to time, the "Merger Agreement"), which provides, among other things, that Purchaser shall make the Offer (as defined in the Merger Agreement) to purchase at a price of $5.50 per share, net to the sellers in cash, all of the issued and outstanding shares of the Company's Common Stock, par value $0.50 per share (the "Company Common Stock"), and shall merge with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement (any term used herein without definition shall have the definition ascribed thereto in the Merger Agreement); WHEREAS, the Stockholder owns beneficially and of record shares of Company Common Stock (such shares of Company Common Stock being collectively referred to herein as the "Stockholder Shares"); and WHEREAS, as a condition to the willingness of the Parent and Purchaser to enter into the Merger Agreement, and as an inducement to them to do so, the Stockholder has agreed for the benefit of the Parent and Purchaser to tender the Stockholder Shares and any other shares of Company Common Stock at any time during the term of this Agreement held by the Stockholder, pursuant to the Offer, to vote all the Stockholder Shares and any other shares of Company Common Stock owned by the Stockholder in favor of the Merger, and to grant to Parent an option to acquire all Stockholder Shares and all other shares of Company Common Stock owned by the Stockholder under certain circumstances, all on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereby agree as follows: 42 ARTICLE I Tender Offer and Option SECTION 1.1. Tender of Shares. (a) Within five business days of the commencement by Purchaser of the Offer, the Stockholder shall tender to the Depository designated in the Offer to Purchase (the "Offer to Purchase") distributed by Purchaser in connection with the Offer (i) a letter of transmittal with respect to the Stockholder Shares and any other shares of Company Common Stock held by the Stockholder (whether or not currently held by the Stockholder; the Stockholder Shares, together with any shares acquired by the Stockholder in any capacity after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the "Shares")), complying with the terms of the Offer to Purchase, (ii) the certificates representing the Shares, and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer to Purchase. (b) The Stockholder shall not, subject to applicable law, withdraw the tender effected in accordance with Section 1.1(a); provided, however, that the Stockholder may decline to tender, or may withdraw, any and all Shares owned by the Stockholder if the Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the stockholders, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). The Stockholder shall give Purchaser at least two business days' prior notice of any withdrawal of Shares owned by the Stockholder pursuant to the immediately preceding proviso. SECTION 1.2. Option. (a) The Stockholder hereby irrevocably grants Parent an option (the "Option"), exercisable only upon the events and subject to the conditions set forth herein, to purchase any or all of the Shares at a purchase price per share equal to $5.50 (or such higher per share price as may be offered by Purchaser in the Offer). (b) Subject to the conditions set forth in Section 1.3 and the termination provisions of Section 6.7, Parent may exercise the Option in whole or in part at any time prior to the date 60 days after the expiration or termination of the Offer (such sixtieth day being herein called the "Option Expiration Date") if (x) the Stockholder fails to comply with any of its obligations under this Agreement or withdraws the tender of the Shares except under the circumstances set forth in the proviso to Section 1.1(b) (but the Option shall not limit any other right or remedy available to the Parent or Purchaser against the Stockholder for breach of this Agreement) or (y) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer set forth in Annex A to the Merger Agreement (other than as a result of any action or inaction of the Parent or Purchaser which constitutes a breach of the Merger Agreement). 2 43 Upon the occurrence of any of such circumstances, Purchaser shall be entitled to exercise the Option and (subject to Section 1.3) Parent shall be entitled to purchase the Shares and the Stockholder shall sell the Shares to Parent. Parent shall exercise the Option by delivering written notice thereof to the Stockholder (the "Notice"), specifying the number of Shares to be purchased and the date, time and place for the closing of such purchase which date shall not be less than three business days nor more than five business days from the date the Stockholder receives the Notice and in no event shall such date be later than the Option Expiration Date. The closing of the purchase of Shares pursuant to this Section 1.2 (the "Closing") shall take place on the date, at the time and at the place specified in such notice; provided, that if at such date any of the conditions specified in Section 1.3 shall not have been satisfied (or waived), Parent may postpone the Closing until a date within five business days after such conditions are satisfied (but not later than the Option Expiration Date). (c) At the Closing, the Stockholder will deliver to Parent (in accordance with Parent's instructions) the certificates representing the Shares owned by the Stockholder and being purchased pursuant to Section 1.2(c), duly endorsed or accompanied by stock powers duly executed in blank. At such Closing, Parent shall deliver to the Stockholder, by bank wire transfer of immediately available funds, an amount equal to the number of Shares being purchased from the Stockholder as specified in the Notice multiplied by $5.50 (or such higher per share price as may be offered by Parent in the Offer). SECTION 1.3. Conditions to Option. The obligation of Parent to purchase the Shares at the Closing is subject to the following conditions: (a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such purchase shall have expired or been terminated; and (b) there shall be no preliminary or permanent injunction or other order, decree or ruling issued by any Governmental Body, nor any statute, rule, regulation or order promulgated or enacted by any Governmental Body prohibiting, or otherwise restraining, such purchase. SECTION 1.4. No Purchase. Purchaser and Parent may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms and conditions set forth in the Offer to Purchase, and may allow the Option to expire without exercising the Option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer to Purchase or pursuant to the exercise of the Option, they shall be returned to the Stockholder, whereupon they shall continue to be held by the Stockholder subject to the terms and conditions of this Agreement. 3 44 ARTICLE II Consent and Voting The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares owned by the Stockholder. By entering into this Agreement, the Stockholder hereby consents to the Merger Agreement and the transactions contemplated thereby, including the Merger. So long as the Merger Agreement is in effect, the Stockholder hereby agrees (i) to vote all Shares now or hereafter owned by such Stockholder or execute a consent or proxy and not revoke any proxy, vote or consent, in favor of the Articles Amendment, the Merger Agreement, the Merger and the transactions contemplated thereby, and (ii) to oppose any Acquisition Proposal and to vote all Shares now or hereafter owned by such Stockholder, or execute a consent or proxy, against any Acquisition Proposal. ARTICLE III Representations, Warranties and Covenants of the Stockholder The Stockholder represents, warrants and covenants to the Purchaser that: SECTION 3.1. (a) Ownership. As of the date hereof the Stockholder is the sole, true, lawful and beneficial owner of 24,263 Shares and that there are no restrictions on voting rights or rights of disposition pertaining to such Shares. The Stockholder will convey good and valid title to the Shares owned by the Stockholder and being acquired pursuant to the Offer, the Merger or the exercise of the Option, as the case may be, free and clear of any and all liens, restrictions, security interests or any encumbrances whatsoever (collectively, "Liens"). None of the Shares owned by the Stockholder is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares. (b) Transfer of the Shares. (i) Until this Agreement is terminated, the Stockholder shall not directly or indirectly offer to sell, sell short, transfer (including gift), assign, pledge or otherwise dispose of or transfer (each, a "Transfer") any interest in or encumber with any Lien any of the Shares, (ii) enter into any contract, option, put, call, "collar" or other agreement or understanding with respect to any Transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares; or (v) take any other action with respect to the Shares that would in any way restrict, limit or interfere with the performance of its obligations hereunder. (c) The Stockholder agrees to place the following legend on any and all certificates evidencing the Shares: 4 45 THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT SHAREHOLDER AGREEMENT, DATED AS OF JULY 12, 1999, BY AND AMONG PARENT, PURCHASER AND STOCKHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. SECTION 3.2. Authority and Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within the Stockholder's power and authority, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Stockholder or to a loss of any benefit of the Stockholder under, any provision of applicable law or regulation or any agreement, judgment, injunction, order, decree, or other instrument binding on the Stockholder or result in the imposition of any Lien on any assets of the Stockholder. If the Stockholder is married and the Shares constitute community property or otherwise are owned or held in a manner that requires spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly consented to and delivered by the Stockholder's spouse or the person giving such approval, enforceable against such spouse or person in accordance with its terms. SECTION 3.3. Binding Effect. This Agreement has been duly executed and delivered by the Stockholder and is the valid and binding agreement of the Stockholder, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 3.4. Total Shares. The Stockholder Shares owned by the Stockholder are the only shares of Company Common Stock beneficially owned as of the date hereof by the Stockholder and the Stockholder has no option to purchase or right to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any other securities of the Company. SECTION 3.5. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder, except as otherwise disclosed in the Merger Agreement. 5 46 ARTICLE IV Representations and Warranties of the Parent and Purchaser The Parent and Purchaser represent and warrant to the Stockholder: SECTION 4.1. Corporate Power and Authority; Noncontravention. The Parent and Purchaser have all requisite corporate power and authority to enter into this Agreement and to perform their obligations hereunder. The execution, delivery and performance by the Parent and Purchaser of this Agreement and the consummation by the Parent and Purchaser of the transactions contemplated hereby (i) have been duly authorized by all necessary corporate action on the part of the Parent and Purchaser, (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Exchange Act), or (iii) do not and will not contravene or constitute a default under, the certificate of incorporation or by-laws of Parent or Purchaser or any provision of applicable law or regulation or any, judgment, injunction, order, decree, material agreement or other material instrument binding on the Parent or Purchaser. SECTION 4.2. Binding Effect. This Agreement has been duly executed and delivered by the Parent and Purchaser and is a valid and binding agreement of the Parent and Purchaser, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.3. Acquisition for Purchaser's Account. Any Shares to be acquired upon consummation of the Offer, or upon exercise of the Option will be acquired by Parent for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act and the rules and regulations promulgated thereunder. ARTICLE V Additional Agreements SECTION 5.1. Agreements of Stockholder. The Stockholder hereby covenants and agrees that: (a) No Solicitation. The Stockholder shall not directly or indirectly (i) solicit, initiate or knowingly encourage (or authorize any person to solicit, initiate or encourage) any Acquisition Proposal, or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise knowingly cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek the foregoing. The Stockholder shall promptly advise the Purchaser of the terms of any communications it or any of its affiliates may receive relating 6 47 to any Acquisition Proposal (including, without limitation, the identify of the party making any such Acquisition Proposal). (b) Adjustment upon Changes in Capitalization or Merger. In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalization, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure of the Company which would have the effect of diluting or changing Parent and Purchaser's rights hereunder, the number and kind of shares or securities subject to this Agreement and the price set forth herein at which Shares may be purchased from the Stockholder pursuant to the Offer or the exercise of the Option shall be appropriately and equitably adjusted so that Parent and Purchaser shall receive pursuant to the Offer or the exercise of the Option the number and class of shares or other securities or property that Parent or Purchaser, as the case may be, would have received in respect of the Shares purchasable pursuant to the Offer or the exercise of the Option if such purchase had occurred immediately prior to such event. ARTICLE VI Miscellaneous SECTION 6.1. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.2. Further Assurances. The Parent, Purchaser and the Stockholder will execute and deliver or cause to be executed and delivered all further documents and instruments and use its reasonable best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby and by the Merger Agreement. SECTION 6.3. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.4. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will not be compensable by money damages. The parties therefore agree that this Shareholder Agreement shall be specifically enforceable and that specific enforcement 7 48 and injunctive relief shall be available to the Parent, Purchaser or the Stockholder for any breach by the other party or parties of any agreement, covenant or representation hereunder. SECTION 6.5. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. SECTION 6.6. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares pursuant to Section 1.2 hereof. None of the representations and warranties contained in this Agreement shall survive the acceptance for payment and payment for the Shares pursuant to the Offer. SECTION 6.7. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. Notwithstanding anything herein to the contrary, this Agreement shall expire and be of no further force or effect if (i) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser breaches any obligation of Purchaser under the Merger Agreement to accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer upon expiration of the Offer or (ii) Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). This Agreement will also terminate upon the earlier of (i) the close of business on March 1, 2000, or (ii) the Effective Time. SECTION 6.8. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may assign its rights and obligations to another wholly-owned subsidiary of the Parent which is the assignee of Purchaser's rights under the Merger Agreement; and provided further that except as set forth in the prior clause, a party may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be null and void. SECTION 6.9. Governing Law. This Agreement shall be construed in accordance with and governed by the law of Delaware without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effects as if the signatures 8 49 thereto and thereof were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 6.11. Stockholder Capacity. The Stockholder signs solely in its capacity as the record holder and beneficial owner of the Shares and nothing herein shall limit or affect any actions taken by the Stockholder in his or her capacity as an officer, director, partner, employee or affiliate of the Company and no such actions shall be deemed a breach of this Agreement. SECTION 6.12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. To the extent that any provision of this Agreement and the Merger Agreement conflict, the provisions of the Merger Agreement shall control. 9 50 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. FEDDERS CORPORATION By: /s/ Robert L. Laurent, Jr. ----------------------------------- Name: Robert L. Laurent, Jr. ----------------------------------- Title: Executive Vice President ----------------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07938 Attn: General Counsel TI ACQUISITION CORP. By: /s/ Robert L. Laurent, Jr. ----------------------------------- Name: Robert L. Laurent, Jr. ----------------------------------- Title: Executive Vice President ----------------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07983-0813 Attn: General Counsel /s/ F. Trent Hill, Jr. (SEAL) ----------------------------------------------- F. Trent Hill, Jr. Address for Notices: One North Second Street P. O. Box 160 Hartsville, SC 29550 51 SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated as of July 12, 1999 (this "Agreement"), among Fedders Corporation, a Delaware corporation (the "Parent"), TI Acquisition Corp., a Pennsylvania corporation and an indirect wholly owned subsidiary of the Parent ("Purchaser"), and Grant R. Meyers (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement the Parent, Purchaser and Trion, Inc., a Pennsylvania corporation (the "Company"), have entered into an Agreement and Plan of Merger dated as of the date hereof (such Agreement and Plan of Merger, as amended from time to time, the "Merger Agreement"), which provides, among other things, that Purchaser shall make the Offer (as defined in the Merger Agreement) to purchase at a price of $5.50 per share, net to the sellers in cash, all of the issued and outstanding shares of the Company's Common Stock, par value $0.50 per share (the "Company Common Stock"), and shall merge with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement (any term used herein without definition shall have the definition ascribed thereto in the Merger Agreement); WHEREAS, the Stockholder owns beneficially and of record shares of Company Common Stock (such shares of Company Common Stock being collectively referred to herein as the "Stockholder Shares"); and WHEREAS, as a condition to the willingness of the Parent and Purchaser to enter into the Merger Agreement, and as an inducement to them to do so, the Stockholder has agreed for the benefit of the Parent and Purchaser to tender the Stockholder Shares and any other shares of Company Common Stock at any time during the term of this Agreement held by the Stockholder, pursuant to the Offer, to vote all the Stockholder Shares and any other shares of Company Common Stock owned by the Stockholder in favor of the Merger, and to grant to Parent an option to acquire all Stockholder Shares and all other shares of Company Common Stock owned by the Stockholder under certain circumstances, all on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereby agree as follows: 52 ARTICLE I Tender Offer and Option SECTION 1.1. Tender of Shares. (a) Within five business days of the commencement by Purchaser of the Offer, the Stockholder shall tender to the Depository designated in the Offer to Purchase (the "Offer to Purchase") distributed by Purchaser in connection with the Offer (i) a letter of transmittal with respect to the Stockholder Shares and any other shares of Company Common Stock held by the Stockholder (whether or not currently held by the Stockholder; the Stockholder Shares, together with any shares acquired by the Stockholder in any capacity after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the "Shares")), complying with the terms of the Offer to Purchase, (ii) the certificates representing the Shares, and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer to Purchase. (b) The Stockholder shall not, subject to applicable law, withdraw the tender effected in accordance with Section 1.1(a); provided, however, that the Stockholder may decline to tender, or may withdraw, any and all Shares owned by the Stockholder if the Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the stockholders, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). The Stockholder shall give Purchaser at least two business days' prior notice of any withdrawal of Shares owned by the Stockholder pursuant to the immediately preceding proviso. SECTION 1.2. Option. (a) The Stockholder hereby irrevocably grants Parent an option (the "Option"), exercisable only upon the events and subject to the conditions set forth herein, to purchase any or all of the Shares at a purchase price per share equal to $5.50 (or such higher per share price as may be offered by Purchaser in the Offer). (b) Subject to the conditions set forth in Section 1.3 and the termination provisions of Section 6.7, Parent may exercise the Option in whole or in part at any time prior to the date 60 days after the expiration or termination of the Offer (such sixtieth day being herein called the "Option Expiration Date") if (x) the Stockholder fails to comply with any of its obligations under this Agreement or withdraws the tender of the Shares except under the circumstances set forth in the proviso to Section 1.1(b) (but the Option shall not limit any other right or remedy available to the Parent or Purchaser against the Stockholder for breach of this Agreement) or (y) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer set forth in Annex A to the Merger Agreement (other than as a result of any action or inaction of the Parent or Purchaser which constitutes a breach of the Merger Agreement). 2 53 Upon the occurrence of any of such circumstances, Purchaser shall be entitled to exercise the Option and (subject to Section 1.3) Parent shall be entitled to purchase the Shares and the Stockholder shall sell the Shares to Parent. Parent shall exercise the Option by delivering written notice thereof to the Stockholder (the "Notice"), specifying the number of Shares to be purchased and the date, time and place for the closing of such purchase which date shall not be less than three business days nor more than five business days from the date the Stockholder receives the Notice and in no event shall such date be later than the Option Expiration Date. The closing of the purchase of Shares pursuant to this Section 1.2 (the "Closing") shall take place on the date, at the time and at the place specified in such notice; provided, that if at such date any of the conditions specified in Section 1.3 shall not have been satisfied (or waived), Parent may postpone the Closing until a date within five business days after such conditions are satisfied (but not later than the Option Expiration Date). (c) At the Closing, the Stockholder will deliver to Parent (in accordance with Parent's instructions) the certificates representing the Shares owned by the Stockholder and being purchased pursuant to Section 1.2(c), duly endorsed or accompanied by stock powers duly executed in blank. At such Closing, Parent shall deliver to the Stockholder, by bank wire transfer of immediately available funds, an amount equal to the number of Shares being purchased from the Stockholder as specified in the Notice multiplied by $5.50 (or such higher per share price as may be offered by Parent in the Offer). SECTION 1.3. Conditions to Option. The obligation of Parent to purchase the Shares at the Closing is subject to the following conditions: (a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such purchase shall have expired or been terminated; and (b) there shall be no preliminary or permanent injunction or other order, decree or ruling issued by any Governmental Body, nor any statute, rule, regulation or order promulgated or enacted by any Governmental Body prohibiting, or otherwise restraining, such purchase. SECTION 1.4. No Purchase. Purchaser and Parent may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms and conditions set forth in the Offer to Purchase, and may allow the Option to expire without exercising the Option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer to Purchase or pursuant to the exercise of the Option, they shall be returned to the Stockholder, whereupon they shall continue to be held by the Stockholder subject to the terms and conditions of this Agreement. 3 54 ARTICLE II Consent and Voting The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares owned by the Stockholder. By entering into this Agreement, the Stockholder hereby consents to the Merger Agreement and the transactions contemplated thereby, including the Merger. So long as the Merger Agreement is in effect, the Stockholder hereby agrees (i) to vote all Shares now or hereafter owned by such Stockholder or execute a consent or proxy and not revoke any proxy, vote or consent, in favor of the Articles Amendment, the Merger Agreement, the Merger and the transactions contemplated thereby, and (ii) to oppose any Acquisition Proposal and to vote all Shares now or hereafter owned by such Stockholder, or execute a consent or proxy, against any Acquisition Proposal. ARTICLE III Representations, Warranties and Covenants of the Stockholder The Stockholder represents, warrants and covenants to the Purchaser that: SECTION 3.1. (a) Ownership. As of the date hereof the Stockholder is the sole, true, lawful and beneficial owner of 218,989 Shares and that there are no restrictions on voting rights or rights of disposition pertaining to such Shares. The Stockholder will convey good and valid title to the Shares owned by the Stockholder and being acquired pursuant to the Offer, the Merger or the exercise of the Option, as the case may be, free and clear of any and all liens, restrictions, security interests or any encumbrances whatsoever (collectively, "Liens"). None of the Shares owned by the Stockholder is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares. (b) Transfer of the Shares. (i) Until this Agreement is terminated, the Stockholder shall not directly or indirectly offer to sell, sell short, transfer (including gift), assign, pledge or otherwise dispose of or transfer (each, a "Transfer") any interest in or encumber with any Lien any of the Shares, (ii) enter into any contract, option, put, call, "collar" or other agreement or understanding with respect to any Transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares; or (v) take any other action with respect to the Shares that would in any way restrict, limit or interfere with the performance of its obligations hereunder. (c) The Stockholder agrees to place the following legend on any and all certificates evidencing the Shares: 4 55 THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT SHAREHOLDER AGREEMENT, DATED AS OF JULY 12, 1999, BY AND AMONG PARENT, PURCHASER AND STOCKHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. SECTION 3.2. Authority and Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within the Stockholder's power and authority, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Stockholder or to a loss of any benefit of the Stockholder under, any provision of applicable law or regulation or any agreement, judgment, injunction, order, decree, or other instrument binding on the Stockholder or result in the imposition of any Lien on any assets of the Stockholder. If the Stockholder is married and the Shares constitute community property or otherwise are owned or held in a manner that requires spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly consented to and delivered by the Stockholder's spouse or the person giving such approval, enforceable against such spouse or person in accordance with its terms. SECTION 3.3. Binding Effect. This Agreement has been duly executed and delivered by the Stockholder and is the valid and binding agreement of the Stockholder, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 3.4. Total Shares. The Stockholder Shares owned by the Stockholder are the only shares of Company Common Stock beneficially owned as of the date hereof by the Stockholder and the Stockholder has no option to purchase or right to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any other securities of the Company. SECTION 3.5. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder, except as otherwise disclosed in the Merger Agreement. 5 56 ARTICLE IV Representations and Warranties of the Parent and Purchaser The Parent and Purchaser represent and warrant to the Stockholder: SECTION 4.1. Corporate Power and Authority; Noncontravention. The Parent and Purchaser have all requisite corporate power and authority to enter into this Agreement and to perform their obligations hereunder. The execution, delivery and performance by the Parent and Purchaser of this Agreement and the consummation by the Parent and Purchaser of the transactions contemplated hereby (i) have been duly authorized by all necessary corporate action on the part of the Parent and Purchaser, (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Exchange Act), or (iii) do not and will not contravene or constitute a default under, the certificate of incorporation or by-laws of Parent or Purchaser or any provision of applicable law or regulation or any, judgment, injunction, order, decree, material agreement or other material instrument binding on the Parent or Purchaser. SECTION 4.2. Binding Effect. This Agreement has been duly executed and delivered by the Parent and Purchaser and is a valid and binding agreement of the Parent and Purchaser, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.3. Acquisition for Purchaser's Account. Any Shares to be acquired upon consummation of the Offer, or upon exercise of the Option will be acquired by Parent for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act and the rules and regulations promulgated thereunder. ARTICLE V Additional Agreements SECTION 5.1. Agreements of Stockholder. The Stockholder hereby covenants and agrees that: (a) No Solicitation. The Stockholder shall not directly or indirectly (i) solicit, initiate or knowingly encourage (or authorize any person to solicit, initiate or encourage) any Acquisition Proposal, or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise knowingly cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek the foregoing. The Stockholder shall promptly advise the Purchaser of the terms of any communications it or any of its affiliates may receive relating 6 57 to any Acquisition Proposal (including, without limitation, the identify of the party making any such Acquisition Proposal). (b) Adjustment upon Changes in Capitalization or Merger. In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalization, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure of the Company which would have the effect of diluting or changing Parent and Purchaser's rights hereunder, the number and kind of shares or securities subject to this Agreement and the price set forth herein at which Shares may be purchased from the Stockholder pursuant to the Offer or the exercise of the Option shall be appropriately and equitably adjusted so that Parent and Purchaser shall receive pursuant to the Offer or the exercise of the Option the number and class of shares or other securities or property that Parent or Purchaser, as the case may be, would have received in respect of the Shares purchasable pursuant to the Offer or the exercise of the Option if such purchase had occurred immediately prior to such event. ARTICLE VI Miscellaneous SECTION 6.1. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.2. Further Assurances. The Parent, Purchaser and the Stockholder will execute and deliver or cause to be executed and delivered all further documents and instruments and use its reasonable best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby and by the Merger Agreement. SECTION 6.3. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.4. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will not be compensable by money damages. The parties therefore agree that this Shareholder Agreement shall be specifically enforceable and that specific enforcement 7 58 and injunctive relief shall be available to the Parent, Purchaser or the Stockholder for any breach by the other party or parties of any agreement, covenant or representation hereunder. SECTION 6.5. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. SECTION 6.6. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares pursuant to Section 1.2 hereof. None of the representations and warranties contained in this Agreement shall survive the acceptance for payment and payment for the Shares pursuant to the Offer. SECTION 6.7. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. Notwithstanding anything herein to the contrary, this Agreement shall expire and be of no further force or effect if (i) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser breaches any obligation of Purchaser under the Merger Agreement to accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer upon expiration of the Offer or (ii) Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). This Agreement will also terminate upon the earlier of (i) the close of business on March 1, 2000, or (ii) the Effective Time. SECTION 6.8. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may assign its rights and obligations to another wholly-owned subsidiary of the Parent which is the assignee of Purchaser's rights under the Merger Agreement; and provided further that except as set forth in the prior clause, a party may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be null and void. SECTION 6.9. Governing Law. This Agreement shall be construed in accordance with and governed by the law of Delaware without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effects as if the signatures 8 59 thereto and thereof were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 6.11. Stockholder Capacity. The Stockholder signs solely in its capacity as the record holder and beneficial owner of the Shares and nothing herein shall limit or affect any actions taken by the Stockholder in his or her capacity as an officer, director, partner, employee or affiliate of the Company and no such actions shall be deemed a breach of this Agreement. SECTION 6.12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. To the extent that any provision of this Agreement and the Merger Agreement conflict, the provisions of the Merger Agreement shall control. SECTION 6.13. Pledged Shares. Notwithstanding anything to the contrary herein, in the event this Agreement conflicts with any agreement or understanding governing any of the 185,292 Shares pledged to Wachovia Bank, N.A., String & Strongfellow or Hugh E. Carr (the "Pledge Agreements"), the Pledge Agreements shall control. 9 60 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. FEDDERS CORPORATION By: /s/ Robert L. Laurent, Jr. ----------------------------------- Name: Robert L. Laurent, Jr. ----------------------------------- Title: Executive Vice President ----------------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07938 Attn: General Counsel TI ACQUISITION CORP. By: /s/ Robert L. Laurent, Jr. ----------------------------------- Name: Robert L. Laurent, Jr. ----------------------------------- Title: Executive Vice President ----------------------------------- Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07983-0813 Attn: General Counsel /s/ Grant R. Meyers (SEAL) ----------------------------------------------- Grant R. Meyers Address for Notices: 105970 Overseas Highway Key Largo, FL 33037 61 SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated as of July 12, 1999 (this "Agreement"), among Fedders Corporation, a Delaware corporation (the "Parent"), TI Acquisition Corp., a Pennsylvania corporation and an indirect wholly owned subsidiary of the Parent ("Purchaser"), and Steven L. Schneider (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement the Parent, Purchaser and Trion, Inc., a Pennsylvania corporation (the "Company"), have entered into an Agreement and Plan of Merger dated as of the date hereof (such Agreement and Plan of Merger, as amended from time to time, the "Merger Agreement"), which provides, among other things, that Purchaser shall make the Offer (as defined in the Merger Agreement) to purchase at a price of $5.50 per share, net to the sellers in cash, all of the issued and outstanding shares of the Company's Common Stock, par value $0.50 per share (the "Company Common Stock"), and shall merge with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement (any term used herein without definition shall have the definition ascribed thereto in the Merger Agreement); WHEREAS, the Stockholder owns beneficially and of record shares of Company Common Stock (such shares of Company Common Stock being collectively referred to herein as the "Stockholder Shares"); and WHEREAS, as a condition to the willingness of the Parent and Purchaser to enter into the Merger Agreement, and as an inducement to them to do so, the Stockholder has agreed for the benefit of the Parent and Purchaser to tender the Stockholder Shares and any other shares of Company Common Stock at any time during the term of this Agreement held by the Stockholder, pursuant to the Offer, to vote all the Stockholder Shares and any other shares of Company Common Stock owned by the Stockholder in favor of the Merger, and to grant to Parent an option to acquire all Stockholder Shares and all other shares of Company Common Stock owned by the Stockholder under certain circumstances, all on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereby agree as follows: 62 ARTICLE I Tender Offer and Option SECTION 1.1. Tender of Shares. (a) Within five business days of the commencement by Purchaser of the Offer, the Stockholder shall tender to the Depository designated in the Offer to Purchase (the "Offer to Purchase") distributed by Purchaser in connection with the Offer (i) a letter of transmittal with respect to the Stockholder Shares and any other shares of Company Common Stock held by the Stockholder (whether or not currently held by the Stockholder; the Stockholder Shares, together with any shares acquired by the Stockholder in any capacity after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the "Shares")), complying with the terms of the Offer to Purchase, (ii) the certificates representing the Shares, and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer to Purchase. (b) The Stockholder shall not, subject to applicable law, withdraw the tender effected in accordance with Section 1.1(a); provided, however, that the Stockholder may decline to tender, or may withdraw, any and all Shares owned by the Stockholder if the Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the stockholders, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). The Stockholder shall give Purchaser at least two business days' prior notice of any withdrawal of Shares owned by the Stockholder pursuant to the immediately preceding proviso. SECTION 1.2. Option. (a) The Stockholder hereby irrevocably grants Parent an option (the "Option"), exercisable only upon the events and subject to the conditions set forth herein, to purchase any or all of the Shares at a purchase price per share equal to $5.50 (or such higher per share price as may be offered by Purchaser in the Offer). (b) Subject to the conditions set forth in Section 1.3 and the termination provisions of Section 6.7, Parent may exercise the Option in whole or in part at any time prior to the date 60 days after the expiration or termination of the Offer (such sixtieth day being herein called the "Option Expiration Date") if (x) the Stockholder fails to comply with any of its obligations under this Agreement or withdraws the tender of the Shares except under the circumstances set forth in the proviso to Section 1.1(b) (but the Option shall not limit any other right or remedy available to the Parent or Purchaser against the Stockholder for breach of this Agreement) or (y) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer set forth in Annex A to the Merger Agreement (other than as a result of any action or inaction of the Parent or Purchaser which constitutes a breach of the Merger Agreement). 2 63 Upon the occurrence of any of such circumstances, Purchaser shall be entitled to exercise the Option and (subject to Section 1.3) Parent shall be entitled to purchase the Shares and the Stockholder shall sell the Shares to Parent. Parent shall exercise the Option by delivering written notice thereof to the Stockholder (the "Notice"), specifying the number of Shares to be purchased and the date, time and place for the closing of such purchase which date shall not be less than three business days nor more than five business days from the date the Stockholder receives the Notice and in no event shall such date be later than the Option Expiration Date. The closing of the purchase of Shares pursuant to this Section 1.2 (the "Closing") shall take place on the date, at the time and at the place specified in such notice; provided, that if at such date any of the conditions specified in Section 1.3 shall not have been satisfied (or waived), Parent may postpone the Closing until a date within five business days after such conditions are satisfied (but not later than the Option Expiration Date). (c) At the Closing, the Stockholder will deliver to Parent (in accordance with Parent's instructions) the certificates representing the Shares owned by the Stockholder and being purchased pursuant to Section 1.2(c), duly endorsed or accompanied by stock powers duly executed in blank. At such Closing, Parent shall deliver to the Stockholder, by bank wire transfer of immediately available funds, an amount equal to the number of Shares being purchased from the Stockholder as specified in the Notice multiplied by $5.50 (or such higher per share price as may be offered by Parent in the Offer). SECTION 1.3. Conditions to Option. The obligation of Parent to purchase the Shares at the Closing is subject to the following conditions: (a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such purchase shall have expired or been terminated; and (b) there shall be no preliminary or permanent injunction or other order, decree or ruling issued by any Governmental Body, nor any statute, rule, regulation or order promulgated or enacted by any Governmental Body prohibiting, or otherwise restraining, such purchase. SECTION 1.4. No Purchase. Purchaser and Parent may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms and conditions set forth in the Offer to Purchase, and may allow the Option to expire without exercising the Option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer to Purchase or pursuant to the exercise of the Option, they shall be returned to the Stockholder, whereupon they shall continue to be held by the Stockholder subject to the terms and conditions of this Agreement. 3 64 ARTICLE II Consent and Voting The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares owned by the Stockholder. By entering into this Agreement, the Stockholder hereby consents to the Merger Agreement and the transactions contemplated thereby, including the Merger. So long as the Merger Agreement is in effect, the Stockholder hereby agrees (i) to vote all Shares now or hereafter owned by such Stockholder or execute a consent or proxy and not revoke any proxy, vote or consent, in favor of the Articles Amendment, the Merger Agreement, the Merger and the transactions contemplated thereby, and (ii) to oppose any Acquisition Proposal and to vote all Shares now or hereafter owned by such Stockholder, or execute a consent or proxy, against any Acquisition Proposal. ARTICLE III Representations, Warranties and Covenants of the Stockholder The Stockholder represents, warrants and covenants to the Purchaser that: SECTION 3.1. (a) Ownership. As of the date hereof the Stockholder is the sole, true, lawful and beneficial owner of 103,000 Shares and that there are no restrictions on voting rights or rights of disposition pertaining to such Shares. The Stockholder will convey good and valid title to the Shares owned by the Stockholder and being acquired pursuant to the Offer, the Merger or the exercise of the Option, as the case may be, free and clear of any and all liens, restrictions, security interests or any encumbrances whatsoever (collectively, "Liens"). None of the Shares owned by the Stockholder is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares. (b) Transfer of the Shares. (i) Until this Agreement is terminated, the Stockholder shall not directly or indirectly offer to sell, sell short, transfer (including gift), assign, pledge or otherwise dispose of or transfer (each, a "Transfer") any interest in or encumber with any Lien any of the Shares, (ii) enter into any contract, option, put, call, "collar" or other agreement or understanding with respect to any Transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares; or (v) take any other action with respect to the Shares that would in any way restrict, limit or interfere with the performance of its obligations hereunder. (c) The Stockholder agrees to place the following legend on any and all certificates evidencing the Shares: 4 65 THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT SHAREHOLDER AGREEMENT, DATED AS OF JULY 12, 1999, BY AND AMONG PARENT, PURCHASER AND STOCKHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. SECTION 3.2. Authority and Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within the Stockholder's power and authority, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Stockholder or to a loss of any benefit of the Stockholder under, any provision of applicable law or regulation or any agreement, judgment, injunction, order, decree, or other instrument binding on the Stockholder or result in the imposition of any Lien on any assets of the Stockholder. If the Stockholder is married and the Shares constitute community property or otherwise are owned or held in a manner that requires spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly consented to and delivered by the Stockholder's spouse or the person giving such approval, enforceable against such spouse or person in accordance with its terms. SECTION 3.3. Binding Effect. This Agreement has been duly executed and delivered by the Stockholder and is the valid and binding agreement of the Stockholder, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 3.4. Total Shares. The Stockholder Shares owned by the Stockholder are the only shares of Company Common Stock beneficially owned as of the date hereof by the Stockholder and the Stockholder has no option to purchase or right to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any other securities of the Company. SECTION 3.5. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder, except as otherwise disclosed in the Merger Agreement. 5 66 ARTICLE IV Representations and Warranties of the Parent and Purchaser The Parent and Purchaser represent and warrant to the Stockholder: SECTION 4.1. Corporate Power and Authority; Noncontravention. The Parent and Purchaser have all requisite corporate power and authority to enter into this Agreement and to perform their obligations hereunder. SectionSection SECTION 4.2. Binding Effect. This Agreement has been duly executed and delivered by the Parent and Purchaser and is a valid and binding agreement of the Parent and Purchaser, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.3. Acquisition for Purchaser's Account. Any Shares to be acquired upon consummation of the Offer, or upon exercise of the Option will be acquired by Parent for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act and the rules and regulations promulgated thereunder. ARTICLE V Additional Agreements SECTION 5.1. Agreements of Stockholder. The Stockholder hereby covenants and agrees that: (a) No Solicitation. The Stockholder shall not directly or indirectly (i) solicit, initiate or knowingly encourage (or authorize any person to solicit, initiate or encourage) any Acquisition Proposal, or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise knowingly cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek the foregoing. The Stockholder shall promptly advise the Purchaser of the terms of any communications it or any of its affiliates may receive relating to any Acquisition Proposal (including, without limitation, the identify of the party making any such Acquisition Proposal). (b) Adjustment upon Changes in Capitalization or Merger. In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalization, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure 6 67 of the Company which would have the effect of diluting or changing Parent and Purchaser's rights hereunder, the number and kind of shares or securities subject to this Agreement and the price set forth herein at which Shares may be purchased from the Stockholder pursuant to the Offer or the exercise of the Option shall be appropriately and equitably adjusted so that Parent and Purchaser shall receive pursuant to the Offer or the exercise of the Option the number and class of shares or other securities or property that Parent or Purchaser, as the case may be, would have received in respect of the Shares purchasable pursuant to the Offer or the exercise of the Option if such purchase had occurred immediately prior to such event. ARTICLE VI Miscellaneous SECTION 6.1. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.2. Further Assurances. The Parent, Purchaser and the Stockholder will execute and deliver or cause to be executed and delivered all further documents and instruments and use its reasonable best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby and by the Merger Agreement. SECTION 6.3. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.4. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will not be compensable by money damages. The parties therefore agree that this Shareholder Agreement shall be specifically enforceable and that specific enforcement and injunctive relief shall be available to the Parent, Purchaser or the Stockholder for any breach by the other party or parties of any agreement, covenant or representation hereunder. SECTION 6.5. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. 7 68 SECTION 6.6. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares pursuant to Section 1.2 hereof. None of the representations and warranties contained in this Agreement shall survive the acceptance for payment and payment for the Shares pursuant to the Offer. SECTION 6.7. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. Notwithstanding anything herein to the contrary, this Agreement shall expire and be of no further force or effect if (i) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser breaches any obligation of Purchaser under the Merger Agreement to accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer upon expiration of the Offer or (ii) Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). This Agreement will also terminate upon the earlier of (i) the close of business on March 1, 2000, or (ii) the Effective Time. SECTION 6.8. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may assign its rights and obligations to another wholly-owned subsidiary of the Parent which is the assignee of Purchaser's rights under the Merger Agreement; and provided further that except as set forth in the prior clause, a party may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be null and void. SECTION 6.9. Governing Law. This Agreement shall be construed in accordance with and governed by the law of Delaware without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effects as if the signatures thereto and thereof were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 6.11. Stockholder Capacity. The Stockholder signs solely in its capacity as the record holder and beneficial owner of the Shares and nothing herein shall limit or affect any actions taken by the Stockholder in his or her capacity as an officer, director, partner, employee or affiliate of the Company and no such actions shall be deemed a breach of this Agreement. 8 69 SECTION 6.12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. To the extent that any provision of this Agreement and the Merger Agreement conflict, the provisions of the Merger Agreement shall control. 9 70 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. FEDDERS CORPORATION By: /s/ Robert L. Laurent, Jr. ---------------------------- Name: Robert L. Laurent, Jr. Title: Executive Vice President Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07938 Attn: General Counsel TI ACQUISITION CORP. By: /s/ Robert L. Laurent, Jr. ---------------------------- Name: Robert L. Laurent, Jr. Title: Executive Vice President Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07983-0813 Attn: General Counsel /s/ Steven L. Schneider (SEAL) ------------------------------------- Steven L. Schneider Address for Notices: 101 McNeill Road Sanford, NC 27330 71 SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated as of July 12, 1999 (this "Agreement"), among Fedders Corporation, a Delaware corporation (the "Parent"), TI Acquisition Corp., a Pennsylvania corporation and an indirect wholly owned subsidiary of the Parent ("Purchaser"), and Samuel J. Wornom III (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement the Parent, Purchaser and Trion, Inc., a Pennsylvania corporation (the "Company"), have entered into an Agreement and Plan of Merger dated as of the date hereof (such Agreement and Plan of Merger, as amended from time to time, the "Merger Agreement"), which provides, among other things, that Purchaser shall make the Offer (as defined in the Merger Agreement) to purchase at a price of $5.50 per share, net to the sellers in cash, all of the issued and outstanding shares of the Company's Common Stock, par value $0.50 per share (the "Company Common Stock"), and shall merge with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement (any term used herein without definition shall have the definition ascribed thereto in the Merger Agreement); WHEREAS, the Stockholder owns beneficially and of record shares of Company Common Stock (such shares of Company Common Stock being collectively referred to herein as the "Stockholder Shares"); and WHEREAS, as a condition to the willingness of the Parent and Purchaser to enter into the Merger Agreement, and as an inducement to them to do so, the Stockholder has agreed for the benefit of the Parent and Purchaser to tender the Stockholder Shares and any other shares of Company Common Stock at any time during the term of this Agreement held by the Stockholder, pursuant to the Offer, to vote all the Stockholder Shares and any other shares of Company Common Stock owned by the Stockholder in favor of the Merger, and to grant to Parent an option to acquire all Stockholder Shares and all other shares of Company Common Stock owned by the Stockholder under certain circumstances, all on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereby agree as follows: 72 ARTICLE I Tender Offer and Option SECTION 1.1. Tender of Shares. (a) Within five business days of the commencement by Purchaser of the Offer, the Stockholder shall tender to the Depository designated in the Offer to Purchase (the "Offer to Purchase") distributed by Purchaser in connection with the Offer (i) a letter of transmittal with respect to the Stockholder Shares and any other shares of Company Common Stock held by the Stockholder (whether or not currently held by the Stockholder; the Stockholder Shares, together with any shares acquired by the Stockholder in any capacity after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the "Shares")), complying with the terms of the Offer to Purchase, (ii) the certificates representing the Shares, and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer to Purchase. (b) The Stockholder shall not, subject to applicable law, withdraw the tender effected in accordance with Section 1.1(a); provided, however, that the Stockholder may decline to tender, or may withdraw, any and all Shares owned by the Stockholder if the Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the stockholders, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). The Stockholder shall give Purchaser at least two business days' prior notice of any withdrawal of Shares owned by the Stockholder pursuant to the immediately preceding proviso. SECTION 1.2. Option. (a) The Stockholder hereby irrevocably grants Parent an option (the "Option"), exercisable only upon the events and subject to the conditions set forth herein, to purchase any or all of the Shares at a purchase price per share equal to $5.50 (or such higher per share price as may be offered by Purchaser in the Offer). (b) Subject to the conditions set forth in Section 1.3 and the termination provisions of Section 6.7, Parent may exercise the Option in whole or in part at any time prior to the date 60 days after the expiration or termination of the Offer (such sixtieth day being herein called the "Option Expiration Date") if (x) the Stockholder fails to comply with any of its obligations under this Agreement or withdraws the tender of the Shares except under the circumstances set forth in the proviso to Section 1.1(b) (but the Option shall not limit any other right or remedy available to the Parent or Purchaser against the Stockholder for breach of this Agreement) or (y) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer set forth in Annex A to the Merger Agreement (other than as a result of any action or inaction of the Parent or Purchaser which constitutes a breach of the Merger Agreement). 2 73 Upon the occurrence of any of such circumstances, Purchaser shall be entitled to exercise the Option and (subject to Section 1.3) Parent shall be entitled to purchase the Shares and the Stockholder shall sell the Shares to Parent. Parent shall exercise the Option by delivering written notice thereof to the Stockholder (the "Notice"), specifying the number of Shares to be purchased and the date, time and place for the closing of such purchase which date shall not be less than three business days nor more than five business days from the date the Stockholder receives the Notice and in no event shall such date be later than the Option Expiration Date. The closing of the purchase of Shares pursuant to this Section 1.2 (the "Closing") shall take place on the date, at the time and at the place specified in such notice; provided, that if at such date any of the conditions specified in Section 1.3 shall not have been satisfied (or waived), Parent may postpone the Closing until a date within five business days after such conditions are satisfied (but not later than the Option Expiration Date). (c) At the Closing, the Stockholder will deliver to Parent (in accordance with Parent's instructions) the certificates representing the Shares owned by the Stockholder and being purchased pursuant to Section 1.2(c), duly endorsed or accompanied by stock powers duly executed in blank. At such Closing, Parent shall deliver to the Stockholder, by bank wire transfer of immediately available funds, an amount equal to the number of Shares being purchased from the Stockholder as specified in the Notice multiplied by $5.50 (or such higher per share price as may be offered by Parent in the Offer). SECTION 1.3. Conditions to Option. The obligation of Parent to purchase the Shares at the Closing is subject to the following conditions: (a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such purchase shall have expired or been terminated; and (b) there shall be no preliminary or permanent injunction or other order, decree or ruling issued by any Governmental Body, nor any statute, rule, regulation or order promulgated or enacted by any Governmental Body prohibiting, or otherwise restraining, such purchase. SECTION 1.4. No Purchase. Purchaser and Parent may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms and conditions set forth in the Offer to Purchase, and may allow the Option to expire without exercising the Option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer to Purchase or pursuant to the exercise of the Option, they shall be returned to the Stockholder, whereupon they shall continue to be held by the Stockholder subject to the terms and conditions of this Agreement. 3 74 ARTICLE II Consent and Voting The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares owned by the Stockholder. By entering into this Agreement, the Stockholder hereby consents to the Merger Agreement and the transactions contemplated thereby, including the Merger. So long as the Merger Agreement is in effect, the Stockholder hereby agrees (i) to vote all Shares now or hereafter owned by such Stockholder or execute a consent or proxy and not revoke any proxy, vote or consent, in favor of the Articles Amendment, the Merger Agreement, the Merger and the transactions contemplated thereby, and (ii) to oppose any Acquisition Proposal and to vote all Shares now or hereafter owned by such Stockholder, or execute a consent or proxy, against any Acquisition Proposal. ARTICLE III Representations, Warranties and Covenants of the Stockholder The Stockholder represents, warrants and covenants to the Purchaser that: SECTION 3.1. (a) Ownership. As of the date hereof the Stockholder is the sole, true, lawful and beneficial owner of 69,125 Shares and that there are no restrictions on voting rights or rights of disposition pertaining to such Shares. The Stockholder will convey good and valid title to the Shares owned by the Stockholder and being acquired pursuant to the Offer, the Merger or the exercise of the Option, as the case may be, free and clear of any and all liens, restrictions, security interests or any encumbrances whatsoever (collectively, "Liens"). None of the Shares owned by the Stockholder is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares. (b) Transfer of the Shares. (i) Until this Agreement is terminated, the Stockholder shall not directly or indirectly offer to sell, sell short, transfer (including gift), assign, pledge or otherwise dispose of or transfer (each, a "Transfer") any interest in or encumber with any Lien any of the Shares, (ii) enter into any contract, option, put, call, "collar" or other agreement or understanding with respect to any Transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares; or (v) take any other action with respect to the Shares that would in any way restrict, limit or interfere with the performance of its obligations hereunder. (c) The Stockholder agrees to place the following legend on any and all certificates evidencing the Shares: 4 75 THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT SHAREHOLDER AGREEMENT, DATED AS OF JULY 12, 1999, BY AND AMONG PARENT, PURCHASER AND STOCKHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. SECTION 3.2. Authority and Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within the Stockholder's power and authority, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Stockholder or to a loss of any benefit of the Stockholder under, any provision of applicable law or regulation or any agreement, judgment, injunction, order, decree, or other instrument binding on the Stockholder or result in the imposition of any Lien on any assets of the Stockholder. If the Stockholder is married and the Shares constitute community property or otherwise are owned or held in a manner that requires spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly consented to and delivered by the Stockholder's spouse or the person giving such approval, enforceable against such spouse or person in accordance with its terms. SECTION 3.3. Binding Effect. This Agreement has been duly executed and delivered by the Stockholder and is the valid and binding agreement of the Stockholder, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 3.4. Total Shares. The Stockholder Shares owned by the Stockholder are the only shares of Company Common Stock beneficially owned as of the date hereof by the Stockholder and the Stockholder has no option to purchase or right to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any other securities of the Company. SECTION 3.5. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder, except as otherwise disclosed in the Merger Agreement. 5 76 ARTICLE IV Representations and Warranties of the Parent and Purchaser The Parent and Purchaser represent and warrant to the Stockholder: SECTION 4.1. Corporate Power and Authority; Noncontravention. The Parent and Purchaser have all requisite corporate power and authority to enter into this Agreement and to perform their obligations hereunder. The execution, delivery and performance by the Parent and Purchaser of this Agreement and the consummation by the Parent and Purchaser of the transactions contemplated hereby (i) have been duly authorized by all necessary corporate action on the part of the Parent and Purchaser, (ii) require no action by or in respect of, or filing with, any Governmental Body (except as may be required under the HSR Act and under the Exchange Act), or (iii) do not and will not contravene or constitute a default under, the certificate of incorporation or by-laws of Parent or Purchaser or any provision of applicable law or regulation or any, judgment, injunction, order, decree, material agreement or other material instrument binding on the Parent or Purchaser. SECTION 4.2. Binding Effect. This Agreement has been duly executed and delivered by the Parent and Purchaser and is a valid and binding agreement of the Parent and Purchaser, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.3. Acquisition for Purchaser's Account. Any Shares to be acquired upon consummation of the Offer, or upon exercise of the Option will be acquired by Parent for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act and the rules and regulations promulgated thereunder. ARTICLE V Additional Agreements SECTION 5.1. Agreements of Stockholder. The Stockholder hereby covenants and agrees that: (a) No Solicitation. The Stockholder shall not directly or indirectly (i) solicit, initiate or knowingly encourage (or authorize any person to solicit, initiate or encourage) any Acquisition Proposal, or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise knowingly cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek the foregoing. The Stockholder shall promptly advise the Purchaser of the terms of any communications it or any of its affiliates may receive relating 6 77 to any Acquisition Proposal (including, without limitation, the identify of the party making any such Acquisition Proposal). (b) Adjustment upon Changes in Capitalization or Merger. In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalization, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure of the Company which would have the effect of diluting or changing Parent and Purchaser's rights hereunder, the number and kind of shares or securities subject to this Agreement and the price set forth herein at which Shares may be purchased from the Stockholder pursuant to the Offer or the exercise of the Option shall be appropriately and equitably adjusted so that Parent and Purchaser shall receive pursuant to the Offer or the exercise of the Option the number and class of shares or other securities or property that Parent or Purchaser, as the case may be, would have received in respect of the Shares purchasable pursuant to the Offer or the exercise of the Option if such purchase had occurred immediately prior to such event. ARTICLE VI Miscellaneous SECTION 6.1. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.2. Further Assurances. The Parent, Purchaser and the Stockholder will execute and deliver or cause to be executed and delivered all further documents and instruments and use its reasonable best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby and by the Merger Agreement. SECTION 6.3. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.4. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will not be compensable by money damages. The parties therefore agree that this Shareholder Agreement shall be specifically enforceable and that specific enforcement 7 78 and injunctive relief shall be available to the Parent, Purchaser or the Stockholder for any breach by the other party or parties of any agreement, covenant or representation hereunder. SECTION 6.5. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. SECTION 6.6. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares pursuant to Section 1.2 hereof. None of the representations and warranties contained in this Agreement shall survive the acceptance for payment and payment for the Shares pursuant to the Offer. SECTION 6.7. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. Notwithstanding anything herein to the contrary, this Agreement shall expire and be of no further force or effect if (i) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser breaches any obligation of Purchaser under the Merger Agreement to accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer upon expiration of the Offer or (ii) Purchaser amends the Offer to (w) reduce the Offer Price to less than $5.50 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). This Agreement will also terminate upon the earlier of (i) the close of business on March 1, 2000, or (ii) the Effective Time. SECTION 6.8. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may assign its rights and obligations to another wholly-owned subsidiary of the Parent which is the assignee of Purchaser's rights under the Merger Agreement; and provided further that except as set forth in the prior clause, a party may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be null and void. SECTION 6.9. Governing Law. This Agreement shall be construed in accordance with and governed by the law of Delaware without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effects as if the signatures 8 79 thereto and thereof were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 6.11. Stockholder Capacity. The Stockholder signs solely in its capacity as the record holder and beneficial owner of the Shares and nothing herein shall limit or affect any actions taken by the Stockholder in his or her capacity as an officer, director, partner, employee or affiliate of the Company and no such actions shall be deemed a breach of this Agreement. SECTION 6.12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. To the extent that any provision of this Agreement and the Merger Agreement conflict, the provisions of the Merger Agreement shall control. 9 80 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. FEDDERS CORPORATION By: /s/ Robert L. Laurent, Jr. ------------------------------ Name: Robert L. Laurent, Jr. Title: Executive Vice President Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07938 Attn: General Counsel TI ACQUISITION CORP. By: /s/ Robert L. Laurent, Jr. ------------------------------ Name: Robert L. Laurent, Jr. Title: Executive Vice President Address for Notices: 505 Martinsville Road Liberty Corner, NJ 07983-0813 Attn: General Counsel /s/ Samuel J. Wornom III (SEAL) --------------------------------------- Samuel J. Wornom III Address for Notices: 111 Imperial Drive Sanford, NC 27330 EX-99.C.4 14 CONFIDENTIALITY AGREEMENT 1 February 25, 1999 Trion, Inc. 101 McNeill Road Sanford, North Carolina 27331 Attention: Mr. Steven L. Schneider, President RE: PROPOSED ACQUISITION OF TRION, INC. ("TRION") Dear Mr. Schneider: Fedders Corporation ("Fedders") is evaluating the potential acquisition of Trion (the "Transaction"). In connection therewith, Fedders may request from Trion certain information which is non-public, confidential or proprietary in nature. Pursuant to such requests, Trion or others acting on its behalf, may furnish to Fedders, either orally, in writing, or by inspection, certain information, materials, and documents regarding Trion and its business, assets, financial condition, operations, and prospects (collectively, the "Evaluation Material"). As a condition to Fedders being furnished with the Evaluation Material, Fedders agrees as follows: 1. All Evaluation Material furnished to Fedders by Trion, or on its behalf, will be deemed confidential and will be kept in strict confidence under appropriate safeguards. In this regard, without the prior written consent of Trion, Fedders and its Representatives (as defined below) will not, directly or indirectly, (i) disclose or reveal any Evaluation Material to anyone except to a limited group of its Representatives who are actively and directly participating in the evaluation of the Transaction, and each of whom shall (a) be informed of the confidential nature of the Evaluation Material and (b) be provided with a copy of this letter agreement; or (ii) use the Evaluation Material for any purpose other than in connection with the Transaction. In any event, Fedders will be responsible for any actions by its Representatives which are not in accordance with the provisions hereof. In addition, unless specifically consented to in writing by Trion, Fedders is specifically prohibited from contacting the suppliers and customers of Trion regarding the business of Trion or the possibility of pursuing a transaction with Trion regardless of whether or not the identity of such customers has been disclosed to Fedders as part of the Evaluation Material. 2. The term "Evaluation Material" as used herein does not include any information which (i) is generally available to the public or to industry employees (other than 2 employees of Trion) other than as a result of a disclosure by Fedders, its Representatives or anyone to whom Fedders or any of its Representatives directly or indirectly transmit any Evaluation Material, (ii) becomes known or available to Fedders on a non-confidential basis from a source (other than Trion or one of its Representatives) who is not prohibited from transmitting the information to Fedders or its Representatives by any contractual, legal, fiduciary or other obligation, or (iii) was known or available to Fedders prior to the date hereof on a non-confidential basis from a source (other than Trion or one of its Representatives) directly or indirectly who is not prohibited from transmitting the information to Fedders or its Representatives by any contractual, legal, fiduciary or other obligation. 3. In the event that Fedders, its Representatives or anyone to whom Fedders or its Representatives supply the Evaluation Material receives a request to disclose all or part of the Evaluation Material (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand, any information or formal investigation by any government or governmental agency or authority or otherwise) Fedders agrees (i) to immediately notify Trion of the existence, terms and circumstances surrounding such a request, (ii) to consult with Trion on the advisability of taking legally available steps to resist or narrow such request and (iii) if disclosure of such information is required, to furnish only that portion of the Evaluation Material which, in the written opinion of Fedders's counsel, Fedders is legally compelled to disclose, and to cooperate with any action by Trion to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed Evaluation Material which Trion so designates. 4. Neither Trion nor its Representatives shall be deemed to make or have made any representation or warranty, express or implied, as to the accuracy or completeness of any Evaluation Material furnished by or on behalf of Trion or its Representatives to Fedders or its Representatives; provided, however, that Trion and its Representatives shall endeavor to provide accurate and timely information hereunder. Neither Trion nor its Representatives shall have any liability to Fedders or its Representatives resulting from the provision of the Evaluation Material to Fedders or its Representatives or the use thereof by Fedders or its Representatives. 5. If Fedders or Trion shall at any time decide not to proceed with the transaction, or upon request from Trion, Fedders (a) shall deliver to Trion all written or tangible material delivered to Fedders by Trion or its Representatives which contains Evaluation Material (including all copies thereof), and (b) shall destroy all summaries, analyses, extracts or other reproductions in whole or in part of such tangible material, and all documents, memoranda, notes and writings containing or based on Evaluation Material and prepared by Fedders or its Representatives (excluding only (i) documents, memoranda, notes and writings prepared by and in possession of Representatives providing legal, tax, accounting, environmental compliance or other professional advice to Fedders (collectively, "Advisor Representatives") and (ii) Evaluation Material used by such Advisor Representatives in connection with providing advice with respect to the 3 Transaction and remaining in their possession). 6. Fedders acknowledges and agrees that in the event of any breach of this letter agreement, Trion may be irreparably and immediately harmed. Without prejudice to any other rights or remedies otherwise available to Trion, Trion shall be entitled to equitable relief by way of injunction to prevent breaches of this letter agreement and to compel specific performance of the provisions of this letter agreement, without need for proof of actual damages and Fedders agrees not to oppose such relief. Fedders agrees to waive, and to cause its Representatives, other than its Advisor Representatives, to waive, any requirement for the securing or posting of any bond in connection with such remedy. Fedders also agrees to reimburse Trion for all reasonable costs and expenses, including reasonable attorney's fees, incurred by it in successfully enforcing Fedders or its Representatives' obligations hereunder, provided the court has found Fedders or its Representatives in violation of this letter agreement and has issued a permanent injunction. No failure or delay by Trion in exercising any rights, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof or the exercise of any right, power or privilege hereunder. 7. Fedders hereby irrevocably and unconditionally submits to the jurisdiction of the courts of the State of North Carolina and the United States District Court for the Western District of North Carolina for purposes of any suit, action or other proceeding arising out of this letter agreement, or of the Transaction contemplated hereby, which is brought by or against Trion and agrees that service of any process, summons, notice or document by U.S. registered mail to Fedders's address shall be effective service of process for any action, suit or proceeding brought against Fedders in any such court. Fedders hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this letter agreement or of the Transaction contemplated hereby, which is brought by or against Trion, in the courts of the State of North Carolina or in the United States District Court for the Western District of North Carolina and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 8. Fedders agrees that, if the Transaction is not consummated, for a period of two years from the date hereof, it will not solicit for hire any person who was employed by Trion during the period of Fedders's investigation of Trion and with whom Fedders had contact during such period with regard to the Transaction, without the prior written consent of Trion. 9. For purposes of this letter agreement, the following terms shall have the meanings set forth below: (a) "affiliates" shall have the meanings set forth in Rule 12b-2 under the Securities Exchange Act of 1934 (the "Exchange Act"); 4 (b) "Trion" shall mean Trion, Inc. and its subsidiaries, divisions and affiliates; (c) "person" shall be broadly interpreted to include, without limitation, any corporation, company, group, partnership, limited liability company or individual; and (d) "Representatives" with respect to any person, shall mean all directors, officers, employees, agents or advisors or any similar person. 10. This letter agreement may be modified or waived only by a separate writing by the parties hereto which expressly modifies or waives this letter agreement. 11. This letter agreement shall be governed by, and construed in accordance with, the laws of the State of North Carolina, without regard to the principles of conflict of laws thereof. This letter agreement shall inure to the benefit of Trion and any successor in interest to Trion, as well as of any person that may acquire, after the date hereof, any subsidiary or division of, or all or substantially all of the business and assets of, Trion or any Trion corporation. The letter agreement may be executed in counterparts, each of which shall be deemed to be an original, all of which shall constitute the same agreement. Please acknowledge your agreement to the terms and provisions contained herein by executing this letter agreement below. Very truly yours, FEDDERS CORPORATION By: Sal Giordano, Jr., President and Chief Executive Officer Acknowledged and Agreed to as of the date first written above: TRION, INC. By: Steven L. Schneider, President EX-99.C.5 15 EMPLOYMENT AGREEMENT 1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered into as of the 12th day of July, 1999 by and between FEDDERS CORPORATION (the "Company"), a Delaware corporation with principal executive offices in Liberty Corner, New Jersey and STEVEN L. SCHNEIDER, an individual residing in Sanford, North Carolina (the "Executive"); RECITALS The Executive has been employed by Trion, Inc. ("Trion") as its President and Chief Executive Officer since May 24, 1993, originally under an Employment Agreement dated March 31, 1993 and subsequently under an Amended and Restated Employment Agreement dated July 28, 1995 and a Second Amended and Restated Employment Agreement dated as of May 20, 1998 (collectively, the "Original Employment Agreement"). Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among the Company, TI Acquisition Corp. (the "Purchaser) and Trion, of even date herewith, the Company has agreed to acquire the capital stock of Trion and Trion will become a subsidiary of the Company. The Company desires to continue the Executive's employment and the Executive desires to serve as an executive of the Company under the terms and conditions provided in this Agreement. This Agreement replaces and supersedes the Original Employment Agreement in its entirety including the change of control provisions contained therein. The execution and delivery of this Agreement have been duly authorized by the Company's Board of Directors (the "Board"). NOW, THEREFORE, the Company and the Executive, each intending to be legally bound, hereby mutually covenant and agree as follows: 1. Termination of Original Employment Agreement; Term. (a) This Agreement replaces and supersedes all of the provisions of the Original Employment Agreement, including the change of control provisions contained therein. The Original Employment Agreement is hereby terminated in all respects and neither Trion nor the Company shall have any obligations to the Executive under the Original Employment Agreement. (b) The term of the Executive's employment shall commence on the date hereof and continue until August 31, 2002, subject to the earlier expiration of such term as provided in Paragraph 5. The term of this Agreement will be extended automatically 2 for one (1) year as of August 31, 2002 and each annual anniversary date thereof unless, no later than one hundred and eighty (180) days prior to any such date, either the Company or the Executive gives written notice to the other, in accordance with Paragraph 11 hereof, that the terms of this Agreement shall not be so extended. 2. Duties. During the period of employment as provided in Paragraph 1 hereof, the Executive shall serve as Senior Vice President of the Company and Chairman and Chief Executive Officer of Indoor Air Quality, the unit of the Company that includes Trion and perform all duties consistent with such positions at the direction of the Chief Executive Officer of the Company and the Board. The Executive shall devote his entire time during reasonable business hours (reasonable sick leave and vacations excepted) and best efforts to fulfill faithfully, responsibly and satisfactorily his duties hereunder. The Executive shall also be an Officer of Trion. 3. Base Salary. For services performed by the Executive for the Company pursuant to this Agreement during the period of employment as provided in Paragraph 1 hereof, the Company shall pay the Executive a base salary of at least $214,000 per year (the "Base Salary"), subject to review and adjustment by the Board and payable in accordance with the Company's regular practices. The Board will review the Executive's performance on an annual basis and may increase his total compensation, including but not limited to, Base Salary, Incentive Compensation (as defined below) and/or other compensation and benefits, at its discretion. 4. Other Benefits. In addition to the Base Salary to be paid to the Executive pursuant to Paragraph 3 hereof, any compensation which may be paid to the Executive under any additional compensation or incentive plan of the Company or which may be otherwise authorized from time to time by the Board shall be in addition to the Base Salary to which the Executive shall be entitled under this Agreement. In addition to any other compensation, the Executive shall be entitled to the following: (a) Participation in Plans. The Executive shall be eligible for participation in all incentive compensation plans, bonuses or programs as may be in effect from time to time at the Company offered to other executives with the Company who have similar responsibilities and for which he is otherwise qualified to participate in (collectively referred to as "Incentive Compensation"). To the extent he is otherwise qualified to do so, the Executive shall also participate in the various retirement, benefit and other plans maintained in force by the Company from time to time. The Executive's Incentive Compensation shall be based, in part, upon the Trion 1999 Management Incentive Plan which provides as follows: (i) an annual Target Incentive of 50% of the Executive's Base Salary (the "Target Incentive"), (ii) 80% of the Target Incentive will be based upon the performance of Indoor Air Quality and 20% of the Target Incentive will be based upon the individual performance of the Executive measured against individual performance targets established by the Chief Executive Officer of the Company and (iii) the performance of Indoor Air Quality will be based 40% on net sales and 60% on operating income. Acquisitions made by the Indoor Air Quality Unit are not included in the 2 3 calculation. To the extent he is otherwise qualified to do so, the Executive shall, also participate in the various retirement benefit and other plans maintained in force by the Company from time to time. (b) Additional Incentive Compensation. In addition to the Incentive Compensation provided for above, the Executive shall be entitled to receive additional incentive compensation payments in an amount equal to 1/4% of the total purchase price of acquisitions of businesses included in the Indoor Air Quality Unit of the Company. The "total purchase price" is defined as the purchase price for the equity or assets of such acquisition plus debt assumed in the acquisition minus the cash on hand of the business acquired on the date of closing of the acquisition. These payments will be earned by the Executive upon the successful closing of the acquisition and will be payable to the Executive in accordance with the Company's policy for paying such bonuses regardless of whether the Executive is employed by the Company at the time of such payment. (c) Fringe Benefits. The Executive shall be entitled to such prerequisites of office, fringe benefits and other similar benefits as are in effect and offered by the Company to executives with similar responsibilities from time to time during the term hereof. (d) Expense Reimbursement. The Company shall reimburse the Executive, upon proper accounting, for reasonable business expenses and disbursements incurred by him in the course of the performance of his duties under this Agreement and in accordance with the Company's policies, as are in effect from time to time. (e) Vacation. The Executive shall be entitled to three (3) weeks of vacation during each year of this Agreement, or such greater period as the Board shall approve, without reduction in salary or other benefits. (f) Automobile. The Executive shall be provided an automobile in accordance with the Company's policies. (g) Stock Options. The Executive will be granted options to purchase 100,000 shares of Fedders Class A Stock at a price equal to the closing price of such stock on the New York Stock Exchange on the date of the Merger in accordance with the Stock Option Agreement, a copy of which is attached at Tab A of this Agreement. One-third of such options to vest each year on the anniversary date of this Agreement. In addition, the Executive shall also have the right to convert his options to purchase Trion's stock into options to purchase Class A Stock of the Company upon the terms provided in the Merger Agreement in accordance with the Stock Option Agreement. (h) Medical Insurance. The Executive shall have the option to participate in the medial insurance plans maintained by either the Company or Trion. 3 4 (i) Vesting. The Executive shall receive credit for years of service with Trion for purposes of participation and vesting in any pension, welfare or other similar benefit plans maintained by the Company. 5. Termination. Unless earlier terminated in accordance with the following provisions of this Paragraph 5, the Company shall continue to employ the Executive and the Executive shall remain employed by the Company during the entire term of this Agreement as set forth in Paragraph 1. Certain capitalized terms used in this Paragraph 5 and Paragraph 6 hereof are defined in Paragraph 5(e) below. (a) Death or Disability. Except to the extent otherwise expressly stated herein, this Agreement shall terminate immediately as of the Date of Termination in the event of the Executive's death or in the event that the Executive becomes disabled. The Executive will be deemed to be disabled upon the earlier of: (i) the end of a six (6) consecutive month period during which, by reason of physical or mental injury or disease, the Executive has been unable to perform substantially the Executive's usual and customary duties under this Agreement with or without a reasonable accommodation and (ii) the date that the Company determines, on the basis of such evidence as it may reasonably deem sufficient, that the Executive will, by reason of physical or mental injury or disease, be unable to perform substantially the Executive's usual and customary duties under this Agreement for a period of at least six (6) consecutive months with or without a reasonable accommodation. The Company shall promptly give the Executive written notice of any such determination of the Executive's disability and of its decision to terminate the Executive's employment by reason thereof. In the event of disability, until the Date of Termination the Base Salary payable to the Executive under Paragraph 3 hereof shall be reduced dollar-for-dollar by the amount of disability benefits, if any, paid to the Executive in accordance with any disability policy or program of the Company. (b) Discharge for Cause. The Company may terminate the Executive from his employment hereunder for cause. Any Discharge for Cause of the Executive by the Company shall be communicated in writing to the Executive in accordance with Paragraph 11 of this Agreement and shall specify the basis for the discharge. (c) Discharge Without Cause. The Company may terminate the Executive from his employment hereunder upon ninety (90) days advanced notice of Discharge Without Cause. The notice shall be communicated in writing to the Executive in accordance with Paragraph 11 of this Agreement. (d) Resignation With Good Reason. The Executive may terminate his employment with the Company upon ninety (90) days advance notice of his Resignation With Good Reason. The notice shall be communicated in writing to the Company in accordance with Paragraph 11 of this Agreement. 4 5 (e) Definitions. For purposes of this Paragraph 5 and Paragraph 6 hereof, the following capitalized terms shall have the meanings set forth below: (i) "Accrued Obligations" shall mean, as of the Date of Termination, the sum of: (A) the Executive's Base Salary under Paragraph 3 through the Date of Termination to the extent not theretofore paid; (B) the amount of any Incentive Compensation, bonuses, deferred compensation and other cash compensation earned by the Executive as of the Date of Termination to the extent not theretofore paid; (C) severance pay in accordance with the Company's then existing severance policy for executives with similar responsibilities; and (D) any vacation pay, expense reimbursements and other cash entitlements earned by the Executive as of the Date of Termination to the extent not theretofore paid. (ii) "Discharge for Cause" shall mean any termination by the Company resulting from the conviction of the Executive of (or a plea of no contest with respect to) a felony or misdemeanor involving moral turpitude or a determination by the Company that the Executive has engaged in serious misconduct (such as dishonesty, insubordination, willful failure to perform a material or significant portion of his duties or other act or omission materially detrimental to the business or reputation of the Company or materially damaging to the relationships of the Company with its customers, suppliers or employees). However, prior to a final determination by the Company that the Executive has engaged in serious misconduct, the Company will provide notice to the Executive of the basis for its belief that the Executive has engaged in serious misconduct and will allow the Executive an opportunity to rebut any and all claims of serious misconduct. The notice shall be communicated in writing to the Executive in accordance with Paragraph 11 of this Agreement. (iii) "Date of Termination" shall mean: (A) in the event of a Discharge for Cause or resignation (other than for good reason), the date the Executive (in the case of Discharge for Cause) or the Company (in the case of resignation other than for good reason) receives written notice of such discharge or resignation of employment or any later date specified therein or agreed to by the parties (which date shall be not more than fifteen (15) days after the giving of such notice); (B) in the event of the Executive's death, the date of the Executive's death; (C) in the event of termination of the Executive's employment by reason of Disability pursuant to Paragraph 5(a), the date the Executive receives written notice of such termination by the Company; and (D) in the event of Discharge Without Cause or Resignation With Good Reason, the ninety first (91st) day after the Executive (in the case of Discharge Without Cause) or the Company (in the case of Resignation With Good Reason) receives written notice of such discharge or resignation of employment or any later date agreed to by the parties. 5 6 (iv) Resignation With Good Reason shall mean any termination by the Executive of his employment with the Company within one (1) year after the occurrence of any of the following: (A) A substantial reduction in the Base Salary, the benefits or perquisites provided to the Executive under this Agreement; (B) A relocation of the Executive's principal place of business to a location which is more than 50 miles from its current location; (C) The assignment to the Executive of any duties inconsistent in any respect with the Executive's current position and duties with the Company as modified by Paragraph 2 hereof (including status, offices, titles and reporting requirements), or any action by the Company which results in diminution in such position, or the Executive's authority, duties or responsibilities, but excluding for this purpose any isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company, promptly after receipt of written notice thereof given by the Executive in accordance with this Agreement; or (D) Any material breach of this Agreement by the Company. (v) "Discharge Without Cause" shall mean a termination by the Company of the Executive from his employment that is not a Discharge for Cause. 6. Obligations of the Company Upon Termination. (a) Death, Disability, Resignation (Other than a Resignation With Good Reason) or Discharge For Cause. If the Executive's employment with the Company terminates because of death, disability, resignation (other than a Resignation With Good Reason) or a Discharge For Cause: (i) the Company shall pay to the Executive all Accrued Obligations in a lump sum in cash within thirty (30) days after the Date of Termination; and (ii) the Executive shall be entitled to receive all benefits earned by him as of the Date of Termination under the Company's retirement, incentive, or other benefit plans in which the Executive was participating as of the Date of Termination, including accrued benefits payable by reason of the Executive's death or disability, if applicable (but only to the extent not previously paid or distributed to the Executive) in such manner and at such time as are provided under the terms of such plans and arrangements; and 6 7 (iii) except as otherwise provided in Paragraph 15 hereof, all other obligations of the Company hereunder shall cease forthwith. (b) Termination Without Cause or Resignation With Good Reason. In the event of a Termination Without Cause (other than in the case of disability) or a Resignation With Good Reason: (i) the Company shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; and (ii) the Company shall pay to the Executive an amount equal to the balance of Base Salary for the remainder of the Agreement and any Incentive Compensation then in effect for each year remaining during the term of this Agreement. Said amount shall be paid to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; and (iii) an amount equal to the sum of the maximum contributions that could have been made by the Company on the Executive's behalf to all defined contribution plans of the Company on the same basis as in effect on the Date of Termination for the remainder of the Agreement shall be paid to the trustees of such plan(s) within thirty (30) days after the Date of Termination, however, in the event any such plan(s) will not allow such payment(s) the Company shall pay to the Executive in lump sum in cash within thirty (30) days after the Date of Termination the total amount not accepted by any such plan(s); and (iv) the Executive shall be entitled to receive all benefits accrued by him as of the Date of Termination under the Company's retirement, incentive or other benefit plans in which the Executive was participating as of the Date of Termination (but only to the extent not previously paid or distributed to the Executive) in such manner and at such time as are provided under the terms of such plans; and (v) the Company agrees that in the event the Executive and/or his dependents elect to continue health coverage under COBRA and remain eligible for COBRA coverage continuation, the Company will pay all premium costs for such coverage continuation for the Executive and/or his dependants to the full extent and duration allowed by COBRA. (vi) the Company agrees that in the event the Executive is so terminated or resigns during the initial three (3) year term of this Agreement, any stock options granted to the Executive pursuant to Paragraph 4(g) hereof which at that point have not fully vested, shall vest immediately and the Executive shall have thirty (30) days from the Date of Termination (as defined above) to exercise such options. 7 8 (vii) except as otherwise provided in Paragraph 15 hereof, all other obligations of the Company hereunder shall cease forthwith. (c) Limitation on Payments. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, if tax counsel selected by the Company and acceptable to the Executive determines that any portion of any payment under this Agreement would constitute an "excess parachute payment," then the payments to be made to the Executive under this Agreement shall be reduced (but not below zero) such that the value of the aggregate payments that the Executive is entitled to receive under this Agreement and any other agreement or plan or program of the Company shall be one dollar ($1) less than the maximum amount of payments which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Internal Revenue Code; provided, however, that the foregoing limitation shall not apply in the event that such tax counsel determines that the benefits to the Executive under this Agreement on an after-tax basis (i.e., after federal, state and local income and excise taxes) if such limitation is not applied would exceed the after-tax benefits to the Executive if such limitation is applied. 7. Indemnification. The Company shall defend and hold the Executive harmless to the fullest extent permitted by applicable law in connection with any claim, action, suit, investigation or proceeding arising out of or relating to performance by the Executive of services for, or action of the Executive as an officer or employee of the Company, or of any other person or enterprise for which the Executive serves or acts in such capacity at the request of the Company. Expenses Incurred by the Executive in defending a claim, action, suit or investigation or criminal proceeding shall be paid by the Company in advance of the final disposition thereof upon the receipt by the Company of an undertaking by or on behalf of the Executive to repay said amount if it shall ultimately be determined that the Executive is not entitled to be indemnified hereunder. The foregoing shall be in addition to any indemnification rights the Executive may have by law, contract, charter, by-law or otherwise. 8. Confidential Information. The Executive will not, during or after the term of this Agreement, disclose to any firm or person any information, except as otherwise required by law, including but not limited to information about the Company, its affiliates and its customers, that is treated as confidential by the Company or an affiliate, to which the Executive has gained or gains access by reason of his position as an employee of the Company or of an affiliate of the Company. Except as otherwise required by law, the Company will not, without the Executive's written consent, disclose to any person any personal or confidential information about the Executive. 9. Right to Injunctive Relief. The Executive acknowledges that the Company will suffer irreparable injury, not readily susceptible of valuation in monetary damages, if the Executive breaches any of his obligations under Paragraph 8 above. Accordingly, the Executive agrees that the Company will be entitled to seek injunctive relief against any breach or 8 9 prospective breach by the Executive of the Executive's obligations under Paragraph 8 in any Federal or State court of competent jurisdiction sitting in the State of New Jersey. The Executive hereby submits to the jurisdiction of such courts for the purposes of any actions or proceedings instituted by the Company to obtain such injunctive relief, and agrees that process may be served on the Executive by registered mail, addressed to the last address of the Executive known to the Company, or in any manner authorized by law. 10. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (a) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (b) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 11. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class certified mail, return receipt requested, postage prepaid, addressed as follows: (a) to the Company, to: Fedders Corporation 505 Martinsville Road Liberty Corner, NJ 07938 Attn.: Corporate Secretary (b) to the Executive, to: Steven L. Schneider 1706 Wilkins Drive Sanford, North Carolina 27330 Addresses may be changed by written notice sent to the other party at the last recorded address of that party. 9 10 12. Execution in Counterparts. This Agreement may be executed by the parties hereto in two or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. 13. Unconditional Obligations; Dispute Resolution. (a) The Company's obligation to make the payments provided for under this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. (b) Any controversy or claim arising out of or relating to this Agreement or the breach thereof (including the arbitrability of any controversy or claim), shall be settled by arbitration in accordance with the internal laws of the State of New Jersey by three arbitrators, one of whom shall be appointed by the Board, one by the Executive and the third of whom shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the appointment of a third arbitrator, then the third arbitrator shall be appointed by the American Arbitration Association. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association, except with respect to the selection of arbitrators which shall be as provided in this Paragraph 13. The cost of any arbitration proceeding hereunder shall be borne equally by the Company and the Executive. The award of the arbitrators shall be binding upon the parties. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. 14. Governing Law. Any disputes with regard to this Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New Jersey, without regard to conflict of law principles. 15. Survival. The provisions of this Paragraph 15 and Paragraphs 6 through 10, 13, 14, 16, and 17 shall survive the termination of this Agreement to the extent necessary to effectuate the respective purposes of such provisions. 16. Severability. If any provisions of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement. 17. Miscellaneous. This Agreement, and any Stock Option Agreements between the parties hereto, embody the entire understanding of the parties hereto, and supersede all other oral or written agreements or understandings between them regarding the subject matter hereof. No change, alteration or modification hereof may be made except in a writing, signed by each of the 10 11 parties hereto. The headings in this Agreement are for convenience of reference only and shall not be construed as part of this Agreement or to limit or otherwise affect the meaning hereof. 18. Condition Precedent. The execution and effectiveness of this Agreement is subject to successful completion of the tender offer described in Merger Agreement. 19. Proration. The parties acknowledge that the Company's fiscal year ends on August 31 and that Trion's fiscal year has previously ended on December 31. The parties agree to equitably prorate the amount due under the Trion, Inc. 1999 Management Incentive Plan as of August 31, 1999 in order that a new incentive compensation plan using the criteria described in Paragraph 4(a) will be established to cover the fiscal year ending August 31, 2000. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first above written. ATTEST: FEDDERS CORPORATION By: /s/ Kent E. Hansen - ------------------------------------ ---------------------- Title: Senior Vice President WITNESS EXECUTIVE /s/ Calvin J. Monsma /s/ Steven L. Schneider - ------------------------------------ ---------------------------------- 11 EX-99.C.6 16 EMPLOYMENT AREEMENT 1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 12th day of July, 1999 by and between TRION, INC. (the "Company"), a Pennsylvania corporation with principal executive offices in Sanford, North Carolina, and CALVIN J. MONSMA, an individual residing in Sanford, North Carolina (the "Executive"); RECITALS Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among the Company, TI Acquisition Corp. (the "Purchaser") and Fedders Corporation ("Fedders"), of even date herewith, Fedders has agreed to acquire the capital stock of the Company. The Executive has been employed by the Company as its Vice President and Chief Financial Officer. The Company and Fedders desire to continue such employment and the Executive desires to continue to serve in the aforesaid capacity under the terms and conditions provided in this Agreement. This Agreement replaces and supersedes that certain Change in Control Agreement between the Executive and the Company. The execution and delivery of this Agreement has been duly authorized by the Company's Board of Directors (the "Board"). NOW, THEREFORE, the Company and the Executive, each intending to be legally bound, hereby mutually covenant and agree as follows: 1. Termination of Change in Control Agreement; Term. (a) This Agreement replaces and supersedes that certain Change in Control Agreement dated as of May 19, 1998 between the Company and the Executive and, upon execution hereof, such agreement shall be terminated and of no further force or effect. (b) The term of the Executive's employment shall commence on the date hereof and continue until August 31, 2002, subject to the earlier expiration of such term as provided in Paragraph 5. The term of this Agreement will be extended automatically for one (1) year as of August 31, 2002 and each annual anniversary date thereof unless, no later than ninety (90) days prior to any such date, either the Company or the Executive gives written notice to the other, in accordance with Paragraph 11 hereof, that the terms of this Agreement shall not be so extended. 2 2. Duties. During the period of employment as provided in Paragraph 1 hereof, the Executive shall serve as Vice President and Chief Financial Officer of the Company and perform all duties consistent with such position at the direction of the Chairman and Chief Executive Officer of the Indoor Air Quality unit of Fedders. The Executive's duties shall include, but not be limited to, duties similar to those performed by the Executive for the Company prior to the Company's merger with Fedders, and will include an increased emphasis on merger and acquisition-related work. The Executive shall devote his entire time during reasonable business hours (reasonable sick leave and vacations excepted) and best efforts to fulfill faithfully, responsibly and satisfactorily his duties hereunder. 3. Base Salary. For services performed by the Executive for the Company pursuant to this Agreement during the period of employment as provided in Paragraph 1 hereof, the Company shall pay the Executive a base salary of at least $113,400 per year (the "Base Salary"), subject to review and adjustment by the Company and payable in accordance with the Company's regular practices. The Base Salary may be reviewed from time to time by the Company and may be increased at the Company's discretion. 4. Other Benefits. In addition to the Base Salary to be paid to the Executive pursuant to Paragraph 3 hereof, any compensation which may be paid to the Executive under any additional compensation or incentive plan of the Company or which may be otherwise authorized from time to time by the Company shall be in addition to the Base Salary to which the Executive shall be entitled under this Agreement. In addition to any other compensation, the Executive shall be entitled to the following: (a) Participation in Plans. The Executive shall be eligible for participation in all incentive compensation plans, bonuses or programs as may be in effect from time to time at the Company offered to other executives with the Company who have similar responsibilities and for which he is otherwise qualified to participate in (collectively referred to as "Incentive Compensation") including, but not limited to, the Trion 1999 Management Incentive Plan, which provides as follows: (i) an annual Target Incentive of 35% of the Executive's Base Salary (the "Target Incentive"), (ii) 80% of the Target Incentive will be based upon the performance of the Company and 20% of the Target Incentive will be based upon the individual performance of the Executive measured against individual performance targets established by the Chairman and Chief Executive Officer of Indoor Air Quality, and (iii) the performance of the Company will be based 40% on net sales and 60% on operating income. Acquisitions made by the Company are not included in the calculation. To the extent he is otherwise qualified to do so, the Executive shall, also participate in the various retirement benefit and other plans maintained in force by the Company from time to time. (b) Additional Incentive Compensation. In addition to the Incentive Compensation provided for above, the Executive shall be entitled to receive additional incentive compensation payments in an amount equal to 1/8% of the total purchase price 2 3 of acquisitions by the Company. The "total purchase price" is defined as the purchase price for the equity or assets of such acquisition plus debt assumed in the acquisition minus the cash on hand of the business acquired on the date of closing of the acquisition. These payments will be earned by the Executive upon the successful closing of the acquisition and will be payable to the Executive in accordance with the Company's policy for paying such bonuses regardless of whether the Executive is employed by the Company at the time of such payment. (c) Fringe Benefits. The Executive shall be entitled to such perquisites of office, fringe benefits and other similar benefits as are in effect and offered by the Company to executives with similar duties and responsibilities from time to time during the term of this Agreement. (d) Expense Reimbursement. The Company shall reimburse the Executive, upon proper accounting, for reasonable business expenses and disbursements incurred by him in the course of the performance of his duties under this Agreement and in accordance with the Company's policies, as are in effect from time to time. (e) Vacation. The Executive shall be entitled to three (3) weeks of vacation during each year of this Agreement, or such greater period as the Company shall approve, without reduction in salary or other benefits. (f) Stock Options. The Executive will be granted options to purchase 25,000 shares of Fedders Class A Stock at a price equal to the closing price of such stock on the New York Stock Exchange on the date of the Merger in accordance with the Stock Option Agreement, a copy of which is attached at Tab A of this Agreement. One-third of such options to vest each year on the anniversary date of this Agreement. In addition, the Executive shall also have the right to convert his options to purchase the Company's stock into options to purchase Class A Stock of Fedders upon the terms provided in the Merger Agreement in accordance with the Stock Option Agreement. 5. Termination. Unless earlier terminated in accordance with the following provisions of this Paragraph 5, the Company shall continue to employ the Executive and the Executive shall remain employed by the Company during the entire term of this Agreement as set forth in Paragraph 1. Certain capitalized terms used in this Paragraph 5 and Paragraph 6 hereof are defined in Paragraph 5(e) below. (a) Death or Disability. Except to the extent otherwise expressly stated herein, this Agreement shall terminate immediately as of the Date of Termination in the event of the Executive's death or in the event that the Executive becomes disabled. The Executive will be deemed to be disabled upon the earlier of: (i) the end of a six (6) consecutive month period during which, by reason of physical or mental injury or disease, the Executive has been unable to perform substantially the Executive's usual and customary duties under this Agreement with or without a reasonable accommodation and 3 4 (ii) the date that the Company determines, on the basis of such evidence as it may reasonably deem sufficient, that the Executive will, by reason of physical or mental injury or disease, be unable to perform substantially the Executive's usual and customary duties under this Agreement for a period of at least six (6) consecutive months with or without a reasonable accommodation. The Company shall promptly give the Executive written notice of any such determination of the Executive's disability and of its decision to terminate the Executive's employment by reason thereof. In the event of disability, until the Date of Termination the Base Salary payable to the Executive under Paragraph 3 hereof shall be reduced dollar-for-dollar by the amount of disability benefits, if any, paid to the Executive in accordance with any disability policy or program of the Company. (b) Discharge for Cause. The Company may terminate the Executive from his employment hereunder for cause. Any Discharge for Cause of the Executive by the Company shall be communicated in writing to the Executive in accordance with Paragraph 11 of this Agreement and shall specify the basis for the discharge. (c) Discharge Without Cause. The Company may terminate the Executive from his employment hereunder upon ninety (90) days advanced notice of Discharge Without Cause. The notice shall be communicated in writing to the Executive in accordance with Paragraph 11 of this Agreement. (d) Resignation With Good Reason. The Executive may terminate his employment with the Company upon ninety (90) days advance notice of his Resignation With Good Reason. The notice shall be communicated in writing to the Company in accordance with Paragraph 11 of this Agreement. (e) Definitions. For purposes of this Paragraph 5 and Paragraph 6 hereof, the following capitalized terms shall have the meanings set forth below: (i) "Accrued Obligations" shall mean, as of the Date of Termination, the sum of: (A) the Executive's Base Salary under Paragraph 3 through the Date of Termination to the extent not theretofore paid; (B) the amount of any Incentive Compensation, including the Target Incentive (paid on a pro rata basis through the date of termination), bonuses, deferred compensation and other cash compensation earned by the Executive as of the Date of Termination to the extent not theretofore paid; (C) severance pay in accordance with the Company's then existing severance policy for executives with similar responsibilities; and (D) any vacation pay, expense reimbursements and other cash entitlements earned by the Executive as of the Date of Termination to the extent not theretofore paid. (ii) "Discharge for Cause" shall mean any termination by the Company resulting from the conviction of the Executive of (or a plea of no contest with respect to) a felony or misdemeanor involving moral turpitude or a determination by the Company that the Executive has engaged in serious misconduct (such as 4 5 dishonesty, insubordination, willful failure to perform a material or significant portion of his duties or other act or omission materially detrimental to the business or reputation of the Company or Fedders or materially damaging to the relationships of the Company or Fedders with its customers, suppliers or employees). However, prior to a final determination by the Company that the Executive has engaged in serious misconduct, the Company will provide notice to the Executive of the basis for its belief that the Executive has engaged in serious misconduct and will allow the Executive an opportunity to rebut any and all claims of serious misconduct. The notice shall be communicated in writing to the Executive in accordance with Paragraph 11 of this Agreement. (iii) "Date of Termination" shall mean: (A) in the event of a Discharge for Cause or resignation (other than for good reason), the date the Executive (in the case of Discharge for Cause) or the Company (in the case of resignation other than for good reason) receives written notice of such discharge or resignation of employment or any later date specified therein or agreed to by the parties (which date shall be not more than fifteen (15) days after the giving of such notice); (B) in the event of the Executive's death, the date of the Executive's death; (C) in the event of termination of the Executive's employment by reason of Disability pursuant to Paragraph 5(a), the date the Executive receives written notice of such termination by the Company; and (D) in the event of Discharge Without Cause or Resignation With Good Reason, the ninety first (91st) day after the Executive (in the case of Discharge Without Cause) or the Company (in the case of Resignation With Good Reason) receives written notice of such discharge or resignation of employment or any later date agreed to by the parties. (iv) Resignation With Good Reason shall mean any termination by the Executive of his employment with the Company within one (1) year after the occurrence of any of the following: (A) A reduction in the Base Salary, the benefits or perquisites provided to the Executive under this Agreement; (B) A relocation of the Executive's principal place of business to a location which is more than 50 miles from its current location; (C) The assignment to the Executive of any duties inconsistent in any respect with the Executive's current position and duties with the Company as modified by Paragraph 2 hereof (including status, offices, titles and reporting requirements), or any action by the Company which results in diminution in such position, or the Executive's authority, duties or responsibilities, but excluding for this purpose any isolated, insubstantial and inadvertent action not taken in bad faith and which is 5 6 remedied by the Company, promptly after receipt of written notice thereof given by the Executive in accordance with this Agreement; or (D) Any material breach of this Agreement by the Company. (v) "Discharge Without Cause" shall mean a termination by the Company of the Executive from his employment that is not a Discharge for Cause. 6. Obligations of the Company Upon Termination. (a) Death, Disability, Resignation (Other than a Resignation With Good Reason) or Discharge For Cause. If the Executive's employment with the Company terminates because of death, disability, resignation (other than a Resignation With Good Reason) or a Discharge For Cause: (i) the Company shall pay to the Executive all Accrued Obligations in a lump sum in cash within thirty (30) days after the Date of Termination; and (ii) the Executive shall be entitled to receive all benefits earned by him as of the Date of Termination under the Company's retirement, incentive, or other benefit plans in which the Executive was participating as of the Date of Termination, including accrued benefits payable by reason of the Executive's death or disability, if applicable (but only to the extent not previously paid or distributed to the Executive) in such manner and at such time as are provided under the terms of such plans and arrangements; and (iii) except as otherwise provided in Paragraph 15 hereof, all other obligations of the Company hereunder shall cease forthwith. (b) Termination Without Cause or Resignation With Good Reason. In the event of a Termination Without Cause (other than in the case of disability) or a Resignation With Good Reason: (i) the Company shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; and (ii) the Company shall pay to the Executive an amount equal to the balance of Base Salary for the remainder of the Agreement and any Incentive Compensation including the Target Incentive then in effect for the year in which such termination occurs and each year remaining during the term of this Agreement. Said amount shall be paid to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; and 6 7 (iii) an amount equal to the sum of the maximum contributions that could have been made by the Company on the Executive's behalf to all defined contribution plans of the Company on the same basis as in effect on the Date of Termination for the remainder of the Agreement shall be paid to the trustees of such plan(s) within thirty (30) days after the Date of Termination, however, in the event any such plan(s) will not allow such payment(s) the Company shall pay to the Executive in lump sum in cash within thirty (30) days after the Date of Termination the total amount not accepted by any such plan(s); and (iv) the Executive shall be entitled to receive all benefits accrued by him as of the Date of Termination under the Company's retirement, incentive or other benefit plans in which the Executive was participating as of the Date of Termination (but only to the extent not previously paid or distributed to the Executive) in such manner and at such time as are provided under the terms of such plans; and (v) the Company agrees that in the event the Executive and/or his dependents elect to continue health coverage under COBRA and remain eligible for COBRA coverage continuation, the Company will pay all premium costs for such coverage continuation for the Executive and/or his dependants to the full extent and duration allowed by COBRA. (vi) the Company agrees that in the event the Executive is so terminated or resigns during the initial three (3) year term of this Agreement, any stock options granted to the Executive pursuant to Paragraph 4(g) hereof which at that point have not fully vested, shall vest immediately and the Executive shall have thirty (30) days from the Date of Termination (as defined above) to exercise such options. (vii) except as otherwise provided in Paragraph 15 hereof, all other obligations of the Company hereunder shall cease forthwith. (c) Limitation on Payments. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, if tax counsel selected by the Company and acceptable to the Executive determines that any portion of any payment under this Agreement would constitute an "excess parachute payment," then the payments to be made to the Executive under this Agreement shall be reduced (but not below zero) such that the value of the aggregate payments that the Executive is entitled to receive under this Agreement and any other agreement or plan or program of the Company shall be one dollar ($1) less than the maximum amount of payments which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Internal Revenue Code; provided, however, that the foregoing limitation shall not apply in the event that such tax counsel determines that the benefits to the Executive under this Agreement on an 7 8 after-tax basis (i.e., after federal, state and local income and excise taxes) if such limitation is not applied would exceed the after-tax benefits to the Executive if such limitation is applied. 7. Indemnification. The Company shall defend and hold the Executive harmless to the fullest extent permitted by applicable law in connection with any claim, action, suit, investigation or proceeding arising out of or relating to performance by the Executive of services for, or action of the Executive as an officer or employee of the Company, or of any other person or enterprise for which the Executive serves or acts in such capacity at the request of the Company. Expenses incurred by the Executive in defending a claim, action, suit or investigation or criminal proceeding shall be paid by the Company in advance of the final disposition thereof upon the receipt by the Company of an undertaking by or on behalf of the Executive to repay said amount if it shall ultimately be determined that the Executive is not entitled to be indemnified hereunder. The foregoing shall be in addition to any indemnification rights the Executive may have by law, contract, charter, by-law or otherwise. 8. Confidential Information. The Executive will not, during or after the term of this Agreement, disclose to any firm or person any information, except as otherwise required by law, including but not limited to information about the Company, its affiliates and its customers, that is treated as confidential by the Company or an affiliate, to which the Executive has gained or gains access by reason of his position as an employee of the Company or of an affiliate of the Company. Except as otherwise required by law, the Company will not, without the Executive's written consent, disclose to any person any personal or confidential information about the Executive. 9. Right to Injunctive Relief. The Executive acknowledges that the Company will suffer irreparable injury, not readily susceptible of valuation in monetary damages, if the Executive breaches any of his obligations under Paragraph 8 above. Accordingly, the Executive agrees that the Company will be entitled to seek injunctive relief against any breach or prospective breach by the Executive of the Executive's obligations under Paragraph 8 in any Federal or State court of competent jurisdiction sitting in the State of New Jersey. The Executive hereby submits to the jurisdiction of such courts for the purposes of any actions or proceedings instituted by the Company to obtain such injunctive relief, and agrees that process may be served on the Executive by registered mail, addressed to the last address of the Executive known to the Company, or in any manner authorized by law. 10. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. 8 9 (c) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 11. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class certified mail, return receipt requested, postage prepaid, addressed as follows: (a) to the Company or the Board, to: Trion Inc. C/o Fedders Corporation 505 Martinsville Road Liberty Corner, New Jersey 07938 Attn.: Corporate Secretary (b) to the Executive, to: Calvin J. Monsma 1717 Windmill Drive Sanford, North Carolina 27330 Addresses may be changed by written notice sent to the other party at the last recorded address of that party. 12. Execution in Counterparts. This Agreement may be executed by the parties hereto in two or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. 13. Unconditional Obligations; Dispute Resolution. (a) The Company's obligation to make the payments provided for under this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. 9 10 (b) Any controversy or claim arising out of or relating to this Agreement or the breach thereof (including the arbitrability of any controversy or claim), shall be settled by arbitration in accordance with the internal laws of the State of New Jersey by three arbitrators, one of whom shall be appointed by the Company, one by the Executive and the third of whom shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the appointment of a third arbitrator, then the third arbitrator shall be appointed by the American Arbitration Association. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association, except with respect to the selection of arbitrators which shall be as provided in this Paragraph 13. The cost of any arbitration proceeding hereunder shall be borne equally by the Company and the Executive. The award of the arbitrators shall be binding upon the parties. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. 14. Governing Law. Any disputes with regard to this Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New Jersey, without regard to conflict of law principles. 15. Survival. The provisions of this Paragraph 15 and Paragraphs 6 through 10, 13, 14, 16, and 17 shall survive the termination of this Agreement to the extent necessary to effectuate the respective purposes of such provisions. 16. Severability. If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement. 17. Miscellaneous. This Agreement, and any Stock Option Agreements between the parties hereto, embody the entire understanding of the parties hereto, and supersede all other oral or written agreements or understandings between them regarding the subject matter hereof. No change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto. The headings in this Agreement are for convenience of reference only and shall not be construed as part of this Agreement or to limit or otherwise affect the meaning hereof. 18. Condition Precedent. The execution and effectiveness of this Agreement is subject to successful completion of the tender offer described in Merger Agreement. 19. Proration. The parties acknowledge that Fedders' fiscal year ends on August 31 and that the Company's fiscal year has previously ended on December 31. The parties agree to equitably prorate the amount due under the Trion, Inc. 1999 Management Incentive Plan as of August 31, 1999 in order that a new incentive compensation plan using the criteria described in Paragraph 4(a) will be established to cover the fiscal year ending August 31, 2000. (Signatures appear on following page.) 10 11 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. ATTEST: TRION, INC. By: /s/ Steven L. Schneider Title: President & Chief Executive Officer WITNESS: EXECUTIVE /s/ John B. Yorke /s/ Calvin J. Monsma -----END PRIVACY-ENHANCED MESSAGE-----