<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1998
REGISTRATION NO. 333-48881
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
YUASA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 3690 23-2955195
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
P. O. BOX 14145
READING, PENNSYLVANIA 19612-4145
(610) 208-1991
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
P. MICHAEL EHLERMAN
YUASA, INC.
P. O. BOX 14145
READING, PENNSYLVANIA 19612-4145
(610) 208-1991
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
JOSEPH M. HARENZA, MICHAEL T. PHILION MARK KESSEL, ESQUIRE
ESQUIRE STEVENS & LEE CHIEF FINANCIAL OFFICER SHEARMAN & STERLING
111 NORTH SIXTH STREET VICE PRESIDENT OF 599 LEXINGTON AVENUE
READING, PENNSYLVANIA FINANCE NEW YORK, NEW YORK
19601 YUASA, INC. (212) 848-4000
(610) 478-2160 P.O. BOX 14145
READING, PENNSYLVANIA
19612-4145
(610) 208-1991
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: [_]
----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED PROPOSED
MAXIMUM MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER SHARE(1) OFFERING PRICE(1) FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock,
$0.01 par value per
share................. 5,050,800 shares $16.00 $80,812,800 $23,840(2)
- -----------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933.
(2) A filing fee of $21,388 was paid upon the first filing of this
Registration Statement on March 30, 1998. The remaining balance of $2,452
is being paid with the filing of this Amendment No. 2.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED MAY 26, 1998
PROSPECTUS
- --------
4,392,000 SHARES
LOGO
OF YUASA
CLASS A COMMON STOCK
-----------
Of the 4,392,000 shares of Class A common stock, par value $.01 per share
(the "Class A Common Stock"), of Yuasa, Inc., a Pennsylvania corporation (the
"Company"), offered hereby (the "Offering"), 3,300,000 shares are being offered
by the Company, a majority-owned subsidiary of Yuasa Corporation, a Japanese
business corporation ("Yuasa Japan"), and 1,092,000 shares are being offered by
an affiliate of Exide Corporation, a Delaware corporation ("Exide" or the
"Selling Stockholder"). See "Principal and Selling Stockholders." The Company
will not receive any proceeds from the sale of shares of Class A Common Stock
by the Selling Stockholder.
The 1,092,000 shares being sold by the Selling Stockholder are shares of
Class B common stock, par value $.01 per share (the "Class B Common Stock" and,
together with the Class A Common Stock, the "Common Stock"), which will convert
to an equal number of shares of Class A Common Stock upon transfer to any
person not an affiliate of the Selling Stockholder. Each share of Class A
Common Stock entitles its holder to one vote, and each share of Class B Common
Stock entitles its holder to two votes. See "Description of Capital Stock--
Conversion."
Prior to the Offering, there has been no public market for the Class A
Common Stock. It is currently estimated that the initial public offering price
will be between $14.00 and $16.00 per share. For information relating to the
factors to be considered in determining the initial public offering price, see
"Underwriting."
Of the 8,092,000 issued and outstanding shares of Class B Common Stock,
7,000,000 (86.5%) are owned by Yuasa Japan and 1,092,000 (13.5%) are owned by
the Selling Stockholder. Immediately after the completion of the Offering,
Yuasa Japan will beneficially own all of the 7,000,000 issued and outstanding
shares of Class B Common Stock, representing approximately 61% of the
outstanding shares of Common Stock and approximately 76% of the combined voting
power of the outstanding shares of Common Stock. See "Principal and Selling
Stockholders."
The Company has applied for listing of the Class A Common Stock on the New
York Stock Exchange under the symbol "YUA".
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS
PRICE TO UNDERWRITING PROCEEDS TO TO SELLING
PUBLIC DISCOUNTS(1) COMPANY(2) STOCKHOLDER
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
- --------------------------------------------------------------------------------
Total(3)......................... $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses payable by the Company of approximately
$1,000,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
658,800 additional shares of Class A Common Stock, on the same terms as set
forth above, solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Proceeds to Company will be $ , $ and $ , respectively. See
"Underwriting."
-----------
The shares of Class A Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions, including the right of the Underwriters to withdraw,
cancel, modify or reject any order in whole or in part. It is expected that
delivery of the shares of Class A Common Stock will be made in New York, New
York, on or about , 1998.
-----------
Joint Lead Managers and Book-Runners
NOMURA SECURITIES INTERNATIONAL, INC. SALOMON SMITH BARNEY
-----------
The date of this Prospectus is , 1998.
<PAGE>
[ARTWORK]
Certain persons participating in the Offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Class A Common
Stock, including purchases of shares of Class A Common Stock to stabilize
their market price, purchases of shares of Class A Common Stock to cover some
or all of a short position in the shares of Class A Common Stock maintained by
the Underwriters and the imposition of penalty bids. For a description of
these activities, see "Underwriting."
2
<PAGE>
FORWARD LOOKING STATEMENTS
Certain statements contained in this Prospectus under "Prospectus Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," in addition to certain statements contained
elsewhere in this Prospectus, are forward looking statements. Such forward
looking statements can be identified by the use of forward looking terminology
such as "believes," "expects," "may," "intends," "will," "should" or
"anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. No assurance can be
given that the future results covered by the forward looking statements will
be achieved. Such statements are subject to risks, uncertainties and other
factors which could cause actual results to differ materially from future
results expressed or implied by such forward looking statements. The most
significant of such risks, uncertainties and other factors are discussed under
the heading "Risk Factors," in this Prospectus, and prospective investors are
urged to carefully consider such factors. The Company does not intend to
update these forward looking statements.
ADDITIONAL INFORMATION
The Company has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon
completion of the Offering, the Company will be subject to the informational
requirements of the Exchange Act, and in accordance therewith, will be
required to file periodic reports and other information with the Securities
and Exchange Commission (the "Commission"). Such information can be inspected
without charge after the Offering at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at Suite
1400, Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois
60661 and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material may also be obtained at prescribed rates from the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a web site
(http://www.sec.gov) that will contain all information filed electronically by
the Company with the Commission.
This Prospectus, which constitutes a part of a Registration Statement on
Form S-1 (the "Registration Statement") filed by the Company with the
Commission under the Securities Act of 1933, as amended (the "Securities
Act"), does not contain all of the information set forth in the Registration
Statement, including the exhibits thereto. For further information with
respect to the Company and the Class A Common Stock offered hereby, reference
is made to the Registration Statement and the exhibits thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and, with respect to each such contract
or document filed as an exhibit to the Registration Statement, reference is
made to the copy of such contract or document, and each such statement is
qualified in all respects by such reference. A copy of the Registration
Statement, including the exhibits thereto, may be inspected and copies thereof
may be obtained as described in the preceding paragraph with respect to
periodic reports and other information to be filed by the Company under the
Exchange Act.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by an independent public
accounting firm and to make available to its stockholders quarterly reports
containing unaudited consolidated financial statements for the first three
quarters of each fiscal year.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety and should be read in
conjunction with the more detailed information and Consolidated Financial
Statements, including the Notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated or the context otherwise requires, all
references herein to "Common Stock" include the Class A Common Stock and the
Class B Common Stock of the Company. All information in this Prospectus (i)
gives effect to the formation of the Company to own all of the shares of the
outstanding common stock of Yuasa-Exide, Inc. ("YEI"), (ii) gives effect to the
exchange of shares of common stock in YEI held by Yuasa Japan and Exide for
shares of Class B Common Stock of the Company on a 1400-for-1 basis on March
26, 1998, (iii) assumes an initial public offering price of $15.00 per share of
Class A Common Stock--the midpoint of the range of estimated offering prices,
and (iv) assumes that the Underwriters' over-allotment option will not be
exercised.
All references in this Prospectus to the "Company" refer to Yuasa, Inc., a
Pennsylvania corporation and, unless the context indicates otherwise, its
consolidated subsidiaries, including YEI which, effective March 9, 1998, began
to do business as "Yuasa, Inc." All references herein to the "Offering" mean
the offering of shares of Class A Common Stock of the Company by the Company
and the Selling Stockholder pursuant to this Prospectus. All references in this
Prospectus to fiscal years are to the Company's fiscal years ended on March 31.
THE COMPANY
The Company believes that it is the leading manufacturer and supplier of
industrial batteries and small engine starting batteries in the Americas. The
Company markets a full line of stationary and other batteries, as well as
motive power batteries and related products and services. Stationary batteries
are used primarily to supply standby operating power for (i) telecommunications
applications, such as wireless and wireline systems, (ii) uninterruptible power
system ("UPS") applications for electronic, security and computer systems, and
(iii) switchgear and electrical control systems used in electric utilities and
energy pipelines. Stationary and other batteries include small engine starting
batteries used to start motorcycles, all-terrain vehicles, snowmobiles and
personal watercraft. Motive power batteries are used primarily to power
industrial forklift trucks and other materials handling equipment. Related
products include chargers, electronic power equipment and a wide variety of
battery accessories. The Company sells its products and services through a
network of distributors, independent representatives and an internal sales
force, and also maintains service centers throughout the United States.
The Company believes that it is well-positioned to benefit from expected
continued growth in the markets for its products, especially the market for its
stationary and motive power industrial batteries. According to industry
sources, U.S. sales of large (greater than 25 amperes/hour) industrial
stationary and motive power batteries were approximately $670 million in fiscal
1997 and were projected to be approximately $760 million for fiscal 1998.
Stationary batteries represent approximately 49% of the total U.S. industrial
battery market in fiscal 1998. The stationary battery market has grown at a
compounded annual growth rate of approximately 13.7% per year over the past
five years, fueled principally by growth in the U.S. telecommunications
industry. The stationary battery market is expected to grow at a similar rate
over the next several years. Motive power batteries represent approximately 51%
of the total U.S. industrial battery market in fiscal 1998. The motive power
battery market has grown at a compounded annual growth rate of approximately
9.6% per year over the past five years, fueled principally by increased demand
for batteries in the industrial forklift truck market. The motive power battery
market is expected to grow at a lower rate for the next several years.
For fiscal 1994 through fiscal 1998 the Company's net sales grew from $296.4
million to $396.3 million, while net earnings decreased from $6.3 million in
fiscal 1994 to $0.6 million in fiscal 1995. The reduction in
4
<PAGE>
fiscal 1995 net earnings was due primarily to a sudden increase in the cost of
raw materials and to manufacturing inefficiencies of the Company. Beginning in
fiscal 1996, the Company initiated a strategic program primarily designed to
improve manufacturing efficiencies and reduce product costs. This program
included, among other items, redesigning certain of the Company's products to
reduce material costs and automating and reengineering manufacturing
operations. The Company's gross profit margin increased from 17.6% to 22.2%
between fiscal 1995 and fiscal 1998 and net earnings increased from $0.6
million in fiscal 1995 to $8.3 million in fiscal 1998 due, in significant part,
to the success of this program. The Company has historically relied on
indebtedness to meet certain of its liquidity requirements and can be expected
to do so in the future in light of the growth contemplated by its business
strategy.
OPERATING STRENGTHS
The Company has been able to achieve profitable growth by capitalizing on
the following operating strengths:
Strong Market Positions. The Company believes it holds the leading market
position in both the motive power and small engine starting battery markets and
is among the three largest suppliers of stationary batteries in the Americas.
The Company believes that its strong market positions result, in large part,
from its extensive direct sales force and national network of independent
distributors, representatives and service centers.
Established Brand Names. The Company believes that its brand names are among
the most highly recognized in the markets it serves. The Company sells its
stationary and related products principally under the "Yuasa" and "Exide" brand
names, motive power products principally under the "Exide" and "General" brand
names, and small engine starting batteries under the "Yuasa" brand name, as
well as under certain private labels. The Company benefits from having the
right to use the "Yuasa" and "Exide" brand names, which the Company believes
hold a reputation in the industry for high quality.
Reputation for Quality, Service and Innovation. The Company believes that
its reputation for product quality, reliability and service enhances its
competitiveness. The Company also competes on the basis of its ability to
partner with its customers to engineer innovative power solutions.
Manufacturing Efficiency. Since it began its strategic initiative to improve
manufacturing efficiency in fiscal 1996, the Company has spent over $45.0
million, among other things, to reengineer and automate its manufacturing
operations and to increase plant capacities. As a result, the Company believes
its manufacturing operations are among the most modern and efficient in the
industry and will provide sufficient capacity to meet expected demand for the
Company's products over the next three years without substantial additional
investment.
Broad Range of Products. The Company believes that it offers the broadest
product capability in the industry, including batteries addressing a wide range
of power requirements (from 1 ampere/hour to 4,000 amperes/hour) and
applications. This broad range of products allows the Company to customize its
products to meet varying customer requirements.
Relationship with Yuasa Japan. The Company benefits from its relationship
with Yuasa Japan through its ability to use the "Yuasa" brand name, and from
technical assistance and access to battery technology developed by Yuasa Japan.
Additionally, the Company sells batteries to Yuasa Japan and its affiliates for
resale in the Pacific Rim, and purchases batteries from Yuasa Japan and its
affiliates for resale in the Americas. Yuasa Japan is one of the leading
manufacturers of lead acid batteries in the world.
5
<PAGE>
BUSINESS STRATEGY
The Company's primary objectives are to increase its net earnings and return
on shareholders' equity and to capitalize on its operating strengths to grow
faster than the markets it serves by implementing the following strategies:
Stationary Products: Focus on Telecommunications, UPS and other High Growth
Markets. The Company believes that the telecommunications markets in the United
States and the rest of the Americas offer high growth potential for sales of
its stationary products. The Company intends to take advantage of its leading
position in the stationary battery market, as well as its other operating
strengths, to increase its share of these growing and profitable markets.
The Company recently strengthened its stationary business by adding new
members to its management team with broad experience in both the industrial
battery and telecommunications markets and extensive business relationships
with existing and potential purchasers of the Company's stationary products.
The Company intends to focus this team's efforts on increasing the Company's
sales of stationary products to the telecommunications markets and other
markets which may be identified as offering rapid growth potential.
The Company also intends to focus its engineering and manufacturing
resources on products which have applications in the telecommunications markets
and other markets which may be identified as offering rapid growth potential.
The Company intends to continue its strategy of developing customized
engineering and other product solutions for original equipment manufacturers
("OEMs") and end users of its products through strategic partnerships with them
and by taking advantage of technical assistance available from Yuasa Japan.
Further, the Company intends to use its increased manufacturing capacity and
new systems and programs to significantly improve delivery to its customers
with shorter lead times.
Motive Power and Small Engine Starting Products: Maintain Leadership
Positions. The Company intends to maintain its leadership position in the
motive power market by (i) continuing to provide a dual brand approach,
including a premium, higher performance product, marketed under the "Exide"
brand, and a lower priced product marketed under the "General" brand, (ii)
leveraging its nationwide sales and service network, and (iii) improving
delivery to its customers through shorter lead times. The Company intends to
maintain its leadership position in the small engine starting battery market by
developing new products for emerging applications, such as cordless electric
mowers and trimmers, and by developing programs to maintain and enhance brand
image and customer loyalty.
Continued Cost Reduction Initiatives. The Company intends to continue its
cost reduction programs initiated in fiscal 1996 by continuing to reengineer
and automate its manufacturing processes and facilities and by redesigning its
products and business processes to further increase efficiency.
Continued Expansion Into New Geographic Markets. The Company believes that
Latin America presents significant growth potential for industrial battery
sales, particularly in the telecommunications markets. The Company established
a sales and distribution business in Mexico in fiscal 1994 and entered into a
joint venture in Argentina in fiscal 1997 to market and sell industrial
batteries. The Company intends to expand into other Latin American countries
through acquisitions, joint ventures and start-up ventures.
----------------
The Company maintains its executive offices at 2366 Bernville Road, Reading,
Pennsylvania 19605-9457. Its mailing address is P.O. Box 14145, Reading,
Pennsylvania 19612-4145, and its telephone number is (610) 208-1991.
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock
offered by: The
Company
3,300,000 shares(/1/)
The Selling Stockholder 1,092,000 shares(/2/)
Common Stock to be
outstanding after the
Offering:
Class A Common Stock 4,392,000 shares(/1/)(/3/)(/4/)
Class B Common Stock 7,000,000 shares(/4/)
Total Common Stock 11,392,000 shares(/1/)(/3/)
Voting Rights: The Class A Common Stock and Class B Common Stock
vote as a single class on all matters, except as
otherwise required by law. Each share of Class A
Common Stock entitles its holder to one vote and
each share of Class B Common Stock entitles its
holder to two votes. All of the outstanding shares
of Class B Common Stock are presently owned by
Yuasa Japan (86.5%) and Exide (13.5%). Immediately
after completion of the Offering, Yuasa Japan will
own all of the 7,000,000 issued and outstanding
shares of Class B Common Stock, representing
approximately 61% of all of the outstanding Common
Stock and 76% of the combined voting power of the
outstanding shares of Common Stock (approximately
73% of the combined voting power if the
Underwriters' over-allotment option is exercised in
full). See "Description of Capital Stock."
Use of Proceeds: The net proceeds received by the Company will be
used to repay a portion of the Company's
indebtedness. See "Use of Proceeds."
New York Stock Exchange The Company has applied for listing of the Class A
Listing: Common Stock on the New York Stock Exchange under
the symbol "YUA".
Risk Factors: An investment in the Class A Common Stock offered
hereby is subject to a number of risks. Prospective
investors should consider carefully all information
set forth herein before making an investment in the
Class A Common Stock. In particular, prospective
investors should consider the factors set forth
herein under "Risk Factors."
</TABLE>
- --------
(1) Up to an aggregate of 658,800 additional shares of Class A Common Stock may
be sold by the Company pursuant to the Underwriters' over-allotment option.
See "Underwriting."
(2) Consists of 1,092,000 shares of Class B Common Stock which will
automatically convert to Class A Common Stock in connection with the
Offering.
(3) Excludes an aggregate of 602,540 shares of Class A Common Stock reserved
for issuance upon exercise of outstanding options and for future issuances
under the Company's Omnibus Stock Plan (the "Omnibus Stock Plan"). See
"Management--Management Incentive Plans--Omnibus Stock Plan" and "--Grant
of Options."
(4) Each share of Class B Common Stock is convertible at any time into one
share of Class A Common Stock at the election of the holder and converts
automatically into one share of Class A Common Stock upon a transfer by the
holder to any person other than an affiliate of such holder, except under
certain limited circumstances. See "Description of Capital Stock--Class A
Common Stock and Class B Common Stock."
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following tables present summary historical consolidated financial
information and certain pro forma data of the Company, for the periods or as of
the dates indicated. The historical consolidated financial information for each
of the five years in the period ended March 31, 1998 has been derived from the
Company's historical financial statements, which have been audited. The pro
forma information is provided for information purposes only and does not
purport to be indicative of the results which would actually have been attained
had the events reflected therein occurred on the dates indicated, or which may
be expected to occur in the future.
The Summary Consolidated Financial Information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Company's Consolidated Financial Statements and the
Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Net sales............... $ 296,416 $ 328,678 $ 357,517 $ 357,526 $396,317
Gross profit............ $ 61,670 $ 57,698 $ 61,722 $ 72,147 $ 87,879
Operating expenses...... $ 39,406 $ 42,744 $ 43,952 $ 48,991 $ 56,398
Operating earnings...... $ 18,724 $ 11,600 $ 14,255 $ 19,527 $ 27,851
Earnings before taxes... $ 11,179 $ 1,277 $ 2,793 $ 9,347 $ 14,138
Net earnings............ $ 6,306 $ 616 $ 1,279 $ 5,111 $ 8,308
Net earnings per share
of Common Stock (basic
and diluted)........... $ 0.78 $ 0.08 $ 0.16 $ 0.63 $ 1.03
Dividends per share of
Common Stock........... $ 0.20 $ 0.28 $ 0.05 $ 0.15 $ 0.49
Weighted average shares
of Common Stock
outstanding(/2/)....... 8,092 8,092 8,092 8,092 8,092
PRO FORMA DATA:
Pro forma net earnings
per share(/1/)(/3/).... $ 0.88
Pro forma weighted
average shares of
Common Stock
outstanding(/2/)(/3/).. 11,392
OTHER DATA:
Capital expenditures.... $ 16,199 $ 19,983 $ 17,078 $ 11,203 $ 18,951
Depreciation and amorti-
zation................. $ 11,493 $ 12,386 $ 15,000 $ 14,022 $ 14,882
Gross profit margin..... 20.8% 17.6% 17.3% 20.2% 22.2%
Operating earnings mar-
gin.................... 6.3% 3.5% 4.0% 5.5% 7.0%
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED(/4/)
-------- ----------------
(in thousands)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total assets......................................... $217,032 $217,032
Total debt........................................... $105,677 $ 60,677
Total shareholders' equity........................... $ 39,997 $ 84,997
</TABLE>
- --------
(1) Adjusted to reflect a reduction of $2.9 million in interest expense, and
the related income tax effect of $1.2 million, on a pro forma basis as if
the net proceeds from the Offering (assuming the Underwriters' over-
allotment option is not exercised) had been utilized to repay a portion of
the Company's outstanding indebtedness at the beginning of each period
presented. Interest expense assumes a weighted average interest rate of
6.55% for fiscal 1998, which approximates the actual interest rate on $45.0
million of indebtedness to be repaid with the estimated net proceeds from
the Offering. Assumes an initial public offering price of $15.00 per share
of Class A Common Stock--the midpoint on the estimated range of the public
offering price.
(2) Amounts exclude an aggregate of 602,540 shares of Class A Common Stock
(equal to 5% of the estimated total shares outstanding after the Offering)
reserved for issuance upon exercise of outstanding options and for future
issuances under the Company's Omnibus Stock Plan. See "Management--
Management Incentive Plans--Omnibus Stock Plan" and "--Grant of Options."
(3) Adjusted to give effect to the sale of 3,300,000 shares of Class A Common
Stock offered hereby by the Company.
(4) Adjusted to reflect the use of estimated net proceeds of $45.0 million to
the Company from the Offering to repay outstanding indebtedness of $45.0
million at the time of the Offering.
8
<PAGE>
RISK FACTORS
An investment in the shares of Class A Common Stock offered hereby involves
a number of risks. Prospective investors should carefully consider the
following information, as well as the other information in this Prospectus,
before investing in shares of Class A Common Stock.
RELATIONSHIP WITH PRINCIPAL STOCKHOLDER
The Company is, at present, a majority owned subsidiary of Yuasa Japan and
after the Offering will remain as such.
Immediately upon completion of the Offering, Yuasa Japan will have
beneficial ownership of 100% of the issued and outstanding shares of Class B
Common Stock of the Company, representing approximately 61% of the total
outstanding shares of Common Stock (approximately 58% if the Underwriters'
over-allotment option is exercised in full). As a result of the voting
disparity between the classes of Common Stock, Yuasa Japan's Class B Common
Stock will represent approximately 76% of the combined voting power of the
Company's Common Stock (approximately 73% if the Underwriters' over-allotment
option is exercised in full). Yuasa Japan therefore has, and will continue to
have, sufficient voting power to elect the entire Board of Directors of the
Company. Yuasa Japan will also be able, in general, to control the vote on any
corporate transaction or other matter submitted to the Company's stockholders
for approval, including extraordinary transactions such as mergers and sales
of all or substantially all of the Company's assets, and to otherwise
substantially influence the operations and strategic direction of the Company.
Such control by Yuasa Japan may discourage certain types of transactions in
which the holders of Class A Common Stock might otherwise receive a premium
over prevailing market prices for their shares. See "Related Party
Transactions," "Principal and Selling Stockholders" and "Description of
Capital Stock."
Certain directors and officers of the Company are also directors and
officers of Yuasa Japan and may have conflicts of interest with respect to
certain transactions which may affect the Company, such as business dealings
between the Company and Yuasa Japan, acquisition opportunities, the issuance
of additional shares of Common Stock and other matters involving conflicts
which cannot now be foreseen. In addition, upon completion of the Offering,
each member of the Company's Board of Directors will be either (i) an officer
or director of, and nominated and elected as a director by, Yuasa Japan, or
(ii) an executive officer of the Company. Although the Company intends to
appoint at least three directors who are independent of Yuasa Japan and of the
Company, following the completion of the Offering, such directors will not
constitute a majority of the Company's Board, and the Company's Board may not
have a majority of independent directors in the future. See "Related Party
Transactions."
The economy of Asia is, at present, highly volatile. Although the Company
does not expect that such volatility, in light of the Company's relationship
with Yuasa Japan, will have any material impact on the Company, no assurances
can be given that it will not.
Yuasa Japan is a Japanese corporation and certain of the Company's
directors and officers are citizens and residents of Japan. Moreover,
substantially all of the assets of Yuasa Japan and such directors and officers
are located outside of the United States. These factors could adversely affect
the ability of investors to effect service of process upon Yuasa Japan or such
directors and officers within the United States or to enforce against such
parties in U.S. courts judgments obtained in U.S. courts, including judgments
predicated upon the federal securities laws of the United States.
TELECOMMUNICATIONS INDUSTRY AND GROWTH OF THE COMPANY
The Company expects that sales of stationary products to telecommunications
customers will account for an increasing percentage of the Company's net sales
and earnings in the future. The continued success of the
9
<PAGE>
Company's stationary batteries and other power supply products and services
will depend, to a substantial extent, on the future continued growth and the
increased accessibility and affordability of telecommunications products and
services in the Americas. There can be no assurance that the demand for such
products and services will continue to grow.
In recent years, the telecommunications industry has undergone substantial
consolidation and change, reducing the number of potential customers for the
Company's products. Although the Company does not expect continuing
consolidation and change to have a material adverse effect on the Company,
there can be no assurance that this will not be the case. See "Business--
Products" and "--Customers and End Users."
COMPETITION; INDUSTRY CONSOLIDATION; PRICING PRESSURES
The industrial lead-acid battery market has for many years been highly
competitive, with competition based primarily on relative product quality and
reliability, price, delivery time and after-sale service. This market has
recently become even more competitive as a result of consolidation among
industrial battery purchasers, which has reduced the number of customers for
the Company's products and increased pricing pressures throughout the
industry. The Company's competitors range from development stage companies to
major domestic and international companies. Although the U.S. market is
currently dominated by domestic manufacturers, foreign competition could
increase, depending on changes in relative prices, duties, tariffs, freight
costs, currency exchange rates or as a result of changes in technology.
Certain of the Company's competitors have technical, marketing, sales,
manufacturing, distribution and other resources significantly greater than
those of the Company, as well as significant name recognition, established
positions in the market and long-standing relationships with OEMs and other
customers. In addition, certain of the Company's competitors own lead smelting
facilities which, during sustained periods of substantial lead cost increases,
may provide a competitive advantage over the Company.
The Company's ability to compete in markets both inside and outside the
United States in the future could be limited by the activities of Yuasa Japan
and Exide, both of which manufacture and sell many of the same products for
the same applications as the products offered by the Company and both of which
are substantially larger and have greater financial resources than the
Company. Exide presently derives a substantial portion of its revenues from
sales of industrial batteries in Europe and its existing agreement not to
compete with the Company expires in June 2001. Accordingly, Exide could become
a competitor of the Company in the Americas and elsewhere in the future.
Although Yuasa Japan has historically viewed the Company as the operation
through which Yuasa Japan markets its products in the Americas and although
the Company is party to an agreement (the "Yuasa Noncompete") which prevents
Yuasa Japan from competing with the Company in the Americas until three years
after such time as Yuasa Japan and its affiliates cease to own directly or
indirectly shares of the Company's capital stock possessing at least 20% of
the voting power of all classes of capital stock, nothing precludes Yuasa
Japan from competing with the Company thereafter. See "--Relationship with
Principal Stockholder," "Business--Competition," and "Related Party
Transactions."
MATERIALS AND MANUFACTURING COSTS
The costs of the components of the Company's products, particularly the
cost of lead, may fluctuate and the Company may be unable to fully pass on any
future cost increases to its customers. When lead costs rise, certain of the
Company's competitors with smelting operations may have lower lead costs than
the Company, providing them with a competitive advantage. Although the Company
has adopted strategies to help minimize these risks, there can be no assurance
that these strategies will be successful over an extended period. See "--
Cyclical Industry; Variations in Quarterly Results," "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Raw Material
Pricing," "Business--Raw Materials" and "--Competition."
The Company's other manufacturing costs, which include a variety of non-
lead materials (such as plastics and steel), labor and most other operating
costs, are also affected by inflationary pressures. The Company's
10
<PAGE>
ability to pass along these inflationary cost increases through higher selling
prices may be limited during periods of stable or declining lead costs because
of established industry practices that tend to link price increases to
increased lead costs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Inflation."
CYCLICAL INDUSTRY; VARIATIONS IN QUARTERLY RESULTS
The Company is subject to certain factors affecting pricing and net sales
over which the Company has no control, such as general economic and industry
specific competitive conditions. In particular, the industrial battery market
in which the Company competes is cyclical in nature and the markets for the
Company's products are sensitive to the rate of economic growth in the U.S.
and world economies. In addition, products which use the Company's small
engine starting batteries are primarily sold for leisure use, and such sales
may be subject to deferral during economic downturns. The U.S. economy has
experienced a relatively long period without major economic downturns and
might be subject to a recession in the future. Future economic downturns could
adversely affect the Company's results of operations and financial condition.
Historically, the Company has experienced higher net sales during the
fourth quarter of the year, reflecting the customary seasonal buying patterns
of its customers. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Fluctuations in Quarterly Results."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS; CURRENCY RISK
The Company derived approximately 7% of its net sales for fiscal 1998 from
sales of its products in countries outside of the United States and the
Company plans to expand its operations significantly in Latin America in the
future. The Company's international operations are subject to the risks
usually associated with foreign operations, including the disruption of
markets, changes in export or import laws, restrictions on currency exchanges,
and the modification or introduction of other governmental policies with
potential adverse effects. Also, foreign sales typically are made in local
currencies. To the extent the Company does not take steps to mitigate the
effect of changes in the relative value of the U.S. dollar and these foreign
currencies, the Company's results of operations and financial condition (which
are reported in U.S. dollars) could be adversely affected. In addition, the
Company may expand in Latin America through joint ventures involving local
partners who may have economic, business or legal interests or goals which are
inconsistent with those of the joint venture or the Company or who may be
unable to meet their financial or other obligations to the joint venture or
the Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview--Net Sales."
TERMINATION OF CERTAIN LICENSES
The Company has exclusive, perpetual royalty-free licenses from Exide for
the use of certain trademarks and patents. Such licenses are subject to
termination in the event the Company breaches its obligations under the
license agreements related to these trademarks and patents. The Company also
has a license and technical assistance agreement with Yuasa Japan (the "Yuasa
License and Technology Agreement"), which gives the Company the right, among
other things, to use certain trademarks, patents and technical know-how of
Yuasa Japan until three years (in the case of certain trademarks) and five
years (in the case of certain patents and technical know-how) after such time
as Yuasa Japan and its affiliates cease to own directly or indirectly shares
of the Company's capital stock possessing at least 20% of the voting power of
all classes of capital stock, subject to earlier termination should the
Company fail to pay royalties due, otherwise breach the agreement and fail to
cure such breach, or become bankrupt. Such termination could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Intellectual Property."
POTENTIAL COSTS OF ENVIRONMENTAL COMPLIANCE
The Company is subject to numerous federal, state and local laws and
regulations that are designed to protect the environment and employee health
and safety, including those pertaining to the storage, handling,
11
<PAGE>
treatment, transportation and disposal of hazardous and toxic materials,
practices and procedures applicable to the construction and operation of the
Company's plants, and standards relating to the discharge of air, soil and
water pollutants. While the Company believes that its operations currently
comply substantially with applicable environmental, health and safety laws and
regulations, such compliance has resulted in ongoing costs for the Company,
and the Company from time to time has had instances of alleged or actual
noncompliance that have resulted in the imposition of fines or penalties. The
Company's continued compliance with environmental, health and safety laws and
regulations could (i) require the Company to incur significant expenses,
including fines and penalties, (ii) restrict the Company's ability to modify
or expand its facilities or continue production, and (iii) require the Company
to install pollution control equipment and make other capital improvements.
In addition, some of the Company's manufacturing sites have a history of
industrial use. As is typical for such businesses, soil and groundwater
contamination has occurred in the past at some sites and might occur or be
discovered at other sites in the future. The Company from time to time
investigates, remediates and monitors soil and groundwater contamination at
certain of those sites. In addition, the Company has been and in the future
may be liable to contribute to the cleanup of locations owned or operated by
other persons to which the Company or its predecessors have sent wastes for
disposal, pursuant to the federal Comprehensive Environmental Response,
Compensation and Liability Act (commonly known as "Superfund") and other
similar laws. Under these laws, the owner or operator of contaminated
properties and the generator of wastes sent to a contaminated disposal
facility can be jointly and severally liable for the cleanup of such
properties, regardless of fault.
The Company attempts to reduce its potential liability associated with
environmental, health and safety laws and regulations by, among other
practices, recycling materials such as lead and acid in batteries and by not
owning or operating lead smelting facilities. In addition, substantially all
of the Company's industrial battery operations were acquired from Exide in a
transaction pursuant to which the Company acquired assets and did not
contractually assume environmental and related liabilities. These assets were
acquired in 1991 and there have not been any significant environmental claims
made since that date. Based on current information, the Company does not
expect compliance with environmental, health and safety laws and regulations
to have a material adverse effect on the business or financial condition of
the Company. However, there can be no assurance that developments, such as
increased requirements of such laws and regulations, increasingly strict
enforcement thereof by governmental authorities, and claims for damages to
property or injury to persons resulting from the environmental, health or
safety impacts of the Company's operations, will not cause the Company to
incur significant costs and liabilities that could have a material adverse
effect. See "Business--Environmental Regulation."
NO PRIOR MARKET FOR CLASS A COMMON STOCK
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active market for the Class A Common
Stock will develop or be sustained after the completion of the Offering, nor
can there by any assurance that investors in the Class A Common Stock will be
able to resell their shares at or above the initial public offering price. The
initial public offering price of the Class A Common Stock will be determined
by negotiations among the Company and the Underwriters and may not be
indicative of the market price after the Offering. See "Underwriting" for a
description of the factors to be considered in determining the initial public
offering price.
POSSIBLE VOLATILITY OF STOCK PRICE; SHARES ELIGIBLE FOR FUTURE SALE
The market price of the Class A Common Stock may be significantly affected
by, and could be subject to significant fluctuations in response to, such
factors as the Company's operating results, changes in any earnings estimates,
announcements of significant business developments by the Company, its
competitors or other third parties, other developments affecting the Company,
its customers or its competitors, and various factors affecting the Company's
business, the financial markets or the economy in general, including
perceptions about market conditions in the battery industry, the impact of
various regulatory proposals and general market conditions, some of which may
be unrelated to the Company's performance. In addition, the stock market has
experienced high
12
<PAGE>
levels of price and volume volatility in the past and market prices for the
stock of many companies, especially companies which have recently completed
initial public offerings, have experienced wide price fluctuations not
necessarily related to the operating performance of such companies. Moreover,
because the number of shares of Class A Common Stock being offered hereby is
small relative to the average number of shares traded of many other publicly
held companies, the market price of Class A Common Stock may be more
susceptible to fluctuation. A decision on the part of Yuasa Japan to sell a
substantial number of shares of the Company's Common Stock in the public
market from time to time after expiration of the 180-day lock-up period (see
"Underwriting"), or the perception that such sales may occur, could adversely
affect the market price of the Class A Common Stock. Yuasa Japan has indicated
to the Company that it has no present intent to sell all or any of its shares
of Common Stock. See "--Relationship with Principal Stockholder" and
"Principal and Selling Stockholders."
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price is substantially higher than the net
tangible book value per share of the Class A Common Stock. Investors in the
Offering will therefore experience an immediate and substantial dilution in
net tangible book value per share of Class A Common Stock of $9.36 per share.
In addition, any future issuance of shares of Common Stock for consideration,
or the exercise of options to purchase Common Stock, at or below the issue
price of the shares offered hereby will cause additional dilution in terms of
net tangible book value per share. To the extent that restricted share awards
are made, there will be further dilution. See "Dilution."
ABSENCE OF DIVIDENDS; RELIANCE ON DIVIDENDS AND DISTRIBUTIONS FROM
SUBSIDIARIES
The Company does not presently intend to declare or pay cash dividends on
its Common Stock after completion of the Offering in the foreseeable future.
As a holding company with no significant assets (other than its investments in
its subsidiaries) or business operations of its own, the principal source of
dividends from the Company will be dividends and other distributions from its
subsidiaries. See "Dividend Policy."
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
by the Company hereby are estimated to be $45.0 million ($ million if the
Underwriters' over-allotment option is exercised in full) based on an assumed
initial offering price to the public of $15.00 per share of Class A Common
Stock after deducting the underwriting discount and estimated expenses of $1.0
million. The Company intends to use all of the estimated net proceeds to repay
$45.0 million of indebtedness. The aggregate weighted average maturity of this
indebtedness is approximately 1.25 years and the weighted average annual
interest rate of this indebtedness was 6.55% during fiscal 1998. Substantially
all of this indebtedness was incurred by the Company in connection with its
1991 acquisition of Exide's industrial battery division. See "Related Party
Transactions--General".
The Company will not receive any of the proceeds of the sale of Class A
Common Stock offered by the Selling Stockholder hereunder. See Note 7 to Notes
to Consolidated Financial Statements. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
DIVIDEND POLICY
The Company does not presently intend to declare or pay cash dividends on
its Common Stock after completion of the Offering in the foreseeable future.
Any determination to pay dividends in the future will be at the discretion of
the Company's Board of Directors and will depend upon the Company's results of
operations, financial condition, contractual restrictions, restrictions
imposed by applicable law and other factors deemed relevant by the Board of
Directors, which may change the Company's dividend policy at any time. Holders
of Class A Common Stock and holders of Class B Common Stock share equally in
dividends declared by the Board. As a holding company with no present business
operations of its own, the principal source of dividends from the Company will
be dividends and other distributions from its subsidiaries. See "Risk
Factors--Absence of Dividends; Reliance on Dividends and Distributions From
Subsidiaries."
14
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt, including the current
portion of long-term debt, and the capitalization of the Company as of March
31, 1998 on an actual and as adjusted basis as of that date to (i) reflect the
sale by the Company of the shares of Class A Common Stock offered hereby (at
an assumed initial public offering price of $15.00 per share) and (ii) the use
of the net proceeds of the Offering (after deducting the underwriting
discounts and commissions and estimated offering expenses payable by the
Company) as described in "Use of Proceeds." This table should be read in
conjunction with the Consolidated Financial Statements of the Company and the
notes thereto appearing elsewhere in this Prospectus. See also "Use of
Proceeds," "Selected Consolidated Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Description of Capital Stock."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(in thousands)
<S> <C> <C>
Short-term debt, including portion of long-term debt..... $ 27,997 $ 27,997
======== ========
Long-term debt:
Loan facilities........................................ $ 68,152 $ 23,152
Capital leases ........................................ 9,528 9,528
-------- --------
Total long-term debt................................. 77,680 32,680
-------- --------
Shareholders' equity:
Preferred stock, par value $0.01 per share, 50,000,000
shares authorized; no shares issued and outstanding... -- --
Class A Common Stock, par value $0.01 per share,
100,000,000 shares authorized; no shares issued and
outstanding actual and 4,392,000 shares issued and
outstanding as adjusted(/1/)(/2/)..................... -- 44
Class B Common Stock, par value $0.01 per share,
100,000,000 shares authorized; 8,092,000 shares issued
and outstanding actual and 7,000,000 shares issued and
outstanding as adjusted(/2/).......................... 81 70
Paid-in capital........................................ 16,324 61,291
Retained earnings...................................... 24,685 24,685
Minimum pension liability.............................. (968) (968)
Cumulative translation adjustment...................... (125) (125)
-------- --------
Total shareholders' equity........................... 39,997 84,997
-------- --------
Total capitalization..................................... $117,677 $117,677
======== ========
</TABLE>
- --------
(1) Actual and as adjusted amounts exclude an aggregate of 602,540 shares of
Class A Common Stock (equal to 5% of the estimated total shares
outstanding after the Offering) reserved for issuance upon exercise of
outstanding options and for future issuances under the Company's Omnibus
Stock Plan. See "Management--Management Incentive Plans--Omnibus Stock
Plan" and "--Grant of Options."
(2) As adjusted amounts give effect to the sale by the Company of 3,300,000
shares of Class A Common Stock in the Offering and the conversion of
1,092,000 shares of Class B Common Stock into Class A Common stock upon
the sale of all of such shares by the Selling Stockholder in the Offering.
15
<PAGE>
DILUTION
As of March 31, 1998, net tangible book value of the Company's Common Stock
before giving effect to the Offering was $19.3 million, or approximately $2.39
per share. Net tangible book value per share is determined by dividing the net
tangible book value by the number of outstanding shares of Common Stock. Net
tangible book value is determined by deducting from total assets all
intangibles (net of amortization) and total liabilities. Without taking into
account any other changes in net tangible book value after March 31, 1998,
other than to give effect to (i) the net proceeds from the issuance of
3,300,000 shares of Class A Common Stock to be offered by the Company in the
Offering (assuming an initial public offering price of $15.00 per share and
after deducting the underwriting discounts and estimated expenses of the
Offering payable by the Company), and (ii) the dividend declared on March 9,
1998, payable in May, 1998, the pro forma net tangible book value of the
Company as of March 31, 1998 would have been $64.3 million, or approximately
$5.64 per share. This represents an immediate increase in net tangible book
value of $3.25 per share of Common Stock to existing stockholders and an
immediate dilution of approximately $9.36 per share to new investors
purchasing shares in the Offering. The following table illustrates the per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $15.00
Net tangible book value per share before the Offering...... $ 2.39
Increase in net tangible book value per share attributable
to new investors.......................................... 3.25
------
Pro forma net tangible book value per share after the
Offering.................................................... 5.64
------
Dilution per share to new investors.......................... $ 9.36
======
</TABLE>
The following table sets forth, as of March 31, 1998, the number of shares
of Common Stock purchased from the Company, the total consideration paid to
the Company and the average price per share paid by (i) Yuasa Japan and Exide,
the Company's two existing stockholders, and (ii) new investors purchasing
shares of Common Stock from the Company in the Offering (before deducting
underwriting discounts and estimated expenses payable by the Company).
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(/1/).... 8,092,000 71.0% $16,405,000 24.9% $ 2.03
New investors(/1/)............ 3,300,000 29.0% 49,500,000 75.1% $15.00
---------- ----- ----------- -----
Total....................... 11,392,000 100.0% $65,905,000 100.0% $ 5.79
========== ===== =========== =====
</TABLE>
- --------
(1) Sales by the Selling Stockholder in the Offering will reduce the number of
shares held by existing stockholders to 7,000,000 or approximately 61% of
the total number of shares of Common Stock outstanding after the Offering
(or 58% if the Underwriters' over-allotment option is exercised in full),
and will increase the number of shares held by new investors to 4,392,000
or approximately 39% of the total number of shares outstanding after the
Offering (or 42% if the Underwriters' over-allotment option is exercised
in full). See "Principal and Selling Stockholders."
The foregoing table assumes no exercise of the Underwriters' over-allotment
option, and excludes options to acquire 570,400 shares of Class A Common Stock
granted to officers and other employees under the Omnibus Stock Plan in March,
1998 at the initial public offering price and 32,140 shares of Class A Common
Stock available for future grants under that Plan. See "Management--Management
Incentive Plan--Omnibus Stock Plan" and "--Grant of Stock Options." Any future
issuance of shares of Common Stock for consideration or the exercise of
options to purchase Common Stock at or below the issue price of the shares of
Class A Common Stock offered hereby will cause dilution in terms of net
tangible book value per share. See "Risk Factors--Immediate and Substantial
Dilution" and "Management--Executive Compensation."
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables present selected historical consolidated financial
information and certain pro forma data of the Company, as of the dates and for
the periods indicated. The historical consolidated income statement
information for each of the five years in the period ended March 31, 1998 and
the consolidated balance sheet data as of March 31, 1994, 1995, 1996, 1997 and
1998 have been derived from the Company's audited consolidated financial
statements. The pro forma information is provided for information purposes
only and does not purport to be indicative of the results which would actually
have been attained had the events reflected therein occurred on the dates
indicated or which may be expected to occur in the future.
The Selected Consolidated Financial Information should be read in
conjunction with "Summary Consolidated Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements and the Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
DATA:
Net sales.................... $296,416 $328,678 $357,517 $357,526 $396,317
Cost of goods sold........... 234,746 270,980 295,795 285,379 308,438
-------- -------- -------- -------- --------
Gross profit................. 61,670 57,698 61,722 72,147 87,879
Operating expenses........... 39,406 42,744 43,952 48,991 56,398
Amortization expense......... 3,540 3,354 3,515 3,629 3,630
-------- -------- -------- -------- --------
Operating earnings........... 18,724 11,600 14,255 19,527 27,851
Interest expense............. 7,736 9,614 11,581 9,625 9,709
Loss on Investment........... -- -- -- -- 4,005
Other (earnings) expense,
net......................... (191) 709 (119) 555 (1)
-------- -------- -------- -------- --------
Earnings before taxes........ 11,179 1,277 2,793 9,347 14,138
Income taxes................. 4,873 661 1,514 4,236 5,830
-------- -------- -------- -------- --------
Net earnings................. $ 6,306 $ 616 $ 1,279 $ 5,111 $ 8,308
======== ======== ======== ======== ========
Net earnings per share of
Common Stock (basic and
diluted).................... $ 0.78 $ 0.08 $ 0.16 $ 0.63 $ 1.03
Dividends per share of Common
Stock....................... $ 0.20 $ 0.28 $ 0.05 $ 0.15 $ 0.49
Weighted average shares of
Common Stock
outstanding(/2/)............ 8,092 8,092 8,092 8,092 8,092
PRO FORMA DATA:
Pro forma net earnings per
share(/1/)(/3/)........... $ 0.88
Pro forma weighted average
shares of Common Stock
outstanding(/2/)(/3/)..... 11,392
OTHER DATA:
Capital expenditures....... $ 16,199 $ 19,983 $ 17,078 $ 11,203 $ 18,951
Depreciation and
amortization.............. 11,493 12,386 15,000 14,022 14,882
Gross profit margin........ 20.8% 17.6% 17.3% 20.2% 22.2%
Operating earnings margin.. 6.3% 3.5% 4.0% 5.5% 7.0%
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, MARCH 31, 1998
----------------------------------- ----------------------
AS
1994 1995 1996 1997 ACTUAL ADJUSTED(/4/)
-------- -------- -------- -------- -------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Total assets............ $186,039 $209,136 $219,226 $219,519 $217,032 $217,032
Total debt.............. $107,283 $124,207 $129,121 $118,436 $105,677 $ 60,677
Total shareholders'
equity................. $ 33,671 $ 31,841 $ 32,262 $ 35,842 $ 39,997 $ 84,997
</TABLE>
- --------
(1) Adjusted to reflect a reduction of $2.9 million in interest expense, and
the related income tax effect of $1.2 million, on a pro forma basis as if
the net proceeds from the Offering (assuming the Underwriters' over-
allotment option is not exercised) had been utilized to repay a portion of
the Company's outstanding indebtedness at the beginning of each period
presented. Interest expense assumes a weighted average interest rate of
6.55% for fiscal 1998, which approximates the actual interest rate on
$45.0 million of indebtedness to be repaid with the estimated net proceeds
from the Offering. Assumes an initial public offering price of $15.00 per
share of Class A Common Stock--the midpoint on the estimated range of the
public offering price.
(2) Amounts exclude an aggregate of 602,540 shares of Class A Common Stock
(equal to 5% of the estimated total shares outstanding after the Offering)
reserved for issuance upon exercise of outstanding options and for future
issuances under the Company's Omnibus Stock Plan. See "Management--
Management Incentive Plans--Omnibus Stock Plan" and "--Grant of Options."
(3) As adjusted to give effect to the sale of 3,300,000 shares of Class A
Common Stock offered hereby by the Company. Assumes that the Class A
Common Stock offered by the Company is sold at $15.00 per share--the
midpoint on the estimated range of public offering prices.
(4) Adjusted to reflect the use of estimated net proceeds of $45.0 million to
the Company from the Offering to repay outstanding indebtedness of $45.0
million at the time of the Offering.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the Selected Consolidated
Financial Information of the Company and the Consolidated Financial Statements
of the Company and the Notes thereto included elsewhere in this Prospectus.
OVERVIEW
General
The Company believes that it is the leading manufacturer and supplier of
industrial batteries and small engine starting batteries in the Americas. The
Company markets a full line of stationary and other batteries, as well as
motive power batteries and related products and services. Stationary batteries
are used primarily to supply standby operating power for (i)
telecommunications applications, such as wireless and wireline systems, (ii)
UPS applications for electronic, security and computer systems, and (iii)
switchgear and electrical control systems used in electric utilities and
energy pipelines. Stationary and other batteries include small engine starting
batteries used to start motorcycles, all-terrain vehicles, snowmobiles and
personal watercraft. Motive power batteries are used primarily to power
industrial forklift trucks and other materials handling equipment. Related
products include chargers, electronic power equipment and a wide variety of
battery accessories. The Company sells its products and services through a
network of distributors, independent representatives and an internal sales
force, and also maintains service centers throughout the United States.
From time to time, the Company has entered into acquisitions or joint
ventures with strategic partners to expand into new geographic markets or
strengthen its existing market positions, including, establishing an
industrial battery sales and distribution business in Mexico in fiscal 1994,
entering into a joint venture in Argentina to market and sell industrial
batteries in fiscal 1997, and acquiring certain assets of a U.S.-based
telecommunications installation and service business in fiscal 1996. In
addition, the Company has also selectively divested certain businesses (such
as Tucker Telecommunications in fiscal 1998) or significantly reduced certain
lines of business (such as the Company's electric vehicle battery ("EV")
product line in fiscal 1996). The Company expects to continue to undertake
selective acquisitions as opportunities arise and could divest or scale back
certain lines of business if they do not meet management's financial
performance requirements. Such transactions could have a material effect on
the Company's financial condition or results of operations. As of the date of
this Prospectus, the Company has no agreements with any prospective candidate
with respect to any specific material transaction.
Net Sales
The Company's net sales are derived mainly from the sale of stationary and
other batteries as well as motive power batteries to dealers, wholesale
distributors, and OEMs. The Company also derives significant net sales from
the sale of chargers, power supply equipment and accessories related to its
batteries, as well as from net sales from installation and maintenance
services. No customer accounted for more than 5% of the Company's net sales in
fiscal 1998. The market for batteries historically has been cyclical, with
periods of economic expansion generally leading to increased demand for the
Company's products.
As a result of rapid growth in the telecommunications industry, net sales
from the Company's stationary business have been increasing and are expected
to continue to increase at a faster rate than the Company's net sales as a
whole. To service the telecommunications industry successfully, the Company's
products and services will need to continue to meet rapidly changing industry
standards and specifications. The Company expects that growth in the
telecommunication industry will also contribute to the Company deriving
increased net sales from installation and maintenance services. In addition,
the Company expects to derive an increasing portion of its net sales from
Latin American and other international markets, where demand for the Company's
products is growing at a faster rate than in the United States.
19
<PAGE>
The battery industry and the Company have in the past been able to increase
product prices in response to significant increases in the cost of lead.
However, in periods of rapid lead cost increases, selling price increases are
not generally able to keep pace with lead costs, resulting in a period of
reduced gross profit margins. During periods of rapidly declining lead prices,
product selling prices have not fallen as rapidly, resulting in a period of
increased gross profit margins.
The Company expects to continue to develop its service business in
connection with, among other things, growth in demand for batteries and
installation services in the telecommunications industry. These activities
require that the Company estimate certain direct and indirect costs of
delivering services in advance of the date on which such service is performed.
The Company's foreign net sales and certain expenses are transacted in
foreign currencies. The Company reviews from time to time its foreign currency
exposure and evaluates whether it should enter into hedging transactions. The
Company does not presently hedge its foreign currency risks, as it does not
believe it has a material exposure.
Cost of Goods Sold
All direct and indirect manufacturing and distribution costs are included
in cost of goods sold. The principal costs include lead, plastics, steel,
separators, direct and indirect labor and benefits, freight costs, energy
costs and depreciation. Beginning in fiscal 1996, the Company initiated a
comprehensive cost reduction program. Among other things, this program has
focused on improving manufacturing efficiency by automating and reengineering
its operations and processes and redesigning products to reduce material costs
and has resulted in improvement in the Company's gross margin. Continuation of
this program should further reduce costs.
Lead represents a significant component of the Company's total cost of
goods sold. Lead is a commodity whose prices fluctuate from time to time. To
the extent these prices fluctuate, the Company's operating results will be
affected. The Company is not currently party to a long-term lead supply
contract, but it does routinely engage in forward contract purchases from its
major suppliers to secure in advance a portion, generally not exceeding 50%,
of its expected lead requirements for periods of up to one year. This policy
is authorized by the Company's Board of Directors and implemented by
authorized officers. Under these contracts, the Company was committed at March
31, 1998 to purchase 23.7 million pounds of lead for a total of $5.7 million.
The Company purchases other commodities, including plastics, steel,
separators, and energy used in its manufacturing activities, in the open
market from various sources and their availability and price are subject to
normal market conditions. Some of the Company's manufacturing plants are
located near customers; nevertheless, because of the lead content and
consequent weight of its battery products and the large geographic territory
in which it operates, the Company incurs significant freight costs in shipping
its products.
Operating Expenses
The Company's operating expenses include sales, general and administrative,
and engineering costs. These costs include salary and benefits, advertising,
promotional materials and certain promotion expenses, bad debt expenses and
professional fees, many of which are not directly affected by sales volumes.
Operating expenses also include certain non-capitalized start-up costs
associated with the Company's expansion into international markets and its
research and development programs, both of which the Company expects to
increase in future periods as the Company continues to expand its products and
geographic markets. The Company also expects to incur additional general and
administrative expenses as a result of becoming a publicly-held company.
Income Taxes
The Company has experienced a significant decrease in its effective tax
rate from approximately 54% in fiscal 1996, to 45% in fiscal 1997 and 41% in
fiscal 1998. This reduction since 1996 was primarily attributable to a
reduction in the effective tax rate for non-deductible amortization expenses
on increasing levels of pre-
20
<PAGE>
tax income and a reduction in the effective tax rate for state income taxes.
The Company expects its effective tax rate in fiscal 1999 to be approximately
40%.
Amortization Expense
The Company's amortization expense is primarily attributable to
identifiable intangible assets associated with acquisitions made by the
Company, and is amortized using the straight-line method over the estimated
useful lives of the related which range from 7 to 25 years.
RESULTS OF OPERATIONS
The following table sets forth items of income and expense reflected in the
Company's consolidated statements of income as percentages of its net sales
for the periods indicated (minor differences are due to roundings):
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Net sales............................................ 100.0% 100.0% 100.0%
Cost of goods sold................................... 82.7 79.8 77.8
------ ------ ------
Gross profit......................................... 17.3 20.2 22.2
Operating expenses................................... 12.3 13.7 14.2
Amortization expense................................. 1.0 1.0 .9
------ ------ ------
Operating earnings................................... 4.0 5.5 7.0
Interest expense..................................... 3.2 2.7 2.4
Loss on investment................................... 0.0 0.0 1.0
Other (earnings) expense, net........................ 0.0 0.1 0.0
------ ------ ------
Earnings before taxes................................ 0.8 2.6 3.6
Income taxes......................................... 0.4 1.2 1.5
------ ------ ------
Net earnings......................................... 0.4% 1.4% 2.1%
====== ====== ======
</TABLE>
The following table sets forth the percentage increase over the prior
comparable period of selected items of income and expense reflected in the
Company's consolidated statements of income.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1996 1997 1998
------- ------- ------
<S> <C> <C> <C>
Net sales............................................. 8.8% 0.0% 10.8%
Gross profit.......................................... 7.0% 16.9% 21.8%
Operating earnings.................................... 22.9% 37.0% 42.6%
Earnings before taxes................................. 118.7% 234.6% 51.3%
Net earnings.......................................... 107.6% 299.6% 62.6%
</TABLE>
FISCAL 1998 VERSUS FISCAL 1997
Net Sales. Net sales for fiscal 1998 were $396.3 million compared to $357.5
million for fiscal 1997, an increase of 10.8%. Virtually all of this growth
resulted from increased unit volumes in the Company's stationary and motive
power lines. Net sales for stationary and other products and services, and
motive power products and services, represented approximately 57% and 43% of
consolidated net sales, respectively.
Gross Profit. Gross profit for fiscal 1998 was $87.9 million compared to
$72.1 million for fiscal 1997, an increase of 21.8%. The Company's gross
profit margin increased 2.0 percentage points to 22.2% in fiscal
21
<PAGE>
1998 compared to 20.2% in fiscal 1997. This substantial increase in gross
profit margin was attributable, in significant part, to continued reductions
in material and manufacturing costs associated with the Company's ongoing cost
reduction initiatives.
Operating Expenses. Operating expenses for fiscal 1998 were $56.4 million
compared to $49.0 million for fiscal 1997, an increase of 15.1%. As a
percentage of net sales, operating expenses increased slightly to 14.2% in
fiscal 1998 compared to 13.7% in fiscal 1997. This increase resulted
principally from increased selling costs from expanding sales, markets,
territories and locations, and continued start-up costs related to the
Company's new joint venture in Argentina.
Amortization Expense. The Company's amortization expense was $3.6 million
in fiscal 1998 and in fiscal 1997. Amortization expense was mainly
attributable to identifiable intangible assets associated with acquisitions
made by the Company.
Operating Earnings. Operating earnings for fiscal 1998 were $27.9 million
compared to $19.5 million for fiscal 1997, an increase of 42.6%. This increase
was primarily attributable to overall unit volume growth, coupled with the
improved gross profit margin attributable to reduced material and
manufacturing costs.
Interest Expense. Interest expense for fiscal 1998 was $9.7 million, which
increased slightly from the same period in fiscal 1997. During this period, a
modest increase in interest rates was offset by slightly lower borrowings.
Loss on Investment. During fiscal 1998, the Company recognized $4.0 million
in losses associated with its investment in Tucker Telecommunications Company
("Tucker"). Such losses consisted of the full write-off of the Company's
investment in Tucker plus the cost of settling certain guarantee obligations
of Tucker related to the closing of its business.
Net Earnings. Net earnings were $8.3 million for fiscal 1998 compared to
$5.1 million for fiscal 1997, an increase of $3.2 million, or 62.6%. This
increase was primarily attributable to increased unit volume and reductions in
both material and manufacturing costs associated with the Company's cost
reduction initiatives, offset by the $4.0 million loss in investment.
FISCAL 1997 VERSUS FISCAL 1996
Net Sales. Net sales for both fiscal 1997 and fiscal 1996 were $357.5
million. When adjusting fiscal 1996 net sales by $14.0 million for the
discontinued EV product line, fiscal 1997 net sales increased 4.1%. Net sales
for stationary and other products and services, and motive power products and
services, represented approximately 57% and 43% of consolidated net sales
respectively. In addition, in late fiscal 1996, the Company expanded its
business in the stationary integrated sales and service area for its
telecommunications customers, through the acquisition of certain assets of
Advanced Power Systems, which accounted for increased net sales of
approximately $3.6 million in fiscal 1997.
Gross Profit. Gross profit for fiscal 1997 was $72.1 million compared to
$61.7 million in fiscal 1996, an increase of 16.9%. The gross profit margin
increased 2.9 percentage points in fiscal 1997 to 20.2%, compared to 17.3% in
fiscal 1996. This substantial increase in gross profit margin was primarily
attributable to a reduction in material and manufacturing costs associated
with the Company's cost reduction initiatives. Additionally, the
discontinuance of the EV product line at the end of fiscal 1996 improved the
fiscal 1997 gross profit margin by approximately 0.8%.
Operating Expenses. Operating expenses for fiscal 1997 were $49.0 million
compared to $44.0 million for fiscal 1996, an increase of 11.4%. As a
percentage of net sales, operating expenses increased to 13.7% in fiscal 1997
from 12.3% in fiscal 1996. This increase resulted principally from increased
engineering costs for new products, start-up costs related to a new joint
venture in Argentina and the discontinuance of the EV product line in 1996
which had negligible operating expenses.
22
<PAGE>
Amortization Expense. Amortization expense was $3.6 million in fiscal 1997
and $3.5 million in fiscal 1996. Amortization expense was mainly attributable
to identifiable intangible assets related to acquisitions made by the Company.
Operating Earnings. Operating earnings for fiscal 1997 were $19.5 million
compared to $14.3 million for fiscal 1996, an increase of 37.0%. This increase
was primarily attributable to the improved gross profit margin, offset by
increased operating expenses.
Interest Expense. Interest expense for fiscal 1997 was $9.6 million
compared to $11.6 million in fiscal 1996. This decrease resulted from a
decrease in the Company's outstanding indebtedness in fiscal 1997, primarily
as a result of improved cash flow and earnings and a modest reduction in
interest rates.
Net Earnings. Net earnings for fiscal 1997 were $5.1 million compared to
$1.3 million for fiscal 1996, an increase of approximately 300%. This
significant increase was primarily attributable to reductions in both material
and manufacturing costs associated with the Company's cost reduction
initiatives, improved earnings connected with the discontinuance of the EV
product line and reductions in interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses cash from operations and from financing activities to fund
working capital needs, capital expenditures and to make payments on
outstanding indebtedness.
The Company has various credit facilities available to assist it in meeting
its liquidity requirements. These consist of term loans, revolving lines of
credit, capital equipment lease obligations and a structured, asset-backed
accounts receivable financing facility. The outstanding balance under the term
loans and capital equipment lease obligations was $92.2 million (which
includes the current portion of long-term debt and capital equipment lease
obligations of $14.5 million) at March 31, 1998. At March 31, 1998,
availability under the Company's various revolving lines of credit totalled
$75.0 million, of which $13.5 million was outstanding. Indebtedness under the
revolving lines of credit, and certain of the term debt facilities, in an
aggregate outstanding principal amount of $43.5 million bear interest at
floating rates. Indebtedness under certain of the long-term debt facilities in
an aggregate outstanding principle amount of $62.2 million bear interest at
fixed annual rates ranging from 3.0% to 7.9%. The weighted average maturity of
the Company's long-term debt was approximately two years at March 31, 1998.
The average annual interest rate for all of the Company's credit facilities
was approximately 6.4% for fiscal 1998. As of March 31, 1998, $39.0 million of
outstanding indebtedness of the Company was guaranteed by Yuasa Japan. The
Company anticipates that, subsequent to the Offering, none of the Company's
indebtedness will be guaranteed by Yuasa Japan.
The Company's financing agreements with certain of its lenders contain
various covenants which, absent prepayment in full of the indebtedness or the
receipt of waivers, would limit the Company's ability to conduct certain
specified business transactions, including incurring debt, extending credit,
mergers, consolidations or similar transactions, buying or selling assets out
of the ordinary course of business, engaging in sale and leaseback
transactions and certain other actions. The Company believes it is presently
in full compliance with all such covenants. The Company intends to repay
certain of the indebtedness to which some of the foregoing covenants apply
using the net proceeds of the Offering. The Company sells accounts receivable,
on a continuous basis, to an asset-backed structured finance conduit. The
maximum amount available under this facility was $40.0 million at March 31,
1998.
Net cash provided by operating activities for fiscal 1998 was $35.7 million
compared to $27.5 million for fiscal 1997. This $8.2 million increase was
primarily attributable to increased net earnings of $3.2 million and changes
in working capital of $3.3 million.
Net cash used in investing activities was $19.0 million in fiscal 1998 and
was used principally to add property, plant and equipment, primarily for
expansion of manufacturing capacity and cost reduction initiatives,
23
<PAGE>
as well as normal replacements. Net cash used in investing activity for fiscal
1997 was $14.3 million, which included $11.1 million for property, plant and
equipment additions related primarily to capacity expansion, cost reduction
and replacement activities and $3.2 million related to the acquisition of
certain assets in the United States and a joint venture in Argentina.
Net cash used in financing activities was $14.4 million for fiscal 1998,
which was primarily attributable to reductions in short-term borrowings by
$13.8 million. Net cash used in financing activities for fiscal 1997 was $11.9
million as total debt was reduced by $10.7 million and a $1.2 million dividend
was paid.
Capital expenditures, including capital lease obligations, were $19.0
million for fiscal 1998. Future capital expenditures are expected to be
focused on increasing manufacturing capacity when required to support
increased demand for the Company's products, cost reduction projects, routine
replacements, and quality and environmental projects. Capital expenditures for
fiscal 1999 are estimated to be approximately $20 million.
The Company uses its short term credit facilities, including its revolving
lines of credit to fund its working capital requirements and to finance
capital additions on an interim basis until replaced with longer term
financing.
In March 1998, the Company declared a cash dividend of $2.3 million to its
current stockholders, Yuasa Japan and Exide, which is expected to be paid in
May 1998. The dividend will be paid from fiscal 1998 earnings and is reflected
in the Company's 1998 financial statements. The Company has also committed to
advance up to $5.0 million to Yuasa Japan under a revolving note agreement
which expires on March 30, 1999. Net proceeds of the Offering will not be used
either to pay such cash dividend or to advance funds to Yuasa Japan under the
revolving note agreement.
The Company intends to use all of the estimated net proceeds from the
Offering to repay the Company's indebtedness. See "Use of Proceeds."
The Company continues to have significant liquidity requirements. In
addition to financing its working capital needs, the Company requires cash to
fund debt service and capital expenditures. The Company believes that existing
cash balances, cash flow from operating activities, and borrowings available
under its credit facilities will be sufficient to fund working capital needs,
capital expenditures and debt service requirements of the Company through
fiscal 1999.
The Company has historically relied on indebtedness to meet certain of its
liquidity requirements and can be expected to do so in the future in light of
the growth contemplated by its business strategy.
RAW MATERIALS
Lead, plastics, steel, copper, separators and sulfuric acid are among the
major raw materials used in the manufacturing of the Company's products and,
accordingly, represent a significant portion of the Company's materials costs.
Total lead purchases accounted for approximately 30% of all the Company's raw
material purchases in all fiscal periods presented. As of March 31, 1998, the
Company was committed under forward supply contracts to purchase 23.7 million
pounds of lead for a total purchase price of $5.7 million.
INFLATION
There was no significant impact on the Company's operations as a result of
inflation during the three years ended March 31, 1998.
INFORMATION SYSTEMS
The Company has analyzed its information systems and software and has
undertaken and expects to continue to undertake capital projects with respect
to these systems, including upgrades or installations of personal computer and
networking systems and the Company's accounting, management information and
24
<PAGE>
communications systems. The Company is communicating with customers,
suppliers, financial institutions and others with which it does business
regarding their Year 2000 compliance. Management does not anticipate that the
Company will incur significant operating expenses or be required to invest
heavily in additional computer systems improvements to be Year 2000 compliant,
and does not anticipate that business operations will be disrupted or that its
customers will experience any interruption of service as a result of the
millennium change. The Company does not believe that the "Year 2000" issue
will have a material adverse impact on its operations.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly results are subject to fluctuation. See "Risk
Factors--Cyclical Industry; Variations in Quarterly Results." Historically,
the Company has experienced increased net sales during the fourth quarter of
the year reflecting the customary seasonal buying patterns of its customers.
As a result of this, the Company's fourth quarter net sales, gross profit,
operating earnings and net earnings typically have been the highest of any
quarter.
The following table sets forth the Company's summary unaudited historical
results of operations on a quarterly basis:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ---------------------- -----------
(dollars in thousands except per share data)
<S> <C> <C> <C> <C>
FISCAL 1998
Net sales................... $94,677 $ 91,795 $ 104,428 $ 105,417
Gross profit................ $20,157 $ 22,205 $ 22,841 $ 22,676
Net earnings................ $ 1,662 $ 2,992 $ 642 $ 3,012
Net earnings per share
(basic and diluted)........ $ 0.21 $ 0.37 $ 0.08 $ 0.37
FISCAL 1997
Net sales................... $85,370 $ 85,821 $ 85,239 $ 101,096
Gross profit................ $15,574 $ 16,986 $ 17,121 $ 22,466
Net earnings................ $ 66 $ 899 $ 810 $ 3,336
Net earnings per share
(basic and diluted)........ $ 0.01 $ 0.11 $ 0.10 $ 0.41
FISCAL 1996
Net sales................... $90,175 $ 82,206 $ 87,201 $ 97,935
Gross profit................ $14,891 $ 14,890 $ 14,536 $ 17,405
Net earnings (loss)......... $ (126) $ 430 $ (224) $ 1,199
Net earnings (loss) per
share (basic and diluted).. $ (0.01) $ 0.05 $ (0.03) $ 0.15
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of. This standard specifies when assets should be reviewed for
impairment, how to determine if an asset is impaired, how to measure an
impairment loss, and what disclosures are necessary in the financial
statements. The Company adopted SFAS 121 on April 1, 1996 and recorded a
pretax charge of $0.4 million during fiscal 1997.
In June 1996, the FASB issued Statement of Financial Accounting Standards
No. 125, Accounting for transfers and Servicing of Financial Assets and
Extinguishment of Liabilities, which provides accounting and reporting
standards for sales, securitizations, and servicing of receivables and other
financial assets, secured borrowing and collateral transactions, and the
extinguishment of liabilities. The Company has modified its asset-backed
accounts receivable financing agreements to meet the new requirements to
enable it to continue
25
<PAGE>
recognizing transfers of certain receivables to special-purpose entities as
sales. The adoption of this standard had no impact on the Company.
In 1997, the FASB issued Statement of Financial Accounting Standards No.
128, Earnings per Share. This standard replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
All earnings per share amounts have been presented to conform to this
standard.
In June 1997, the FASB issued Statement of Financial Accounting Standards
130 ("SFAS 130"), Reporting Comprehensive Income, which establishes rules for
reporting and displaying all changes in shareholders' equity exclusive of
transactions with owners, such as capital investments. Examples of
comprehensive income include unrealized gains or losses on available-for-sale
securities, translation adjustments on investments in foreign subsidiaries,
and certain changes in minimum pension liabilities. The statement is effective
for fiscal years beginning after December 15, 1997. Adoption of SFAS 130 will
not impact the Company's financial condition or results of operations.
In June 1997, the FASB issued Statement of Financial Accounting Standards
131 ("SFAS 131"), Disclosures about Segments of an Enterprise and Related
Information, which is effective for years beginning after December 15, 1997.
SFAS 131 establishes standards for the way that public businesses report
information about operating segments in annual financial statements and
requires that those businesses report selected information about operating
segments in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The Company will adopt the new requirements for the fiscal year
ending March 31, 1999, which will require retroactive application. The Company
has not completed its review of this standard and has not determined the
impact its adoption will have on the Company's financial statements.
In March 1998, the AICPA issued SOP 98-1, Accounting For the Costs of
Computer Software Developed For or Obtained For Internal-Use. SOP 98-1 will
become effective for the Company on April 1, 1999. This SOP will require the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal-use. The Company
currently capitalizes certain external costs and expenses all other costs as
incurred. The Company believes the SOP will not materially effect the
Company's earnings or financial position.
26
<PAGE>
BUSINESS
GENERAL
The Company believes that it is the leading manufacturer and supplier of
industrial batteries and small engine starting batteries in the Americas. The
Company markets a full line of stationary and other batteries, as well as
motive power batteries and related products and services. Stationary batteries
are used primarily to supply standby operating power for (i)
telecommunications applications, such as wireless and wireline systems, (ii)
UPS applications for electronic, security and computer systems, and (iii)
switchgear and electrical control systems used in electric utilities and
energy pipelines. Stationary and other batteries include small engine starting
batteries used to start motorcycles, all-terrain vehicles, snowmobiles and
personal watercraft. Motive power batteries are used primarily to power
industrial forklift trucks and other materials handling equipment. Related
products include chargers, electronic power equipment and a wide variety of
battery accessories. The Company sells its products and services through a
network of distributors, independent representatives and an internal sales
force, and also maintains service centers throughout the United States.
For fiscal 1994 through fiscal 1998 the Company's net sales grew from
$296.4 million to $396.3 million, while net earnings decreased from $6.3
million in fiscal 1994 to $0.6 million in fiscal 1995. The reduction in fiscal
1995 net earnings was due to a sudden increase in the cost of raw materials
and manufacturing inefficiencies at the Company. Beginning in fiscal 1996, the
Company initiated a strategic program primarily designed to improve
manufacturing efficiencies and reduce product costs. This program included,
among other items, redesigning certain of the Company's products to reduce
material costs and automating and reengineering its manufacturing operations.
The Company's gross profit margin increased from 17.6% to 22.2% between fiscal
1995 and fiscal 1998 and net earnings increased from $0.6 million in fiscal
1995 to $8.3 million in fiscal 1998 due, in significant part, to the success
of this program.
The Company was formed in 1998 to hold the stock of YEI. YEI was formed in
1965 to purchase and resell industrial batteries manufactured by Yuasa Japan.
In June 1991, YEI acquired the stationary and motive power business and
related assets of Exide's U.S. industrial battery operations. In 1992, Yuasa
Japan caused an existing U.S. battery manufacturing joint venture between YEI
and Exide to merge with YEI. Immediately after completion of the Offering,
Yuasa Japan will own all of the 7,000,000 issued and outstanding shares of
Class B Common Stock, representing approximately 61% of all of the Company's
outstanding Common Stock and approximately 76% of the combined voting power of
the outstanding shares of Common Stock (approximately 73% of the combined
voting power if the Underwriters' over-allotment option is exercised in full).
See "Risk Factors--Relationship with Principal Stockholder" and "Description
of Capital Stock." The Company benefits from its relationship with Yuasa Japan
through its right to use the "Yuasa" brand name, and from its right to receive
technical assistance from, and its right of access to battery technology
developed by, Yuasa Japan. Additionally, the Company sells batteries to Yuasa
Japan and its affiliates for sale in the Pacific Rim and purchases batteries
from Yuasa Japan and its affiliates for sale in the Americas. See "Related
Party Transactions."
INDUSTRY
The Company believes that it is well-positioned to benefit from expected
continued growth in the markets for its products, especially the market for
its stationary and motive power industrial products. According to industry
sources, U.S. sales of large (greater than 25 amperes/hour) industrial
stationary and motive power batteries were approximately $670 million for
fiscal 1997 and are projected to be approximately $760 million for fiscal
1998. Stationary batteries represent approximately 49% of the total U.S.
industrial battery market in fiscal 1998. The stationary battery market has
grown at a compounded annual growth rate of approximately 13.7% per year over
the past five years, fueled principally by growth in the U.S.
telecommunications industry. The U.S. market for telecommunications services
has grown significantly during this period, and is expected to continue to
grow as cellular, PCS, paging, specialized mobile radio and other new and
emerging technologies
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<PAGE>
become increasingly accessible and affordable to a growing number of
customers. In addition, use of the World Wide Web and other Internet services,
electronic funds transfers, e-mail and other electronic data interchange, fax
transmissions, television cable and other forms of electronic data
transmission has grown and appears likely to continue to grow significantly.
This growth has required, and the Company believes will continue to require,
substantial investment by service providers in infrastructure equipment and
installation, including batteries and related products and services of the
type offered by the Company. Motive power batteries represent approximately
51% of the total U.S. industrial battery market in fiscal 1998. The motive
power battery market has grown at a compounded annual growth rate of
approximately 9.6% per year over the past five years, fueled principally by
increased demand for batteries in the industrial forklift truck market. The
motive power battery market is expected to grow at a lower rate for the next
several years.
OPERATING STRENGTHS
The Company has been able to achieve profitable growth by capitalizing on
the following operating strengths:
Strong Market Positions. The Company believes it holds the leading market
position in both the motive power and small engine starting battery markets
and is among the three largest suppliers of stationary batteries in the
Americas. The Company believes that its strong market positions result, in
large part, from its extensive direct sales force and national network of
independent distributors, representatives and service centers.
Established Brand Names. The Company believes that its brand names are
among the most highly recognized in the markets it serves. The Company sells
its stationary and related products principally under the "Yuasa" and "Exide"
brand names, motive power products principally under the "Exide" and "General"
brand names, and small engine starting batteries under the "Yuasa" brand name,
as well as under certain private labels. The Company benefits from having the
right to use the "Yuasa" and "Exide" brand names which hold a reputation for
high quality.
Reputation for Quality, Service and Innovation. The Company believes that
its reputation for product quality, reliability and service enhances its
competitiveness. The Company also competes on its ability to partner with its
customers to engineer innovative power solutions.
Manufacturing Efficiency. Since it began its strategic initiative to
improve manufacturing efficiency in fiscal 1996, the Company has spent over
$45.0 million, among other things, to reengineer and automate its
manufacturing operations and to increase plant capacities. As a result, the
Company believes its manufacturing operations are among the most modern and
efficient in the industry and will provide sufficient capacity to meet
expected demand for the Company's products over the next three years without
substantial additional investment.
Broad Range of Products. The Company believes that it offers the broadest
product capability in the industry, including batteries addressing a wide
range of power requirements (from 1 ampere/hour to 4,000 amperes/hour) and
applications. This broad range of products allows the Company to customize its
products to meet varying customer requirements.
Relationship with Yuasa Japan. The Company benefits from its relationship
with Yuasa Japan through its ability to use the "Yuasa" brand name, and from
technical assistance and access to battery technology
developed by Yuasa Japan. Additionally, the Company sells batteries to Yuasa
Japan and its affiliates for resale in the Pacific Rim, and purchases
batteries from Yuasa Japan and its affiliates for resale in the Americas.
Yuasa Japan is one of the leading manufacturers of lead acid batteries in the
world.
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<PAGE>
BUSINESS STRATEGY
The Company's primary objectives are to increase its net earnings and
return on shareholders' equity and to capitalize on its operating strengths to
grow faster than the markets it serves by implementing the following
strategies:
Stationary Products: Continue to Focus on High Growth Telecommunications
Markets. The Company believes that the telecommunications markets in the
United States and the rest of the Americas offer high growth potential for
sales of its stationary products. The Company intends to take advantage of its
leading position in the stationary battery market, as well as its other
operating strengths to increase its share of these growing and profitable
markets.
The Company recently strengthened its stationary business by adding new
members to its management team with broad experience in both the industrial
battery and telecommunications markets and extensive business relationships
with existing and potential purchasers of the Company's stationary products.
The Company intends to focus this team's efforts on increasing the Company's
sales of its stationary products to the telecommunications markets and other
markets which may be identified as offering rapid growth potential.
The Company also intends to focus its engineering and manufacturing
resources on products which have applications in the telecommunications
markets and other markets which may be identified as offering rapid growth
potential. The Company intends to continue its strategy of developing
customized engineering and other product solutions for OEMs and end users of
its products through strategic partnerships with them and by taking advantage
of technical assistance available from Yuasa Japan. Further, the Company
intends to use its increased manufacturing capacity and new systems and
programs to significantly improve delivery to its customers with shorter lead
times.
Motive Power and Small Engine Starting Products: Maintain Leadership
Position. The Company intends to maintain its leadership position in the
motive power market by (i) continuing to provide a dual brand approach,
including a premium, higher performance product, marketed under the "Exide"
brand, and a lower priced product marketed under the "General" brand, (ii)
leveraging its nationwide sales and service network, and (iii) improving
delivery to its customers through shorter lead times. The Company intends to
maintain its leadership position in the small engine starting battery market
by developing new products for emerging applications, such as cordless
electric mowers and trimmers, and by developing programs to maintain and
enhance brand image and customer loyalty.
Continued Cost Reduction Initiatives. The Company intends to continue its
cost reduction programs initiated in fiscal 1996 by continuing to reengineer
and automate its manufacturing processes and facilities and by redesigning its
products and business processes to further increase efficiency.
Continued Expansion Into New Geographic Markets. The Company believes that
Latin America presents significant growth potential for industrial battery
sales, particularly in the telecommunications markets. The Company established
a sales and distribution business in Mexico in fiscal 1994 and entered into a
joint venture in Argentina in fiscal 1997 to market and sell industrial
batteries. The Company intends to expand into other Latin American countries
through acquisitions, joint ventures and start-up ventures.
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<PAGE>
PRODUCTS
General
The Company's lead acid battery products span a broad range of sizes,
configurations and electrical capacities (from 1 ampere/hour to 4,000
amperes/hour) and are generally of either the flooded or the valve regulated
("VRLA") type. Of these two types, VRLA batteries represent newer technology.
This broad range of products allows the Company to more readily meet customer
specifications.
Stationary and Other Products
The Company's stationary products include a variety of lead-acid batteries
(both flooded and VRLA) and power supply cabinets, enclosures and other
equipment and services. The Company's stationary products are used to provide
"last resort" backup or standby power for facilities or electrical equipment
in the event of a loss of power from the primary power source, generally
external alternating current ("AC"). Primary applications include (i)
telecommunications, such as central telephone exchanges, microwave relay
stations, and many other wireless and wireline systems; (ii) UPS, principally
for computers and computer-controlled equipment, hospital life support
equipment, corporate and residential alarm systems, point of sale equipment,
emergency lighting, closed circuit television systems, computers (mainframe,
desktop and portable), medical equipment, test equipment and various types of
instrumentation and (iii) standby power for switchgear and other
instrumentation control systems and equipment for electric utilities, pipeline
systems and desalinization plants, and to help cover peak loads experienced by
electric utilities.
Because of the significantly different needs of the telecommunications,
UPS, switchgear and other stationary battery markets, the Company offers a
distinct line of batteries for each of those markets, each comprising a
variety of products. These batteries range from 1 to 4,000 amperes/hour in
electrical capacity. UPS normally provide up to fifteen minutes of AC power in
the event of loss of power from the primary external power source, typically
to provide orderly shut-down of computer equipment to protect against loss of
data, or to ensure continued operation of life support or other equipment
during power outages on a short-term basis until emergency generators are able
to start operating at sufficient capacity to power the equipment.
For typical telecommunications applications, the Company's batteries are
designed to provide high reliability and extended operation (up to eight hours
before recharging). For typical switchgear and electrical control systems in
electric utilities, the Company's batteries are designed to provide high
reliability over an eight-hour period to back up the electrical
instrumentation and control systems, while also providing a very high
discharge rate for short periods at several intervals to operate the
switchgear. The Company's small capacity VRLA standby and UPS batteries and
related products are sold under the "Yuasa" brand name and the Company's large
capacity standby batteries and related products are sold principally under the
"Exide" brand name.
The Company's power system products, principally chargers, power control
and distribution equipment, perform a wide variety of functions. The Company's
chargers and power rectifiers convert or rectify external AC power into direct
current ("DC") power at the appropriate level and quality of voltage and apply
that DC power to charge the battery and, in some cases (such as
telecommunications and UPS), to operate the customer's equipment. For
applications that require different power levels, the Company's power control
and distribution equipment can distribute DC power at appropriate levels to
each application.
The Company also manufactures and purchases for resale a wide variety of
battery trays, component racks, cabinets and other accessories that are used
in conjunction with its motive power and stationary battery and power systems
products and a complete line of cabinets for office installation of lead-acid
batteries. Some of the Company's racks and cabinets are designed to meet very
demanding customer specifications, including racks designed to withstand
seismic shocks and weatherproof cabinets to meet Regional Bell Operating
Company specifications.
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<PAGE>
The Company's Integrated Systems and Service ("IS&S") unit provides turnkey
engineering, design, furnishing, installation, service, maintenance and
management of stationary products and DC power systems, chiefly to the
telecommunications industry. Its services include (i) design of integrated
wireless and wireline telecommunications base stations, (ii) manufacture of
some or all of associated DC power supplies and electronic equipment; (iii)
manufacture and supply of backup batteries and enclosures or other
accessories; and (iv) on site installation and ongoing maintenance and
management of the complete system. Through the Company's service network, the
Company's IS&S unit offers its Certified Power Program, which is an extended
service contract, allowing the customer to outsource DC power management
functions.
The Company's small engine starting batteries are of both flooded and VRLA
types and are used to start small engines, such as those found in motorcycles,
all-terrain vehicles, snowmobiles, and personal watercraft. The products are
sold under the "Yuasa" brand name and under certain private labels.
Motive Power Products
The Company's motive power products include complete systems and individual
components, mainly to power, monitor, charge and test the batteries used in
industrial forklift trucks and other materials handling equipment. They are
used in a variety of other applications, such as starting diesel locomotive
engines, and railroad and grade crossing warning lights. Batteries for the
motive power market are primarily flooded, although VRLA batteries are gaining
increasing acceptance in this market. Motive power batteries typically are
designed to provide relatively high discharge rates for a six- to eight-hour
operating period. They also require durable casings and content to withstand
the rigors of operation within moving vehicles that subject them to high
levels of vibration and shock. The life expectancy of motive power batteries
is normally five years.
The Company's motive power chargers rectify AC to DC to recharge motive
power batteries during the intervals between the operating periods of the
vehicles which the batteries power. The Company's other principal motive power
accessories include electronic controls to operate power rectifiers from
remote locations, a system for periodically adding water to batteries, which
can also be fitted with an automatic activator energized by the power
rectifier, and a variety of trays, connectors and other accessories. Motive
power products are sold primarily under the "Exide" and "General" brand names.
CUSTOMERS AND END USERS
Stationary and Other Products
Telecommunications Industry. End users are typically local, and long
distance wireline and wireless telecommunications service providers, as well
as OEMs of telecommunications equipment. See "Risk Factors--Telecommunications
Industry and Growth of the Company."
Computer Industry. End users of UPS are primarily businesses, and some
consumers, who have significant computer installations, or who otherwise
desire additional protection against data losses, as well as health care
providers having life-support or other critical equipment. The Company's
customers include OEMs of UPS and distributors of aftermarket replacement
equipment.
Security/Electronics Users. End users are typically businesses and
consumers who purchase or own alarm systems. Significant customers include
OEMs and their suppliers, distributors and contractors.
Electric Utilities, etc. End users of the Company's large-capacity standby
batteries include industrial installations such as electric utilities,
petroleum pipelines, and desalinization plants. Customers include utilities,
the petroleum industry, and government and military entities.
Other Users. The Company sells its small engine batteries to substantially
all OEMs in North America, motorcycle and automotive warehouse distributors,
and after-market replacement retailers. Other battery manufacturers and
distributors also purchase significant quantities of the Company's products to
resell under their own brand names to large retail customers.
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<PAGE>
Motive Power Products
The customer base of this business unit is extremely diverse. It includes
dealers of industrial forklift trucks and other materials handling equipment
and, to a lesser extent, OEMs and end users of such equipment. End users
include manufacturers, distributors, warehouses, and retailers.
DISTRIBUTION AND SALES
Distribution, sales and service of products vary with the product or
service type, and the brand under which they are sold. Motive power products
marketed under the "General" brand are sold and serviced primarily through a
network of independent representatives. Motive power products bearing the
"Exide" brand are sold and serviced primarily through the Company's in-house
sales force. Large capacity stationary products bearing the "Exide" brand are
sold and serviced primarily through a combination of in-house sales force and
manufacturing representatives. The Company's small capacity stationary
products, which generally bear the "Yuasa" brand, are sold and serviced
primarily through independent representatives. IS&S sells integrated services
through independent representatives and in-house sales force, whereas the
installation and service work associated with IS&S is conducted primarily
through in-house technicians. Small engine starting batteries are sold
primarily through an in-house sales force.
The Company's in-house sales and marketing forces total approximately 380
employees, and the Company has approximately 107 independent representatives
for its products and services. Regardless of the business unit or product
line, the Company's independent representatives generally operate under a
written contract covering, among other things, an exclusive territory and
providing for compensation on a commission basis, with incentives provided for
higher margin sales. The Company's representatives generally do not market the
products of any of the Company's competitors, although many representatives
regularly service competitors' products, while offering the Company's products
as replacements.
WARRANTIES
The Company generally offers a limited warranty on its industrial battery
products and selected power supply equipment. The Company's small engine
starting batteries generally carry no warranty. These warranties are generally
limited to replacement of defective material; however, such limitations could
be contested in the event of a warranty claim. The Company believes that its
warranty reserve is adequate to cover future warranty costs.
INTERNATIONAL AND EXPORT
The Company's international business operations focus primarily on Canada,
Mexico, South America and, through Yuasa Japan affiliates, the Pacific Rim.
These operations consist of a network of subsidiaries and affiliated
companies, an internal sales force, and independent representatives, and are
responsible for the sale of substantially all of the Company's products
outside the U.S. Total international net sales were approximately 12% of
consolidated net sales in fiscal 1998, approximately 40% of which was
attributable to the Company's U.S. operations and approximately 60% of which
was attributable to the Company's foreign operations. Net sales of stationary
products represented approximately 64% of consolidated net sales attributable
to international operations in fiscal 1998 and approximately 56% in fiscal
1997. See "Risk Factors--Risks Associated with International Operations;
Currency Risk."
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MANUFACTURING OPERATIONS
The following chart lists the Company's manufacturing and principal
distribution facilities, their principal functions, the approximate size of
the facility, and whether the Company owns or leases the identified facility:
<TABLE>
<CAPTION>
Square
Location Function Footage Owned/Leased
- -------- ------------------------------------------- ------- ------------
<S> <C> <C> <C>
Hays, KS Small Capacity Stationary Batteries; 360,000 Owned
distribution
Richmond, KY Motive Power and Large Capacity Stationary 357,000 Owned
Batteries; distribution
Sumter, SC Motive Power and Large Capacity Stationary 303,000 Owned
Batteries; distribution
Laureldale, PA Small Engine Starting Batteries; 110,000 Owned
distribution
Cleveland, OH Chargers; distribution 63,000 Owned
Sumter, SC Battery Trays and Racks 46,374 Owned
Fogelsville, PA Distribution 92,000 Leased
Dallas, TX DC Power Equipment (primarily for wireless 45,380 Leased
telecommunications industry)
</TABLE>
All battery plants are certified to ISO 9002 standards; the Cleveland, Ohio
charger plant and its engineering and service groups are certified to ISO
9001. The Company believes that its ISO certification in 1995 made it the
first ISO 9000 registered battery corporation in North America. ISO
certifications are given by the International Organization for Standardization
to businesses that establish (and document their compliance with) quality
assurance programs and procedures. The Company believes that certain of its
customers attach significance to ISO certification, and that some customers
require ISO certification of their vendors as a condition of purchasing from
them. The Company believes that its manufacturing operations and product line
focus at each of its plant facilities allow for flexible manufacturing and the
ability to move large unit volumes efficiently. The Company also benefits from
an experienced workforce.
The Company believes that its manufacturing operations are among the most
modern and efficient in the industry and will provide sufficient capacity to
meet expected demand for the Company's products over the next three years
without substantial additional investment. However, disruption of production
at a plant where a key product line is produced could have a material adverse
effect on the Company.
APPLICATION ENGINEERING AND PRODUCT DEVELOPMENT
General
For fiscal 1998, fiscal 1997 and fiscal 1996, the Company's engineering
expenditures, including research and development activities, were $7.6
million, $6.8 million and $5.5 million, which include the Company's
expenditures for application engineering and product development. At March 31,
1998, the Company employed a manufacturing engineering group comprising 44
engineers, scientists and technicians.
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New Products
Since the early 1980s, technological developments in the battery industry
have been limited principally to the development of VRLA batteries. VRLA
batteries are sealed, generally do not contain caps for adding water, are
designed to require minimal maintenance and, under normal operating
conditions, they need not be installed in separate facilities. Market
acceptance of these batteries has been greatest in the UPS and
telecommunications portion of the standby power market, although they are also
gaining wider acceptance in the motive power battery market.
During the last several years, the Company has focused its research and
development efforts on improving existing products and manufacturing
processes, expanding its product lines and on developing new product lines,
particularly for its telecommunications customers. Examples include:
--a new line of VRLA stationary batteries, primarily for UPS
applications; a new line of batteries designed specifically to meet the
short duration, high energy power requirements of standby systems for
computer installations; and an expanded line of power rectifiers, power
supplies and other components for telecommunications applications.
--a modular battery using tubular positive plates in combination with
gelled electrolyte designed for use in long-duration, high-cycle
telecommunications applications, as well as for renewable energy
storage, switchgear, UPS and peak shaving/load leveling. The gel
additive provides a larger volume of electrolyte than the absorbed
glass mat technology typically used in the telecommunications industry.
In addition, Yuasa Japan has entered into a License and Technology
Agreement, under which Yuasa Japan has agreed to provide the Company with
exclusive access in the Americas to technical assistance, and access to new
and emerging technologies, products and product developments relating to the
Company's core business. See "Business--Intellectual Property--Licenses."
COMPETITION
General
The industrial lead-acid battery market is highly competitive and has
experienced substantial consolidation both among competitors who manufacture
and sell industrial batteries and among customers who purchase industrial
batteries. This factor has resulted in a decrease in the number of customers
for the Company's products and increased competitive pressure on the Company.
The Company's competitors range from development stage companies to major
domestic and international companies. Some of these companies have technical,
marketing, sales, manufacturing, distribution, and other resources
significantly greater than those of the Company. In addition, some of these
companies have significant name recognition, established positions in the
market, and long-standing relationships with OEMs and other customers.
In addition, certain of the Company's competitors own lead smelting
facilities and may therefore, during sustained periods of substantial lead
cost increases, have a competitive advantage over the Company.
The Company's competitors are primarily domestic manufacturers, although
foreign competition could become a factor depending on changes in the relative
levels of domestic prices, duties, tariffs, freight costs, currency exchange
rates and the impact of changing technology. The Company competes primarily on
the basis of product quality, reliability of service and delivery and price.
The Company believes that its products and services are competitively priced
and its reputation for quality products and service help maintain its
competitive position in the industry, although there can be no assurance that
continued consolidation and continuing competition will not have an adverse
effect on the Company in the future.
The Company's ability to compete in markets both inside and outside the
United States in the future could be limited by the activities of Yuasa Japan
and Exide, both of which manufacture and sell many of the same products for
the same applications as the products offered by the Company and both of which
are substantially
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<PAGE>
larger and have greater financial resources than the Company. Exide presently
derives a substantial portion of its revenues from sales of industrial
batteries in Europe and its existing agreement not to compete with the Company
expires in June 2001. Accordingly, Exide could become a competitor of the
Company in the Americas and elsewhere in the future. Although Yuasa Japan has
historically viewed the Company as the operation through which Yuasa Japan
markets its products in the United States and elsewhere in the Americas and
although there are agreements currently in force which would prevent Yuasa
Japan from competing with the Company in the Americas until such time as Yuasa
Japan ceases to own shares of the Company's capital stock possessing at least
20% of the voting power of all classes of capital stock of the Company, if
Yuasa Japan were to divest itself of its interest in the Company below these
levels in the future, it could become a competitor of the Company. See "Risk
Factors--Relationship with Principal Stockholder," "--Competition; Industry
Consolidated Pricing Pressures," and "Related Party Transactions."
Stationary and Other Products
The stationary battery market in the Americas is highly competitive and is
dominated by the Company, C&D Technologies, Inc. ("C&D"), and GNB Technologies
("GNB"). Competition in the stationary products market is based to a great
extent on reputation, product quality and reliability, and price, as well as
the availability of after-sale service.
Motive Power Products
Price is an important competitive factor in the motive power market.
Product offerings, product quality and reliability and service capability also
are important factors. The motive power market in the Americas is dominated by
four manufacturers: the Company, C&D, East Penn Manufacturing Co., and GNB.
The Company believes that it is the leader in the motive power market.
RAW MATERIALS
The principal raw materials used in the manufacture of the Company's
products are lead, plastics, steel, copper, separators and sulfuric acid. The
principal raw material used by the Company is lead. In fiscal 1998, the
Company consumed approximately 151.5 million pounds of lead, which cost
approximately $49.8 million and represented approximately 30% of the Company's
raw material purchases.
The Company buys its lead from a number of leading suppliers. Lead is a
commodity product. It is traded on the world's commodity markets and its
prices fluctuate on a daily basis. Its cost is therefore subject to rapid
fluctuations. To mitigate the adverse effects of these fluctuations, from time
to time the Company makes forward purchases of lead, generally not exceeding
50% of its projected lead requirements for periods generally of up to one year
from its lead suppliers.
Other significant materials required in the Company's production processes
include steel, plastic products, and separators, substantially all of which
are manufactured by third parties. See "Risk Factors--Materials and
Manufacturing Costs."
INTELLECTUAL PROPERTY
General
There are no patents which the Company considers to be material to the
Company's business. Although the Company applies for patents on new inventions
and designs, from time to time, the Company believes that the growth of its
business will depend primarily upon the quality of its products and its
relationships with its customers, rather than the extent of its patent
protection.
The Company owns or possesses licenses and other rights to use a number of
trademarks in conjunction with its business. The Company has registered many
of these trademarks in various styles in the United States
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<PAGE>
Patent and Trademark Office, Canada and other countries. The Company believes
many such rights and licenses are important to its business. Some of the
significant trademarks owned by the Company include: "HUP," "Loadhog,"
"Superhog," "Cobra," and "Dynacell."
Licenses
In connection with the Company's acquisition of Exide's industrial battery
division in 1991, Exide provided perpetual, exclusive, world-wide, royalty-
free, licenses to the Company to use certain trademarks and patents in
connection with the industrial battery business and related products,
excluding golf cart batteries manufactured at the Company's Sumter S.C. plant
and automotive, motorcycle, garden, tractor and marine engine starting
batteries and related products. The licensed trademarks include "GBC," "ESB,"
"Exide," "Willard," "Hybernator," "Ironclad-Exide," "Liberator," "Oasis," and
"Titan," among others. The Company views many of these as of substantial value
in the marketing of its products. The licensed patents include technology
relating to a variety of designs and manufacturing processes. The Company also
licensed certain of such patents back to Exide simultaneously. Although these
licenses are perpetual, they could be revoked by Exide if the Company's
products using the licensed trademarks fail to meet certain quality standards,
or if the Company assigns the trademarks outside the scope of the industrial
battery business, and the Company fails to begin to cure those circumstances
within 90 days of notice from Exide, or if the Company becomes bankrupt.
The Company is a party to the Yuasa License and Technology Agreement,
pursuant to which the Company has the exclusive (subject to limited
exceptions) right to manufacture and sell certain types of products in a
territory comprising all of the Americas, using patents, processes, technical
know-how and other intellectual property of Yuasa Japan, and to manufacture
and sell any derivative products, improvements and developments. In addition,
the Company is granted the right to purchase the technical know-how for
certain new products developed by Yuasa Japan, on such terms as the Company
and Yuasa Japan may agree from time to time. The Yuasa License and Technology
Agreement also gives the Company the exclusive (subject to limited exceptions)
right to use the name and trademark "Yuasa" and certain related trademarks,
logos and trade dress in connection with the sale of such products in the
Americas. In consideration of these rights, the Company pays royalties to
Yuasa Japan. The Yuasa License and Technology Agreement also provides Yuasa
Japan with a cross-license to manufacture and sell batteries and related
products which use technology developed or acquired by the Company after the
date of the agreement (to the extent such grant would not violate third
parties' rights), on financial terms to be negotiated before Yuasa Japan
begins to manufacture or sell them. This right applies in Japan (on an
exclusive basis) and elsewhere outside the Americas (on a non-exclusive
basis), and embodies the practices that the Company and Yuasa Japan have
historically followed. The Yuasa License and Technology Agreement does not
restrict Yuasa Japan's ability to sell any products outside the Americas which
do not use technology belonging to the Company.
The Yuasa License and Technology Agreement could be terminated by Yuasa
Japan on certain defaults by the Company, such as failure to pay royalties or
insolvency of the Company, and will terminate automatically on the third
anniversary of the first date on which Yuasa Japan and its affiliates cease to
own shares of Common Stock of the Company possessing the right to cast at
least 20% of the total votes entitled to be cast by holders of all Common
Stock of all classes. Following any such termination or revocation, however,
the Company's rights thereunder with respect to trademarks would survive for
three years, and with respect to patents and technical know-how would survive
for five years.
The Company's agreements with Yuasa Japan also include the Yuasa
Noncompete, in which Yuasa Japan agrees not to sell (directly or through
certain controlled affiliates) substantially all types of products made and
sold by the Company throughout a territory comprising all of the Americas, for
a period ending on the third anniversary of the first date on which Yuasa
Japan and its affiliates cease to own shares of Common Stock of the Company
possessing the right to cast at least 20% of the total votes entitled to be
cast by holders of all Common Stock of all classes. Unlike the Yuasa License
and Technology Agreement, however, the Yuasa Noncompete Agreement is not, by
its terms, subject to earlier revocation or termination.
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<PAGE>
The termination, revocation or expiration of the Yuasa License and
Technology Agreement or the Yuasa Noncompete, as applicable, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Royalty payments by the Company to Yuasa Japan under the Yuasa License and
Technology Agreement and other arrangements in effect during prior periods
amounted to $1.6 million for fiscal 1998, $1.4 million for fiscal 1997, and
$1.2 million for fiscal 1996. The royalties under the Yuasa License and
Technology Agreement are payable at substantially similar rates. See "Related
Party Transactions--Yuasa Japan."
EMPLOYEES
At March 31, 1998, the Company had approximately 2,707 employees. Of these
employees, approximately 1,970 were employed in manufacturing (with 499 being
covered by collective bargaining agreements), 380 were employed in sales and
marketing (including branch operations), 251 were employed in service and
installation and 106 were employed in engineering, finance and administrative
activities.
The Company's management considers its employee relations to be good.
Historically, there has been no material labor unrest, disruption of
production or strike by the Company's employees. Employees at the Company's
Laureldale, Pennsylvania, Hays, Kansas, Richmond, Kentucky and Dallas, Texas
plants are not represented by unions. Employees at the Company's Cleveland,
Ohio and Sumter, South Carolina plants are represented by labor unions under
collective bargaining agreements which expire in January, 2001 and April,
2001, respectively.
ENVIRONMENTAL REGULATION
The Company is subject to numerous federal, state and local laws and
regulations designed to protect the environment and employee health and
safety, including those pertaining to the storage, handling, treatment,
transportation and disposal of hazardous and toxic materials, practices and
procedures applicable to the construction and operation of the Company's
plants, and standards relating to the discharge of air, soil and water
pollutants. The Company believes that its operations currently are in
substantial compliance with applicable environmental, health and safety laws
and regulations. Such compliance has resulted in ongoing costs for the
Company, and the Company from time to time has had instances of alleged or
actual noncompliance that have resulted in the imposition of fines or
penalties. The Company is currently finalizing a settlement with the State of
South Carolina concerning certain alleged violations under the federal Clean
Air Act at its Sumter plant, pursuant to which the Company expects to pay a
civil penalty of $105,000. The Company does not anticipate having other future
obligations under such settlement agreement. The Company's continued
compliance with environmental, health and safety laws and regulations could
require the Company to incur significant expenses, including fines and
penalties, could restrict the Company's ability to modify or expand its
facilities or continue production, and could require the Company to install
pollution control equipment and make other capital improvements, such as
currently ongoing improvements to wastewater treatment systems at two plants.
Certain of the Company's manufacturing sites have a history of industrial
use. As is typical for such businesses, soil and groundwater contamination has
occurred in the past at some sites and might occur or be discovered at other
sites in the future. The Company from time to time investigates, remediates
and monitors soil and groundwater contamination at certain of these sites. In
addition, the Company has been named as a de minimis "Potentially Responsible
Party" at one National Priority List site pursuant to Superfund. The Company
has received an offer to settle the case from the EPA for $8,000, which the
Company intends to accept. Settlement with the EPA will provide relief from
joint and several liability and late claims for contribution from other
"PRPs." In the future, the Company may be liable pursuant to this law and
other similar laws to contribute to the cleanup of other locations, owned or
operated by other persons, to which the Company or its predecessors have sent
wastes for disposal. Under these laws the owner or operator of contaminated
properties and the generator of wastes sent to a contaminated disposal
facility can be jointly and severally liable for the cleanup of such
properties, regardless of fault.
37
<PAGE>
The Company attempts to reduce its potential liability associated with
environmental, health and safety laws and regulations by, among other
practices, recycling materials such as lead and acid in batteries and
purchasing lead from third parties rather than owning or operating lead
smelting facilities. In addition, substantially all of the Company's
industrial battery operations were acquired from Exide in a transaction
pursuant to which the Company acquired assets and did not contractually assume
environmental and related liabilities. These assets were acquired in 1991 and
there have not been any significant environmental claims made since that date.
In addition, the Company has established a program for environmental, health
and safety compliance, supervised by certain employees, under which Company
personnel design procedures for auditing practices subject to environmental,
health and safety laws and regulations, and monitor and communicate to other
Company employees regulatory activities and developments, including certain
standards for reducing lead exposure to employees promulgated under the
federal Occupational Safety and Health Act of 1970. Based on current
information, the Company does not expect compliance with environmental, health
and safety laws and regulations to have a material adverse effect on the
business or financial condition of the Company. However, there can be no
assurance that developments, such as increased requirements of such laws and
regulations, increasingly strict enforcement thereof by governmental
authorities, and claims for damages to property or injury to persons resulting
from the environmental, health or safety impacts of the Company's operations,
will not cause the Company to incur significant costs and liabilities that
could have such a material adverse effect. See "Risk Factors--Potential Costs
of Environmental Compliance."
LITIGATION
The Company is, from time to time, involved in routine litigation
incidental to the conduct of its business. In the opinion of management, none
of such litigation, individually or in the aggregate, could be expected to
have a material adverse effect on the financial condition, results of
operations or cash flows of the Company.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the Company's
existing directors and executive officers. A summary of the background and
experience of each director and executive officer is set forth in the
paragraphs following the table.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Teruhisa Yuasa................... 62 Chairman of the Board
P. Michael Ehlerman.............. 59 Vice Chairman, Chief Executive Officer and
Director
John D. Craig.................... 46 President, Chief Operating Officer and
Director
Shuji Kawata..................... 60 Vice President--International and Director
Michael T. Philion............... 46 Vice President--Finance, Chief Financial
Officer and Assistant Secretary
Hiroshi Horiuchi................. 55 Vice President--Export, Secretary and
Director
Yasukazu Sakai................... 66 Director
Arthur M. Hawkins................ 55 Director
James Kanda...................... 58 Director
Raymond J. Kenny................. 71 Director
</TABLE>
TERUHISA YUASA has served as Chairman of the Board of the Company since
1991. Mr. Yuasa has served as Chairman of Yuasa Japan, a publicly-traded
Japanese manufacturer of a full line of lead acid automotive and industrial
batteries, since 1997 and as a director since 1970. Prior to his election as
Chairman, he served as President of Yuasa Japan. Mr. Yuasa is also President
and a director of Yuasa Trading Co., a publicly traded Japanese trading
company.
P. MICHAEL EHLERMAN has served as Vice Chairman and Chief Executive Officer
of the Company since April 1, 1998. Prior thereto, he served as President of
the Company and has been a director since 1991, when the Company acquired
Exide's industrial battery division. Prior to becoming President of the
Company, Mr. Ehlerman was employed by Exide and a predecessor, General Battery
Corporation, in various executive management positions.
JOHN D. CRAIG has served as President and Chief Operating Officer of the
Company since April 1, 1998. Prior thereto, he served as Executive Vice
President of the Company since 1995. He has been a director since 1996. Prior
thereto, Mr. Craig was Vice President--Operations of the Company since 1994
and Vice President--Operations of Nordyne, Inc., a manufacturer of heating and
air conditioning equipment.
SHUJI KAWATA has served as a director since 1991 and as Vice Chairman
between 1995 and March 31, 1998. Mr. Kawata has served as a director of Yuasa
Japan since 1991 and has been an employee of Yuasa Japan since 1960. Effective
April 1, 1998, he will retire as an employee of Yuasa Japan and become Vice
President--International and a full time employee of the Company.
MICHAEL T. PHILION has served as Vice President--Finance; Chief Financial
Officer and Assistant Secretary of the Company since 1994. Prior thereto, he
was employed as Chief Financial Officer of the Wood Company, a food service
management company. He was elected as Assistant Secretary in 1997 and has been
elected as Acting Secretary, effective April 1, 1998.
HIROSHI HORIUCHI has served as a director and as Vice President--Export of
the Company since 1995. Prior thereto, he served as Deputy General Manager--
International Division of Yuasa Japan since 1991. He has advised the Company
that he intends to resign as a director of the Company as soon as practicable
on completion of the Offering.
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<PAGE>
YASUKAZU SAKAI has served as a director of the Company and as Vice Chairman
of the Company between 1991 and March 31, 1998. Mr. Sakai is senior managing
director of Yuasa Japan and has been employed in various senior executive
positions since 1954 and has been a director of Yuasa Japan since 1986.
ARTHUR M. HAWKINS has served as a director of the Company since 1992. Mr.
Hawkins has served as Chairman, President, Chief Executive Officer and a
director of Exide Corporation, a publicly-traded U.S. manufacturer of a full
line of lead acid automotive and industrial batteries since 1985. He has
advised the Company that he intends to resign as a director of the Company as
soon as practicable on completion of the Offering.
JAMES KANDA has served as a director of the Company since 1991. Over the
past five years, he has served as a consultant to Yuasa Japan and a special
advisor to its Chairman and President.
RAYMOND J. KENNY has served on the Board of Directors of the Company since
1991. Prior to his retirement in 1993, he served as Vice President Operations
of the Company.
THE BOARD OF DIRECTORS
The Company's Board of Directors presently consists of nine members and is
divided into three classes: Class I directors, whose terms expire in 1999;
Class II directors whose terms expire in 2000; and Class III directors whose
terms expire in 2001. Each of the Company's directors is presently either (i)
an officer or director of, and was nominated and elected as a director by,
Yuasa Japan or Exide (see "Principal and Selling Stockholders"), or (ii) an
executive officer of the Company. Messrs. Yuasa, Ehlerman and Kanda have been
elected to serve as Class I directors until the 1999 annual meeting of
stockholders; Messrs. Kawata, Horiuchi and Kenny have been elected to serve as
Class II directors until the 2000 annual meeting of stockholders; and Messrs.
Sakai, Hawkins, and Craig have been elected to serve as Class III directors
until the 2001 annual meeting of stockholders. Each of Messrs. Horiuchi (Class
II), and Hawkins (Class III) has advised the Company that he intends to resign
as a director of the Company upon completion of the Offering. Upon such
resignation, the Board of the Company intends, as soon as practicable, to
elect three as yet unidentified independent directors who are not affiliated
with Yuasa Japan or the Company, one to sit as a Class I director, one to sit
as a Class II director and one to sit as a Class III director. See "Related
Party Transactions."
The Company's Bylaws provide that, among other things, (i) each class of
directors must consist, as nearly as possible, of one-third of the total
number of directors; (ii) one class must be elected each year to serve for a
term of three years, after a transitional period, or until earlier removal or
resignation; and (iii) sitting directors have the ability to fill vacancies
arising from resignations or from newly-created directorships for the balance
of the term of the class to which they are elected. The next annual meeting of
the stockholders of the Company to be held after the closing of the Offering
is scheduled for July, 1999. Executive officers are elected annually and hold
office until their successors are duly elected and qualified or until earlier
removal or resignation.
A Stockholders' Agreement dated as of April 1, 1992 (the "Stockholders'
Agreement") between the Company and Exide entitles Exide to designate one
person for election to the Board of Directors of the Company acceptable to
Yuasa Japan. Yuasa Japan has contractually obligated itself to determine that
Mr. Hawkins is acceptable to it and Exide historically has exercised its right
to name Mr. Hawkins as a director. On completion of the Offering and sale by
Exide of its Class B Common Stock, this obligation will terminate. The other
directors were selected, nominated and elected by Yuasa Japan. Following the
Offering, Yuasa Japan will own all of the issued and outstanding Class B
Common Stock representing approximately 76% of the combined voting power of
all shares of outstanding Common Stock and will be able to nominate and elect
all of the members of the Board. See "Related Party Transactions."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has formed a new standing Audit
Committee and a new standing Compensation Committee, effective as of the
completion of the Offering and will appoint members to such committees on the
election of at least three independent directors.
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<PAGE>
Compensation Committee
The Compensation Committee will consist solely of non-employee directors,
and the Company's Chief Executive Officer as an ex officio member. The
Compensation Committee makes recommendations to the Board of Directors with
respect to compensation, including stock based compensation, of members of the
Company's executive staff.
Audit Committee
The Audit Committee will have general responsibility for supervision of
financial controls, as well as for accounting and audit activities of the
Company. The Audit Committee, a majority of which will consist of non-
management directors independent of Yuasa Japan, will annually review the
qualification of the Company's independent certified public accountants, make
recommendations to the board of directors as to their selection and review the
planning, fees and results of their audit.
DIRECTOR COMPENSATION
The members of the Board of Directors of the Company do not currently
receive compensation for services rendered as members of the Board of
Directors. After completion of the Offering, the Company will pay each
director, who is not an employee of the Company or an employee, officer or
representative of Yuasa Japan, a quarterly retainer of $5,000, plus $1,000 for
each Board meeting attended and $500 for each committee meeting attended.
Directors' and Officers' Insurance
The Company is in the process of obtaining a policy of directors' and
officers' liability insurance to cover all directors, officers and employees
of the Company and its subsidiaries for liability, loss, damage and expense
which they may incur in their capacities as such. The Company expects that
this policy will be in place prior to the completion of the Offering.
EXECUTIVE COMPENSATION
The following table sets forth all salary and other compensation earned
with respect to fiscal 1998 and bonus earned with respect to 1997 by the
Company's Vice Chairman and Chief Executive Officer and each of the four other
most highly compensated executive officers of the Company whose total annual
salary and bonus exceeded $100,000 for services rendered in all capacities to
the Company.
<TABLE>
<CAPTION>
Name and Annual Compensation
Principal Year Ended ------------------- All Other
Position March 31 Bonus(/1/) Compensation(/2/)(/3/)
- --------- ---------- Salary ---------- ----------------------
<S> <C> <C> <C> <C>
P. Michael Ehlerman..... 1998 $283,133 $100,800 $7,500
Vice Chairman and CEO
John D. Craig........... 1998 $194,950 $ 55,000 $7,500
President and COO
Michael T. Philion...... 1998 $155,575 $ 36,500 $7,500
Vice President--Finance
and CFO
Nicholas I. Magnani..... 1998 $158,257 $ 16,700 $7,500
Vice President--
Engineering and R&D
John Shea............... 1998 $145,646 $ 20,000 $7,282
Vice President--Motive
Power
</TABLE>
41
<PAGE>
- --------
(1) Represents amounts paid under the Company's short-term Management
Incentive Plan in respect of fiscal 1997. The Company did not have a long-
term incentive plan during 1997 or 1998.
(2) Amounts in this column represent the Company's annual retirement
contribution (generally, 4% of earnings on such employee's Form W-2) and
matching contributions under the Company's 401(k) Plan for the years
indicated. See "Salaried Retirement and 401(k) Plan."
(3) Compensation in the form of perquisites and other personal benefits has
been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of each named executive
officer's total annual salary and bonus.
MANAGEMENT INCENTIVE PLANS
The purpose of the Company's Management Incentive Plan (the "Short Term
Plan") is to provide short-term incentive to key officers and employees of the
Company for meeting and exceeding certain established financial performance
goals. Participation in the Short Term Plan is limited to a maximum incentive
reward as a percent of base salary earnings determined for each eligible
participant. Each participant is measured on a combination of Company and
personal objectives with the exception of participants who are employed in
certain of the Company's manufacturing facilities, whose incentive award is
based upon one hundred percent of facility objectives. Incentive awards are
payable in a lump sum early in the next fiscal year immediately following the
determination of the eligibility to receive an incentive award. The
eligibility of a participant who is discharged or resigns during a plan year
will be automatically canceled. In the case of termination due to death or
retirement, or if a participant becomes eligible to participate during the
plan year (which requires a minimum of six months of service in the applicable
incentive year), the participant or his or her estate will be eligible for a
reduced incentive reward. For purposes of determining an incentive award, base
salary is defined as W-2 salary earnings exclusive of any payments under the
Short Term Plan and any non-reoccurring adjustments to salary.
During fiscal 1997, the Company adopted the Long Term Incentive Plan (the
"Long Term Plan"). The purpose of this plan is to attract, motivate and retain
key executives of the Company. The Long Term Plan is structured in three-year
cycles with a new cycle beginning each year. The first cycle begins in fiscal
1998 and runs through the end of fiscal 2000. For fiscal 1998, twelve
executives were named by the Board to participate. Participation is
established annually for each new performance cycle. An executive who
voluntarily terminates employment with the Company (other than for retirement)
is not entitled to receive a payment for an uncompleted cycle. The Board
establishes financial targets for the Long Term Plan at the beginning of each
cycle. For the fiscal 1998-2000 cycle, the Board set the target at the three-
year average of return on average capital employed by the Company. In addition
to the target, the Board sets performance points below and above which no
payment will be made. Awards are capped at a percentage of base pay which
varies with financial performance. Earned awards are paid after each completed
cycle. The Board has reserved the right to adjust financial targets for
divestures or acquisitions which have a material impact on performance
factors. If a change in control of the Company occurs, and the Long Term Plan
is terminated or substantially changed, all uncompleted cycles vest. Absent a
change in control, no amounts will be paid under the Long Term Plan until
after completion of the first cycle at the end of fiscal 2000. The Offering
does not result in a change in control within the meaning of this plan.
Salaried Retirement and 401(k) Plan
The Company maintains the Salaried Retirement and 401(k) Plan (the "Savings
Plan") for the benefit of its salaried employees. The Savings Plan is a
defined contribution plan and is qualified under Sections 401(a) and 401(k) of
the Internal Revenue Code of 1986, as amended (the "Code"). Salaried employees
are eligible to participate in the Savings Plan after the completion of six-
months of service. The Company is required, under the terms of the Savings
Plan, to make a retirement contribution on behalf of each eligible employee in
an amount equal to four percent of such employees compensation as defined in
the Savings Plan. The Savings Plan permits participants to elect to
contribute, pursuant to salary reduction, up to 15% of such participant's
Compensation (as defined in the Savings Plan) on a pre-tax basis. The Company
is required to match at least twenty-five percent of the first four percent of
compensation contributed by the participant.
Omnibus Stock Plan
The Company's Board and shareholders have approved the Omnibus Stock Plan
effective March 9, 1998. The purpose of the Omnibus Stock Plan is to provide
additional incentives to employees of the Company by
42
<PAGE>
facilitating their purchase of stock in the Company. The Omnibus Stock Plan
will have a term of ten years from the date of its adoption (unless the plan
is earlier terminated by the Board of Directors of the Company) after which no
awards may be made. Pursuant to the Omnibus Stock Plan, 602,540 shares of
Class A Common Stock (equal to 5% of the estimated number of shares of the
Company's Common Stock outstanding upon completion of the Offering), will be
reserved for future issuance by the Company, in the form of newly-issued or
treasury shares, upon exercise of stock options ("Options") or stock
appreciation rights ("SARs"). Options and SARs are collectively referred to
herein as "Awards." If Awards should expire, become unexercisable or be
forfeited for any reason without having been exercised or without becoming
vested in full, the shares of Class A Common Stock subject to such Awards
will, unless the Omnibus Stock Plan shall have been terminated, be available
for the grant of additional Awards under the Omnibus Stock Plan. Approximately
twenty individuals are eligible to participate in the Omnibus Stock Plan.
The Omnibus Stock Plan will, after April 1, 1998, be administered by the
Compensation Committee. The Compensation Committee selects the employees to
whom Awards are to be granted, the number of shares to be subject to such
Awards, and the terms and conditions of such Awards (provided that any
discretion exercised by the Compensation Committee must be consistent with the
terms of the Omnibus Stock Plan).
The Company intends Options granted under the Omnibus Stock Plan to
constitute both (i) incentive stock options (options that afford favorable tax
treatment to recipients upon compliance with certain restrictions pursuant to
Section 422 of the Code, and that do not result in tax deductions to the
Company unless participants fail to comply with Section 422 of the Code)
("ISOs") and (ii) Options that do not so qualify ("NQSOs"). The exercise price
for Options will be, in the case of an ISO, the fair market value of the
Common Stock on the day of grant and in the case of an NQSO, the option price
will be determined by the Compensation Committee on the day of grant. The
Omnibus Stock Plan permits the Compensation Committee to impose exercise and
transfer restrictions on the Common Stock that optionees may purchase. It is
possible that the Compensation Committee will impose such restrictions on
shares subject to options granted on or after the Omnibus Stock Plan's
effective date. No Option shall be exercisable after the expiration of ten
years from the date it is granted; provided, however, that in the case of any
employee who owns more than 10% of the outstanding Common Stock at the time an
ISO is granted, the option price for the ISO shall not be less than 110% of
the price at which the Common Stock is sold in the Offering, and the ISO shall
not be exercisable after the expiration of five years from the date it is
granted. An otherwise unexpired Option, unless otherwise determined by the
Compensation Committee, shall cease to be exercisable upon (i) an employee's
termination of employment for "cause" (as defined in the Omnibus Stock Plan),
(ii) the date six months after termination of service due to retirement, (iii)
the date three months after an employee terminates service for a reason other
than just cause, death, or disability, (iv) the date an employee terminates
service due to disability (except as to "vested" options), or (v) the date two
years after termination of such service due to the employee's death.
A SAR may be granted in tandem with all or any part of any Option or
without any relationship to any Option. Whether or not a SAR is granted in
tandem with an Option, exercise of the SAR will entitle the optionee to
receive, as the Compensation Committee prescribes in the grant, all or a
percentage of the excess of the then fair market value of the shares of Common
Stock subject to the SAR at the time of its exercise, over the aggregate
exercise price of the shares subject to the SAR. Payment to the optionee may
be made in cash or shares of Class A Common Stock, as determined by the
Compensation Committee.
The Company will receive no monetary consideration for the granting of
Awards under the Omnibus Stock Plan, and will receive no monetary
consideration other than the Option exercise price for each share issued to
optionees upon the exercise of Options. The Option exercise price may be paid
in cash or Common Stock. The exercise of Options and SARs will be subject to
such terms and conditions established by the Compensation Committee as are set
forth in a written agreement between the Compensation Committee and the
optionee (to be entered into at the time an Award is granted). In the event
that the fair market value per share of the Common Stock falls below the
option price of previously granted Options or SARs, the Compensation Committee
will have the authority, with the consent of the optionee, to cancel
outstanding Options or SARs and to reissue new Options or SARs at the then
current fair market price per share of the Common Stock.
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<PAGE>
Although directors and officers of the Company generally would be
prohibited under the federal securities laws from profiting from certain
purchases and sales (or sales and purchases) of shares of Common Stock within
any six-month period, they generally will not be prohibited by such laws from
exercising options and immediately selling the shares they receive. As a
result, the Company's directors and officers generally will be permitted to
benefit in the event the market price for the shares exceeds the exercise
price of their Options, without being subject to loss in the event the market
price falls below the exercise price.
Notwithstanding the provisions of any Award that provides for its exercise
or vesting in installments, all Awards shall become fully vested upon a
"change in control" (as defined in the Omnibus Stock Plan) and, for a period
of 60 days beginning on the date of such change in control, all Options and
SARs shall be fully vested and immediately exercisable. In the event of a
change in control, the Compensation Committee may permit the holders of
exercisable Options to surrender their Options in exchange for cash in an
amount equal to the excess of the fair market value of the Common Stock
subject to the Options over their exercise price. Unless otherwise permitted
by an Award agreement and in accordance with applicable law, no Award is
assignable or transferable except by will or the laws of descent and
distribution, or pursuant to the terms of a "qualified domestic relations
order" (within the meaning of Section 414(p) of the Code and the regulations
and rulings thereunder).
Grant of Stock Options
The Compensation Committee, when formed, intends to grant, conditioned upon
the successful completion of the Offering, nonqualified stock options under
the Omnibus Stock Plan to certain executive officers of the Company identified
below to purchase shares of the Company's Class A Common Stock at the public
offering price set forth on the cover page of this Prospectus. The options
granted will become exercisable to the extent of 40% of the options granted on
the second anniversary of the date of grant, with an additional 20% of the
options granted becoming exercisable on the third, fourth, and fifth
anniversaries of the date of grant. The options will expire ten years after
the date of grant, subject to earlier termination in accordance with the
provisions of the Omnibus Stock Plan. The options are not assignable or
otherwise transferable, except by will or the laws of descent and
distribution. During fiscal 1998, the Company issued options under the Omnibus
Stock Plan to acquire 570,400 shares of Class A Common Stock at an exercise
price equal to the public offering price set forth on the cover page of this
Prospectus to 16 officers and employees of the Company, including the
following executive officers:
<TABLE>
<CAPTION>
Number of Shares
Name Expiration Date Subject to Option Type of Option
---- --------------- ----------------- -------------------------
<S> <C> <C> <C>
P. Michael Ehlerman..... March 31, 2008 186,000 Nonqualified Stock Option
John D. Craig........... March 31, 2008 124,000 Nonqualified Stock Option
Michael T. Philion...... March 31, 2008 62,000 Nonqualified Stock Option
Nicholas I. Magnani..... March 31, 2008 24,800 Nonqualified Stock Option
John A. Shea............ March 31, 2008 24,800 Nonqualified Stock Option
</TABLE>
The number of shares reserved for issuance under the plan and the number of
shares subject to options will be adjusted to the extent that the number of
shares reserved for issuance are less than or exceed 5% of the shares of the
Company's Common Stock outstanding upon completion of the Offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee during fiscal 1997 and
compensation decisions during fiscal 1997 were made, with respect to the
President, by the Company's Board of Directors and with respect to other
Company officers, by the President. The Board of Directors voted to establish
a Compensation Committee, effective April 1, 1998.
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<PAGE>
RELATED PARTY TRANSACTIONS
ONGOING TRANSACTIONS WITH EXIDE
General
On June 10, 1991, the Company acquired the assets of the industrial battery
division, including certain trademarks of Exide, together with a related
covenant not to compete, for approximately $120 million. As part of this
purchase, Exide and the Company entered into a number of agreements which are
still in effect. The following description constitutes a summary of certain of
these agreements and other agreements entered into with Exide after June 10,
1991. The following description is subject to and is qualified in its entirety
by reference to the agreements, copies of which have been filed as exhibits to
the Registration Statement of which this Prospectus is a part. Except for the
Stockholders' Agreement, which will terminate on completion of the Offering,
these agreements will not be affected by the Offering or the sale by Exide of
its shares of the Company's stock. See "Principal and Selling Stockholders."
Agreement Not to Compete
Exide and the Company are parties to an Agreement Not to Compete dated June
10, 1991 (the "Exide Agreement Not to Compete"). Pursuant to this agreement,
Exide agreed not to compete in the industrial battery business in North and
South America and in over 160 other countries, including certain European
countries. The businesses in which Exide may not compete include the
manufacturing and sale of batteries for all industrial uses, including
electrical vehicle batteries and battery products (other than golf cart
batteries formerly manufactured at the Company's Sumter, South Carolina plant,
and also excluding automotive, motorcycle, garden tractor and marine engine
starting batteries). Since June 1991, Exide has acquired certain European
battery manufacturers who own and operate industrial battery operations. The
Company waived compliance of the Exide Agreement Not to Compete as they
related to Europe in order to permit Exide to acquire these European
operations, in exchange for a right of first refusal to acquire those
operations if Exide elects to sell them. Exide's obligations under the Exide
Agreement Not to Compete expire in June, 2001, at which time Exide will be
free of its obligation not to compete with the Company.
Trademark and Patent Licensing Agreements
Exide has granted the Company licenses to use Exide's name and certain
trademarks and patents in connection with various products manufactured by the
Company. See "Business--Intellectual Property--Licenses."
Other Transactions with Exide
The Company engages in other transactions with Exide in the ordinary course
of its business. The Company believes that those transactions are on terms and
conditions which are no less favorable than those available from unrelated
parties.
Lead. During fiscal 1996, 1997 and 1998, respectively, the Company
purchased approximately 16.2 million, 5.4 million, and 6.0 million pounds of
lead from Exide, at prevailing market prices. These purchases amounted to
approximately $9.5 million, $1.8 million, and $1.5 million, respectively, and
accounted for 19.1%, 3.8%, and 3.9%, respectively, of the Company's lead
purchases during fiscal 1996, 1997 and 1998.
Utilities. The Company has agreements with Exide for the supply of
electricity, gas and waste water treatment services to the Company's
Laureldale, Pennsylvania small starting engine battery facility. These
services had a total cost of $1.3 million, $1.4 million and $1.2 million in
fiscal 1996, 1997 and 1998, respectively. The Company is free to obtain these
utility services from other sources if it so chooses, and any of these
services provided by Exide could be terminated by the Company on 90 days
notice. Absent breach by the Company, however, the services cannot be
terminated by Exide without substantially greater advance notice,
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<PAGE>
during which time the Company could make other arrangements for the same
services without disruption of its operations or material cost.
Other Sales and Purchases. The Company supplies Exide with motorcycle
batteries. In fiscal 1996 and 1997, the Company also supplied Exide with EV
batteries (used in golf cart applications) built to Exide's specifications.
Total sales to Exide during fiscal 1996, 1997 and 1998 amounted to
approximately $20.0 million, $4.6 million and $3.8 million, respectively.
Total purchases of lead, certain other battery components and other goods
and services from Exide amounted to approximately $10.8 million, $6.9 million
and $4.4 million for fiscal 1996, 1997 and 1998, respectively.
Stockholders' Agreement. The Stockholders' Agreement between the Company
and Exide, as presently in effect, contains various rights and obligations
with respect to the Class B Common Stock owned by Yuasa Japan and Exide, but
will terminate when Exide sells its Common Stock in the Offering.
Dividend. On March 9, 1998 the Company's Board of Directors declared a
special dividend, payable in May 1998. The dividend will be in the aggregate
amount of $2.3 million, of which 13.5% will be paid to Exide.
YUASA JAPAN
Yuasa License and Technology Agreement. Yuasa Japan has entered into the
Yuasa License and Technology Agreement with the Company, which gives the
Company, among other things, exclusive (subject to limited exceptions)
licenses to use certain patents and technology of Yuasa Japan, manufacturing
rights with regard to certain types of batteries, technical assistance and
support, future improvements and innovations related to the products and their
manufacture, the right to purchase certain other technical know-how and a
license to use the name "Yuasa" and related trademarks. In consideration of
these rights, the Company pays royalties to Yuasa Japan, which, together with
payments under similar arrangements in effect for prior periods, amounted to
$1.6 million for fiscal 1998, $1.5 million for fiscal 1997, and $1.1 million
for fiscal 1996. See "Business--Intellectual Property--Licenses."
The Yuasa License and Technology Agreement can be terminated by Yuasa Japan
on certain defaults by the Company, such as failure to pay royalties or
insolvency of the Company, and will expire automatically on the third
anniversary of the first date on which Yuasa Japan and its affiliates cease to
own shares of Common Stock of the Company possessing the right to cast at
least 20% of the total votes entitled to be cast by holders of all Common
Stock of all classes. Following any such termination or revocation, however,
the Company's rights thereunder with respect to trademarks would survive for
three years, and with respect to patents and technical know-how would survive
for five years.
The Company's agreements with Yuasa Japan also include the Yuasa
Noncompete, in which Yuasa Japan agrees not to sell (directly or through
certain controlled affiliates) substantially all types of products made and
sold by the Company, throughout a territory comprising all of the Americas,
for a period ending on the third anniversary of the first date on which Yuasa
Japan and its affiliates cease to own shares of Common Stock of the Company
possessing the right to cast at least 20% of the total votes entitled to be
cast by holders of all Common Stock of all classes. Unlike the Yuasa License
and Technical Assistance Agreement, however, the Yuasa Japan Agreement is not
by its terms subject to earlier revocation or termination.
The termination, revocation or expiration of the Yuasa License and
Technical Assistance Agreement or the Yuasa Noncompete, as applicable, could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Risk Factors--Relationship with Principal
Stockholder" and "--Competition; Industry Consolidation; Pricing Pressures."
The Company also makes payments to Yuasa Japan of approximately $250,000
per year, for travel and other expenses incurred by Yuasa Japan in connection
with providing technical and management assistance to
46
<PAGE>
the Company and attendance by its executives and other personnel at meetings
of directors and management, and visits to the Company's facilities. See
"Principal and Selling Stockholders."
During fiscal 1996, 1997, and 1998 the Company purchased approximately
$20.6 million, $15.0 million, and $11.6 million, respectively, of finished
batteries, parts and accessories from Yuasa Japan and its affiliates. During
fiscal 1996, 1997, and 1998, the Company sold approximately $10.0 million,
$6.0 million, and $7.8 million, respectively, of finished batteries to Yuasa
Japan and its affiliates.
Dividend. On March 9, 1998 the Company's Board of Directors declared a
special dividend, payable in May, 1998. The dividend will be in the aggregate
amount of $2.3 million, of which 86.5% will be paid to Yuasa Japan.
In March, 1998, the Company entered into a revolving credit facility for up
to $5 million with Yuasa Japan. Under this facility, Yuasa Japan may borrow,
repay and reborrow from the Company at any time until March 30, 1999. At March
31, 1998, no amounts were outstanding under this facility. This facility is
unsecured, matures in its entirety on March 31, 1999, and bears interest at a
rate approximately equal to the U.S. Federal funds rate plus 1%, payable
monthly.
FUTURE RELATED PARTY TRANSACTIONS
The Company has adopted a policy, effective as of the date of the closing
of the Offering, requiring that all material transactions (including
amendments, modifications or extensions of existing transactions) between the
Company and its executive officers, directors and affiliates (including Yuasa
Japan) be approved in advance by both (i) a majority of the members of the
Company's Board of Directors, and (ii) a majority of the independent members
of the Company's Board of Directors. See "Risk Factors--Relationship with
Principal Stockholder."
47
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of the date of this Prospectus, and as
adjusted to reflect the issuance and sale by the Company of 3,300,000 shares
of Class A Common Stock in the Offering, for each person who is known to the
Company to own beneficially more than 5% of the Common Stock.
<TABLE>
<CAPTION>
Common Common
Shares Beneficially Number of Shares Beneficially Number of
Owned Prior Votes Entitled Owned After Votes Entitled
to Offering(/1/) to be Cast Offering(/1/)(/2/) to be Cast
---------------------- ------------------ ---------------------- ------------------
Name Number Percent(/3/) Number Percent Number Percent(/3/) Number Percent
- ---- --------- ------------ ---------- ------- --------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Yuasa 7,000,000 86.5% 14,000,000 86.5% 7,000,000 61% 14,000,000 76%
Corporation(/4/)(/5/)..
NT Building, 47-1, OH-I
1-Chome, Shinagawa-ku
Tokyo 140 Japan
Exide Corporation(/4/).. 1,092,000 13.5% 2,184,000 13.5% -- -- -- --
1400 North Woodward
Avenue Suite 130
Bloomfield Hills, MI
48304
</TABLE>
- --------
(1) As of the date of the Prospectus, no director or executive officer of the
Company beneficially owns any shares of Common Stock or options to
purchase shares of Common Stock exercisable within 60 days of the date of
this Prospectus. The shareholders named in the table have sole voting and
investment power with respect to all shares indicated.
(2) Yuasa Japan and Exide have agreed not to purchase additional shares of
Common Stock in the Offering.
(3) Applicable percentage of ownership is based on 8,092,000 shares of Class B
Common Stock outstanding on the date of this Prospectus and a total of
11,392,000 shares of Class A Common Stock and Class B Common Stock
outstanding after the completion of the Offering and assumes no exercise
of the Underwriters' over-allotment option. Excludes options to acquire
570,400 shares of Class A Common Stock granted under the Company's Omnibus
Stock Plan which by their terms, are not exercisable until March 2000. The
7,000,000 Class B shares owned by Yuasa Japan after the Offerings
represent approximately 76% of the combined voting power of all shares of
Common Stock outstanding.
(4) See "Related Party Transactions" for additional information relating to
the Company's relationships with Yuasa Japan and with Exide.
(5) Yuasa Japan is a Japanese public company. As of March 31, 1998, there were
no holders of 5% or more of its common stock, except Yuasa Trading Co.,
Ltd. (7.1%), Mitsui Mutual Life Insurance, Co. (6.3%), and The Mitsui
Trust and Banking Co., Ltd. (5.4%), each of which is a Japanese publicly
held company.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description is a summary and is subject to and qualified in
its entirety by reference to the provisions of the Company's Articles of
Incorporation and Bylaws, copies of which have been filed as an exhibit to the
Registration Statement of which this Prospectus is a part and to the
applicable provisions of the Pennsylvania Business Corporation Law of 1988, as
amended (the "PBCL").
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
The Company possesses the authority, under its Articles of Incorporation,
to issue up to 100 million shares of Class A Common Stock, par value $.01 per
share, and up to 100 million shares of Class B Common Stock, par value $.01
per share. Shares of Class A Common Stock and shares of Class B Common Stock
carry the same rights, powers, preferences, privileges and limitations, except
that Class A Common Stock has one vote per share on all matters while Class B
Common Stock has two votes per share on all matters. Prior to the Offering,
there were 8,092,000 shares of Class B Common Stock outstanding, of which
1,092,000 were held of record by Exide, and 7,000,000 were held of record by
Yuasa Japan.
After giving effect to the Offering (including the sale of its interest by
Exide) the Class B Common Shares held by Yuasa Japan will represent
approximately 61% of the shares of Common Stock of the Company outstanding and
approximately 76% of the combined voting power of all Common Stock outstanding
upon completion of the offering. See "Principal and Selling Stockholders."
Holders of Common Stock on completion of the Offering do not possess
preemptive rights or rights to subscribe for additional securities of the
Company.
Shares of Class B Common Stock will automatically become shares of Class A
Common Stock upon any sale or transfer of such Class B Common Stock by Yuasa
Japan or by Exide Corporation to any person or entity other than an affiliate
of Yuasa Japan. In addition, shares of Class A Common Stock acquired by Yuasa
Japan or any other person in the open market in negotiated transactions or
from the Company will retain their status as such and will not convert to
Class B shares. See "--Conversion."
VOTING RIGHTS--COMMON STOCK
Holders of Class A Common Stock are entitled to one vote per share on all
matters. Holders of Class B Common Stock are entitled to two votes per share
on all matters. Except as otherwise required by law, the holders of both Class
A Common Stock and Class B Common Stock will vote together as a single class
on all matters presented to the stockholders for their vote or approval.
Shareholders are not entitled to cumulate their votes for the election of
directors.
Because of the disproportionate voting rights of the Class B Common Stock,
Yuasa Japan will be able to control the outcome of matters submitted to a vote
of the Company's stockholders, including the election of directors, even when
the number of outstanding shares of Class B Common Stock which it owns is less
than a majority of the number of shares of all classes of Common Stock then
outstanding. Only if and when the number of outstanding shares of Class B
Common Stock represents less than 33.4% of the number of shares of all classes
of Common Stock then outstanding would the holders of Class A Common Stock be
able to cast more votes than Yuasa Japan. See "Risk Factors--Relationship with
Principal Stockholder."
DIVIDENDS
Holders of Class A Common Stock and Class B Common Stock are entitled to
receive dividends at the same rate on a per share basis if, as and when such
dividends are declared by the Board of Directors of the Company out of assets
or funds available therefor, subject to standard limitations on dividends
under state law. In the case of a dividend or other distribution payable in
shares of a class of Common Stock, including distributions pursuant to stock
splits or divisions of Common Stock, only shares of Class A Common Stock may
49
<PAGE>
be distributed with respect to Class A Common Stock and only shares of Class B
Common Stock may be distributed with respect to Class B Common Stock. The
number of shares of each class of Common Stock so distributed shall be equal
in number on a per share basis.
CONVERSION
Class A Common Stock has no conversion rights. Shares of Class B Common
Stock are convertible into Class A Common Stock, in whole or in part, at any
time and from time to time at the option of the holder, on the basis of one
share of Class A Common Stock for each share of Class B Common Stock
converted. Each share of Class B Common Stock will automatically convert into
one share of Class A Common Stock when the holder sells, exchanges or
otherwise transfers such Class B shares to any person other than an affiliate
of such holder. A bona fide pledge of shares of Class B Common Stock would not
constitute a transfer of such stock for purposes of this provision.
The Company has agreed to (i) at all times reserve and keep available, out
of its authorized but unissued shares of Class A Common Stock, such number of
shares of Class A Common Stock issuable upon the conversion of all outstanding
shares of Class B Common Stock, (ii) cause any share of Class A Common Stock
issuable upon conversion of a share of Class B Common Stock that requires
registration with or approval of any governmental authority under federal or
state law before such shares may be issued upon conversion to be so registered
or approved and (iii) use its best efforts to list the shares of Class A
Common Stock required to be delivered upon conversion prior to such delivery
upon such national securities exchange upon which the outstanding Class A
Common Stock is listed at the time of such delivery.
RESTRICTIONS ON TRANSFER OF CLASS B COMMON STOCK
Upon sale, exchange or other transfer of Class B Common Stock by Yuasa
Japan to an entity not affiliated with the transferor, those shares of Class B
Common Stock automatically become shares of Class A Common Stock.
Notwithstanding the foregoing (i) Yuasa Japan may pledge shares of Class B
Common Stock to a financial institution pursuant to a bona fide pledge of such
shares as collateral security for indebtedness, provided that (i) such shares
remain subject to the transfer restrictions set forth above and (ii) Yuasa
Japan retains the sole and exclusive right to vote such pledged shares.
RECLASSIFICATION, MERGER AND DISSOLUTION
In the event the Company enters into any consolidation, merger, combination
or other transaction in which shares of Common Stock are exchanged for or
changed into other stock or securities, cash or any other property, the shares
of Class A Common Stock and Class B Common Stock, treated as a single class,
will be exchanged for or changed into the same amount of stock, securities,
cash or any other property, as the case may be, into which or for which each
share of any other class of Common Stock is exchanged or changed. In the event
of any dissolution, liquidation or winding up of the affairs of the Company,
after payment of the debts and other liabilities of the Company, the remaining
assets of the Company will be distributable ratably among the holders of the
Class A Common Stock and Class B Common Stock treated as a single class. None
of the Class A Common Stock or Class B Common Stock may be reclassified,
subdivided or combined in any manner unless the other class is simultaneously
reclassified, subdivided or combined in the same proportion. The holders of
the Class A Common Stock and Class B Common Stock are not entitled to
preemptive rights, other than Exide under the Stockholders' Agreement which,
by its terms, will expire upon completion of the Offering. See "Related Party
Transactions."
PREFERRED STOCK
The Company's Board of Directors is authorized to issue preferred stock,
without the approval of the Company's shareholders. The rights,
qualifications, limitations and restrictions on each series of Preferred Stock
issued will be determined by the Board of Directors at the time of issuance
and may include, among other things,
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<PAGE>
rights to participating dividends, voting rights and convertibility into
shares of the Company's Class A Common Stock. Shares of preferred stock may be
issued with dividend, redemption, voting, and liquidation rights taking
priority over Common Stock, and may be convertible into Common Stock, as
determined by the Company's Board of Directors at the time of issuance.
LIMITATION ON DIRECTORS' LIABILITY
As authorized by the PBCL, the Company's Bylaws provide that no director of
the Company shall be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases or (iv)
for any transaction from which the director derived an improper personal
benefit. The effect of these provisions will be to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described in clauses (i)-
(iv) of the preceding sentence. These provisions do not affect the
availability of equitable remedies such as injunctive relief and will not
alter the liability of directors under federal securities laws. The Company is
in the process of obtaining a policy of insurance to cover its directors and
officers for loss, damage and expense which they incur in their capacity as
such. See "Management--Directors and Officers Insurance."
In 1990, Pennsylvania adopted legislation further amending the PBCL. This
legislation generally: (1) expands the factors and groups (including
shareholders) which the Company's Board of Directors can consider in
determining whether a certain action is in the best interests of the
corporation; (2) provides that the Company's Board of Directors need not
consider the interests of any particular group as dominant or controlling; (3)
provides that the Company's directors, in order to satisfy the presumption
that they have acted in the best interests of the corporation, need not
satisfy any greater obligation or higher burden of proof with respect to
actions relating to an acquisition or potential acquisition of control; (4)
provides that actions relating to acquisitions of control that are approved by
a majority of "disinterested directors" are presumed to satisfy the directors'
standard, unless it is proven by clear and convincing evidence that the
directors did not assent to such action in good faith after reasonable
investigation; and (5) provides that the fiduciary duty of the Company's
directors is solely to the corporation and may be enforced by the corporation
or by a shareholder in a derivative action, but not by a shareholder directly.
The 1990 amendments to the PBCL also provide that the fiduciary duty of
directors shall not be deemed to require directors to (1) redeem any rights
under, or to modify or render inapplicable, any shareholder rights plan; (2)
render inapplicable, or make determinations under, provisions of the PBCL
relating to control transactions, business combinations, control-share
acquisitions or disgorgement by certain controlling shareholders following
attempts to acquire control; or (3) act as the board of directors, a committee
of the board or an individual director solely because of the effect such
action might have on an acquisition or potential or proposed acquisition of
control of the corporation or the consideration that might be offered or paid
to shareholders in such an acquisition.
Pennsylvania Anti-takeover Laws
The PBCL contains certain provisions which, among other things: (1) require
that, following any acquisition by any person or group of 20% of a public
corporation's voting power, the remaining shareholders have the right to
receive payment for their shares, in cash, from such person or group in an
amount equal to the "fair value" of the shares, including an increment
representing a proportion of any value payable for control of the corporation;
and (2) prohibit for five years, subject to certain exceptions, a "business
combination" (which includes a merger or consolidation of the corporation or a
sale, lease or exchange of assets) with a shareholder or group of shareholders
beneficially owning 20% or more of a public corporation's voting power. These
provisions, together with (i) the multiple voting rights accorded the Class B
Common Stock, (ii) the ability of the Board to issue preferred stock and
determine the rights, qualifications, limitations and restrictions with
respect
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<PAGE>
to such preferred stock without the approval of the Company's shareholders,
(iii) the classified nature of the Company's Board, (iv) the matters discussed
under "Limitation on Directors' Liability," and (v) provisions in the
Company's Articles of Incorporation requiring a supermajority vote to amend
certain provisions of the Company's Articles may, in the event Yuasa Japan
ceases to own shares of Class B Common Stock sufficient to control the
Company, have the effect of discouraging a potentially interested purchaser
from attempting a non-negotiated bid for the Company or of otherwise deferring
or preventing a change in control of the Company.
Chapter 25 of the PBCL contains certain other "anti-takeover" provisions
which apply to a "registered corporation," unless the registered corporation
elects not to be governed by such provisions. The Company will be a
"registered corporation" within the meaning of Chapter 25 of the PBCL because
the common stock of the Company is entitled to vote generally in the election
of directors and will be registered under the Securities Exchange Act of 1934.
The relevant provisions are contained in Subchapters 25E through 25H of the
PBCL. As permitted under the PBCL, the Company has opted out of the provisions
of Subchapters 25E (relating to control transactions), 25F (relating to
business combinations), 25G (relating to control-share acquisitions) and 25H
(relating to disgorgement). As a result of the Company opting out of
Subchapter 25G (relating to control-share acquisitions) the Company is not
subject to Subchapter 25I (relating to severance payments) or Subchapter 25J
(relating to labor contracts).
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A Common Stock and the Class
B Common Stock is American Stock Transfer & Trust Company.
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<PAGE>
UNDERWRITING
Nomura Securities International, Inc. ("Nomura") and Smith Barney Inc. are
acting as representatives (the "Representatives") of each of the Underwriters
named below (the "Underwriters"). Subject to the terms and conditions set
forth in an underwriting agreement (the "Underwriting Agreement"), among the
Company, the Selling Stockholder and the Underwriters, the Company and the
Selling Stockholder have agreed to sell to the Underwriters, and each of the
Underwriters, severally and not jointly, has agreed to purchase from the
Company and the Selling Stockholder the number of shares of Class A Common
Stock set forth opposite its name below:
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Nomura Securities International, Inc..............................
Smith Barney Inc..................................................
---------
Total......................................................... 4,392,000
=========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the
shares of Class A Common Stock being sold pursuant to such agreement if any of
the shares of Class A Common Stock being sold pursuant to such agreement are
purchased. In certain circumstances, under the Underwriting Agreement the
commitments of non-defaulting Underwriters may be increased.
The Representatives have advised the Company and the Selling Stockholder
that the Underwriters propose initially to offer the shares of Class A Common
Stock to the public at the initial public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share of Class A Common Stock. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share of Class A Common Stock on sales to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.
The Company, its directors and executive officers and Yuasa Japan have
agreed, subject to certain exceptions, not to, directly or indirectly, (i)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of, or otherwise transfer or dispose of any Common Stock
or securities convertible into or exchangeable or exercisable for Common
Stock, whether now owned or hereafter acquired by the person executing the
agreement or with respect to which the person executing the agreement
thereafter acquires the power of disposition, or exercise any right to require
the Company to file a registration statement under the Securities Act with
respect to the foregoing or (ii) enter into any swap or other agreement or
transaction that transfers, in whole or part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap
or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, without the prior written consent of Nomura,
for a period of 180 days after the date of this Prospectus.
The Company has granted to the Underwriters an over-allotment option,
exercisable not later than 30 days after the date of this Prospectus, to
purchase up to an aggregate of 658,800 additional shares of Class A Common
Stock at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus. To the extent that
the Underwriters exercise this option, each Underwriter will be committed,
subject to certain conditions, to purchase a number of additional shares of
Class A Common Stock proportionate to such Underwriter's initial commitment as
indicated in the preceding table, and the Company will be obligated, pursuant
to the option, to sell such shares of Class A Common Stock to the
Underwriters. The over-allotment option may be exercised for fewer than all of
the shares subject to such option. The Underwriters may exercise the option
only to cover over-allotments, if any, made in connection with the sale of the
Class A Common Stock offered hereby. If purchased, the Underwriters will offer
such additional shares on the same terms as those on which the shares of Class
A Common Stock are being offered.
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<PAGE>
Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the Class A Common Stock
was determined by negotiation between the Company and the Representatives. The
factors considered in determining the initial public offering price, in
addition to prevailing market conditions, are price-to-earnings ratios of
publicly traded companies that the Representatives believe to be comparable to
the Company, certain financial information of the Company, the history of, and
the prospects for, the Company and the industry in which it competes, and an
assessment of the Company's management, its past and present operations, the
prospects for, and timing of, future revenues of the Company, the present
state of the Company's development, and the above factors in relation to
market values and various valuation measures of other companies engaged in
activities similar to the Company. There can be no assurance that an active
trading market will develop for the Class A Common Stock or that the Class A
Common Stock will trade in the public market subsequent to the Offering made
hereby at or above the initial public offering price. The initial public
offering price set forth on the cover page of this Prospectus should not be
considered an indication of the actual value of the Class A Common Stock. Such
price is subject to change as a result of market conditions and other factors.
The Company has applied for listing of the Class A Common Stock on the New
York Stock Exchange under the symbol "YUA."
The Company and the Selling Stockholder have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect thereof.
The Representatives have advised the Company and the Selling Stockholder
that the Underwriters do not intend to confirm sales of Class A Common Stock
offered hereby to any accounts over which they exercise discretionary
authority.
Until the distribution of the Class A Common Stock is completed, rules of
the Commission may limit the ability of the Underwriters and certain selling
group members to bid for and purchase the Class A Common Stock. As an
exception to these rules, the Representatives are permitted to engage in
certain transactions that stabilize the price of the Class A Common Stock.
Such transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Class A Common Stock.
If the Underwriters create a short position in the Class A Common Stock in
connection with the Offering, (i.e., if they sell more shares of Class A
Common Stock than are set forth on the cover page of this Prospectus), they
may reduce that short position by purchasing Class A Common Stock in the open
market. The may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Class A Common Stock in the open market to reduce the Underwriters'
short position or to stabilize the price of the Class A Common Stock, they may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the Class A Common Stock by purchasers in the
Offering.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Class A Common
Stock. In addition, neither the Company nor any of the Underwriters makes any
representation that the Representatives will engage in such transaction or
that such transactions, once commenced, will not be discontinued without
notice.
Certain of the Underwriters and their respective affiliates have provided
from time to time, and expect to provide in the future, financial advisory and
investment banking services for, or normal banking relationships with, the
Company and its affiliates, for which they receive customary compensation.
54
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Stevens & Lee, Philadelphia and Reading, Pennsylvania.
Certain legal matters will be passed upon for the Underwriters by Shearman &
Sterling, New York, New York. Shearman & Sterling will rely on the opinion of
Stevens & Lee with respect to matters of Pennsylvania law.
EXPERTS
The consolidated financial statements and financial statement schedule of
Yuasa, Inc. at March 31, 1998, and for the year then ended, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young, LLP,
independent auditors, and at March 31, 1997, and for the two years ended March
31, 1997 and March 31, 1996, by Price Waterhouse LLP, independent accountants,
as set forth in their respective reports thereon appearing elsewhere herein,
and are included in reliance upon such reports given upon the authority of
such firms as experts in accounting and auditing. In connection with engaging
Price Waterhouse LLP to provide its consent to be named as an expert and to
include its report in this Prospectus, in accordance with its firm's general
practice, Price Waterhouse LLP requested and the Company agreed, to indemnify
Price Waterhouse LLP for the payment of solely the legal costs and expenses
that Price Waterhouse LLP might incur in its successful defense of a legal
action or proceeding that arises as a result of the consent of Price
Waterhouse LLP to the incorporation of its audit report on the Company's 1997
and 1996 financial statements in the Registration Statement. With respect to
such indemnification, legal costs and expenses must be actually and reasonably
incurred by Price Waterhouse LLP in connection with the defense or settlement
of such action or proceeding and so long as Price Waterhouse LLP acted in good
faith and in a manner in or not opposed to the best interests of the Company,
except that no indemnification shall be made in respect to any claim, issue or
matter as to which Price Waterhouse LLP shall have been determined to be
liable to the Company or for which Price Waterhouse LLP was unsuccessful in
its defense. A successful defense in this context would be one in which Price
Waterhouse LLP (or any of its members) is determined to have been neither
culpable nor obligated to pay any part of the plaintiff's damages with respect
to any such action or proceeding.
CHANGE IN INDEPENDENT ACCOUNTANTS
Effective as of December 1, 1997, Price Waterhouse LLP declined to re-
propose to serve as the Company's independent accountants. The report of Price
Waterhouse LLP as of March 31, 1997 and for each of the two years in the
period then ended did not contain an adverse opinion or disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope or accounting
principles. In connection with the audits for the years ended March 31, 1996
and 1997, Price Waterhouse LLP has indicated to the Company that it concurs
with the Company's assertion that there were no disagreements between the
Company and Price Waterhouse LLP which, if not resolved to the satisfaction of
Price Waterhouse LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, would have
caused Price Waterhouse LLP to make reference thereto in their report on the
financial statements for such years. The Company subsequently appointed Ernst
& Young LLP as its independent accountants. This appointment was approved by
the Company's Board of Directors. Prior to retaining Ernst & Young LLP, the
Company had not consulted with Ernst & Young LLP regarding the application of
accounting principles or the type of audit opinion that might be rendered on
the Company's financial statements.
None of the reports of Price Waterhouse LLP on the Company's previously
issued consolidated financial statements as of March 31, 1996 and March 31,
1997 contained an adverse opinion or a disclaimer of opinion, nor was any such
report qualified or modified as to uncertainty, audit scope or accounting
principles. Furthermore, during that period there were no "reportable events"
within the meaning of Item 304(a)(1)(v) of Regulation S-K promulgated under
the Securities Act.
55
<PAGE>
YUASA, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Accountants....................................... F-2
Consolidated Balance Sheets at March 31, 1997 and 1998................... F-4
Consolidated Statements of Income for the Years Ended March 31, 1996,
1997 and 1998........................................................... F-5
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended March 31, 1996, 1997 and 1998..................................... F-6
Consolidated Statements of Cash Flows for the Years Ended March 31, 1996,
1997 and 1998........................................................... F-7
Notes to the Consolidated Financial Statements........................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and ShareholdersYuasa, Inc.
We have audited the accompanying consolidated balance sheet of Yuasa, Inc.
as of March 31, 1998, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for the fiscal year ended March
31, 1998. Our audit also included the financial statement schedule (as it
pertains to fiscal 1998) listed in the Index at Item 16(b). These financial
statements and schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Yuasa, Inc. at March 31, 1998, and the consolidated results of its
operations and its cash flows for the fiscal year ended March 31, 1998, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic fiscal 1998 financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
Ernst & Young LLP
May 6, 1998
Harrisburg, Pennsylvania
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Yuasa, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, changes in shareholders' equity and cash
flows present fairly, in all material respects, the financial position of
Yuasa, Inc. and its subsidiaries (the Company) at March 31, 1997, and the
results of their operations and cash flows for the years ended March 31, 1997
and March 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Philadelphia, PA
May 27, 1997, except for Note 16, which is as of March 26, 1998
F-3
<PAGE>
YUASA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March 31, March 31,
1997 1998
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash..................................................... $ 4,965 $ 7,311
Accounts receivable, less allowance for doubtful accounts
of $811 for 1997 and $921 for 1998...................... 40,243 31,803
Inventories.............................................. 60,055 63,261
Deferred taxes........................................... 2,181 1,978
Prepaid expenses and other current assets................ 6,171 4,388
-------- --------
Total current assets................................... 113,615 108,741
-------- --------
Property, plant and equipment, net....................... 77,481 83,250
-------- --------
Intangible assets, net................................... 24,338 20,695
Deferred taxes........................................... 2,903 3,551
Other.................................................... 1,182 795
-------- --------
Total assets........................................... $219,519 $217,032
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current portion of long-term liabili-
ties.................................................... $ 36,225 $ 27,997
Accounts payable......................................... 32,622 34,474
Dividends payable........................................ -- 2,315
Accrued expenses......................................... 30,037 32,510
-------- --------
Total current liabilities.............................. 98,884 97,296
-------- --------
LONG-TERM LIABILITIES
Long-term debt........................................... 72,294 68,152
Capital lease obligations................................ 9,917 9,528
Other.................................................... 2,582 2,059
-------- --------
Total liabilities...................................... 183,677 177,035
-------- --------
COMMITMENTS AND CONTINGENCIES..............................
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value, 50,000 shares autho-
rized, no shares issued and outstanding................. -- --
Class A common stock, $0.01 par value, 100,000 authorized
shares; no shares issued and outstanding................ -- ---
Class B common stock, $0.01 par value, 100,000 shares au-
thorized, 8,092 shares issued and outstanding........... 81 81
Paid-in capital.......................................... 16,324 16,324
Retained earnings........................................ 20,372 24,685
Cumulative translation adjustment........................ (108) (125)
Minimum pension liability................................ (827) (968)
-------- --------
Total shareholders' equity............................. 35,842 39,997
-------- --------
Total liabilities and shareholders' equity............. $219,519 $217,032
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
YUASA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Years Ended March 31,
---------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $357,517 $357,526 $396,317
Cost of goods sold............................... 295,795 285,379 308,438
-------- -------- --------
Gross profit................................. 61,722 72,147 87,879
Operating expenses............................... 43,952 48,991 56,398
Amortization expense............................. 3,515 3,629 3,630
-------- -------- --------
Operating earnings........................... 14,255 19,527 27,851
Interest expense................................. 11,581 9,625 9,709
Loss on investment............................... -- -- 4,005
Other expense (earnings)......................... (119) 555 (1)
-------- -------- --------
Earnings before taxes............................ 2,793 9,347 14,138
Income taxes..................................... 1,514 4,236 5,830
-------- -------- --------
Net earnings..................................... $ 1,279 $ 5,111 $ 8,308
======== ======== ========
Basic and diluted earnings per share............. $ .16 $ .63 $ 1.03
======== ======== ========
Weighted average shares of Common Stock outstand-
ing............................................. 8,092 8,092 8,092
======== ======== ========
Dividends per share.............................. $ .05 $ .15 $ .49
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
YUASA, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
COMMON COMMON CUMULATIVE MINIMUM SHARE-
PREFERRED STOCK STOCK PAID-IN RETAINED TRANSLATION PENSION HOLDERS'
STOCK CLASS A CLASS B CAPITAL EARNINGS ADJUSTMENT LIABILITY EQUITY
--------- ------- ------- ------- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT APRIL 1,
1995................... $ -- $ -- $81 $16,324 $15,582 $ 203 $(349) $31,841
Minimum pension......... (122) (122)
Net earnings............ 1,279 1,279
Dividends............... (400) (400)
Cumulative translation
adjustment............. (336) (336)
---- ---- --- ------- ------- ------ ----- -------
BALANCE AT MARCH 31,
1996................... -- -- 81 16,324 16,461 (133) (471) 32,262
Minimum pension......... (356) (356)
Net earnings............ 5,111 5,111
Dividends............... (1,200) (1,200)
Cumulative translation
adjustment............. 25 25
---- ---- --- ------- ------- ------ ----- -------
BALANCE AT MARCH 31,
1997................... -- -- 81 16,324 20,372 (108) (827) 35,842
Minimum pension......... (141) (141)
Net earnings............ 8,308 8,308
Dividends............... (3,995) (3,995)
Cumulative translation
adjustment............. (17) (17)
---- ---- --- ------- ------- ------ ----- -------
BALANCE AT MARCH 31,
1998................... $ -- $ -- $81 $16,324 $24,685 $ (125) $(968) $39,997
==== ==== === ======= ======= ====== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
YUASA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended March 31,
----------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.................................... $ 1,279 $ 5,111 $ 8,308
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization................... 15,000 14,022 14,882
Provision for doubtful accounts................. 38 398 366
Provision for deferred taxes.................... (1,978) (257) (445)
Loss on sale of subsidiary...................... 127 --
Profit on sale-leaseback of machinery and equip-
ment........................................... (267) (327) (327)
Loss on retirement and write-downs of property,
plant and equipment............................ 56 468 30
Loss on investment.............................. -- -- 1,450
CHANGES IN ASSETS AND LIABILITIES, NET OF ACQUI-
SITIONS AND DIVESTITURES:
(Increase) decrease in accounts receivable...... (3,526) (1,903) 8,074
(Increase) decrease in inventories.............. (4,161) 5,768 (3,206)
(Increase) decrease in prepaid expenses and
other current assets........................... (764) (2,599) 1,783
(Increase) decrease in other assets............. (157) 2,475 (997)
Increase in accounts payable.................... 116 4,454 801
Increase in accrued expenses.................... 5,126 217 5,217
Decrease in other liabilities................... (1,255) (278) (199)
-------- -------- --------
Net cash provided by operating activities...... 9,634 27,549 35,737
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................ (17,078) (11,203) (18,951)
Investments in subsidiaries and affiliates...... (1,500) (3,229)
Proceeds from sale of subsidiary................ 109 -- --
Proceeds from sale-leaseback of machinery and
equipment...................................... 6,012 -- --
Proceeds from sales of property, plant and
equipment...................................... 15 145 --
-------- -------- --------
Net cash used in investing activities.......... (12,442) (14,287) (18,951)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term debt................. (18,005) (3,395) (13,835)
Proceeds from issuance of long-term debt........ 30,000 1,760 10,000
Repayments of long-term debt.................... (6,000) (8,033) (8,133)
Repayments of capital lease obligations......... (1,078) (1,016) (792)
Dividends paid.................................. (400) (1,200) (1,680)
-------- -------- --------
Net cash (used in) provided by financing activ-
ities......................................... 4,517 (11,884) (14,440)
-------- -------- --------
Net increase in cash........................... 1,709 1,378 2,346
Cash beginning of year........................... 1,878 3,587 4,965
-------- -------- --------
Cash, end of year................................ $ 3,587 $ 4,965 $ 7,311
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business
YUASA, INC. (the Company) is a manufacturer and supplier of industrial
batteries and small engine starting batteries. The Company's shareholders are
Yuasa Corporation (86.5%) and Exide Corporation (13.5%).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its majority owned and wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Revenue and Warranty Expense Recognition
Sales are recorded upon shipment of products and as services are rendered.
Expenses for estimated warranty claims are accrued in the period of sales
recognition.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. The cost of inventory consists
principally of material, labor and associated overhead.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and includes
expenditures which substantially increase the useful lives of the assets.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets as follows: 10 to 33 years for buildings and
improvements and 3 to 10 years for machinery and equipment. Depreciation
expense totaled $11,074, $10,044 and $11,164 for fiscal years 1996, 1997 and
1998, respectively. Maintenance and repairs are expensed as incurred. Interest
on capital projects is capitalized during the construction period and amounted
to $523, $688 and $431 in fiscal 1996, 1997 and 1998, respectively. Gains and
losses from dispositions or retirements of property, plant and equipment are
recognized currently.
Intangible Assets
Identifiable intangible assets, such as purchased patents and trademarks,
are amortized using the straight-line method over their estimated useful
lives, which range from 7 to 25 years. Non-compete agreements are amortized
over the lives of the contracts (5 to 10 years) using the straight-line
method. Goodwill represents the excess of cost over the fair value of net
assets acquired resulting from business acquisitions. Management reviews the
carrying value of goodwill and other intangibles on an ongoing basis. When
factors indicate that an intangible asset may be impaired, management uses an
estimate of the undiscounted future cash flows over the remaining life of the
asset in measuring whether the intangible asset is recoverable. If such an
analysis indicates that impairment has in fact occurred, the book value of the
intangible asset is written down to its estimated fair value using discounted
cash flows.
Environmental Expenditures
Environmental expenditures that will benefit future operations are
capitalized; all other environmental expenditures are expensed as incurred.
Accruals are recorded when environmental expenditures for remedial efforts are
probable and the amounts can be reasonably estimated.
F-8
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. These temporary differences are measured using enacted
tax rates expected to apply to taxable income in the years in which the
temporary differences are expected to be realized.
Valuation allowances are recorded to reduce deferred tax assets when it is
probable that a tax benefit will not be realized. The provision for income
taxes represents income taxes paid or payable for the current year and the
change in deferred taxes during the year.
Foreign Currency Translation
Results of foreign operations are translated into U.S. dollars using
average exchange rates during the period while assets and liabilities are
translated into U.S. dollars using current rates as of the balance sheet date.
The resulting translation adjustments are accumulated as a separate component
of shareholders' equity.
Transaction gains and losses resulting from exchange rate changes on
transactions denominated in currencies other than those of the foreign
subsidiaries are included in income in the year in which the change occurs.
Earnings per Share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 128 (SFAS 128), "Earnings Per Share." All
earnings per share amounts have been presented to conform to the SFAS 128
requirements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Accounting Standards Change
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of." This standard specifies when assets should be reviewed for
impairment, how to determine if an asset is impaired, how to measure an
impairment loss, and what disclosures are necessary in the financial
statements. The Company adopted SFAS 121 on April 1, 1996 and recorded a
pretax charge of $400 during the year ended March 31, 1997.
In June 1996, the FASB issued Statement No. 125 (SFAS 125), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities," which provides accounting and reporting standards for sales,
securitizations, and servicing of receivables and other financial assets,
secured borrowing and collateral transactions, and the extinguishment of
liabilities. The Company has modified an agreement to meet the new
requirements to enable it to continue recognizing transfers of certain
receivables to a qualifying special-purpose entity as sales. This agreement is
structured to allow the Company to sell to an affiliate of a bank, without
recourse, all right, title and interest in designated accounts receivable. As
of March 31, 1997 and 1998, a total of $30,000 and $40,000, respectively, of
accounts receivable were sold. Receivables are sold daily at a discount
F-9
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
rate based upon U.S. federal funds plus 1/4%. Discounts included in interest
expense were $1,949 in fiscal 1996, $1,907 in fiscal 1997 and $1,858 in fiscal
1998.
New Accounting Pronouncements Not Yet Adopted
In June 1997, FASB issued Statement of Financial Accounting Standards No.
131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related
Information," which is effective for years beginning after December 15, 1997.
SFAS 131 establishes standards for the way that public businesses report
information about operating segments in annual financial statements and
requires that those businesses report selected information about operating
segments in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The Company will adopt the new requirements for the fiscal year
ended March 31, 1999, which will require retroactive application. Management
has not completed its review of SFAS 131 and has not determined the impact
that the adoption will have on the Company's financial statements.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 (SFAS 130), "Reporting Comprehensive Income," which establishes rules
for reporting and displaying all changes in shareholders' equity exclusive of
transactions with owners, such as capital investments. Examples of
comprehensive income include unrealized gains or losses on available-for-sale
securities, translation adjustments on investments in foreign subsidiaries,
and certain changes in minimum pension liabilities. SFAS 130 is effective for
fiscal years beginning after December 15, 1997.
In March 1998, the AICPA issued SOP 98-1, Accounting For the Costs of
Computer Software Developed For or Obtained For Internal--Use. The SOP is
effective for the Company on April 1, 1999. The SOP will require the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal--use. The
Company currently capitalizes certain external costs and expenses all other
costs as incurred. The Company believes the SOP will not materially effect the
Company's earnings or financial position.
Financial Instruments
The Company's financial instruments recorded on the balance sheet include
cash, accounts and notes receivable, accounts payable and debt. Because of the
short maturity, the carrying amount of cash, accounts and notes receivable,
accounts payable and short-term debt approximates fair value. Fair value of
long-term debt is based on rates available to the Company for debt with
similar terms and maturities and is deemed to approximate book value.
2. BUSINESS COMBINATIONS:
On October 1, 1995, the Company sold its 51% interest in Arctic Yuasa-Exide
Company for $147 which resulted in a loss on sale of $127.
Effective November 30, 1995, the Company paid $600 for the inventory and
fixed assets of Advanced Power Systems, Inc. (APS), a Pennsylvania corporation
in the business of installing and servicing certain telecommunications
equipment. The Company also paid two former owners of APS $900 for agreements
not to compete.
On July 1, 1996, the Company paid $350 for a 55% interest in Yuasa-Exide
Argentina, a joint venture in the business of manufacturing and marketing lead
acid batteries and related equipment.
F-10
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
On September 9, 1996, the Company paid $2,879 for the fixed assets and
inventory of H&R Metal Products Inc., a South Carolina corporation which
manufactures metal trays for certain battery types. The Company also entered
into non-compete and consulting agreements with the former owner of H&R Metal
Products Inc., whereby the Company is to make total payments of $300 and $400,
respectively over five years.
3. INVENTORIES:
Inventories consist of:
<TABLE>
<CAPTION>
March 31,
---------------
1997 1998
------- -------
<S> <C> <C>
Raw materials................................................ $10,650 $ 9,657
Work-in-process.............................................. 12,083 13,402
Finished goods............................................... 37,322 40,202
------- -------
$60,055 $63,261
======= =======
</TABLE>
Inventory reserves for obsolescence and other estimated losses were $625 and
$725 at March 31, 1997 and March 31, 1998, respectively.
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
March 31,
------------------
1997 1998
-------- --------
<S> <C> <C>
Land..................................................... $ 6,371 $ 6,378
Buildings and improvements............................... 42,760 43,588
Machinery and equipment.................................. 74,632 83,408
Construction in progress................................. 6,260 13,543
-------- --------
130,023 146,917
Less: Accumulated depreciation and amortization (52,542) (63,667)
-------- --------
Net property, plant and equipment........................ $ 77,481 $ 83,250
======== ========
</TABLE>
F-11
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
5. INTANGIBLE ASSETS:
Intangible assets consist of:
<TABLE>
<CAPTION>
March 31,
------------------
1997 1998
-------- --------
<S> <C> <C>
Non-compete agreements................................... $ 21,254 $ 21,254
Proprietary technology................................... 8,679 8,679
Patents.................................................. 6,035 6,035
Tradenames and trademarks................................ 5,907 5,907
Goodwill and marketing rights............................ 2,388 2,388
-------- --------
44,263 44,263
Less: accumulated amortization........................... (19,925) (23,568)
-------- --------
Intangible assets........................................ $ 24,338 $ 20,695
======== ========
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses consist of:
<TABLE>
<CAPTION>
March 31,
---------------
1997 1998
------- -------
<S> <C> <C>
Product warranty reserve.................................... $ 4,951 $ 5,397
Payroll and related benefits................................ 11,873 12,173
Interest.................................................... 1,233 1,256
Other....................................................... 11,980 13,684
------- -------
Accrued Expenses............................................ $30,037 $32,510
======= =======
</TABLE>
7. DEBT:
Short-Term Debt
Short-term debt consists primarily of borrowings associated with revolving
bank lines of credit. The Company had $27,300 and $13,465 in borrowings under
lines of credit and $70,700 and $61,535 in available but unused lines of
credit with banks at March 31, 1997 and 1998, respectively. These lines of
credit are renewed annually and are unsecured. Borrowings generally bear
interest at the federal funds rate plus a percentage which ranged between 0.3%
and 0.5% (weighted average of 5.9% and 6.2% at March 31, 1997 and 1998,
respectively).
F-12
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
Long-Term Debt
<TABLE>
<CAPTION>
March 31,
---------------
1997 1998
------- -------
<S> <C> <C>
Unsecured loan payable in a lump-sum due December 10, 1998,
bearing interest at 7.90% fixed per annum................. $30,000 $30,000
Unsecured loan payable in semi-annual installments from
January 10, 1995 through July 10, 1999, bearing interest
at 7.37% fixed per annum.................................. 15,000 9,000
Mortgage loan payable in three annual installments through
December 20, 1998, bearing interest at 5.94% per annum.
Loan is secured by a first mortgage lien interest in the
Company's corporate headquarters.......................... 3,800 1,900
Loan payable in monthly installments through August 1,
2003, bearing interest at 3.00% fixed per annum. Loan is
secured by a second mortgage lien interest in the
Company's corporate headquarters.......................... 1,627 1,392
Unsecured loan payable in ten semi-annual installments from
May 10, 1998 through November 10, 2002, bearing interest
at a rate of LIBOR +.375% per annum (approximately 6.25%
at March 31, 1998)........................................ 10,000 10,000
Unsecured loan payable in ten semi-annual installments from
April 30, 1998 through October 30, 2002, bearing interest
at a rate of LIBOR +.375% per annum (approximately 6.25%
at March 31, 1998)........................................ 20,000 20,000
Unsecured loan payable in 20 quarterly installments of $500
from July 1, 2001 through April 1, 2006 bearing interest
at a fixed rate of 6.43%.................................. -- 10,000
------- -------
80,427 82,292
Less: Current Portion 8,133 14,140
------- -------
$72,294 $68,152
======= =======
</TABLE>
The Company paid $11,842, $9,985 and $10,075 for interest during fiscal
1996, 1997 and 1998 respectively. Aggregate maturities of long-term debt in
each of the five years after March 31, 1998 are as follows:
<TABLE>
<S> <C>
1999................................. $14,140
2000................................. 9,248
2001................................. 6,255
2002................................. 7,763
2003................................. 8,271
Thereafter........................... 6,615
-------
$52,292
=======
</TABLE>
Excluded from above is the $30,000 loan payable due December 10, 1998. The
Company has the ability and intent to enter into a financing agreement with a
bank to refinance the loan on a long-term basis. Repayment terms shall be
determined in November 1998; however, under no circumstances will repayment be
required prior to July 1, 1999.
Yuasa Corporation has guaranteed $39,000 of the Company's outstanding long-
term debt.
F-13
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
The Company's financing agreements with certain of its lenders contain
various covenants which, absent prepayment in full of the indebtedness or the
receipt of waivers, would limit the Company's ability to conduct certain
specified business transactions including incurring debt, extending credit,
mergers, consolidations or similar transactions, buying or selling assets out
of the ordinary course of business, engaging in sale and leaseback
transactions and certain other actions. The Company believes it is presently
in full compliance with all such covenants. The Company intends to repay
certain of the indebtedness to which some of the foregoing covenants apply
using the net proceeds of the Offering (see Note 17). The Company sells
accounts receivable, on a continuous basis, to an asset-backed structured
finance conduit. The maximum amount available on this receivable financing was
$40.0 million at March 31, 1998.
As of March 31, 1998, under arrangements with certain banks, the Company
had $2,663 of standby letters of credit outstanding.
8. LOSS ON INVESTMENT:
During the year ended March 31, 1998, the Company recognized $4,005 in
losses associated with its investment in Tucker Telecommunications Company
(Tucker). Such losses consisted primarily of the cost of settling certain
guarantee obligations of Tucker related to the closing of its business during
the year and the write-off of all the Company's investment.
9. INCOME TAXES:
Earnings before income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------
1996 1997 1998
------ ------ -------
<S> <C> <C> <C>
U.S. operations........................................ $1,837 $8,715 $13,652
Foreign operations..................................... 956 632 486
------ ------ -------
$2,793 $9,347 $14,138
====== ====== =======
</TABLE>
Income tax expense (benefit) is comprised of the following:
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------
1996 1997 1998
------- ------ ------
<S> <C> <C> <C>
Current:
Federal........................................... $ 2,435 $4,075 $5,748
State............................................. 1,057 364 538
Foreign........................................... -- 54 (11)
------- ------ ------
Total current................................... 3,492 4,493 6,275
------- ------ ------
Deferred:
Federal........................................... $(1,831) $ (235) $ (424)
State............................................. (157) (22) (21)
Foreign........................................... 10 -- --
------- ------ ------
Total deferred.................................. (1,978) (257) (445)
------- ------ ------
Income tax expense.................................. $ 1,514 $4,236 $5,830
======= ====== ======
</TABLE>
F-14
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
Income taxes paid by the Company for the years ended March 31, 1996, 1997
and 1998 were $2,930, $3,454 and $3,618, respectively.
The following table sets forth the tax effects of temporary differences
that give rise to significant portions of the deferred tax assets and
liabilities:
<TABLE>
<CAPTION>
Years Ended March 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Accounts receivable.............................. $ 233 $ --
Inventories...................................... 766 900
Intangibles, principally due to differences in
amortization.................................... 1,158 1,309
Deferred gain.................................... 581 468
Net operating loss carryforwards................. 446 379
Accrued liabilities and other items.............. 4,876 5,211
---------- ----------
Gross deferred tax assets...................... 8,060 8,267
Valuation allowance............................ (252) (185)
---------- ----------
Net deferred tax assets.......................... 7,808 8,082
Deferred tax liabilities:
Accounts receivable.............................. 525
Intangibles, principally due to differences in
amortization.................................... 189 118
Plant and equipment, principally due to
differences in depreciation..................... 1,532 1,906
Prepaid expenses and other items................. 1,003 4
---------- ----------
Gross deferred tax liabilities................... 2,724 2,553
---------- ----------
Net deferred tax asset........................... $ 5,084 $ 5,529
========== ==========
</TABLE>
The Company has recorded a valuation allowance for net deferred tax assets
in foreign tax jurisdictions, primarily related to net operating loss
carryforwards, due to the significant losses incurred in these tax
jurisdictions in previous years.
A reconciliation of income taxes at the statutory rate to the income tax
provision is as follows:
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
U.S. statutory income taxes (at 35%)............... $ 978 $ 3,271 $ 4,948
Increase (decrease) resulting from:
State income taxes, net of federal effect........ 142 229 336
Non-deductible intangible amortization and
other........................................... 330 263 357
Other............................................ 64 473 189
------- ------- -------
$ 1,514 $ 4,236 $ 5,830
======= ======= =======
</TABLE>
At March 31, 1998, the Company has not made provision for U.S. federal and
state income taxes on approximately $127 of foreign earnings which are
expected to be reinvested indefinitely. Upon distribution of those earnings in
the form of dividends or otherwise, the Company would be subject to U.S.
income taxes (subject to an adjustment for foreign tax credits) and
withholding taxes payable to the various foreign countries.
F-15
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
10. PENSION PLANS:
The Company has noncontributory defined benefit pension plans covering
substantially all hourly employees. The benefits for these plans are based
primarily on stated amounts for each year of credited service. Company
contributions to these plans are made in accordance with applicable laws and
tax regulations. Plan assets consist of mutual funds and common trust funds
invested in bonds, common stocks and money market funds.
Net pension cost for the defined benefit plans of the Company includes the
following components:
<TABLE>
<CAPTION>
Years Ended March 31,
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Service cost...................................... $ 323 $ 401 $ 520
Interest cost..................................... 171 257 314
Actual loss (return) plan assets.................. (263) (227) (717)
Net amortization and deferrals.................... 140 104 522
------- ------- -------
Net pension cost................................ $ 371 $ 535 $ 639
======= ======= =======
</TABLE>
The funded status of the defined benefit plans of the Company is as
follows:
<TABLE>
<CAPTION>
March 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation............................... $(3,579) $(4,910)
======= =======
Accumulated benefit obligation............................ $(3,889) $(5,313)
======= =======
Actuarial present value of projected benefit obligation... $(3,889) $(5,313)
Plan assets at fair value................................. 2,894 4,196
------- -------
Plan assets less projected benefit obligation............. (995) (1,117)
Unrecognized prior service cost........................... 58 125
Unrecognized net loss..................................... 1,345 1,621
Additional minimum liability.............................. (1,403) (1,746)
------- -------
Accrued pension cost...................................... $ (995) $(1,117)
======= =======
</TABLE>
The projected benefit obligation (PBO) was determined using a discount rate
of 7.75% during fiscal 1997 and 7.0% during fiscal 1998. The PBO increased
mainly due to a change in the actuarial assumptions, principally the reduction
in the discount rate. The assumed long-term rate of return on plan assets was
9% in fiscal 1996, 1997 and 1998.
Substantially all salaried employees are eligible to participate in the
Salaried Retirement and 401(k) Plan.
Under this Plan, the Company contributes annually 4% of eligible employees'
salaries to a trust fund. In addition to the employer contribution, a salaried
employee may make voluntary contributions to the Plan of up to 12% of their
salary. During fiscal 1998, the voluntary contribution percentage was
increased from 12% to 15%. The Company is obligated to make additional
contributions, to the extent of the employee's participation in the Plan, of
25% of the amount contributed by the employee up to a maximum of 4% of the
employee's salary. The 401(k)
F-16
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
program also allows for Company discretionary matching contributions. For
fiscal 1998, total Company contributions were 25% of the amount contributed by
the employee up to a maximum of 4% of the employee's salary. Employer
contributions made to the salaried retirement and 401(k) plan for fiscal 1996,
1997 and 1998 were $1,269, $1,167 and $1,270, respectively.
The Company provides all hourly-paid employees with at least one year of
eligible service at the Richmond, KY, Sumter, SC and Laureldale, PA
manufacturing facilities with an Hourly Savings Plan. Under this Plan an
employee may make voluntary contributions to the Plan of up to 12% of their
salary. The Company has the option, based on performance factors, to
contribute an amount equal to 25% of the amount contributed by the employee,
up to a maximum of 4% of the employee's salary. Employer contributions made to
the hourly savings plan for fiscal 1996, 1997 and 1998 were $69, $122 and
$116, respectively.
11. LEASES
The Company has entered into various capital lease arrangements in
connection with its Reading, PA and Hays, KS manufacturing facilities.
Payments under these arrangements are supported by letters of credit partially
guaranteed by Yuasa Corporation. The Company has also entered into capital
lease arrangements for certain computer equipment.
The following is an analysis of the leased property under capital leases by
major classes:
<TABLE>
<CAPTION>
March 31,
------------------
1997 1998
-------- --------
<S> <C> <C>
Classes of property
Land................................................... $ 232 $ 232
Building............................................... 4,474 4,474
Machinery and equipment................................ 11,463 11,463
-------- --------
16,169 16,169
Less: Accumulated depreciation......................... (13,373) (13,891)
-------- --------
$ 2,796 $ 2,278
======== ========
</TABLE>
Amortization relating to fixed assets under capital leases is included in
depreciation expense.
F-17
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
The Company's future minimum lease payments under capital and operating
leases which have non-cancelable terms in excess of one year at March 31, 1998
are as follows:
<TABLE>
<CAPTION>
Lease Type
-----------------
Capital Operating
------- ---------
<S> <C> <C>
1999....................................................... $ 807 $ 4,049
2000....................................................... 430 3,830
2001....................................................... 9,688 2,268
2002....................................................... -- 1,611
Thereafter................................................. -- 3,009
------- -------
Total minimum payments................................... $10,925 $14,767
=======
Less: Interest at rates ranging from 4.0% to 9.7%.......... 1,008
-------
Present value of net minimum lease payments................ 9,917
Less: Current portion...................................... 389
-------
Long-term portion........................................ $ 9,528
=======
</TABLE>
Operating lease rental expense was $6,489, $6,786, and $7,431 for fiscal
1996, 1997, and 1998 respectively. Certain operating lease agreements contain
renewal or purchase options and/or escalation clauses.
12. RELATED PARTY TRANSACTIONS
The Company transacts business with several entities with which it is
related through common ownership. Summarized below are the Company's
transactions with related parties.
<TABLE>
<CAPTION>
Purchases Sales
Years Ended Years Ended
March 31, March 31,
----------------------- -----------------------
1996 1997 1998 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Company
Exide(1)...................... $10,752 $ 6,888 $ 4,431 $19,965 $ 4,633 $ 3,793
Yuasa Corporation(2).......... 20,597 15,005 11,622 10,010 6,000 7,767
------- ------- ------- ------- ------- -------
$31,349 $21,893 $16,053 $29,975 $10,633 $11,560
======= ======= ======= ======= ======= =======
</TABLE>
The following balances with related parties are outstanding as of:
<TABLE>
<CAPTION>
Accounts Payable Accounts Receivable
March 31, March 31,
-------------------------------------
1997 1998 1997 1998
--------- ----------------- ---------
<S> <C> <C> <C> <C>
Company
Exide(1)................................ $ 702 $ 280 $ 1,053 $ 1,588
Yuasa Corporation(2).................... 480 511 969 1,450
--------- ------- --------- ---------
$ 1,182 $ 791 $ 2,022 $ 3,038
========= ======= ========= =========
</TABLE>
F-18
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
Payment terms are generally the same as those extended to unrelated third
parties, and the balances are settled within the stated terms.
(1) The Company purchases lead, certain battery components and
administrative services from Exide. The Company sells certain finished
batteries to Exide. Transactions between the Company and Exide
approximate market prices.
(2) The Company purchases from and sells to Yuasa Corporation and its
affiliates certain finished batteries depending upon market demands.
Additionally, the Company purchases certain finished batteries, parts and
accessories from Yuasa Corporation and affiliates. Transactions between
the Company and Yuasa Corporation and affiliates approximate market
prices.
The Company incurred royalty expenses from Yuasa Corporation related to
sales of motorcycle and small stationary batteries. Royalty expenses for
fiscal 1996, 1997 and 1998 were $1,069, $1,497 and $1,601, respectively.
Royalties payable at March 31, 1997 and 1998 were $485 and $447, respectively,
which are included in accrued expenses.
Additionally, the Company incurred expenses from Yuasa Corporation of
approximately $250 per year for fiscal 1996, 1997, and 1998, related to the
reimbursement of Yuasa Corporation out-of-pocket expenses associated with
services provided to the Company.
In March 1998, the Company entered into a revolving credit facility for up
to $5 million with Yuasa Japan. Under this facility, Yuasa Japan may borrow,
repay and reborrow from the Company at any time until March 30, 1999. At March
31, 1998, no amounts were outstanding under this facility. This facility is
unsecured, matures in its entirety on March 31, 1999, and bears interest at a
rate approximately equal to the U.S. Federal funds rate plus 1%, payable
monthly.
13. COMMITMENTS AND CONTINGENCIES
The Company is involved in routine litigation incidental to the conduct of
its business, the results of which, in the opinion of management, are not
likely to be material to the Company's financial condition, results of
operations, or cash flows.
As a result of its manufacturing activities, the Company is subject to
various environmental laws and is exposed to the costs and risks of handling,
processing, storing and disposing of hazardous and toxic substances (primarily
lead and acid). The Company's operations are also subject to Federal and state
occupational and health regulations, particularly relating to the control of
blood lead levels in the workplace. The Company is involved in certain
environmental matters pending before the Federal and state courts and
regulatory agencies. In the opinion of management, such matters known to the
Company are not expected to have a material adverse effect on the Company's
financial condition or results of operations, but the full extent of the
Company's liability in this area cannot be quantified at this time.
In order to ensure a steady supply of lead and to keep the cost of products
stable, the Company has entered into contracts with suppliers for the purchase
of lead. Each such contract is for a period not extending beyond one year.
Under these contracts, the Company was committed at March 31, 1998 to purchase
23.7 million pounds of lead for a total purchase price of $5,722.
14. CONCENTRATION OF CREDIT RISK
Financial instruments which subject the Company to potential concentration
of credit risk consist principally of trade accounts and notes receivable and
temporary cash investments. The Company places its
F-19
<PAGE>
YUASA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
temporary cash investments with various financial institutions and, generally,
limits the amount of credit exposure to any one financial institution.
Concentrations of credit risk with respect to trade receivables is limited by
a large customer base and its geographic dispersion. The Company performs
ongoing credit evaluations of its customers' financial condition and requires
collateral, such as letters of credit, in certain circumstances.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
1998
Net Sales.................................. $94,677 $91,795 $104,428 $105,417
Gross Profit............................... $20,157 $22,205 $ 22,841 $ 22,676
Net Earnings............................... $ 1,662 $ 2,992 $ 642 $ 3,012
Net Earnings per share (basic and
diluted).................................. $ .21 $ .37 $ .08 $ .37
1997
Net Sales.................................. $85,370 $85,821 $ 85,239 $101,096
Gross Profit............................... $15,574 $16,986 $ 17,121 $ 22,466
Net Earnings............................... $ 66 $ 899 $ 810 $ 3,336
Net Earnings per share (basic and
diluted).................................. $ .01 $ .11 $ .10 $ .41
</TABLE>
The results of operations for the third quarter of 1998 reflect a $4.0
million loss on its investment in Tucker. See Note 8.
16. CAPITAL STRUCTURE
Effective March 9, 1998, the Company was incorporated in the Commonwealth
of Pennsylvania as the holding company for its wholly-owned operating
subsidiary Yuasa-Exide, Inc. (Subsidiary). On March 26, 1998, the Company's
shareholders exchanged their shares of the Subsidiary for shares of Class B
Common Stock of the Company. The basis of the exchange was 1 share of the
Subsidiary common stock for 1,400 shares of the Company's Class B Common
Stock. All shares of Common Stock and per share amounts have been presented to
give retroactive effect to the formation of the Company.
17. INITIAL PUBLIC OFFERING
On March 30, 1998, the Company filed a registration statement on Form S-1
with the Securities and Exchange Commission in anticipation of a public
offering of common stock.
18. STOCK OPTIONS
In connection with the planned initial public offering, the Company's Board
of Directors and Shareholders approved the Omnibus Stock Plan (the Plan).
Under the Plan, awards denominated or payable in shares, options to purchase
shares of the Company's Class A Common Stock or stock appreciation rights may
be granted. A maximum of 5% of the total outstanding shares of Common Stock of
the Company following the initial public offering may be issued under the
Plan.
The Board of Directors and Shareholders approved, subject to successful
completion of the Company's Initial Public Offering, the granting of options
to purchase 570,400 shares of Class A Common Stock with an exercise price
equal to the Offering Price to the public.
F-20
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE CLASS A COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON
TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS
SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 9
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Consolidated Financial Information.............................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 27
Management............................................................... 39
Related Party Transactions............................................... 45
Principal and Selling Stockholders....................................... 48
Description of Capital Stock............................................. 49
Underwriting............................................................. 53
Legal Matters............................................................ 55
Experts.................................................................. 55
Change in Independent Accountants........................................ 55
Index to Financial Statements............................................ F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPAT-
ING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIV-
ERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PRO-
SPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,392,000 SHARES
LOGO
Yuasa, Inc.
CLASS A COMMON STOCK
---------------
PROSPECTUS
---------------
Joint Lead Managers and Book-Runners
NOMURA SECURITIES INTERNATIONAL, INC.
SALOMON SMITH BARNEY
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses, other than the SEC registration fee, are estimated.
All expenses of this offering will be paid by the Company.
<TABLE>
<S> <C>
SEC registration fee........................................... $ 23,840
NASD filing fee................................................ $ 8,582
NYSE listing fee............................................... $ 84,600
Blue Sky fees and expenses..................................... $ 50,000
Transfer agent's and registrar's fees and expenses............. $ 50,000
Printing and engraving expenses................................ $ 50,000
Accounting fees and expenses................................... $ 300,000
Legal fees and expenses (other than Blue Sky fees and
expenses)..................................................... $ 200,000
Miscellaneous.................................................. $ 232,978
----------
Total........................................................ $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 6.01 of Article VI of Registrant's By-Laws (Exhibit 3.2 hereto),
provide for the indemnification of its directors and officers under certain
circumstances and are incorporated herein by reference. The Pennsylvania
Business Corporation Law also provides for indemnification as set forth in
Section 145 thereof, which is incorporated herein by reference. The effect of
those provisions is to indemnify the directors and officers of the Registrant
against all costs, expenses and amounts of liability incurred by them in
connection with any action, suit or proceeding in which they are involved by
reason of their affiliation with the Registrant, to the fullest extent
permitted by law.
The Underwriting Agreement (Exhibit 1.1 hereto) contains certain provisions
pursuant to which the Underwriters have agreed to indemnify the Registrant,
its directors, each of the officers who signed the Registration Statement,
each person who controls the Registrant within the meaning of the Securities
Act of 1933, the Registrant's principal subsidiary, and each person who
controls the Registrant's principal subsidiary within the meaning of the
Securities Act of 1933.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
1.1 Underwriting Agreement.
3.1 Articles of Incorporation.
3.2 Bylaws.
5.1 Opinion of Stevens & Lee, P.C. re legality of shares.
10.1 1998 Yuasa, Inc. Omnibus Stock Plan.
10.2 Covenant Not to Compete between Yuasa Battery (America), Inc. and Exide
Corporation dated June 10, 1991.
10.3 License and Technical Assistance Agreement dated May 19, 1998 between
Yuasa, Inc. and Yuasa Corporation (Japan).
10.4 Agreement Not to Compete dated May 1998 between Yuasa, Inc. and Yuasa
Corporation (Japan).
10.5 Securitization Agreement dated as of March 16, 1998 among YESCO, Inc.,
Prominent Funding Corporation, Yuasa Exide, Inc., and The Sakura Bank,
Limited.
10.6 Receivables Transfer Agreement dated as of March 16, 1998 between Yuasa
Exide, Inc. and YESCO, Inc.
10.7 Financing Agreements and Related Notes between Yuasa Exide, Inc. and
various lenders.
10.8 Trademark and Tradename License Agreement dated June 10, 1991 between
Yuasa Battery (America), Inc. and Exide Corporation.
16.1 Letter of Price Waterhouse LLP re change in accountants.**
21. Subsidiaries of Yuasa, Inc.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Stevens & Lee (included in Exhibit 5.1).
23.3 Consent of Ernst & Young LLP.
24. Power of Attorney (contained as part of signature page).**
27.1 Financial Data Schedule.**
</TABLE>
- --------
** Previously filed.
(b) Financial Statement Schedules and Related Reports
Schedule II
Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred
II-2
<PAGE>
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
READING, COMMONWEALTH OF PENNSYLVANIA, ON MAY 20, 1998.
Yuasa, Inc.
/s/ P. Michael Ehlerman*
By: _________________________________
P. MICHAEL EHLERMAN,
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
<TABLE>
<S> <C>
/s/ Teruhisa Yuasa* Chairman of the May 20, 1998
- ------------------------------------- Board; Director
TERUHISA YUASA
/s/ P. Michael Ehlerman* Vice Chairman and May 20, 1998
- ------------------------------------- CEO; Director
P. MICHAEL EHLERMAN, INDIVIDUALLY (Principal
AND AS ATTORNEY IN FACT Executive Officer)
/s/ Michael T. Philion Vice President-- May 20, 1998
- ------------------------------------- Finance, CFO
MICHAEL T. PHILION (Principal
Financial Officer)
/s/ Raymond J. Grzybowski* Controller May 20, 1998
- ------------------------------------- (Principal
RAYMOND J. GRZYBOWSKI Accounting Officer)
/s/ John D. Craig* President and Chief May 20, 1998
- ------------------------------------- Operating Officer;
JOHN D. CRAIG Director
/s/ Hiroshi Horiuchi* Vice President-- May 20, 1998
- ------------------------------------- Export and
HIROSHI HORIUCHI Secretary; Director
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Arthur M. Hawkins* Director May 20, 1998
- -------------------------------------
ARTHUR M. HAWKINS
/s/ Yasukazu Sakai* Director May 20, 1998
- -------------------------------------
YASUKAZU SAKAI
/s/ Shuji Kawata* Vice President-- May 20, 1998
- ------------------------------------- International;
SHUJI KAWATA Director
/s/ James Kanda* Director May 20, 1998
- -------------------------------------
JAMES KANDA
/s/ Raymond J. Kenny* Director May 20, 1998
- -------------------------------------
RAYMOND J. KENNY
/s/ Michael T. Philion Attorney-in-Fact
*By _________________________________
MICHAEL T. PHILION
</TABLE>
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ---------- ---------- ---------- ---------
Additions
Balance at Charged to Balance
Beginning Costs and at End of
Description of Period Expenses Deductions Period
----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Valuation Accounts Deducted in the
Consolidated Balance Sheet from
the Assets to which They Apply:
Year ended March 31, 1998:
Allowance for doubtful accounts.. 811 366 256 921
Allowance for inventory losses... 625 1,750 1,650 725
Year Ended March 31, 1997:
Allowance for doubtful accounts.. 704 398 291 811
Allowance for inventory losses... 627 1,499 1,501 625
Year Ended March 31, 1996:
Allowance for doubtful accounts.. 778 38 112 704
Allowance for inventory losses... 200 1,470 1,043 627
</TABLE>
<PAGE>
EXHIBIT 1.1
================================================================================
YUASA, INC.
(a Pennsylvania corporation)
4,392,000 Shares of Class A Common Stock
UNDERWRITING AGREEMENT
Dated: , 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
UNDERWRITING AGREEMENT.................................................... 1
SECTION 1. Representations and Warranties........................ 3
(a) Representations and Warranties by the Company......... 3
(i) Compliance with Registration Requirements..... 3
(ii) Independent Accountants....................... 4
(iii) Financial Statements.......................... 4
(iv) No Material Adverse Change in Business........ 4
(v) Good Standing of the Company.................. 5
(vi) Good Standing of Subsidiaries................. 5
(vii) Capitalization................................ 5
(viii) Authorization of Agreement.................... 6
(ix) Authorization and Description of Securities... 6
(x) Absence of Defaults and Conflicts............. 6
(xi) Absence of Labor Dispute...................... 7
(xii) Absence of Proceedings........................ 7
(xiii) Accuracy of Exhibits.......................... 7
(xiv) Possession of Intellectual Property........... 7
(xv) Absence of Further Requirements............... 7
(xvi) Possession of Licenses and Permits............ 8
i
<PAGE>
(xvii) Title to Property............................. 8
(xviii) Investment Company Act........................ 8
(xix) Environmental Laws............................ 8
(xx) Registration Rights........................... 9
(xxi) Absence of Stabilization or Manipulation...... 9
(xxii) Insurance..................................... 9
(xxiii) Relationships with Directors, Stockholders,
Customers and Suppliers....................... 9
(xxiv) Stock Purchase Rights and Transfer
Restrictions.................................. 9
(xxv) Taxes......................................... 10
(b) Representations and Warranties by the Selling
Stockholder........................................... 10
(i) Accuracy of Disclosure........................ 10
(ii) Authorization of Agreements................... 10
(iii) Good and Marketable Title..................... 11
(iv) Due Execution of Power of Attorney and
Custody Agreement............................. 11
(v) Absence of Stabilization or Manipulation...... 11
(vi) Absence of Further Requirements............... 12
(vii) Certificates Suitable for Transfer............ 12
(viii) No Association with NASD...................... 12
(c) Officer's Certificates................................ 12
ii
<PAGE>
SECTION 2. Sale and Delivery to Underwriters; Closing............ 13
(a) Initial Securities.................................... 13
(b) Option Securities..................................... 13
(c) Payment............................................... 13
(d) Denominations; Registration........................... 14
SECTION 3. Covenants of the Company.............................. 14
(a) Compliance with Securities Regulations and
Commission Requests................................... 14
(b) Filing of Amendments.................................. 15
(c) Delivery of Registration Statements................... 15
(d) Delivery of Prospectuses.............................. 15
(e) Continued Compliance with Securities Laws............. 15
(f) Blue Sky Qualifications............................... 16
(g) Rule 158.............................................. 16
(h) Use of Proceeds....................................... 16
(i) Listing............................................... 16
(j) Restriction on Sale of Securities..................... 16
(k) Reporting Requirements................................ 17
(l) Compliance with NASD Rules............................ 17
(m) Compliance with Rule 463.............................. 17
SECTION 4. Payment of Expenses................................... 17
(a) Expenses.............................................. 17
(b) Expenses of the Selling Stockholder................... 18
iii
<PAGE>
(c) Termination of Agreement.............................. 18
(d) Allocation of Expenses................................ 18
SECTION 5. Conditions of Underwriters' Obligations............... 18
(a) Effectiveness of Registration Statement............... 19
(b) Opinion of Counsel for Company........................ 19
(c) Opinion of Counsel for Selling Stockholder............ 19
(d) Opinion of Counsel for Underwriters................... 19
(e) Officers' Certificate................................. 20
(f) Certificate of Selling Stockholder.................... 20
(g) Accountants' Comfort Letter........................... 20
(h) Bring-down Comfort Letter............................. 20
(i) Approval of Listing................................... 21
(j) No Objection.......................................... 21
(k) Lock-up Agreements.................................... 21
(l) Yuasa Technology Agreements........................... 21
(m) Agreement Not to Purchase Shares in the Offering...... 21
(n) Waivers............................................... 21
(o) Documentation Furnished to Counsel for
Underwriters.......................................... 21
(p) Conditions to Purchase of Option Securities........... 21
(q) Additional Documents.................................. 23
(r) Termination of Agreement.............................. 23
SECTION 6. Indemnification....................................... 23
iv
<PAGE>
(a) Indemnification of Underwriters....................... 23
(b) Indemnification of Company, Directors and
Officers and Selling Stockholder...................... 24
(c) Actions against Parties; Notification................. 24
(d) Settlement without Consent if Failure to Reimburse.... 25
[(e) Indemnification for Reserved Securities...............25]
(f) Other Agreements with Respect to Indemnification...... 25
SECTION 7. Contribution.......................................... 25
SECTION 8. Representations, Warranties and Agreements to
Survive Delivery...................................... 27
SECTION 9. Termination of Agreement.............................. 27
(a) Termination; General.................................. 27
(b) Liabilities........................................... 28
SECTION 10. Default by One or More of the Underwriters............ 28
SECTION 11. Default by the Selling Stockholder or the Company..... 28
SECTION 12. Notices............................................... 29
SECTION 13. Parties............................................... 29
SECTION 14. GOVERNING LAW AND TIME................................ 29
SECTION 15. Effect of Headings.................................... 29
v
<PAGE>
SCHEDULES
Schedule A - List of Underwriters..............................Sch A-1
Schedule B - List of Selling Stockholders......................Sch B-1
Schedule C - Pricing Information...............................Sch C-1
Schedule D - List of Persons and Entities Subject to Lock-up...Sch D-1
Schedule E - List of Subsidiaries of the Company...............Sch E-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel..................A-1
Exhibit B - Form of Opinion of Counsel for the Selling
Stockholder...........................................B-1
Exhibit C - Form of Lock-up Letter................................C-1
vi
<PAGE>
FORM OF UNDERWRITING AGREEMENT
-------------------------------
YUASA, INC.
(a Pennsylvania corporation)
4,392,000 Shares of Class A Common Stock
(Par Value $0.01 Per Share)
__________, 1998
NOMURA SECURITIES INTERNATIONAL, INC.
SMITH BARNEY, INC.
as Representatives of the several Underwriters
c/o Nomura Securities International, Inc.
2 World Financial Center, Building B
New York, New York 10281
Ladies and Gentlemen:
<PAGE>
Yuasa, Inc., a Pennsylvania corporation (the "Company"), and General Battery
Corporation, a wholly owned subsidiary of Exide Corporation, a Delaware
corporation (the "Selling Stockholder") confirm their respective agreements with
Nomura Securities International, Inc. ("Nomura") and Smith Barney, Inc. ("Smith
Barney") and each of the other Underwriters named in Schedule A hereto
(collectively, the "Underwriters," which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Nomura and
Smith Barney are acting as representatives (in such capacity, the
"Representatives"), with respect to (i) the sale by the Company and the Selling
Stockholder, acting severally and not jointly, and the purchase by the
Underwriters, acting severally and not jointly, of the respective numbers of
shares of Class A Common Stock, par value $0.01 per share ("Class A Common
Stock"), of the Company set forth in Schedules A and B hereto and (ii) the grant
by the Company to the Underwriters, acting severally and not jointly, of the
option described in Section 2(b) hereof to purchase all or any part of
__________ additional shares of Class A Common Stock to cover over-allotments,
if any. The aforesaid 4,392,000 shares of Class A Common Stock (the "Initial
Securities") to be purchased by the Underwriters and all or any part of the
__________ shares of Class A Common Stock subject to the option described in
Section 2(b) hereof (the "Option Securities") are hereinafter called,
collectively, the "Securities."
The shares being sold by the Selling Stockholder are shares of Class B common
stock, par value $0.01 per share (the "Class B Common Stock" and, together with
the Class A Common Stock, the "Common Stock") which will convert to an equal
number of shares of Class A Common Stock upon transfer to any person not an
affiliate of the Selling Stockholder.
2
<PAGE>
The Company and the Selling Stockholder understand that the Underwriters
propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company, the Selling Stockholder and the Underwriters agree that up to
__________ shares of the Securities to be purchased by the Underwriters (the
"Reserved Securities") shall be reserved for sale by the Underwriters to certain
eligible employees and persons having business relationships with the Company,
as part of the distribution of the Securities by the Underwriters, subject to
the terms of this Agreement, the applicable rules, regulations and
interpretations of the National Association of Securities Dealers, Inc. and all
other applicable laws, rules and regulations. To the extent that such Reserved
Securities are not orally confirmed for purchase by such eligible employees and
persons having business relationships with the Company by the end of the first
business day after the date of this Agreement, such Reserved Securities may be
offered to the public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-48881) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of
3
<PAGE>
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the
1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely
upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term
sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule
424(b). The information included in such prospectus or in such Term Sheet, as
the case may be, that was omitted from such registration statement at the time
it became effective but that is deemed to be part of such registration statement
at the time it became effective (a) pursuant to paragraph (b) of Rule 430A is
referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule
434 is referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto at the time it
became effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations
is herein referred to as the "Rule 462(b) Registration Statement," and after
such filing the term "Registration Statement" shall include the Rule 462(b)
Registration Statement. The final prospectus in the form first furnished to the
Underwriters for use in connection with the offering of the Securities is herein
called the "Prospectus." If Rule 434 is relied on, the term "Prospectus" shall
refer to the preliminary prospectus dated __________, 1998 together with the
Term Sheet and all references in this Agreement to the date of the Prospectus
shall mean the date of the Term
4
<PAGE>
Sheet. For purposes of this Agreement, all references to the Registration
Statement, any preliminary prospectus, the Prospectus or any Term Sheet or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company represents
and warrants to each Underwriter as of the date hereof, as of the Closing Time
referred to in Section 2(c) hereof, and as of each Date of Delivery (if any)
referred to in Section 2(b) hereof, and agrees with each Underwriter, as
follows:
(i) Compliance with Registration Requirements. Each of the
-----------------------------------------
Registration Statement and any Rule 462(b) Registration Statement has become
effective under the 1933 Act and no stop order suspending the effectiveness of
the Registration Statement or any Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or, to the knowledge of the Company, are
contemplated by the Commission, and any request on the part of the Commission
for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing
5
<PAGE>
Time (and, if any Option Securities are purchased, at each Date of Delivery),
the Registration Statement, the Rule 462(b) Registration Statement and any
amendments and supplements thereto complied and will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations
and did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Prospectus, any
preliminary prospectus and any supplement thereto or prospectus wrapper
prepared in connection therewith, at their respective times of issuance and at
the Closing Time, complied and will comply in all material respects with any
applicable laws or regulations of foreign jurisdictions in which the
Prospectus and such preliminary prospectus, as amended or supplemented, if
applicable, are distributed in connection with the offer and sale of Reserved
Securities. Neither the Prospectus nor any amendments or supplements thereto,
at the time the Prospectus or any such amendment or supplement was issued and
at the Closing Time (and, if any Option Securities are purchased, at the Date
of Delivery), included or will include an untrue statement of a material fact
or omitted or will omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. If Rule 434 is used, the Company will comply with
the requirements of Rule 434 and the Prospectus shall not be "materially
different", as such term is used in Rule 434, from the prospectus included in
the Registration Statement at the time it became effective. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or Prospectus made
in reliance upon and in
6
<PAGE>
conformity with information furnished to the Company in writing by any
Underwriter through Nomura expressly for use in the Registration Statement or
Prospectus.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectus delivered to the Underwriters for
use in connection with this offering was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules, if any, included in the
Registration Statement are independent public accountants as required by the
1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements of the Company
--------------------
included in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position of the
Company and its consolidated subsidiaries at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved. The supporting schedules, if
7
<PAGE>
any, included in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The selected financial
data and the summary financial information included in the Prospectus present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in the
Registration Statement. The pro forma financial information and the related
notes thereto included in the Registration Statement and the Prospectus
present fairly the information shown therein, have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein, and
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(iv) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, (A) there has been no material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than those in
the ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise, (C) there has been
no dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock, or (D) there
8
<PAGE>
has been no sale or grant of options, warrants or other rights to acquire
shares of capital stock of the Company or other securities convertible into
such shares, other than employee stock options under stock option plans
approved prior to the date hereof.
(v) Good Standing of the Company. The Company, a majority-owned
----------------------------
subsidiary of Yuasa Corporation, a Japanese business corporation ("Yuasa
Japan"), has been duly organized and is validly existing as a corporation in
good standing under the laws of the Commonwealth of Pennsylvania and has
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and to enter into and
perform its obligations under this Agreement; and the Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect.
(vi) Good Standing of Significant Subsidiary. The "significant
---------------------------------------
subsidiary" of the Company (as such term is defined in Rule 1-02 of Regulation
S-X) (the "Subsidiary") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or
9
<PAGE>
leasing of property or the conduct of business, except where the failure so to
qualify or to be in good standing would not result in a Material Adverse
Effect; except as otherwise disclosed in the Registration Statement, all of
the issued and outstanding capital stock of the Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is owned
by the Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity; none
of the outstanding shares of capital stock of the Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of such
Subsidiary. The only subsidiaries of the Company are the subsidiaries listed
on Schedule E hereto and Yuasa-Exide, Inc. is the only Subsidiary of the
Company.
(vii) Capitalization. The authorized, issued and outstanding
--------------
capital stock of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or pursuant
to the exercise of convertible securities or options referred to in the
Prospectus). The shares of issued and outstanding capital stock of the
Company, including the Securities to be purchased by the Underwriters from the
Selling Stockholder, have been duly authorized and validly issued and are
fully paid and non-assessable; none of the outstanding shares of capital stock
of the Company, including the Securities to be purchased by the Underwriters
from the Selling Stockholder, was issued in violation of the preemptive or
other similar rights of any securityholder of the Company; and each
outstanding warrant, option or other right to
10
<PAGE>
acquire shares of capital stock of the Company, whether or not currently
exercisable, conforms to the description thereof contained in the Prospectus
and such description conforms to the rights set forth in the instruments
defining the same.
(viii) Authorization of Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The
-------------------------------------------
Securities to be purchased by the Underwriters from the Company have been duly
authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued and fully paid and non-assessable; the Class A Common Stock
conforms to all statements relating thereto contained in the Prospectus and
such description conforms to the rights set forth in the instruments defining
the same; no holder of the Securities will be subject to personal liability by
reason of being such a holder; and the issuance of the Securities is not
subject to the preemptive or other similar rights of any securityholder of the
Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor
---------------------------------
any of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract,
11
<PAGE>
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or
other agreement or instrument to which the Company or any of its subsidiaries
is a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject (collectively,
"Agreements and Instruments"), except for such defaults that would not result
in a Material Adverse Effect; and the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use of Proceeds") and
compliance by the Company with its obligations hereunder have been duly
authorized by all necessary corporate action and do not and will not, whether
with or without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to, the Agreements and Instruments (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not result
in a Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or any subsidiary or
any applicable law, statute, rule, regulation, judgment, order, writ or decree
of any government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their assets,
properties or operations. As used herein, a "Repayment Event" means any event
or condition which gives the holder of any note, debenture or other evidence
of indebtedness
12
<PAGE>
(or any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such indebtedness
by the Company or any subsidiary.
(xi) Absence of Labor Dispute. Except as otherwise described in the
------------------------
Registration Statement and the Prospectus, no material labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge of the
Company, is imminent; the Company is not aware of any labor dispute with the
employees of the Company or any subsidiary which may reasonably be expected to
result in a Material Adverse Effect; and the Company is not aware of any
existing or, to the knowledge of the Company, imminent labor disturbance by
the employees of any of its or any subsidiary's principal suppliers,
manufacturers, customers or contractors, which, in either case, may reasonably
be expected to result in a Material Adverse Effect.
(xii) Absence of Proceedings. Except as disclosed in the Prospectus,
----------------------
there is no action, suit, proceeding, inquiry or investigation before or
brought by any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Company, threatened, against or affecting
the Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which might
reasonably be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the properties or
assets thereof or the consummation of the transactions contemplated in this
Agreement or the performance by the Company of its obligations hereunder; the
aggregate of all pending legal or governmental
13
<PAGE>
proceedings to which the Company or any subsidiary is a party or of which any
of their respective property or assets is the subject which are not described
in the Registration Statement, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result in a
Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents
--------------------
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so described
and filed as required.
(xiv) Possession of Intellectual Property. Except as disclosed
-----------------------------------
in the Prospectus, the Company and its subsidiaries own or possess, or can
acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") necessary to carry on the
business now operated by them, and neither the Company nor any of its
subsidiaries has received any notice or is otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Company or any
of its subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material Adverse
Effect.
14
<PAGE>
(xv) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration, qualification
or decree of, any court or governmental authority or agency is necessary or
required for the performance by the Company of its obligations hereunder, in
connection with the offering, issuance or sale of the Securities hereunder or
the consummation of the transactions contemplated by this Agreement, except
such as have been already obtained or as may be required under the 1933 Act or
the 1933 Act Regulations or state securities laws.
(xvi) Possession of Licenses and Permits. Except as disclosed in
----------------------------------
the Prospectus, the Company and its subsidiaries possess such permits,
licenses, approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to conduct the business now
operated by them; the Company and its subsidiaries are in compliance with the
terms and conditions of all such Governmental Licenses, except where the
failure so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full force
and effect, except when the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect would not
have a Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the revocation
or modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Effect.
15
<PAGE>
(xvii) Title to Property. The Company and its subsidiaries have
-----------------
good and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Prospectus or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any of its
subsidiaries; and all of the leases and subleases material to the business of
the Company and its subsidiaries, considered as one enterprise, and under
which the Company or any of its subsidiaries holds properties described in the
Prospectus, are in full force and effect, and neither the Company nor any
subsidiary has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any subsidiary
under any of the leases or subleases mentioned above, or affecting or
questioning the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.
(xviii) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the application
of the net proceeds therefrom as described in the Prospectus will not be, an
"investment company" or an entity "controlled" by an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
16
<PAGE>
(xix) Environmental Laws. Except as described in the Registration
------------------
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company nor any of its subsidiaries
is in violation of any applicable federal, state, local or foreign statute,
law, rule, regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and
its subsidiaries have all permits, authorizations and approvals required under
any applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings relating
to any Environmental Law against the Company or any of its subsidiaries and
(D) there are no events or circumstances that might reasonably be expected to
form the basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or
affecting the Company or any of its subsidiaries relating to Hazardous
Materials or any Environmental Laws.
17
<PAGE>
(xx) Registration Rights. Except as described in the Registration
-------------------
Statement and the Prospectus, there are no persons with registration rights or
other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the 1933
Act.
(xxi) Absence of Stabilization or Manipulation. The Company has not
----------------------------------------
taken and will not take, directly or indirectly, any action designed to, or
that might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the shares of Class A Common Stock to facilitate
the sale or resale of the Securities.
(xxii) Insurance. The Company and each of its subsidiaries carry,
---------
or are covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and as is customary
for companies engaged in similar businesses in similar industries.
(xxiii) Relationships with Directors, Stockholders, Customers and
---------------------------------------------------------
Suppliers. No relationship, direct or indirect, exists between or among the
---------
Company, on the one hand, and the directors, officers, shareholders, customers
or suppliers of the Company on the other hand, which is required to be
described in the Prospectus which is not so described.
(xxiv) Stock Purchase Rights and Transfer Restrictions. Except as
-----------------------------------------------
described in the Registration Statement and the Prospectus, (i) there are no
outstanding warrants or
18
<PAGE>
options issued by the Company to purchase any shares of the capital stock of
the Company, (ii) there are no statutory, contractual, preemptive or other
rights to subscribe for or to purchase any Class A Common Stock that do not by
their terms terminate upon the Closing Time and (iii) there are no
restrictions upon transfer of the Class A Common Stock pursuant to the
Company's Articles of Incorporation or By-laws.
(xxv) Taxes. All United States federal income tax returns of the
-----
Company and its subsidiaries required by law to be filed have been filed and
all taxes shown by such returns or otherwise assessed, which are due and
payable, have been paid, except assessments against which appeals have been or
will be promptly taken and as to which adequate reserves have been provided.
The United States federal income tax returns of the Company through the fiscal
year ended __________ have been settled and no assessment in connection
therewith has been made against the Company. The Company and its subsidiaries
have filed all other tax returns that are required to have been filed by them
pursuant to applicable foreign, state, local or other law except insofar as
the failure to file such returns would not result in a Material Adverse
Effect, and have paid all taxes due pursuant to such returns or pursuant to
any assessment received by the Company and its subsidiaries, except for such
taxes, if any, as are being contested in good faith and as to which adequate
reserves have been provided. The charges, accruals and reserves on the books
of the Company in respect of any income and corporation tax liability for any
years not finally determined are adequate to meet any assessments or re-
assessments for additional income tax for any years not finally determined,
except to the extent of any inadequacy that would not result in a Material
Adverse Effect.
19
<PAGE>
(b) Representations and Warranties by the Selling Stockholder. The Selling
Stockholder represents and warrants to each Underwriter and the Company as of
the date hereof and as of the Closing Time, and agrees with each Underwriter and
the Company, as follows:
(i) Accuracy of Disclosure. To the best knowledge of the Selling
----------------------
Stockholder, the representations and warranties of the Company contained in
Section 1(a) hereof are true and correct; the Selling Stockholder has reviewed
and is familiar with the Registration Statement and the Prospectus and neither
the Prospectus nor any amendments or supplements thereto includes any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; the Selling Stockholder is not prompted
to sell the Securities to be sold by the Selling Stockholder hereunder by any
information concerning the Company or any subsidiary of the Company which is
not set forth in the Prospectus.
(ii) Authorization of Agreements. The Selling Stockholder has the
---------------------------
full right, power and authority to enter into this Agreement and a Power of
Attorney and Custody Agreement (the "Power of Attorney and Custody Agreement")
and to sell, transfer and deliver the Securities to be sold by the Selling
Stockholder hereunder. The execution and delivery of this Agreement and the
Power of Attorney and Custody Agreement and the sale and delivery of the
Securities to be sold by the Selling Stockholder and the consummation of
20
<PAGE>
the transactions contemplated herein and compliance by the Selling Stockholder
with its obligations hereunder have been duly authorized by the Selling
Stockholder and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any tax, lien,
charge or encumbrance upon the Securities to be sold by the Selling
Stockholder or any property or assets of the Selling Stockholder pursuant to
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, license, lease or other agreement or instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder may be bound, or to
which any of the property or assets of the Selling Stockholder is subject, nor
will such action result in any violation of the provisions of the charter or
by-laws or other organizational instrument of the Selling Stockholder, if
applicable, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government instrumentality
or court, domestic or foreign, having jurisdiction over the Selling
Stockholder or any of its properties.
(iii) Good and Marketable Title. The Selling Stockholder has, and
-------------------------
will at the Closing Time have, good and marketable title to the Securities to
be sold by the Selling Stockholder hereunder, free and clear of any security
interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of any
kind, other than pursuant to this Agreement; and upon delivery of such
Securities and payment of the purchase price therefor as herein contemplated,
assuming each such Underwriter has no notice of any adverse claim, each of the
Underwriters will receive good and marketable title to the Securities
purchased by it from
21
<PAGE>
the Selling Stockholder, free and clear of any security interest, mortgage,
pledge, lien, charge, claim, equity or encumbrance of any kind.
(iv) Due Execution of Power of Attorney and Custody Agreement. The
--------------------------------------------------------
Selling Stockholder has duly executed and delivered, in the form heretofore
furnished to the Representatives, the Power of Attorney and Custody Agreement
with __________, or any of them, as attorneys-in-fact (the "Attorneys-in-
Fact") and the Company, as custodian (the "Custodian"); the Custodian is
authorized to deliver the Securities to be sold by the Selling Stockholder
hereunder and to accept payment therefor; and each Attorney-in-Fact is
authorized to execute and deliver this Agreement and the certificate referred
to in Section 5(f) or that may be required pursuant to Sections 5(o) and 5(p)
on behalf of the Selling Stockholder, to sell, assign and transfer to the
Underwriters the Securities to be sold by the Selling Stockholder hereunder,
to determine the purchase price to be paid by the Underwriters to the Selling
Stockholder, as provided in Section 2(a) hereof, to authorize the delivery of
the Securities to be sold by the Selling Stockholder hereunder, to accept
payment therefor, and otherwise to act on behalf of the Selling Stockholder in
connection with this Agreement.
(v) Absence of Stabilization or Manipulation. The Selling
----------------------------------------
Stockholder has not taken, and will not take, directly or indirectly, any
action which is designed to or which has constituted or which might reasonably
be expected to cause or result in stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
22
<PAGE>
Securities; and the Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Securities other than any preliminary prospectus
filed with the Commission, the Prospectus or other material permitted by the
1933 Act.
(vi) Absence of Further Requirements. No filing with, or consent,
-------------------------------
approval, authorization, order, registration, qualification or decree of, any
court or governmental authority or agency, domestic or foreign, is necessary
or required for the performance by the Selling Stockholder of its obligations
hereunder or in the Power of Attorney and Custody Agreement, or in connection
with the sale and delivery of the Securities hereunder or the consummation of
the transactions contemplated by this Agreement, except such as may have
previously been made or obtained or as may be required under the 1933 Act or
the 1933 Act Regulations or state securities laws.
(vii) Certificates Suitable for Transfer. Certificates for all of
----------------------------------
the Securities to be sold by the Selling Stockholder pursuant to this
Agreement, in suitable form for transfer by delivery or accompanied by duly
executed instruments of transfer or assignment in blank with signatures
guaranteed, have been placed in custody with the Custodian with irrevocable
conditional instructions to deliver such Securities to the Underwriters
pursuant to this Agreement.
23
<PAGE>
(viii) No Association with NASD. Neither the Selling Stockholder
------------------------
nor any of its affiliates directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, or has any other association with (within the meaning of Article I,
Section 1(m) of the By-laws of the National Association of Securities Dealers,
Inc. ("NASD")), any member firm of the NASD.
(c) Officer's Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of the Selling Stockholder as such and
delivered to the Representatives or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by the
Selling Stockholder to the Underwriters as to the matters covered thereby.
24
<PAGE>
SECTION 2. Sale and Delivery to Underwriters; Closing.
------------------------------------------
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and the Selling Stockholder, severally and not jointly, agree to sell to
each Underwriter, severally and not jointly, and each Underwriter, severally and
not jointly, agrees to purchase from the Company and the Selling Stockholder, at
the price per share set forth in Schedule C, that proportion of the number of
Initial Securities set forth in Schedule B opposite the name of the Company or
the Selling Stockholder, as the case may be, which the number of Initial
Securities set forth in Schedule A opposite the name of such Underwriter, plus
any additional number of Initial Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof, bears to
the total number of Initial Securities, subject, in each case, to such
adjustments among the Underwriters as the Representatives in their sole
discretion shall make to eliminate any sales or purchases of fractional
securities.
(b) Option Securities. In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriters, severally and
not jointly, to purchase up to an additional 658,800 shares of Class A Common
Stock, as set forth in Schedule B, at the price per share set forth in Schedule
C, less an amount per share equal to any dividends or distributions declared by
the Company and payable on the Initial Securities but not payable on the Option
Securities. The option hereby granted will expire 30 days after the date hereof
and may be exercised in whole or
25
<PAGE>
in part from time to time only for the purpose of covering over-allotments which
may be made in connection with the offering and distribution of the Initial
Securities upon notice by the Representatives to the Company setting forth the
number of Option Securities as to which the several Underwriters are then
exercising the option and the time and date of payment and delivery for such
Option Securities. Any such time and date of delivery (a "Date of Delivery")
shall be determined by the Representatives, but shall not be earlier than three
nor later than seven full business days after the exercise of said option, nor
in any event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the Option Securities, each of the
Underwriters, acting severally and not jointly, will purchase that proportion of
the total number of Option Securities then being purchased which the number of
Initial Securities set forth in Schedule A opposite the name of such Underwriter
bears to the total number of Initial Securities, subject in each case to such
adjustments as the Representatives in their discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of certificates
for, the Initial Securities shall be made at the offices of Shearman & Sterling,
599 Lexington Avenue, New York, New York 10022, or at such other place as shall
be agreed upon by the Representatives and the Company and the Selling
Stockholder, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing
occurs after 4:30 P.M. (Eastern time) on any given day) business day after the
date hereof (unless postponed in accordance with the provisions of Section 10),
or such other time not later than ten business days after such date as shall be
agreed upon by the
26
<PAGE>
Representatives and the Company and the Selling Stockholder (such time and date
of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company, on each Date of Delivery as specified in the notice from the
Representatives to the Company.
Payment shall be made to the Company and the Selling Stockholder by wire
transfer of immediately available funds to the bank accounts designated by the
Company and by the Custodian pursuant to the Selling Stockholder's Power of
Attorney and Custody Agreement against delivery to the Representatives for the
respective accounts of the Underwriters of certificates for the Securities to be
purchased by them. It is understood that each Underwriter has authorized the
Representatives, for its account, to accept delivery of, receipt for, and make
payment of the purchase price for, the Initial Securities and the Option
Securities, if any, which it has agreed to purchase. Nomura, individually and
not as representative of the Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial Securities or the Option
Securities, if any, to be purchased by any Underwriter whose funds have not been
received by the Closing Time or the relevant Date of Delivery, as the case may
be, but such payment shall not relieve such Underwriter from its obligations
hereunder.
27
<PAGE>
(d) Denominations; Registration. Certificates for the Initial Securities and
the Option Securities, if any, shall be in such denominations and registered in
such names as the Representatives may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
Underwriter as follows:
28
<PAGE>
(a) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(b), will comply with the requirements of
Rule 430A or Rule 434, as applicable, and will notify the Representatives
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or
of the initiation or threatening of any proceedings for any of such purposes.
The Company will promptly effect the filings necessary pursuant to Rule 424(b)
and will take such steps as it deems necessary to ascertain promptly whether
the form of prospectus transmitted for filing under Rule 424(b) was received
for filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to
29
<PAGE>
either the prospectus included in the Registration Statement at the time it
became effective or to the Prospectus, will furnish the Representatives with
copies of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use any such
document to which the Representatives or counsel for the Underwriters shall
reasonably object.
(c) Delivery of Registration Statements. The Company has furnished
or will deliver to the Representatives and counsel for the Underwriters,
without charge, signed copies of the Registration Statement as originally
filed and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Representatives, without
charge, a conformed copy of the Registration Statement as originally filed and
of each amendment thereto (without exhibits) for each of the Underwriters.
The copies of the Registration Statement and each amendment thereto furnished
to the Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be
30
<PAGE>
delivered under the 1933 Act or the Securities Exchange Act of 1934 (the "1934
Act") but no time later than one year after Closing Time, such number of
copies of the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is required
by the 1933 Act to be delivered in connection with sales of the Securities,
any event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the Underwriters or for the Company,
to amend the Registration Statement or amend or supplement the Prospectus in
order that the Prospectus will not include any untrue statements of a material
fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances existing
at the time it is delivered to a purchaser, or if it shall be necessary, in
the opinion of such counsel, at any such time to amend the Registration
Statement or amend or supplement the Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company will
promptly prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such statement or
omission or to make the Registration Statement or the Prospectus comply with
31
<PAGE>
such requirements, and the Company will furnish to the Underwriters such
number of copies of such amendment or supplement as the Underwriters may
reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts,
in cooperation with the Underwriters, to qualify the Securities for offering
and sale under the applicable securities laws of such states and other
jurisdictions as the Representatives may designate and to maintain such
qualifications, if any, for so long as reasonably required for distribution of
the Securities; provided, however, that the Company shall not be obligated to
file any general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is
not so qualified or to subject itself to taxation in respect of doing business
in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports, if any, as may be required by the laws of
such jurisdiction to continue such qualification in effect, for so long as
reasonably required for distribution of the Securities.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
32
<PAGE>
(h) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds."
(i) Listing. The Company will use its best efforts to effect the
listing of the Class A Common Stock (including the Securities) on the New York
Stock Exchange.
(j) Restriction on Sale of Securities. During a period of 180 days
after the date of the Prospectus, the Company will not, and will ensure that
its directors and executive officers and Yuasa Japan will not, without the
prior written consent of Nomura, directly or indirectly, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale
of, or otherwise dispose of or transfer any share of Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the person executing the agreement
or with respect to which the person executing the agreement has or hereafter
acquires the power of disposition, or exercise any right to require the
Company to file any registration statement under the 1933 Act with respect to
any of the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap
or transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Securities to be sold hereunder,
(B) transfers of
33
<PAGE>
shares of Common Stock by operation of law or (C) any shares of Common Stock
issued or options to purchase Common Stock granted pursuant to the Omnibus
Stock Plan of the Company referred to in the Prospectus. During such 180-day
period, the person executing the agreement may make gifts of shares of Common
Stock or securities convertible into Common Stock, upon the condition that
such donees or transferees agree to be bound by the foregoing restriction in
the same manner as it applies to the person entering into the agreement.
(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to
the 1934 Act within the time periods required by the 1934 Act and the rules
and regulations of the Commission thereunder.
[(l) Compliance with NASD Rules. The Company hereby agrees that it
will ensure that the Reserved Securities will be restricted as required by the
NASD or the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of this
Agreement. The Underwriters will notify the Company as to which persons will
need to be so restricted. At the request of the Underwriters, the Company
will direct the transfer agent to place a stop transfer restriction upon such
securities for such period of time. Should the Company release, or seek to
release, from such restrictions any of the Reserved Securities, the Company
agrees to reimburse the Underwriters for any reasonable expenses (including,
without limitation, legal expenses) they incur in connection with such
release.]
34
<PAGE>
(m) Compliance with Rule 463. The Company will report the use of the
proceeds from the sale of the Securities in its first periodic report filed
under the 1934 Act after the date of the Prospectus and thereafter on each of
its subsequent reports filed under the 1934 Act through the disclosure of the
application of all of the proceeds from the sale of the Securities pursuant to
Rule 463 of the 1933 Act Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay or
-------------------
cause to be paid all expenses incident to the performance of its obligations
under this Agreement, including (i) the preparation, printing (in excess of
$150,000, such printing expenses up to $150,000 to be paid by the Underwriters)
and filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the printing
and delivery to the Underwriters of this Agreement, any Agreement among
Underwriters and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Securities, (iii) the
preparation, issuance and delivery of the certificates for the Securities to the
Underwriters, including any stock or other transfer taxes and any stamp or other
duties payable upon the sale, issuance or delivery of the Securities to the
Underwriters, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors, (v) the filing fees incident to any necessary
filings under state securities laws and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary prospectus, any
Term
35
<PAGE>
Sheets and of the Prospectus and any amendments or supplements thereto prior to
or during the period specified in paragraph 3(d) but not exceeding one year
after Closing Time, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii)
the fees and expenses of any transfer agent or registrar for the Securities, and
(ix) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the NASD of the
terms of the sale of the Securities, (x) the fees and expenses incurred in
connection with the listing of the Securities on the New York Stock Exchange and
(xi) all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, in connection with matters
related to the Reserved Securities which are designated by the Company for sale
to employees and others having a business relationship with the Company.
(b) Expenses of the Selling Stockholder. The Selling Stockholder will pay
all expenses incident to the performance of its obligations under, and the
consummation of the transactions contemplated by, this Agreement, including (i)
any stamp duties, capital duties and stock transfer taxes, if any, payable upon
the sale of the Securities to the Underwriters, and their transfer between the
Underwriters pursuant to an agreement between such Underwriters, and (ii) the
fees and disbursements of its counsel and accountants.
(c) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Company and the Selling Stockholder shall reimburse
the Underwriters for all of their
36
<PAGE>
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
(d) Allocation of Expenses. The provisions of this Section shall not affect
any agreement that the Company and the Selling Stockholder may make for the
sharing of such costs and expenses.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Stockholder
contained in Section 1 hereof or in certificates of any officer of the Company
or any subsidiary of the Company or on behalf of the Selling Stockholder
delivered pursuant to the provisions hereof, to the performance by the Company
and the Selling Stockholder of their respective covenants and other obligations
hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. A prospectus containing the Rule 430A Information shall have
been filed with the Commission in accordance with Rule 424(b) (or a post-
effective amendment providing such information
37
<PAGE>
shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule
434, a Term Sheet shall have been filed with the Commission in accordance with
Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Stevens & Lee, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to the
effect set forth in Exhibit A hereto and to such further effect as counsel to
the Underwriters may reasonably request.
(c) Opinion of Counsel for Selling Stockholder. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of _____________, counsel for the Selling Stockholder, in form and
substance satisfactory to counsel for the Underwriters, together with signed
or reproduced copies of such letter for each of the other Underwriters to the
effect set forth in Exhibit B hereto and to such further effect as counsel to
the Underwriters may reasonably request.
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Shearman & Sterling, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in
38
<PAGE>
clauses (i), (ii), (v), (vi) (solely as to preemptive or other similar rights
arising by operation of law or under the articles of incorporation or by-laws
of the Company), (viii) through (x), inclusive, (xii), (xiv) (solely as to the
information in the Prospectus under "Description of Capital Stock--Class A
Common Stock and Class B Common Stock") and the penultimate paragraph of
Exhibit A hereto. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the State
of New York and the federal law of the United States, upon the opinions of
Stevens & Lee, counsel to the Company, __________, General Counsel of the
Selling Stockholder, and the opinions of other counsel satisfactory to the
Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(e) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President or any vice
president of the Company and of the chief financial or chief accounting
officer of the Company, dated as of Closing Time, to the effect that (i) there
has been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same force and
effect as though expressly made at and as of Closing Time, (iii) the Company
has complied with all
39
<PAGE>
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or, to the best of their
knowledge, are contemplated by the Commission.
(f) Certificate of Selling Stockholder. At Closing Time, the
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of the Selling Stockholder, dated as of Closing Time, to the effect
that (i) the representations and warranties of the Selling Stockholder
contained in Section 1(b) hereof are true and correct in all respects with the
same force and effect as though expressly made at and as of Closing Time and
(ii) the Selling Stockholder has complied in all material respects with all
agreements and all conditions on its part to be performed under this Agreement
at or prior to Closing Time.
(g) Accountants' Comfort Letter. At the time of the execution of
this Agreement, the Representatives shall have received from each of Ernst &
Young LLP and Price Waterhouse LLP a letter dated such date, in form and
substance satisfactory to the Representatives, together with signed or
reproduced copies of such letter for each of the other Underwriters confirming
that they are independent public accountants with respect to the Company
within the meaning of the 1933 Act and the applicable published 1933 Act
Regulations and are in compliance with the applicable requirements relating to
the qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission and containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial
40
<PAGE>
information contained in the Registration Statement and the Prospectus in
compliance with the procedures described in Statement on Auditing Standards
("SAS") No. 72, as amended, and SAS No. 71, Interim Financial Information, if
applicable.
(h) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from each of Ernst & Young LLP and Price Waterhouse LLP a
letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (g) of this
Section, except that the specified date referred to shall be a date not more
than three business days prior to Closing Time.
(i) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
(j) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(k) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit C hereto signed by the persons listed on Schedule D hereto.
41
<PAGE>
(l) Yuasa Technology Agreements. At Closing Time, the Company shall
have executed and delivered the technology assistance and license agreements
between the Company and Yuasa Japan as described in the Prospectus under
"Business--Intellectual Property--Licenses" and "Related Party Transactions--
Yuasa Japan--Yuasa Technology Agreements."
(m) Agreement Not to Purchase Shares in the Offering. At Closing
Time, each of Yuasa Japan and the Selling Stockholder shall have executed and
delivered an agreement under which each of Yuasa Japan and the Selling
Stockholder promise not to purchase any shares in the public offering of the
Securities.
(n) Waivers. At Closing Time, the Company shall have received from
its creditors and delivered to the counsel for the Underwriters any and all
waivers required under the Company's financing agreements.
(o) Documentation Furnished to Counsel for Underwriters. At the
Closing Time, counsel for the Underwriters shall have been furnished with all
such documents, certificates and opinions as they may reasonably request for
the purpose of enabling them to pass upon the issuance and sale of the Initial
Securities as contemplated in this Agreement and the matters referred to in
Section 5(d) and in order to evidence the accuracy and completeness of any of
the representations, warranties or statements of the Company or the Selling
Stockholder, the performance of any of the covenants of the Company, or the
42
<PAGE>
fulfillment of any of the conditions herein contained; and all proceedings
taken by the Company and the Selling Stockholder at or prior to the Closing
Time in connection with the authorization, issuance and sale of the Initial
Securities as contemplated in this Agreement shall be satisfactory in form and
substance to the Representatives and to counsel for the Underwriters.
(p) Conditions to Purchase of Option Securities. In the event that
the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations and
warranties of the Company and the Selling Stockholder contained herein and the
statements in any certificates furnished by the Company, any subsidiary of the
Company and the Selling Stockholder hereunder shall be true and correct as of
each Date of Delivery and, at the relevant Date of Delivery, the
Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
---------------------
Delivery, of the President or any vice president of the Company and
of the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at Closing Time pursuant to
Section 5(e) hereof remains true and correct as of such Date of
Delivery.
(ii) Certificate of Selling Stockholder. A certificate, dated
----------------------------------
such Date of Delivery, of an Attorney-in-Fact on behalf of the
Selling Stockholder
43
<PAGE>
confirming that the certificate delivered at Closing Time pursuant to
Section 5(f) hereof remains true and correct as of such Date of
Delivery.
(iii) Opinion of Counsel for Company. The favorable opinion of
------------------------------
Stevens & Lee, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(b) hereof.
(iv) Opinion of Counsel for Selling Stockholder. The favorable
------------------------------------------
opinion of ____________, counsel for the Selling Stockholder, in form
and substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect
as the opinion required by Section 5(c) hereof.
(v) Opinion of Counsel for Underwriters. The favorable opinion
-----------------------------------
of Shearman & Sterling, counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(d) hereof.
(vi) Bring-down Comfort Letter. A letter from each of Ernst &
-------------------------
Young LLP and Price Waterhouse LLP, in form and substance
satisfactory to the
44
<PAGE>
Representatives and dated such Date of Delivery, substantially in the
same form and substance as the letter furnished to the
Representatives pursuant to Section 5(h) hereof, except that the
"specified date" in the letter furnished pursuant to this paragraph
shall be a date not more than three business days prior to such Date
of Delivery.
(vii) Documentation Furnished to Counsel for the Underwriters.
-------------------------------------------------------
All such documents, certificates and opinions as counsel for the
Underwriters may have reasonably requested for the purpose of
enabling them to pass upon the issuance and sale of the Option
Securities as contemplated in this Agreement and the matters referred
to in Section 5(p)(v) and to evidence the accuracy and completeness
of any of the representations, warranties or statements of the
Company or the Selling Stockholder, the performance of any of the
covenants of the Company, or the fulfillment of any of the conditions
herein contained; and evidence of proceedings taken by the Company
and the Selling Stockholder at or prior to the relevant Date of
Delivery in connection with the authorization, issuance and sale of
the Option Securities as contemplated in this Agreement satisfactory
in form and substance to the Representatives and to counsel for the
Underwriters.
(q) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with such
documents and opinions as
45
<PAGE>
they may require for the purpose of enabling them to pass upon the issuance
and sale of the Securities as herein contemplated, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by the
Company and the Selling Stockholder in connection with the issuance and sale
of the Securities as herein contemplated shall be satisfactory in form and
substance to the Representatives and counsel for the Underwriters.
(r) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the Company
at any time at or prior to Closing Time or such Date of Delivery, as the case
may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1, 6, 7
and 8 shall survive any such termination and remain in full force and effect.
46
<PAGE>
SECTION 6. Indemnification.
---------------
(a) Indemnification of Underwriters. The Company and the Selling
Stockholder, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact included in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
47
<PAGE>
alleged untrue statement or omission; provided that (subject to Section 6(d)
below) any such settlement is effected with the written consent of the Company
and the Selling Stockholder; and
(iii) against any and all expense whatsoever, as incurred (including
the reasonable fees and disbursements of counsel chosen by Nomura), reasonably
incurred in investigating, preparing or defending against any litigation, or
any investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Nomura expressly for use in the Registration Statement (or
any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto).
(b) Indemnification of Company, Directors and Officers and Selling
Stockholder. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls
48
<PAGE>
the Company within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act, and the Selling Stockholder and each person, if any, who controls
the Selling Stockholder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through Nomura
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Actions against Parties; Notification. Each indemnified party shall give
notice as promptly as reasonably practicable to each indemnifying party of any
action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Nomura, and, in the case
of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however,
49
<PAGE>
that counsel to the indemnifying party shall not (except with the consent of the
indemnified party) also be counsel to the indemnified party. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 6 or Section 7 hereof (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for reasonable fees and expenses of counsel, such indemnifying
party agrees that it shall be liable for any settlement of the nature
contemplated by Section 6(a)(ii) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying
50
<PAGE>
party shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.
(e) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees, promptly upon a request
in writing, to indemnify and hold harmless the Underwriters from and against any
and all losses, liabilities, claims, damages and expenses incurred by them as a
result of the failure of eligible employees and __________ of the Company to pay
for and accept delivery of Reserved Securities which, by the end of the first
business day following the date of this Agreement, were subject to a properly
confirmed agreement to purchase.
(f) Other Agreements with Respect to Indemnification. The provisions of this
Section shall not affect any agreement among the Company and the Selling
Stockholder with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section 6
------------
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholder on the one hand and the Underwriters on the other hand from
the offering of the Securities pursuant to this Agreement
51
<PAGE>
or (ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Selling Stockholder on the one hand and of the Underwriters on
the other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company and the Selling Stockholder on
the one hand and the Underwriters on the other hand in connection with the
offering of the Securities pursuant to this Agreement shall be deemed to be in
the same respective proportions as the total net proceeds from the offering of
the Securities pursuant to this Agreement (before deducting expenses) received
by the Company and the Selling Stockholder and the total underwriting discount
received by the Underwriters, in each case as set forth on the cover of the
Prospectus, or, if Rule 434 is used, the corresponding location on the Term
Sheet bear to the aggregate initial public offering price of the Securities as
set forth on such cover.
The relative fault of the Company and the Selling Stockholder on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Selling Stockholder or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
52
<PAGE>
The Company, the Selling Stockholder and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
53
<PAGE>
For purposes of this Section, each person, if any, who controls an Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as such Underwriter, and each
director of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company or the Selling
Stockholder within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the Company or the
Selling Stockholder, as the case may be. The Underwriters' respective
obligations to contribute pursuant to this Section are several in proportion to
the number of Initial Securities set forth opposite their respective names in
Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Stockholder with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its subsidiaries or the
Selling Stockholder submitted pursuant hereto shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Company or the
Selling Stockholder, and shall survive delivery of the Securities to the
Underwriters.
SECTION 9. Termination of Agreement.
------------------------
54
<PAGE>
(a) Termination; General. The Representatives may terminate this Agreement,
by notice to the Company and the Selling Stockholder, at any time at or prior to
Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which on the financial markets of the
United States or the international financial markets, is such as to make it, in
the judgment of the Representatives, impracticable to market the Securities or
to enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission, the New York Stock Exchange or the National Association of
Securities Dealers, Inc., or if trading generally on the American Stock Exchange
or the New York Stock Exchange or in the Nasdaq National Market has been
suspended or materially limited, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority, or
(iv) if a banking moratorium has been declared by Federal, New York or
Pennsylvania authorities.
55
<PAGE>
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters. If one or more of
------------------------------------------
the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, the non-defaulting
Underwriters shall be obligated, each severally and not jointly, to purchase
the full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all non-
defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after Closing Time, the obligation of the
Underwriters to purchase and
56
<PAGE>
of the Company to sell the Option Securities to be purchased and sold on such
Date of Delivery shall terminate without liability on the part of any non-
defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either (i) the Representatives or (ii) the Company and the
Selling Stockholder shall have the right to postpone Closing Time or the
relevant Date of Delivery, as the case may be, for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section.
SECTION 11. Default by the Selling Stockholder or the Company. (a) If the
-------------------------------------------------
Selling Stockholder shall fail at Closing Time to sell and deliver the number of
Securities which the Selling Stockholder is obligated to sell hereunder, then
the Underwriters may, at the option of the Representatives, by notice from the
Representatives to the Company either (a) terminate this Agreement without any
liability on the part of any non-defaulting party except that the provisions of
Sections 1, 4, 6, 7 and 8 shall remain in full force and effect or (b) elect to
purchase the
57
<PAGE>
Securities which the Company has agreed to sell hereunder. No action taken
pursuant to this Section shall relieve the Selling Stockholder so defaulting
from liability in respect of such default.
In the event of a default by the Selling Stockholder as referred to in this
Section, each of the Representatives and the Company shall have the right to
postpone Closing Time or the relevant Date of Delivery for a period not
exceeding seven days in order to effect any required change in the Registration
Statement or Prospectus or in any other documents or arrangements.
(b) If the Company shall fail at Closing Time or at a Date of Delivery to sell
the number of Securities that it is obligated to sell hereunder, then this
Agreement shall terminate without any liability on the part of any non-
defaulting party; provided, however, that the provisions of Sections 1, 4, 6, 7
-------- -------
and 8 shall remain in full force and effect. No action taken pursuant to this
Section shall relieve the Company from liability in respect of such default.
SECTION 12. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at 2 World Financial
Center, Building B, New York, New York 10281, attention of the Office of General
Counsel; notices to the Company shall be directed to it at 2366 Bernville Road,
Reading, Pennsylvania 19605-9457, attention of Michael T. Philion, Chief
Financial Officer, together with a copy to Joseph M. Harenza, Stevens & Lee, 111
North 6/th/ Street, Reading, Pennsylvania 19601;
58
<PAGE>
and notices to the Selling Stockholder shall be directed to it at 1400 North
Woodward Avenue, Suite 130, Bloomfield Hills, Michigan 48304, attention of
General Counsel.
SECTION 13. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon the Underwriters, the Company and the Selling Stockholder and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters, the Company and the Selling Stockholder and their
respective successors and the controlling persons and officers and directors
referred to in Sections 6 and 7 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Company and the Selling Stockholder and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND
----------------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES
OF DAY REFER TO NEW YORK CITY TIME.
59
<PAGE>
SECTION 15. Effect of Headings. The Article and Section headings herein and
------------------
the Table of Contents are for convenience only and shall not affect the
construction hereof.
60
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company and the Attorney-in-Fact for the Selling
Stockholder a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement among the Underwriters, the
Company and the Selling Stockholder in accordance with its terms.
Very truly yours,
YUASA, INC.
By:
--------------------------------
Title:
EXIDE CORPORATION
for and on behalf of
General Battery Corporation
By:
--------------------------------
61
<PAGE>
As Attorney-in-Fact acting on behalf of the Selling
Stockholder named in Schedule B hereto
CONFIRMED AND ACCEPTED,
as of the date first above written:
NOMURA SECURITIES INTERNATIONAL, INC.
SMITH BARNEY, INC.
By: NOMURA SECURITIES INTERNATIONAL, INC.
By
---------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
62
<PAGE>
SCHEDULE A
LIST OF UNDERWRITERS
--------------------
<TABLE>
<CAPTION>
Number of
Initial
Name of Underwriter Securities
- ------------------- ----------
<S> <C>
Nomura Securities International, Inc........................
Smith Barney, Inc...........................................
---------
Total....................................................... 4,392,000
=========
</TABLE>
Sch A - 1
<PAGE>
SCHEDULE B
LIST OF SELLING STOCKHOLDERS
----------------------------
<TABLE>
<CAPTION>
Number of Initial Maximum Number of Option
Securities to be Sold Securities to be Sold
--------------------- ------------------------
<S> <C> <C>
Yuasa, Inc. 3,300,000 658,800
General Battery Corporation, 1,092,000 0
a wholly owned subsidiary
of Exide Corporation
--------- -------
Total........................ 4,392,000 658,800
========= =======
</TABLE>
Sch B - 1
<PAGE>
SCHEDULE C
PRICING INFORMATION
-------------------
YUASA, INC.
4,392,000 Shares of Class A Common Stock
(Par Value $0.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $__________.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $__________, being an amount equal to the
initial public offering price set forth above less $__________ per share;
provided that the purchase price per share for any Option Securities
purchased upon the exercise of the over-allotment option described in
Section 2(b) shall be reduced by an amount per share equal to any dividends
or distributions declared by the Company and payable on the Initial
Securities but not payable on the Option Securities.
Sch C - 1
<PAGE>
SCHEDULE D
LIST OF PERSONS AND ENTITIES SUBJECT TO LOCK-UP
-----------------------------------------------
Name of person or entity
- ------------------------
Yuasa Corporation
Teruhisa Yuasa
P. Michael Ehlerman
John D. Craig
Shuji Kawata
Michael T. Philion
Hiroshi Horiuchi
Yasukazu Sakai
Arthur M. Hawkins
James Kanda
Raymond J. Kenny
Nicholas I. Magnani
Bruce K. Retter
John A. Shea
[additional names to be provided]
Sch D - 1
<PAGE>
SCHEDULE E
LIST OF SUBSIDIARIES OF THE COMPANY
-----------------------------------
Name Percentage Ownership
- ------------------------------- ------------------------
Yuasa-Exide, Inc. 100.0%
YERMCO, Inc. 100.0%
Yuasa-GBC, Inc. 100.0%
Hertner, Inc. 100.0%
H & R Metal Products 100.0%
(d/b/a Sumter Metal Products)
Yuasa de Mexico S.A. de C.V. 90.0%
Yuasa-Exide (Canada), Inc. 100.0%
Yuasa-Exide Argentina, A.S. 55.0%
(Joint Venture)
Tucker Telecommunications, Inc. 48.0%
(d/b/a Yuasa Telecommunications International)
Sch E - 1
<PAGE>
EXHIBIT A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Pennsylvania.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Underwriting
Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus in the column entitled "Actual" under the caption
"Capitalization" (except for subsequent
A-1
<PAGE>
issuances, if any, pursuant to the Underwriting Agreement or pursuant to
reservations, agreements or employee benefit plans referred to in the Prospectus
or pursuant to the exercise of convertible securities or options referred to in
the Prospectus); the shares of issued and outstanding capital stock of the
Company, including the Securities to be purchased by the Underwriters from the
Selling Stockholder, have been duly authorized and validly issued and are fully
paid and non-assessable; and none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive or other similar rights of
any securityholder of the Company.
(v) The Securities to be purchased by the Underwriters from the Company
have been duly authorized for issuance and sale to the Underwriters pursuant to
the Underwriting Agreement and, when issued and delivered by the Company
pursuant to the Underwriting Agreement against payment of the consideration set
forth in the Underwriting Agreement, will be validly issued and fully paid and
non-assessable and no holder of the Securities is or will be subject to personal
liability by reason of being such a holder and the issuance of the Securities by
the Company is not subject to preemptive or other similar rights of any
securityholder of the Company, except as disclosed in the Prospectus.
(vi) The issuance and sale of the Securities by the Company and the sale
of the Securities by the Selling Stockholder is not subject to the preemptive or
other similar rights of any securityholder of the Company.
(vii) Each Subsidiary has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and,
A-2
<PAGE>
based solely on certificates of public officials in the respective jurisdictions
delivered to you by the Company, is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and, except as set forth on
Schedule E, to the best of our knowledge, is owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding shares of capital
stock of any Subsidiary was issued in violation of the preemptive or similar
rights of any securityholder of such Subsidiary. The only Subsidiary of the
Company is Yuasa-Exide, Inc.
(viii) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and, to the best of our knowledge, no
stop order suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or threatened
by the Commission.
A-3
<PAGE>
(x) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus, and each amendment or supplement to the Registration
Statement and Prospectus, as of their respective effective or issue dates (other
than the financial statements and supporting schedules and other financial data
included therein or omitted therefrom, as to which we need express no opinion)
complied as to form in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations.
(xi) If Rule 434 has been relied upon, the Prospectus was not "materially
different", as such term is used in Rule 434, from the prospectus included in
the Registration Statement at the time it became effective.
(xii) The form of certificate used to evidence the Class A Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the articles of incorporation and by-laws of
the Company and the requirements of the New York Stock Exchange.
(xiii) To the best of our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary is a party, or to which the property of the Company or any subsidiary
is subject, before or brought by any court or governmental agency or body,
domestic or foreign, which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Underwriting Agreement or the performance by
the Company of its obligations thereunder.
A-4
<PAGE>
(xiv) The information in the Prospectus under "Description of Capital
Stock", "Shares Eligible For Future Sale", "Business--Manufacturing Operations",
"Business--Intellectual Property", "Business--Environmental Regulation",
"Business--Litigation", "Related Party Transactions", and "__________" and in
the Registration Statement under Items 14 and 15, to the extent that it
constitutes matters of law, summaries of legal matters, the Company's articles
of incorporation and by-laws or legal proceedings, or legal conclusions, has
been reviewed by us and is correct in all material respects.
(xv) To the best of our knowledge, there are no statutes or regulations
that are required to be described in the Prospectus that are not described as
required.
(xvi) All descriptions in the Registration Statement and Prospectus of
contracts and other documents to which the Company or its subsidiaries are a
party are accurate in all material respects; to the best of our knowledge, there
are no franchises, contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments required to be described or referred to in the
Registration Statement and Prospectus or to be filed as exhibits thereto other
than those described or referred to therein or filed or incorporated by
reference as exhibits thereto, and the descriptions thereof or references
thereto are correct in all material respects.
(xvii) To the best of our knowledge, neither the Company nor any subsidiary
is in violation of its articles of incorporation or by-laws and no default by
the Company or any subsidiary exists in the due performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is
A-5
<PAGE>
described or referred to in the Registration Statement or the Prospectus or
filed or incorporated by reference as an exhibit to the Registration Statement,
except for such defaults that would not result in a Material Adverse Effect.
(xvii) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign, (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Underwriting Agreement or for the offering,
issuance, sale or delivery of the Securities.
(xix) The execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions contemplated in the
Underwriting Agreement and in the Registration Statement (including the issuance
and sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use Of Proceeds")
and compliance by the Company with its obligations under the Underwriting
Agreement do not and will not, whether with or without the giving of notice or
lapse of time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined in Section 1(a)(x) of the Underwriting Agreement)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or any other agreement or instrument, known to us, to
which the Company or any subsidiary is a party or by which it or any of them may
be bound, or to which any of the property or assets of the Company or any
subsidiary is subject (except for such conflicts, breaches or defaults or
A-6
<PAGE>
liens, charges or encumbrances that would not have a Material Adverse Effect),
nor will such action result in any violation of the provisions of the charter or
by-laws of the Company or any subsidiary, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any subsidiary or any of their respective properties, assets
or operations.
(xx) To the best of our knowledge, except as described in the Registration
Statement and the Prospectus, there are no persons with registration rights or
other similar rights to have any securities of the Company registered by the
Company pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act.
(xxi) The Company is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the 1940 Act.
A-7
<PAGE>
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such Registration
Statement or any such amendment became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may rely, (i) as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials and
(ii) as to all matters governed by the laws of jurisdictions other than the law
of the Commonwealth of Pennsylvania, the federal law of the United States and
the law of the State of Delaware, upon opinions of counsel satisfactory to you,
in which case the opinion shall state that they believe you and they are
entitled to so rely. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991).
A-8
<PAGE>
EXHIBIT B
FORM OF OPINION OF COUNSEL FOR THE SELLING STOCKHOLDER
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) No filing with, or consent, approval, authorization, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign, (other than the issuance of the order of the
Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state securities
laws, as to which we need express no opinion) is necessary or required to be
obtained by the Selling Stockholder for the performance by the Selling
Stockholder of its obligations under the Underwriting Agreement or in the Power
of Attorney and Custody Agreement, or in connection with the offer, sale or
delivery of the Securities.
(ii) The Power of Attorney and Custody Agreement has been duly executed
and delivered by the Selling Stockholder and constitutes the legal, valid and
binding agreement of the Selling Stockholder.
(iii) The Underwriting Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Stockholder.
B-1
<PAGE>
(iv) Each Attorney-in-Fact has been duly authorized by the Selling
Stockholder to deliver the Securities on behalf of the Selling Stockholder in
accordance with the terms of the Underwriting Agreement.
(v) The execution, delivery and performance of the Underwriting Agreement
and the Power of Attorney and Custody Agreement and the sale and delivery of the
Securities and the consummation of the transactions contemplated in the
Underwriting Agreement and in the Registration Statement and compliance by the
Selling Stockholder with its obligations under the Underwriting Agreement have
been duly authorized by all necessary action on the part of the Selling
Stockholder and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach of, or
default under or result in the creation or imposition of any tax, lien, charge
or encumbrance upon the Securities or any property or assets of the Selling
Stockholder pursuant to, any contract, indenture, mortgage, deed of trust, loan
or credit agreement, note, license, lease or other instrument or agreement to
which the Selling Stockholder is a party or by which it may be bound, or to
which any of the property or assets of the Selling Stockholder may be subject,
nor will such action result in any violation of the provisions of the charter or
by-laws of the Selling Stockholder, if applicable, or any law, administrative
regulation, judgment or order of any governmental agency or body or any
administrative or court decree having jurisdiction over the Selling Stockholder
or any of its properties.
(vi) To the best of our knowledge, the Selling Stockholder has valid and
marketable title to the Securities to be sold by the Selling Stockholder
pursuant to the Underwriting Agreement, free and clear of any pledge, lien,
security interest, charge, claim, equity or encumbrance of any kind, and has
full
B-2
<PAGE>
right, power and authority to sell, transfer and deliver such Securities
pursuant to the Underwriting Agreement. By delivery of a certificate or
certificates therefor the Selling Stockholder will transfer to the Underwriters
who have purchased such Securities pursuant to the Underwriting Agreement
(without notice of any defect in the title of the Selling Stockholder and who
are otherwise bona fide purchasers for purposes of the Uniform Commercial Code)
valid and marketable title to such Securities, free and clear of any pledge,
lien, security interest, charge, claim, equity or encumbrance of any kind.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules included therein or omitted therefrom, as to which we
need make no statement), at the time such Registration Statement or any such
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and schedules
included therein or omitted therefrom, as to which we need make no statement),
at the time the Prospectus was issued, at the time any such amended or
supplemented prospectus was issued or at the Closing Time, included or includes
an untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
B-3
<PAGE>
EXHIBIT C
FORM OF LOCK-UP LETTER FROM DIRECTORS, OFFICERS OR OTHER STOCKHOLDERS
PURSUANT TO SECTION 5(k)
__________, 1998
NOMURA SECURITIES INTERNATIONAL, INC.
SMITH BARNEY, INC.
as Representatives of the several Underwriters
c/o Nomura Securities International, Inc.
2 World Financial Center
Building B
New York, New York 10281
Re: Proposed Initial Public Offering by Yuasa, Inc.
---------------------------------------------------
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of Yuasa,
Inc., a Pennsylvania corporation (the "Company"), understands that Nomura
Securities International, Inc. ("Nomura") and Smith Barney, Inc. propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") with the
Company and an affiliate of Exide Corporation (the "Selling Stockholder")
providing for the
C-1
<PAGE>
initial public offering of shares of the Company's Class A common stock, par
value $0.01 per share (the "Class A Common Stock"). In recognition of the
benefit that such an offering will confer upon the undersigned as a stockholder
[and an officer and/or director] of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees with each underwriter to be named in the Underwriting
Agreement that, during a period of 180 days from the date of the Underwriting
Agreement, the undersigned will not, without the prior written consent of
Nomura, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of, or otherwise dispose of or
transfer any shares of the Class A Common Stock or Class B Common Stock, par
value $0.01 per share ("Class B Common Stock" and, together with the Class A
Common Stock, the "Common Stock") or any securities convertible into or
exchangeable or exercisable for Common Stock, whether now owned or hereafter
acquired by the undersigned or with respect to which the undersigned has or
hereafter acquires the power of disposition, or exercise any right to require
the Company to file any registration statement under the Securities Act of 1933,
as amended, with respect to any of the foregoing or (ii) enter into any swap or
any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Common
Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise; provided that
--------
the foregoing shall not apply to transfers of shares of Common Stock by
operation of law. During such 180-day period, the undersigned may make gifts of
shares of Common Stock or securities convertible into Common Stock, or may
transfer to its affiliates shares of Common Stock or securities convertible into
Common Stock, upon the condition that such donees or transferees agree to be
bound by the foregoing restriction in the same manner it applies to the
undersigned.
C-2
<PAGE>
Very truly yours,
Signature:
---------------------------
Print Name:
--------------------------
C-3
<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
YUASA, INC.
FIRST. The name of the Corporation is Yuasa, Inc.
SECOND. The location and post office address of the Corporation's
registered office in this Commonwealth is 2366 Bernville Road, Reading,
Pennsylvania 19605-9457.
THIRD. The purpose of the Corporation is and it shall have unlimited power
to engage in and to do any lawful act concerning any or all lawful business for
which corporations may be incorporated under provisions of the Business
Corporation Law of 1988, the Act approved December, 1988, P.L. 1444, as amended
(the "Pennsylvania Business Corporation Law").
FOURTH. The term of the Corporation's existence is perpetual.
FIFTH.
A. The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is Two Hundred Fifty
Million (250,000,000) consisting of:
1. One Hundred Million (100,000,000) shares of Class A Common Stock,
par value .01 per share (the "Class A Common");
2. One Hundred Million (100,000,000) shares of Class B Common Stock,
par value .01 per share (the "Class B Common");
3. Fifty Million (50,000,000) shares of Preferred Stock, par value
$.01 per share (the "Preferred Stock").
B. Preferred Stock. The Board of Directors is authorized, subject to any
---------------
limitations prescribed by law, to provide for the issuance of the
shares of Preferred Stock in series, and by filing a statement
pursuant to the applicable law of the Commonwealth of Pennsylvania
(such statement being hereinafter referred to as a "Preferred Stock
Designation"), to establish from time to time the number of shares to
be included in each such series, and to fix the designation, powers,
preferences, and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. The number of
authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then
1
<PAGE>
outstanding) by the affirmative vote of a majority of the votes cast
by the holders of the Common Stock, without a vote of the holders of
Preferred Stock, or of any series thereof, unless a vote of any such
holders is required pursuant to the terms of any Preferred Stock
Designation.
C. Common Stock.
------------
1. General. The voting, dividend and liquidation rights of the
-------
holders of the Common Stock are subject to and qualified by the
rights of the holders of the Preferred Stock of any series as may
be designated by the Board of Directors upon any issuance of the
Preferred Stock of any series. The designations, preferences,
limitations and relative rights of the Class A Common and the
Class B Common shall be identical in all respects, except as
stated in these Articles of Incorporation or as otherwise
required by law. Except as provided in these Articles of
Incorporation or as may otherwise be required by law, the Series
A Common and Series B Common shall vote together as a single
class with respect to all matters. Dividends may be declared and
paid on the Common Stock from funds lawfully available therefore
as and when determined by the Board of Directors and subject to
any preferential dividend rights or restrictions of any then
outstanding Preferred Stock. Upon the dissolution or liquidation
of the Corporation, whether voluntary or involuntary, holders of
Common Stock will be entitled to receive all assets of the
Corporation available for distribution to its stockholders after
payment of creditors and subject to any preferential rights of
any then outstanding Preferred Stock. In the event of any stock
split or stock dividend, shares of Class B Common will be
distributed with respect to outstanding shares of Class B Common
and shares of Class A Common will be distributed with respect to
outstanding shares of Class A Common.
2. Class A Common.
--------------
(a) Voting. The holders of Class A Common are entitled to one
------
(1) vote for each share held at all meetings of stockholders
(and written actions in lieu of meetings).
2
<PAGE>
3. Class B Common.
--------------
(a) Voting. The holders of Class B Common are entitled to two
------
(2) votes for each share held at all meetings of
stockholders (and written actions in lieu of meetings).
(b) Conversion.
----------
(1) Optional Conversion. Each record holder of Class B
-------------------
Common is entitled, at any time or from time to time,
to convert any or all of the shares of such holder's
Class B Common into shares of Class A Common at the
ratio of one share of Class A Common for each share of
Class B Common.
(2) Optional Conversion Procedures.
------------------------------
(a) Each conversion of shares pursuant to paragraph
(b)(1) of this section shall be effected by the
surrender of the certificate or certificates
representing the shares to be converted at the
principal office of the Corporation at any time
during normal business hours, together with a
written notice by the holder stating the number of
shares that such holder desires to convert. Such
conversion shall be deemed to have been effected
as of the close of business on the date on which
such certificate or certificates have been
surrendered, and at such time the rights of any
such holders with respect to the converted shares
of such holder will cease and the person or
persons in whose name or names the certificate or
certificates for shares are to be issued upon such
conversion will be deemed to have become the
holder or holders of record of such shares
represented thereby.
(b) Promptly after such surrender, the Corporation
will issue and deliver in accordance with the
surrendering holder's instructions the certificate
or certificates for the Class A Common shares
issuable upon
3
<PAGE>
such conversion and a certificate representing any
Class B Common shares which were represented by
the certificate or certificates delivered to the
Corporation in connection with such conversion,
but which were not converted.
(3) Automatic Conversion. Each share of Class B Common
--------------------
will convert automatically into one share of Class A
Common upon the sale, exchange, or any other transfer
thereof (including, without limitation, conveyance into
a trust and transfer by the operation of law or of any
will or laws of descent and distribution) except (i) in
the case of shares of Class B Common owned by Yuasa
Corporation, any sale or other transfer to an Affiliate
of Yuasa Corporation, and (ii) in the case of shares of
Class B Common owned by General Battery Corporation,
any sale or other transfer to Exide Corporation or an
Affiliate of Exide Corporation. A bona fide pledge of
Class B Common shares shall not be deemed a transfer
within the meaning of this paragraph C(3), provided
that the pledgor of such shares retains the sole right
to vote such shares. The sale, exchange or other
transfer of shares of Class B Common Stock by the
pledgee thereof (including the retention of such shares
in realization of the pledgee's security interest
therein) shall be deemed such a transfer, in all
events.
(4) Affiliate. As used in this paragraph C(3), "Affiliate"
---------
means any corporation or other entity (the "Entity") of
which (i) at least fifty-one percent (51%) of the
equity interests in such Entity are owned beneficially
by, and (ii) at least fifty-one percent (51%) of all
the votes entitled to be cast are controlled, directly
or indirectly, by Yuasa Corporation or Exide
Corporation, as the case may be.
(5) Issuance Cost. The issuance of certificates upon
-------------
conversion of shares pursuant hereto will be made
without
4
<PAGE>
charge to the holder or holders of such shares for any
issuance tax (except stock transfer tax) in respect
thereof or other costs incurred by the Corporation in
connection therewith.
(6) Reservation of Shares. Solely for the purpose of
---------------------
issuance upon conversion of such shares as herein
provided, the Corporation shall at all times reserve
and keep available out of its authorized but unissued
shares of Class A Common such number of shares of Class
A Common as are then issuable upon the conversion of
all outstanding shares of Class B Common.
SIXTH. The Preferred Stock may be issued from time to time as a class
without series or, if so determined by the Board of Directors of the
Corporation, either in whole or in part, in one or more series. There is hereby
expressly granted to and vested in the Board of Directors of the Corporation
authority to fix and determine (except as fixed and determined herein), by
resolution, the par value, voting powers, full or limited, or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights, if any, and the qualifications, limitations or
restrictions thereof, if any, including specifically, but not limited to, the
dividend rights, conversion rights, redemption rights and liquidation
preferences, if any, of any wholly unissued series of Preferred Stock (or the
entire class of Preferred Stock if none of such shares have been issued), the
number of shares constituting any such series and the terms and conditions of
the issue thereof. Prior to the issuance of any shares of Preferred Stock, a
statement setting forth a copy of each such resolution or resolutions and the
number of shares of Preferred Stock of each such class or series shall be
executed and filed in accordance with the Pennsylvania Business Corporation Law.
Unless otherwise provided in any such resolution or resolutions, the number of
shares of capital stock of any such class or series so set forth in such
resolution or resolutions may thereafter be increased or decreased (but not
below the number of shares then outstanding), by a statement likewise executed
and filed setting forth a statement that a specified increase or decrease
therein had been authorized and directed by a resolution or resolutions likewise
adopted by the board of directors of the Corporation. In case the number of
such shares shall be decreased, the number of shares so specified in the
statement shall resume the status they had prior to the adoption of the first
resolution or resolutions.
SEVENTH. No shareholder shall be entitled to cumulate any votes for the
election of directors.
5
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EIGHTH. The management, control and government of the Corporation shall be
vested in a Board of Directors consisting of not less than six (6) nor more than
fifteen (15) members in number, as fixed by the Board of Directors of the
Corporation from time to time. The directors of the Corporation shall be
divided into three classes: Class I, Class II and Class III. Each Class shall
be as nearly equal in number as possible. If the number of Class I, Class II or
Class III directors is fixed for any term of office, it shall not be increased
during that term, except by a majority vote of the Board of Directors. The term
of office of the initial Class I directors shall expire at the annual election
of directors by the shareholders of the Corporation in 1999; the term of office
of the initial Class II directors shall expire at the annual election of
directors by the shareholders of the Corporation in 2000; and the term of office
of the initial Class III directors shall expire at the annual election of
directors by the shareholders of the Corporation in 2001. After the initial
term of each Class, the term of office of each Class shall be three (3) years,
so that the term of office of one class of directors shall expire each year when
their respective successors have been duly elected by the shareholders and
qualified. At each annual election by the shareholders of the Corporation, the
directors chosen to succeed those whose terms then expire shall be identified as
being of the same class as the directors they succeed. If, for any reason, a
vacancy occurs on the Board of Directors of the Corporation, a majority of the
remaining directors shall have the exclusive power to fill the vacancy by
electing a director to hold office for the unexpired term in respect of which
the vacancy occurred. No director of the Corporation shall be removed from
office, as a director, by the vote of shareholders, unless the votes of
shareholders cast in favor of the resolution for the removal of such director
constitute at least a majority of the votes which all shareholders would be
entitled to cast at an annual election of directors.
NINTH. No holder of any class of capital stock of the Corporation shall
have preemptive rights, and the Corporation shall have the right to issue and to
sell to any person or persons any shares of its capital stock or any option,
warrant or right to acquire capital stock, or any securities having conversion
or option rights without first offering such shares, rights or securities to any
holder of any class of capital stock of the Corporation, except to the extent
specified to the contrary in the Stockholder's Agreement among General Battery
Corporation, Yuasa-Exide, Inc. and Exide Corporation dated as of April 1, 1992,
as it may be amended from time to time.
TENTH. The presence, in person or by proxy, of shareholders entitled to
cast at least a majority of the votes which all shareholders are entitled to
cast shall constitute a quorum of shareholders at any annual or special meeting
of shareholders of the Corporation.
6
<PAGE>
ELEVENTH. A special meeting of the shareholders of the Corporation may be
called only by: (i) the Chief Executive Officer of the Corporation, (ii)
holders of at least 20% of all the outstanding Common Stock of the Company, or
(iii) the Board of Directors pursuant to a resolution adopted by a majority of
the total number of directors which the Corporation would have if there were no
vacancies on the Board of Directors.
TWELFTH. Except for any action taken by the unanimous written consent of
all of the stockholders of the Corporation, any action required or permitted to
be taken by the stockholders of the Corporation must be effected at a duly
called annual or special meeting of stockholders of the Corporation and may not
be effected by any consent in writing by such stockholders.
THIRTEENTH. The Control Transactions provisions of the Pennsylvania
Business Corporation Law (15 Pa. Cons. Stat. Section 2541 et seq.) shall not be
-- ---
applicable to the Corporation.
A. The Business Combinations provisions of the Pennsylvania Business
Corporation Law (15 Pa. Cons. Stat. Section 2551 et seq.) shall not be
-- ---
applicable to the Corporation.
B. The Control-Share Acquisitions provisions of the Pennsylvania Business
Corporation Law (15 Pa. Cons. Stat. Section 2561 et seq.) shall not be
-- ---
applicable to the Corporation.
C. The Disgorgement By Certain Controlling Shareholders Following Attempt
to Acquire Control provisions of the Pennsylvania Business Corporation
Law (15 Pa. Cons. Stat. Section 2577 et seq.) shall not be applicable
-- ---
to the Corporation.
FOURTEENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in its Articles of Incorporation in the manner
now or hereafter prescribed by statute and all rights conferred upon
shareholders and directors herein are hereby granted subject to this
reservation; provided, however, that the provisions set forth in Articles
SEVENTH, EIGHTH and TENTH through FOURTEENTH, inclusive, of these Articles of
Incorporation may not be repealed, altered or amended, in any respect
whatsoever, unless such repeal, alteration or amendment is approved by either
(a) the affirmative vote of shareholders of the Corporation entitled to cast at
least eighty percent (80%) of the votes which all shareholders of the
Corporation are then entitled to cast or (b) the affirmative vote of sixty-six
and two-thirds percent (66 2/3%) of the members of the Board of Directors of the
Corporation and the affirmative vote of shareholders of the Corporation entitled
to cast at least a majority of the votes which all shareholders of the
Corporation are then entitled to cast.
7
<PAGE>
FIFTEENTH. The name and post office address of the incorporator is:
Name Address
---- -------
Kathleen S. Wetzel STEVENS & LEE
111 North Sixth Street
P.O. Box 679
Reading, PA 19603-0679
IN TESTIMONY WHEREOF, the Incorporator has signed these Articles of
Incorporation this _____ day of March, 1998.
__________________________________
Kathleen S. Wetzel,
Incorporator
8
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
YUASA, INC.
ARTICLE I
SHAREHOLDERS
Section 1.01. - Annual Meeting -
- ------------------------------
(a) General. The annual meeting of shareholders shall be held on such day
-------
each year as may be fixed from time to time by the board of directors,
or, if no day be so fixed, on the fourth Tuesday of July of each year;
provided, however, that if such day falls upon a legal holiday, then
on the next business day thereafter. If the annual meeting shall not
have been called and held within six (6) months after the designated
time, any shareholder may call the meeting at any time thereafter. At
each annual meeting of shareholders, directors shall be elected,
reports of the affairs of the corporation shall be considered, and
such other business as may properly come before the meeting may be
transacted.
(b) Conduct of Meetings. At every meeting of the shareholders, the
-------------------
Chairman of the Board or, in his absence, the officer designated by
the Chairman of the Board, or, in the absence of such designation, a
chairman (who shall be one of the officers, if any is present) chosen
by a majority of the members of the board of directors shall act as
chairman of the meeting. The chairman of the meeting shall have any
and all powers and authority necessary in the chairman's sole
discretion to conduct an orderly meeting and preserve order and to
determine any and all procedural matters, including imposing
reasonable limits on the amount of time at the meeting taken up in
remarks by any one shareholder or group of shareholders. In addition,
until the business to be completed at a meeting of the shareholders is
completed, the chairman of a meeting of the shareholders is expressly
authorized to temporarily adjourn and postpone the meeting from time
to time. The Secretary of the corporation or in his absence, an
assistant secretary, shall act as Secretary of all meetings of the
shareholders. In the absence at such meeting of the Secretary or
assistant secretary, the chairman of the meeting may appoint another
person to act as secretary of the meeting.
Section 1.02. - Special Meetings - Special meetings of the shareholders may be
- --------------------------------
called only in accordance with the articles of incorporation of the corporation.
Upon written request to the
1
<PAGE>
Chief Executive Officer or the Secretary, sent by registered mail or delivered
to such officer in person, of any person or persons entitled to call a special
meeting of the shareholders, it shall be the duty of the Secretary to fix the
time of the meeting, which shall be held not more than sixty (60) days after the
receipt of the request. If the Secretary neglects or refuses to fix the time of
the meeting, the person or persons duly calling the meeting may do so.
Section 1.03. - Place of Meeting - All meetings of the shareholders shall be
- --------------------------------
held at such place, within or outside the Commonwealth of Pennsylvania, as may
be designated by the board of directors in the notice of meeting. In the
absence of such designation, shareholders' meetings shall be held at the
registered office of the corporation.
Section 1.04. - Notice of Meetings of Shareholders - Except as provided
- --------------------------------------------------
otherwise in these bylaws or required by law, written notice of every meeting of
the shareholders shall be given by, or at the direction of, the Secretary or
other authorized person, to each shareholder of record entitled to vote at the
meeting at least ten (10) days prior to the day named for the meeting.
Section 1.05. - Contents - The notice of the meeting shall specify the place,
- ------------------------
day and hour of the meeting and, in the case of a special meeting, the general
nature of the business to be transacted. If the purpose, or one of the
purposes, of the meeting is to consider the adoption, amendment or repeal of the
bylaws, there shall be included in, enclosed with, or accompanied by, the notice
a copy of the proposed amendment or a summary of the changes to be made by the
amendment.
Section 1.06. - Quorum - A meeting of the shareholders duly called shall not be
- ----------------------
organized for the transaction of business unless a quorum is present. The
presence in person or by proxy of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a particular
matter to be acted upon at the meeting shall constitute a quorum for the
purposes of consideration and action on such matter. The shareholders present
at a duly organized meeting can continue to do business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 1.07. - Adjournments - If a meeting of the shareholders duly called
- ----------------------------
cannot be organized because a quorum has not attended, the chairman of the
meeting or a majority of shareholders present in person or by proxy and entitled
to vote may adjourn the meeting to such time and place as they may determine.
At any meeting at which directors are to be elected and which has previously
been adjourned for lack of a quorum, the shareholders present and entitled to
vote, although less than a quorum as fixed herein, shall nevertheless constitute
a quorum for the
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<PAGE>
purpose of electing directors. In other cases, those shareholders entitled to
vote who attend a meeting of the shareholders that has been previously adjourned
for one or more periods aggregating at least fifteen (15) days because of an
absence of quorum, although less than a quorum as fixed herein, shall
nonetheless constitute a quorum for the purpose of acting upon any matter stated
in the notice of the meeting, provided the notice of meeting states that
shareholders who attend such adjourned meeting shall nonetheless constitute a
quorum for the purpose of acting upon the matter.
When a meeting of the shareholders is adjourned, it shall not be necessary to
give any notice of the adjourned meeting or of the business to be transacted at
the adjourned meeting other than by announcement at the meeting at which the
adjournment is taken, unless the board of directors fixes a new record date for
the adjourned meeting or unless notice of the business to be transacted was
required by the Pennsylvania Business Corporation Law of 1988, as it may be
amended, to be stated in the original notice of the meeting and such notice had
not been previously provided.
Section 1.08. - Action by Shareholders - Whenever any corporate action is to be
- --------------------------------------
taken by vote of the shareholders, it shall be authorized upon receiving the
affirmative vote of a majority of the votes cast by all shareholders entitled to
vote thereon and, if any shareholders are entitled to vote thereon as a class,
upon receiving the affirmative vote of the majority of the votes cast by the
shareholders entitled to vote as a class on the matter, except when a different
vote is required by law, or the articles of incorporation, or these bylaws.
Reference shall be made to the voting rights granted by the Articles of
Incorporation to each class and series of stock outstanding in determining the
number of votes entitled to be cast by the corporation's shareholders.
Section 1.09. - Voting Rights of Shareholders - Except as otherwise provided in
- ---------------------------------------------
the articles of incorporation, every shareholder of the corporation shall be
entitled to one vote for every share outstanding in the name of the shareholder
on the books of the corporation.
Section 1.10. - Voting and Other Action by Proxy -
- ------------------------------------------------
(a) General. Every shareholder entitled to vote at a meeting of
-------
shareholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to
act for that shareholder by proxy. The presence of, or vote or other
action at a meeting of shareholders, or the expression of consent or
dissent to corporate action in writing, by a proxy of a shareholder
shall constitute the presence of, or vote or action by, or written
consent or dissent of the shareholder.
3
<PAGE>
Where two or more proxies of a shareholder are present, the
corporation shall, unless otherwise expressly provided in the proxy,
accept as the vote of all shares represented thereby the vote cast by
a majority of them and, if a majority of the proxies cannot agree
whether the shares represented shall be voted, or upon the manner of
voting the shares, the voting of the shares shall be divided equally
among those persons.
(b) Minimum Requirements. Every proxy shall be executed in writing by the
--------------------
shareholder or by the duly authorized attorney-in-fact of the
shareholder and filed with the Secretary of the corporation. A
telegram, telex, cablegram, datagram or similar transmission from a
shareholder or attorney-in-fact, or a photographic, facsimile or
similar reproduction of a writing executed by a shareholder or
attorney-in-fact:
(i) may be treated as properly executed; and
(ii) shall be so treated if it sets forth a confidential and unique
identification number or other mark furnished by the corporation
to the shareholder for the purposes of a particular meeting or
transaction.
(c) Revocation. A proxy, unless coupled with an interest, shall be
----------
revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a proxy
shall not be effective until written notice thereof has been given to
the Secretary of the corporation. An unrevoked proxy shall not be
valid after three years from the date of its execution unless a longer
time is expressly provided therein. A proxy shall not be revoked by
the death or incapacity of the maker unless, before the vote is
counted or the authority is exercised, written notice of the death or
incapacity is given to the Secretary of the corporation.
Section 1.11. - Voting by Fiduciaries and Pledgees - Shares of the corporation
- --------------------------------------------------
standing in the name of a trustee or other fiduciary and shares held by an
assignee for the benefit of creditors or by a receiver may be voted by the
trustee, fiduciary, assignee or receiver. A shareholder whose shares are
pledged shall be entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the pledgee, but
nothing in this section shall affect the validity of a proxy given to a pledgee
or nominee.
4
<PAGE>
Section 1.12. - Voting of Joint Holders of Shares -
- -------------------------------------------------
(a) General. Where shares of the corporation are held jointly or as
-------
tenants in common by two or more persons, as fiduciaries or otherwise:
(i) if only one or more of such persons is present in person or by
proxy, all of the shares standing in the name of such persons
shall be deemed to be represented for the purpose of determining
a quorum and the corporation shall accept as the vote of all the
shares the vote cast by a joint owner or a majority of them; and
(ii) if the persons are equally divided upon whether the shares held
by them shall be voted or upon the manner of voting the shares,
the voting of the shares shall be divided equally among the
persons without prejudice to the rights of the joint owners or
the beneficial owners thereof among themselves.
(b) Exception. If there has been filed with the Secretary of the
---------
corporation a copy, certified by an attorney at law to be correct, of
the relevant portions of the agreement under which the shares are held
or the instrument by which the trust or estate was created or the
order of court appointing them or of an order of court directing the
voting of the shares, the persons specified as having such voting
power in the document latest in date of operative effect so filed, and
only those persons, shall be entitled to vote the shares but only in
accordance therewith.
Section 1.13. - Voting by Corporations - Any corporation that is a shareholder
- --------------------------------------
of this corporation may vote by any of its officers or agents, or by proxy
appointed by any officer or agent, unless some other person, by resolution of
the board of directors of the other corporation or a provision of its articles
or bylaws, a copy of which resolution or provision certified to be correct by
one of its officers has been filed with the Secretary of this corporation, is
appointed its general or special proxy in which case that person shall be
entitled to vote the shares.
Section 1.14. - Determination of Record Date - The board of directors may fix a
- --------------------------------------------
time prior to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled, notwithstanding
any transfer of shares on the books of the corporation after any record date
fixed as provided in this section. The board of directors may similarly
5
<PAGE>
fix a record date for the determination of shareholders of record for any other
purpose. When a determination of shareholders of record has been made as
provided in this section for purposes of a meeting, the determination shall
apply to any adjournment thereof unless the board fixes a new record date for
the adjourned meeting.
Section 1.15. - Voting List - The officer or agent having charge of the transfer
- ---------------------------
books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purposes thereof.
Failure to comply with the requirements of this section shall not affect the
validity of any action taken at a meeting prior to a demand at the meeting by
any shareholder entitled to vote thereat to examine the list. The original
share register or transfer book, or a duplicate thereof kept in Pennsylvania,
shall be prima facie evidence as to who are the shareholders entitled to examine
the list or share register or transfer book or to vote at any meeting of
shareholders.
Section 1.16. - Judges of Election - In advance of any meeting of shareholders
- ----------------------------------
of the corporation, the board of directors may appoint judges of election, who
need not be shareholders, to act at the meeting or any adjournment thereof. If
judges of election are not so appointed, the presiding officer of the meeting
may, and on the request of any shareholder shall, appoint judges of election at
the meeting. The number of judges shall be one or three. No person who is a
candidate for office to be filled at the meeting shall act as a judge of
election.
In the event any person appointed as a judge fails to appear or fails or refuses
to act, the vacancy may be filled by appointment made by the board of directors
in advance of the convening of the meeting or at the meeting by the presiding
officer thereof.
The judges of election shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies, receive votes or
ballots, hear and determine all challenges and questions in any way arising in
connection with the right to vote, count and tabulate all votes, determine the
result and do such acts as may be proper to conduct the election or vote with
fairness to all shareholders. The judge or judges of election shall perform
their duties impartially, in good faith, to the best of their ability and as
expeditiously as is practical. If there are three judges of election, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act or certificate of all.
6
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On request of the presiding officer of the meeting, or of any shareholder, the
judge or judges shall make a report in writing of any challenge or question or
matter determined by them, and execute a certificate of any fact found by them.
Any report or certificate made by them shall be prima facie evidence of the
facts stated therein.
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. - General - Unless otherwise provided by statute, all powers
- -----------------------
vested by law in the corporation shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be managed under the
direction of, the board of directors of the corporation.
Section 2.02. - Number, Qualifications, Selection and Term of Office - The board
- --------------------------------------------------------------------
of directors of the corporation shall consist of at least six (6) and not more
than fifteen (15) directors, the exact number to be set from time to time by
resolution of the board of directors. Each director shall be a natural person
of full age, and not less than two (2) of the directors shall be persons who are
not an employee, officer or former officer of the company or a subsidiary or
division thereof, or a relative of a principal executive officer, or who is not
an individual member of an organization acting as an advisor, consultant, legal
counsel, or in a similar capacity who receives compensation on a continuing
basis from the corporation in addition to director's fees. Each director shall
hold office until the expiration of the term for which he or she was selected
and until a successor has been selected and qualified or until his or her
earlier death, resignation or removal. A decrease in the number of directors
shall not have the effect of shortening the term of any incumbent director.
Section 2.03. - Nominations for Directors - Nominations for the election of
- -----------------------------------------
directors may be made by the board of directors or by any shareholder entitled
to vote for the election of directors. Nominations made by a shareholder
entitled to vote for the election of directors shall be made by notice in
writing, delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the corporation not less than ninety (90) days prior to any
meeting of the shareholders called for the election of directors; provided,
however, that if less than fifteen (15) days' notice of the meeting is given to
shareholders, such written notice shall be delivered or mailed, as prescribed,
to the Secretary of the corporation not later than the close of the third day
following the day on which notice of the meeting was mailed to shareholders.
Notice of nominations which are proposed by the board of directors shall be
given by the Chairman of the Board or any other appropriate officer. Each
notice of nominations made by a shareholder shall set forth (i) the name, age,
business address and, if known, residence
7
<PAGE>
address of each nominee proposed in such notice, (ii) the principal occupation
or employment of each such nominee, and (iii) the number of shares of capital
stock of the corporation which are beneficially owned by each such nominee.
Upon receiving a notice of nomination made by a shareholder, the board of
directors shall be entitled to request any other information relating to such
nominee deemed relevant by the board. The Chairman of the meeting may, if the
facts warrant, determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedure, and if he should so determine,
he shall so declare to the meeting and the defective nomination shall be
disregarded.
Section 2.04. - Election - Except as otherwise provided in these bylaws,
- ------------------------
directors of the corporation shall be elected by the shareholders. In elections
for directors, voting need not be by ballot unless required by vote of the
shareholders before the voting for election of directors begins. The candidates
receiving the highest number of votes, up to the number of directors to be
elected, shall be elected.
Section 2.05. - Vacancies -
- -------------------------
(a) Vacancies. Vacancies in the board of directors shall exist in the
---------
case of the happening of any of the following events: (i) the death
or resignation of any director; (ii) if at any annual or special
meeting the shareholders at which directors are to be elected, the
shareholders fail to elect the full authorized number of directors to
be voted for at that meeting; (iii) an increase in the number of
directors by resolution of the board of directors; (iv) the removal of
a director by the affirmative vote of shareholders of the corporation
in accordance with the articles of incorporation of the corporation;
or (v) the removal of a director by the board of directors or a court
of competent jurisdiction in accordance with these bylaws or otherwise
in accordance with law.
(b) Filling Vacancies. Vacancies in the board of directors, including
-----------------
vacancies resulting from an increase in the number of directors, may
be filled by a majority vote of the remaining members of the board
though less than a quorum, or by a sole remaining director, and each
person so selected shall be a director to serve for the balance of the
unexpired term and until his or her successor has been selected and
qualified or until his or her earlier death, resignation or removal.
8
<PAGE>
Section 2.06. - Removal and Resignation -
- ---------------------------------------
(a) Removal by Shareholders. A director may be removed by shareholders
-----------------------
only in accordance with the articles of incorporation of the
corporation.
(b) Removal by Action of the Directors. The board of directors may
----------------------------------
declare vacant the office of a director if that director: (i) has
been judicially declared of unsound mind; (ii) has been convicted of
an offense punishable by imprisonment for a term of more than one
year; or (iii) if within sixty (60) days after notice of his or her
election, the director does not accept such office either in writing
or by attending a meeting of the board of directors and fulfilling
such other requirements of qualification as these bylaws or the
articles of incorporation may provide.
(c) Resignation. Any director may resign at any time from his or her
-----------
position as a director upon written notice to the corporation. The
resignation shall be effective upon its receipt by the corporation or
at such later time as may be specified in the notice of resignation.
Section 2.07. - Regular Meetings - The board of directors of the corporation
- --------------------------------
shall hold an annual meeting for the election of officers and the consideration
of other proper business either as soon as practical after, and at the same
place as, the annual meeting of shareholders of the corporation, or at such
other day, hour and place as may be fixed by the board. The board of directors
may designate by resolution the day, hour and place, within or outside the
Commonwealth of Pennsylvania, of other regular meetings.
Section 2.08. - Special Meetings - Special meetings of the board of directors
- --------------------------------
may be called by the Chairman of the Board, the Chief Executive Officer, or the
President of the corporation or a majority of the directors then in office. The
person or persons calling the special meeting may fix the day, hour and place,
within or outside the Commonwealth of Pennsylvania, of the meeting.
Section 2.09. - Notice of Meetings -
- ----------------------------------
(a) General. No notice of any annual or regular meeting of the board of
-------
directors of the corporation need be given. Written notice of each
special meeting of the board of directors, specifying the place, day
and hour of the meeting, shall be given to each director at least 24
hours before the time set for the meeting. Neither the business to be
transacted at, nor the purpose of, any annual, regular or special
meeting of the board need be specified in the notice of the meeting.
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(b) Validation of Meeting Defectively Called or Noticed. The transactions
---------------------------------------------------
of any meeting of the board of directors, however called and noticed
or wherever held, are as valid as though taken at a meeting duly held
after regular call and notice, if a quorum is present and if, either
before or after the meeting, each of the directors not present signs a
waiver of notice. All such waivers shall be filed with the corporate
records or made a part of the minutes of the meeting. Attendance of a
director at any meeting shall constitute a waiver of notice of such
meeting except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 2.10. - Quorum and Action by Directors - A majority of the directors in
- ----------------------------------------------
office shall be necessary to constitute a quorum for the transaction of
business. The acts of a majority of directors present and voting at a meeting
at which a quorum is present shall be the acts of the board of directors, except
where a different vote is required by law, the articles of incorporation or
these bylaws. Every director shall be entitled to one vote.
Any action required or permitted to be taken at a meeting of the board of
directors may be taken without a meeting if, prior or subsequent to the action,
a consent or consents thereto by all of the directors in office is filed with
the Secretary of the corporation.
Section 2.11. - Presumption of Assent - A director of the corporation who is
- -------------------------------------
present at a meeting of the board of directors, or of a committee of the board,
at which action on any corporate matter is taken on which the director is
generally competent to act, shall be presumed to have assented to the action
taken unless his or her dissent is entered in the minutes of the meeting or
unless that director files his or her written dissent to the action with the
Secretary of the meeting before its adjournment or submits the dissent in
writing to the Secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a director who voted in
favor of the action. Nothing in this section shall bar a director from
asserting that the minutes of a meeting incorrectly omitted that director's
dissent if, promptly upon receipt of a copy of those minutes, the director
notified the Secretary, in writing, of the asserted omission or inaccuracy.
Section 2.12. - Presiding Officer - All meetings of the board of directors of
- ---------------------------------
the corporation shall be called to order and presided over by the Chairman of
the Board of Directors, or in the Chairman's absence, by the Chief Executive
Officer of the corporation or, in the absence of the Chairman and the Chief
Executive Officer, by a chairman of the meeting elected at such meeting by the
board of directors. The Secretary of the
10
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corporation shall act as Secretary of the board of directors unless otherwise
specified by the board of directors. In case the Secretary shall be absent from
any meeting, the chairman of the meeting may appoint any person to act as
secretary of the meeting.
Section 2.13. - Committees - The board of directors may, by resolution adopted
- --------------------------
by a majority of the directors in office, establish one or more committees.
Each committee is to consist of at least two (2) directors of the corporation
and not less than two-thirds of the members of each committee shall be persons
who are not officers or employees of the corporation or of any entity
controlling, controlled by or under common control with the corporation and who
are not beneficial owners of a controlling interest in the voting stock of the
corporation or of any such entity. The Chief Executive Officer shall be an ex-
officio member of each committee of the board of directors. The board may
designate one or more directors as alternate members of any committee who may
replace any absent or disqualified member at any meeting of the committee or for
purposes of any written action of the committee.
A committee, to the extent provided in the resolution of the board of directors
creating it, shall have and may exercise all of the powers and authority of the
board of directors except that a committee shall not have any power or authority
regarding: (i) the submission to shareholders of any action requiring the
approval of shareholders under the Pennsylvania Business Corporation Law of
1988, as it may be amended, (ii) the creation or filling of vacancies in the
board of directors, (iii) the adoption, amendment or repeal of these bylaws,
(iv) the amendment, adoption or repeal of any resolution of the board of
directors that by its terms is amendable or repealable only by the board of
directors, or (v) any action on matters committed by the bylaws or resolution of
the board of directors to another committee of the board. Each committee of the
board shall serve at the pleasure of the board.
Section 2.14. - Executive Committee - There shall be a standing committee of
- -----------------------------------
the Board of Directors to be known as the Executive Committee consisting of the
Chairman of the Board, the President and at least one (1) other director. The
Executive Committee, during the intervals between meetings of the Board of
Directors, shall to the extent permitted by law, exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation.
The Executive Committee shall keep minutes of its proceedings and shall report
on its activities at each regular meeting of the Board of Directors.
Section 2.15. - Compensation Committee - There shall be a standing Compensation
- --------------------------------------
Committee of the Board of Directors which shall be responsible for making annual
recommendations to the
11
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Board of Directors with respect to officer and employee compensation and
benefits.
The Compensation Committee shall keep minutes of its proceedings and shall
report on its activities at each regular meeting of the Board of Directors.
Section 2.16. - Audit Committee - There shall be a standing committee of the
- -------------------------------
board of directors to be known as the Audit Committee. The members of the Audit
Committee shall consist exclusively of directors who are not employees, officers
or former officers of the corporation or a subsidiary or division thereof, or a
relative of a principal executive officer, or who are not members of an
organization acting as an advisor, consultant, legal counsel, or in a similar
capacity who receives compensation on a continuing basis from the corporation in
addition to director's fees. The Audit Committee shall: (i) make
recommendations to the board of directors as to the independent accountants to
be appointed by the board, (ii) review with the independent accountants the
scope of their examination, (iii) receive the reports of the independent
accountants and meet with the representatives of such accountants for the
purpose of reviewing and considering questions relating to their examination and
such reports, (iv) review the internal accounting and auditing procedures of the
corporation, and (v) perform such other duties as may be assigned to it from
time to time by the board of directors.
Section 2.17. - Personal Liability of Directors -
- -----------------------------------------------
(a) To the fullest extent permitted by Pennsylvania law, a director of the
corporation shall not be personally liable for monetary damages for
any action taken, or any failure to take any action, unless the
director has breached or failed to perform the duties of his or her
office under Subchapter B of Chapter 17 of the Pennsylvania Business
Corporation Law of 1988, as it may be amended, and such breach or
failure to perform constitutes self-dealing, willful misconduct or
recklessness; provided, however, that the foregoing provision shall
not eliminate or limit (i) the responsibility or liability of a
director under any criminal statute, or (ii) the liability of a
director for the payment of taxes according to local, state or federal
law. Any repeal, modification or adoption of any provision
inconsistent with this section shall be prospective only, and neither
the repeal or modification of this bylaw nor the adoption of any
provision inconsistent with this bylaw shall adversely affect any
limitation on the personal liability of a director of the corporation
existing at the time of such repeal or modification or the adoption of
such inconsistent provision.
12
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(b) Notwithstanding anything herein contained to the contrary, this
Section 2.17 may not be amended or repealed, and a provision
inconsistent herewith may not be adopted, except by the affirmative
vote of 66-2/3% of the members of the entire Board of Directors or by
the affirmative vote of shareholders of the corporation entitled to
cast at least 80% of the votes which all shareholders of the
corporation are then entitled to cast, except that, if the
Pennsylvania Business Corporation Law or Directors' Liability Act is
amended or any other statute is enacted so as to decrease the exposure
of directors to liability, then this Section 2.17 and any other
provisions of these bylaws inconsistent with such decreased exposure
shall be amended, automatically and without any further action on the
part of the shareholders or directors, to reflect such reduced
exposure, unless such legislation expressly requires otherwise.
(c) If, for any reason, any provision of this Section 2.17 shall be held
invalid, such invalidity shall not affect any other provision not held
so invalid, and each such other provision shall, to the full extent
consistent with law, continue in full force and effect. If any
provision of this Section 2.17 shall be held invalid in part, such
invalidity shall in no way affect the remainder of such provision, and
the remainder of such provision, together with all other provisions of
this Section 2.17 shall, to the full extent consistent with law,
continue in full force and effect.
ARTICLE III
OFFICERS
Section 3.01. - Officers and Qualifications - The corporation shall have a
- -------------------------------------------
Chairman of the Board, a Chief Executive Officer, a President, a Chief Financial
Officer, a Secretary, and a Treasurer, each of whom shall be elected or
appointed by the board of directors. The board may also elect one or more vice
chairmen, vice presidents, executive vice presidents, and such other officers
and assistant officers as the board deems necessary or advisable. All officers
shall be natural persons of full age. Any two or more offices may be held by
the same person. It shall not be necessary for officers to be directors of the
corporation. Officers of the corporation shall have such authority and perform
such duties in the management of the corporation as is provided by or under
these bylaws or in the absence of controlling provisions in these bylaws as is
determined by or under resolutions or orders of the board of directors.
Section 3.02. - Election- Term and Vacancies - The officers and assistant
- --------------------------------------------
officers of the corporation shall be elected by the
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board of directors at the annual meeting of the board or from time to time as
the board shall determine, and each officer shall hold office for one (1) year
and until his or her successor has been duly elected and qualified or until that
officer's earlier death, resignation or removal. A vacancy in any office
occurring in any manner may be filled by the board of directors and, if the
office is one for which these bylaws prescribe a term, shall be filled for the
unexpired portion of the term.
Section 3.03. - Subordinate Officers, Committees and Agents - The board of
- -----------------------------------------------------------
directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the corporation may
require, including one or more assistant secretaries, and one or more assistant
treasurers, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine. The board of directors may delegate
to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
Section 3.04. - Removal; Resignation and Bonding -
- ------------------------------------------------
(a) Removal. Any officer or agent of the corporation may be removed by
-------
the board of directors with or without cause, but such removal shall
be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
(b) Resignation. Any officer may resign at any time upon written notice
-----------
to the corporation. The resignation shall be effective upon its
receipt by the corporation or at such later time as may be specified
in the notice of resignation.
(c) Bonding. The corporation may secure the fidelity of any or all of its
-------
officers by bond or otherwise.
Section 3.05. - Chairman of the Board - The Chairman of the Board of Directors
- -------------------------------------
of the corporation, if one is elected, shall preside at all meetings of the
shareholders and of the directors at which he or she is present, and shall have
such authority and perform such other duties as the board of directors may from
time to time designate.
Section 3.06. - Chief Executive Officer - The Chief Executive Officer shall, in
- ---------------------------------------
the absence of the Chairman of the Board, preside at all meetings of the
shareholders and of the board of directors at which he or she is present.
Subject to the control of the board of directors of the corporation and, within
the scope of their authority, any committees thereof, the Chief
14
<PAGE>
Executive Officer shall (a) have general and active management of all the
business, property and affairs of the corporation, (b) see that all orders and
resolutions of the board of directors and its committees are carried into
effect, (c) appoint and remove subordinate officers and agents, other than those
appointed or elected by the board of directors, as the business of the
corporation may require, (d) have custody of the corporate seal, or entrust the
same to the Secretary, (e) act as the duly authorized representative of the
board in all matters, except where the board has formally designated some other
person or group to act, (f) sign, execute and acknowledge, in the name of the
corporation, deeds, mortgages, bonds, contracts or other instruments authorized
by the board of directors, except in cases where signing and execution thereof
shall be expressly delegated by the board of directors, or by these bylaws, to
some other officer or agent of the corporation, and (g) in general perform all
the usual duties incident to the office of Chief Executive Officer and such
other duties as may be assigned to such person by the board of directors.
Section 3.07. - President - The President shall perform the duties of Chief
- -------------------------
Executive Officer either when he has been chosen as Chief Executive Officer or
when the Chief Executive Officer is absent or unable to perform the duties of
his office. The President shall have such other powers and perform such other
duties as from time to time as may be prescribed by him by the board of
directors or prescribed by the bylaws.
Section 3.08. - Vice Presidents - Each vice president, if any, shall perform
- -------------------------------
such duties as may be assigned to him or her by the board of directors or the
Chief Executive Officer.
Section 3.09. - Secretary - The Secretary shall (a) keep or cause to be kept the
- -------------------------
minutes of all meetings of the shareholders, the board of directors, and any
committees of the board of directors in one or more books kept for that purpose,
(b) have custody of the corporate records, stock books and stock ledgers of the
corporation, (c) keep or cause to be kept a register of the address of each
shareholder, which address has been furnished to the Secretary by the
shareholder, (d) see that all notices are duly given in accordance with law, the
articles of incorporation, and these bylaws, and (e) in general perform all the
usual duties as may be assigned to him or her by the board of directors or the
Chief Executive Officer.
Section 3.10. - Assistant Secretary - The Assistant Secretary, if any, or
- -----------------------------------
Assistant Secretaries if more than one, shall perform the duties of the
Secretary in his or her absence and shall perform other duties as the board of
directors, the Chief Executive Officer or the Secretary may from time to time
designate.
Section 3.11. - Chief Financial Officer - The Chief Financial Officer shall have
- ---------------------------------------
general supervision of the fiscal affairs of the corporation. The Chief
Financial Officer shall, with the
15
<PAGE>
assistance of the Chief Executive Officer and managerial staff of the
corporation: (a) see that a full and accurate accounting of all financial
transactions is made; (b) invest and reinvest the capital funds of the
corporation in such manner as may be directed by the board of directors, unless
that function shall have been delegated to a nominee or agent; (c) prepare any
financial reports that may be requested from time to time by the board of
directors; (d) cooperate in the conduct of any annual audit of the corporation's
financial records by certified public accountants duly appointed by the board of
directors; and (e) in general perform all the usual duties incident to the
office of treasurer and such other duties as may be assigned to him or her by
the board of directors or the Chief Executive Officer.
Section 3.12. - Treasurer - The Treasurer shall have custody of all funds and
- -------------------------
valuables of the corporation and shall give such bond, if any, with or without
sureties, as the directors may require, conditioned upon the faithful
performance of the duties of his office. He shall receive the funds of the
corporation and, except as otherwise provided by the directors, shall make
disbursements therefrom, taking proper vouchers therefor, and shall keep regular
books of account showing receipts and disbursements. He shall deposit in the
name of the corporation all moneys and valuables of the corporation coming into
his hands with a depository or depositories to be designated by the directors.
He shall also perform such other duties as are incident to his office or as may
be required by the directors.
Section 3.13. - Officer Salaries - Unless otherwise provided by the board of
- --------------------------------
directors of the corporation, the salaries of each of the officers elected by
the board of directors shall be fixed from time to time by the board of
directors and the salaries of all other officers of the corporation shall be
fixed from time to time by the Chief Executive Officer or such other person as
may be designated from time to time by the Chief Executive Officer or the board
of directors.
No officer shall be prevented from receiving such salary or other compensation
by reason of the fact that the officer is also a director of the corporation.
ARTICLE IV
SHARE CERTIFICATES AND TRANSFERS
Section 4.01. - Share Certificates - Share certificates shall be in such form as
- ----------------------------------
shall be approved by the board of directors and shall state: (i) that the
corporation is incorporated under the laws of the Commonwealth of Pennsylvania,
(ii) the name of the person to whom issued, and (iii) the number and class of
shares and the designation of the series, if any, that the share certificate
represents.
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<PAGE>
The share register or transfer books and blank share certificates shall be kept
by the Secretary or by any transfer agent or registrar designated by the board
of directors for that purpose.
Section 4.02. - Issuance - The share certificates of the corporation shall be
- ------------------------
numbered and registered in the share register or transfer books of the
corporation as they are issued. They shall be signed on behalf of the
corporation by the President or a vice president and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer; but where a
certificate is signed by a transfer agent or a registrar, the signature of any
corporate officer upon the certificate may be a facsimile, engraved or printed.
In case any officer who has signed, or whose facsimile signature has been placed
upon, any share certificate shall have ceased to be such officer because of
death, resignation or otherwise, before the certificate is issued, it may be
issued with the same effect as if the officer had not ceased to be such at the
date of its issue. The provisions of this section shall be subject to any
inconsistent or contrary agreement at the time between the corporation and any
transfer agent or registrar.
Section 4.03. - Transfer of Shares - Transfer of shares shall be made on the
- ----------------------------------
books of the corporation upon surrender of the certificates therefor, endorsed
by the person named in the certificate or by his attorney, lawfully constituted
in writing. No transfer shall be made which is inconsistent with law.
Section 4.04. - Lost, Destroyed, Mutilated or Stolen Certificates - If the
- -----------------------------------------------------------------
registered owner of a share certificate claims that the security has been lost,
destroyed, mutilated or wrongfully taken, another may be issued in lieu thereof
in a manner and upon such terms as the board of directors may authorize and
shall be issued in place of the original security, in accordance with law, if
the owner: (a) so requests before the corporation has notice that the security
has been acquired by a bona fide purchaser; (b) files with the corporation, if
requested by the corporation, a sufficient indemnity bond; and (c) satisfies any
other reasonable requirements imposed by the corporation.
ARTICLE V
NOTICE, WAIVERS, AND MEETINGS
Section 5.01. - Manner of Giving Notice - Whenever written notice is required to
- ---------------------------------------
be given to any person under the provisions of the Pennsylvania Business
Corporation Law of 1988, as it may hereafter be amended, or by the articles of
incorporation or these bylaws, it may be given to the person either personally
or by sending a copy of it by any class of mail or express mail, postage
prepaid; or by telegram (with messenger service specified), telex or TWX (with
answerback received) or courier service, charges prepaid; or by facsimile
transmission, to the
17
<PAGE>
shareholder's address (or to shareholder's telex, TWX, or facsimile number)
appearing on the books of the corporation; or, in the case of directors,
supplied by the director to the corporation for the purpose of notice. Notice
sent by mail, by telegraph or by courier service shall be deemed to have been
given to the person entitled thereto when deposited in the United States mail or
with a telegraph office or courier service for delivery to that person, or in
the case of telex or TWX, when dispatched or in the case of fax, when received
except that, in the case of directors, notice sent by regular mail shall be
deemed to have been given 48 hours after being deposited in the United States
mail or, in the case of telex, TWX, or facsimile, when dispatched.
A notice of meeting shall specify the place, day and hour of the meeting and any
other information required by any other provision of the Business Corporation
Law of 1988, the articles of incorporation or these bylaws.
Section 5.02. - Waiver of Notice - Whenever any written notice is required to be
- --------------------------------
given by statute or the articles of incorporation or these bylaws, a waiver of
the notice in writing, signed by the person or persons entitled to the notice,
whether before or after the time stated in it, shall be deemed equivalent to the
giving of the notice. Neither the business to be transacted at, nor the purpose
of, a meeting need be specified in the waiver of notice of such meeting.
Attendance of a person, either in person or by proxy, at any meeting shall
constitute a waiver of notice of the meeting, except where the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting was not lawfully
called or convened.
Section 5.03. - Modification of Proposal - Whenever the language of a proposed
- ----------------------------------------
resolution is included in a written notice of a meeting required to be given
under the provisions of the Business Corporation Law of 1988, as it may be
amended, or the articles of incorporation or these bylaws, the meeting
considering the resolution may without further notice adopt it with such
clarifying or other amendments as do not enlarge its original purpose.
Section 5.04. - Use of Conference Telephone and Similar Equipment - One of more
- -----------------------------------------------------------------
persons may participate in a meeting of the directors, or of any committee of
directors, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Such participation shall constitute presence in person at the meeting.
18
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ARTICLE VI
INDEMNIFICATION AND INSURANCE
Section 6.01. - Indemnification -
- -------------------------------
(a) Indemnification of Directors and Officers. The corporation shall
-----------------------------------------
indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative
(including, without limitation, actions by or in the right of the
corporation), by reason of the fact that such person is or was a
director or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), amounts paid
in settlement, judgments, and fines actually and reasonably incurred
by such person in connection with such action, suit, or proceeding;
provided, however, that no indemnification shall be made in any case
where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful
misconduct or recklessness.
(b) Indemnification of Others. The corporation may, at its discretion,
-------------------------
indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative
(including, without limitation, actions by or in the right of the
corporation), by reason of the fact that such person is or was an
employee or agent of the corporation who is not entitled to rights
under Section 6.01(a) hereof, or such person is or was serving at the
request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), amounts paid in
settlement, judgments, and fines actually and reasonably incurred by
such person in connection with such action, suit, or proceeding;
provided, however, that no indemnification shall be made in any case
where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful
misconduct or recklessness.
(c) Advancing Expenses. Expenses (including attorneys' fees) incurred in
------------------
defending a civil or criminal action, suit, or proceeding shall be
paid by the corporation in advance of the final disposition of such
action, suit, or proceeding upon receipt of an undertaking by or on
19
<PAGE>
behalf of the director, officer, employee, or agent to repay such
amount if it shall be ultimately determined that he is not entitled to
be indemnified by the corporation as authorized in this Article Six.
(d) Rights Not Exclusive. The indemnification and advancement of expenses
--------------------
provided by this Article Six shall not be deemed exclusive of any
other right to which persons seeking indemnification and advancement
of expenses may be entitled under any agreement, vote of shareholders
or disinterested directors, or otherwise, both as to actions in such
persons' official capacity and as to their actions in another capacity
while holding office, and shall continue as to a person who has ceased
to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of such person.
(e) Insurance; Other Security. The corporation may purchase and maintain
-------------------------
insurance on behalf of any person, may enter into contracts of
indemnification with any person, may create a fund of any nature
(which may, but need not be, under the control of a trustee) for the
benefit of any person, and may otherwise secure in any manner its
obligations with respect to indemnification and advancement of
expenses, whether arising under this Article Six or otherwise, to or
for the benefit of any person, whether or not the corporation would
have the power to indemnify such person against such liability under
the provisions of this Article Six.
Section 6.02. - Contract Rights; Amendment or Repeal - All rights under this
- ----------------------------------------------------
Article Six shall be deemed a contract between the corporation and the
indemnified representative pursuant to which the corporation and each
indemnified representative intend to be legally bound. Any repeal, amendment or
modification hereof shall be prospective only and shall not affect any rights or
obligations then existing.
Section 6.03. - Reliance on Provisions - Each person who shall act as an
- --------------------------------------
indemnified representative of the corporation shall be deemed to be doing so in
reliance upon the rights provided by this Article Six.
Section 6.04. - Interpretation - The provisions of this Article are intended to
- ------------------------------
constitute bylaws authorized by 15 Pa. C.S. Section 1746.
20
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ARTICLE VII
MISCELLANEOUS
Section 7.01. - Registered Office - The registered office of the corporation,
- ---------------------------------
required by law to be maintained in the Commonwealth of Pennsylvania, may be,
but need not be, the principal place of business of the corporation. The
address of the registered office may be changed from time to time by the board
of directors of the corporation.
Section 7.02. - Other Offices - The corporation may have additional offices and
- -----------------------------
business in such places, within or outside the Commonwealth of Pennsylvania, as
the board of directors of the corporation may designate or as the business of
the corporation may require.
Section 7.03. - Corporate Seal - The corporation may have a corporate seal,
- ------------------------------
which shall have inscribed on it the name of the corporation, the year of
organization, and the words "Corporate Seal--Pennsylvania" or such inscription
as the board of directors of the corporation may determine. The seal may be
used by causing it or a facsimile of it to be impressed or affixed, or in any
manner reproduced.
Section 7.04. - Fiscal Year - The fiscal year of the corporation shall be
- ---------------------------
established by the Board of Directors of the Corporation.
Section 7.05. - Checks - All checks, notes, bills of exchange or other orders in
- ----------------------
writing shall be signed by such person or persons as the board of directors or,
any person authorized by resolution of the board of directors may from time to
time designate.
Section 7.06. - Contracts - Except as otherwise provided in the Business
- -------------------------
Corporation Law of 1988, as it may be amended, in the case of transactions that
require action by the shareholders, the board of directors may authorize any
officer or agent to enter into any contract or to execute or deliver any
instrument on behalf of the corporation, and such authority may be general or
confined to specific instances.
Any note, mortgage, evidence of indebtedness, contract or other document, or any
assignment or endorsement thereof, executed or entered into between the
corporation and any other person, when signed by one or more officers or agents
having actual or apparent authority to sign it, or by the Chief Executive
Officer, the President or a vice president and the Secretary or Assistant
Secretary or Treasurer or Assistant Treasurer of the corporation, shall be held
to have been properly executed for and on behalf of the corporation, without
prejudice to the rights of the corporation against any person who shall have
executed the instrument in excess of his or her actual authority.
21
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Section 7.07. - Amendment of Bylaws - The authority to make, amend, alter,
- -----------------------------------
change or repeal these bylaws is hereby expressly vested in the board of
directors of the corporation, subject to the power of the shareholders to change
such action. Any change in the bylaws shall take effect when adopted unless
otherwise provided in the resolution effecting the change.
Section 7.08. - Severability - If any provision of these bylaws or the
- ----------------------------
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of these bylaws and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be deemed to be applicable to the greatest extent permitted by
law.
22
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Exhibit 5.1
May __, 1998
Board of Directors
Yuasa, Inc.
P.O. Box 14145
Reading, PA 19612-4145
Re: Registration Statement on Form S-1
SEC File No. 333-48881
Gentlemen:
In connection with the proposed offering by Yuasa, Inc. (the "Company") of
up to 4,392,000 shares of the Company's Class A Common Stock, par value $0.01
per share (the "Class A Common Stock") covered by the Company's Registration
Statement on Form S-1 (No. 333-48881 (the "Registration Statement"), we, as
counsel to the Company, have reviewed:
1. The Articles of Incorporation of the Company;
2. The By-laws of the Company;
3. The Resolutions of the Board of Directors of the Company adopted March
9, 1998 as certified by the Corporate Secretary of the Company;
4. A Corporate Subsistence Certificate, dated _____________, 1998, issued
by the Secretary of the Commonwealth of Pennsylvania with respect to the
Company; and
5. The Registration Statement.
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Based on our review of such documents, it is our opinion that:
1. The Company has been duly incorporated under the laws of the
Commonwealth of Pennsylvania and is validly existing and in good standing under
the laws of such Commonwealth.
2. The 4,392,000 shares of Class A Common Stock covered by the
Registration Statement have been duly authorized and, when issued and sold for
cash pursuant to the terms described in the Registration Statement, will be
legally issued by the Company and fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement, and to the reference to us under the heading "legal matters" in the
related Prospectus. In giving this consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the Rules and Regulations of the
Securities and Exchange Commission thereunder.
Very truly yours
STEVENS & LEE
2
<PAGE>
Exhibit 10.1
YUASA, INC.
-----------
OMNIBUS STOCK PLAN
------------------
1. Purpose. The Yuasa, Inc. Omnibus Stock Plan ("Plan") is intended to
-------
secure for Yuasa, Inc. (the "Company") and its shareholders the benefits arising
from ownership of the Company's Class A common stock, $.01 par value per share
("Common Stock"), by those selected executives and other key employees of the
Company who will be responsible for its future growth. The Plan is designed to
help attract and retain superior personnel for positions of substantial
responsibility with the Company, and to provide key employees with an additional
incentive to contribute to the success of the Company.
2. Elements of the Plan. In order to maintain flexibility in the award
--------------------
of stock benefits, the Plan is comprised of three parts. The first part is the
Incentive Stock Option Plan ("Incentive Plan"). The second part is the
Compensatory or Nonqualified Stock Option Plan ("Compensatory Plan"). The third
part is the Stock Appreciation Rights Plan ("S.A.R. Plan"). Copies of the
Incentive Plan, Compensatory Plan and S.A.R. Plan are attached hereto as Part I,
Part II and Part III, respectively, and are collectively referred to herein as
the "Plans." The grant of an option or appreciation right under one of the
Plans shall not be construed to prohibit the grant of an option or appreciation
right under any of the other Plans.
3. Applicability of General Provisions. Unless any Plan specifically
-----------------------------------
indicates to the contrary, all Plans shall be subject to the General Provisions
of the Omnibus Stock Plan set forth below.
4. Administration of the Plans. The Plans shall be administered,
---------------------------
construed, governed and amended in accordance with their respective terms.
GENERAL PROVISIONS OF OMNIBUS STOCK PLAN
Article 1. Administration. The Plan shall be administered by the
--------------
Compensation Committee of the Board of Directors of the Company. The committee,
when acting to administer the Plan, is referred to as the "Plan Administrators."
Any action of the Plan Administrators shall be taken by majority vote or the
unanimous written consent of the Plan Administrators. The Board of Directors,
with the Plan Administrators not voting, shall administer the Plan with respect
to the options granted to the Plan Administrators in accordance with the
provisions of the Compensatory Plan. No Plan Administrator or member of the
Board of Directors of the Company or any parent or subsidiary, shall be liable
for any action or determination made in good faith with respect to the Plan or
to any option or stock appreciation right, granted thereunder.
1
<PAGE>
Article 2. Authority of Plan Administrators. Subject to the other
--------------------------------
provisions of this Plan, and with a view to effecting its purpose, the Plan
Administrators shall have sole authority in their absolute discretion: (a) to
construe and interpret the Plan; (b) to define the terms used herein; (c) to
prescribe, amend, and rescind rules and regulations relating to the Plan; (d) to
determine the employees to whom options and appreciation rights shall be granted
under the Plan; (e) to determine the time or times at which options and
appreciation rights shall be granted under the Plan; (f) to determine the number
of shares subject to any option or stock appreciation right under the Plan as
well as the option price, and the duration of each option and appreciation right
and any other terms and conditions of options and appreciation rights; (g) to
terminate the Plan; and (h) to make any other determinations necessary or
advisable for the administration of the Plan and to do everything necessary or
appropriate to administer the Plan. All decisions, determinations, and
interpretations made by the Plan Administrators shall be binding and conclusive
on all participants in the Plan and on their legal representatives, heirs and
beneficiaries.
Article 3. Maximum Number of Shares Subject to the Plan. The maximum
--------------------------------------------
aggregate number of shares of Common Stock available pursuant to the Plans,
subject to adjustment as provided in Article 6 hereof, shall be equal to the
number of shares that represent 5% of the Company's outstanding shares of Class
A and Class B Common Stock immediately following the completion of the Company's
initial public offering. If any of the options granted under this Plan expire
or terminate for any reason before they have been exercised in full, the
unpurchased shares subject to those expired or terminated options shall again be
available for the purposes of the Plan.
Article 4. Eligibility and Participation. Only regular full-time
-----------------------------
employees of the Company, including officers whether or not directors of the
Company, or of any parent or any subsidiary, shall be eligible for selection by
the Plan Administrators to participate in the Plan.
Article 5. Effective Date and Term of Plan. The Plan was adopted by the
-------------------------------
Board of Directors of the Company effective March 9, 1998 and has been approved
by the Company's shareholders. The Plan shall continue in effect for a term of
10 years unless sooner terminated under Article 2 of the General Provisions.
Article 6. Adjustments. If the shares of Common Stock of the Company as a
-----------
whole are increased, decreased, changed into, or exchanged for a different
number or kind of shares or securities through merger, consolidation,
combination, exchange of shares, other reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment shall be made in the maximum number and
2
<PAGE>
kind of shares as to which options and appreciation rights may be granted under
this Plan. A corresponding adjustment changing the number or kind of shares
allocated to unexercised options and appreciation rights, or portions thereof,
which shall have been granted prior to any such change, shall likewise be made.
Any such adjustment in outstanding options and appreciation rights shall be made
without change in the aggregate purchase price applicable to the unexercised
portion of the option or appreciation right, but with a corresponding adjustment
in the price for each share or other unit of any security covered by the option
or appreciation right. In making any adjustment pursuant to this Article 6, any
fractional shares shall be disregarded.
Article 7. Termination and Amendment of Plan. The Plan shall terminate no
---------------------------------
later than 10 years from the date such Plan is adopted by the Board of
Directors, or the date such Plan is approved by the shareholders, whichever is
earlier. No options or appreciation rights, shall be granted under the Plan
after that date. Subject to the limitation contained in Article 8 of the
General Provisions, the Plan Administrators may at any time amend or revise the
terms of the Plan, including the form and substance of the option and
appreciation right agreements to be used hereunder; provided that no amendment
or revision shall (a) increase the maximum aggregate number of shares that may
be sold, subjected to appreciation, or distributed pursuant to options or
appreciation rights, granted under this Plan, except as permitted under Article
6 of the General Provisions; (b) change the minimum purchase price for shares
under Section 4 of the Incentive Plan and the Compensatory Plan; (c) increase
the maximum term established under the Plans for any option or appreciation
right; or (d) permit the granting of an option or appreciation right, to anyone
other than as provided in Article 4 of the General Provisions.
Article 8. Prior Rights and Obligations. No amendment, suspension, or
----------------------------
termination of the Plan shall, without the consent of the employee who has
received an option or appreciation right, alter or impair any of that employee's
rights or obligations under any option or appreciation right granted under the
Plan prior to such amendment, suspension, or termination.
Article 9. Privileges of Stock Ownership. Notwithstanding the exercise of
-----------------------------
any options granted pursuant to the terms of this Plan, no employee shall have
any of the rights or privileges of a shareholder of the Company with respect to
any shares of stock issuable upon the exercise of his or her option until
certificates representing the shares have been issued and delivered. No shares
shall be required to be issued and delivered upon exercise of any option unless
and until all of the requirements of law and of all regulatory agencies having
jurisdiction over the issuance and delivery of the securities shall have been
fully complied with. No adjustment shall be made for dividends or any other
distributions for which the record
3
<PAGE>
date is prior to the date on which such stock certificate is issued.
Article 10. Reservation of Shares of Common Stock. The Company, during
-------------------------------------
the term of this Plan, will at all times reserve and keep available such number
of shares of its Common Stock as shall be sufficient to satisfy the requirements
of the Plan. In addition, the Company will from time to time, as is necessary
to accomplish the purposes of this Plan, seek to obtain from any regulatory
agency having jurisdiction, any requisite authority in order to issue and sell
shares of Common Stock hereunder. The inability of the Company to obtain from
any regulatory agency having jurisdiction the authority deemed, by the Company's
counsel, to be necessary to the lawful issuance and sale of any shares of its
stock hereunder shall relieve the Company of any liability in respect of the
non-issuance or sale of the stock as to which the requisite authority shall not
have been obtained.
Article 11. Tax Withholding. The exercise of any option or appreciation
---------------
right, granted under the Plan is subject to the condition that if at any time
the Company shall determine, in its discretion, that the satisfaction of
withholding tax or other withholding liabilities under any state or federal law
is necessary or desirable as a condition of, or in any connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then in such
event, the exercise of the option or appreciation right shall not be effective
unless such withholding tax or other withholding liabilities shall have been
satisfied in a manner acceptable to the Company.
Article 12. Employment. Nothing in the Plan or in any option or stock
----------
appreciation right, shall confer upon any eligible employee any right to
continued employment by the Company, or by any parent or subsidiary corporation,
or limit in any way the right of the Company or any parent or subsidiary
corporation at any time to terminate or alter the terms of that employment.
4
<PAGE>
PART I
YUASA, INC.
-----------
INCENTIVE STOCK OPTION PLAN
---------------------------
Section 1. Purpose. The purpose of the Yuasa, Inc. Incentive Stock Option
-------
Plan ("Incentive Plan") is to promote the growth and general prosperity of the
Company by permitting the Company to grant options to purchase shares of its
Common Stock. The Incentive Plan is designed to help attract and retain
superior personnel for positions of responsibility with the Company and any
parent or subsidiary, and to provide key employees with an additional incentive
to contribute to the success of the Company. The Company intends that options
granted pursuant to the provisions of the Incentive Plan will qualify and will
be identified as "incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended ("Code"). This Incentive Plan is
Part I of the Company's Omnibus Stock Plan ("Plan"). Unless any provision
herein indicates to the contrary, this Incentive Plan shall be subject to the
General Provisions of the Plan.
Section 2. Option Terms and Conditions. The terms and conditions of
---------------------------
options granted under the Incentive Plan may differ from one another as the Plan
Administrators shall, in their discretion, determine, as long as all options
granted under the Incentive Plan satisfy the requirements of the Incentive Plan.
Section 3. Duration of Options. Each option and all rights thereunder
-------------------
granted pursuant to the terms of the Incentive Plan shall expire on the date
determined by the Plan Administrators, but in no event shall any option granted
under the Incentive Plan expire later than 10 years from the date on which the
option is granted, except that any employee who owns more than 10% of the
combined voting power of all classes of stock of the Company, or of any parent
or subsidiary, must exercise any options within five years from the date of
grant. In addition, each option shall be subject to early termination as
provided in the Incentive Plan.
Section 4. Purchase Price. The purchase price for shares acquired
--------------
pursuant to the exercise, in whole or in part, of any option shall not be less
than the fair market value of the shares at the time of the grant of the option;
except that for any employee who owns more than 10% of the combined voting power
of all classes of stock of the Company, or of any parent or subsidiary, the
purchase price shall not be less than 110% of fair market value. Fair market
value shall be determined by the Plan Administrators on the basis of such
factors as they deem appropriate; provided, however, that fair market value
shall be determined without regard to any restriction other than a restriction
which, by its terms, will never lapse, and further provided, however, that if at
the time the determination of fair
5
<PAGE>
market value is made, those shares are subject to trading on a national
securities exchange for which sale prices are regularly reported, the fair
market value of those shares shall not be less than the mean of the high and low
asked or closing sales prices reported for the Common Stock on that exchange on
the day or most recent trading day preceding the date on which the option is
granted. For purposes of this Section 4, the term "national securities
exchange" shall include the National Association of Securities Dealers Automated
Quotation System and the over-the-counter market.
Section 5. Maximum Amount of Options in Any Calendar Year. The aggregate
----------------------------------------------
fair market value (determined as of the time the option is granted), of the
Common Stock with respect to which incentive stock options are first exercisable
by any Optionee during any calendar year under the terms of this Plan and all
such plans of the Company and any parent or subsidiary corporation, shall not
exceed $100,000. Any option in excess of the foregoing limitations shall be
granted pursuant to the Compensatory Plan, and shall be clearly and specifically
designated as not being an incentive stock option.
Grants to any employee under the Incentive Plan shall not exceed in the
aggregate 200,000 options during any period of 12 consecutive months. Such
limitation shall be subject to adjustments in the manner described in Article 6
of the General Provisions of this Plan.
Section 6. Exercise of Options. Each option shall be exercisable in one
-------------------
or more installments during its term, and the right to exercise may be
cumulative as determined by the Plan Administrators. No option may be exercised
for a fraction of a share of Common Stock. The purchase price of any shares
purchased shall be paid in full, in cash or by certified or cashier's check
payable to the order of the Company or by shares of Common Stock, if permitted
by the Plan Administrators, or by a combination of cash, check, or shares of
Common Stock, at the time of exercise of the option; provided that the form(s)
of payment allowed the employee shall be established when the option is granted.
If any portion of the purchase price is paid in shares of Common Stock, those
shares shall be tendered at their then fair market value as determined by the
Plan Administrators in accordance with Section 4 of this Incentive Plan.
Notwithstanding the foregoing, Common Stock acquired pursuant to the exercise of
an incentive stock option may not be tendered as payment unless the holding
period requirements of Code Section 422(a)(1) have been satisfied, and Common
Stock not acquired pursuant to the exercise of an incentive stock option may not
be tendered as payment unless it has been held, beneficially and of record, for
at least one year.
Section 7. Acceleration of Right of Exercise of Installments.
-------------------------------------------------
Notwithstanding the first sentence of Section 6 of this Incentive Plan, in the
event of a Change in Control, any
6
<PAGE>
option granted pursuant to the terms of the Incentive Plan shall become
immediately exercisable with respect to the full number of shares subject to
that option during the period commencing as of the date of the Change in
Control. For purposes of the Incentive Plan, the term "Change in Control" means
any of the following:
(i) Yuasa Japan, or an Affiliate ceases to beneficially own at
least 40% of the combined voting power of all classes of stock of the
Company; the term "Affiliate" as used in the Incentive Plan shall mean (A)
any entity with respect to which Yuasa Japan, directly or indirectly, holds
the right (by reason of its ownership of voting securities or by means of a
proxy, voting trust or otherwise) to vote (or direct the voting of) more
than 50% of the total votes which all holders of such entity's securities
are entitled to cast or to otherwise elect a majority of the members of the
board of directors of such entity; and (B) any entity which, directly or
indirectly, holds the right (by reason of its ownership of the voting
securities of Yuasa Japan or by means of a proxy, voting trust or
otherwise) to vote (or direct the voting of) more than 50% of the total
votes of Yuasa Japan which all holders of Yuasa Japan's securities are
entitled to cast, or to otherwise elect a majority of the board of
directors of such entity;
(ii) the occurrence of, or execution of an agreement providing
for, a sale of all or substantially all of the assets of the Company or
Yuasa, Inc. (a Delaware Corporation) to an entity which is not Yuasa Japan
(or an Affiliate of Yuasa Japan), but only on the date upon which all
material conditions precedent to closing under such agreement have passed;
(iii) the occurrence of, or execution of an agreement providing
for, a reorganization, merger, consolidation or similar transaction
involving the Company, unless Yuasa Japan (or an Affiliate of Yuasa Japan)
will own securities representing a majority of the voting power of the
surviving or resulting corporation; and
(iv) any other event which is at any time irrevocably
designated as a "Change in Control" for purposes of the Incentive Plan by
resolution adopted by a majority of the then non-employee directors of the
Company.
Section 8. Written Notice Required. Any option granted pursuant to the
-----------------------
terms of the Incentive Plan shall be exercised when written notice of that
exercise has been given to the Company at its principal office by the person
entitled to exercise the option and full payment for the shares with respect to
which the option is exercised has been received by the Company.
7
<PAGE>
Section 9. Additional Exercise Provisions. An employee granted and
------------------------------
holding more than one option granted pursuant to the terms of the Incentive Plan
at any relevant time may, in accordance with the provisions of the Incentive
Plan, elect to exercise such options in any order.
In addition, at the request of the employee and to the extent permitted by
applicable law, the Company may, in its sole discretion, selectively approve
arrangements with a brokerage firm under which such brokerage firm, on behalf of
the employee, shall pay to the Company the exercise price of the options being
exercised, and the Company, pursuant to an irrevocable notice from the employee,
shall promptly deliver the shares being purchased to such brokerage firm.
Section 10. Compliance With Securities Laws. Shares of Common Stock shall
-------------------------------
not be issued with respect to any option granted under the Incentive Plan unless
the exercise of that option and the issuance and delivery of those shares
pursuant to that exercise shall comply with all relevant provisions of state and
federal law including, without limitation, the Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance. The Plan Administrators may also require an employee to whom an
option has been granted under the Incentive Plan ("Optionee") to furnish
evidence satisfactory to the Company, including a written and signed
representation letter and consent to be bound by any transfer restriction
imposed by law, legend, condition, or otherwise, that the shares are being
purchased only for investment and without any present intention to sell or
distribute the shares in violation of any state or federal law, rule, or
regulation. Further, each Optionee shall consent to the imposition of a legend
on the shares of Common Stock subject to his or her option restricting their
transferability as required by law or by this Section 10.
Section 11. Employment of Optionee. Each Optionee, if requested by the
----------------------
Plan Administrators when the option is granted, must agree in writing as a
condition of receiving his or her option, that he or she will remain in the
employ of the Company, or any parent or subsidiary corporation of the Company
(or a corporation or a parent or subsidiary of such corporation issuing or
assuming a stock option in a transaction to which Section 424(a) of the Code
applies), as the case may be, following the date of the granting of that option
for a period specified by the Plan Administrators, which period shall in no
event exceed three years. Nothing in the Plan or in any option granted
hereunder shall confer upon any Optionee any right to continued employment by
the Company, or any parent or subsidiary corporation, or limit in any way the
right of the Company or any parent or subsidiary corporation at any time to
terminate or alter the terms of that employment.
8
<PAGE>
Section 12. Option Rights Upon Termination of Employment. If an Optionee
--------------------------------------------
ceases to be employed by the Company, or any parent or subsidiary corporation
(or a corporation or a parent or subsidiary of such corporation issuing or
assuming a stock option in a transaction to which Code Section 424(a) applies),
for any reason other than early, normal, or late retirement, or if the Optionee
is involuntarily terminated for any reason other than for Cause (as defined
below), his or her option shall immediately terminate; provided, however, that
the Plan Administrators may, at the time an option is granted, in their
discretion, allow such option to be exercised (to the extent exercisable on the
date of termination of employment) at any time within three months after the
date of termination of employment, but in no event later than the option
expiration date.
Section 13. Option Rights Upon Disability. If an Optionee becomes
-----------------------------
permanently and totally disabled within the meaning of Code Section 22(e)(3)
while employed by the Company, or any parent or subsidiary corporation (or a
corporation or a parent or subsidiary of such corporation issuing or assuming a
stock option in a transaction to which Code Section 424(a) applies), the option
may be exercised, to the extent exercisable on the date of termination of
employment, in whole at any time or from time to time in part, but in no event
later than the option expiration date.
Section 14. Option Rights Upon Death of Optionee. Except as otherwise
------------------------------------
limited by the Plan Administrators at the time of the grant of an option, if an
Optionee dies while employed by the Company, or any parent or subsidiary
corporation (or a corporation or a parent or subsidiary of such corporation
issuing or assuming a stock option in a transaction to which Code Section 424(a)
applies), or within three months after ceasing to be an employee thereof, his or
her option shall expire two years after the date of death unless by its term it
expires sooner. During this two year or shorter period, the option may be
exercised, to the extent that it remains unexercised on the date of death, by
the person or persons to whom the Optionee's rights under the option shall pass
by will or by the laws of descent and distribution, but only to the extent that
the Optionee is entitled to exercise the option at the date of death.
Section 15. Option Rights Upon Retirement. If an Optionee ceases to be
-----------------------------
employed by the Company, or any parent or subsidiary corporation (or a
corporation or a parent or subsidiary of such corporation issuing or assuming a
stock option in a transaction to which Code Section 424(a) applies), because of
early, normal or late retirement as defined in the Yuasa, Inc. Salaried
Retirement and 401(k) Plan, the Optionee may exercise an option, to the extent
that he or she was entitled to do so at the date of early, normal or late
retirement, in whole at any time or from time to time in part, within six months
after the date of such early, normal or late retirement, but in no event later
than the option expiration date.
9
<PAGE>
Section 16. Option Rights Upon Termination For Cause. If the Optionee's
----------------------------------------
employment is terminated by the Company for Cause, all unexercised options,
whether vested or non-vested, shall be forfeited. For purposes of the Incentive
Plan, Cause is defined to mean the termination of a Optionee's service with the
Company because of (a) a felony conviction of the Optionee; (b) the commission
by such Optionee of an act of fraud or embezzlement against the Company; (c)
willful misconduct materially detriment to the Company; (d) the Optionee's
continued failure to implement reasonable requests or directions arising from
actions of the Company's Board of Directors after 30 days written notice to the
Optionee; (e) the wrongful dissemination of confidential or proprietary
information; (f) the engagement in competitive activities which directly or
indirectly compete or interfere with the Company's research, development,
manufacture, licensing, patenting or marketing of any of the Company's products;
or (g) the intentional and habitual neglect by the Optionee of his or her duties
to the Company.
Section 17. Options Not Transferable. Options granted pursuant to the
------------------------
terms of the Incentive Plan may not be sold, pledged, assigned, or transferred
in any manner otherwise than by will or the laws of descent or distribution and
may be exercised during the lifetime of an Optionee only by that Optionee.
Section 18. Adjustments to Number and Purchase Price of Optioned Shares.
-----------------------------------------------------------
All options granted pursuant to the terms of this Incentive Plan shall be
adjusted in the manner prescribed by Article 6 of the General Provisions of this
Plan.
10
<PAGE>
PART II
YUASA, INC.
-----------
NONQUALIFIED STOCK OPTION PLAN
------------------------------
Section 1. Purpose. The purpose of the Yuasa, Inc. Nonqualified Stock
-------
Option Plan ("Compensatory Plan") is to permit the Company to grant options to
purchase shares of its Class A Common Stock to selected executive officers and
full-time, key employees of the Company. The Compensatory Plan is designed to
help attract and retain superior personnel for positions of substantial
responsibility with the Company and any parent or subsidiary, and to provide key
employees with an additional incentive to contribute to the success of the
Company. Any option granted pursuant to this Compensatory Plan shall be clearly
and specifically designated as not being an incentive stock option, as defined
in Section 422(b) of the Internal Revenue Code of 1986, as amended ("Code").
This Compensatory Plan is Part II of the Company's Omnibus Stock Plan ("Plan").
Unless any provision herein indicates to the contrary, this Compensatory Plan
shall be subject to the General Provisions of the Plan.
Section 2. Option Terms and Conditions. The terms and conditions of
---------------------------
options granted under this Compensatory Plan may differ from one another as the
Plan Administrators shall, in their discretion, determine as long as all options
granted under the Compensatory Plan satisfy the requirements of the Compensatory
Plan.
Section 3. Duration of Options. Each option and all rights thereunder
-------------------
granted pursuant to the terms of this Compensatory Plan shall expire on the date
determined by the Plan Administrators, but in no event shall any option granted
under the Compensatory Plan expire later than 10 years from the date on which
the option is granted. In addition, each option shall be subject to early
termination as provided in the Compensatory Plan.
Section 4. Purchase Price. The purchase price for shares acquired
--------------
pursuant to the exercise, in whole or in part, of any option shall be equal to
or less than the fair market value of the shares at the time of the grant of the
option, as determined by the Plan Administrators at the time of grant on the
basis of such factors as they deem appropriate; provided, however, that fair
market value shall be determined without regard to any restriction other than a
restriction which, by its terms, shall never lapse. If at the time of the
determination, the shares of the Company are admitted to trading on a national
securities exchange for which sales prices are regularly reported, the fair
market value of those shares shall not be less than the mean of the high and low
asked or closing sales prices reported for the Common Stock on that exchange on
the day or most recent trading
11
<PAGE>
day preceding the date on which the option is granted. For purposes of this
Section 4, the term "national securities exchange" shall include the National
Association of Securities Dealers Automated Quotation System and the over-the-
counter market.
Section 5. Exercise of Options. Each option shall be exercisable in one
-------------------
or more installments during its term and the right to exercise may be cumulative
as determined by the Plan Administrators (or the Board of Directors with respect
to the Plan Administrators). No options may be exercised for a fraction of a
share of Common Stock. The purchase price of any shares purchased shall be paid
in full in cash or by certified or cashier's check payable to the order of the
Company or by shares of Common Stock, if permitted by the Plan Administrators
(or the Board of Directors with respect to the Plan Administrators), or by a
combination of cash, check or shares of Common Stock, at the time of exercise of
the option. If any portion of the purchase price is paid in shares of Common
Stock, those shares shall be tendered at their then fair market value as
determined by the Plan Administrators (or the Board of Directors with respect to
the Plan Administrators) in accordance with Section 4 of this Compensatory Plan.
Notwithstanding the foregoing, Common Stock acquired pursuant to the exercise of
an incentive stock option may not be tendered as payment unless the holding
period requirements of Code Section 422(a)(1) have been satisfied, and Common
Stock not acquired pursuant to the exercise of an incentive stock option may not
be tendered as payment unless it has been held, beneficially and of record, for
at least one year. In addition, at the request of the employee and to the
extent permitted by applicable law, the Company may, in its sole discretion,
selectively approve arrangements with a brokerage firm under which such
brokerage firm, on behalf of the employee, shall pay to the Company the exercise
price of the options being exercised, and the Company, pursuant to an
irrevocable notice from the employee, shall promptly deliver the shares being
purchased to such brokerage firm.
Section 6. Acceleration of Right of Exercise of Installments.
-------------------------------------------------
Notwithstanding the first sentence of Section 5 of this Compensatory Plan, in
the event of a Change in Control, any option granted pursuant to the terms of
this Compensatory Plan shall become immediately exercisable with respect to the
full number of shares subject to that option during the period commencing as of
the date of the Change in Control. For purposes of the Compensatory Plan, the
term "Change in Control" means any of the following:
(i) Yuasa Japan, or an Affiliate ceases to beneficially own at
least 40% of the combined voting power of all classes of stock of the
Company; the term "Affiliate" as used in the Compensatory Plan shall mean
(A) any entity with respect to which Yuasa Japan, directly or indirectly,
holds the right (by reason of its ownership of voting
12
<PAGE>
securities or by means of a proxy, voting trust or otherwise) to vote (or
direct the voting of) more than 50% of the total votes which all holders of
such entity's securities are entitled to cast or to otherwise elect a
majority of the members of the board of directors of such entity; and (B)
any entity which, directly or indirectly, holds the right (by reason of its
ownership of the voting securities of Yuasa Japan or by means of a proxy,
voting trust or otherwise) to vote (or direct the voting of) more than 50%
of the total votes of Yuasa Japan which all holders of Yuasa Japan's
securities are entitled to cast, or to otherwise elect a majority of the
board of directors of such entity;
(ii) the occurrence of, or execution of an agreement providing
for, a sale of all or substantially all of the assets of the Company or
Yuasa, Inc. (a Delaware Corporation) to an entity which is not Yuasa Japan
(or an Affiliate of Yuasa Japan), but only on the date upon which all
material conditions precedent to closing under such agreement have passed;
(iii) the occurrence of, or execution of an agreement providing
for, a reorganization, merger, consolidation or similar transaction
involving the Company, unless Yuasa Japan (or an Affiliate of Yuasa Japan)
will own securities representing a majority of the voting power of the
surviving or resulting corporation; and
(iv) any other event which is at any time irrevocably
designated as a "Change in Control" for purposes of the Compensatory Plan
by resolution adopted by a majority of the then non-employee directors of
the Company.
Section 7. Written Notice Required. Any option granted pursuant to the
-----------------------
terms of this Compensatory Plan shall be exercised when written notice of that
exercise has been given to the Company at its principal office by the person
entitled to exercise the option and full payment for the shares with respect to
which the option is exercised has been received by the Company.
Section 8. Compliance With Securities Laws. Shares shall not be issued
-------------------------------
with respect to any option granted under the Compensatory Plan unless the
exercise of that option and the issuance and delivery of the shares pursuant
thereto shall comply with all relevant provisions of state and federal law,
including, without limitation, the Securities Act of 1933, as amended, the rules
and regulations promulgated thereunder and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance. The
Plan Administrators may also require an employee to whom an option has been
granted ("Optionee") to furnish evidence satisfactory to the Company,
13
<PAGE>
including a written and signed representation letter and consent to be bound by
any transfer restrictions imposed by law, legend, condition, or otherwise, that
the shares are being purchased only for investment purposes and without any
present intention to sell or distribute the shares in violation of any state or
federal law, rule, or regulation. Further, each Optionee shall consent to the
imposition of a legend on the shares of Common Stock subject to his or her
option restricting their transferability as required by law or by this Section
8.
Section 9. Employment of Optionee. Each Optionee, if requested by the
----------------------
Plan Administrators, must agree in writing as a condition of the granting of his
or her option, to remain in the employment of the Company or any parent or
subsidiary (or a corporation or a parent or subsidiary of such corporation
issuing or assuming a stock option in a transaction to which Code Section 424(a)
applies), following the date of the granting of that option for a period
specified by the Plan Administrators, which period shall in no event exceed
three years. Nothing in this Compensatory Plan or in any option granted
hereunder shall confer upon any Optionee any right to continued employment by
the Company or any parent or subsidiary, or limit in any way the right of the
Company or any parent or subsidiary at any time to terminate or alter the terms
of that employment.
Section 10. Option Rights Upon Termination of Employment. If any Optionee
--------------------------------------------
under this Compensatory Plan ceases to be employed by the Company or any parent
or subsidiary (or a corporation or a parent or subsidiary of such corporation
issuing or assuming a stock option in a transaction to which Code Section 424(a)
applies), for any reason other than early, normal, or late retirement, or if the
Optionee is involuntarily terminated for any reason other than for Cause (as
defined below), his or her option shall immediately terminate; provided,
however, that the Plan Administrators may, at the time an option is granted,
allow such option to be exercised (to the extent exercisable on the date of
termination of employment), at any time within three months after the date of
termination of employment, but in no event later than the option expiration
date.
Section 11. Option Rights Upon Disability. If an Optionee becomes
-----------------------------
permanently and totally disabled within the meaning of Code Section 22(e)(3)
while employed by the Company, or any parent or subsidiary corporation (or a
corporation or a parent or subsidiary of such corporation issuing or assuming a
stock option in a transaction to which Code Section 424(a) applies), the option
may be exercised, to the extent exercisable on the date of termination of
employment, in whole at any time or from time to time in part, but in no event
later than the option expiration date.
Section 12. Option Rights Upon Death of Optionee. Except as otherwise
------------------------------------
limited by the Plan Administrators at the time of
14
<PAGE>
the grant of an option, if an Optionee dies while employed by the Company, or
any parent or subsidiary corporation (or a corporation or a parent or subsidiary
of such corporation issuing or assuming a stock option in a transaction to which
Code Section 424(a) applies), or within three months after ceasing to be an
employee thereof, his or her option shall expire two years after the date of
death unless by its term it expires sooner. During this two year or shorter
period, the option may be exercised, to the extent that it remains unexercised
on the date of death, by the person or persons to whom the Optionee's rights
under the option shall pass by will or by the laws of descent and distribution,
but only to the extent that the Optionee is entitled to exercise the option at
the date of death.
Section 13. Option Rights Upon Retirement. If an Optionee ceases to be
-----------------------------
employed by the Company, or any parent or subsidiary corporation (or a
corporation or a parent or subsidiary of such corporation issuing or assuming a
stock option in a transaction to which Code Section 424(a) applies), because of
early, normal or late retirement as defined in the Yuasa, Inc. Salaried
Retirement and 401(k) Plan, the Optionee may exercise an option, to the extent
that he or she was entitled to do so at the date of early, normal or late
retirement, in whole at any time or from time to time in part, within six months
after the date of such early, normal or late retirement, but in no event later
than the option expiration date.
Section 14. Option Rights Upon Termination For Cause. If the Optionee's
----------------------------------------
employment is terminated by the Company for Cause, all unexercised options,
whether vested or non-vested, shall be forfeited. For purposes of the
Compensatory Plan, Cause is defined to mean the termination of a Optionee's
service with the Company because of (a) a felony conviction of the Optionee; (b)
the commission by such Optionee of an act of fraud or embezzlement against the
Company; (c) willful misconduct materially detriment to the Company; (d) the
Optionee's continued failure to implement reasonable requests or directions
arising from actions of the Company's Board of Directors after 30 days written
notice to the Optionee; (e) the wrongful dissemination of confidential or
proprietary information; (f) the engagement in competitive activities which
directly or indirectly compete or interfere with the Company's research,
development, manufacture, licensing, patenting or marketing of any of the
Company's products; or (g) the intentional and habitual neglect by the Optionee
of his or her duties to the Company.
Section 15. Restrictions on Transferability. An option shall not be
-------------------------------
assignable or transferable by the Optionee other than by will or the laws of
dissent and distribution and during the lifetime of an Optionee an option shall
be exercisable only by such Optionee. However, an option granted under the
Compensatory Plan may, in the discretion of the Plan Administrators, at the time
of the grant, be transferred to and may thereafter be exercised by members of
the Optionee's
15
<PAGE>
immediate family, or a partnership whose members include only the Optionee
and/or members of the Optionee's immediate family, or a trust for the benefit of
only the Optionee and/or members of the Optionee's immediate family. Provided,
however, that any such permitted transfer shall not prevent termination of the
option following the Optionee's termination of employment as provided in the
Compensatory Plan. An option shall terminate immediately if it has been
transferred to a partnership or trust as permitted above and any person who is
not a member of the Optionee's immediate family becomes a member of such
partnership or a beneficiary of such trust. As used herein, the term Optionee's
immediate family includes only the Optionee's spouse, parents or other ancestors
and children and other direct lineal descendants of the Optionee or the
Optionee's spouse (including such ancestors and lineal descendants by adoption).
Section 16. Adjustments to Number and Purchase Price of Optioned Shares.
-----------------------------------------------------------
All options granted pursuant to the terms of this Compensatory Plan shall be
adjusted in a manner prescribed by Article 6 of the General Provisions of the
Plan.
16
<PAGE>
PART III
YUASA, INC.
-----------
STOCK APPRECIATION RIGHTS PLAN
------------------------------
Section 1. Purpose. The purpose of the Yuasa, Inc. Stock Appreciation
-------
Rights Plan ("S.A.R. Plan") is to permit the Company to grant stock appreciation
rights for its Class A Common Stock to its full-time, key employees. The S.A.R.
Plan is designed to help attract and retain superior personnel for positions of
substantial responsibility with the Company and any parent or subsidiary and to
provide key employees with an additional incentive to contribute to the success
of the Company. This S.A.R. Plan is Part III of the Company's Omnibus Stock
Plan ("Plan").
Section 2. Terms and Conditions. The Plan Administrators may, but shall
--------------------
not be obligated to, authorize, on such terms and conditions as they deem
appropriate in each case, the Company to accept the surrender by the recipient
of a stock option granted under the Incentive Plan or the Compensatory Plan of
the right to exercise that option, or portion thereof, in consideration for the
payment by the Company of an amount equal to the excess of the fair market value
of the shares of Common Stock subject to such option, or portion thereof
surrendered, over the option price of such shares. Such payment, at the
discretion of the Plan Administrators, may be made in shares of Common Stock
valued at the then fair market value thereof, determined as provided in Section
4 of the Incentive Plan, or in cash or partly in cash and partly in shares of
Common Stock; provided that with respect to rights granted in tandem with
incentive stock options, the Plan Administrators shall establish the form(s) of
payment allowed the Optionee at the date of grant. The Plan Administrators
shall not be authorized to make payment to any optionee in shares of the
Company's Common Stock unless Section 83 of the Internal Revenue Code of 1986,
as amended ("Code") would apply to the Common Stock transferred to the Optionee.
Notwithstanding the foregoing, the Company may not permit the exercise and
cancellation of a stock appreciation right issued pursuant to this S.A.R. Plan
until the Company has been subject to the reporting requirements of Section 13
of the Securities Exchange Act of 1934, as amended ("Exchange Act") for a period
of at least one year prior to the exercise and cancellation of any such stock
appreciation right. To the extent applicable, the definition of Change in
Control contained in the Incentive Plan and the Compensatory Plan, respectively,
are applicable to a stock appreciation right granted under the S.A.R. Plan.
Section 3. Time Limitations. Any election by an Optionee to exercise the
----------------
stock appreciation rights provided in this S.A.R. Plan shall be made during the
period beginning on the third business day following the release for publication
of quarterly
17
<PAGE>
or annual financial information required to be prepared and disseminated by the
Company pursuant to the requirements of the Exchange Act and ending on the
twelfth business day following such date. The required release of information
shall be deemed to have been satisfied when the specified financial data appears
on or in a wire service, financial news service or newspaper of general
circulation or is otherwise first made publicly available.
Section 4. Exercise of Stock Appreciation Rights; Effect on Stock Options
--------------------------------------------------------------
and Vice-Versa. Upon the exercise of a stock appreciation right, the number of
- --------------
shares available under the stock option to which it relates shall decrease by a
number equal to the number of shares for which the right was exercised. Upon
the exercise of a stock option, any related stock appreciation right shall
terminate as to any number of shares subject to the right that exceeds the total
number of shares for which the stock option remains unexercised.
Section 5. Time of Grant. With respect to options granted under the
-------------
Incentive Plan, stock appreciation rights must be granted concurrently with the
stock options to which they relate; with respect to options granted under the
Compensatory Plan, stock appreciation rights may be granted concurrently or at
any time thereafter prior to the exercise or expiration of such options.
Section 6. Non-Transferable. The holder of a stock appreciation right may
----------------
not transfer or assign the right otherwise than by will or in accordance with
the laws of descent and distribution. Furthermore, in the event of the
termination of his or her service with the Company as a director, officer and/or
employee, the right may be exercised only within the period, if any, which the
option to which it relates may be exercised.
Section 7. Tandem Incentive Stock Option - Stock Appreciation Right.
--------------------------------------------------------
Whenever an incentive stock option, granted pursuant to the Incentive Plan and a
stock appreciation right authorized hereunder are granted together and the
exercise of one affects the right to exercise the other, the following
requirements shall apply:
1) The stock appreciation right will expire no later than the expiration
of the underlying incentive stock option;
2) The stock appreciation right may be for no more than the difference
between the exercise price of the underlying option and the market price of the
stock subject to the underlying option at the time the stock appreciation right
is exercised;
3) The stock appreciation right is transferable only when the underlying
incentive stock option is transferable, and under the same conditions;
18
<PAGE>
4) The stock appreciation right may be exercised only when the underlying
incentive stock option is eligible to be exercised; and
5) The stock appreciation right may be exercised only when the market
price of the stock subject to the option exceeds the exercise price of the stock
subject to the option.
Section 8. Tandem Stock Option - Limited Stock Appreciation Right. The
------------------------------------------------------
Plan Administrators may provide that any tandem stock appreciation right granted
pursuant to Section 8 hereof be a limited stock appreciation right, in which
event:
1) The limited stock appreciation right shall be exercisable during the
period beginning on the first day following the expiration of an Offer (as
defined below) and ending on the thirtieth day following such date (but in no
event less than six months after the date of grant of the right);
2) Neither the option tandem to the limited stock appreciation right nor
any other stock appreciation right tandem to such option may be exercised at any
time that the limited stock appreciation right may be exercised, provided that
this requirement shall not apply in the case of an incentive stock option tandem
to a limited stock appreciation right if and to the extent that the Plan
Administrators determine that such requirement is not consistent with applicable
statutory provisions regarding incentive stock options and the regulations
issued thereunder;
3) Upon exercise of the limited stock appreciation right, the fair market
value of the shares to which the right relates for purposes of Section 4 of the
Incentive Plan shall be determined as the highest price per share paid in any
Offer that is in effect at any time during the period beginning on the sixtieth
day prior to the date on which the limited stock appreciation right is exercised
and ending on such exercise date; provided, however, with respect to a limited
stock appreciation right tandem to an incentive stock option, the Plan
Administrators shall determine fair market value of such shares in a different
manner if and to the extent that the Plan Administrators deem necessary or
desirable to conform with applicable statutory provisions regarding incentive
stock options and the regulations issued thereunder.
The term "Offer" shall mean any tender offer or exchange offer for shares
of the Company, provided that the person making the offer acquires shares of the
Company's capital stock pursuant to such offer.
Section 9. Exercise Restriction Effects. For the purposes of Section 9 of
----------------------------
the Incentive Plan, a tandem incentive stock option - stock appreciation right
will be considered exercised in
19
<PAGE>
full when either the underlying incentive stock option or the stock appreciation
right is fully exercised.
Section 10. Request for Reports. A copy of the Company's annual report to
-------------------
shareholders shall be delivered to each Optionee. Upon written request, the
Company shall furnish to each Optionee a copy of its most recent Form 10-K
Annual Report and each Form 10-Q Quarterly Report and Form 8-K Current Report
filed with the Securities and Exchange Commission since the end of the Company's
prior fiscal year.
20
<PAGE>
Exhibit 10.2
================================================================================
AGREEMENT NOT TO COMPETE
by and between
EC ACQUISITION, INC.
and
YUASA BATTERY (AMERICA), INC.
-----------------
JUNE 10, 1991
-----------------
================================================================================
<PAGE>
EXHIBIT G TO ASSET PURCHASE AGREEMENT
AGREEMENT NOT TO COMPETE
------------------------
THIS AGREEMENT NOT TO COMPETE (the "Agreement") is made and entered into as
of the 10th day of June, 1991 by and between EC ACQUISITION, INC., a Delaware
corporation ("ECA"), and YUASA BATTERY (AMERICA) CORPORATION, a California
corporation ("Purchaser").
WHEREAS, Exide Corporation, a Delaware corporation and an indirect,
wholly-owned subsidiary of ECA ("Seller") and Purchaser have entered into that
certain Asset Purchase Agreement dated as of June 10, 1991 (the "Purchase
Agreement") pursuant to which Seller has agreed to sell, and Purchaser has
agreed to purchase from Seller, the Division (as such term is defined in the
Purchase Agreement);
WHEREAS, pursuant to Sections 11.3 and 12.3 of the Purchase Agreement, it
is a condition precedent to the consummation of the transactions contemplated
thereby that ECA and Purchaser execute and deliver this Agreement; and
WHEREAS, ECA hereby acknowledges that it shall derive substantial benefit
from the consummation of the transactions contemplated in the Purchase
Agreement, and that Purchaser would not consummate the Purchase Agreement
without first receiving a fully-executed original of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, hereby agree as follows:
1. Non-Competition.
---------------
(a) For a period commencing on the date hereof and terminating on the
tenth (10th) anniversary of the date hereof (the "Non-Compete Period"), ECA
shall not, and shall cause any Affiliate (as hereinafter defined) not to,
directly or indirectly (a) engage in any activity which constitutes or would
constitute Business (as hereinafter defined) or (b) own, manage, control,
operate, participate in or with, or be connected with the ownership, management,
operation or control of, any person or entity which engages in any activity
which constitutes or would constitute Business, provided, however, that (i)
--------
Seller may engage in any activity constituting Business which is solely and
exclusively related to the manufacture or sale of batteries used
-1-
<PAGE>
to operate motorized wheelchairs; and (ii) the provisions of Clause (b) of this
Section 1 shall not apply if (A) the entity referred to therein is an Affiliate
of Yuasa Battery Co., Ltd.; (B) Purchaser and Seller shall agree at any time
that Seller, or any Affiliate thereof, shall be a distributor for Purchaser with
respect to any products manufactured thereby; or (C) the ownership referred to
therein constitutes the ownership of securities comprising not more that 5% of
the total issued and outstanding voting securities of such entity or affiliated
group of entities (including in such amount any securities which are
exchangeable for or convertible into voting securities of such entity). The
provisions of this Section 1 shall not apply to Seller's ownership interest in
Battronics (as defined herein) in accordance with the terms of Section 4 hereof.
For purposes of this Agreement, the term "Affiliate" shall mean any person
directly or indirectly controlled by ECA including, without limitation, General
Battery Corporation, a Delaware corporation ("GBC"), EC Merger, Inc., a Delaware
corporation ("ECM"), and Seller.
(i) the term "Business" shall mean the design, research and
development, manufacture, marketing, sale and distribution of (A) Products (as
defined in Sub-clause (ii) below) manufactured by Purchaser as a result of the
foregoing activities, to the extent such activities were conducted by Seller
immediately prior to the Closing (as defined in the Purchase Agreement); (B)
Products derived directly from research and development acquired from Seller at
the Closing; and (C) Products developed directly from the Products described in
Sub-clauses (A) and (B) above; and
(ii) the term "Products" shall mean any batteries, battery products or
battery chargers for any and all industrial uses including, without limitation,
electric vehicle batteries and battery products, (other than golf cart batteries
manufactured at Yuasa's plant in Sumter, South Carolina), but excluding
automotive, motorcycle, garden tractor and marine use SLI batteries and battery
products.
2. Non-Disclosure and Non-Solicitation. The parties further agree that,
-----------------------------------
during the Non-Compete Period, ECA shall not, and shall cause its Affiliates not
to, directly or indirectly, without the prior written consent of Purchaser, (a)
disclose or reveal to any person any information constituting any Intellectual
Property Rights or Proprietary Rights (as such terms are defined in the Purchase
Agreement), except (i) as required by law, or in legal or administrative
proceedings, or (ii) as otherwise agreed in writing between the parties or any
Affiliates thereof; (b) solicit, encourage or persuade any person who is an
employee of Purchaser to terminate his or her employment with
-2-
<PAGE>
Purchaser, or discourage any person from becoming an employee of Purchaser; or
(c) solicit, encourage or persuade any person having any business relationship
with Purchaser exclusively in connection with the Business, including without
limitation any customer, supplier, distributor or independent contractor of
Purchaser, to terminate such business relationship.
3. Applicable Territories. The parties hereby agree that the provisions
----------------------
of this Agreement shall apply in each of the following geographical regions
(each of such regions being hereinafter referred to as a "Territory"): (a) each
of the states of the United States, and (b) each of the countries set forth on
Exhibit A attached hereto and hereby incorporated herein.
4. Special Provisions Relating to Canada, Mexico, New Zealand and South
--------------------------------------------------------------------
Africa.
- ------
(a) The parties acknowledge that Seller owns a 50% interest in the
shares of common stock of Battronics, Inc., a corporation organized and existing
under the laws of Canada ("Battronics"), which is engaged in the assembly and
sale of industrial batteries and/or industrial battery products. In order to
set forth the relative rights and obligations or each of Seller and Purchaser
with respect to Battronics, the parties have entered into, all as of even date
herewith, (i) that certain Agreement, by and among Seller, Purchaser and
Battronics; (ii) that certain License and Technical Assistance Agreement, by and
between Battronics and Purchaser (the "Industrial License"); and (iii) that
certain License and Technical Assistance Agreement, by and between Battronics
and Seller (the "Automotive License"). As a result of such agreements, Seller
shall, from and after the date hereof, no longer be obligated to provide
intellectual property rights, technical assistance or make any other form of
investment in or contribution to Battronics with respect to its industrial
battery operations. Accordingly, the parties hereby agree that it shall not be
a violation of the terms of this Agreement for Seller to maintain its ownership
of its existing interest in Battronics, provided, that it shall be a material
--------
violation of Seller's obligations hereunder if Seller shall (A) make any
additional capital contribution, investment, financial accommodation, extension
of credit or loan to, or become a surety or guarantor for the benefit of,
Battronics or (B) provide technical assistance, information not generally in
the public domain, additional personnel, or any other information or means,
where the effect of any of such actions would result in enabling Battronics to
compete more effectively with Purchaser with respect to the Business in Canada.
-3-
<PAGE>
(b) The parties further acknowledge that Seller is the licensor to
companies operating in Mexico, New Zealand and South Africa of certain
intellectual property rights pertaining to the Business which are intended to be
assigned to Purchaser under the Purchase Agreement but which, due to
governmental restrictions in the aforementioned countries, are not able to be
transferred as of the Closing Date (as defined in the Purchase Agreement) (such
licenses being hereinafter referred to as the "Deferred Licenses"). ECA agrees
to cause Seller to use its best efforts to effectuate the transfer of such
Deferred Licenses as quickly after the date hereof as practicable. Until such
time as Seller shall be able to transfer such Deferred Licenses, ECA shall cause
Seller (i) to perform its obligations thereunder in accordance with the terms
thereof and in compliance with all applicable laws, rules and regulations; and
(ii) to collect for Purchaser's benefit, and remit to Purchaser, any royalties
or other compensation collected by Seller pursuant to such Deferred Licenses.
(c) ECA further acknowledges and agrees that the provisions of this
Section 4 constitute a limited exception to this Agreement in respect of
existing arrangements of Seller, and that any investment or other activity
prohibited with respect to any other person or entity in Canada, Mexico, New
Zealand or South africa by ECA or its Affiliates will be a violation of this
Agreement.
5. Prohibition on Merger or Dissolution. ECA hereby agrees that, for so
------------------------------------
long as this Agreement is in full force and effect, it shall not merge,
dissolve or otherwise terminate its corporate identity, whether by contract or
by operation of law, nor divest itself of its controlling interest in any
Affiliate, unless and until the successor or successors of ECA or such Affiliate
agrees with Purchaser in writing to be bound by all of the terms and conditions
hereunder to which ECA and its Affiliates are bound.
6. The Non-Compete Payment. In consideration for ECA performing its
-----------------------
obligations hereunder, at the Closing (as defined in the Purchase Agreement)
Purchaser shall pay to ECA the sum of Twenty Million Dollars ($20,000,000).
7. Execution of Consents by ECM, GBC and Seller. ECA agrees to cause
--------------------------------------------
ECM, GBC and Seller to execute and deliver the consents in the form attached
hereto as Appendices A, B and C, respectively.
8. Representations and Warranties. Each party hereto hereby represents
-------------------------------
and warrants to the other party hereto as follows:
-4-
<PAGE>
(a) Such party is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and has
all requisite corporate power and authority to carry on its business as it is
now being conducted.
(b) such party has all requisite corporate power and authority to
enter into, execute and deliver this Agreement, and to perform the obligations
required to be performed by it hereunder. The Board of Directors and, if
required, the shareholders, of such party have taken all action required by law,
its Certificate of Incorporation, its Bylaws or otherwise to be taken by it to
authorize the execution, delivery and performance of this Agreement and the
obligations to be performed by it hereunder, and this Agreement is the valid and
binding agreement of such party, enforceable against such party, in accordance
with its terms, except as (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
performance of any obligation created hereby will (i) violate any provision of
the Certificate of Incorporation or Bylaws of such party, (ii) result in the
breach of any material contract to which such party is a signatory or by which
such party, or any of its assets or properties, are bound (except where the
other party or parties to any such contract shall have consented in writing to
such breach), or (iii) violate or conflict with any governmental or regulatory
authorization or any statute, law, judgment, decree, order, regulation or rule
of any court or governmental authority by which such party, or any of its assets
or properties, are bound.
(d) No consent, approval of authorization of, or declaration, filing
or registration with, any person or governmental or regulatory authority or
agency is necessary to the execution, delivery or performance of this Agreement
by such party.
9. Remedies; Equitable Relief. ECA specifically acknowledges that the
--------------------------
remedy at law for any breach of its covenants contained herein may be
inadequate, and that Purchaser shall be entitled to temporary and permanent
injunctive relief, specific performance or any other equitable remedy available
to Purchaser against it without the necessity of proving actual damage resulting
from any breach hereof. The specific remedies
-5-
<PAGE>
set forth above shall be cumulative and non-exclusive, and shall be in addition
to any other remedy, in equity or at law, to which Purchaser may otherwise be
entitled.
10. Burden and Benefit. This Agreement shall inure to the benefit of, and
------------------
be binding upon, the respective successors and assigns of the parties hereto.
11. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be delivered personally, sent by
certified mail, postage prepaid, return receipt requested, or sent by telex,
telecopier or other electronic facsimile transmission, addressed as follows (or
to such other address or addressee as the party to be notified shall have given
notice of as herein provided):
(a) if to Purchaser, to:
Yuasa Battery (America), Inc.
9728 Alburtis Avenue
Santa Fe Springs, California 90670
Attention: Shuji Kawata
President
Tel: 213-949-4266
Fax: 213-949-5527
with a copy, which shall not constitute notice, to:
Graham & James
4675 MacArthur Court, Suite 800
Newport Beach, California 92660-1836
Attention: W. James Scott, Jr., Esq.
Tel: 714-752-0550
Fax: 714-851-2497
(b) if to ECA, to:
EC Acquisition, Inc.
1111 West Long Lake, Suite 300
Troy, Michigan 48018-4493
Attention: Chief Executive Officer
Tel: 313-641-2800
Fax: 313-641-2894
-6-
<PAGE>
with a copy, which shall not constitute notice, to:
Samuel Fried, Esq.
Vice President, Secretary and
General Counsel
EC Acquisition, Inc.
1111 West Long Lake, Suite 300
Troy, Michigan 48098-4493
Tel: 313-641-2800
Fax: 313-641-2849
Any such notice or other communication will be deemed to have been given only as
follows: (a) if sent by telex, when the telex is transmitted and the
appropriate answer back is received; or (b) if sent by any other means or
personally delivered, upon delivery against receipt therefor.
12. Governing Law. This Agreement will be governed by, and construed and
-------------
interpreted in accordance with, the internal laws of the State of New York,
without giving effect to the principles of conflicts of law applied thereby.
13. Severability. The convenants contained herein shall be construed to
------------
be a series of separate convenants, one for each Territory specified herein.
Except for the Territory covered, each such separate covenant shall be deemed
identical to the terms contained in this Agreement in every other respect. In
the event that a court of competent jurisdiction deems any term, provision or
Territory of this Agreement to be invalid, illegal or unenforceable for any
reason, such term, provision or Territory shall be amended or eliminated to
conform to applicable law so as to be valid and enforceable, or, if it cannot
be so amended or eliminated without materially altering the intention of the
parties expressed herein, the invalidity or unenforceability of such term or
provision shall in no way affect to the maximum extent permissible by law the
validity or enforceability of any other term, provision or Territory of this
Agreement, or the validity or enforceability of the remaining separate covenants
hereunder.
14. Entire Agreement. This Agreement incorporates the complete and
----------------
entire agreement among the parties hereto with reference to the subject matter
hereof, and there are no other agreements, understandings, representations or
warranties, express or implied, oral or written, relating thereto between the
parties. No modification or amendment of this Agreement shall be
-7-
<PAGE>
binding upon the parties unless executed in writing by each of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
EC ACQUISITION, INC.
By: /s/ R. L. Touve
---------------------------
Name:
Title:
------------------------
YUASA BATTERY (AMERICA), INC.
By: /s/ Shuji Kawata
---------------------------
Name: Shuji Kawata
Title: President
-8-
<PAGE>
APPENDIX C
----------
CONSENT
The undersigned, General Battery Corporation, a Delaware corporation and
wholly-owned subsidiary of Exide Corporation, which is a wholly-owned subsidiary
of Exide Corporation, which is a wholly-owned subsidiary of EC Acquisition, Inc.
("ECA"), hereby consents to be bound by and subject to all of the terms and
provisions set forth in that certain Agreement Not to Compete, dated as of June
10, 1991, by and between ECA and Yuasa Battery (America), Inc., a Delaware
corporation ("Purchaser"), as fully as if the undersigned had been a signatory
thereto as of such date. This Consent is delivered in consideration of
Purchaser entering into that certain Asset Purchase Agreement, dated as of even
date herewith, by and between Purchaser and Exide Corporation, a Delaware
corporation and wholly-owned subsidiary of the undersigned, and the undersigned
acknowledges and agrees that Purchaser would not have entered into said Asset
Purchase Agreement, which is of direct, material benefit to the undersigned,
without the execution, delivery and performance by the undersigned of this
Consent.
Entered into as of this 10th day of June, 1991.
GENERAL BATTERY CORP.
-----------------------------
By: [SIGNATURE APPEARS HERE]
--------------------------
Name:
------------------------
Title:
----------------------
<PAGE>
APPENDIX A
----------
CONSENT
The undersigned, EC Merger, Inc., a Delaware corporation and wholly-owned
subsidiary of EC Acquisition, Inc. ("ECA"), hereby consents to be bound by and
subject to all of the terms and provisions set forth in that certain Agreement
Not to Compete, dated as of June 10, 1991, by and between ECA and Yuasa Battery
(America), Inc., a Delaware corporation ("Purchaser"), as fully as if the
undersigned had been a signatory thereto as of such date. This Consent is
delivered in consideration of Purchaser entering into that certain Asset
Purchase Agreement, dated as of even date herewith, by and between Purchaser and
Exide Corporation, a Delaware corporation and wholly-owned subsidiary of the
undersigned, and the undersigned acknowledges and agrees that Purchaser would
not have entered into said Asset Purchase Agreement, which is of direct,
material benefit to the undersigned, without the execution, delivery and
performance by the undersigned of this Consent.
Entered into as of this 10th day of June, 1991.
EC MERGER, INC.
-------------------------------
By: [SIGNATURE APPEARS HERE]
----------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
APPENDIX B
----------
CONSENT
The undersigned, Exide Corporation, a Delaware corporation and wholly-owned
subsidiary of EC Merger, Inc., which is a wholly-owned subsidiary of EC
Acquisition, Inc. ("ECA"), hereby consents to be bound by and subject to all of
the terms and provisions set forth in that certain Agreement Not to Compete,
dated as of June 10, 1991, by and between ECA and Yuasa Battery (America), Inc.,
a Delaware corporation ("Purchaser"), as fully as if the undersigned had been a
signatory thereto as of such date. This Consent is delivered in consideration of
Purchaser entering into that certain Asset Purchase Agreement, dated as of even
date herewith, by and between Purchaser and Exide Corporation, a Delaware
corporation and wholly-owned subsidiary of the undersigned, and the undersigned
acknowledges and agrees that Purchase Agreement, which is of direct, material
benefit to the undersigned, without the execution, delivery and performance by
the undersigned or this Consent.
Entered into as of this 10th day of June, 1991.
EXIDE CORPORATION
-----------------------------------
By: /s/ [SIGNATURE APPEARS HERE]
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
EXHIBIT A
TERRITORIES OTHER THAN THE UNITED STATES OF AMERICA
---------------------------------------------------
Afghanistan Comoros Islands
Albania Congo
Algeria Cook Islands
American Samoa Costa Rica
Andorra Cuba
Angola Cyprus
Anguilla Czechoslovakia
Antigua and Barbuda Denmark
Argentina Djibouti
Aruba Dominica
Australia Dominican Republic
Austria Ecuador
Azores Egypt
Bahamas El Salvador
Bahrain Equatorial Guinea
Bangladesh Ethiopia
Barbados Faeroe Islands
Belgium Falkland Islands
Belize Federal Rep. of Germany
Benin Fiji
Bermuda Finland
Bhutan France
Bolivia French Guiana
Botswana French Polynesia
Brazil Gabon
British Indian Ocean Gambia
Territory Ghana
Brunei Gibraltar
Bulgaria Great Britain
Burkina Faso Greece
Burma Greenland
Burundi Grenada
Cameroon Guadeloupe
Canada Guam
Cape Verde Guatemala
Cayman Islands Guinea
Central African Republic Guinea-Bissau
Chad Guyana
Channel Islands Haiti
Chile Honduras
People's Rep. of China Hong Kong
Colombia Hungary
<PAGE>
Iceland New Caledonia
India New Zealand
Indonesia Nicaragua
Iran Niger
Iraq Nigeria
Ireland Niue Island
Isle of Man Norfolk Island
Israel Northern Marianas
Italy Norway
Ivory Coast Oman
Jamaica Pacific Trust Territory
Japan Pakistan
Jordan Panama
Kampuchea Papua New Guinea
Kenya Paraguay
Kiribati Peru
Korea (South) Philippines
Korea (North) Pitcairn Island
Kuwait Poland
Laos Portugal
Lebanon Puerto Rico
Lesotho Qatar
Liberia Reunion
Libya Romania
Liechtenstein Rwanda
Luxembourg St. Christopher & Nevis
Macao St. Helena Island Group
Madagascar St. Lucia
Madeira Islands St. Pierre & Miquelon
Malawi St. Vincent and
Malaysia the Grenadines
Maldives San Marino
Mali Sao Tome & Principe
Malta Saudi Arabia
Marshall Islands Senegal
Martinique Seychelles
Mauritius Sierra Leone
Mexico Singapore
Micronesia Federation Solomon Islands
Midway Island Somalia
Monaco South Africa
Mongolia Spain
Montserrat Sri Lanka
Morocco Sudan
Mozambique Suriname
Namibia Swaziland
Nauru Sweden
Nepal Switzerland
Netherlands Syria
Netherlands Antilles Taiwan
<PAGE>
Tanzania
Thailand
Togo
Tokelau
Tonga
Trinidad and Tobago
Tunisia
Turkey
Turks and Caicos Islands
Tuvalu
Uganda
Union of Soviet Socialist
Republics
United Arab Emirates
Uruguay
Vanuatu
Venezuela
Virgin Islands
Wake Island
Wallis and Futuna Islands
Western Samoa
Yemen
Yugoslavia
Zaire
Zambia
Zimbabwe
<PAGE>
Exhibit 10.3
LICENSE AND TECHNICAL ASSISTANCE AGREEMENT
------------------------------------------
LICENSE AND TECHNICAL ASSISTANCE AGREEMENT (this "Agreement") dated
the ____ day of __________, 1998, by and between YUASA CORPORATION, a
corporation duly organized and existing under the laws of Japan ("Yuasa Japan")
and YUASA, INC., a corporation duly organized and existing under the laws of the
Commonwealth of Pennsylvania ("YI").
BACKGROUND
----------
A. Yuasa Japan is in the business of manufacturing, marketing and selling
all types of electrical storage batteries and related products, including both
industrial and consumer batteries. Yuasa Japan sells these products directly
and indirectly through various entities.
B. Yuasa Japan presently owns 86.5% of the issued and outstanding capital
stock of YI. Through YI's operating subsidiaries, YI is the leading
manufacturer and supplier of industrial and small engine starting batteries in
the Americas.
C. Yuasa Japan is or has been a party to various agreements and
arrangements (collectively, the "Prior Agreements") with YI or its predecessors
under which Yuasa Japan, among other things, granted licenses to use the name
"Yuasa" in connection with the manufacture and sale of certain products in
specific territories, and provided to YI technical assistance, know-how, secret
processes, formulas and other valuable industrial proprietary rights,
engineering expertise and similar benefits. The Prior Agreements include a
License Agreement dated February 6, 1979, a Technical Assistance Agreement dated
November 5, 1985 and a Technical Assistance Agreement dated July 1, 1988, all of
which were between Yuasa Japan and YI's predecessor by merger, Yuasa General
Battery Corporation.
D. YI is contemplating an initial public offering of its stock (the
"Offering"), in connection with which YI has filed a registration statement (the
"Registration Statement") with the Securities and Exchange Commission. The
Offering, if completed, will have the result, among other things, of diluting
Yuasa Japan's percentage ownership of YI.
E. The Registration Statement indicates that significant risk factors
exist if the present relationship between Yuasa Japan and YI is terminated by
Yuasa Japan, because such termination could adversely affect YI's competitive
position, results of operations and future profits. The possibility that this
could occur, in turn, could adversely affect the valuation of YI in connection
with the Offering and, therefore, adversely affect the Offering price, which
would increase the dilution in Yuasa Japan's percentage of ownership in YI.
1
<PAGE>
F. Yuasa Japan and YI have therefor determined that entering into this
agreement to provide YI with continued access to the intellectual property,
technical assistance and other valuable rights and benefits that currently flow
from the Prior Agreements and from YI's relationship with Yuasa Japan would
enhance the enterprise value of YI and its business, and, in particular, would
enhance the pricing of the Offering and thereby decrease the dilution in Yuasa
Japan's percentage ownership of YI that would result from the Offering.
NOW, THEREFORE, for the purposes of enhancing the market value of YI
and its business, and to decrease the dilution in Yuasa Japan's percentage
ownership of YI that will result from the Offering, and in consideration of the
covenants set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE 1. DEFINITIONS
-----------------------
As used in this Agreement, the following terms shall have the
following meanings:
1.1 Net Sales.
---------
The term "net sales" shall mean the gross selling price of Products
invoiced by YI to third party customers less all discounts, rebates, excise
taxes and any freight charges to such third party customers.
1.2 Patents
-------
The term "Patents" shall mean, collectively, all US, Japanese and
other patents currently owned and all patent applications currently pending in
the USA and in Japan by Yuasa Japan relating to the Products, all of which are
listed on Exhibit "A" attached hereto, and all patents hereafter applied for by
or issued to Yuasa Japan that relate to the Products. Yuasa Japan will notify
YI of any additions thereto as they will have been registered and become valid,
and all such patents shall form part of the Technical Know-how.
1.3 Products
--------
The term "Products" shall mean, collectively, all of the following:
(a) motive power batteries and chargers (including, without
limitation, batteries and chargers for industrial forklift trucks, other
materials handling equipment and wheelchairs);
(b) stationary batteries and chargers (including, without limitation,
standby batteries and power supply equipment
2
<PAGE>
for wireless and wireline telecommunications applications, such as central
telephone exchanges, microwave relay stations, and switchgear and other
instrumentation control systems);
(c) uninterruptible power systems (including, without limitation,
batteries for computer, electronic, security, computer, life support and other
medical applications);
(d) motorcycle and other small engine starting batteries, such as
batteries for snowmobiles, lawn and garden tractors and personal watercraft, and
including batteries for starting small internal combustion engines used for
auxiliary charging power for electric vehicles, but excluding other automobile
and truck starting batteries;
(e) related battery accessories (including, without limitation,
cabinets and battery racks and trays); and
(f) any other products manufactured by YI at the time of execution of
this agreement, and any and all future improvements, developments and
innovations with respect to any of the foregoing made by YI or Yuasa Japan
during the term of this Agreement.
1.4 Technical Know-how
------------------
The term "Technical Know-how" shall mean all patented and unpatented
manufacturing processes, formulas, prescriptions, methods, experiences, "show-
how," constructions, designs, secret processes and other industrial property
rights and knowledge relating to the Products, including all improvements and
modifications thereto, which are currently owned or used by Yuasa Japan, or are
hereafter developed relating to Products.
1.5 Territory
---------
The term "Territory" shall mean the territory consisting of Canada,
the United States, Central America, South America, and the Caribbean Islands.
1.6 Trademarks
----------
The term "Trademarks" includes the name "Yuasa" and any other
trademarks, tradenames, logos, trade dress and other rights described or
depicted on Exhibit "B" attached hereto. The trademarks, tradenames, logos,
trade dress, and other rights covered by Exhibit "B" may be modified, expanded
or reduced by mutual agreement of the parties from time to time, which shall be
embodied in a written document referring to this agreement, containing a revised
Exhibit "B" which, when executed, shall form a part of this Agreement, and
revised Exhibit "B" shall supersede Exhibit "B" as then in effect for all
purposes from and after such time.
3
<PAGE>
1.7 YI Affiliates
-------------
The term "YI Affiliate" shall mean any entity with respect to which
YI, directly or indirectly, now or at any time during the term of this Agreement
holds the right, by reason of its ownership of voting securities, or by means of
a proxy, voting trust or otherwise, to cast (or direct the casting of) more than
50% of the total votes which all holders of such entity's securities are
entitled to cast or to otherwise elect a majority of the members of the Board of
Directors of such entity.
1.8 Yuasa Japan Affiliates.
----------------------
The term "Yuasa Japan Affiliate" shall mean, collectively,
(a) any entity (other than YI) with respect to which Yuasa
Japan, directly or indirectly, now or at any time during the term of this
Agreement, holds the right, by reason of its ownership of voting
securities, or by means of a proxy, voting trust or otherwise, to cast (or
direct the casting of) more than 50% of the total votes which all holders
of such entity's securities are entitled to cast or to otherwise elect a
majority of the members of the Board of Directors of such entity; and
(b) any entity which, directly or indirectly, now or at any time
during the term of this Agreement, holds the right, by reason of its
ownership of voting securities of Yuasa Japan, or by means of a proxy,
voting trust or otherwise, to cast (or direct the casting of) more than 50%
of the total votes of Yuasa Japan which all holders of Yuasa Japan's
securities are entitled to cast or to otherwise elect a majority of the
members of the Board of Directors of such entity.
The parties acknowledge that, as of the date hereof, Global & Yuasa (Korea) is
not a Yuasa Japan Affiliate.
ARTICLE 2. GRANT OF MANUFACTURING RIGHTS AND
---------------------------------------------
TECHNICAL KNOW-HOW LICENSE TO YI
--------------------------------
2.1 Exclusive Grant to YI.
---------------------
Yuasa Japan hereby grants the exclusive right and license (without
reserving any such right to itself or any Yuasa Affiliate) to YI to manufacture,
distribute, sell and/or market the Products in the Territory using the Technical
Know-how, whether existing at the time of signing of this Agreement or as the
Products and Technical Know-how may be hereafter developed. Notwithstanding the
foregoing or anything else contained herein or in any other agreement:
4
<PAGE>
(a) Yuasa Japan and the Yuasa Japan Affiliates may continue to
export into the Territory and sell products now exported by them to
customers to whom such products are now sold;
(b) Yuasa Japan and the Yuasa Japan Affiliates may sell
batteries to original equipment manufacturers ("OEMs") located outside the
Territory for installation outside the Territory and eventual export of
such batteries as part of the original equipment manufactured by such OEMs
into the Territory;
(c) so long as the technical assistance agreement between Yuasa
Japan and Auto Parts Japones S.A. of Ecuador ("APJ") is in effect, and to
the extent contemplated by such agreement as it is now in effect, (i) Yuasa
Japan may continue to sell the products called for by such agreement to APJ
in Ecuador and (ii) APJ may continue to manufacture and sell such products
for resale in Ecuador;
(d) so long as the joint venture involving Yuasa Japan,
Microlite-Yuasa Baterias Ltda., of Brazil ("Microlite") and other parties
is in existence, and to the extent contemplated by the governing agreements
as now in effect, Yuasa Japan may continue to sell to Microlite in Brazil,
and Microlite may continue to manufacture and sell for resale in Brazil,
(i) motorcycle starting batteries, (ii) automotive starting batteries,
(iii) "UXL" stationary batteries, and (iv) small VRLA batteries; and
(e) YI shall not unreasonably withhold its consent to other
sales of batteries by Yuasa Japan within the Territory.
2.2 Furnishing of Technical Know-how.
--------------------------------
Yuasa Japan shall furnish and disclose to YI the Technical Know-how
of Yuasa Japan related to the Products, and shall furnish to YI all future
improvements and innovations in the Products and the methods of making them
which Yuasa Japan may develop or acquire during the term of this Agreement,
insofar as they are not restricted against disclosure by agreement with any
third parties. Yuasa Japan shall use its best efforts to eliminate or reduce
any such restrictions as may presently exist, to the extent necessary to allow
YI to enjoy the full benefit of such innovations and shall not hereafter enter
into any agreement that would create or permit such a restriction.
2.3 YI Improvements and Developments.
--------------------------------
YI will promptly notify Yuasa Japan of all improvements and
modifications made by YI to the Products and the methods of making the Products
during the continuance of this Agreement and will grant Yuasa Japan the
exclusive and gratis right and license
5
<PAGE>
to use such improvements and modifications in the world outside of the
Territory.
ARTICLE 3. GRANT OF TRADEMARK LICENSE
--------------------------------------
3.1 Grant.
-----
Yuasa Japan hereby grants the exclusive right and license to YI to use
the Trademarks in the Territory in connection with the manufacture,
distribution, sale and marketing of the Products.
3.2 Standards of Usage
------------------
YI's use of the Trademarks hereunder shall at all times conform to
reasonable standards promulgated from time to time by Yuasa Japan. The initial
standards will be included in Exhibit "B" attached hereto, and Yuasa Japan may
make reasonable modifications in those standards from time to time, by written
notice to YI.
ARTICLE 4. OWNERSHIP AND OPTION
--------------------------------
4.1 Yuasa Japan Ownership.
---------------------
The ownership of the Patents and Technical know-how provided initially
by Yuasa Japan shall be vested in Yuasa Japan. YI and all YI Affiliates shall
be irrevocably entitled to use such granted rights and license in the Territory
during the term of this Agreement.
4.2 YI Ownership.
------------
The ownership of any Technical Know-how developed initially by YI
shall be vested in YI. Yuasa Japan and all Yuasa Japan Affiliates shall be
entitled to use such rights, as further provided in Section 2.3 hereof.
4.3 Option OF YI.
------------
YI will have the option to acquire ownership of all Technical Know-how
of any kind relating to or necessary for the manufacture, sale and distribution
of Products in the Territory, on such financial terms as Yuasa Japan and YI
shall agree from time to time.
ARTICLE 5. EXPORT BY YI
------------------------
YI and the YI Affiliates shall not sell, export nor cause any third
party to sell or export Products manufactured using Yuasa Japan's Technical
Know-how or bearing the Trademarks
6
<PAGE>
outside the Territory without either (a) Yuasa Japan's prior written consent
which shall not be unreasonably withheld, or (b) first offering Yuasa Japan the
opportunity to market the Products in question outside the Territory, directly
or through other Yuasa Japan Affiliates. Nothing contained herein shall be
construed to prevent YI or the YI Affiliates from selling any products in any
territory that are neither manufactured using Technical Know-how belonging to
Yuasa Japan nor sold under any of the Trademarks.
ARTICLE 6. DISPATCH OF TECHNICAL EXPERTS; TRAINING
---------------------------------------------------
6.1 Training in the USA
-------------------
(a) Upon request by YI and acknowledgement of the necessity by Yuasa
Japan, which shall not be unreasonably withheld, Yuasa Japan shall dispatch its
technical expert(s) to YI's facilities in the USA for the purpose of instructing
YI's personnel on specific technical and/or engineering matters pertaining to
the manufacture of the Products under the license granted herein. The number of
Yuasa Japan's technical expert(s) to be dispatched, the time of dispatch and the
length of stay shall be mutually agreed upon.
(b) YI shall pay all reasonable out-of-pocket expenses incurred by
Yuasa Japan in connection with visits by Yuasa Japan technical experts to the
USA pursuant to YI's requests, such as round-trip air fare between Japan and the
USA, hotel charges, meals and local transportation.
(c) In addition to the expenses stated above, YI shall pay a fee (the
"Daily Technical Assistance Fee") for the technical experts during their stay in
the USA, in the net amount of Forty Thousand Japanese Yen (Yen 40,000) (net of
any withholding tax and other deductions required in the USA), per person per
day for the number of days spent in the USA, inclusive of both dates of arrival
and departure, Sundays, and national holidays of the USA. The Daily Technical
Assistance Fee shall be subject to review and revision by agreement of the
parties hereto, once every two (2) years during the term of this Agreement, to
reflect the increase of remuneration and expenses incurred in relation to
employment of such personnel at Yuasa Japan. Should payment of the Daily
Technical Assistance Fee be subject to withholding tax and other deduction at
source in the USA, YI shall deliver the corresponding tax receipts to Yuasa
Japan.
6.2 Training at Yuasa Japan Facilities.
----------------------------------
Upon request by YI and acknowledgement of the necessity by Yuasa
Japan, which acknowledgement shall not be unreasonable withheld, Yuasa Japan
shall receive at its factories in Japan (or at factories of its associated
companies located in countries
7
<PAGE>
other than Japan) YI's technical personnel to familiarize them with the
Technical Know-how, as it develops from time to time, and provide free training
facilities for such dispatched technical personnel. The number of technical
personnel to be dispatched, the time of dispatch and the length of stay shall be
mutually agreed upon. All expenses including round-trip air fare, hotel
charges, meals and local transportation of YI'S dispatched technical personnel
shall be borne by YI. Yuasa Japan however, agrees to offer to provide them,
when available, with lodgings such as company dormitories and meals at
reasonable cost to make the cost of the sojourn economical.
6.3 Accidents, etc.
--------------
Yuasa Japan shall not be held responsible for any claim, loss or
damages arising in connection with any personal injury, death and damage or loss
of property which may be sustained by YI's dispatched personnel, unless caused
by the gross negligence or willful misconduct of Yuasa Japan. YI shall not be
held responsible for any claim, loss or damages arising in connection with any
personal injury, death, damage or loss of property which may be sustained by
Yuasa Japan's dispatched personnel unless caused by the gross negligence or
willful misconduct of YI.
ARTICLE 7. CONFIDENTIAL TREATMENT
----------------------------------
The parties acknowledge that their respective trade secrets and
confidential information concerning their business, products, Technical Know-
how, manufacturing methods and processes and other technical information,
whether acquired from each other pursuant hereto or otherwise, as they may exist
from time to time, are their respective valuable, special and unique proprietary
assets. In light of the highly competitive nature of the industry in which
their respective businesses are conducted, the parties further agree, each to
the other on its own behalf and on behalf of all entities under their respective
control, that all knowledge and information described in the preceding sentence
shall be considered confidential information. In recognition of this fact, each
party, on its own behalf and on behalf of all entities under its control, agrees
that it will not, at any time, disclose any of such confidential information to
any person or other entity for any reason or purpose whatsoever, nor shall they
make use of any such secrets, processes or other confidential information for
their own purposes or for the benefit of any person or other entity under any
circumstances at any time during or after the term hereof, except as may be
expressly provided hereby or by other written agreements between them. However,
each party, subject to the other's prior written consent, which shall not be
unreasonably withheld, may identify to suppliers from which it desires to
procure raw materials or component parts for the Product such information in the
scope which it deems necessary for such
8
<PAGE>
procurement. The party making such disclosure shall take all reasonable
precautions in order to ensure appropriate protection by such suppliers of the
confidentiality of such information. Failure to take appropriate measures shall
constitute a breach of this Agreement.
ARTICLE 8. ROYALTIES PAYABLE TO YUASA JAPAN, ETC.
--------------------------------------------------
8.1 Royalties.
---------
In consideration of Yuasa Japan's obligations as set forth in this
Agreement, YI agrees to pay Yuasa Japan during the term of this Agreement a
royalty (the "Royalty") calculated as follows:
(a) Three percent (3%) of the Net Sales by YI of batteries which
the parties presently refer to as "UXL stationary" and "NP batteries," plus
----
(b) Three percent (3%) of the first million dollars of Net Sales
by YI of the motorcycle and other small engine starting batteries more
specifically described in paragraph 1.3(d) of this Agreement; two percent
(2%) of the Net Sales by YI of such batteries above $1 million, and up to
$2 million; and one percent (1%) of the Net Sales of such batteries of $2
million and above,
which batteries, are both (i) manufactured by YI using the Technical Know-how,
and (ii) are sold by YI in the Territories. The parties acknowledge that, as of
the date of the execution of this Agreement, Yuasa Japan has only supplied YI
with Technical Know-how with respect to the Products identified in subparagraphs
8.1(a) and 8.1(b) above. Royalties under this paragraph 8.1 shall be payable on
a quarterly basis, within ninety (90) days after the close of each fiscal
quarter of YI, beginning with the fiscal quarter ending June 30, 1998.
8.2 Renegotiation.
-------------
The parties shall meet from time to time and consider whether to
renegotiate the Royalty, based on facts and circumstances, technology, and
prevailing market conditions and other relevant factors at the time.
8.3 Withholding for Double Taxation.
-------------------------------
Should payment of the Royalty payable hereunder be subject to USA
withholding tax under the Double Taxation Prevention Treaty (or any other
relevant treaty or convention) existing between the USA and Japan, the tax shall
be borne by Yuasa Japan, and YI will pay the tax for Yuasa Japan's account and
will deliver to Yuasa Japan the corresponding tax receipt and deduct the amount
thereof from any Royalty payment.
9
<PAGE>
8.4 Records.
-------
During the term of this Agreement YI shall keep full and accurate
records of its business in the Products and make such records open to inspection
and audit at all reasonable business hours upon reasonable notice by Yuasa Japan
or its representatives.
8.5 Development Costs for Certain Products.
--------------------------------------
The development costs incurred at Yuasa Japan for battery models
required solely for YI and manufactured by YI upon request from YI shall be
borne by YI, as may be mutually agreed from time to time.
8.6 Overdue Interest.
----------------
YI agrees to pay Yuasa Japan overdue interest at the rate of 7% per
annum of the unpaid amount without any deduction in respect of Royalty payments
not made within ninety (90) days after the end of each fiscal quarter.
Calculation of the amount of such interest shall be made on a daily basis for
the period from the 91st day after the end of fiscal quarter until and including
the date of actual payment. This obligation of YI shall be in addition to and
not in substitution for any other rights Yuasa Japan may have in respect to late
payment or non-payment of any sum due.
ARTICLE 9. GRANT OF LICENSE BY YI TO YUASA JAPAN;
--------------------------------------------------
CROSS LICENSING OF FUTURE PRODUCTS AND KNOW-HOW
-----------------------------------------------
9.1 YI hereby grants to Yuasa Japan the following non-transferrable
rights and licenses (to the extent Yuasa Japan does not already possess such
rights) during the term of this Agreement:
(a) the non-exclusive, royalty free, right and license to
manufacture and/or sell the Products identified in Section 1.3(a), (b),
(c), (d), (e) and (f) of this Agreement throughout the world, except in the
Territories; and
(b) the right to manufacture and/or sell batteries and related
products which employ technology and know-how developed or acquired by YI
after the date of this Agreement (i) in Japan (on an exclusive basis), and
(ii) throughout the rest of the world, except in the Territories (on a non-
exclusive basis), in exchange for compensation to be negotiated between the
parties prior to any manufacture or sale by Yuasa Japan.
9.2 Yuasa Japan hereby grants to YI the exclusive right to
manufacture and/or sell batteries and related products
10
<PAGE>
in the Territories which employ technology and know-how which either (a) now
exists but is not presently used by YI, or (b) is developed or acquired by Yuasa
Japan or a Yuasa Japan Affiliate after the date of this Agreement, for
compensation to be negotiated by the parties prior to any manufacture or sale by
YI.
9.3 Neither YI nor Yuasa Japan shall have any obligation to grant any
license or right under this Article 9 to the other if such grant would cause it
to violate any agreement with any unaffiliated third party and such third
party's consent cannot be obtained on reasonable terms and conditions.
ARTICLE 10. EFFECTIVE DATE
---------------------------
The effective date of this Agreement shall be April 1, 1998.
ARTICLE 11. TERM
-----------------
The term of this Agreement shall take effect on the effective date
and, unless sooner terminated in accordance with the provisions of Article 11,
this Agreement shall remain in full force and effect through the third (3rd)
anniversary of the first date on which Yuasa Japan and the Yuasa Japan
Affiliates do not own sufficient shares of common stock of YI in the aggregate
to cast (or direct the casting of) more than twenty percent (20%) of the total
votes entitled to be cast by holders of shares of stock of YI of all classes.
ARTICLE 12. TERMINATION
------------------------
12.1 By Yuasa Japan.
--------------
Yuasa Japan shall have the right to cancel this Agreement or any
extension hereof prior to the expiration of the term specified in Article 10, by
ninety (90) days' written notice to YI, in case:
(a) Royalties have remained unpaid for a period longer than one
hundred eighty (180) days after the end of a fiscal year of YI;
(b) there has been any material breach of this Agreement by YI which
is not remedied by YI within ninety (90) days after the date of
Yuasa Japan's written notice sent to YI of such breach; or
(c) YI shall file a petition for bankruptcy, or an order for relief
is entered in any involuntary bankruptcy case brought against YI,
or YI makes any assignment for the benefit of creditors or
11
<PAGE>
becomes insolvent, or is placed in the hands of a receiver.
12.2 By YI.
-----
YI shall have the right to cancel this Agreement or any extension
hereof prior to the expiration of the term specified in Article 10, by ninety
(90) days' written notice to Yuasa Japan, in case:
(a) there has been any material breach of this agreement by
Yuasa Japan which is not remedied by Yuasa Japan within ninety (90) days
after the date of YI's written notice sent to Yuasa Japan of such breach;
or
(b) Yuasa Japan shall file a petition for bankruptcy, or an
order shall be entered in any involuntary bankruptcy case commenced against
Yuasa Japan under the laws of Japan or under the similar laws of any other
relevant country, or Yuasa Japan makes an assignment for the benefit of
creditors or becomes insolvent, or is placed in the hands of a receiver.
ARTICLE 13. EFFECT OF TERMINATION
----------------------------------
13.1 Survival of Certain Rights and Obligations.
------------------------------------------
Notwithstanding any other provision of this Agreement or any other
agreement, after any revocation, cancellation or termination of this Agreement,
regardless of the reason or cause therefor:
(a) YI's right to use the Trademarks in connection with the
manufacture, distribution, marketing and sale of the Products in the
Territory shall survive for a period of three (3) years;
(b) YI's right to use the Technical Know-how and Patents
belonging to Yuasa Japan to manufacture Products for sale in the Territory
shall survive for a period of five (5) years; and
(c) the undertakings regarding confidentiality of information
under Article 7 shall survive indefinitely.
YI shall continue to pay the Royalties during such period, to the extent it
continues to use the Trademarks, Patents and Technical Know-how of Yuasa Japan.
12
<PAGE>
13.2 Certain Rights Not Affected.
---------------------------
Any termination or cancellation of this Agreement shall be without
prejudice to the rights of the parties to bring any action on their lawful
claims for damages or other compensation by reason of breach or violation of
contract or by any other lawful or contractual reason.
ARTICLE 14. INFRINGEMENT
-------------------------
YI shall notify Yuasa Japan promptly in writing of any claim action
made or brought against YI asserting that any Product or any part thereof
manufactured or sold by YI using or under any patent, trademark, trade secret or
other intellectual property provided by Yuasa Japan constitutes an infringement
of any patent, trademark or other intellectual property right or other right of
any third party. Yuasa Japan shall have the duty and right (with YI's
assistance, if reasonably required) to conduct settlement negotiations or
contest such claim or action, at Yuasa Japan's expense.
ARTICLE 15. ASSIGNMENT
-----------------------
The rights and obligations of the parties hereto under this Agreement
shall not be assigned without prior consent in writing of the other party
hereto, except to the respective successors to their businesses and assets.
ARTICLE 16. AMENDMENT
----------------------
No amendment to, waiver of or modification of any provisions of, this
Agreement shall be effective for any purpose whatsoever, if not confirmed in
writing by the parties hereto.
ARTICLE 17. FORCE MAJEURE
--------------------------
If performance of all or any part of this Agreement becomes
impracticable or is suspended by any force majeure (including but not limited
to, governmental regulations or directives, state of emergency, Act of God, war,
warlike conditions, hostilities, civil commotions, riots, epidemics strikes,
lock-out and any other causes beyond the control of the parties hereto) each
party hereto shall not be held responsible for such impracticability or
suspension of the performance. Upon occurrence of any event of force majeure,
the affected party shall inform the other party of such occurrence, and both
parties hereto shall discuss and decide the necessary measures to cope with such
force majeure.
13
<PAGE>
ARTICLE 18. CONSULTATION
-------------------------
Any matter not addressed or not fully provided for in this Agreement
shall be settled by the parties hereto upon mutual consultation and agreement
each time such matter arises.
ARTICLE 19. ARBITRATION
------------------------
In the event of any dispute, controversy or difference of opinion
between the parties hereto arising out of or in connection with this Agreement
or with regard to performance of any obligation hereunder by either party, the
parties shall use their best efforts to settle such dispute, controversy or
difference of opinion amicably by negotiation. Any dispute, controversy or
difference of opinion that can not be settled amicably by negotiation between
the parties shall be referred to arbitration to be conducted in accordance with
the provisions of the Japan-America Trade Arbitration Agreement dated September
16, 1952, and the award will be final and binding on the parties. Such
arbitration shall be held in Tokyo under the laws of Japan if initiated by YI
and shall be held in New York under the laws of New York if initiated by Yuasa
Japan.
ARTICLE 20. NOTICES
--------------------
Any notice to be given under this Agreement by a party hereto shall be
in writing and shall be given by being delivered or sent by registered airmail
(or telecopy or e-mail, with confirmation following by hard copy), addressed to
the other party at its address or telecopy number given blow or such other
address or telecopy as it may specify in writing. Any such notice sent by
registered airmail, telecopy or e-mail, shall conclusively be deemed to have
been given and received at the time when the same would have been received in
the ordinary course of mail, but no later than the date on which it is actually
received.
Yuasa, Inc.: Yuasa, Inc.
P.O. Box 14145
Reading PA 19612-4145
Telecopy: 610-208-1807
E-mail: [email protected]
Attention: P. Michael Ehlerman,
Chief Executive Officer
14
<PAGE>
Yuasa Japan: Yuasa Corporation
NT Building, 47-1, Oh-1
1- Chome, Shinagawa-ku
Tokyo, 140-8514 Japan
Telecopy: 3-5742-7835
E-mail:
Attention: Naruo Otsubo,
President
ARTICLE 21. GOVERNING LAW
--------------------------
Subject to the provisions of Article 9 above, this Agreement shall be
governed by and construed in accordance with the domestic, internal law (but not
the law of conflict of laws) of the Commonwealth of Pennsylvania.
ARTICLE 22. PARTIES BOUND, ETC.
-------------------------------
The provisions of this Agreement are for the benefit of YI and the YI
Affiliates, and may be enforced by them and their permitted successors and
assigns. Yuasa Japan is executing this Agreement on behalf of all other Yuasa
Japan Affiliates, and agrees to cause all of the Yuasa Japan Affiliates to
observe all of the terms and conditions hereof as if they were parties hereto.
ARTICLE 23. COUNTERPARTS.
--------------------------
This Agreement may be executed in any number of counterparts, each of
which will be deemed one and the same instrument which may be sufficiently
evidenced by any one counterpart.
ARTICLE 24. ENTIRE AGREEMENT; ENGLISH TEXT OF AGREEMENT
--------------------------------------------------------
(a) The English version shall be the only valid version of this
Agreement.
(b) This Agreement contains the entire understanding of the
parties hereto and shall supersede all prior verbal and written discussions
respect to the subject matter hereof. No modification shall be effective unless
it is in writing signed by the party against whom such modification is to be
enforced. This Agreement shall supersede the Prior Agreements in their entirety.
15
<PAGE>
ARTICLE 25. HEADINGS
---------------------
The headings of articles of this Agreement are for convenience of
reference only and shall not be interpreted as part of the contents of
respective articles of this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Agreement to be executed the day and year first written above.
YUASA INC.
By_________________________________
P. Michael Ehlerman,
Chief Executive Officer
Attest:____________________________
Michael T. Philion,
Acting Secretary
YUASA CORPORATION
By_________________________________
Naruo Otsubo, President
Title:
16
<PAGE>
Exhibit "A"
-----------
Patents
[list to be provided]
17
<PAGE>
Exhibit "B"
-----------
Trademarks
----------
1. Description. The following trademarks and trade names and all derivatives
-----------
thereof, wherever registered in any office
Yuasa
Yumicron
The logos and trade dress shown on Schedule 1 attached to this Exhibit.
2. Standards of Usage.
------------------
[to be provided]
18
<PAGE>
Exhibit 10.4
AGREEMENT NOT TO COMPETE
------------------------
AGREEMENT NOT TO COMPETE (the "Agreement") dated the ____ day of
___________, 1998, by and between YUASA, INC., a corporation duly organized and
existing under the laws of the Commonwealth of Pennsylvania ("YI") and YUASA
CORPORATION, a corporation duly organized and existing under the laws of Japan
("Yuasa Japan").
BACKGROUND
----------
A. Yuasa Japan is in the business of manufacturing, marketing and
selling all types of electrical storage batteries and related products,
including both industrial and consumer batteries. Yuasa Japan sells these
products directly and indirectly through various entities.
B. Yuasa Japan presently owns 86.5% of the issued and outstanding
capital stock of YI. Through YI's operating subsidiaries, YI is the leading
manufacturer and supplier of industrial and small engine starting batteries in
the Americas.
C. YI is contemplating an initial public offering of its stock (the
"Offering"), in connection with which YI has filed a registration statement (the
"Registration Statement") with the Securities and Exchange Commission. The
Offering, if completed, will have the result, among other things, of diluting
Yuasa Japan's percentage ownership in YI.
D. The Registration Statement indicates that significant risk
factors exist if the present relationship between Yuasa Japan and YI is
terminated by Yuasa Japan, because such termination could adversely affect YI's
competitive position, results of operations and future profits, which, in turn
could adversely affect the valuation of YI in connection with the Offering and,
therefore, adversely affect the Offering price, which would increase the
dilution in Yuasa Japan's percentage of ownership in YI.
E. Yuasa Japan and YI have therefore determined that entering into
this agreement not to compete would enhance the market value of YI and its
business, and, in particular, would enhance the pricing of the Offering and
thereby decrease the dilution in Yuasa Japan's percentage ownership of YI that
would result from the Offering.
NOW, THEREFORE, for the purposes of enhancing the market value of YI
and its business, and to decrease the dilution in Yuasa Japan's percentage
ownership in YI that will result from the Offering, and in consideration of the
covenants set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
1
<PAGE>
1. Definitions. As used in this Agreement, the following terms shall
-----------
have the following meanings:
(a) The Term "Restricted Period" shall mean the period
commencing with the date hereof and ending on the third (3rd) anniversary
of the first date on which Yuasa Japan and the Yuasa Japan Affiliates do
not own sufficient shares of common stock of YI in the aggregate to cast
(or direct the casting of) more than twenty percent (20%) of the total
votes entitled to be cast by holders of stock of YI of all classes.
(b) The Term "Restricted Territory" shall mean the territory
consisting of North America, Central America, South America and the
Caribbean Islands.
(c) The term "YI Affiliate" shall mean any entity with respect
to which YI, directly or indirectly, now or at any time during the term of
this Agreement, holds the right, by reason of its ownership of voting
securities, or by means of a proxy, voting trust or otherwise, to cast (or
direct the casting of) more than 50% of the total votes which all holders
of such entity's securities are entitled to cast or to otherwise elect a
majority of the members of the Board of Directors of such entity.
(d) The term "Yuasa Japan Affiliate" shall mean, collectively,
(i) any entity (other than YI) with respect to which Yuasa
Japan, directly or indirectly, now or at any time during the term of
this Agreement, holds the right, by reason of its ownership of voting
securities, or by means of a proxy, voting trust or otherwise, to cast
(or direct the casting of) more than 50% of the total votes which all
holders of such entity's securities are entitled to cast or to
otherwise elect a majority of the members of the Board of Directors of
such entity; and
(ii) any entity which, directly or indirectly, now or at
any time during the term of this Agreement, holds the right, by reason
of its ownership of voting securities of Yuasa Japan, or by means of a
proxy, voting trust or otherwise, to cast (or direct the casting of)
more than 50% of the total votes of Yuasa Japan which all holders of
Yuasa Japan's securities are entitled to cast or to otherwise elect a
majority of the members of the Board of Directors of such entity.
The parties acknowledge that, as of the date hereof, Global & Yuasa (Korea)
is not a Yuasa Japan Affiliate.
2
<PAGE>
2. Non Competition. Yuasa Japan hereby acknowledges and recognizes
---------------
the highly competitive nature of the business engaged in by YI and accordingly
agrees that, during and for the Restricted Period, without the prior consent of
YI, which shall not be unreasonably withheld, Yuasa Japan shall not:
(a) engage, directly or indirectly through any Yuasa Japan
Affiliate either for its own enterprise or as principal, agent, partner,
investor, or otherwise of any person, firm, corporation or enterprise, in
the manufacture, importing, development, distribution, marketing or sale of
(i) motive power batteries and chargers (including,
without limitation, batteries and chargers for industrial forklift
trucks, other materials handling equipment and wheelchairs),
(ii) stationary batteries and chargers (including, without
limitation, standby batteries and power supply equipment for wireless
and wireline telecommunications applications, such as central
telephone exchanges, microwave relay stations, and switchgear and
other instrumentation control systems),
(iii) uninterruptible power systems (including, without
limitation, batteries for computer, electronic, security, life support
and other medical applications),
(iv) motorcycle batteries,
(v) related battery accessories (including, without
limitation, cabinets and battery racks and trays), or
(vi) any other product that YI now makes or hereafter may
develop, manufacture, distribute, market or sell during the Restricted
Period, but not including batteries for starting small engines other
than motorcycles and small internal combustion engines used for
auxiliary charging power in electric vehicles,
(collectively, the "Restricted Products") in the Restricted Territory,
other than through YI and/or the YI Affiliates; or
(b) engage, directly or indirectly, either for its own
enterprise or as principal, agent, consultant, partner, investor, or
otherwise of any person, firm, corporation or enterprise, in the
distribution or sale of Restricted Products in any other geographic area
whatsoever, if Yuasa Japan or any Yuasa Japan Affiliate has reason to
believe that a material amount of Restricted Products are
3
<PAGE>
intended to be sold or resold for use in the Restricted Territory; or
(c) directly or indirectly provide offer or provide financial or
other assistance to any person, firm, corporation or enterprise engaged in
any Restricted Activity during the Restricted Period in the Restricted
Territory other than the YI Affiliates.
The activities from which Yuasa Japan and the Yuasa Japan Affiliates are
proscribed shall be referred to collectively as the "Restricted Activities".
3. Exceptions to Restricted Activities. Notwithstanding the
-----------------------------------
foregoing or anything else contained herein or in any other agreement:
(a) Yuasa Japan and the Yuasa Japan Affiliates may continue to
export into the Territory and sell products now exported by them to
customers to whom such products are now sold;
(b) Yuasa Japan and the Yuasa Japan Affiliates may sell
batteries to original equipment manufacturers ("OEMs") located outside the
Territory for installation outside the Territory and eventual export or
such batteries as part of the original equipment manufactured by such OEMs
into the Territory;
(c) so long as the technical assistance agreement between Yuasa
Japan and Auto Parts Japones S.A. of Ecuador ("APJ") is in effect, and to
the extent contemplated by such agreement as it is now in effect, (i) Yuasa
Japan may continue to sell the products called for by such agreement to APJ
in Ecuador and (ii) APJ may continue to manufacture and sell such products
for resale in Ecuador; and
(d) so long as the joint venture between Yuasa Japan and
Microlite-Yuasa Baterias Ltda., of Brazil ("Microlite") is in existence,
and to the extend contemplated by the governing agreements as now in
effect, Yuasa Japan may continue to sell to Microlite in Brazil, and
Microlite may continue to manufacture and sell for resale in Brazil, (i)
motorcycle starting batteries, (ii) automotive starting batteries, (iii)
"UXL" stationary batteries, and (iv) small VRLA batteries.
4. No Solicitation. Without the prior consent of YI, which shall
---------------
not be unreasonably withheld, at no time during the Restricted Period shall
Yuasa Japan or any Yuasa Japan Affiliate solicit or hire any person who was at
any time an employee of YI or any YI Affiliate or encourage or induce any
employee of YI or any YI Affiliate to terminate his or her employment
relationship.
4
<PAGE>
5. Reformation. Although Yuasa Japan and YI consider the
-----------
restrictions contained in Sections 2, 3 or 4 of this Agreement to be reasonable
for the purpose of enhancing the market value of YI and its business, and to
decrease the dilution in Yuasa Japan's ownership percentage in YI that will
result from the Offering, if (a) a final judicial determination is made by a
court having jurisdiction that the time or territory or any other restriction
contained in Sections 2, 3 or 4 of this Agreement is an unreasonable or
otherwise unenforceable restriction against Yuasa Japan or any Yuasa Japan
Affiliate or (b) if any governmental regulatory agency of the United States
advises YI or Yuasa Japan that any provision of Sections 2, 3 or 4 would cause
YI or Yuasa Japan to be in violation of any United States Antitrust Laws, which
violation would cause such party to be subject to a material criminal or civil
penalty, the provisions of Sections 2, 3 and 4 of this Agreement shall not be
rendered void, but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such court or agency may determine or
indicate to be reasonable or lawful.
6. Equitable Relief. Yuasa Japan acknowledges and agree that YI's
----------------
remedy at law for a breach or threatened breach of any of the provisions of
Sections 2, 3 or 4 of this Agreement would be inadequate and, in recognition of
that fact, in the event of a breach or threatened breach by Yuasa Japan or any
Yuasa Japan Affiliate of any provision of this Agreement, it is agreed that, in
addition to its remedy at law, and in addition to the arbitration remedies
provided the Section 7, YI shall be entitled to equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available. Nothing
herein contained shall be construed as prohibiting YI from pursuing any other
remedies available to it for such breach or threatened breach. YI and the YI
Affiliates shall not be required to post any bond in connection with any request
for such equitable relief.
7. Arbitration. In the event of any dispute, controversy or
-----------
difference of opinion between the parties hereto arising out of or in connection
with this Agreement or with regard to performance of any obligation hereunder by
either party, the parties shall use their best efforts to settle such dispute,
controversy or difference of opinion amicably by negotiation. Any dispute,
controversy or difference of opinion that can not be settled amicably by
negotiation between the parties shall be referred to arbitration to be conducted
in accordance with the provisions of the Japan-America Trade Arbitration
Agreement dated September 16, 1952, and the award will be final and binding on
the parties. Such arbitration shall be held in New York under the laws of the
Commonwealth of Pennsylvania.
8. Waiver. The waiver by YI of a breach of any provision of this
------
Agreement by either Yuasa Japan or any Yuasa
5
<PAGE>
Japan Affiliate shall not operate or be construed as a waiver of any subsequent
breach.
9. Assignment. This Agreement shall not be assignable by either
----------
party without the prior written consent of the other party, except that this
Agreement and the benefits to YI hereunder may be assigned by YI to (a) any
successor to the business of YI and (b) any present or future YI Affiliate.
10. Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties hereto and shall supersede all prior verbal and
written discussions respect to the subject matter hereof. No modification shall
be effective unless it is in writing signed by the party against whom such
modification is to be enforced.
11. Notices. All notices, requests and demands to or upon the
-------
respective parties hereto shall be deemed to have been given or made when
deposited in the mails, postage prepaid, registered or certified mail, return
receipt requested, or when sent by courier system providing for receipt of
delivery, or when sent by telecopy or e-mail, addressed as follows or to such
other address as may be hereafter designated in writing by the respective
parties hereto:
Yuasa, Inc.: Yuasa, Inc.
P.O. Box 14145
Reading PA 19612-4145
Telecopy: 610-208-1807
E-mail: [email protected]
Attention: P. Michael Ehlerman,
Chief Executive Officer
Yuasa Japan: Yuasa Corporation
NT Building, 47-1, OH-1
1- Chome, Shinagawa-ku
Tokyo, 140 Japan
Telecopy:
Attention: Naruo Otsubo,
President
12. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the domestic, internal law (but not the law of conflict of
laws) of the Commonwealth of Pennsylvania.
13. Jurisdiction; Venue; Service. Each party irrevocably consents to
----------------------------
the exclusive jurisdiction of the United States District Court for the Eastern
District of Pennsylvania, agrees that such courts are the most convenient forum
for all
6
<PAGE>
judicial litigation of matters relating hereto, and irrevocably appoints the
Secretary of State of Pennsylvania as its agent to accept and acknowledge on its
behalf all service of process. Each party further agrees that such service of
process is in every respect effective and valid personal service of process upon
it. Any party who institutes any proceeding in any forum other than the United
States District Court for the Eastern District of Pennsylvania (other than an
arbitration proceeding under Section 7) shall be responsible for all counsel
fees, costs and related expenses that any other party may incur in connection
with the transfer of such matter.
14. Parties Bound, Etc. The provisions of this Agreement are for the
------------------
benefit of YI and the YI Affiliates, and may be enforced by them and their
permitted successors and assigns. Yuasa Japan is executing this Agreement on
behalf of all other Yuasa Japan Affiliates, and agrees to cause them to observe
all of the terms and conditions hereof as if they were parties hereto.
15. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed one and the same instrument which may
be sufficiently evidenced by any one counterpart.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Agreement to be executed the day and year first written above.
YUASA INC.
By________________________________
P. Michael Ehlerman,
Chief Executive Officer
Attest:_________________________________
Michael T. Philion, Acting Secretary
YUASA CORPORATION
By_________________________________
Naruo Otsubo, President
7
<PAGE>
EXHIBIT 10.5
[EXECUTION COPY]
SECURITIZATION AGREEMENT
DATED AS OF MARCH 16, 1998
AMONG
YESCO, INC.,
AS SELLER
---------
PROMINENT FUNDING CORPORATION,
AS PURCHASER
------------
YUASA EXIDE, INC.,
AS SERVICER
-----------
AND
THE SAKURA BANK, LIMITED,
ACTING THROUGH ITS NEW YORK BRANCH,
AS AGENT
--------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I THE COMMITMENT....................................... 2
1.1 Commitment............................................. 2
----------
1.2 Limits on Commitment to Purchase....................... 3
--------------------------------
1.3 Purchase Procedure..................................... 3
------------------
1.4 Commitment Termination Date............................ 4
---------------------------
1.5 Voluntary Termination of Commitment or Reduction
------------------------------------------------
of Maximum Investment.................................. 5
---------------------
ARTICLE II PURCHASER'S INTEREST................................. 5
2.1 Assignment of Purchaser's Interest..................... 5
----------------------------------
2.2 Purchaser's Percentage................................. 6
----------------------
2.3 Rate Tranches; Selection of Yield Periods.............. 7
-----------------------------------------
ARTICLE III SETTLEMENTS.......................................... 8
3.1 Non-Pay Out Settlement Procedures for Collections 8
-------------------------------------------------
3.2 Pay Out Settlement Procedures for Collections.......... 13
---------------------------------------------
3.3 Dilutions.............................................. 14
---------
3.4 Optional Reduction of Purchaser's Investment........... 16
--------------------------------------------
3.5 Reporting by Servicer.................................. 17
---------------------
3.6 Delivery of Deemed Collections; Collections Held
------------------------------------------------
in Trust............................................... 18
--------
3.7 Application of Collections Distributable to
-------------------------------------------
Seller................................................. 18
------
3.8 Support Account........................................ 19
---------------
ARTICLE IV PAYMENT PROCEDURES; FEES AND YIELD PROTECTION........ 20
4.1 Payments and Computations.............................. 20
-------------------------
4.2 Interest on Overdue Amounts............................ 21
---------------------------
4.3 Fees................................................... 21
----
4.4 Yield Protection....................................... 21
----------------
ARTICLE V CONDITIONS PRECEDENT................................. 24
5.1 Conditions Precedent to Initial Purchase............... 24
----------------------------------------
5.2 Conditions Precedent to All Purchases and
-----------------------------------------
Reinvestments.......................................... 27
-------------
ARTICLE VI REPRESENTATIONS AND WARRANTIES....................... 28
6.1 Representations and Warranties of the Seller and
------------------------------------------------
the Servicer........................................... 28
------------
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII GENERAL COVENANTS OF SELLER AND SERVICER............. 35
7.1 Affirmative Covenants of the Seller and the
-------------------------------------------
Servicer............................................... 35
--------
7.2 Reporting Requirements of the Seller and the
--------------------------------------------
Servicer............................................... 37
--------
7.3 Negative Covenants of the Seller and the Servicer...... 39
-------------------------------------------------
7.4 Separate Corporate Existence of Seller................. 44
--------------------------------------
ARTICLE VIII ADMINISTRATION AND COLLECTION........................ 46
8.1 Designation of Servicer................................ 46
-----------------------
8.2 Duties of Servicer..................................... 47
------------------
8.3 Rights of the Agent.................................... 50
-------------------
8.4 Responsibilities of Seller and the Servicer............ 51
-------------------------------------------
8.5 Further Action Evidencing Purchases.................... 52
-----------------------------------
8.6 Application of Obligors' Payments...................... 54
---------------------------------
ARTICLE IX SECURITY INTEREST.................................... 54
9.1 Grant of Security Interest............................. 54
--------------------------
9.2 Further Assurances..................................... 55
------------------
9.3 Remedies............................................... 55
--------
ARTICLE X TERMINATION EVENTS................................... 55
10.1 Termination Events..................................... 55
------------------
10.2 Remedies............................................... 59
--------
ARTICLE XI THE AGENT............................................ 60
11.1 Authorization and Action............................... 60
------------------------
11.2 Agent's Reliance, Etc.................................. 60
---------------------
11.3 Agent and Affiliates................................... 61
--------------------
ARTICLE XII ASSIGNMENTS BY SELLER OR PURCHASER................... 62
12.1 Restrictions on Assignments............................ 62
---------------------------
12.2 Documentation; Notice of Assignment.................... 63
-----------------------------------
12.3 Rights of Assignee..................................... 63
------------------
12.4 Allocation of Payments................................. 64
----------------------
12.5 Calculation of Earned Discount After Assignment........ 64
-----------------------------------------------
12.6 Rights of Collateral Agent............................. 64
--------------------------
ARTICLE XIII INDEMNIFICATION...................................... 65
13.1 Indemnities by the Seller.............................. 65
-------------------------
13.2 Indemnities by Servicer................................ 69
-----------------------
ARTICLE XIV MISCELLANEOUS........................................ 69
14.1 Amendments, Etc........................................ 69
---------------
14.2 Notices, Etc........................................... 70
------------
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
14.3 No Waiver; Remedies.................................... 71
-------------------
14.4 Binding Effect; Survival............................... 71
------------------------
14.5 Costs, Expenses and Taxes.............................. 72
-------------------------
14.6 No Proceedings......................................... 72
--------------
14.7 Confidentiality of Seller Information.................. 73
-------------------------------------
14.8 Confidentiality of Program Information................. 76
--------------------------------------
14.9 No Recourse Against Other Parties...................... 80
---------------------------------
14.10 Definitions; Other Terms............................... 80
------------------------
14.11 Captions and Cross References.......................... 80
-----------------------------
14.12 Integration............................................ 81
-----------
14.13 Governing Law.......................................... 81
-------------
14.14 Waiver Of Jury Trial................................... 81
--------------------
14.15 Consent To Jurisdiction; Waiver Of Immunities.......... 82
---------------------------------------------
14.16 Execution in Counterparts.............................. 82
-------------------------
14.17 Syndication of Liquidity............................... 82
------------------------
</TABLE>
(iii)
<PAGE>
APPENDIX
APPENDIX A Definitions
SCHEDULES
SCHEDULE A Description of Fiscal Periods
SCHEDULE 6.01(i) Description of Material Adverse Changes
SCHEDULE 6.01(j) Description of Litigation
SCHEDULE 6.01(n) List of Offices of Seller where Records Are Kept
SCHEDULE 6.01(o) List of Lock-Box Banks
SCHEDULE 6.01(p)-1 Forms of Contracts
SCHEDULE 6.01(p)-2 Description of Credit and Collection Policy
SCHEDULE 14.02 Addresses for Notice
EXHIBITS
EXHIBIT 1.03 Form of Purchase Request
EXHIBIT 3.05(a) Form of Periodic Report
EXHIBIT 3.05(b) Form of Pay Out Statement
EXHIBIT 5.01(b) Form of Receivables Transfer Agreement
EXHIBIT 5.01(e)(i) Form of Yuasa/Seller/Purchaser UCC Financing Statement
EXHIBIT 5.01(e)(ii) Form of Seller/Purchaser UCC Financing Statement
EXHIBIT 5.01(g) Form of Lock-Box Agreement
EXHIBIT 5.01(h) Form of Corporate/UCC Opinion of Counsel for
Seller and Servicer
EXHIBIT 5.01(i) Form of Opinion of True Sale/Substantive Non-Consolidation
Opinion of Counsel for Seller and Servicer
EXHIBIT 5.01(k) Form of Power of Attorney
(iv)
<PAGE>
SECURITIZATION AGREEMENT
SECURITIZATION AGREEMENT, dated as of March 16, 1998 among YESCO, INC., a
Nevada corporation (the "Seller"), as seller, PROMINENT FUNDING CORPORATION, a
------
Delaware corporation (the "Purchaser"), as purchaser, YUASA EXIDE, INC., a
---------
California corporation ("Yuasa"), as initial Servicer (as defined herein) and
-----
THE SAKURA BANK, LIMITED, a banking corporation organized under the laws of
Japan ("Sakura Japan"), acting through its NEW YORK BRANCH ("Sakura"), as agent
------------ ------
for the Purchaser (in such capacity, the "Agent"). Unless otherwise indicated,
-----
capitalized terms used in this Agreement are defined in Appendix A.
----------
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Seller is engaged in the business of purchasing receivables
arising from the sale of lead-acid and other batteries by the Originator, which
receivables so purchased and from time to time held by the Seller are herein
sometimes referred to as the Pool Receivables;
WHEREAS, the Seller has requested the Purchaser, and the Purchaser has
agreed, subject to the terms and conditions contained in this Agreement, to
purchase from the Seller, an undivided interest, herein referred to as the
Purchaser's Interest, in one or more Purchases from time to time during the
Reinvestment Period;
WHEREAS, the Seller and the Purchaser also desire that, subject to the
terms and conditions of this Agreement, certain of the daily Collections in
respect of the Purchaser's Interest be reinvested in Pool Receivables so that
the Purchaser may maintain its Purchaser's Investment fully invested in
uncollected Pool Receivables;
1
<PAGE>
WHEREAS, the Purchaser expects generally to fund its Purchases and
Reinvestments through the issuance of Commercial Paper Notes. The Purchaser has
entered into a Liquidity Funding Agreement providing for the making by the
Liquidity Banks of Liquidity Fundings in the event that (among other things) the
Purchaser is unable to fund its Purchases or Reinvestments pursuant to this
Agreement by the issuance of Commercial Paper Notes or otherwise prefers to fund
such Purchases or Reinvestments under the Liquidity Funding Agreement rather
than by the issuance of Commercial Paper Notes, or is unable to pay such
Commercial Paper Notes at maturity from its share of collections on Pool
Receivables. The Purchaser has also entered into a Credit Agreement with a
Credit Bank and the Credit Agent providing for the making of loans to the
Purchaser to provide funds for (among other things) the payment of Commercial
Paper Notes in the circumstances described above when funding is not available
under the Liquidity Funding Agreement; and
WHEREAS, the Purchaser has appointed Sakura as its agent to perform certain
administrative duties for the Purchaser, including, among other things, the
arrangement of the transactions provided for hereunder, the administration of
the funding of such transactions and the making of certain determinations
hereunder and in connection herewith;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
THE COMMITMENT
SECTION 1.1 Commitment. On the terms and subject to the conditions set
----------
forth in this Agreement (including Article V):
---------
2
<PAGE>
(a) Purchases. Pursuant to Section 1.03, from time to time during the
--------- ------------
Reinvestment Period, upon request by the Seller, the Purchaser shall purchase
from the Seller, in one or more transactions, an undivided interest in the Pool
Receivables and Related Property. Each of the initial purchases of the
Purchaser's Interest hereunder and each subsequent purchase increasing the
Purchaser's Interest is herein called a "Purchase".
--------
(b) Reinvestments. Pursuant to Section 3.01, during the Reinvestment
------------- ------------
Period, the Purchaser shall permit the Servicer to cause certain of the
Collections in respect of the Purchaser's Interest to be paid to Seller for
reinvestment in the Receivables and Related Property. Each such payment is
herein called a "Reinvestment".
------------
The Purchaser's obligation to make such Purchases and Reinvestments is herein
called the "Commitment".
----------
SECTION 1.2 Limits on Commitment to Purchase. Under no circumstances
--------------------------------
shall the Purchaser make any Purchase to the extent that, after giving effect to
such Purchase:
(a) the Purchaser's Investment would exceed the Maximum Investment; or
(b) the Unadjusted Purchaser's Percentage would exceed the Maximum
Percentage.
SECTION 1.3 Purchase Procedure.
------------------
(a) Purchase Request. Each Purchase from the Seller by the Purchaser
----------------
shall be made on written request by the Seller to the Purchaser and the Agent,
substantially in the form of Exhibit 1.03 (a "Purchase Request"), received by
------------ ----------------
the Agent not later than 11:00 a.m. (New York City time) on the second Business
3
<PAGE>
Day preceding the date of such proposed Purchase. Each such request shall
specify the desired amount and date of such Purchase.
(b) Amount of Purchase Price. The amount of the purchase price paid
------------------------
by the Purchaser for each Purchase shall be equal to the lesser of (x) the
amount proposed by the Seller pursuant to Section 1.03(a) and (y) the maximum
---------------
amount permitted under Section 1.02.
------------
(c) Funding of Purchase. On the date of each Purchase, the Purchaser
-------------------
shall, upon satisfaction of the applicable conditions set forth in Article V,
---------
make available to the Agent in same day funds, at its office at 277 Park Avenue,
New York, New York 10172-0121, the amount of the purchase price to be paid for
such Purchase (determined pursuant to Section 1.03(b)) and after receipt by the
---------------
Agent of such funds, the Agent will make such funds immediately available to the
Seller at such office.
SECTION 1.4 Commitment Termination Date.
---------------------------
(a) The "Commitment Termination Date" shall be the earlier to occur
---------------------------
of (i) March 15, 1999 (herein, as the same may be extended, called the
"Scheduled Commitment Termination Date"), and (ii) the date of termination of
-------------------------------------
the Commitment pursuant to Section 1.04(c), 1.05 or 10.02.
--------------- ---- -----
(b) The Scheduled Commitment Termination Date may be extended by 364
days on the Commitment Termination Date then in effect; provided that (i) not
--------
less than 90 days prior to such Commitment Termination Date, the Seller shall
have delivered a written request for such extension to the Purchaser and the
Agent, and (ii) within 30 days prior to such Commitment Termination Date, the
Purchaser and the Agent, shall each have given its written consent to such
extension (which consent may be
4
<PAGE>
given or withheld by either such party in its sole discretion). As a condition
to any such extension, the Seller and the Servicer shall deliver such
certificates, opinions of counsel or other documents as the Purchaser or the
Agent may require.
(c) The Commitment shall terminate, and the Purchaser shall have no
obligation to make any further Purchases or Reinvestments hereunder, on the
scheduled date of termination of the Liquidity Banks' commitments under the
Liquidity Funding Agreement. The Purchaser agrees to give the Seller and the
Originator at least 30 days' prior written notice of the termination of the
Commitment pursuant to the foregoing sentence, but no failure to give or delay
in giving such notice shall prevent or delay such termination.
SECTION 1.5 Voluntary Termination of Commitment or Reduction of Maximum
-----------------------------------------------------------
Investment. The Seller may, upon at least five Business Days' notice to the
- ----------
Agent, terminate the Commitment in whole or reduce in part the unused portion of
the Maximum Investment; provided, however, that (a) each partial reduction shall
-------- -------
be in an amount equal to $2,000,000 or an integral multiple thereof and (b)
after giving effect to such reduction, the remaining Maximum Investment will not
be less than $30,000,000.
ARTICLE II
PURCHASER'S INTEREST
SECTION 2.1 Assignment of Purchaser's Interest. The Seller hereby sells,
----------------------------------
assigns and transfers to the Purchaser, effective on and as of the date of the
initial Purchase hereunder and, with respect to any increase in the Purchaser's
Interest effected by an additional Purchase hereunder, on the date of such
additional Purchase, an undivided ownership interest, in a percentage equal to
the Purchaser's Percentage as determined from time to time in accordance with
Section 2.02, in all Pool
- ------------
5
<PAGE>
Receivables and Related Property, whether now existing or hereafter arising or
acquired by the Seller from time to time. Such undivided ownership interest as
in effect from time to time is herein called the "Purchaser's Interest").
--------------------
SECTION 2.2 Purchaser's Percentage. The Purchaser's Interest shall be in
----------------------
a percentage (the "Purchaser's Percentage") equal at any time to the quotient
----------------------
obtained by dividing
(a) the sum of (i) the Purchaser's Investment, (ii) the Discount
Factor, (iii) the Default Reserve, (iv) the Servicer's Fee Reserve and (v) the
Yield Reserve (such sum being herein sometimes called the "Purchaser's
-----------
Allocation"), by
- ---------- --
(b) the Net Pool Balance,
as most recently computed in accordance with this Section 2.02 (such quotient,
------------
expressed as a percentage, before giving effect to the following proviso, being
the "Unadjusted Purchaser's Percentage"); provided, however,
--------------------------------- -------- -------
(1) the Purchaser's Percentage shall not be greater than 100%;
(2) during the Pay Out Period, the Purchaser's Percentage shall
be the greater of (x) the Purchaser's Percentage in effect immediately
before the commencement of the Pay Out Period and (y) the Purchaser's
Percentage as otherwise determined in accordance with this Section 2.02;
------------
and
(3) the Purchaser's Percentage shall become zero at such time as
(A) the Purchaser shall have received the accrued Earned Discount, shall
have recovered the Purchaser's Investment and shall have received all other
amounts payable to the Purchaser pursuant to this Agreement
6
<PAGE>
and (B) the Servicer shall have received the accrued Servicer's Fee.
The Purchaser's Percentage shall initially be computed by the Servicer as of the
opening of business of the Servicer on the date of each Purchase and shall be
recomputed in each Periodic Report and each Pay Out Statement; provided,
--------
however, the Agent may from time to time request the Servicer to deliver a
- -------
Periodic Report for the purpose of recalculating the Purchaser's Percentage, and
the Servicer shall deliver such Periodic Report within three Business Days after
its receipt of such request. The Purchaser's Percentage shall remain constant
from the time as of which any such computation or recomputation is made until
the time as of which the next such recomputation, if any, shall be made.
SECTION 2.3 Rate Tranches; Selection of Yield Periods.
-----------------------------------------
(a) From time to time, for purposes of determining the Yield Periods
applicable to different portions of the Purchaser's Interest, and of calculating
the Earned Discount and Servicer's Fee with respect thereto, the Agent shall
allocate the Purchaser's Interest to one or more tranches (each a "Rate
----
Tranche"), each corresponding to a portion of the Purchaser's Investment (with
- -------
respect to each Rate Tranche, the "Purchaser's Tranche Investment"). At any
------------------------------
time, each Rate Tranche shall have only one Yield Period and one Purchaser Rate
applicable for purposes of calculating Earned Discount, and shall be funded by
(i) an issue of Commercial Paper Notes, (ii) one or more Discretionary Bank
Advances, or (iii) Liquidity Fundings funded by the Liquidity Banks ratably and
having the same Yield Period, but not by more than one of the foregoing at the
same time.
(b) The Agent shall select the duration of the initial, and each
subsequent, Yield Period for each Rate Tranche in its discretion; provided that,
--------
so long as no Termination Event
7
<PAGE>
shall have occurred and be continuing, the Agent shall use reasonable efforts,
taking into account market conditions, to accommodate the Seller's preferences.
(c) From time to time the Agent shall notify the Servicer of the
number of Rate Tranches, the Purchaser's Tranche Investment of each Rate
Tranche, the Purchaser Rate for such Rate Tranche and the duration of the
current Yield Period selected by it for each Rate Tranche.
ARTICLE III
SETTLEMENTS
SECTION 3.1 Non-Pay Out Settlement Procedures for Collections.
-------------------------------------------------
(a) Daily Procedure. On each day during the Reinvestment Period, the
---------------
Servicer shall deem an amount equal to the Purchaser's Share of Collections of
Pool Receivables received or deemed received on such day to be received in
respect of the Purchaser's Interest, and, out of the Purchaser's Share of such
Collections, shall:
(i) hold in trust for the benefit of the Purchaser (in
accordance with Section 3.06) an amount equal to (A) the sum of (I) the
------------
aggregate unpaid Earned Discount accrued and scheduled to accrue for each
Rate Tranche during the related Yield Period, and (II) the aggregate of the
aggregate unpaid Facility Fee accrued and scheduled to accrue during such
calendar month and the aggregate Servicer's Fee accrued and unpaid through
such day, less (B) the amount, if any, theretofore set aside and then so
----
held for the benefit of the Purchaser in respect of such Earned Discount,
Facility Fee and Servicer's Fee;
8
<PAGE>
(ii) set aside and hold in trust for the Purchaser (in
accordance with Section 3.06) an amount equal to the excess, if any, of
------------
(A) the greatest of
(I) if the Seller shall have elected to reduce the
Purchaser's Investment under Section 3.04, the amount of the
------------
proposed reduction,
(II) if the Purchaser's Investment shall exceed the
Maximum Investment, the amount of such excess,
(III) if the Purchaser's Percentage shall exceed the
Maximum Percentage, an amount equal to the minimum reduction of
the Purchaser's Investment which (based on the Purchaser Rates
currently in effect, and assuming that such reduction will be
applied to reduce the Purchaser's Tranche Investments of the Rate
Tranches having the shortest remaining Yield Periods) would
result in the Purchaser's Percentage being no greater than the
Maximum Percentage, and
(IV) if any of the conditions precedent to
Reinvestment set forth in Section 5.02 shall not be met, the
------------
Purchaser's Investment, over
----
(B) the aggregate of the amounts theretofore set aside and
then so held for the benefit of the Purchaser pursuant to this clause
------
(ii); and
----
(iii) subject to Section 5.02, pay the remainder, if any, of
------------
such Collections to the Seller for application to
9
<PAGE>
Reinvestment, for the benefit of the Purchaser, in the Purchaser's Interest
in accordance with Section 1.01(b).
---------------
The Servicer shall, first, apply the Seller's Share of such Collections to the
-----
payment of any other amounts (other than Earned Discount and Purchaser's
Investment) then due to the Purchaser or the Agent and, second, pay any
------
remaining portion of the Seller's Share of such Collections to the Seller.
(b) Settlement Date Procedure. Prior to the Pay Out Period, on the
-------------------------
Settlement Date for each Settlement Period with respect to any Rate Tranche, the
Servicer shall deposit to the Agent's Account:
(i) out of the amounts set aside pursuant to clause (i) of
----------
Section 3.01(a), an amount equal to the Earned Discount, Facility Fee and
---------------
Servicer's Fee accrued during the related Yield Period with respect to such
Rate Tranche; and
(ii) out of the amount, if any, set aside pursuant to clause
------
(ii) of Section 3.01(a) and not theretofore reinvested in accordance with
---- ---------------
Section 3.01(d) or deposited to the Agent's Account pursuant to this
---------------
Section 3.01(b), an amount equal to the lesser of such amount and the
---------------
Purchaser's Tranche Investment of the related Rate Tranche;
provided, however, that
- -------- -------
(A) if the Agent gives its consent (which consent may be
revoked at any time), the Servicer may retain amounts which would
otherwise be deposited in respect of Servicer's Fee, in which case no
distribution shall be made in respect of Servicer's Fee under clause
------
(c) below; and
---
10
<PAGE>
(B) if any Yield Period for any Rate Tranche shall exceed
three months, the Servicer shall pay to the Agent within three days
after the last day of each three month period in such Yield Period all
Earned Discount, Facility Fee and Servicer's Fee that shall have
accrued with respect to such Rate Tranche during such three-month
period to the same extent as if such Yield Period had ended on such
last day.
In addition, if, on such Settlement Date, after reducing the Purchaser's Tranche
Investment of the related Rate Tranche by the amount deposited pursuant to
clause (ii) above, the Purchaser's Investment would be greater than the Maximum
- -----------
Investment or the Unadjusted Purchaser's Percentage would be greater than the
Maximum Percentage, then the Seller shall pay to the Servicer, and the Servicer
shall deposit to the Agent's Account, an amount equal to the least of (x) the
minimum reduction of the Purchaser's Investment which would result in the
Purchaser's Investment not exceeding the Maximum Investment and the Purchaser's
Percentage not exceeding the Maximum Percentage, (y) the Purchaser's Tranche
Investment of the related Rate Tranche and (z) the Seller's Collection Amount.
(c) Order of Application. Upon receipt by the Agent of funds
--------------------
deposited pursuant to subsection (b) on a Settlement Date for any Rate Tranche,
--------------
the Agent shall distribute them to the Persons, for the purposes and in the
order of priority set forth below:
(i) to the Purchaser in payment of the accrued and unpaid Earned
Discount for such Rate Tranche;
(ii) to the Purchaser in payment of the accrued and unpaid
Facility Fee for such Rate Tranche;
11
<PAGE>
(iii) to the Servicer in payment of the accrued and unpaid
Servicer's Fee payable with respect to such Rate Tranche; and
(iv) to the Purchaser in reduction of the Purchaser's Tranche
Investment of such Rate Tranche.
(d) Unreinvested Collections. During the Reinvestment Period, if on
------------------------
any date the amount of Collections theretofore set aside and then held by the
Servicer for the benefit of the Purchaser pursuant to clause (ii) of Section
----------- -------
3.01(a) shall exceed the maximum amount then required to be set aside and so
- -------
held pursuant to such clause (ii), then, subject to the applicable conditions
-----------
precedent set forth in Section 5.02, the Servicer shall pay to the Seller the
------------
amount of such excess Collections, for application to Reinvestment in accordance
with Section 1.01(b). To the extent and for so long as such Collections may not
---------------
be so reinvested, the Servicer shall hold such Collections in trust for the
benefit of the Purchaser in a separate deposit account containing only such
Collections and no other funds in accordance with Section 3.06(b). On each
---------------
Settlement Date and each date when a payment is due under clause (B) of the
----------
proviso to Section 3.01(b) with respect to any Rate Tranche, the Servicer shall
- ------- ---------------
pay to the Agent for the account of the Purchaser, in reduction of the
Purchaser's Investment, the amount of Collections then held in trust pursuant to
the immediately preceding sentence or, if less, the Purchaser's Tranche
Investment of such Rate Tranche; any such amounts remaining after such
application shall continue to be held in trust pursuant to this paragraph (d)
-------------
and shall be applied on the next successive Settlement Dates until such amount
has been reduced to zero. The Purchaser's Investment shall not be deemed
reduced by any amount held in trust pursuant to this subsection (d) unless and
--------------
until, and then only to the extent that, such amount is finally paid to the
Agent in accordance with the immediately preceding sentence.
12
<PAGE>
SECTION 3.2 Pay Out Settlement Procedures for Collections.
---------------------------------------------
(a) Daily Procedure. During the Pay Out Period, on each day, the
---------------
Servicer shall (i) set aside and hold in trust for the Purchaser the Purchaser's
Share of the Collections of Pool Receivables received by the Servicer for such
day by depositing such Collections within one Business Day of the Servicer's
receipt thereof into a bank account acceptable to the Agent in which no other
funds shall be deposited, and (ii) first, apply the Seller's Share of such
-----
Collections to the payment of any other amounts (other than Earned Discount and
Purchaser's Investment) then due to the Purchaser or the Agent and, second, pay
------
any remaining portion of the Seller's Share of such Collections to the Seller.
(b) Settlement Date Procedure. During the Pay Out Period, on each
-------------------------
Settlement Date for any Rate Tranche, the Servicer shall deposit to the Agent's
Account, in accordance with Section 4.01, the amounts set aside pursuant to
------------
Section 3.02(a), but not to exceed the sum of (i) the accrued and unpaid Earned
- ---------------
Discount and Facility Fee with respect to such Rate Tranche, (ii) the
Purchaser's Tranche Investment of such Rate Tranche, (iii) the aggregate of
other amounts (other than the Purchaser's Investment, Earned Discount, Facility
Fee and Servicer's Fee) owed hereunder by the Seller to the Purchaser or the
Agent, and (iv) the accrued Servicer's Fee payable with respect to such Rate
Tranche. Any amounts in excess of the amount required to be deposited in the
Agent's Account pursuant to the previous sentence shall continue to be set aside
and held in trust by the Servicer for application on the next succeeding
Settlement Date(s).
(c) Order of Application. Upon receipt of funds deposited to the
--------------------
Agent's Account pursuant to Section 3.02(b), the
---------------
13
<PAGE>
Agent shall distribute them to the Persons, for the purposes and in the order of
priority set forth below:
(i) to the Purchaser in payment of the accrued and unpaid Earned
Discount for such Rate Tranche;
(ii) to the Purchaser in payment of the accrued and unpaid
Facility Fee for such Rate Tranche;
(iii) if the Servicer is a Person other than the Originator or
an Affiliate of the Originator, to the Servicer in payment of the accrued
and unpaid Servicer's Fee with respect to such Rate Tranche, in an amount
not to exceed the Servicer's Fee Reserve;
(iv) to the Purchaser in reduction of the Purchaser's Tranche
Investment with respect to such Rate Tranche;
(v) subject to and in accordance with the payment priorities set
forth in the other Transaction Documents, to the Purchaser or the Agent (as
the case may be) in payment of any other amounts owed by the Seller
hereunder to the Purchaser or the Agent (other than the Purchaser's
Investment, Earned Discount, Facility Fee and Servicer's Fee); and
(vi) to the Servicer in payment of the accrued Servicer's Fee
payable with respect to such Rate Tranche, to the extent not paid pursuant
to clause (iii) above.
------------
SECTION 3.3 Dilutions.
---------
(a) If on any day the Unpaid Balance of any Pool Receivable is
14
<PAGE>
(i) reduced as a result of any defective, rejected or returned
merchandise or services, any cash discount, any allowances or billing
errors, any trade-in or trade-up, any adjustment by the Originator or any
Affiliate of the Originator or by the Servicer or any early termination,
prepayment, refinancing, consolidation or replacement of the Contract
related to such Pool Receivable,
(ii) reduced or canceled as a result of a setoff in respect of
any claim or dispute by the Obligor thereof against the Originator or any
Affiliate of the Originator (individually or as Servicer) or any other
Person (whether such claim arises out of the same or a related or an
unrelated transaction),
(iii) reduced on account of the obligation of the Originator or
an Affiliate of the Originator (individually or as Servicer) to pay to the
related Obligor any rebate or refund, or
(iv) determined by the Agent, the Servicer or the Seller to have
been less than the Unpaid Balance of such Receivable used in calculating
the Net Pool Balance for purposes of the most recent Periodic Report or Pay
Out Statement,
then, on such day, the Seller or, in the case of any adjustment by or claim
against the Servicer or any matter described in clause (iv) above, the Servicer
-----------
shall be deemed to have received a Collection of such Pool Receivable in the
amount of such reduction or cancellation or, in the case of clause (iv) above,
-----------
by the amount of the difference between the actual Unpaid Balance and the Unpaid
Balance as so reported.
(b) If on any day (i) any of the representations or warranties of the
Seller or the Servicer set forth in
15
<PAGE>
Section 6.01(l) or (p) shall not be true with respect to a Pool Receivable
- --------------- ---
(other than solely by reason of such Pool Receivable's being a Defaulted
Receivable), or (ii) when the Seller or the Servicer delivers any Periodic
Report or Pay Out Statement, any Pool Receivable the Unpaid Balance of which is
included in the computation of the Net Pool Balance therein shall not be an
Eligible Receivable, then, on such day, the Seller or the Servicer, as
applicable, shall be deemed to have received a Collection of such Pool
Receivable in the amount of the Unpaid Balance of such Pool Receivable.
SECTION 3.4 Optional Reduction of Purchaser's Investment. The Seller
--------------------------------------------
may at any time elect to cause the reduction of the Purchaser's Investment as
follows:
(a) the Seller shall give the Agent at least two Business Days' prior
written notice of such reduction (including the amount of such proposed
reduction and the proposed date on which such reduction will commence);
(b) on the proposed date of commencement of such reduction and on each
day thereafter, the Servicer shall set aside Collections and hold them in trust
for the Purchaser under clause (ii) of Section 3.01(a) until the amount so set
----------- ---------------
aside shall equal the desired amount of reduction; and
(c) the Servicer shall set aside and hold such Collections for the
benefit of the Purchaser and, on each Settlement Date and each date on which a
payment is due under clause (B) of the proviso to Section 3.01(b) with respect
---------- ------- ---------------
to any Rate Tranche, shall pay to the Agent for the benefit of the Purchaser, in
reduction of the Purchaser's Investment, the amount of such Collections so held
or, if less, the Purchaser's Tranche Investment of such Rate Tranche (it being
understood that the Purchaser's Investment shall not be deemed reduced by any
amount set aside or held pursuant to this Section 3.04 unless and until,
------------
16
<PAGE>
and then only to the extent that, such amount is finally paid to the Agent as
aforesaid);
provided that,
- --------
(i) the amount of any such reduction shall be not less than
$1,000,000 and shall be an integral multiple of $1,000,000, and the
Purchaser's Investment after giving effect to such reduction shall be not
less than $20,000,000 (unless the Purchaser's Investment shall thereby be
reduced to zero),
(ii) the Seller shall use reasonable efforts to attempt to
choose a reduction amount, and the date of commencement thereof, so that
such reduction shall commence and conclude in a single Yield Period with
respect to a Rate Tranche, and
(iii) such proposed reduction shall be applied, unless the Agent
shall consent otherwise, to the Rate Tranche with the shortest remaining
Yield Period.
SECTION 3.5 Reporting by Servicer.
---------------------
(a) On or prior to the tenth day of each Fiscal Period, the Servicer
shall prepare and forward to the Agent a Periodic Report relating to the
Purchaser's Interest as of the close of business of the Servicer on the
immediately preceding Fiscal Period End Date. In addition, if at any time the
Agent shall so request, then, within three Business Days after the later of (i)
the date of such request and (ii) such other date as the Agent may designate in
such request as the effective date of the requested report, the Servicer shall
prepare and deliver to the Agent a Periodic Report relating to the Purchaser's
Interest as of the close of business on the date of such request or such other
effective date, as applicable.
17
<PAGE>
(b) During the Pay Out Period, on the Settlement Date of each
Settlement Period for each Rate Tranche, the Servicer shall prepare and forward
to the Agent a Pay Out Statement as of the close of business of the Servicer on
such Settlement Date.
SECTION 3.6 Delivery of Deemed Collections; Collections Held in Trust.
---------------------------------------------------------
(a) Whenever the Seller or the Servicer is deemed to receive
Collections pursuant to Section 3.03, if the Net Pool Balance on such date is
------------
less than 105% of the Purchaser's Percentage of the Net Pool Balance on such
date, the Seller shall (if the Seller is deemed to receive such Collections)
forthwith deliver to the Servicer the amount of such deemed Collections, and the
Servicer shall in any event set aside and hold or distribute such Collections as
and to the same extent as if such Collections had actually been received on the
date of such delivery to or deemed receipt by the Servicer. If Collections are
then being paid to the Agent, or lock boxes or accounts directly or indirectly
owned or controlled by the Agent, the Servicer shall forthwith cause such deemed
Collections to be paid to the Agent or to such lock boxes or accounts, as
applicable.
(b) So long as the Seller or the Servicer shall hold any Collections
or deemed Collections required to be paid to the Servicer or the Agent, it shall
hold such Collections in trust and separate and apart from its own funds and
shall clearly mark its records to reflect such trust.
SECTION 3.7 Application of Collections Distributable to Seller. Unless
--------------------------------------------------
otherwise instructed by the Seller, the Servicer shall on any Business Day
allocate and apply, on behalf of the Seller, Collections distributable to the
Seller hereunder first, to the payment or provision for payment of the Seller's
operating expenses, as instructed by the Seller, second, to the payment or
provision for payment when due of accrued and unpaid interest on
18
<PAGE>
the Company Note, third, to the payment to the Originator of the purchase price
of new Pool Receivables in accordance with the Receivables Transfer Agreement,
fourth, to the payment to the Originator of principal with respect to the
Company Note up to the unpaid principal balance of the Company Note on such
date, and fifth, to the making of advances to the Originator pursuant to Section
2.8 of the Receivable Transfer Agreement. The Seller shall apply all funds
received by it under Section 1.03 in the manner and in the order of priority set
forth in clauses third, fourth and fifth above.
SECTION 3.8 Support Account.
---------------
(a) On or prior to the date of the initial Purchase hereunder, Seller
shall establish a segregated account at the Agent in the name of Seller and the
Agent, for the benefit of the Purchaser. The account shall be titled "Yesco,
Inc. - Support Account" (the "Support Account"). The Agent shall have sole
---------------
dominion and control over the Support Account and all funds therein, and Seller
shall have no right to withdraw such funds.
(b) At any time that an event described in Section 10.01(i)(y) has
-------------------
occurred and is continuing, and Seller desires to cure such event within the
applicable time frame specified in such section (or, thereafter, to cure the
related Termination Event), Seller may either (i) deposit the amount of cash
necessary to cure such event (or Termination Event) in the Support Account or
(ii) deliver to the Agent and the Purchaser a new Periodic Report as of a date
within such applicable cure period (or, if the related Termination Event has
occurred, as of a date thereafter) showing that the event described in Section
-------
10.01(i)(y) is no longer existing. If a Termination Event described in Section
- ----------- -------
10.01(i)(y) has occurred, promptly following Seller's cure of such Termination
- -----------
Event, as provided above, the Agent shall notify each rating agency then
requested by the Purchaser to provide a rating of the Commercial Paper Notes of
19
<PAGE>
the occurrence of such cure. The Agent shall withdraw all funds from the
Support Account on the next succeeding Settlement Date for the Purchaser for
application to the Purchaser's Investment.
(c) Funds on deposit in the Support Account shall be invested in
Eligible Investments at the direction of Seller, provided that such investments
--------
shall mature no later than the next occurring Settlement Date. Interest earned
on such investments shall be deposited into the Support Account.
ARTICLE IV
PAYMENT PROCEDURES; FEES AND YIELD PROTECTION
SECTION 4.1 Payments and Computations.
-------------------------
(a) All amounts to be paid or deposited by the Seller or the Servicer
to or for the account of the Purchaser or the Agent hereunder shall be paid or
deposited in accordance with the terms hereof no later than 11:00 a.m. (New York
City time) on the day when due in lawful money of the United States of America
in same day funds to such account (the "Agent's Account") as the Agent may
---------------
designate at Sakura's office at 277 Park Avenue, New York, New York 10172-0121
or at such other place in New York City as the Agent may designate; provided,
--------
however, that such account shall be maintained at all times either (x) as a
- -------
managed agency account subject to Regulation 9 of the Comptroller of the
Currency or a segregated trust account of the depository bank, or (y) at a bank
having short-term credit ratings at least as high as the credit ratings of the
Commercial Paper Notes.
(b) All computations of interest, Earned Discount, Negative Spread Fee
and any other fees hereunder shall be made on the basis of a year of 360 days
for the actual number of days (including the first day but excluding the last
day) elapsed.
20
<PAGE>
SECTION 4.2 Interest on Overdue Amounts. The Seller or Servicer, as
---------------------------
applicable, shall, to the extent permitted by law, pay to the Agent interest on
all amounts not paid or deposited when due hereunder at 2% per annum above the
--- -----
Alternate Base Rate, payable on demand, provided, however, that such interest
-------- -------
rate shall not at any time exceed the maximum rate permitted by applicable law.
SECTION 4.3 Fees. The Seller shall pay to the Agent and the Purchaser,
----
for the sole benefits and account of the Purchaser, the fees in the amounts and
at the times set forth in the fee letter agreement dated as of the date hereof
between the Agent and the Seller (as amended from time to time, the "Fee
---
Letter").
- ------
SECTION 4.4 Yield Protection.
----------------
(a) If (i) Regulation D or (ii) any Regulatory Change occurring after
the date hereof
(A) shall subject an Affected Party to any tax, duty or other
charge with respect to the Purchaser's Interest or any portion thereof, or
any obligations or right to make Purchases or Reinvestments or to provide
funding therefor, or shall change the basis of taxation of payments to the
Affected Party of any of the Purchaser's Investment or Earned Discount
owned by, owed to or funded by it or any other amounts due under this
Agreement in respect of the Purchaser's Interest or any portion thereof or
its obligations or rights, if any, to make Purchases or Reinvestments or to
provide funding therefor (except for changes in the rate of tax on the
overall net income of such Affected Party imposed by the United States of
America, by the jurisdiction in which such Affected Party's principal
executive office is located and, if such Affected Party's principal
executive office is not in the United States of
21
<PAGE>
America, by the jurisdiction where such Affected Party's principal office
in the United States is located); or
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Federal Reserve
Board, but excluding any reserve included in the determination of Earned
Discount), special deposit or similar requirement against assets of any
Affected Party, deposits or obligations with or for the account of any
Affected Party or with or for the account of any affiliate (or entity
deemed by the Federal Reserve Board to be an affiliate) of any Affected
Party, or credit extended by any Affected Party; or
(C) shall change the amount of capital maintained or required or
requested or directed to be maintained by any Affected Party; or
(D) shall impose any other condition affecting the Purchaser's
Interest or any portion thereof owned or funded by any Affected Party, or
its obligations or rights, if any, to make Purchases or Reinvestments or to
provide funding therefor; or
(E) shall change the rate for, or the manner in which the Federal
Deposit Insurance Corporation (or any successor thereto) assesses, deposit
insurance premiums or similar charges, or shall impose on any Affected
Party a requirement to maintain deposit insurance;
and the result of any of the foregoing is or would be
(x) to increase the cost to or to impose a cost on (I) an
Affected Party funding or making or maintaining any Purchases or
Reinvestments, any Liquidity Fundings under the Liquidity Funding
Agreement, or any commitment of such
22
<PAGE>
Affected Party with respect to any of the foregoing, or (II) the Agent for
continuing its or the Seller's relationship with the Purchaser,
(y) to reduce the amount of any sum received or receivable by an
Affected Party under this Agreement or any other Transaction Document, or
under the Liquidity Funding Agreement with respect thereto, or
(z) in the sole determination of such Affected Party, to reduce
the rate of return on the capital of an Affected Party as a consequence of
its obligations hereunder or arising in connection herewith to a level
below that which such Affected Party could otherwise have achieved (taking
into consideration the policies of such Affected Party with respect to
capital adequacy) by an amount deemed by such Affected Party to be
material,
then, within thirty days after demand by such Affected Party (which demand shall
be accompanied by a statement setting forth the basis of such demand), the
Seller shall pay directly to such Affected Party such additional amount or
amounts as will compensate such Affected Party for such additional or increased
cost or such reduction.
(b) Each Affected Party will promptly notify the Seller and the Agent
of any event of which it has knowledge which occurs after the date hereof and
will entitle such Affected Party to compensation pursuant to this Section 4.04;
------------
provided, however, no failure to give or delay in giving such notification shall
- -------- -------
adversely affect the rights of any Affected Party to such compensation.
(c) In determining any amount provided for or referred to in this
Section 4.04, an Affected Party may use any reasonable averaging and attribution
- ------------
methods that it (in its sole
23
<PAGE>
discretion) shall deem applicable. Any Affected Party when making a claim under
this Section 4.04 shall submit to the Seller a statement as to such increased
------------
cost or reduced return (including calculation thereof in reasonable detail),
which statement shall, in the absence of manifest error, be conclusive and
binding upon the Seller.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 Conditions Precedent to Initial Purchase. The initial
----------------------------------------
Purchase hereunder is subject to the condition precedent that the Agent shall
have received, on or before the date of such Purchase, the following, each
(unless otherwise indicated) dated (or dated as of) such date and in form and
substance satisfactory to the Agent:
(a) This Agreement, duly executed by the Seller and the Servicer;
(b) An executed copy of the Receivables Transfer Agreement,
substantially in the form of Exhibit 5.01(b), together with the closing
---------------
documents required to be delivered thereunder;
(c) Good standing certificates issued by the Secretary of State of
Nevada (in the case of the Seller) and Secretaries of State of California and
Pennsylvania (in the case of the Servicer) and dated as of recent dates
acceptable to the Agent;
(d) A certificate of the Secretary or an Assistant Secretary of each
of the Seller and the Servicer certifying:
(i) a copy of its articles or certificates of incorporation,
certified by the Secretary of State or
24
<PAGE>
other appropriate official of its state of incorporation as of a recent
date acceptable to the Agent;
(ii) a copy of its by-laws;
(iii) a copy of the resolutions of its Board of Directors,
approving this Agreement and the other Transaction Documents to be
delivered by it hereunder or pursuant hereto and the transactions
contemplated hereby and thereby; and
(iv) the names and true signatures of the officers authorized on
its behalf to sign this Agreement and the other Transaction Documents to be
delivered by it hereunder or pursuant hereto
on which certificate the Agent and the Purchaser may conclusively rely until
such time as the Agent shall receive from the Seller or the Servicer, as
applicable, a revised certificate meeting the requirements of this subsection
(d);
(e) Acknowledgment copies of proper Financing Statements (Form UCC-1),
substantially in the form attached hereto as Exhibit 5.01(e)(i) and Exhibit
------------------ -------
5.01(e)(ii) (with such modifications, if any, as may be necessary or appropriate
- -----------
to conform to the law, customary practice or standard forms of a particular
jurisdiction), filed on or prior to the date of the initial Purchase, (1) naming
the Originator as the debtor and seller of Receivables, the Seller as secured
party and purchaser and the Purchaser as assignee, and (2) the Seller as the
debtor and seller of Receivables or an undivided interest therein and the
Purchaser as the secured party and purchaser, or other, similar instruments or
documents, as may be necessary or, in the opinion of the Agent, desirable under
the UCC or any comparable law of all appropriate jurisdictions to perfect the
Seller's interest in the Pool Receivables and Related Property,
25
<PAGE>
Purchaser's Interest and the security interest granted to the Purchaser under
Article IX hereof;
- ----------
(f) A search report or reports provided in writing to the Agent by CT
Corporation, as of a recent date (or dates) acceptable to the Agent, listing all
effective financing statements that name the Seller or Yuasa as debtor and that
are filed in the jurisdictions in which filings were made pursuant to subsection
----------
(e) above and in such other jurisdictions as the Agent may reasonably request,
- ---
together with copies of such financing statements (none of which (other than the
financing statements described in subsection (e) above) shall cover any
Receivables or Contracts or interests therein or Collections or proceeds of any
thereof);
(g) Duly executed copies of Lock-Box Agreements with each of the
Lock-Box Banks, in substantially the form of Exhibit 5.01(g) or in such other
--------------
form as the Agent may approve in writing;
(h) A favorable opinion of Tucci & Tannenbaum, counsel to each of the
Seller and the Servicer (as to corporate, UCC and other matters), in
substantially the form of Exhibit 5.01(h);
---------------
(i) A favorable opinion of Tucci & Tannenbaum, counsel to the Seller
and the Servicer (as to certain bankruptcy issues), substantially in the form of
Exhibit 5.01(i);
- ---------------
(j) Such sublicenses as the Agent shall require with regard to all
programs leased by the Seller and the Servicer and used in the servicing of the
Receivables Pool;
(k) Such powers of attorney as the Agent shall reasonably request to
enable the Agent to collect all amounts due under any and all Pool Receivables,
which powers of attorney
26
<PAGE>
shall be substantially in the form of Exhibit 5.01(k) or in such other form as
---------------
the Agent may reasonably request;
(l) A Periodic Report as of the most recent Fiscal Period End Date
(in which the Purchaser's Interest and the components thereof shall be
calculated after giving effect to the initial Purchase);
(m) Evidence that the Purchaser shall have entered into the Liquidity
Funding Agreement and all conditions to the effectiveness thereof shall have
been met or duly waived by the parties thereto;
(n) Written confirmation from the rating agencies then rating the
Commercial Paper Notes that the Purchaser's execution and delivery of this
Agreement and its acquisition of the Purchaser's Interest hereunder will not
cause the ratings of the Commercial Paper Notes to be reduced or withdrawn;
(o) The Purchaser shall have received the Structuring Fee; and
(p) Such other agreements, instruments, certificates, opinions and
other documents as the Agent may reasonably request.
SECTION 5.2 Conditions Precedent to All Purchases and Reinvestments.
-------------------------------------------------------
Each Purchase (including the initial Purchase) and each Reinvestment hereunder
shall be subject to the further conditions precedent that on the date of such
Purchase or Reinvestment the following statements shall be true (and the Seller
by accepting the amount of such Purchase or by receiving the proceeds of such
Reinvestment shall be deemed to have certified that):
(a) The representations and warranties contained in Section 6.01 are
------------
correct on and as of such day as though made on
27
<PAGE>
and as of such day and shall be deemed to have been made on such day,
(b) No event has occurred and is continuing, or would result from
such Purchase or Reinvestment, that constitutes a Termination Event or Unmatured
Termination Event,
(c) In the case of a Reinvestment, the amount of the Reinvestment
will not exceed the amount available therefor under Section 3.01, and in the
------------
case of a Purchase, after giving effect thereto, the Purchaser's Investment will
not exceed the Maximum Investment and the Unadjusted Purchaser's Percentage will
not exceed the Maximum Percentage, and
(d) The Commitment Termination Date shall not have occurred;
provided, however, the absence of the occurrence and continuance of an Unmatured
- -------- -------
Termination Event shall not be a condition precedent to any Reinvestment or to
any Purchase on any day which does not cause the Purchaser's Investment, after
giving effect to such Purchase, to exceed the Purchaser's Investment as of the
opening of business on such day.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 Representations and Warranties of the Seller and the
----------------------------------------------------
Servicer. Each of the Seller and the Servicer severally represents and warrants
- --------
as follows:
(a) Organization and Good Standing. It has been duly organized and is
------------------------------
validly existing as a corporation in good standing under the laws of the State
of Nevada (in the case of the Seller) or the State of California (in the case of
the
28
<PAGE>
Servicer), with power and authority to own its properties and to conduct its
business as such properties are presently owned and such business is presently
conducted, and had at all relevant times, and now has, all necessary power,
authority, and legal right to acquire and own the Pool Receivables.
(b) Due Qualification. It is duly qualified to do business as a
-----------------
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business requires such qualification, licenses or
approvals.
(c) Power and Authority; Due Authorization. It (i) has all necessary
--------------------------------------
power, authority and legal right to execute and deliver this Agreement and the
other Transaction Documents to which it is a party, to perform its obligations
hereunder and thereunder, and (in the case of the Seller) to sell and assign the
Purchaser's Interest on the terms and conditions herein provided, and (ii) has
duly authorized by all necessary corporate action the execution, delivery and
performance of this Agreement and the other Transaction Documents to which it is
a party and (in the case of the Seller) the sale and assignment of the
Purchaser's Interest on the terms and conditions herein provided.
(d) Valid Sale; Binding Obligations. In the case of the Seller, this
-------------------------------
Agreement constitutes a valid sale, transfer, and assignment of the Purchaser's
Interest to the Purchaser, enforceable against creditors of, and purchasers
from, the Seller; and in the case of each of the Seller and the Servicer, this
Agreement constitutes, and each other Transaction Document to be signed by such
Person when duly executed and delivered will constitute, a legal, valid and
binding obligation of such Person, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement
29
<PAGE>
of creditors' rights generally and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding in equity or at
law.
(e) No Violation. The execution, delivery and performance by such
------------
Person of this Agreement and the other Transaction Documents to which it is a
party and the consummation of the transactions contemplated hereby and thereby
will not (i) conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time or both) a
default under, its articles of incorporation or by-laws, or any indenture, loan
agreement, receivables transfer agreement, mortgage, deed of trust, or other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture, loan
agreement, receivables transfer agreement, mortgage, deed of trust, or other
agreement or instrument, other than this Agreement, or (iii) violate any law or
any order, rule, or regulation applicable to it of any court or of any federal
or state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Seller or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending, or threatened, before, and there has been no injunction, decree or
other decision issued or made by, any court, regulatory body, administrative
agency, or other tribunal or governmental agency or instrumentality (i)
asserting the invalidity of this Agreement or any other Transaction Document,
(ii) seeking to prevent the sale and assignment of the Purchaser's Interest or
any portion thereof or the consummation of any of the other transactions
contemplated by this Agreement or any other Transaction Document, (iii) seeking
any determination or ruling that might have a Material Adverse Effect
30
<PAGE>
or (iv) seeking to adversely affect the federal income tax attributes of the
Purchases hereunder.
(g) Bulk Sales Act. No transaction contemplated hereby or by any
--------------
Transaction Document to which such Person is a Party requires compliance with
any bulk sales act or similar law.
(h) Government Approvals. No authorization or approval or other
--------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
such Person of this Agreement or any other Transaction Document, except for the
------
filing of the UCC Financing Statements referred to in Article V, all of which,
---------
at the time required in Article V, shall have been duly made and shall be in
---------
full force and effect.
(i) Financial Condition. (x) The audited consolidated balance sheets
-------------------
of Yuasa and its consolidated subsidiaries as at March 31, 1997, and the related
statements of income, cash flows and shareholders' equity of Yuasa and its
consolidated subsidiaries for the fiscal year then ended, certified by Price
Waterhouse L.L.P., independent certified public accountants, and the
consolidated balance sheets of Yuasa and its consolidated subsidiaries as at
September 30, 1997, and the related statements of income, cash flows and
shareholders' equity of Yuasa and its consolidated subsidiaries for the periods
then ended, copies of each of which have been furnished to the Agent, fairly
present the consolidated financial condition, business, business prospects and
operations of Yuasa and its consolidated subsidiaries as at such dates and the
consolidated results of the operations of Yuasa and its consolidated
subsidiaries for the period ended on such dates, all in accordance with
generally accepted accounting principles consistently applied, and (y) since
March 31, 1997 there has been no material adverse change in any such condition,
business, business prospects or operations except as described in Schedule
--------
6.01(i).
- -------
31
<PAGE>
(j) Litigation. No injunction, decree or other decision has been
----------
issued or made by any court, governmental agency or instrumentality thereof that
prevents, and no threat by any person has been made to attempt to obtain any
such decision that would prevent such Person from conducting a significant part
of its business operations, except as described in Schedule 6.01(j).
----------------
(k) Margin Regulations. In the case of the Seller, the use of all
------------------
funds obtained by the Seller under this Agreement will not conflict with or
contravene any of Regulations G, T, U and X promulgated by the Board of
Governors of the Federal Reserve System from time to time.
(l) Quality of Title. In the case of the Seller, (i) each Pool
----------------
Receivable, together with the Related Property, has been sold or contributed by
the Originator to the Seller pursuant to the Receivables Transfer Agreement, and
is owned by the Seller free and clear of any Lien (other than any Lien arising
solely as the result of any action taken by the Purchaser (or any assignee
thereof) or by the Agent); (ii) when the Purchaser makes a Purchase, it shall
have acquired and shall at all times thereafter continuously maintain a valid
and perfected first priority undivided percentage ownership interest, in a
percentage equal to the Purchaser's Percentage in effect from time to time, in
each Pool Receivable and in the Related Property, free and clear of any Lien
(other than any Lien arising solely as the result of any action taken by the
Purchaser (or any assignee thereof) or by the Agent); and (iii) no effective
financing statement or other instrument similar in effect covering any Pool
Receivable, any interest therein or any of the Related Property is on file in
any recording office except such as may be filed (A) in favor of the Originator
or the Seller in accordance with the Contracts or in respect of the assignment
thereof by the Originator to the Seller, (B) in favor of the Purchaser or the
Agent in accordance with this Agreement or in connection with any
32
<PAGE>
Lien arising solely as the result of any action taken by the Purchaser (or any
assignee thereof) or by the Agent, or (C) in favor of the Collateral Agent.
(m) Accurate Reports. No Periodic Report or Pay Out Statement (if
----------------
prepared by the Seller or the Servicer, or to the extent that information
contained therein was supplied by the Seller or the Servicer) or other
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Seller or the Servicer to the Agent or the
Purchaser in connection with this Agreement was or will be inaccurate in any
material respect as of the date it was or will be dated or (except as otherwise
disclosed to the Agent or the Purchaser, as the case may be, at such time) as of
the date so furnished, or contained or will contain any material misstatement of
fact or omitted or will omit to state a material fact or any fact necessary to
make the statements contained therein not materially misleading.
(n) Offices. The respective chief place of business and chief
-------
executive office of each of the Seller and the Servicer are located at the
address of the Seller and the Servicer referred to in Section 14.02, and the
-------------
offices where each of the Seller and the Servicer keep all their books, records
and documents evidencing or included in the Pool Receivables and Related
Property are located at the addresses specified in Schedule 6.01(n) (or at such
----------------
other locations, notified to the Agent in accordance with Section 7.01(f), in
---------------
jurisdictions where all action required by Section 8.05 has been taken and
------------
completed).
(o) Lock-Box Accounts. The names and addresses of all the Lock-Box
-----------------
Banks, together with the account numbers of the Lock-Box Accounts of the Seller
at such Lock-Box Banks, and the addresses and numbers of all Lock Boxes, are
specified in
33
<PAGE>
Schedule 6.01(o) (or have been notified to the Agent in accordance with Section
- ---------------- -------
7.03(d)).
- -------
(p) Eligible Receivables. Each Receivable included in the Net Pool
--------------------
Balance as an Eligible Receivable on the date of any Purchase or Reinvestment
shall be an Eligible Receivable on such date.
(q) Servicing Programs. Any and all programs used by the Servicer in
------------------
the servicing of the Receivables Pool are owned by it and not leased or
licensed. No license or approval is required for the Agent's use of any program
used by the Servicer in the administration of the Receivables, other than those
which have been obtained and are in full force and effect.
(r) Investment Company Act. The Seller is not, and is not controlled
----------------------
by, an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended.
(s) Solvency. After giving effect to the incurrence of its
--------
obligations under the Transaction Documents, the Seller is not insolvent, does
not have unreasonably small capital with which to carry on its business and is
able to pay its debts generally as they become due and payable, and its
liabilities do not exceed its assets.
(t) Receivables Evidenced by Instruments and Chattel Paper. In the
------------------------------------------------------
case of the Seller, none of the Receivables is evidenced by any "instrument" or
"chattel paper" (as defined in the applicable UCC).
34
<PAGE>
ARTICLE VII
GENERAL COVENANTS OF SELLER AND SERVICER
SECTION 7.1 Affirmative Covenants of the Seller and the Servicer.
----------------------------------------------------
From the date hereof until the Final Pay Out Date, each of the Seller and the
Servicer severally agrees that it will, unless the Agent shall otherwise consent
in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with
-------------------------
all laws, rules, regulations and orders applicable to it, including those with
respect to the Pool Receivables and related Contracts.
(b) Preservation of Corporate Existence. Preserve and maintain its
-----------------------------------
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and qualification would
have a Material Adverse Effect.
(c) Audits. (i) At any time and from time to time during regular
------
business hours, permit the Agent, or its agents or representatives, (A) to
examine and make copies of and abstracts from all books, records and documents
(including computer tapes and disks) in the possession or under the control of
such Person relating to Pool Receivables, including the related Contracts and
purchase orders and other agreements, and (B) to visit the offices and
properties of such Person for the purpose of examining such materials and to
discuss matters relating to Pool Receivables or such Person's performance
hereunder with any of the officers or employees of such Person having knowledge
of such matters and with its independent certified public accountants; and (ii)
without limiting the provisions of clause (i) next above, from time to time on
----------
request of the Agent given not more
35
<PAGE>
than once in each calendar year so long as no Termination Event or Unmatured
Termination Event shall have occurred and be continuing, permit certified public
accountants or other auditors acceptable to the Agent to conduct, at such
Person's expense, a review of such Person's books and records with respect to
the Pool Receivables.
(d) Keeping of Records and Books of Account; Software. Maintain and
-------------------------------------------------
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Pool Receivables in the
event of the destruction of the originals thereof), and keep and maintain, all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Pool Receivables (including, without
limitation, records adequate to permit the daily identification of each new Pool
Receivable and all Collections of and adjustments to each existing Pool
Receivable) and make arrangements reasonably satisfactory to the Agent to ensure
the Agent's legal right and authority, and the Agent's access and ability, to
utilize any proprietary software employed in servicing the Pool Receivables.
(e) Performance and Compliance with Receivables and Contracts. At its
---------------------------------------------------------
expense timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by it under the Contracts
related to the Pool Receivables and all purchase orders and other agreements
related to such Pool Receivables.
(f) Location of Records. Keep its chief place of business and chief
-------------------
executive office, and the offices where it keeps its records concerning the Pool
Receivables, all related Contracts and all purchase orders and other agreements
related to such Pool Receivables (and all original documents relating thereto),
at the address(es) of the Seller or the Servicer, as applicable, referred to in
Section 6.01(n) or, upon 30 days'
- ---------------
36
<PAGE>
prior written notice to the Agent, at such other locations in jurisdictions
where all action required by Section 8.05 shall have been taken and completed.
------------
(g) Credit and Collection Policies. Comply in all material respects
------------------------------
with its Credit and Collection Policy in regard to each Pool Receivable and the
related Contract.
(h) Collections. Instruct all Obligors to cause all Collections of
-----------
Pool Receivables to be sent or deposited directly to a Lock Box or a Lock-Box
Account and deposit all Collections received (including Collections received in
a Lock Box) into a Lock-Box Account within one Business Day after such receipt.
(i) Transaction Documents. Perform and comply in all material
---------------------
respects with all of its covenants and agreements set forth in the Receivables
Transfer Agreement and the other Transaction Documents to which it is a party,
and, in the case of the Seller, enforce the covenants and agreements of the
Originator under the Receivables Transfer Agreement and the other Transaction
Documents to which it is a party, unless instructed otherwise by the Agent.
SECTION 7.2 Reporting Requirements of the Seller and the Servicer.
-----------------------------------------------------
From the date hereof until the Final Pay Out Date, the Seller and the Servicer,
as applicable, each severally agrees that it will, unless the Agent shall
otherwise consent in writing, furnish to the Agent:
(a) Semiannual Financial Statements. As soon as available and in any
-------------------------------
event within 30 days after the end of each of the first six Fiscal Periods of
each fiscal year of the Seller and the Servicer, copies of the financial
statements of each of the Seller, the Servicer and its respective Subsidiaries,
prepared on a consolidated basis and on a consolidating basis, in each case in
conformity with generally accepted accounting
37
<PAGE>
principles, duly certified by the chief financial officer of the Seller and the
Servicer, as the case may be; together with a certificate from such officer
containing a computation of, and showing compliance with, the financial
restrictions contained in Section 7.03;
------- ----
(b) Annual Financial Statements. As soon as available and in any
---------------------------
event within 120 days after the end of each fiscal year of the Seller and the
Servicer, copies of the financial statements of each of the Seller, the Servicer
and its respective Subsidiaries prepared on a consolidated basis and on a
consolidating basis, in each case in conformity with generally accepted
accounting principles, duly certified by independent certified public
accountants of recognized standing selected by the Seller and the Servicer, as
the case may be; together with a certificate from the chief financial officer of
the Seller and the Servicer containing a computation of, and showing compliance
with, the financial restrictions contained in Section 7.03;
------------
(c) Reports to Holders and Exchanges. Copies of any reports which the
--------------------------------
Seller or the Servicer, as applicable, sends to any of its respective security
holders, and any reports or registration statements that the Seller or the
Servicer, as applicable, files with the Securities and Exchange Commission or
any national securities exchange other than registration statements relating to
employee benefit plans and to registrations of securities for selling security
holders;
(d) ERISA. Promptly after the filing or receiving thereof, copies of
-----
all reports and notices with respect to any Reportable Event defined in Article
IV of ERISA which the Seller or the Servicer, as applicable, files under ERISA
with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or
the U.S. Department of Labor or which the Seller or the Servicer, as applicable,
receives from the Pension Benefit Guaranty Corporation;
38
<PAGE>
(e) Termination Events. As soon as possible and in any event within
------------------
five days after the occurrence of each Termination Event and each Unmatured
Termination Event, a written statement of the chief financial officer or chief
accounting officer of the Seller or the Servicer, as the case may be, setting
forth details of such event and the action that the Seller or the Servicer, as
applicable, proposes to take with respect thereto;
(f) Litigation. As soon as possible and in any event within three
----------
Business Days of the Seller's or the Servicer's knowledge thereof, notice of (i)
any litigation, investigation or proceeding threatened against the Seller or the
Servicer, as the case may be, which may exist at any time which could have a
Material Adverse Effect and (ii) any material adverse development in previously
disclosed litigation;
(g) Reports under Receivables Transfer Agreement. Promptly upon the
--------------------------------------------
Agent's request, copies of any reports which the Originator has furnished to the
Seller under the Receivables Transfer Agreement and which has not already been
furnished directly to the Agent; and
(h) Other. Promptly, from time to time, such other information,
-----
documents, records or reports respecting the Receivables or the condition or
operations, financial or otherwise, of the Seller or the Servicer as the Agent
may from time to time reasonably request in order to protect the interests of
the Agent or the Purchaser under or as contemplated by this Agreement.
SECTION 7.3 Negative Covenants of the Seller and the Servicer. From
-------------------------------------------------
the date hereof until the Final Pay Out Date, each of the Seller and the
Servicer severally agrees that it will not, without the prior written consent of
the Agent:
39
<PAGE>
(a) Sales, Liens, Etc. Except as otherwise provided herein, sell,
-----------------
assign (by operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist any Lien upon or with respect to, any Pool Receivable or Related
Property, or any interest therein, or any lock-box or account to which any
Collections of any Pool Receivable are sent, or any right to receive income from
or in respect of any of the foregoing or, in the case of the Servicer, assert
any interest in the Receivables, except as Servicer; provided, however, that the
-------- -------
Seller may assign to the Originator any Receivable solely for the purpose of
collection of such Receivable.
(b) Extension or Amendment of Receivables. Except as otherwise
-------------------------------------
permitted in Section 8.02, extend, amend, terminate or otherwise modify the
------------
terms of any Pool Receivable, or amend, modify, terminate or waive any term or
condition of any Contract related thereto.
(c) Change in Business or Credit and Collection Policy. Make any
--------------------------------------------------
change in the character of its business or in the Credit and Collection Policy,
which change would, in either case, impair the collectibility of any Pool
Receivable, relax any credit criteria applied to new or continuing Obligors or
otherwise affect the interests, rights or remedies of the Purchaser under this
Agreement or any other Transaction Document, or, in the case of the Originator,
make any material change in its primary business.
(d) Change in Payment Instructions to Obligors. Add or terminate any
------------------------------------------
bank as a Lock-Box Bank from those listed in Schedule 6.01(o) or make any change
----------------
in its instructions to Obligors regarding payments to be made to the Seller or
the Servicer or payments to be made to any Lock Box or Lock- Box Account, unless
the Agent shall have received (i) notice of such addition, termination or
change, and (ii) duly executed copies of Lock-Box Agreements with each new Lock-
Box Bank (which shall be
40
<PAGE>
in form and substance acceptable to the Agent), and (iii) the Agent previously
shall have consented in writing to such addition, termination or change (which
consent, in the case of any such addition or termination, shall not be
unreasonably withheld by the Agent).
(e) Deposits to Lock-Box Accounts. Deposit or transfer any
-----------------------------
Collections received in any Lock Box or otherwise to any account other than a
Lock-Box Account, or credit, or cause or permit to be deposited or credited, to
any Lock-Box Account any funds other than Collections on Pool Receivables.
(f) Mergers, Acquisitions, Sales, etc. Be a party to any merger or
---------------------------------
consolidation, or purchase or otherwise acquire all or substantially all of the
assets or any stock of any class of, or any partnership or joint venture
interest in, any other Person, or, except in the ordinary course of its
business, sell, transfer, convey or lease all or any substantial part of its
assets, or permit any Subsidiary to do any of the foregoing, except, in the case
of the Servicer, for any such merger or consolidation, sale, transfer,
conveyance, lease or assignment of or by any wholly-owned Subsidiary (other than
the Seller) into the Servicer or into, with or to any other wholly-owned
Subsidiary and any such purchase or other acquisition by the Servicer or any
wholly-owned Subsidiary of the assets or stock of any wholly-owned Subsidiary
(other than the Seller).
(g) Minimum Working Capital. In the case of the Servicer, permit the
-----------------------
excess of its consolidated Current Assets over its consolidated Current
Liabilities to be less than $3,000,000.
(h) Minimum Net Worth. Permit its consolidated tangible net worth (as
-----------------
hereinafter defined) to be less than $2,500,000 (in the case of the Seller) or
$35,000,000 (in the case of the Servicer). Consolidated tangible net worth of a
41
<PAGE>
Person shall mean the consolidated net worth of such Person and its Subsidiaries
including, without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks and brand names.
(i) Minimum Current Ratio. In the case of the Servicer, permit its
---------------------
consolidated current ratio (as hereinafter defined) to be less than 1.0.
Consolidated current ratio of a Person shall mean the ratio of (x) consolidated
Current Assets of such Person and its Subsidiaries to (y) consolidated Current
Liabilities of such Person and its Subsidiaries.
(j) Incurrence of Indebtedness. In the case of the Seller, incur or
--------------------------
permit to exist any indebtedness or liability on account of deposits or advances
or for borrowed money or for the deferred purchase price of any property or
services, except (i) indebtedness of the Seller to the Originator in accordance
with the Receivables Transfer Agreement and (ii) current accounts payable
arising in the ordinary course of business.
(k) Restricted Payments. In the case of the Seller, purchase or
-------------------
redeem any shares of the capital stock of the Seller, declare or pay any
dividends thereon (other than stock dividends), make any distribution to
stockholders, make any advance to the Originator pursuant to Section 2.8 of the
-----------
Receivables Transfer Agreement, make any payment of principal or interest on the
Company Note or set aside any funds for any such purpose, or prepay, purchase or
redeem any subordinated indebtedness of the Seller, except for payments to the
Originator in accordance with the Receivables Transfer Agreement other than
advances made pursuant to Section 2.8 thereof or payments of principal or
-----------
interest on the Company Note; provided, however, the Seller may pay dividends
-------- -------
out of its capital surplus out of funds that do not represent the Purchaser's
Share of any Collections or deemed Collections (prior to any Reinvestment
thereof) and may make payments of principal or interest on the Company Note and
42
<PAGE>
subject to Section 2.8 of the Receivables Transfer Agreement, the Seller may
-----------
make advances to the Originator, if, in each case, both before and after giving
effect thereto, no Termination Event or Unmatured Termination Event (including
any violation of the covenants set forth in Sections 7.03(g), (h) and (i)
---------------- -- ---
hereof) or Liquidity Default (as defined in the Liquidity Funding Agreement)
under Section 9.01(k) of the Liquidity Funding Agreement shall have occurred and
---------------
be continuing.
(l) Investments, Etc. In the case of the Seller, except as
----------------
contemplated in the Receivables Transfer Agreement in connection with the
Seller's purchases of Receivables and Related Property from the Originator, (i)
make, incur or suffer to exist an investment in or equity contribution to, any
Person; (ii) make any loan or advance to any Person other than for reasonable
and customary operating expenses and advances to the Originator in accordance
with the Receivables Transfer Agreement; or (iii) create any direct or indirect
Subsidiary or otherwise acquire direct or indirect ownership of any equity
interests in any other Person.
(m) Change in Name. In the case of the Seller, change its corporate
--------------
name or the name under or by which it does business, or permit the Originator to
change its corporate name or the name under or by which it does business, unless
the Seller shall have given the Servicer and the Agent at least 30 days' prior
written notice thereof and unless, prior to any such change in name, the Seller
or the Originator shall have filed (or shall have caused to be filed) such
financing statements or amendments as the Servicer or the Agent determines may
be necessary to continue the perfection of the Purchaser's interest in the
Receivables and Related Property.
(n) Amendment of Certificate of Incorporation; Change in Seller's
-------------------------------------------------------------
Business. In the case of the Seller, amend its
- --------
43
<PAGE>
certificate of incorporation or bylaws, or engage in any business other than as
contemplated by the Transaction Documents.
(o) Negative Pledges. Enter into or assume any agreement (other than
----------------
this Agreement and the other Transaction Documents) prohibiting the creation or
assumption of any Lien upon any Receivables or Related Property, whether now
owned or hereafter acquired by the Seller, as contemplated by the Transaction
Documents, or otherwise prohibiting or restricting any transactions contemplated
hereby or by the other Transaction Documents.
(p) Other Agreements. Amend, modify or terminate the Receivables
----------------
Transfer Agreement.
SECTION 7.4 Separate Corporate Existence of Seller. The Seller and
--------------------------------------
the Servicer each hereby acknowledges that the Purchaser and the Agent are
entering into the transactions contemplated hereby in reliance upon the Seller's
identity as a legal entity separate from the Originator (individually and as
Servicer) and its Affiliates. Therefore, the Seller and the Servicer each will
take such actions as shall be required in order that:
(a) The Seller's operating expenses will not be paid by the
Originator or any other Affiliate of the Seller;
(b) The Seller will have its own stationery and bank checks and, if
it uses premises leased, owned or occupied by the Originator or any of its other
Affiliates, its portion of such premises will be defined and separately
identified and it will pay the Originator or such Affiliate, as applicable,
reasonable compensation for the use of such premises;
44
<PAGE>
(c) The books and records of the Seller will be maintained separately
from those of each of the Originator and any other Affiliate of the Seller;
(d) Any financial reports required of the Seller will comply with
generally accepted accounting principles and are issued separately from, but may
be consolidated with, any reports prepared for any of its Affiliates;
(e) The Seller's assets will be maintained in a manner that
facilitates their identification and segregation from those of the Originator
and any other Affiliates;
(f) Each Affiliate of the Seller will strictly observe corporate
formalities in its dealings with the Seller, and the Seller will strictly
observe corporate formalities in its dealings with any of its Affiliates, and
funds or other assets of the Seller will not be commingled with those of any of
its Affiliates;
(g) No Affiliate of the Seller will maintain joint bank accounts with
the Seller or other depository accounts with the Seller to which any such
Affiliate (other than in its capacity as the Servicer hereunder or under the
Receivables Transfer Agreement) has independent access, or will otherwise
commingle its funds with those of the Seller;
(h) No Affiliate of the Seller shall, directly or indirectly, name
the Seller or enter into any agreement to name the Seller as a direct or
contingent beneficiary or loss payee on any insurance policy covering the
property of such Affiliate or any other Affiliate of the Seller; it being
understood and agreed that the Seller may be named as a beneficiary or loss
payee under any umbrella insurance policy covering the property of the
Originator and its Subsidiaries; provided that the Seller shall
45
<PAGE>
reimburse the Originator for a reasonably allocated portion of the insurance
premiums;
(i) Each Affiliate of the Seller will maintain arm's-length
relationships with the Seller, and each Affiliate of the Seller that renders or
otherwise furnishes services or merchandise to the Seller will be compensated by
the Seller at market rates for such services or merchandise; and
(j) No Affiliate of the Seller will be, nor will it hold itself out
to be, responsible for the debts of the Seller or the decisions or actions in
respect of the daily business and affairs of the Seller, and the Seller will not
be, nor will it hold itself out to be, responsible for the debts of any of its
Affiliates or the decisions or actions in respect of the daily business and
affairs of any of its Affiliates.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.1 Designation of Servicer.
-----------------------
(a) Yuasa as Initial Servicer. The servicing, administering and
-------------------------
collection of the Pool Receivables shall be conducted by the Person designated
as the servicer hereunder (the "Servicer") from time to time in accordance with
--------
this Section 8.01. Until the Agent gives to the Seller a notice designating a
------------
new Servicer (as provided in Section 8.01(b)), Yuasa is hereby designated as,
---------------
and hereby agrees to perform the duties and obligations of, the Servicer
pursuant to the terms hereof.
(b) Designation of New Servicer. Upon the Servicer's receipt of a
---------------------------
notice from the Agent of the Agent's designation of a new Servicer, the Servicer
agrees that it will terminate its
46
<PAGE>
activities hereunder in a manner that the Agent believes will facilitate the
transition of the performance of such activities to the new Servicer, and the
Agent (or, its designee) shall assume each and all of the Servicer's said
obligations to service and administer such Receivables, on the terms and subject
to the conditions herein set forth, and the Servicer shall use its best efforts
to assist the Agent (or its designee) in assuming such obligations. The Agent
agrees not to give such notice until after the occurrence of (i) any Termination
Event, (ii) any default by the Servicer of the type described in Section
-------
10.01(a) (whether or not the Originator or an Affiliate of the Originator is the
- --------
Servicer) or any other material Unmatured Termination Event, or (iii) any event
which, in the reasonable opinion of the Agent, could have a material adverse
effect on the Servicer's ability to perform its obligations hereunder, in which
case such notice may be given at any time in the Agent's discretion.
(c) Subcontracts. The Servicer may, with the prior consent of the
------------
Agent, subcontract with any other person for servicing, administering or
collecting the Pool Receivables; provided that the Servicer shall remain liable
--------
for the performance of the duties and obligations of the Servicer pursuant to
the terms hereof; and provided, further, that any funds received by any
-------- -------
subcontractor pursuant to the subcontract shall be deemed to have been received
by the Servicer.
SECTION 8.2 Duties of Servicer.
------------------
(a) Appointment; Duties in General. Each of the Seller, the Purchaser
------------------------------
and the Agent hereby appoints as its agent the Servicer, as from time to time
designated pursuant to Section 8.01, (i) to enforce its rights and interests in
------------
and under the Pool Receivables, the Contracts and other Related Property, (ii)
to take or cause to be taken all such actions as may be necessary or advisable
to collect each Pool Receivable from time to time, all in accordance with
applicable laws, rules
47
<PAGE>
and regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy, and (iii) to take such other actions and exercise
such other powers on behalf of the Purchaser and the Agent under this Agreement
and the Receivables Transfer Agreement as are delegated to the Servicer by the
terms hereof and thereof.
(b) Allocation of Collections; Segregation. The Servicer shall set
--------------------------------------
aside and hold in trust for the account of the Seller and the Purchaser their
respective allocable shares of the Collections of Pool Receivables in accordance
with Sections 3.01, 3.02 and 3.06, but shall not be required (unless otherwise
------------- ---- ----
requested by the Agent) to segregate the funds constituting such portions of
such Collections prior to the remittance thereof in accordance with said
Sections. If instructed by the Agent, the Servicer shall segregate and deposit
with a bank designated by the Agent such allocable shares of Collections of Pool
Receivables, set aside for the Purchaser and any assignee from the Purchaser of
the Purchaser's Interest (or any portion thereof), on the first Business Day
following receipt by the Servicer of such Collections in immediately available
funds.
(c) Modification of Receivables. So long as no Termination Event or
---------------------------
Unmatured Termination Event shall have occurred and be continuing (or would
result from such action), the Originator, while it is Servicer, may, to the
extent such action is in accordance with the Credit and Collection Policy, (i)
extend the maturity or adjust the Unpaid Balance of any Defaulted Receivable as
the Servicer may determine to be appropriate to maximize Collections thereof;
provided that, no such extension shall be for more than ten days and, after
- -------- ----
giving effect to such extension of maturity or such adjustment, the Unadjusted
Purchaser's Percentage will not exceed the Maximum Percentage, and (ii) adjust
the Unpaid Balance of any Receivable to reflect the reductions or cancellations
described in Section 3.03(a).
---------------
48
<PAGE>
(d) Documents and Records. The Seller shall deliver to the Servicer,
---------------------
and the Servicer shall hold in trust for the Seller and the Purchaser in
accordance with their respective interests, all documents, instruments and
records (including, without limitation, computer tapes or disks) that evidence
or relate to Pool Receivables.
(e) Power of Attorney. The Seller hereby grants to the Servicer an
-----------------
irrevocable power of attorney, with full power of substitution, coupled with an
interest, to take in the name of the Seller all steps which are necessary or
advisable to endorse, negotiate or otherwise realize on any writing or other
right of any kind held or transmitted by the Seller or transmitted or received
by the Purchaser (whether or not from the Seller) in connection with any
Receivable.
(f) Certain Duties to the Seller. The Servicer shall, as soon as
----------------------------
practicable following receipt, turn over to the Seller (i) that portion of
Collections of Pool Receivables representing its undivided interest therein,
less, the sum of (A) in the event the Originator is no longer the Servicer, all
reasonable and appropriate out-of-pocket costs and expenses of the Servicer of
servicing, collecting and administering the Pool Receivables to the extent not
covered by the Servicer's Fee received by it and (B) any amounts, other than
Purchaser's Investment and Earned Discount, then due to the Purchaser or the
Agent, and (ii) the collections of any receivable which is not a Pool
Receivable. The Servicer shall, at the Seller's expense, as soon as practicable
upon demand, deliver to the Seller all documents, instruments and records in its
possession that evidence or relate to Receivables of the Seller other than Pool
Receivables, and copies of documents, instruments and records in its possession
that evidence or relate to Pool Receivables.
(g) Termination. The Servicer's authorization under this Agreement
-----------
shall terminate on the Final Pay Out Date.
49
<PAGE>
SECTION 8.3 Rights of the Agent.
-------------------
(a) Notice to Obligors. At any time the Agent may notify the Obligors
------------------
of Pool Receivables, or any of them, of the ownership of the Purchaser's
Interest by the Purchaser.
(b) Notice to Lock-Box Banks. The Agent is hereby authorized, at any
------------------------
time when a Termination Event or an Unmatured Termination Event shall have
occurred, (i) to give notice to the Lock-Box Banks, as provided in the Lock-Box
Agreements, of the transfer to the Agent of dominion and control over the Lock
Boxes and the Lock-Box Accounts to which the Obligors of Pool Receivables make
payments and the termination of the Servicer's authority with respect thereto,
and (ii) to notify, or require the Servicer to notify, the Obligors to send
their payments to a lock box located at Sakura or another bank approved by the
Agent, under the dominion and control of the Agent. The Seller hereby transfers
to the Agent, effective when the Agent shall give notice to the Lock-Box Banks
as provided in the Lock-Box Agreements, the exclusive dominion and control over
such Lock Boxes and Lock-Box Accounts, and shall take any further action that
the Agent may reasonably request to effect such transfer.
(c) Rights on Designation of New Servicer. At any time following the
-------------------------------------
designation of a Servicer other than the Originator pursuant to Section 8.01:
------------
(i) The Agent may direct the Obligors of Pool Receivables, or
any of them, to pay all amounts payable under any Pool Receivable directly
to the Agent or its designee.
(ii) The Seller and Yuasa shall, at the Agent's request and at
Yuasa's expense, give notice of such ownership to each said Obligor and
direct that payments be made directly to the Agent or its designee.
50
<PAGE>
(iii) The Seller and Yuasa shall, at the Agent's request, (A)
assemble all of the documents, instruments and other records (including,
without limitation, computer programs, tapes and disks) which evidence the
Pool Receivables and Related Property, or which are otherwise necessary or
desirable to collect such Pool Receivables, and make the same available to
the Agent at a place selected by the Agent or its designee, and (B)
segregate all cash, checks and other instruments received by it from time
to time constituting Collections of Pool Receivables in a manner acceptable
to the Agent and shall, promptly upon receipt, remit all such cash, checks
and instruments, duly endorsed or with duly executed instruments of
transfer, to the Agent or its designee.
(d) Authorization and Power of Attorney. Each of Yuasa, the Seller
-----------------------------------
and the Purchaser hereby authorizes the Agent and hereby appoints the Agent as
its attorney-in-fact (which appointment is coupled with an interest and is
irrevocable), from time to time upon and after the designation of a successor
Servicer in accordance with Section 8.01, to take any and all steps in Yuasa's
------------
or the Seller's name and on behalf of Yuasa, the Seller and the Purchaser which
are necessary or desirable, in the determination of the Agent, to collect all
amounts due under any and all Pool Receivables, including, without limitation,
endorsing Yuasa's or the Seller's name on checks and other instruments
representing Collections and enforcing such Pool Receivables and the related
Contracts.
SECTION 8.4 Responsibilities of Seller and the Servicer. Anything
-------------------------------------------
herein to the contrary notwithstanding:
(a) The Seller and the Servicer shall perform all of their respective
obligations under the Contracts related to the Pool Receivables and under the
related purchase orders and other agreements to the same extent as if the
Purchaser's Interest had
51
<PAGE>
not been sold hereunder and the exercise by the Agent of its rights hereunder
shall not relieve the Seller from such obligations.
(b) Neither the Agent nor the Purchaser shall have any obligation or
liability with respect to any Pool Receivables, Contracts related thereto or any
other related purchase orders or other agreements, nor shall any of them be
obligated to perform any of the obligations of the Originator or the Seller
thereunder.
SECTION 8.5 Further Action Evidencing Purchases.
-----------------------------------
(a) The Seller and the Servicer each severally agrees that from time
to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action necessary, or that the
Agent may reasonably request, in order to perfect, protect or more fully
evidence the Purchases hereunder and the resulting Purchaser's Interest, or to
enable the Purchaser or the Agent to exercise or enforce any of their respective
rights hereunder or under the other Transaction Documents. Without limiting the
generality of the foregoing, the Seller and the Servicer will upon the request
of the Agent:
(i) execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate;
(ii) mark conspicuously each Contract evidencing each Pool
Receivable with a legend, acceptable to the Agent, evidencing the sale of
the Purchaser's Interest; and
(iii) mark its master data processing records evidencing such
Pool Receivables and related Contracts with such legend.
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(b) The Seller hereby authorizes the Agent to file in the name of the
Seller, to the extent permitted by applicable law, one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Pool Receivables and Related Property now existing
or hereafter arising. If the Seller fails to perform any of its agreements or
obligations under this Agreement, the Agent may (but shall not be required to)
itself perform, or cause performance of, such agreement or obligation, and the
expenses of the Agent incurred in connection therewith shall be payable by the
Seller as provided in Section 13.01.
-------------
(c) Without limiting the generality of subsection (a), the Seller
--------------
will, not earlier than six (6) months and not later than three (3) months from
the fifth anniversary of the date of filing of the financing statements referred
to in Section 5.01(f) or any other financing statement filed pursuant to this
---------------
Agreement or in connection with any Purchase hereunder, unless the Final Pay Out
Date shall have occurred:
(i) execute and deliver and file or cause to be filed an
appropriate continuation statement with respect to each such financing
statement; and
(ii) deliver or cause to be delivered to the Agent an opinion of
the counsel for the Seller referred to in Section 5.01(i) (or other counsel
---------------
for the Seller reasonably satisfactory to the Agent), in form and substance
reasonably satisfactory to the Agent, confirming and updating the opinion
delivered pursuant to Section 5.01(i) with respect to the matters set forth
---------------
in paragraph no. [7] of Exhibit 5.01(i) and otherwise to the effect that
---------------
the Purchaser's Interest hereunder continues to be a valid and perfected
security interest subject to no Liens of record except as provided herein
or otherwise permitted hereunder.
53
<PAGE>
SECTION 8.6 Application of Obligors' Payments.
---------------------------------
(a) Any payment by an Obligor in respect of any indebtedness owed by
it to the Seller or the Originator shall, except as otherwise specified by such
Obligor or otherwise required by contract or law and unless the Agent instructs
otherwise, be applied as a Collection of any Pool Receivable or Receivables of
such Obligor to the extent of any amounts then due and payable thereunder before
such payment is applied to any other indebtedness of such Obligor.
(b) Except or as otherwise required by law or the underlying Contract,
all Collections received from an Obligor of any Receivable shall be applied to
Receivables then outstanding of such Obligor in the order of the age of such
Receivables, starting with the oldest such Receivable; provided, however, that,
-------- -------
if payment is designated by such Obligor for application to specific
Receivables, it shall be applied to such specified Receivables.
ARTICLE IX
SECURITY INTEREST
SECTION 9.1 Grant of Security Interest. To secure all obligations of
--------------------------
the Seller arising in connection with this Agreement and each other Transaction
Document, whether now or hereafter existing, due or to become due, direct or
indirect, or absolute or contingent, including, without limitation, Indemnified
Amounts, payments on account of Collections received or deemed to be received,
fees and Earned Discount, in each case pro rata according to the respective
--- ----
amounts thereof, the Seller hereby assigns and grants to the Purchaser, for its
benefit and the benefit of the Agent, the Affected Parties and the Indemnified
Parties, a security interest in all of the Seller's right, title and interest
(including specifically any undivided
54
<PAGE>
interest retained by the Seller hereunder) now or hereafter existing in, to and
under all the Pool Receivables and Related Property.
SECTION 9.2 Further Assurances. The provisions of Section 8.05 shall
------------------ ------------
apply to the security interest granted under Section 9.01 as well as to the
------------
Purchases and the Purchaser's Interest hereunder.
SECTION 9.3 Remedies. Upon the occurrence of a Termination Event, the
--------
Purchaser, for its own benefit and for the benefit of the Agent, the Affected
Parties and the Indemnified Parties, shall have, with respect to the collateral
granted pursuant to Section 9.01, and in addition to all other rights and
------------
remedies available to the Purchaser, the Agent, the Affected Parties or the
Indemnified Parties under this Agreement or other applicable law, all the rights
and remedies of a secured party upon default under the UCC.
ARTICLE X
TERMINATION EVENTS
SECTION 10.1 Termination Events. The following events shall be
------------------
"Termination Events" hereunder:
- -------------------
(a) (i) The Servicer (if the Originator or an Affiliate of the
Originator is the Servicer) shall fail to perform or observe any term, covenant
or agreement hereunder (other than as referred to in clause (ii) next following)
-----------
and such failure shall remain unremedied for three Business Days after receipt
by the Servicer of notice or (ii) the Servicer (if the Originator or an
Affiliate of the Originator is the Servicer) or the Seller shall fail to make
any payment or deposit to be made by it hereunder when due; or
55
<PAGE>
(b) Any representation or warranty made or deemed to be made by the
Seller or the Originator (individually or as Servicer) (or any of their
respective officers) under or in connection with any Transaction Document or any
Periodic Report or Pay Out Statement or other information or report delivered
pursuant hereto shall prove to have been false or incorrect in any material
respect when made and, within three Business Days after written notice thereof
shall have been given to the Seller or the Originator (individually or as
Servicer), as the case may be, the circumstances or condition in respect of
which such representation or warranty was incorrect shall not have been
eliminated or otherwise cured in a manner satisfactory to the Agent; or
(c) The Seller or the Originator (individually or as Servicer) shall
fail to perform or observe any other term, covenant or agreement contained in
this Agreement or any other Transaction Document on its part to be performed or
observed and any such failure shall remain unremedied for ten Business Days
after written notice thereof shall have been given by the Agent to the Seller or
the Originator, as the case may be; or
(d) A default shall have occurred and be continuing under any
instrument or agreement evidencing, securing or providing for the issuance of
indebtedness for borrowed money in excess of $500,000 of, or guaranteed by, the
Seller, the Originator or any Affiliate thereof, which default (i) is a default
in payment of such indebtedness or any portion thereof, any interest thereon on
any other amount owing under or in connection with such instrument or agreement
or (ii) if unremedied, uncured, or unwaived (with or without the passage of time
or the giving of notice or both) would permit acceleration of the maturity of
such indebtedness and such default shall have continued unremedied, uncured or
unwaived for a period long enough to permit such acceleration and any notice of
default required to permit acceleration shall have been given; or any
56
<PAGE>
default under any agreement or instrument relating to the purchase of
receivables of the Seller or the Originator, or any other event, shall occur and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default is to terminate, or
permit the termination of, the commitment of any party to such agreement or
instrument to purchase receivables or the right of the Seller or the Originator
to reinvest in receivables the principal amount paid by any party to such
agreement or instrument for an interest in receivables; or
(e) An Event of Bankruptcy shall have occurred and remained continuing
with respect to the Seller or the Originator or any Affiliate thereof; or
(f) (i) Any litigation (including, without limitation, derivative
actions), arbitration proceedings or governmental proceedings not disclosed in
writing by the Seller or the Servicer to the Agent and the Purchaser prior to
the date of execution and delivery of this Agreement is pending against the
Seller or the Originator or any Affiliate thereof, or (ii) any material
development not so disclosed has occurred in any litigation (including, without
limitation, derivative actions), arbitration proceedings or governmental
proceedings so disclosed, which, in the case of clause (i) or (ii), in the
---------- ----
opinion of the Agent, is likely to have a Material Adverse Effect; or
(g) The Internal Revenue Service shall file notice of a lien pursuant
to Section 6323 of the Internal Revenue Code with regard to any of the assets of
the Originator or the Seller and such lien shall not have been released within
__ days, or the Pension Benefit Guaranty Corporation shall, or shall indicate
its intention to, file notice of a lien pursuant to Section 4068 of ERISA with
regard to any of the assets of the Originator or the Seller; or
57
<PAGE>
(h) There shall have occurred or shall exist any event or condition
which has, or would have a material possibility of causing, a Material Adverse
Effect; or the warranty in Section 6.01(i)(y) shall not be true at any time; or
------------------
(i) At any time, (x) the ratio (expressed as a percentage) computed by
dividing (1) the aggregate Unpaid Balance of Pool Receivables that are Eligible
Receivables by (2) the Purchaser's Interest shall be less than 105%; or (y) the
Unadjusted Purchaser's Percentage shall exceed the Maximum Percentage and such
condition shall continue for more than three Business Days; or
(j) The Default Ratio for any date of determination exceeds 5.0%; or
(k) There shall have been entered against the Originator or the Seller
one or more judgments, awards or decrees which in the aggregate exceed $500,000
at any one time outstanding and which shall not have been fully paid, bonded,
discharged or stayed pending appeal within ten days after the entry thereof,
excluding judgments, awards or decrees for which there is full insurance and
with respect to which the insurer has assumed responsibility in writing; or
(l) The Originator ceases to own, directly, or indirectly, free of any
Liens, 100% of the issued and outstanding capital stock of the Seller; or
(m) The Purchaser shall cease to have a valid, perfected first
priority ownership interest in the Receivables and the Related Property for any
reason; or this Agreement, the Receivables Transfer Agreement or any other
Transaction Document shall cease to be in full force and effect or the Seller or
the Originator shall so state in writing; or
58
<PAGE>
(n) The Available Credit Commitment shall be less than five percent
(5%) of the sum of all the maximum amounts that the Purchaser may pay or lend in
respect of Receivables Interests under this Agreement and each and every other
securitization agreement then in effect; or
(o) The Seller's net worth shall be less than the greater of (i)
$2,500,000 and (ii) 3% of the aggregate Principal Balance of all Pool
Receivables.
SECTION 10.2 Remedies.
--------
(a) Optional Termination. Upon the occurrence of a Termination Event
--------------------
(other than a Termination Event described in subsection (e) of Section 10.01),
-------------- -------------
the Agent shall, at the request, or may with the consent, of the Purchaser, by
notice to the Seller (and on the same Business Day of such receipt, the Seller
shall furnish a copy of such notice to the Originator and the Servicer) declare
the Commitment Termination Date to have occurred.
(b) Automatic Termination. Upon the occurrence of a Termination Event
---------------------
described in subsections (e) of Section 10.01, the Commitment Termination Date
----------- --- -------------
shall be deemed to have occurred automatically upon the occurrence of such event
and no further Purchases or Reinvestments shall thereafter be made.
(c) Additional Remedies. Upon any termination of the Facility
-------------------
pursuant to this Section 10.02, the Agent and the Purchaser shall have, in
-------------
addition to all other rights and remedies under this Agreement or otherwise, all
other rights and remedies provided under the UCC of each applicable jurisdiction
and other applicable laws, which rights shall be cumulative. Without limiting
the foregoing or the general applicability of Article XIII hereof, (i) the
------------
occurrence of a Termination Event shall not deny to the Purchaser any remedy in
addition to
59
<PAGE>
termination of the Commitment to which the Purchaser may be otherwise
appropriately entitled, whether at law or in equity, and (ii) following the
occurrence of any Termination Event the Purchaser may elect to assign to any
Person the Purchaser's Interest, or any portion thereof.
ARTICLE XI
THE AGENT
SECTION 11.1 Authorization and Action. The Purchaser has appointed the
------------------------
Agent as its agent pursuant to an administration agreement between the Purchaser
and Sakura, and hereby authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Agent by the terms hereof and of said administration agreement, together with
such powers as are reasonably incidental thereto.
SECTION 11.2 Agent's Reliance, Etc. Neither the Agent nor any of its
---------------------
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or the Agent under or in connection with the
Transaction Documents (including, without limitation, the servicing,
administering or collecting Pool Receivables as the Servicer pursuant to Section
-------
8.01), except for its or their own gross negligence or willful misconduct, and
- ----
except for any breach by the program administrator of its obligations to the
Purchaser expressly set forth in the administration agreement referred to in
Section 11.01. Without limiting the generality of the foregoing, the Agent:
- -------------
(a) may consult with legal counsel (including counsel for the Seller),
independent certified public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (b)
makes no warranty or representation to the Purchaser or any other holder of any
interest in Pool Receivables and shall
60
<PAGE>
not be responsible to the Purchaser or any such other holder for any statements,
warranties or representations made by any Person (other than the program
administrator) in or in connection with the Transaction Documents; (c) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of the Transaction Documents on the
part of the Seller or the Originator or to inspect the property (including the
books and records) of the Seller, except for its duties to the Purchaser as set
forth in the administration agreement referred to above; (d) shall not be
responsible to the Purchaser (except for any breach by the program administrator
of its duties set forth in the administration agreement referred to above) or to
any other holder of any interest in Pool Receivables for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other Transaction Document; and (e) shall incur no liability
under or in respect of this Agreement by acting upon any notice (including
notice by telephone), consent, certificate or other instrument or writing (which
may be by facsimile or telex) believed by it to be genuine and signed or sent by
the proper party or parties.
SECTION 11.3 Agent and Affiliates. Sakura Japan and its Affiliates may
--------------------
generally engage in any kind of business with the Seller, the Originator or any
Obligor, any of their respective Affiliates and any Person who may do business
with or own securities of the Seller, the Originator or any Obligor or any of
their respective Affiliates, all as if Sakura were not the Agent and without any
duty to account therefor to the Purchaser or any other holder of an interest in
Pool Receivables.
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ARTICLE XII
ASSIGNMENTS BY SELLER OR PURCHASER
SECTION 12.1 Restrictions on Assignments.
--------------------------
(a) Neither the Seller nor the Purchaser may assign its rights
hereunder or any interest herein without the prior written consent of the Agent,
and the Purchaser may not assign the Purchaser's Interest (or any portion
thereof) to any Person without the prior written consent of the Seller (which
consent shall not be unreasonably withheld or delayed); provided, however, that
-------- -------
(i) the Purchaser may assign, or grant a security interest in,
the Purchaser's Interest (or any portion thereof) to Sakura Japan, the
Liquidity Banks (or any successor of any thereof by merger, consolidation
or otherwise), or any Affiliate of Sakura Japan or any of the Liquidity
Banks (which may then assign the Purchaser's Interest (or any portion
thereof so assigned) or any interest therein to such party or parties as it
may choose); and
(ii) the Purchaser may assign and grant a security interest in
the Purchaser's Interest and the Purchaser's rights and interests in, to
and under this Agreement and the other Transaction Documents to Sakura, as
Collateral Agent, and any successor in such capacity, to secure the
Purchaser's obligations under or in connection with the Commercial Paper
Notes, the Liquidity Funding Agreement, and certain other obligations of
the Purchaser incurred in connection with the funding of the Purchases and
Reinvestments hereunder, which assignment and grant of a security interest
shall not be considered an "assignment" for purposes of Section 12.01(b),
----------------
Section 12.03 or 12.04 or,
------------- -----
62
<PAGE>
prior to the enforcement of such security interest, for purposes of any
other provision of this Agreement.
(b) The Seller agrees to advise the Agent within five Business Days
after notice to the Seller of any proposed assignment by the Purchaser of the
Purchaser's Interest (or any portion thereof), not otherwise permitted under
subsection (a), of the Seller's consent or non-consent to such assignment. If
- --------------
the Seller does not consent to such assignment, the Purchaser may immediately
assign the Purchaser's Interest (or such portion) to Sakura Japan, any of the
Liquidity Banks or any Affiliate of Sakura Japan or any of the Liquidity Banks.
All of the aforementioned assignments shall be upon such terms and conditions as
the Purchaser and the assignee may mutually agree.
SECTION 12.2 Documentation; Notice of Assignment.
-----------------------------------
(a) Any assignment of the Purchaser's Interest (or any portion
thereof) to any Person may be evidenced by such instruments or documents as may
be satisfactory to the Purchaser, the Agent and the assignee; and
(b) The Purchaser shall provide notice to the Seller of any assignment
of the Purchaser's Interest (or any portion thereof) by the Purchaser to any
assignee (other than the assignment and grant of a security interest referred to
in Section 12.01(a)(ii)).
--------------------
SECTION 12.3 Rights of Assignee. Upon the assignment by the Purchaser of
------------------
the Purchaser's Interest (or any portion thereof) in accordance with this
Article XII, the assignee receiving such assignment shall have all of the rights
- -----------
of the Purchaser hereunder with respect to the Purchaser's Interest (or the
portion thereof so assigned); subject, however, to Sections 12.04 and 12.05.
------- ------- -------------- -----
63
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SECTION 12.4 Allocation of Payments. If on any date there are sufficient
----------------------
funds in the Agent's Account to distribute a portion, but not all, of the
amounts payable pursuant to subsection (c)(i) of either Section 3.01 or Section
----------------- ------------ -------
3.02 and, due to any assignment of the Purchaser's Interest (or any portion
- ----
thereof), such amounts are payable to more than one Person, then, unless
otherwise agreed between such Persons, the Agent shall distribute funds to such
Persons pro rata based upon the amounts so payable to such Persons.
--- ----
SECTION 12.5 Calculation of Earned Discount After Assignment. Upon and
-----------------------------------------------
after the assignment of the Purchaser's Interest (or any portion thereof)
pursuant to this Article XII, the Purchaser Rate used to calculate Earned
-----------
Discount from time to time with respect to the Purchaser's Interest (or the
portion thereof so assigned) for each applicable Yield Period beginning after
the effective date of such assignment shall be the Bank Rate, unless the
Purchaser, the Seller and the assignee may agree in writing upon to use a
different Purchaser Rate for calculating such Earned Discount. If (i) the
Seller fails to consent to any assignment of the Purchaser's Interest (or any
portion thereof) proposed by the Purchaser, (ii) the Purchaser makes an
assignment of the Purchaser's Interest (or such portion) to Sakura Japan or any
Affiliate of Sakura Japan as permitted under Section 12.01(b), and (iii) in the
----------------
opinion of the Agent, the Purchaser was required by applicable law, regulation
or directive from any governmental authority to make such assignment, then the
Earned Discount with respect to the Purchaser's Interest (or the portion thereof
so assigned) shall immediately begin to accrue at the Bank Rate for the
remainder of any then applicable Yield Period.
SECTION 12.6 Rights of Collateral Agent. The Seller hereby agrees that,
--------------------------
upon notice to the Seller, the Collateral Agent referred to in Section 12.01 may
-------------
exercise all the rights of the Agent hereunder with respect to the Purchaser's
Interest (or all portions thereof, and Collections with respect thereto, which
64
<PAGE>
are owned by the Purchaser), and all other rights and interests of the Purchaser
in, to or under this Agreement or any other Transaction Document. Without
limiting the foregoing, upon such notice such Collateral Agent may request the
Servicer to segregate the Purchaser's allocable share of Collections from the
Seller's allocable share in accordance with Section 8.02(a), may give a notice
---------------
designating a new Servicer pursuant to Section 8.01(a), may give or require the
---------------
Agent to give notice to the Lock-Box Banks as referred to in Section 8.03(b),
---------------
and may direct the Obligors of Pool Receivables to make payments in respect
thereof directly to an account or lockbox designated by it, in each case, to the
same extent as the Purchaser or the Agent might have done.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.1 Indemnities by the Seller.
-------------------------
(a) General Indemnity. Without limiting any other rights which any
-----------------
such Person may have hereunder or under the other Transaction Documents or under
applicable law, the Seller hereby agrees to indemnify each of the Agent, the
Purchaser, the Liquidity Banks, Sakura Japan, each of their respective
Affiliates, successors, transferees, participants and assigns and all officers,
directors, shareholders, controlling persons, employees and agents of any of the
foregoing (each an "Indemnified Party"), forthwith on demand, from and against
-----------------
any and all damages, losses, claims, liabilities and related costs and expenses,
including reasonable attorneys' fees and disbursements (all of the foregoing
being collectively referred to as "Indemnified Amounts") awarded against or
-------------------
incurred by any of them arising out of or relating to this Agreement or the
other Transaction Documents or the ownership or funding of the Purchaser's
Interest (or any portion thereof) or in respect of
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<PAGE>
any Receivable or any Contract, excluding, however, (a) Indemnified Amounts to
--------- -------
the extent resulting from gross negligence or willful misconduct on the part of
the Agent, the Purchaser or such Indemnified Party or (b) recourse (except as
otherwise specifically provided in this Agreement) for Defaulted Receivables.
Without limiting the foregoing, the Seller shall indemnify each Indemnified
Party for Indemnified Amounts arising out of or relating to:
(i) the transfer by the Seller of any interest in any
Receivable other than the transfer of the Purchaser's Interest to the
Purchaser pursuant to this Agreement and the grant of a security interest
to the Purchaser pursuant to Section 9.01;
------------
(ii) the breach of any representation or warranty made by the
Seller (or any of its officers) under or in connection with this Agreement,
any Periodic Report or Pay Out Statement or any other information or report
delivered by the Seller or the Servicer pursuant hereto, which shall have
been false or incorrect in any material respect when made or deemed made;
(iii) the failure by the Seller to comply with any applicable
law, rule or regulation with respect to any Pool Receivable or the related
Contract, or the nonconformity of any Pool Receivable or the related
Contract with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Purchaser
an undivided percentage ownership interest, to the extent of the
Purchaser's Interest, in the Receivables in, or purporting to be in, the
Receivables Pool, together with all Related Property, free and clear of any
Lien, other than a Lien arising solely as a result of an act of the
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Purchaser or the Agent, whether existing at the time of any Purchase or
Reinvestment or at any time thereafter;
(v) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any Pool
Receivables or Related Property, whether at the time of any Purchase or
Reinvestment or at any time thereafter;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any Receivable
in, or purporting to be in, the Receivables Pool (including, without
limitation, a defense based on such Receivable's or the related Contract's
not being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting from
the sale of the merchandise or services related to such Receivable or the
furnishing or failure to furnish such merchandise or services;
(vii) any failure of the Seller or the Servicer, to perform its
duties or obligations in accordance with the provisions of Article VIII;
------------
(viii) any products liability claim arising out of or in
connection with merchandise or services that are the subject of any Pool
Receivable; or
(ix) any tax or governmental fee or charge (but not including
taxes upon or measured by net income), all interest and penalties thereon
or with respect thereto, and all out-of-pocket costs and expenses,
including the reasonable fees and expenses of counsel in defending against
the same, which may arise by reason of the purchase or ownership of the
Purchaser's Interest, any portion thereof
67
<PAGE>
or any other interest in the Pool Receivables or Related Property or in any
goods or services which secure any such Pool Receivables.
(b) Contest of Tax Claim; After-Tax Basis. If any Indemnified Party
-------------------------------------
shall have notice of any attempt to impose or collect any tax or governmental
fee or charge for which indemnification will be sought from the Seller under
Section 13.01(a)(ix), such Indemnified Party shall give prompt and timely notice
- --------------------
of such attempt to the Seller, and the Seller shall have the right, at its
expense, to participate in any proceedings resisting or objecting to the
imposition or collection of any such tax, governmental fee or charge.
Indemnification hereunder shall be in an amount necessary to make the
Indemnified Party whole after taking into account any tax consequences to the
Indemnified Party of the payment of any of the aforesaid taxes and the receipt
of the indemnity provided hereunder or of any refund of any such tax previously
indemnified hereunder, including the effect of such tax or refund on the amount
of tax measured by net income or profits which is or was payable by the
Indemnified Party.
(c) Contribution. If for any reason the indemnification provided
------------
above in this Section 13.01 is unavailable to an Indemnified Party or is
-------------
insufficient to hold an Indemnified Party harmless, then the Seller shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by such Indemnified Party on the
one hand and the Seller on the other hand but also the relative fault of such
Indemnified Party as well as any other relevant equitable considerations.
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<PAGE>
SECTION 13.2 Indemnities by Servicer.
-----------------------
(a) Without limiting any other rights which any Indemnified Party may
have hereunder or under applicable law, the Servicer hereby agrees to indemnify
the Indemnified Parties, forthwith on demand, from and against any and all
Indemnified Amounts awarded against or incurred by any of them to the extent
that such Indemnified Amounts arise out of or relate to the Servicer's
performance of, or failure to perform, any of its obligations under or in
connection with any Transaction Documents, excluding, however, (A) Indemnified
--------- -------
Amounts to the extent determined by a court of competent jurisdiction to have
resulted from gross negligence or willful misconduct on the part of such
Indemnified Party and (B) recourse for Defaulted Receivables.
(b) If for any reason the indemnification provided above in this
Section 13.02 is unavailable to an Indemnified Party or is insufficient to hold
- -------------
an Indemnified Party harmless, then the Servicer shall contribute to the amount
paid by such Indemnified Party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Party on the one hand and the Servicer on
the other, but also the relative fault of such Indemnified Party (if any) and
the Servicer and any other relevant equitable considerations.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Amendments, Etc. No amendment or waiver of any provision of
---------------
this Agreement nor consent to any departure by the Seller or the Servicer
therefrom shall in any event be effective unless the same shall be in writing
and signed by (a) the Seller, the Servicer, the Agent and the Purchaser (with
69
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respect to an amendment) or (b) the party against whom enforcement is sought
(with respect to a waiver or consent), as the case may be, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such amendment, waiver or
-------- -------
consent (other than an amendment, waiver or consent to cure any ambiguity, to
correct or supplement any provision which may be inconsistent with any other
provision herein, or to add any other provision with respect to matters or
questions arising hereunder which shall not be inconsistent with the provisions
of this Agreement or such Schedule 1.01, with respect to each of which the
-------------
Purchaser or the Program Administrator shall give subsequent written notice to
the Rating Agencies) shall be effective unless and until such Rating Agencies
shall have confirmed in writing that the execution thereof will not cause the
rating on the Commercial Paper Notes to be reduced or withdrawn.
SECTION 14.2 Notices, Etc. All notices and other communications provided
------------
for hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by express
mail or courier, or by certified mail, postage prepaid, or by facsimile, to the
intended party at the address or facsimile number of such party set forth in
Schedule 14.02 hereto or at such other address or facsimile number as shall be
- --------------
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective, (a) if personally delivered
or sent by express mail or courier, when received, (b) if sent by certified
mail, three Business Days after having been deposited in the mail, postage
prepaid, and (c) if transmitted by facsimile, when sent, receipt confirmed by
telephone or electronic means, except that notices and communications pursuant
to Article I shall not be effective until received.
---------
70
<PAGE>
SECTION 14.3 No Waiver; Remedies. No failure on the part of the Agent,
-------------------
any Affected Party, any Indemnified Party, the Purchaser or any assignee of the
Purchaser's Interest or any portion thereof to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Without limiting the foregoing, Sakura Japan is hereby authorized by the Seller
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by Sakura Japan to or for the credit or the account of the Seller against any
and all obligations of the Seller, now or hereafter existing under this
Agreement or any other Transaction Document, to the Agent, any Affected Party,
any Indemnified Party or the Purchaser, or their respective successors and
assigns.
SECTION 14.4 Binding Effect; Survival. This Agreement shall be binding
------------------------
upon and inure to the benefit of the Seller, the Agent, the Servicer, the
Purchaser and their respective successors and assigns, and the provisions of
Section 4.04 and Article XIII shall inure to the benefit of the Affected Parties
- ------------ ------------
and the Indemnified Parties, respectively, and their respective successors and
assigns; provided, however, nothing in the foregoing shall be deemed to
-------- -------
authorize any assignment not permitted by Section 12.01. This Agreement shall
-------------
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until such
time as the Final Pay Out Date shall have occurred [and all obligations of the
Servicer to the Seller shall have been paid and performed in full]. The rights
and remedies with respect to any breach of any representation and warranty made
by the Seller pursuant to Article VI and the provisions of
----------
71
<PAGE>
Article XIII, Section 4.04 and Sections 14.05 through 14.09 shall be continuing
- ------------ ------------ -------------- -----
and shall survive any termination of this Agreement.
SECTION 14.5 Costs, Expenses and Taxes. In addition to its obligations
-------------------------
under Article XIII, the Seller agrees to pay on demand:
------------
(a) all costs and expenses incurred by the Agent, the Purchaser,
Sakura Japan and their respective Affiliates in connection with the negotiation,
preparation, execution and delivery, the administration (including periodic
auditing) or the enforcement of, any amendment, modification or waiver of,
consent with respect to or termination of, or any actual or claimed breach of,
this Agreement and the other Transaction Documents, including, without
limitation (i) the reasonable fees and expenses of counsel to any of such
Persons incurred in connection with any of the foregoing or in advising such
Persons as to their respective rights and remedies under any of the Transaction
Documents, and (ii) all reasonable out-of-pocket expenses (including reasonable
fees and expenses of independent accountants) incurred in connection with any
review of the Seller's books and records either prior to the execution and
delivery hereof or pursuant to Section 7.01(c); and
---------------
(b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of this
Agreement or any or the other Transaction Documents (and the Seller agrees to
indemnify each Indemnified Party against any liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees).
SECTION 14.6 No Proceedings. Each of the Seller, Yuasa, individually and
--------------
as Servicer, each successor Servicer, by accepting its appointment as such, and
Sakura, individually and
72
<PAGE>
as Agent, hereby agrees that it will not institute against the Purchaser, or
join any other Person in instituting against the Purchaser, any insolvency
proceeding (namely, any proceeding of the type referred to in the definition of
Event of Bankruptcy) so long as any Commercial Paper Notes issued by the
Purchaser shall be outstanding or there shall not have elapsed one year plus one
day since the last day on which any such Commercial Paper Notes shall have been
outstanding. The foregoing shall not limit any such Person's right to file any
claim in or otherwise take any action with respect to any insolvency proceeding
that was instituted by any Person other than any parties to the Program
Documents.
SECTION 14.7 Confidentiality of Seller Information.
-------------------------------------
(a) Confidential Information. Each of the Purchaser and the Agent
-------------------------
acknowledges that certain of the information provided to such party by or on
behalf of the Seller or the Originator in connection with this Agreement and the
transactions contemplated hereby is or may be confidential, and each such party
severally agrees that, unless the Seller or the Originator shall otherwise agree
in writing, and except as provided in subsection (b), such party will not
--------------
disclose to any other person or entity:
(i) any information regarding, or copies of, any Periodic
Reports, Pay Out Statements, and any non-public financial statements,
reports and other information, furnished by the Seller or the Originator to
the Purchaser or the Agent pursuant to this Agreement, or
(ii) any other information regarding the Seller which is
designated by the Seller to such party in writing or otherwise as
confidential
73
<PAGE>
(the information referred to in clauses (i) and (ii) above is collectively
----------- ----
referred to as the "Seller Information"; provided, however, "Seller Information"
------------------ -------- ------- ------------------
shall not include
(A) any information which is or becomes generally available
to the general public or to such party on a nonconfidential basis from
a source other than the Seller or the Originator, or which was known
to such party on a nonconfidential basis prior to its disclosure by
the Seller or the Originator, or
(B) general information regarding the nature of this
Agreement and the other Transaction Documents, the basic terms hereof
(including without limitation the amount and nature of the Commitment
and the Purchaser's Investment hereunder and of the reserves or other
credit enhancement provided hereunder or pursuant hereto), the nature,
amount and status of the Pool Receivables, and the current and/or
historical default ratios and/or ratios of losses to liquidations
and/or outstandings with respect to the Receivables Pool, and the
identity of the Seller and/or the Originator).
(b) Disclosure. Notwithstanding subsection (a), each party may
---------- --------------
disclose any Seller Information:
(i) to any of such party's independent attorneys, consultants
and auditors, and to such of the Liquidity Banks, any dealer or placement
agent for the Purchaser's commercial paper, and any actual or potential
assignees of, or participants in, any of the rights or obligations of the
Purchaser, the Liquidity Banks, or Sakura Japan under or in connection with
this Agreement, who (A) are informed by such party of the confidential
nature of the Seller Information and the terms of this Section 14.07, and
-------------
(B) are subject to
74
<PAGE>
confidentiality restrictions generally consistent with this Section 14.07,
-------------
(ii) to any rating agency that maintains a rating for the
Purchaser's commercial paper or is considering the issuance of such a
rating, for the purposes of reviewing the credit of the Purchaser in
connection with such rating,
(iii) to any other party to this Agreement or any other
Transaction Document, for the purposes contemplated hereby and thereby,
(iv) to any Person whom any dealer or placement agent for the
Purchaser shall have identified as an actual or potential investor in
Commercial Paper Notes, and who shall have agreed with Sakura Japan in
writing to keep such information confidential and use it only in connection
with considering or monitoring such investments, subject to applicable
legal requirements (it being understood that such Person may also receive
the information excluded from the definition of "Seller Information"
pursuant to clause (B) of subsection (a)),
---------- --------------
(v) as may be required by any municipal, state, federal or
other regulatory body having or claiming to have jurisdiction over such
party, in order to comply with any law, order, regulation, regulatory
request or ruling applicable to such party, or
(vi) subject to subsection (c), in the event such party is
--------------
legally compelled (by interrogatories, requests for information or copies,
subpoena, civil investigative demand or similar process) to disclose such
Seller Information.
(c) Legal Compulsion. In the event that any party hereto (other than
----------------
the Seller or the Originator) or any of its
75
<PAGE>
representatives is requested or becomes legally compelled (by interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process) to disclose any of the Seller Information, such party will (or
will cause its representatives to)
(i) provide the Seller or the Originator with prompt written
notice of such request or legal compulsion; and
(ii) at the Seller's or the Originator's expense, use its
reasonable efforts to cooperate with the Seller or the Originator in making
an appropriate objection to disclosure, seeking a protective order or
taking such other actions as may be lawful and appropriate in order to
maintain the confidentiality of such Seller Information.
(d) Survival. This Section 14.07 shall survive termination of this
-------- -------------
Agreement.
SECTION 14.8 Confidentiality of Program Information.
--------------------------------------
(a) Program Information. Each party hereto (other than Sakura)
-------------------
acknowledges that Sakura regards the structure and terms of the transactions
contemplated by this Agreement, and by the Liquidity Funding Agreement, and the
other Program Documents referred to therein, to be proprietary, and each such
party severally agrees that:
(i) unless Sakura shall otherwise agree in writing, and except
as provided in subsection (b), such party will not disclose to any other
--------------
person or entity:
(A) any information regarding, or copies of, this Agreement
or any transaction contemplated hereby (including, without limitation,
any information
76
<PAGE>
regarding the rates or calculation of fees or Earned Discount payable
hereunder),
(B) any information regarding, or copies of, the Liquidity
Funding Agreement, any of the other "Program Documents" referred to
therein, or any transaction contemplated thereby,
(C) any information regarding the organization or business
of the Purchaser or its commercial paper program, or
(D) any information regarding Sakura Japan which is
designated by Sakura to such party in writing or otherwise as
confidential or not otherwise available to the general public
(the information referred to in clauses (A), (B), (C) and (D) above, whether
----------- --- --- ---
furnished by the Purchaser, Sakura, any Liquidity Bank, any assignee of or
participant in any rights or obligations of the Purchaser, any Liquidity Bank,
or any attorney for or other representative of any of the foregoing (each a
"Program Information Provider"), is collectively referred to as the "Program
- ----------------------------- -------
Information"; provided, however, "Program Information" shall not include any
- ----------- -------- ------- -------------------
information which is or becomes generally available to the general public or to
such party on a nonconfidential basis from a source other than Sakura or any
other Program Information Provider, or which was known to such party on a
nonconfidential basis prior to its disclosure by Sakura or any other Program
Information Provider);
(ii) such party will make the Program Information available to
only such of its officers, directors, employees and agents who (I) in the
good faith belief of such party, have a need to know such Program
Information, (II) are informed by such party of the confidential nature of
the
77
<PAGE>
Program Information and the terms of this Section 14.08, and (III) are
-------------
subject to confidentiality restrictions consistent with this Section 14.08;
-------------
(iii) such party will use the Program Information solely for the
purposes of evaluating, administering and enforcing the transactions
contemplated by this Agreement and the other Transaction Documents and
making any necessary business judgments with respect thereto; and
(iv) such party will, upon demand, return (and cause each of
its officers, directors, employees, agents, attorneys, consultants or
auditors (collectively, "representatives") to return) to Sakura, or to such
---------------
other Program Information Provider as shall have furnished it with any
Program Information, all documents or other written material received from
Sakura or such other Program Information Provider which constitute or
contain any Program Information and all copies of such documents or other
material in its possession or in the possession of any of its
representatives, and will not retain any copy, summary or extract thereof
on any storage medium whatsoever.
(b) Disclosure. Notwithstanding clause (i) of subsection (a), each
---------- ---------- --------------
party may disclose any Program Information:
(i) to its independent attorneys, consultants and auditors who
(I) in the good faith belief of such party, have a need to know such
Program Information, (II) are informed by such party of the confidential
nature of the Program Information and the terms of this Section 14.08, and
-------------
(III) are subject to confidentiality restrictions consistent with this
Section 14.08,
-------------
(ii) to any other party to this Agreement, for the purposes
contemplated hereby,
78
<PAGE>
(iii) as may be required by any municipal, state, federal or
other regulatory body having or claiming to have jurisdiction over such
party, in order to comply with any law, order, regulation, regulatory
request or ruling applicable to such party (provided that prior to making
--------
any required filing of this Agreement or any other Transaction Document
with the Securities and Exchange Commission, such party shall apply for
confidential treatment and shall expurgate those provisions requested by
the Agent), or
(iv) subject to subsection (c), in the event such party is
--------------
legally compelled (by interrogatories, requests for information or copies,
subpoena, civil investigative demand or similar process) to disclose such
Program Information.
(c) Legal Compulsion. In the event that any party hereto (other than
----------------
Sakura) or any one to whom such party or its representatives transmits the
Program Information is requested or becomes legally compelled (by
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process) to disclose any of the Program
Information, such party will (or will cause its representatives to)
(i) provide Sakura with prompt written notice of such request
or legal compulsion;
(ii) unless Sakura agrees that such Program Information may be
disclosed, make a timely objection to the request or compulsion to provide
such Program Information on the basis that such Program Information is
confidential and subject to the agreements contained in this Section 14.08;
-------------
and
(iii) at the expense of Sakura or any other Program Information
Provider, take any action as Sakura or such other Program Information
Provider may reasonably
79
<PAGE>
request to seek a protective order or other appropriate remedy and
otherwise to maintain the confidentiality of such Program Information.
(d) Survival. This Section 14.08 shall survive termination of this
-------- -------------
Agreement.
SECTION 14.9 No Recourse Against Other Parties. No recourse under any
---------------------------------
obligation, covenant or agreement of the Purchaser contained in this Agreement
shall be had against any stockholder, employee, officer, director or
incorporator of the Purchaser or J H Management Corporation; provided, however,
-------- -------
that nothing in this Section shall relieve any of the foregoing Person from any
liability which such Persons may otherwise have (i) for such Person's
intentional misrepresentation made in respect of any representation or warranty
contained herein or in any other Transaction Document or (ii) for such Person's
gross negligence or willful misconduct in respect of any covenant contained
herein or in any other Transaction Document the performance of which has not
been delegated to or undertaken by another Person under any Transaction Document
or in respect of such Person's affirmative exercise of any right, power or
authority contained herein or in any other Transaction Document.
SECTION 14.10 Definitions; Other Terms. Unless otherwise defined herein,
------------------------
all capitalized terms used in this Agreement shall have the meanings set forth
in Appendix A attached to this Agreement and by this reference made a part
----------
hereof. All accounting terms not specifically defined herein shall be construed
in accordance with generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of New York, and not specifically defined
herein, are used herein as defined in such Article 9.
SECTION 14.11 Captions and Cross References. The various captions
-----------------------------
(including, without limitation, the table of contents)
80
<PAGE>
in this Agreement are provided solely for convenience of reference and shall not
affect the meaning or interpretation of any provision of this Agreement. Unless
otherwise indicated, references in this Agreement to any Section, Appendix,
Schedule or Exhibit are to such Section of or Appendix, Schedule or Exhibit to
this Agreement, as the case may be, and references in any Section, subsection,
or clause to any subsection, clause or subclause are to such subsection, clause
or subclause of such Section, subsection or clause.
SECTION 14.12 Integration. This Agreement contains a final and complete
-----------
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire Agreement among the
parties hereto with respect to the subject matter hereof, superseding all prior
oral or written understandings.
SECTION 14.13 GOVERNING LAW. THIS AGREEMENT, INCLUDING THE RIGHTS AND
-------------
DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
PERFECTION (AND THE EFFECT OF PERFECTION OR NONPERFECTION) OF THE INTERESTS OF
THE PURCHASER IN THE RECEIVABLES OR THE RELATED PROPERTY IS GOVERNED BY THE LAWS
OF THE JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 14.14 WAIVER OF JURY TRIAL. EACH OF THE SELLER AND THE SERVICER
--------------------
HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER TRANSACTION
DOCUMENT OR ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY BE IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING OR
OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT A JURY.
81
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SECTION 14.15 CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES. EACH OF THE
---------------------------------------------
SELLER, THE SERVICER AND PURCHASER HEREBY ACKNOWLEDGES AND AGREES THAT:
(A) IT IRREVOCABLY (I) SUBMITS TO THE JURISDICTION, FIRST, OF ANY
UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL JURISDICTION IS NOT
AVAILABLE, OF ANY NEW YORK STATE COURT, IN EITHER CASE SITTING IN NEW YORK CITY,
NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, (II) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED ONLY IN SUCH NEW YORK STATE OR FEDERAL COURT AND NOT
IN ANY OTHER COURT, AND (III) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING.
(B) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO EXECUTION,
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER OR IN
CONNECTION WITH THIS AGREEMENT.
SECTION 14.16 Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts and by the differ ent parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
Agreement.
SECTION 14.17 Syndication of Liquidity. Each of the Seller and Yuasa,
------------------------
individually and as Servicer, severally agrees to cooperate with Sakura in
connection with any syndication of the Liquidity Funding Agreement.
82
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
above written.
PROMINENT FUNDING CORPORATION,
as Purchaser
By________________________________
Name: __________________________
Title: _________________________
THE SAKURA BANK, LIMITED, acting
through its New York Branch,
as Agent
By________________________________
Name: __________________________
Title: _________________________
By________________________________
Name: __________________________
Title: _________________________
YESCO, INC.
as Seller
By________________________________
Name: __________________________
Title: _________________________
YUASA EXIDE, INC.,
as Servicer
By________________________________
Name: __________________________
Title: _________________________
83
<PAGE>
Consented to by:
THE SAKURA BANK, LIMITED, acting
through its New York Branch,
as Credit Agent
By______________________________
Name: ________________________
Title: _______________________
84
<PAGE>
APPENDIX A
DEFINITIONS
This is Appendix A to the Securitization Agreement dated as of __________,
----------
1998 among Yesco, Yuasa Exide, Inc., Prominent Funding Corporation and The
Sakura Bank, Limited, acting through its New York Branch, as Agent (as amended,
supplemented or otherwise modified from time to time, this "Agreement"). Each
---------
reference in this Appendix A to any Section, Appendix or Exhibit refers to such
----------
Section of or Appendix or Exhibit to this Agreement.
As used in this Agreement, unless the context requires a different meaning,
the following terms have the meanings indicated hereinbelow:
"Accounting Change" means, with respect to any Person, (a) changes in
-----------------
accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion of the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants (or any successor thereto or
any agency with similar functions); (b) changes in accounting principles
concurred in by such Person's certified public accountants; (c) purchase
accounting adjustments under A.P.B. 16 or 17 and EITF 88-16, and the application
of the accounting principles set forth in FASB 109, including the establishment
of reserves pursuant thereto and any subsequent reversal (in whole or in part)
of such reserves; and (d) the reversal of any reserves established as a result
of purchase accounting adjustments.
"Affected Party" means each of the Purchaser, the Liquidity Banks, any
--------------
permitted assignee of the Purchaser, any assignee of or participant in any of
the Purchaser's obligations to the Liquidity Banks, Sakura Japan (including any
branch or agency
A-1
<PAGE>
thereof) and any successor to Sakura Japan or Sakura as the Agent.
"Affiliate" when used with respect to a Person means any other Person
---------
controlling, controlled by, or under common control with, such Person.
"Agent" has the meaning set forth in the preamble.
----- --------
"Agent's Account" has the meaning set forth in Section 4.01(a).
--------------- ---------------
"Alternate Base Rate" means, on any date, a fluctuating rate of interest
-------------------
per annum equal to Sakura's overnight cost of funds determined solely by Sakura.
- --- -----
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by Sakura in connection with extensions of credit.
"Average Maturity" means, on any day, that time period (expressed in days)
----------------
equal to the weighted average maturity of the Pool Receivables as shall be
calculated by the Servicer, as set forth in the most recent Periodic Report in
accordance with the provisions thereof. If the Agent shall disagree with any
such calculation, the Agent may recalculate the Average Maturity for such day,
which calculation shall, absent manifest error, be binding upon the Servicer,
the Seller and the Purchaser.
"Bank Rate" for any Yield Period for any Rate Tranche means a rate per
--------- ---
annum equal to the Alternate Base Rate plus 1.0%.
- -----
"Business Day" means a day on which both (a) the Agent at its principal
------------
office in New York City, New York is open for business and (b) commercial banks
in New York City are not authorized or required to be closed for business.
A-2
<PAGE>
"Collections" means, with respect to any Receivable, all funds which either
-----------
(a) are received by the Seller or the Servicer from or on behalf of the related
Obligors in payment of any amounts owed (including, without limitation, purchase
prices, finance charges, interest and all other charges) in respect of such
Receivable, or applied to such amounts owed by such Obligors (including, without
limitation, insurance payments that the Seller or Servicer applies in the
ordinary course of its business to amounts owed in respect of such Receivable
and net proceeds of the sale or other disposition of repossessed goods or other
collateral or property of the Obligor or any other party directly or indirectly
liable for payment of such Receivable and available to be applied thereon), or
(b) are deemed to have been received by the Seller or any other Person as a
Collection pursuant to Section 3.03 or 3.04.
------------ ----
"Commercial Paper Notes" means short-term promissory notes issued or to be
----------------------
issued by the Purchaser to fund its investments in accounts receivable or other
financial assets.
"Commercial Paper Rate" for any Yield Period for any Rate Tranche means a
---------------------
rate per annum equal to the sum of (i) the rate or, if more than one rate, the
--- -----
weighted average of the rates, determined by converting to an interest-bearing
equivalent rate per annum the discount rate (or rates) at which Commercial Paper
--- -----
Notes having a term equal to such Yield Period and to be issued to fund the
Purchase of or to maintain such Rate Tranche by the Purchaser (including,
without limitation, the Purchaser's Tranche Investment and accrued and unpaid
Earned Discount) may be sold by any placement agent or commercial paper dealer
selected by the Agent, as agreed between each such agent or dealer and the
Agent, plus (ii) the commissions and charges charged by such placement agent or
----
commercial paper dealer with respect to such Commercial Paper Notes, expressed
as a percentage of such face amount and converted to an interest-bearing
equivalent rate per annum.
--- -----
A-3
<PAGE>
"Commitment" has the meaning set forth in Section 1.01.
---------- ------------
"Commitment Termination Date" has the meaning set forth in Section 1.04.
--------------------------- ------------
"Company Note" has the meaning set forth in Section 2.4(b) of the
------------ --------------
Receivables Transfer Agreement.
"Concentration Limit" for any Obligor at any time means the greater of (a)
-------------------
the Special Concentration Limit, if any, for such Obligor and (b) 3.0% of the
Purchaser's Investment at such time.
"Contract" means with respect to a Receivable, any and all contracts,
--------
understandings, instruments, agreements, invoices or other writings pursuant to
which such Receivable arises or which evidences such Receivable or under which
an Obligor becomes or is obligated to make payment in respect of such
Receivable.
"Credit Agent" means Sakura as credit agent under the Credit Agreement, and
------------
any successor to Sakura in such capacity.
"Credit Agreement" means and includes (a) the Amended and Restated Credit
----------------
Agreement dated as of December 19, 1997 among the Purchaser, the Agent and
certain financial institutions and (b) any other agreement (other than the
Liquidity Funding Agreement or another agreement of the type described in clause
------
(b) of the definition thereof (whether or not related to the Purchaser's
- ---
Interest)) hereafter entered into by the Purchaser providing for the making of
loans to the Purchaser or any other extensions of credit to or for the account
of the Purchaser to support all or any part of the Purchaser's payment
obligations under its Commercial Paper Notes, as amended, supplemented or
otherwise modified from time to time.
"Credit and Collection Policy" means those credit and collection policies
----------------------------
and practices relating to Contracts and
A-4
<PAGE>
Receivables described in Schedule 6.01(p)-2, as modified without violating
------------------
Section 7.03(c).
- ---------------
"Credit Bank" means and includes Sakura as lender to the Purchaser, and any
-----------
other or additional bank or other financial institution now or hereafter
extending credit or having a commitment to extend credit to or for the account
of the Purchaser under the Credit Agreement.
"Current Assets" means, with respect to any Person as of any date, all
--------------
assets of such Person that would, in accordance with generally accepted
accounting principles, be classified as current assets by a company conducting a
business the same as, or similar to, that of such Person, after deducting
adequate reserves in each case where a reserve is proper in accordance with
generally accepted accounting principles.
"Current Liabilities" means, with respect to any Person as of any date, (a)
-------------------
Debt which is required to be paid or prepaid within one year after such date,
(b) all other indebtedness and obligations that are required to be paid or
prepaid within one year after such date, and (c) all other items (including
taxes accrued as estimated) that would, in accordance with generally accepted
accounting principles, be included as current liabilities by a company
conducting a business the same as, or similar to, such Person.
"Debt" means (a) indebtedness for money borrowed, including long-term
----
capital lease obligations, having a stated maturity in excess of one year from
and after the date as of which such indebtedness was contracted for or assumed
and (b) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clause (a) next above.
----------
A-5
<PAGE>
"Default Horizon Ratio" means, on any date of determination, the sum of the
---------------------
gross sales (calculated in accordance with GAAP) for each of the seven
consecutive Fiscal Periods immediately preceding such date, divided by the
----------
Unpaid Balance of Eligible Receivables as of the last day of the immediately
preceding Fiscal Period.
"Default Ratio" means, on any date of determination, the highest of the
-------------
arithmetic averages of the Sales Based Default Percentage for any three
consecutive Fiscal Periods occurring during the twelve-month period ending on
(and including) the immediately preceding Fiscal Period.
"Default Reserve" on any day means an amount equal to the product of (a)
---------------
the Default Reserve Percentage at the close of business of the Purchaser on such
day, times (b) the sum of (i) the Purchaser's Investment at the opening of
-----
business of the Purchaser on such day, plus (ii) the Discount Factor at the
close of business of the Purchaser on such day.
"Default Reserve Percentage" means, on any date of determination, the
--------------------------
greater of (a) an amount equal to (x) four times the Concentration Limit on such
date divided by (y) .80 and (b) three times the product of (x) the Default Ratio
----------
on such date and (y) the Default Horizon Ratio on such date.
"Defaulted Receivable" means a Pool Receivable (a) as to which any payment,
--------------------
or part thereof, remains unpaid for 151 days from the original due date for such
payment, (b) as to which the Obligor thereof is the Obligor on any other
Defaulted Receivable, (c) as to which an Event of Bankruptcy has occurred and
remains continuing with respect to the Obligor thereunder, (d) as to which
payments have been extended, or the terms of payment thereof rewritten, without
the Agent's consent or (e) which, consistent with the Credit and Collection
Policy, would be written off the Seller's books as uncollectible.
A-6
<PAGE>
"Delinquent Receivable" means a Receivable that is not a Defaulted
---------------------
Receivable and: (a) as to which any payment, or part thereof, remains unpaid for
31 days or more from the original due date for such payment; or (b) which,
consistent with the Credit and Collection Policy, would be classified as
delinquent by the Seller.
"Designated Obligor" means, at any time, all Obligors except any Obligor as
------------------
to which the Agent has, at least three Business Days prior to the date of
determination, given notice to the Seller that such Obligor shall not be
considered a Designated Obligor.
"Discount Factor" at any time means an amount equal to the sum of (a) the
---------------
aggregate accrued and unpaid Earned Discount with respect to all Rate Tranches
at such time, (b) the aggregate accrued and unpaid Servicer's Fee with respect
to all Rate Tranches at such time, and (c) the aggregate accrued and unpaid
Facility Fee with respect to all Rate Tranches at such time.
"Discretionary Bank Advance" means an advance made by either the Liquidity
--------------------------
Agent pursuant to a Liquidity Funding Agreement or the Credit Agent pursuant to
the Credit Agreement, in either case in its sole discretion, to the Purchaser
for the purpose of funding the Purchaser's acquisition or maintenance of the
Purchaser's Interest or a portion thereof or the payment by the Purchaser of
certain other obligations specified in such agreements.
"Discretionary Bank Advance Rate" on any day means a rate per annum equal
------------------------------- ---------
to the sum of (a) 2% per annum, plus (b) the Alternate Base Rate in effect on
--------- ----
such day.
"Dollars" means dollars in lawful money of the United States of America.
-------
A-7
<PAGE>
"Earned Discount" for any Rate Tranche for each day in a Yield Period
---------------
applicable to such Rate Tranche means an amount equal to the sum of (a) the
product of (i) the Purchaser's Tranche Investment of such Rate Tranche on such
day, times (ii) the Purchaser Rate for such Rate Tranche on such day, times
----- -----
(iii) 1/360, plus (b) the Negative Spread Fee, if any, for such Rate Tranche on
----
such day. No provision of this Agreement shall require the payment or permit
the collection of Earned Discount in excess of the maximum permitted by
applicable law. Earned Discount for any Rate Tranche shall not be considered
paid by any distribution if at any time such distribution is rescinded or must
otherwise be returned for any reason.
"Eligible Contract" means a Contract in one of the forms set forth in
-----------------
Schedule 6.01(p)-1 or otherwise approved by the Agent.
- ------------------
"Eligible Investments" means any one or more of the following types of
--------------------
investments:
(a) marketable obligations of the United States having a legal, final
maturity of not more than 30 days from the date of acquisition;
(b) marketable obligations directly and fully guaranteed as to full
and timely payment by the United States having a legal, final maturity of not
more than 30 days from the date of acquisition;
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations denominated in Dollars and issued by any bank with
capital, surplus and undivided profits aggregating at least $100,000,000, the
short-term securities of which are rated at least as highly as the Commercial
Paper Notes by Standard & Poor's and by Moody's, in each case having a legal,
final maturity of not more than 30 days from the date of acquisition;
A-8
<PAGE>
(d) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clauses (a), (b) and (c) above
----------- --- ---
entered into with any bank of the type described in clause (c) above;
----------
(e) commercial paper having a maturity of not more than 30 days
(except for commercial paper issued by the Purchaser or any of its Affiliates
provided that Sakura (or any branch agency thereof) shall not be deemed an
- --------
Affiliate of the Purchaser) rated at least as highly as the Commercial Paper
Notes by Standard & Poor's and Moody's; and
(f) freely redeemable shares in money market funds (which provide
immediately available funds upon redemption) which invest solely in obligations,
bankers' acceptances, certificates of deposit, repurchase agreements and
commercial paper of the types described in clauses (a) through (e), without
----------- ---
regard to the limitations as to the maturity of such obligations, bankers'
acceptances, certificates of deposit, repurchase agreements or commercial paper
set forth in such clauses, rated at least AAm or AAm-G by Standard & Poor's and
Aaa by Moody's;
provided, however, that the maximum amount of funds of the Seller which may be
- -------- -------
invested in obligations of the types described in clauses (c), (d) and (e) above
-----------
of any one issuer (other than Sakura Japan) (including any branch or agency
thereof)) shall not exceed the greater of 5% of such funds and $10,000,000;
provided, further, however, that Eligible Investments shall not include
investments that have been assigned a rating by Standard & Poor's which rating
contains an "r" denotation.
"Eligible Receivable" means, at any time, a Receivable:
-------------------
(a) which represents a bona fide obligation resulting from a sale of
---- ----
goods and services in the ordinary course of
A-9
<PAGE>
business of the Originator as conducted on the date of the initial Purchase;
(b) which, (i) if the perfection of the Purchaser's undivided
ownership interest therein is governed by the laws of a jurisdiction where the
Uniform Commercial Code -- Secured Transactions is in force, constitutes an
account as defined in the Uniform Commercial Code as in effect in such
jurisdiction, and (ii) if the perfection of the Purchaser's undivided ownership
interest therein is governed by the law of any jurisdiction where the Uniform
Commercial Code -- Secured Transactions is not in force, the Seller has
furnished to the Agent such opinions of counsel and other evidence as has
reasonably been requested, establishing to the reasonable satisfaction of the
Agent that the Purchaser's undivided ownership interest and other rights with
respect thereto are not significantly less protected and favorable than such
rights under the UCC;
(c) the Obligor of which is a United States resident, is not an
Affiliate of any of the parties hereto, and is not a government or a
governmental subdivision or agency;
(d) the Obligor of which is not of an Obligor with regard to which a
matured or unmatured Event of Bankruptcy has occurred;
(e) which is denominated and payable only in Dollars in the United
States;
(f) the Obligor of which is a Designated Obligor;
(g) the Obligor of which is not the Obligor of any Defaulted
Receivable;
A-10
<PAGE>
(h) which is not a Defaulted Receivable and, on the date of purchase
of the Purchaser's Interest therein (other than on the Closing Date), is not a
Delinquent Receivable;
(i) with regard to which the warranty of the Seller in Section 6.01(l)
---------------
is true and correct;
(j) the assignment of which (including, without limitation, the sale
of which to Seller and the sale of an Undivided Interest in which to Purchaser)
does not contravene or conflict with any law, rule or regulation or any
contractual or other restriction, limitation or encumbrance, and the sale or
assignment of which does not require the consent of the Obligor thereof;
(k) the sale of an undivided interest in which does not contravene or
conflict with any law or require the consent or approval of, or notice to, any
Person, including the Obligor;
(l) which arises under an Eligible Contract that has been duly
authorized and that, together with such Receivable, is in full force and effect
and constitutes the legal, valid and binding obligation of the Obligor of such
Receivable enforceable against such Obligor in accordance with its terms and is
not subject to a reduction, cancellation, rebate or refund or any dispute,
offset, counterclaim or defense whatsoever;
(m) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations applicable
thereto (including, without limitation, laws, rules and regulations relating to
usury, truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) and with respect
to which no party to the Contract related thereto is in violation of any such
law, rule or regulation in any material
A-11
<PAGE>
respect if such violation would impair the collectibility of such Receivable;
(n) which (i) satisfies all applicable requirements of the Credit and
Collection Policy and (ii) complies with such other criteria and requirements
(other than those relating to the collectibility of such Receivable) as the
Agent may from time to time specify to the Seller following thirty days' notice;
(o) which arises under a Contract (i) the performance of which has
been completed by the Originator and by all other parties thereto other than the
Obligor, to the extent of the amount of the related Receivable, (ii) which has
been invoiced by the Originator and (iii) which requires such Receivable to be
paid in full within 30 days or less from the date on which the related goods or
services are received; provided, however, that with respect to this clause
-------- ------- ------
(iii), a Spring Dated Receivables shall be an Eligible Receivable if, when the
- -----
Unpaid Balance of such Spring Dated Receivable is added to the aggregate Unpaid
Balance of all other Spring Dated Receivables, the Aggregate Unpaid Balance of
Spring Dated Receivables does not exceed 15% of the Unpaid Balance of all Pool
Receivables.
(p) which represents all or part of the sales price of merchandise,
insurance or services within the meaning of section 3(c)(5) of the Investment
Company Act of 1940, as amended; and an undivided interest in which qualifies as
an eligible asset within the meaning of Rule 3a-7 under said Investment Company
Act; and
(q) as to which the Agent has not notified the Seller that the Agent
has determined, in its sole discretion, that such Receivable (or class of
Receivables) is not acceptable for purchase hereunder.
A-12
<PAGE>
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means, with respect to any Originator, any trade or
---------------
business (whether or not incorporated) that, together with such Originator, are
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the IRC.
"Event of Bankruptcy" shall be deemed to have occurred with respect to a
-------------------
Person if either:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the liquidation,
reorganization, debt arrangement, dissolution, winding up, or composition or
readjustment of debts of such Person, the appointment of a trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for such Person or all
or substantially all of its assets, or any similar action with respect to such
Person under any law relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60 consecutive
days; or an order for relief in respect of such Person shall be entered in an
involuntary case under the federal bankruptcy laws or other similar laws now or
hereafter in effect; or
(b) (i) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar law now or hereafter in effect, or
shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) for, such Person or for any substantial part of its property, or shall
make any general assignment for the benefit of creditors, or (ii) such Person
shall fail to, or admit in writing
A-13
<PAGE>
its inability to, pay its debts generally as they become due, or (iii) if a
corporation or similar entity, its board of directors shall vote to implement
any of the foregoing.
"Facility Fee" has the meaning set forth in the Fee Letter.
------------
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
---------------------
System, or any successor thereto or to the functions thereof.
"Fee Letter" has the meaning set forth in Section 4.03.
---------- ------------
"Final Pay Out Date" means the date, after the Commitment Termination Date,
------------------
when the Purchaser's Percentage has been reduced to zero in accordance with
clause (3) of Section 2.02.
- ---------- ------------
"Fiscal Period" means a fiscal period as specified in Schedule A to the
-------------
Securitization Agreement.
"Fiscal Period End Date" means the last day of a Fiscal Period.
----------------------
"GAAP" means generally accepted accounting principles in the United States
----
of America as in effect on the Closing Date.
"IRC" means the Internal Revenue Code of 1986 and any regulations
---
promulgated thereunder.
"Indemnified Amounts" has the meaning set forth in Section 13.01.
------------------- -------------
"Indemnified Party" has the meaning set forth in Section 13.01.
----------------- -------------
"Lien" means a lien, security interest, charge, or encumbrance, or other
----
right or claim of any Person other than
A-14
<PAGE>
(a) a potential claim or right (that has not yet been asserted) of a trustee
appointed for an Obligor in connection with any Event of Bankruptcy or (b) an
unfiled lien for taxes accrued but not yet payable.
"Liquidity Agent" means Sakura, as Liquidity Agent under the Liquidity
---------------
Funding Agreements, and any successor to Sakura in such capacity.
"Liquidity Bank" means and includes Sakura, as lender under the Liquidity
--------------
Funding Agreement, and any other or additional bank or other financial
institution hereafter extending credit to or for the account of the Purchaser
under the Liquidity Funding Agreement.
"Liquidity Funding" means either a loan made by a Liquidity Bank to the
-----------------
Purchaser or a purchase made by such Liquidity Bank from the Purchaser, in each
case pursuant to the Liquidity Funding Agreement.
"Liquidity Funding Agreement" means and includes (a) the Liquidity Funding
---------------------------
Agreement dated as of March 16, 1998 among the Purchaser, as borrower, the
Agent, Sakura, as lender and as agent for such lender(s), and (b) any other
agreement hereafter entered into by the Purchaser providing for the making of
loans or other extensions of credit to the Purchaser secured by a security
interest in the Purchaser's Interest (or any portion thereof), to support all or
part of the Purchaser's payment obligations under the Commercial Paper Notes or
to provide an alternate means of funding the Purchaser's Interest, and under
which the amount available from such loans or other extensions of credit is
limited to an amount calculated by reference to the value or unpaid balance of
the Pool Receivables or any portion or category thereof or the level of credit
enhancement available with respect thereto, in each case as amended,
supplemented or otherwise modified from time to time.
A-15
<PAGE>
"Lock Box" means any U.S. post office box to which the Obligors are
--------
directed to, or do, send payments under the Pool Receivables.
"Lock-Box Account" means any bank account into which collections from Pool
----------------
Receivables are deposited.
"Lock-Box Agreement" means a letter agreement, in substantially the form of
------------------
Exhibit 5.01(g), between the Seller and any Lock-Box Bank.
- ---------------
"Lock-Box Bank" means any of the banks holding one or more lock-box
-------------
accounts or deposit accounts for receiving Collections from Pool Receivables.
"Material Adverse Effect" means, with respect to any event, condition or
-----------------------
circumstance, a material adverse effect on:
(i) the business, assets, financial condition, operations or
prospects of the Seller or the Originator;
(ii) the ability of the Servicer, the Seller or the Originator
to perform its obligations under this Agreement or any other Transaction
Document;
(iii) the validity, enforceability or collectibility of this
Agreement, any other Transaction Document, or any material portion of the
Receivables or the related Contracts; or
(iv) the status, existence, perfection, priority or
enforceability of the Purchaser's Interest.
"Maximum Investment" means $40,000,000, as such amount may be reduced at
------------------
the option of the Seller pursuant to Section 1.05.
------------
A-16
<PAGE>
"Maximum Percentage" means for purposes of determining whether any Purchase
------------------
is permitted under Sections 1.02 and 5.02, 95%.
------------- ----
"Negative Spread Fee" means, for any Rate Tranche on any day in a Yield
-------------------
Period applicable to such Rate Tranche (computed without regard to clause (C) of
----------
the proviso to the definition of "Yield Period"), the sum of:
-------
(a) if such day occurs during a period in which a downgraded Liquidity
Bank shall have placed funds in escrow pursuant to the Liquidity Funding
Agreement, an amount designated by the Agent to enable, when taken together with
other amounts similarly designated with respect to other Rate Tranches, the
Purchaser to compensate such Liquidity Bank for the excess, if any, of (x) the
Earned Discount which would have accrued on funds in such escrow account at the
Bank Rate if such funds had been designated as a Liquidity Funding over (y) the
income actually earned by investing such funds, plus
----
(b) if all or any part of such Yield Period falls in the Pay Out
Period, the amount, if any, by which:
(i) the additional Earned Discount (calculated without taking
into account any Negative Spread Fee) which would have accrued on the
reductions of the Purchaser's Tranche Investment of such Rate Tranche
during such Yield Period if such reductions had remained as the Purchaser's
Investment, exceeds
-------
(ii) the income, if any, received by the Purchaser from
investing the proceeds of such reductions of the Purchaser's Investment.
A-17
<PAGE>
"Net Pool Balance" at any time means an amount equal to
----------------
(a) the aggregate Unpaid Balance of the Eligible Receivables in the
Receivables Pool specified in the most recent Periodic Report, minus
-----
(b) the aggregate (for all Obligors) of the amounts by which (i) the
Unpaid Balance of all Eligible Receivables of each Obligor in the Receivables
Pool exceeds (ii) the Concentration Limit for such Obligor at such time, plus
----
(c) the amount of funds in the Support Account at such time.
"Obligor" means a Person obligated to make payments with respect to a
-------
Receivable. In the case of an Obligor which is an Affiliate of any other
Obligor, the Concentration Limit, the Special Concentration Limit, if any, and
the aggregate Unpaid Balance of Pool Receivables of such Obligors shall be
calculated as if such Obligors were one Obligor.
"Originator" means Yuasa, together with its successors as permitted under
----------
the Receivables Transfer Agreement.
"Pay Out Period" means the period from and including the Commitment
--------------
Termination Date and to and including the Final Pay Out Date.
"Pay Out Statement" means a statement substantially in the form of Exhibit
-----------------
3.05(b).
"Periodic Report" means a report in substantially the form of Exhibit
--------------- -------
3.05(a).
- -------
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust,
A-18
<PAGE>
unincorporated association, joint venture, government or any agency or political
subdivision thereof or any other entity.
"Plan" means, at any time, an employee benefit plan, as defined in Section
----
3(3) of ERISA, that Originator or ERISA Affiliate maintains, contributes to or
has an obligation to contribute to on behalf of participants who are or were
employed by Originator or ERISA Affiliate.
"Pool Receivable" means a Receivable in the Receivables Pool.
---------------
"Program Information" has the meaning set forth in Section 14.08.
------------------- -------------
"Program Information Provider" has the meaning set forth in Section 14.08.
---------------------------- -------------
"Purchase" has the meaning set forth in Section 1.01(a).
-------- ---------------
"Purchase Report" has the meaning set forth in Section 2.4(d) of the
--------------- --------------
Receivables Transfer Agreement, in substantially the form of Exhibit A attached
---------
thereto.
"Purchase Request" has the meaning set forth in Section 1.03.
---------------- ------------
"Purchase Termination Date" has the meaning set forth in Section 2.5 of the
------------------------- -----------
Receivables Transfer Agreement.
"Purchaser" has the meaning set forth in the preamble.
--------- --------
"Purchaser Rate" for any Yield Period for any Rate Tranche means:
--------------
A-19
<PAGE>
(a) in the case of a Rate Tranche other than one referred to in clause
------
(b) or (c) of this definition, the Commercial Paper Rate for such Rate Tranche
- --- ---
for such Yield Period;
(b) in the case of a Rate Tranche funded by a Discretionary Bank
Advance, a rate per annum equal for each day in such Yield Period to the
---------
Discretionary Bank Advance Rate in effect on such day; and
(c) in the case of a Rate Tranche funded pursuant to the Liquidity
Funding Agreement, the Bank Rate for such Rate Tranche for such Yield Period;
provided, however, that on any day when any Termination Event or Unmatured
- -------- -------
Termination Event shall have occurred and be continuing, the Purchaser Rate
shall mean a rate per annum equal to the Alternate Base Rate in effect on such
--- -----
day plus 2% per annum.
--- -----
"Purchaser's Allocation" has the meaning set forth in Section 2.02.
---------------------- ------------
"Purchaser's Interest" has the meaning set forth in Section 2.01.
-------------------- ------------
"Purchaser's Investment" at any time means an amount equal to
----------------------
(a) the aggregate of the amounts theretofore paid to the Seller for
the acquisition of the Purchaser's Interest by Purchase pursuant to Sections
--------
1.01(a) and 1.03, less
- ------- ---- ----
(b) the sum of (i) the aggregate amount of Collections theretofore
received by the Servicer and actually distributed to the Agent for the account
of the Purchaser on account of such
A-20
<PAGE>
Purchaser's Investment pursuant to Sections 3.01 and 3.02, and (ii) the
------------- ----
aggregate amount of funds theretofore withdrawn by the Agent from the Support
Account for application to such Purchaser's Investment pursuant to Section 3.08;
------------
provided, however, the Purchaser's Investment shall not be considered reduced by
- -------- -------
any distribution of any portion of Collections if at any time such distribution
is rescinded or must otherwise be returned for any reason.
"Purchaser's Percentage" has the meaning set forth in Section 2.02.
---------------------- ------------
"Purchaser's Share" of any Collections means a portion of such Collections
-----------------
in an amount equal to the product of (a) the amount of such Collections, times
-----
(b) the Purchaser's Percentage as in effect on the date of determination.
"Purchaser's Tranche Investment" has the meaning set forth in Section 2.03.
------------------------------ ------------
"Rate Tranche" has the meaning set forth in Section 2.03.
------------ ------------
"Rate Variance Factor" means at any time, 2.0%.
--------------------
"Receivable" means any right to payment from a Person, whether constituting
----------
an account, chattel paper, instrument or general intangible, arising from the
sale by Originator of goods and services, and includes the right to payment of
any interest or finance charges and other obligations of such Person with
respect thereto.
"Receivables Pool" means at any time all then outstanding Receivables as to
----------------
which the Obligors thereunder are Designated Obligors.
A-21
<PAGE>
"Receivables Transfer Agreement" means that certain Receivables Transfer
------------------------------
Agreement, dated as of March 16, 1998, among Yuasa and the Seller, as the same
may be amended, supplemented, amended and restated or otherwise modified from
time to time in accordance with the terms thereof and of this Agreement.
"Regulation D" means Regulation D of the Federal Reserve Board, or any
------------
other regulation of the Federal Reserve Board that prescribes reserve
requirements applicable to nonpersonal time deposits or "Eurocurrency
Liabilities" as presently defined in Regulation D, as in effect from time to
time.
"Regulatory Change" means, relative to any Affected Party
-----------------
(a) any change in (or the adoption, implementation, phase-in or
commencement of effectiveness of) any
(i) United States federal or state law or foreign law
applicable to such Affected Party;
(ii) regulation, interpretation, directive, requirement or
request (whether or not having the force of law) applicable to such
Affected Party of (A) any court, government authority charged with the
interpretation or administration of any law referred to in clause (a)(i) or
-------------
of (B) any fiscal, monetary or other authority having jurisdiction over
such Affected Party; or
(iii) generally accepted accounting principles or regulatory
accounting principles applicable to such Affected Party and affecting the
application to such Affected Party of any law, regulation, interpretation,
directive, requirement or request referred to in clause (a)(i) or (a)(ii)
------------- -------
above; or
A-22
<PAGE>
(b) any change in the application to such Affected Party of any
existing law, regulation, interpretation, directive, requirement, request or
accounting principles referred to in clause (a)(i), (a)(ii) or (a)(iii) above;
------------- ------- --------
or
(c) the issuance, publication or release of any regulation,
interpretation, directive, requirement or request of a type described in clause
------
(a)(ii) above to the effect that the obligations of a Liquidity Bank under the
- -------
Liquidity Funding Agreement are not entitled to be included in the zero percent
category of off-balance sheet assets for purposes of any risk-weighted capital
guidelines applicable to such Liquidity Bank or any related Affected Party.
"Reinvestment" has the meaning set forth in Section 1.01(b).
------------ ---------------
"Reinvestment Period" means the period from and including the date hereof
-------------------
to but excluding the Commitment Termination Date.
"Related Property" means, with respect to any Pool Receivable: (a) all of
----------------
the Seller's (or, in the case of the Receivables Transfer Agreement,
Originator's) right, title and interest in and to all Contracts, purchase orders
or other agreements or documents that evidence, secure or otherwise relate to
such Pool Receivable; (b) all of the Seller's (or, in the case of the
Receivables Transfer Agreement, Originator's) interest in the merchandise
(including returned merchandise), if any, relating to the sale which gave rise
to such Pool Receivable; (c) all Liens from time to time purporting to secure
payment of such Pool Receivable, whether pursuant to the Contract related to
such Pool Receivable or otherwise, and all property subject to such Liens; (d)
all UCC financing statements covering any collateral securing payment of such
Pool Receivable (to the extent of the interest of the Purchaser in the related
Pool Receivable); (e) all guarantees and other agreements or arrangements of
whatever character from time to time supporting
A-23
<PAGE>
or securing payment of such Pool Receivable whether pursuant to the Contract
related to such Pool Receivable or otherwise; (f) all books and records
evidencing or otherwise relating to any Pool Receivables or any of the
foregoing; (g) all Collections with respect to, and other proceeds of, such Pool
Receivables and any of the property described above; (h) for purposes of this
Agreement (but not the Receivables Transfer Agreement) all rights of the Seller
under the Receivables Transfer Agreement with respect to such Receivable; and
(i) all of the Seller's right, title and interest in and to the Support Account.
"Reportable Event" means an event described in Section 4043(b) of ERISA
----------------
with respect to a Plan as to which the 30-day notice requirement has not been
waived by the Pension Benefit Guaranty Corporation.
"Sakura" has the meaning set forth in the preamble.
------ --------
"Sakura Japan" has the meaning set forth in the preamble.
------------ --------
"Sales Based Default Percentage" means, on any date of determination, a
------------------------------
percentage equal to
(a) the balance of the Pool Receivables (excluding any Receivables
that are Ineligible Receivables other than by reason of being Defaulted
Receivables), as of the last day of the immediately preceding Fiscal Period,
(i) as to which any payment, or part thereof, remains unpaid
for more than 150 but not more than 180 days from the original due date for
such payment, or
(ii) as to which any payment, or part thereof, remains unpaid
for less than 151 days from the original due date for such payment and
which, the Seller has written off
A-24
<PAGE>
from its books as uncollectible during such immediate preceding Fiscal
Period,
divided by
- ----------
(b) the sum of all gross sales (calculated in accordance with GAAP)
generated in the seventh Fiscal Period immediately preceding such date of
determination.
"Scheduled Commitment Termination Date" has the meaning set forth in
-------------------------------------
Section 1.04.
- ------------
"Seller" has the meaning set forth in the preamble.
------ --------
"Seller Information" has the meaning set forth in Section 14.07.
------------------ -------------
"Seller's Collection Amount" at any time means an amount equal to the
--------------------------
excess, if any, of (a) the aggregate of the amounts theretofore paid by the
Servicer to the Seller for Reinvestment pursuant to Section 3.01(a)(iii) over
-------------------- ----
(b) the aggregate of the amounts, if any, theretofore paid by the Seller to the
Servicer pursuant to the last sentence of Section 3.01(b).
---------------
"Seller's Share" of any Collections means a portion of such Collections
--------------
equal to the amount of such Collections less the Purchaser's Share thereof.
----
"Servicer" has the meaning set forth in Section 8.01.
-------- ------------
"Servicer's Fee" accrued for any day means
--------------
(a) an amount equal to (x) 0.50% per annum, times (y) the amount of
--- ----- -----
the Purchaser's Investment at the close of business on such day, times (z)
-----
1/360; or
A-25
<PAGE>
(b) on and after the Servicer's reasonable request made at any time
when the Originator shall no longer be the Servicer, an alternative amount
specified by Servicer not exceeding (x) 110% of the Servicer's aggregate
documented reasonable cost and expenses of performing its obligations under this
Agreement during the Yield Period when such day occurs, divided by (y) the
number of days in such Yield Period.
With respect to any Rate Tranche, the Servicer's Fee allocable thereto shall be
equal to the Servicer's Fee determined as set forth above times a fraction, the
-----
numerator of which is the Purchaser's Tranche Investment of such Rate Tranche
and the denominator of which is the Purchaser's Investment.
"Servicer's Fee Reserve" at any time means an amount equal to the product
----------------------
of
(a) the Purchaser's Investment at such time, times
-----
(b) (i) the percentage per annum set forth in clause (a)(x) of the
--- ----- -------------
definition of the "Servicer's Fee", or (ii) if the Servicer's Fee is calculated
pursuant to clause (b) of such definition, the percentage per annum determined
---------- --- -----
for each day by dividing the amount of the Servicer's Fee accrued for such day
by the Purchaser's Investment at the close of business on such day, multiplying
the quotient by 360 and expressing the product as a percentage, times
-----
(c) a fraction, the numerator of which is two times the then Average
Maturity of the Receivables Pool and the denominator of which is 360.
"Settlement Date" means the last day of each Settlement Period.
---------------
A-26
<PAGE>
"Settlement Period" for any Rate Tranche means
-----------------
(a) each period commencing on the first day of each Yield Period for
such Rate Tranche and ending on the last day of such Yield Period; and
(b) on and after the Commitment Termination Date, such period
(including, without limitation, a period of one day) as shall be selected from
time to time by the Agent or, in absence of any such selection, each period of
thirty days from the next preceding Settlement Date;
provided, however, that
- -------- -------
(i) with respect to any Yield Period of one day, the related
Settlement Period shall be the first day following such Yield Period;
(ii) any Settlement Period which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding
Business Day; and
(iii) the last Settlement Period shall end on the Final Pay Out
Date.
"Special Concentration Limit" for any Obligor at any time means the amount,
---------------------------
if any, most recently designated by the Agent in a writing delivered to the
Seller as the Special Concentration Limit for such Obligor, as set forth in
Schedule [_] hereto.
"Spring Dated Receivable" means an Eligible Receivable, other than with
-----------------------
respect to clause (o)(iii) of the definition thereof, arising from an invoice
---------------
dated October, November or December in any calendar year, the Contract with
respect to which requires such Receivable to be paid in full within not less
than 31 days nor more than 240 days.
A-27
<PAGE>
"Stock" means all shares, options, warrants, general or limited partnership
-----
interests or other equivalents (regardless of how designated) of or in a
corporation, partnership or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act).
"Stockholder" means, with respect to any Person, each holder of Stock of
-----------
such Person.
"Structuring Fee" has the meaning set forth in the Fee Letter.
---------------
"Subsidiary" means a corporation of which the Servicer and/or its other
----------
Subsidiaries own, directly or indirectly, such number of outstanding shares as
have more than 50% of the ordinary voting power for the election of directors.
"Support Account" has the meaning set forth in Section 3.04(a).
--------------- ---------------
"Termination Event" has the meaning set forth in Section 10.01.
----------------- -------------
"Transaction Documents" means this Agreement, the Receivables Transfer
---------------------
Agreement, the Lock Box Agreements, the Fee Agreement and the other documents
to be executed and delivered in connection with this Agreement or the
Receivables Transfer Agreement.
"UCC" means the Uniform Commercial Code as from time to time in effect in
---
the applicable jurisdiction or jurisdictions.
A-28
<PAGE>
"Unadjusted Purchaser's Percentage" has the meaning set forth in Section
--------------------------------- -------
2.02.
- ----
"Unfunded Current Liability" of any Plan means the amount, if any, by which
--------------------------
the actuarial present value of the accumulated plan benefits under the Plan as
of the close of its most recent plan year, determined in accordance with
Statement of Financial Accounting Standards No. 35, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan, exceeds the fair market value of the assets allocable thereto,
determined in accordance with Section 412 of the IRC.
"Unmatured Termination Event" means any event which, with the giving of
---------------------------
notice or lapse of time or both, would, unless cured or waived, become a
Termination Event.
"Unpaid Balance" of any Receivable means at any time the sum of (x) the
-------------- ---
unpaid principal amount thereof, plus (y) the unpaid amount of all finance
----
charges, interest payments and other amounts actually accrued thereon at such
time, but excluding, in the case of clause (y) next above, all late payment
--------- ----------
charges, delinquency charges, and extension or collection fees.
"Weighted Average Cost of Funds" means the weighted average cost of funds
------------------------------
under (a) the Securitization Agreement (which cost of funds shall be calculated
exclusive of any fees payable to the Program Administrator) and (b) the Company
Note (as defined in Section 2.4(b) of the Receivables Transfer Agreement).
--------------
"Yield Period" means with respect to any Rate Tranche, each period
------------
(a) commencing on, and including, the date of creation of such Rate
Tranche pursuant to Section 2.03, or the last day of the immediately preceding
------------
Yield Period for such Rate Tranche (whichever is later); and
A-29
<PAGE>
(b) ending on, and excluding, the date that falls
(i) in the case of a Rate Tranche funded by the issuance of
Commercial Paper Notes, except as provided in clause (iii) below, such
------------
number of days (not to exceed 270 days) thereafter as the Agent shall
select, after consultation with the Seller; and
(ii) in the case of (A) any Rate Tranche funded by Liquidity
Fundings, and (B) any Rate Tranche funded by a Discretionary Bank Advance,
and (C) any other Rate Tranche, if the Purchaser Rate for such Yield Period
is based on the Alternate Base Rate, such number of days thereafter as the
Agent may select in its sole discretion;
provided, however, that
- -------- -------
(A) any Yield Period (other than a Yield Period consisting of one
day) which would otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day;
(B) any Yield Period of one day for any Rate Tranche, (I) if such
Yield Period is the initial Yield Period for a new Rate Tranche created in
connection with a Purchase, shall be the day of the Purchase of such Rate
Tranche, and (II) if such Yield Period is not the initial Yield Period for
such Rate Tranche (or, in the case of a Rate Tranche created by division or
combination pursuant to Section 2.03, any predecessor Rate Tranche), (x) if
------------
the immediately preceding Yield Period is more than one day, shall be the
last day of such immediately preceding Yield Period, and (y) if the
immediately preceding Yield Period is one day, shall be the next day
following such immediately preceding Yield Period;
A-30
<PAGE>
(C) any Yield Period which commences before the Commitment
Termination Date and would otherwise end after the Commitment Termination
Date shall end on the Commitment Termination Date; and
(D) each Yield Period which commences on or after the Commitment
Termination Date shall be of such duration as the Agent may select in its
sole discretion.
The "related" Yield Period for any Rate Tranche at any time means the Yield
-------
Period pursuant to which Earned Discount is then accruing for such Rate Tranche.
"Yield Reserve" at any time means an amount equal to the product of (a) the
-------------
Purchaser's Investment at such time, times (b) the sum of the (i) highest
-----
applicable rate for a hypothetical Rate Tranche equal to the Purchaser's
Investment and for a Yield Period of one month deemed to commence at such time,
plus (ii) the Rate Variance Factor deemed to be in effect at such time, plus
- ---- ----
(iii) 0.35%, times (c) a fraction, the numerator of which is two times the
-----
Average Maturity of the Receivables Pool and the denominator of which is 360.
"Yuasa" has the meaning set forth in the preamble.
-----
A-31
<PAGE>
Exhibit 10.6
[EXECUTION COPY]
RECEIVABLES TRANSFER AGREEMENT
Dated as of March 16, 1998
between
YUASA EXIDE, INC.
and
YESCO, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS AND RELATED MATTERS
1.1. Defined Terms................................................... 1
-------------
1.2. Other Interpretive Matters...................................... 1
--------------------------
ARTICLE II
CONTRIBUTION OF RECEIVABLES; AGREEMENT TO
PURCHASE AND SELL; PURCHASE PRICE
2.1. Contribution of Receivables..................................... 2
---------------------------
2.2. Agreement to Purchase and Sell.................................. 2
------------------------------
2.3. Timing of Purchases and Contributions........................... 2
-------------------------------------
2.4. Purchase Price for Receivables Sold by Originator............... 2
-------------------------------------------------
2.5. Purchase Termination Date....................................... 5
-------------------------
2.6. No Recourse or Assumption of Obligations........................ 5
----------------------------------------
2.7. Intention of the Parties........................................ 5
------------------------
2.8. Advances by the Company to Originator........................... 5
-------------------------------------
ARTICLE III
ADMINISTRATION AND COLLECTION
3.1. Originator to Act as Servicer................................... 6
-----------------------------
3.2. Deemed Collections.............................................. 6
------------------
3.3. [Reserved]...................................................... 7
3.4. Actions Evidencing Purchases.................................... 7
----------------------------
3.5. Application of Collections...................................... 8
--------------------------
3.6. Rights of the Company........................................... 8
---------------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ORIGINATOR
4.1. Organization and Good Standing.................................. 8
------------------------------
4.2. Due Qualification............................................... 8
-----------------
4.3. Power and Authority; Due Authorization.......................... 8
--------------------------------------
4.4. Valid Sale or Contribution; Binding Obligations................. 9
-----------------------------------------------
4.5. No Violation.................................................... 9
------------
4.6. No Proceedings.................................................. 9
--------------
4.7. Bulk Sales Act.................................................. 9
--------------
4.8. Government Approvals............................................ 10
--------------------
4.9. Financial Condition............................................. 10
-------------------
4.10. Margin Regulations.......................................... 10
------------------
4.12. Accuracy of Information..................................... 11
-----------------------
4.13. Offices..................................................... 11
-------
4.14. Trade Names................................................. 11
-----------
4.15. Compliance with Applicable Laws............................. 11
-------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.16. Solvency........................................................ 11
--------
4.18. Servicing Programs.............................................. 12
------------------
4.19. Investment Company Act.......................................... 12
----------------------
4.20. Receivables Evidenced by Instruments and
Chattel Paper................................................... 12
--------------
4.21. Material Adverse Effect......................................... 12
-----------------------
4.22. Ventures, Subsidiaries and Affiliates;
Outstanding Stock............................................... 12
-----------------
4.23. Taxes........................................................... 13
-----
4.24. Notices to Obligors............................................. 13
-------------------
4.25. ERISA........................................................... 13
-----
4.26. Representations and Warranties in Other
Transaction Documents........................................... 13
---------------------
ARTICLE V
COVENANTS OF ORIGINATOR
5.1. Affirmative Covenants........................................... 14
---------------------
5.2. Reporting Requirements.......................................... 17
----------------------
5.3. Negative Covenants.............................................. 17
------------------
ARTICLE VI
PURCHASE TERMINATION EVENTS
6.1. Purchase Termination Events..................................... 19
---------------------------
6.2. Remedies........................................................ 20
--------
ARTICLE VII
INDEMNIFICATION
7.1. Indemnities by Originator....................................... 20
-------------------------
ARTICLE VIII
MISCELLANEOUS
8.1. Amendments, Waivers, etc....................................... 22
------------------------
8.2. Notices, etc................................................... 23
------------
8.3. Binding Effect; Assignability.................................. 23
-----------------------------
8.4. Survival....................................................... 23
--------
8.5. GOVERNING LAW.................................................. 23
-------------
8.6. Costs, Expenses and Taxes...................................... 24
-------------------------
8.7. No Proceedings................................................. 24
--------------
8.8. Waiver of Jury Trial........................................... 24
--------------------
8.9. Consent To Jurisdiction; Waiver Of Immunities.................. 24
---------------------------------------------
8.10. Execution in Counterparts...................................... 25
-------------------------
</TABLE>
SCHEDULES
SCHEDULE 2.1 List of Contributed Assets
ii
<PAGE>
SCHEDULE 4.13 Office Locations
SCHEDULE 4.14 Trade Names
SCHEDULE 4.22 Subsidiaries and Outstanding Stock of Originator
EXHIBITS
--------
EXHIBIT A Form of Purchase Report
EXHIBIT B Form of Company Note
EXHIBIT C Closing Date Report
iii
<PAGE>
RECEIVABLES TRANSFER AGREEMENT
THIS RECEIVABLES TRANSFER AGREEMENT (as amended, supplemented or modified from
time to time, this "Agreement"), dated as of March 16, 1998, is between YUASA
---------
EXIDE, INC., a California corporation ("Originator"), as seller and contributor,
----------
and YESCO, INC. a Nevada corporation (the "Company"), as purchaser and
-------
contributee.
Background
----------
1. On the Closing Date, Originator is transferring certain Receivables and
Related Property to the Company as a contribution to the Company in return for
shares of the common stock of the Company. From time to time Originator may
transfer additional Receivables and Related Property to the Company as a capital
contribution to the Company.
2. In order to finance its business, Originator wishes to sell certain
Receivables and Related Property from time to time to the Company, and the
Company is willing, on the terms and subject to the conditions set forth herein,
to purchase such Receivables and Related Property from Originator.
3. The Company intends to obtain a Commitment from the Purchaser (as defined
herein) pursuant to the Securitization Agreement (as defined herein) in order to
finance its purchases of certain Receivables and Related Property hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND RELATED MATTERS
1.1. Defined Terms. Unless otherwise indicated, certain terms that are
-------------
capitalized and used throughout this Agreement are defined in Appendix A to the
----------
Securitization Agreement of even date herewith (as amended, supplemented or
otherwise modified from time to time, the "Securitization Agreement"), among the
------------------------
Company, as Seller, Originator, as Servicer, Prominent Funding Corporation, as
purchaser (the "Purchaser"), and The Sakura Bank, Limited, a banking corporation
---------
organized under the laws of Japan, acting through its New York Branch, as agent
for the Purchaser (the "Agent").
-----
1.2. Other Interpretive Matters. In this Agreement, unless otherwise
--------------------------
specified: (a) references to any Section or Annex refer to such Section of, or
Annex to, this Agreement, and references in any Section or definition to any
subsection or clause refer to such
1
<PAGE>
subsection or clause of such Section or definition; (b) "herein", "hereof",
------ ------
"hereto", "hereunder" and similar terms refer to this Agreement as a whole and
------ ---------
not to any particular provision of this Agreement; (c) "including" means
---------
"including without limitation", and other forms of the verb "to include" have
---------------------------- ----------
correlative meanings; (d) the word "or" is not exclusive; and (e) captions are
--
solely for convenience of reference and shall not affect the meaning of this
Agreement;
ARTICLE II
CONTRIBUTION OF RECEIVABLES; AGREEMENT TO
PURCHASE AND SELL; PURCHASE PRICE
2.1. Contribution of Receivables. On the Closing Date (as defined below),
---------------------------
Originator hereby assigns and transfers to the Company, as a contribution of
capital, Receivables and Related Property with respect thereto consisting of
each Receivable of Originator identified in Schedule 2.1, with an aggregate Fair
Market Value (as defined below) of all such Receivables shall be equal to the
amount set forth on Exhibit C. In addition, from time to time Originator may
---------
assign and transfer to the Company, as a contribution of capital, Receivables
and Related Property with respect thereto as designated by Originator
(collectively, together with Receivables and Related Property contributed on the
Closing Date; the "Contributed Assets").
------------------
2.2. Agreement to Purchase and Sell. On the terms and subject to the
------------------------------
conditions set forth in this Agreement, Originator hereby sells to the Company,
and the Company hereby purchases from Originator, all of Originator's right,
title and interest in and to the Receivables and the Related Property (other
than the Contributed Assets) and all proceeds of the foregoing.
2.3. Timing of Purchases and Contributions. Originator's entire right, title
-------------------------------------
and interest in each Receivable that existed and was owing to Originator as of
the close of Originator's business on March 16, 1998 (the "Closing Date") shall
------------
be deemed to have been sold and/or contributed to the Company on such date.
After the Closing Date, each Receivable created or purchased by Originator shall
be purchased (or, if such Receivable is designated as being contributed by
Originator to the Company pursuant to Section 2.1, acquired) and owned by the
-----------
Company (without any further action) upon the creation of such Receivable or the
purchase thereof by the Originator. The Related Property with respect to each
Receivable (and proceeds of such Receivable and Related Property) shall be sold
and/or contributed at the same time as such Receivable, whether such Related
Property (or proceeds) exist at such time or arise or are acquired thereafter.
2.4. Purchase Price for Receivables Sold by Originator. (a) Calculation of
------------------------------------------------- --------------
Purchase Price. The purchase price for each Receivable and the Related Property
- --------------
with respect thereto sold to the Company (excluding any Contributed Assets)
shall equal the fair
2
<PAGE>
market value of such Receivable on the date of purchase and shall be computed by
multiplying the Unpaid Balance of that Receivable on such date by the Discount
Percentage with respect to such date. With respect to sales of receivables on
any day during a Fiscal Period, the Discount Percentage (the "Discount
--------
Percentage") shall be equal to (I) 100% minus (II)(A) Average Maturity on such
- ----------
day divided by 360, multiplied by (B) the discount rate equivalent of a per
----------
annum interest rate equal to the sum of (i) 0.50% and (ii) the Company's
Weighted Average Cost of Funds on such day, plus (III) the Default Ratio on such
day. For purposes of computing the Discount Percentage on any day after the
first Fiscal Period, Average Maturity, the Company's Weighted Average Cost of
Funds and the Default Ratio shall be computed using data from the most recent
Fiscal Period for which a Periodic Report has been delivered pursuant to the
Securitization Agreement.
(b) Initial Purchase Price Payment. On the terms and subject to the
------------------------------
conditions set forth in this Agreement, the Company agrees to pay to Originator
the purchase price for the purchase of Receivables and the Related Property to
be sold (and not contributed) to the Company on the Closing Date (i) in cash, to
the extent of funds obtained by the Company on such date under the
Securitization Agreement from the sale by the Company to the Purchaser of the
Purchaser's Interest in such Receivables, and (ii) by issuing to Originator a
promissory note in the form of Exhibit B (as such promissory note may be
---------
amended, supplemented, endorsed or otherwise modified from time to time,
together with all promissory notes issued from time to time in substitution
therefor or renewal thereof, the "Company Note") in an initial principal amount
------------
equal to the purchase price for such Receivables minus the amount paid under
clause (i) above. The initial purchase price for the Receivables and Related
- ----------
Property with respect thereto sold to the Company on the Closing Date shall be
set forth on Exhibit C.
---------
(c) Subsequent Purchase Price Payments. On the 10th day (or if such day is not
----------------------------------
a Business Day, the next Business Day) of each Fiscal Period (the "Reporting
---------
Date"), the Company and Originator shall settle as to the purchase price for
- ----
Receivables and Related Property sold during the immediately preceding Fiscal
Period (other than Receivables and Related Property sold on the Closing Date).
Notwithstanding such periodic settlement arrangement, on each Business Day,
Originator, in its capacity as the Company's servicer, will, on behalf of the
Company, transfer to Originator (for Originator's own account) all cash made
available to the Company for such purpose under Sections 3.01 and 3.07 of the
------------- ----
Securitization Agreement after satisfying the Company's obligations under the
Securitization Agreement. On each Reporting Date, the Company and the Originator
shall determine the aggregate amount of such transfers made during the
immediately preceding Fiscal Period and the aggregate purchase price for
Receivables and Related Property sold during such immediately preceding Fiscal
Period. If any advance from the Company to the Originator pursuant to Section
-------
2.8 hereof was outstanding as of the prior Reporting Date (on the basis of
- ---
calculations made pursuant to this subsection (b) on that
--------------
3
<PAGE>
prior Reporting Date), then a portion of the purchase price equal to the amount
of such advance shall be deemed to have been paid in consideration of
extinguishment of such advance. The amounts transferred shall then be deemed to
have been applied:
first, as a payment of accrued and unpaid interest due on the Company
Note, calculated as provided in the Company Note, with respect to the
immediately (or any earlier) preceding Fiscal Period; and
second, as a payment of the remaining purchase price for Receivables
sold during the immediately preceding Fiscal Period and their Related
Property;
provided, that in the event that on any Reporting Date the Company and the
- --------
Originator determine that the amount of cash transferred to the Originator
pursuant to this Section 2.4(c) during the preceding Fiscal Period was in excess
--------------
of the amount due and payable under clauses first and second above, the
Originator shall make an adjustment payment on such Reporting Date in
immediately available funds, in an amount equal to such excess; provided further
-------- -------
that such adjustment payment shall be reduced by (i) an amount up to the
outstanding principal amount of the Company Note on such Reporting Date, which
reduction shall be deemed a payment of such outstanding principal amount, and
(ii) if the adjustment payment has not been reduced to zero pursuant to clause
(i) above, an amount up to the amount of advances by the Company pursuant to
Section 2.08 that are permitted on such Reporting Date consistent with Section
- ------------ -------
7.03(k) of the Securitization Agreement. Any portion of the purchase price for
- -------
Receivable and Related Property sold during any Fiscal Period which remains
unpaid on the next succeeding Reporting Date, after giving effect to the
foregoing settlements and transfers made on such date, shall be paid by
increasing the outstanding principal amount of the Company Note.
(d) Purchase Reports. On or prior to the Reporting Date, Originator agrees to
----------------
prepare and deliver to the Company a signed report, in substantially the form of
Exhibit A or in such other form as the parties may agree on from time to time
- ---------
with the written approval of the Agent (each, a "Purchase Report"). Each
---------------
Purchase Report shall set forth a summary of information as to the Receivables
transferred, collections on Receivables and other charges or credits as may be
required by this Agreement as of the preceding Fiscal Period End Date, and the
Discount Percentage as of such Reporting Date.
(e) Company Note. Servicer shall make all appropriate record keeping entries
------------
with respect to the Company Note or otherwise to reflect the foregoing payments
and adjustments pursuant to Section 3.2, and Servicer's books and records shall
-----------
constitute rebuttable presumptive evidence of the principal amount of and
accrued interest on the Company Note at any time. Furthermore, Servicer shall
hold the Company Note for the benefit of Originator (except as and to the extent
the Agent and the Company shall otherwise
4
<PAGE>
consent in writing), and all payments under the Company Note shall be made to
the Servicer for the account of the applicable payee thereof. Originator hereby
irrevocably authorizes Servicer to mark the Company Note "CANCELLED" and to
return the Company Note to the Company upon the final payment thereof after the
occurrence of the Purchase Termination Date.
2.5. Purchase Termination Date. The "Purchase Termination Date" means the
------------------------- -------------------------
earliest of (a) the date of termination of this Agreement pursuant to Section
-------
6.2(i) or (ii), (b) the Final Pay Out Date, (c) the date of any Termination
- ------ ----
Event of the type described in Section 10.01(p) of the Securitization Agreement
----------------
and (d) the date of any Event of Bankruptcy with respect to the Company.
2.6. No Recourse or Assumption of Obligations. Except as specifically
----------------------------------------
provided in this Agreement, the purchase and sale of Receivables and Related
Property under this Agreement shall be without recourse to Originator.
Originator and the Company intend the transactions hereunder to constitute true
sales of Receivables and the Related Property by Originator to the Company,
providing the Company with the full risks and benefits of ownership of the
Receivables and Related Property (such that the Receivables and the Related
Property would not be property of Originator's estate in the event of
Originator's bankruptcy).
The Company shall not have any obligation or liability with respect to any
Receivables or Related Property, nor shall the Company have any obligation or
liability to any Obligor or other customer or client of Originator (including
any obligation to perform any of the obligations of Originator under any
Receivables or Related Property).
2.7. Intention of the Parties. It is the express intent of the parties
------------------------
hereto that the transfers of the Receivables and Related Property by Originator
to the Company as contemplated by this Agreement be, and be treated as, sales
and capital contributions, respectively, and not as secured loans secured by the
Receivables and Related Property. If, however, notwithstanding the intent of
the parties, such transactions are deemed to be loans, Originator hereby grants
to the Company a security interest in all of the Originator's right, title and
interest in and to the Receivables and the Related Property now existing and
hereafter created, and all proceeds thereof, to secure all of Originator's
obligations hereunder.
2.8. Advances by the Company to Originator. The Company may make advances to
-------------------------------------
Originator from time to time if so agreed between such parties and to the extent
the Company has funds available for that purpose after satisfying its
obligations under this Agreement and the Securitization Agreement. Any such
advances shall be payable upon demand and the Company may net any payments to be
made to Originator hereunder against any such outstanding advances.
5
<PAGE>
ARTICLE III
ADMINISTRATION AND COLLECTION
3.1. Originator to Act as Servicer. Notwithstanding the sale of Receivables
-----------------------------
pursuant to this Agreement, Originator shall continue to be responsible for the
servicing, administration and collection of the Receivables, all on the terms
set out in (and subject to any rights to terminate Originator as servicer
pursuant to) the Securitization Agreement.
3.2. Deemed Collections. (a) If on any day the Unpaid Balance of any Pool
------------------
Receivable is (i) reduced as a result of any defective, rejected or returned
merchandise or services, any cash discount, any allowances or billing errors,
any trade-in or trade-up, any adjustment by Originator or any Affiliate of
Originator or any early termination, refinancing, prepayment, consolidation or
replacement of the Contract related to such Receivable, (ii) reduced or
cancelled as a result of a setoff in respect of any claim or dispute by the
Obligor thereof against Originator or any Affiliate of Originator or any other
Person (whether such claim arises out of the same or a related or an unrelated
transaction), (iii) reduced on account of the obligation of Originator or an
Affiliate of Originator to pay to the related Obligor any rebate or refund, or
(iv) otherwise is less than the amount reported by Originator in (or for
purposes of) any Purchase Report, or any Periodic Report or Payout Statement
delivered pursuant to the Securitization Agreement, then, on such day,
Originator shall be deemed to have received a Collection of such Pool Receivable
in the amount of such reduction or cancellation or, the difference between the
actual Unpaid Balance and the amount reported by Originator, as applicable.
(b) If on any day it is determined that any of the representations or
warranties of Originator set forth in Section 4.4, 4.11 or 4.17 are not true as
to any Receivable, Originator shall be deemed to have received a Collection of
such Receivable in the amount of the Unpaid Balance of such Receivable. To the
extent that the Company subsequently receives Collections with respect to any
such Receivable, the Company shall pay Originator an amount equal to the amount
so collected.
(c) Not later than the Reporting Date occurring in the first Fiscal Period
after the Business Day on which Originator is deemed, pursuant to this Section
-------
3.2, to have received any Collections, the amount of any such Collections shall
- ---
be applied as a credit for the account of the Company against the purchase price
of Receivables subsequently purchased by the Company from the Originator
hereunder (which credit may be in a form of an adjustment to the Unpaid Balance
of such subsequently purchased Receivables); provided, however, if the purchase
-------- -------
price for such subsequent purchases of Receivables is less than the amount of
such credit, the amount of such credit (i) shall be paid in cash to the Company
by the Originator, or (ii) shall be deducted from the principal amount
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outstanding under the Company Note in each case on such Reporting Date; provided
--------
further, however, that at any time (y) on or after a Termination Event under the
- ------- -------
Securitization Agreement or (z) on or after the Purchase Termination Date, the
amount of any such credit shall be paid by Originator to the Company by deposit
in immediately available funds into the Lock-Box Account for application by
Servicer to the same extent as if Collections of the applicable Receivable in
such amount had actually been received on the later to occur of (A) the Business
Day on which Originator is deemed to have received the applicable Collections,
and (B) such Termination Event or Purchase Termination Date (as the case may
be).
(d) Each Purchase Report shall include a calculation of the aggregate
reductions described in Section 3.2(a) or (b) relating to the Receivables since
-------------- ---
the last Purchase Report delivered hereunder.
3.3. [Reserved].
3.4. Actions Evidencing Purchases. (a) On or prior to the Closing Date,
----------------------------
Originator shall mark its master data processing records evidencing Receivables
and Contracts with a legend, acceptable to the Company, evidencing that the
Receivables have been sold in accordance with this Agreement. In addition,
Originator agrees that from time to time, at its expense, it shall promptly
execute and deliver all further instruments and documents, and take all further
action, that the Company or its assigns may reasonably request in order to
perfect, protect or more fully evidence the purchases hereunder, or to enable
the Company or its assigns to exercise or enforce any of their respective rights
with respect to the Receivables and the Related Property. Without limiting the
generality of the foregoing, Originator shall upon the request of the Company or
its designee: (i) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate; and (ii) mark conspicuously each
Contract evidencing each Receivable with a legend, acceptable to the Company,
evidencing that the related Receivables have been sold in accordance with this
Agreement.
(b) Originator hereby authorizes the Company or its designee (i) to file one
or more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Receivables and the Related
Property now existing or hereafter arising in the name of Originator and (ii) to
the extent permitted by the Securitization Agreement, to notify Obligors of the
assignment of the Receivables and the Related Property.
(c) Without limiting the generality of Section 3.4(a), Originator shall, not
earlier than six months and not later than three months prior to the fifth
anniversary of the date of filing of the financing statements filed in
connection with the Closing Date or any other financing statement filed pursuant
to this Agreement: (i) execute and deliver and file or cause to be filed
7
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appropriate continuation statements; and (ii) deliver or cause to be delivered
to Agent an opinion of counsel reasonably satisfactory to the Company, in form
and substance reasonably satisfactory to the Company, confirming and updating
the opinion delivered in connection with the Closing Date relating to the
validity, perfection and priority of the Company's interests in the Receivables.
3.5. Application of Collections. Any payment by an Obligor in respect of any
--------------------------
indebtedness owed by it to Originator shall, except as otherwise specified by
such Obligor or otherwise required by the related Contract or law, be applied
first, as a Collection of any Receivables of such Obligor, and to specific
- -----
Receivables in accordance with the regular policies of the Servicer, and second,
------
to any other indebtedness of such Obligor to Originator.
3.6. Rights of the Company. Originator hereby authorizes the Company and the
---------------------
Servicer (if other than Originator) or their respective designees to take any
and all steps in Originator's name necessary or desirable, in their respective
determination, to collect all amounts due under any and all Receivables and
Related Property, including endorsing Originator's name on checks and other
instruments representing Collections and enforcing such Receivables and the
provisions of the related Contracts that concern payment and/or enforcement of
rights to payment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ORIGINATOR
Originator, in its capacity as seller and/or contributor under this Agreement,
hereby makes the representations and warranties set forth in this Article IV.
----------
4.1. Organization and Good Standing. Originator has been duly organized and
------------------------------
is validly existing as a corporation in good standing under the laws of the
State of California, with power and authority to own its properties and to
conduct its business as such properties are presently owned and such business is
presently conducted.
4.2. Due Qualification. Originator is duly qualified to do business as a
-----------------
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business requires such qualification, licenses or
approvals and where the failure to have such qualification, license or approval
would have a Material Adverse Effect.
4.3. Power and Authority; Due Authorization. Originator (a) has all
--------------------------------------
necessary power, authority and legal right (i) to execute and deliver, and
perform its obligations under, each Transaction Document to which it is a party,
and (ii) to generate, own, sell, contribute and assign Receivables and Related
Property on the terms
8
<PAGE>
and subject to the conditions herein provided; and (b) has duly authorized such
execution, delivery and, performance of such obligations by all necessary
corporate action.
4.4. Valid Sale or Contribution; Binding Obligations. Each sale or
-----------------------------------------------
contribution, as the case may be, of Receivables and Related Property made by
Originator pursuant to this Agreement shall constitute a valid sale, transfer
and assignment or contribution, as the case may be, thereof to the Company,
enforce able against creditors of, and purchasers from, Originator; and this
Agreement constitutes, and each other Transaction Document to be signed by
Originator, when duly executed and delivered, will constitute, a legal, valid,
and binding obligation of Originator, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
4.5. No Violation. The execution, delivery and performance by Originator of
------------
the Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby will not (a) conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under (i) Originator's articles of
incorporation or by-laws, or (ii) any indenture, loan agreement, receivables
purchase agreement, mortgage, deed of trust, or other agreement or instrument to
which it is a party or by which it or any of its properties is bound, (b) result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, loan agreement, receivables purchase agreement,
mortgage, deed of trust, or other agreement or instrument, other than the
Transaction Documents, or (c) violate any law or any order, rule, or regulation
applicable to it of any court or of any federal, state or foreign regulatory
body, administrative agency, or other governmental instrumentality having
jurisdiction over it or any of its properties.
4.6. No Proceedings. There are no proceedings or investigations pending, or
--------------
threatened, before, and there has been no injunction, decree or other decision
issued or made by, any court, regulatory body, administrative agency, or other
tribunal or governmental agency or instrumentality (i) asserting the invalidity
of this Agreement or any other Transaction Document, (ii) seeking to prevent the
sale or contribution of the Receivables and Related Property to the Company or
any portion thereof or the consummation of any of the other transactions
contemplated by this Agreement or any other Transaction Document or (iii)
seeking any determination or ruling that might have a Material Adverse Effect.
4.7. Bulk Sales Act. No transaction contemplated hereby or by any other
--------------
Transaction Documents requires compliance with any bulk sales act or similar
law.
9
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4.8. Government Approvals. No authorization or approval or other action by,
--------------------
and no notice to or filing with, any governmental authority or regulatory body
is required for Originator's due execution, delivery and performance of any
Transaction Document to which it is a party, except for the filing of certain
UCC financing statements, all of which shall have been duly made and shall be in
full force and effect.
4.9. Financial Condition. (x) The audited consolidated balance sheets of
-------------------
Originator and its consolidated subsidiaries as at March 31, 1997, and the
related statements of income, cash flows and shareholders' equity of Originator
and its consolidated subsidiaries for the fiscal year then ended, certified by
Price, Waterhouse L.L.P., independent certified public accountants, and the
unaudited consolidated balance sheets of Originator and its consolidated
subsidiaries as at September 30, 1997 and the related statements of income, cash
flows and shareholders' equity of Originator and its consolidated subsidiaries
for the period[s] then ended, copies of each of which have been furnished to the
Agent, fairly present the consolidated (or separate, in the case of
consolidating statements) financial condition, business, business prospects and
operations of Originator and its consolidated subsidiaries as at such dates and
the consolidated (or separate, in the case of consolidating statements) results
of the operations of Originator and its consolidated subsidiaries for the period
ended on such dates, all in accordance with generally accepted accounting
principles consistently applied, and (y) since March 31, 1997 there has been no
material adverse change in any such condition, business, business prospects or
operations.
4.10. Margin Regulations. No use of any funds obtained by Originator under
------------------
this Agreement will conflict with or contravene any of Regulations G, T, U and X
promulgated by the Board of Governors of the Federal Reserve System from time to
time.
4.11. Quality of Title.
----------------
(a) Each Receivable (together with the Related Property) which is to be sold
or contributed to the Company hereunder is or shall be owned by Originator, free
and clear of any Lien (other than any Lien arising solely as the result of any
action taken by the Company or the Purchaser (or any assignee thereof) or by the
Agent in accordance with this Agreement and /or the Securitization Agreement).
Whenever the Company makes a purchase or accepts a contribution hereunder, it
shall have acquired a valid and perfected first priority ownership interest
(free and clear of any Lien other than any Lien arising solely as the result of
any action taken by the Company or the Purchaser (or any assignee thereof) or by
the Agent in accordance with this Agreement and/or the Securitization Agreement)
in all Receivables generated by Originator and all Collections related thereto,
and in Originator's entire right, title and interest in and to the other Related
Property with respect thereto.
10
<PAGE>
(b) No effective financing statement or other instrument similar in effect
covering any Receivable, any interest therein or any of the Related Property is
on file in any recording office except such as may be filed in favor of the
Company or Originator, as the case may be, in accordance with the Contracts or
this Agreement or in favor of the Purchaser (or any assignee thereof) or the
Agent in accordance with the Securitization Agreement.
4.12. Accuracy of Information. No information furnished or to be furnished
-----------------------
in writing by Originator to the Company, the Agent or the Purchaser for purposes
of or in connection with any Transaction Document will be inaccurate in any
material respect as of the date it was furnished or will be furnished or (except
as otherwise disclosed to the Company, the Agent or the Purchaser at or prior to
such time) as of the date as of which such information was or will be dated, or
contained or will contain any material misstatement of fact or omitted or will
omit to state any material fact necessary to make such information contained
therein not materially misleading.
4.13. Offices. Originator's principal place of business and chief executive
-------
office is located at the address set forth under Originator's signature hereto,
and the offices where Originator keeps all its books, records and documents
evidencing or included in the Receivables are located at the addresses specified
on Schedule 4.13 (or at such other locations, notified to Servicer (if other
-------------
than Originator) and the Agent in accordance with Section 5.3(d), in
--------------
jurisdictions where all action required by Section 5.3(d) has been taken and
--------------
completed).
4.14. Trade Names. Except as disclosed on Schedule 4.14, Originator does not
----------- -------------
use any trade name other than its actual corporate name. From and after the
date that fell five (5) years before the date hereof, Originator has not been
known by any legal name other than its corporate name as of the date hereof, nor
has Originator been the subject of any merger or other corporate reorganization
except as disclosed on Schedule 4.14.
-------------
4.15. Compliance with Applicable Laws. Originator is in compliance, in all
-------------------------------
material respects, with the requirements of all applicable laws, rules,
regulations, and orders of all governmental authorities (including Regulation Z,
laws, rules and regulations relating to usury, truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt collection
practices and privacy and all other consumer laws applicable to the Receivables
and related Contracts).
4.16. Solvency. After giving effect to the incurrence of its obligations
--------
under the Transaction Documents, Originator is not insolvent, does not have
unreasonably small capital with which to carry on its business and is able to
pay its debts generally as they become due and payable, and its liabilities do
not exceed its assets.
11
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4.17. Eligibility of Receivables. Unless otherwise identified to the Company
--------------------------
in the Purchase Report delivered to the Company in the first Fiscal Period
following the date of contribution and/or purchase hereunder, each Receivable
contributed and/or purchased hereunder is on the date of contribution and/or
purchase an Eligible Receivable and, so long as the Originator is the Servicer,
each Receivable included as an Eligible Receivable in the calculation of Net
Pool Balance is an Eligible Receivable as of the date of such calculation.
Originator has no knowledge of any fact (including any defaults by the Obligor
thereunder on any other Receivable) that would cause it or should have caused it
to expect that any payments on such Eligible Receivable will not be paid in full
when due or to expect any other Material Adverse Effect with respect to such
Eligible Receivable.
4.18. Servicing Programs. Any and all programs used by Originator in the
------------------
servicing of the Receivables are owned by it and not leased or licensed. No
license or approval is required for the Agent's use of any program used by
Originator in the administration of the Receivables, other than those which have
been obtained and are in full force and effect.
4.19. Investment Company Act. Originator is not, and is not controlled by,
----------------------
an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended.
4.20. Receivables Evidenced by Instruments and Chattel Paper. None of the
------------------------------------------------------
Receivables is evidenced by any "instrument" or "chattel paper" (as defined in
the applicable UCC).
4.21. Material Adverse Effect. Between March 31, 1997, and the Closing Date,
-----------------------
(i) Originator has not incurred any obligations, contingent or non-contingent
liabilities, liabilities for charges, long-term leases or unusual forward or
long-term commitments that, alone or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, (ii) no contract, lease or other
agreement or instrument has been entered into by Originator or has become
binding upon any Originator's assets and no law or regulation applicable to
Originator has been adopted that has had or could reasonably be expected to have
a Material Adverse Effect on Originator, and (iii) Originator is not in default
and no third party is in default under any material contract, lease or other
agreement or instrument to which Originator is a party that alone or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
Between March 31, 1997, and the Closing Date no event has occurred that alone or
together with other events could reasonably be expected to have a Material
Adverse Effect.
4.22. Ventures, Subsidiaries and Affiliates; Outstanding Stock. Except as
--------------------------------------------------------
set forth in Schedule 4.22, Originator has no Subsidiaries, is not engaged in
-------------
any joint venture or partnership with any other Person, nor is an Affiliate of
any other Person. All of the issued and outstanding Stock of Originator is
owned by
12
<PAGE>
each of the Stockholders in the amounts set forth on Schedule 4.22. There are
-------------
no outstanding rights to purchase, options, warrants, or similar rights or
agreements pursuant to which Originator may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock or
other equity securities of its Subsidiaries.
4.23. Taxes. Originator has filed or has had filed on its behalf all United
-----
States Federal income tax returns and all other material tax returns which are
required to be filed by it, timely (including extensions), and has paid all
taxes shown on such returns and paid, or contested in accordance with Section
5.1(m)(ii), any assessments received by Originator related to such returns.
4.24. Notices to Obligors. Originator has directed all Obligors of
-------------------
Receivables originated by it to remit all payments with respect to such
Receivables for deposit in a Lock Box or a Lock-Box Account.
4.25. ERISA. Each Plan is in substantial compliance with ERISA and the Code;
-----
no Reportable Event has occurred with respect to a Plan; no Plan is insolvent or
in reorganization; no Plan has an Unfunded Current Liability; no Plan has an
accumulated or waived funding deficiency, has permitted decreases in its funding
standard account or has applied for an extension of any amortization period
within the meaning of Section 412 of the IRC; all contributions required to be
made with respect to a Plan have been timely made; neither the Originator nor
any Subsidiary nor any ERISA Affiliate has incurred any material liability to or
on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of
the IRC or expects to incur any liability under any of the foregoing Sections
with respect to any Plan; no proceedings have been instituted to terminate or
appoint a trustee to administer any Plan; no condition exists which presents a
material risk to Originator or any Subsidiary or any ERISA Affiliate of
incurring a liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the IRC; no Lien imposed under the IRC or ERISA on the
assets of the Company or any Subsidiary or any ERISA Affiliate exists or is
likely to arise on account of any Plan; and Originator and its Subsidiaries may
cease contributions to or terminate any employee benefit plan maintained by any
of them without incurring any material liability (other than, to the extent
limited by a related collective bargaining agreement in effect on the date of
this Agreement, the Hertner Division Pension Plan related to its production
facility in Cleveland, Ohio.
4.26. Representations and Warranties in Other Transaction Documents. Each of
-------------------------------------------------------------
the representations and warranties of Originator (whether in its capacity as
Originator or Servicer) contained in the Transaction Documents (other than this
Agreement) is true and correct in all material respects and Originator hereby
makes each such representation and warranty to, and for the benefit
13
<PAGE>
of, the Purchaser, the Servicer (in the case the Servicer is not the Originator)
and the Agent as if the same were set forth in full herein.
The representations and warranties described in this Article IV shall survive
----------
the sale and/or contribution of the Receivables to the Company, any subsequent
assignment of the Receivables by the Company, and the termination of this
Agreement and the other Transaction Documents and shall continue until the
indefeasible payment in full of all Receivables.
ARTICLE V
COVENANTS OF ORIGINATOR
5.1. Affirmative Covenants. From the date hereof until the Final Pay Out
---------------------
Date under the Securitization Agreement, Originator shall, unless the Company
and the Agent shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with all
--------------------------
applicable laws, rules, regulations and orders, including those with respect to
the Receivables and the related Contracts.
(b) Preservation of Corporate Existence. Preserve and maintain its corporate
-----------------------------------
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification could reasonably be
expected to have a Material Adverse Effect.
(c) Audits. (i) At any time and from time to time during regular business
------
hours, permit the Agent, or its agents or representatives, (A) to examine and
make copies of and abstracts from all books, records and documents (including
computer tapes and disks) in the possession or under the control of such party
relating to Receivables, including the related Contracts and purchase orders and
other agreements, and (B) to visit the offices and properties of Originator for
the purpose of examining such materials described in clause (i)(A), and to
-------------
discuss matters relating to Receivables or Originator's performance hereunder
with any of the officers or employees of such party having knowledge of such
matters and with its independent certified public accountants; and (ii) without
limiting the provisions of clause (i) immediately above, from time to time on
----------
request of the Agent (given not more than once in each calendar year so long as
no Termination Event or material Unmatured Termination Event shall have occurred
and be continuing under the Securitization Agreement), permit certified public
accountants or other auditors acceptable to the Agent to conduct, at
Originator's expense, a review of the Originator's books and records with
respect to the Receivables.
14
<PAGE>
(d) Keeping of Records and Books of Account. Maintain and implement
---------------------------------------
administrative and operating procedures (including an ability to recreate
records evidencing Receivables in the event of the destruction of the originals
thereof), and keep and maintain, all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including records adequate to permit the daily identification of
each new Receivable and all Collections of and adjustments to each existing
Receivable) and make arrangements reasonably satisfactory to the Agent to ensure
the Agent's legal right and authority, and the Agent's access and ability, to
utilize any proprietary software employed in servicing the Receivables.
(e) Performance and Compliance with Receivables and Contracts. At its expense
---------------------------------------------------------
timely and fully perform and comply with all material provisions, covenants and
other promises required to be observed by it under the Contracts related to the
Receivables and all purchase orders and all other agreements related to such
Receivables.
(f) Location of Records. Keep its chief place of business and chief executive
-------------------
office, and the offices where it keeps its records concerning or related to
Receivables and all purchase orders and other agreements related to the
Receivables, all related Contracts and all required documents relating thereto),
at the address(es) referred to in Schedule 4.13 or, upon 30 days' prior written
-------------
notice to the Company and the Agent, at such other locations in jurisdictions
where all action required by the Servicer or the Agent to continue the
perfection of the Company's and the Purchaser's interests in the Receivables and
the Related Property.
(g) Credit and Collection Policies. Comply in all material respects with its
------------------------------
Credit and Collection Policy in regard to each Receivable and the related
Contract.
(h) Collections. Instruct all Obligors to cause all Collections of
-----------
Receivables to be sent or deposited directly to a Lock Box or a Lock-Box
Account, and deposit all Collections received in a Lock Box into a Lock-Box
Account within one Business Day after such receipt.
(i) Transaction Documents. Perform and comply in all material respects with
---------------------
all of its covenants and agreements set forth in the Transaction Documents to
which it is a party.
(j) Independent Director. Vote all of the shares of capital stock of the
--------------------
Company now or hereafter owned by it, beneficially or otherwise, as necessary to
cause to be elected to, and maintained on, the Company's board of directors at
least one independent director meeting the qualifications set forth in the
Company's certificate of incorporation.
15
<PAGE>
(k) Communication With Accountants. Instruct its independent certified
------------------------------
public accountants and advisors to disclose and make available to the Company,
the Servicer, the and the Agent any and all financial statements and other
supporting financial documents, schedules and information relating to itself
(including copies of any issued management letters) with respect to its
business, financial condition and other affairs. Originator agrees to render to
the Company, the Servicer and the Agent at such Originator's own cost and
expense, such clerical and other assistance as may be reasonably requested with
regard to the foregoing. If any Purchase Termination Event or any Termination
Event pursuant to the Securitization Agreement shall have occurred and be
continuing, Originator shall, promptly upon request therefor, assist the Company
in delivering to the Agent Records reflecting activity through the close of
business on the Business Day immediately preceding the date of such request.
(l) ERISA. Give the Company, the Purchaser and the Agent prompt written
-----
notice of any event that could result in the imposition of a Lien under Section
412 of the IRC or Section 302 or 4068 of ERISA.
(m) Payment, Performance and Discharge of Obligations.
-------------------------------------------------
(i) Subject to Section 5.1(m)(ii), pay, perform and discharge or cause
------------------
to be paid, performed and discharged all of its obligations and
liabilities, including all taxes, assessments and governmental
charges upon its income and properties and all lawful claims for
labor, materials, supplies and services, promptly when due.
(ii) May contest in good faith, by appropriate proceedings, the validity
or amount of any charges or claims described in Section 5.1(m)(i);
-----------------
provided, that (A) adequate reserves with respect to such contest
--------
are maintained on the books of Originator, in accordance with GAAP,
(B) such contest is maintained and prosecuted continuously and with
diligence, (C) none of the Receivable or the Related Property may
become subject to forfeiture or loss as a result of such contest,
(D) no Lien may be imposed to secure payment of such charges or
claims other than inchoate tax liens.
(n) Accounting Changes. If any Accounting Changes occur and such changes
------------------
result in a change in the standards or terms used herein, then the parties
hereto agree to enter into negotiations in order to amend such provisions so as
to equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating the financial condition of such Persons and their
Subsidiaries shall be the same after such Accounting Changes as if such
Accounting Changes had not been made. If the parties hereto agree upon the
required amendments to this Agreement, then after
16
<PAGE>
appropriate amendments have been executed and the underlying Accounting Change
with respect thereto has been implemented, any reference to GAAP contained
herein shall, only to the extent of such Accounting Change, refer to GAAP
consistently applied after giving effect to the implementation of such
Accounting Change. If such parties cannot agree upon the required amendments
within 30 days following the date of implementation of any Accounting Change,
then all financial statements delivered and all standards and terms used herein
shall be prepared, delivered and used without regard to the underlying
Accounting Change.
5.2. Reporting Requirements. From the date hereof until the first day
----------------------
following the Final Pay Out Date, Originator shall, unless the Agent and the
Company shall otherwise consent in writing, furnish to the Company and the Agent
the information set forth in Section 7.02 of the Securitization Agreement (to
------------
the extent such information relates to Originator).
5.3. Negative Covenants. From the date hereof until the Final Pay Out Date,
------------------
unless the Agent and the Company shall otherwise consent in writing, the
Originator shall not:
(a) Sales, Liens, Etc. Except as otherwise expressly provided herein, sell,
------------------
assign (by operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist any Lien upon or with respect to, any Receivable or Related
Property, or any interest therein, or any lock box or account to which any
Collections of any Receivables are sent, or any right to receive income from or
in respect thereof, or the Company Note or any shares of capital stock of the
Company
(b) Extension or Amendment of Receivables. Extend, amend, terminate or
-------------------------------------
otherwise modify the terms of any Receivable, or amend, modify, terminate or
waive any term or condition of any Contract related thereto, unless (i) no
Termination Event or material Unmatured Termination Event shall have occurred
and be continuing or would result from such action, (ii) such action is
consistent with the Credit and Collection Policy, and (iii) in the case of any
reduction or cancellation of the Unpaid Balance of any Receivable, Originator
shall have made or deemed made any payment required by Section 3.2.
(c) Change in Business or Credit and Collection Policy. Make any change in
--------------------------------------------------
the character or operation of its business or in its Credit and Collection
Policy or amend, supplement or otherwise modify its certificate or articles of
incorporation or bylaws, which change would, in either case, impair the
collectibility of any Receivable, relax any credit criteria applied to new or
continuing Obligors or otherwise adversely affect the interests, rights or
remedies of the Company or the Purchaser under any Transaction Document, unless,
in each case, Originator shall have given the Agent at least thirty days' prior
written notice of such change and the Agent shall not have given Originator
written notice of objection to such change within such thirty day period.
17
<PAGE>
(d) Change in Name. Change its corporate name or the name under or by which
--------------
it does business, unless Originator shall have given the Company and the Agent
at least 30 days' prior written notice thereof and unless, prior to any such
change in name, Originator shall have filed (or shall have caused to be filed)
such financing statements or amendments as the Servicer or the Agent determines
may be necessary to continue the perfection of the Company's and the Purchaser's
interest in the Receivables and Related Property.
(e) Negative Pledges. Enter into or assume any agreement (other than this
----------------
Agreement and the other Transaction Documents) prohibiting the creation or
assumption of any Lien upon any Receivables or Related Property, whether now
owned or hereafter acquired by the Originator, as contemplated by the
Transaction Documents, or otherwise prohibiting or restricting any transaction
contemplated hereby or by the other Transaction Documents.
(f) Deposits to Lock-Box Accounts. Deposit or transfer any Collections
-----------------------------
received in any Lock Box or otherwise to any account other than a Lock-Box
Account, or credit, or cause or permit to be deposited or credited, to any Lock-
Box Account any funds other than Collections on Receivables.
(g) Mergers, Acquisitions, Sales, etc. Be a party to any merger or
---------------------------------
consolidation, or purchase or otherwise acquire all or substantially all of the
assets or any stock of any class of, or any partnership or joint venture
interest in, any other Person, or, except in the ordinary course of its
business, sell, transfer, convey or lease all or any substantial part of its
assets, or permit any Subsidiary to do any of the foregoing for any such merger
or consolidation, sale, transfer, conveyance, lease or assignment of or by any
wholly-owned Subsidiary into Originator or into, with or to any other wholly-
owned Subsidiary and any such purchase or other acquisition by Originator or any
wholly-owned Subsidiary of the assets or stock of any wholly-owned Subsidiary.
(h) Corporate Separateness Take any action that is inconsistent with the
----------------------
terms of Section 7.04 of the Securitization Agreement.
------------
(i) Change in Payment Instructions to Obligors. Add or terminate any bank as
------------------------------------------
a Lock-Box Bank from those listed in Schedule 6.01(o) of the Securitization
----------------
Agreement or make any change in its instructions to Obligors regarding payments
to be made to the Seller or the Servicer or payments to be made to any Lock Box
or Lock-Box Account, unless the Agent shall have received (i) notice of such
addition, termination or change, (ii) duly executed copies of Lock-Box
Agreements with each new Lock-Box Bank (which shall be in form and substance
acceptable to the Agent), and (iii) the Agent previously shall have consented in
writing to such addition, termination or change (which consent, in the case of
any such addition or termination, shall not be unreasonably withheld by the
Agent).
18
<PAGE>
(j) Minimum Working Capital. Permit the excess of its consolidated Current
-----------------------
Assets over its consolidated Current Liabilities to be less than $3,000,000.
(k) Minimum Net Worth. Permit its consolidated tangible net worth (as
-----------------
hereinafter defined) to be less than $35,000,000. Consolidated tangible net
worth of a Person shall mean the consolidated net worth of such Person and its
Subsidiaries including, without limitation, goodwill, franchises, licenses,
patents, trademarks, trade names, copyrights, service marks and brand names.
(l) Minimum Current Ratio. Permit its consolidated current ratio (as
---------------------
hereinafter defined) to be less than 1.0. Consolidated current ratio of a Person
shall mean the ratio of (x) consolidated Current Assets of such Person and its
Subsidiaries to (y) consolidated Current Liabilities of such Person and its
Subsidiaries.
(m) Sale Characterization. Make statements or disclosures or prepare any
---------------------
financial statements for any purpose, including for federal income tax,
reporting or accounting purposes, that shall account for the transactions
contemplated by this Agreement in any manner other than (i) with respect to the
sale of each Receivable originated by it, as a true sale or absolute assignment
of its full right, title and ownership interest in such Receivable to the
Company and (ii) with respect to each Receivable contributed to the Company, as
a contribution to the stated capital of the Company.
(n) ERISA. Cause or permit any ERISA Affiliate to, cause or permit to occur
-----
an event that could result in the imposition of a Lien under Section 412 of the
IRC or Section 302 or 4068 of ERISA.
(o) Adverse Tax Consequences. Take or permit to be taken any action (other
------------------------
than with respect to actions taken or to be taken solely by a Governmental
Authority), or fail or neglect to perform, keep or observe any of its
obligations hereunder or under the other Transaction Documents, that would have
the effect directly or indirectly of subjecting any payment to the Company, the
Purchaser or holders of the Commercial Paper who are residents of the United
States of America to withholding taxation.
ARTICLE VI
PURCHASE TERMINATION EVENTS
6.1. Purchase Termination Events. Each of the following events or
---------------------------
occurrences described in this Section 6.1 shall constitute a "Purchase
----------- --------
Termination Event":
- -----------------
(a) A Termination Event shall have occurred under the Securitization
Agreement and the Agent shall have declared the Commitment Termination Date to
have occurred; or
19
<PAGE>
(b) Originator shall fail to make any payment or deposit to be made by it
hereunder when due and such failure shall remain unremedied for three Business
Days after written notice thereof shall have been given by Servicer, the Agent
or the Company to Originator; or
(c) Any representation or warranty made or deemed to be made by Originator
(or any of its officers) under or in connection with this Agreement, any other
Transaction Document or any other information, certificate or report delivered
pursuant hereto or thereto shall prove to have been false or incorrect in any
material respect when made or deemed made and, within three Business Days after
written notice thereof shall have been given to the Originator (individually or
as Servicer), as the case may be, the circumstances or condition in respect of
which such representation or warranty was incorrect shall not have been
eliminated or otherwise cured in a manner satisfactory to the Agent; or
(d) Originator shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement on its part to be performed or observed
and any such failure shall remain unremedied for thirty days after written
notice thereof shall have been given by Servicer, the Agent or the Company to
Originator; or
(e) An Event of Bankruptcy shall have occurred and remained continuing with
respect to Originator.
6.2. Remedies.
--------
(i) Automatic Termination. The agreement of the Originator to sell
---------------------
Receivables hereunder, and the agreement of the Company to purchase Receivables
from the Originator hereunder, shall terminate automatically (and the Purchase
Termination Date shall be deemed to have occurred) on the occurrence of a
Purchase Termination Event of the type described in Section 6.1(e).
--------------
(ii) Optional Termination. Upon the occurrence of a Purchase Termination
--------------------
Event, the Company, with the consent of the Agent, shall have the option by
notice to Originator (with a copy to the Agent) to declare the Purchase
Termination Date to have occurred.
(iii) Remedies Cumulative. Upon any termination pursuant to this Section
------------------- -------
6.2, the Company shall have, in addition to all other rights and remedies under
this Agreement or otherwise, all other rights and remedies provided under the
UCC of each applicable jurisdiction and other applicable laws, which rights
shall be cumulative.
ARTICLE VII
INDEMNIFICATION
7.1. Indemnities by Originator. Without limiting any other rights that any
-------------------------
such Person may have hereunder or under applicable
20
<PAGE>
law, Originator hereby agrees to indemnify the Company and each of its
successors, and assigns and all officers, directors, employees and agents of any
of the foregoing (each of the foregoing Persons being individually called a
"Receivables Transfer Indemnified Party"), forthwith on demand, from and against
--------------------------------------
any and all damages, losses, claims, judgments, liabilities and related costs
and expenses, including reasonable attorneys' fees and disbursements
(collectively, the "Receivables Transfer Indemnified Amounts") awarded against
----------------------------------------
or incurred by any of them arising out of or as a result of the following:
(a) the transfer by Originator of an interest in any Receivable or Related
Property to any Person other than the Company;
(b) the breach of any representation or warranty made by Originator pursuant
to this Agreement, or any information or report delivered by Originator pursuant
hereto or thereto which shall have been false or incorrect in any material
respect when made or deemed made;
(c) the failure by Originator to comply with any applicable law, rule or
regulation with respect to any Receivable or the related Contract, or the
nonconformity of any Receivable or the related Contract with any such applicable
law, rule or regulation;
(d) the failure to vest and maintain vested in the Company an ownership
interest in the Receivables generated by Originator and Related Property free
and clear of any Lien, other than any Lien arising solely as a result of an act
of the Company, whether existing at the time of the purchase or contribution of
such Receivables or at any time thereafter;
(e) any dispute, claim, offset or defense of any Obligor (other than its
discharge in bankruptcy) to the payment of any Receivable sold and/or
contributed hereunder (including a defense based on such Receivable or the
related Contract therefor not being a legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms but excluding
discounts to, or any Collections Originator is deemed to have received on such
Receivable thereof), or any claim resulting from the sale of the merchandise or
services related to any Receivable or the furnishing or failure to furnish such
merchandise or services; or any products liability claim arising out of or in
connection with merchandise or services that are the subject of any Receivable;
(f) any investigation, litigation or proceeding related to this Agreement or
the use of proceeds of purchases hereunder or the ownership of, or in respect
of, any Receivables, Related Property or Contract;
(g) any tax or governmental fee or charge (other than any tax based upon or
measured by net income), all interest and penalties thereon or with respect
thereto, and all out-of-pocket costs and
21
<PAGE>
expenses, including the reasonable fees and expenses of counsel in defending
against the same, which may arise by reason of the purchase, contribution or
ownership of the Receivables or any Related Property connected with any such
Receivables;
(h) any failure of Originator to perform its duties or obligations in
accordance with the provisions of this Agreement, any other Transaction Document
or any Contract related to a Receivable, including the commingling of
Collections with respect to the Receivables by Originator (whether in its
capacity as Originator or Servicer) at any time with the funds of any other
Person;
excluding, however, (i) Receivables Transfer Indemnified Amounts to the extent
- --------- -------
resulting from gross negligence or willful misconduct on the part of a
Receivables Transfer Indemnified Party and (ii) any indemnification which has
the effect of recourse to Originator for non-payment of the Receivables due to
credit reasons (except as otherwise specifically provided in this Agreement).
7.2. (a) any failure by Originator to cause the filing of, or any delay in
filing, financing statements or other similar instruments or documents under the
UCC of any applicable jurisdiction or any other applicable laws with respect to
any Receivable sold and/or contributed hereunder, whether at the time of any
such transfer or at any subsequent time;
(b) any claim brought by any Person other than a Receivables Transfer
Indemnified Party arising from any activity by Originator or any of its
Affiliates in servicing, administering or collecting any Receivables;
If for any reason the indemnification provided above in this Section 7.1 is
-----------
unavailable to a Receivables Transfer Indemnified Party or is insufficient to
hold such Receivables Transfer Indemnified Party harmless, then Originator shall
contribute to the amount paid or payable by such Receivables Transfer
Indemnified Party as a result of such loss, claim, damage or liability to the
maximum extent permitted under applicable law.
NO RECEIVABLES TRANSFER INDEMNIFIED PARTY SHALL BE RESPONSIBLE OR LIABLE TO
ANY OTHER PARTY TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF ANY
TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
ARTICLE VIII
MISCELLANEOUS
8.1. Amendments, Waivers, etc. No amendment of this Agreement or waiver of
------------------------
any provision hereof or consent to any departure by
22
<PAGE>
either party therefrom shall be effective without the written consent of the
party that is sought to be bound. Any such waiver or consent shall be effective
only in the specific instance given. No failure or delay on the part of either
party to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law. Originator acknowledges that institutions
providing financing (by way of purchases of Receivables or interests therein)
pursuant to the Securitization Agreement may rely upon the terms of this
Agreement and the Company Note, and the terms of this Agreement and the Company
Note may not be amended, nor any material waiver of those terms be granted,
without the consent of the Agent.
8.2. Notices, etc. All notices and other communications provided for
------------
hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by express
mail or courier or by certified mail, postage-prepaid, or by facsimile, to the
intended party at the address or facsimile number of such party set forth under
its name on the signature pages hereof or at such other address or facsimile
number as shall be designated by such party in a written notice to the other
parties hereto. All such notices and communications shall be effective, (i) if
personally delivered or sent by express mail or courier or if sent by certified
mail, when received, and (ii) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means.
8.3. Binding Effect; Assignability. This Agreement shall be binding upon and
-----------------------------
inure to the benefit of the parties hereto and their respective successors and
assigns and shall also, to the extent provided herein, inure to the benefit of
the parties to the Securitization Agreement. Originator may not assign its
rights hereunder or any interest herein without the prior consent of the Company
and the Agent. Originator acknowledges that the Company's rights under this
Agreement may be assigned to the Purchaser under the Securitization Agreement
and consents to such assignment and to the exercise of those rights directly by
the Purchaser or the Agent on its behalf.
8.4. Survival. The rights and remedies with respect to any breach of any
--------
representation and warranty made by Originator or the Company pursuant to
Article IV and the indemnification and payment provisions of Article VII and
- ---------- -----------
Section 8.6 shall be continuing and shall survive any termination of this
- -----------
Agreement.
8.5. GOVERNING LAW. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE
-------------
PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF PENNSYLVANIA, EXCEPT TO THE EXTENT THAT THE
PERFECTION (AND THE EFFECT OF PERFECTION OR NONPERFECTION) OF THE INTERESTS OF
THE PURCHASER IN
23
<PAGE>
THE RECEIVABLES OR THE RELATED PROPERTY IS GOVERNED BY THE LAWS OF THE
JURISDICTION OTHER THAN THE STATE OF PENNSYLVANIA.
8.6. Costs, Expenses and Taxes. In addition to its obligations under Article
------------------------- -------
VII, Originator agrees to pay on demand (a) all costs and expenses incurred by
- ---
the Company and its assigns in connection with the enforcement of any amendment,
modification or waiver of, consent with respect to or termination of, or any
actual or claimed breach of, this Agreement, including the reasonable fees and
expenses of counsel to any of such Persons incurred in connection with any of
the foregoing or in advising such Persons as to their respective rights and
remedies under this Agreement in connection with any of the foregoing and (b)
all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement.
8.7. No Proceedings. Originator agrees, for the benefit of the parties to the
--------------
Securitization Agreement, that it will not institute against the Company or the
Purchaser, or join any other Person in instituting against the Company or the
Purchaser, any insolvency proceeding (namely, any proceeding of the type
referred to in the definition of Event of Bankruptcy) until one year and one day
after the Final Pay Out Date (in relation to the Company) or for one year and
one day after the date when the latest maturing Commercial Paper Note is paid
(in relation to the Purchaser). In addition, all amounts payable by the Company
to Originator pursuant to this Agreement shall be payable solely from funds
available for that purpose (after the Company has satisfied all obligations then
due and owing under the Securitization Agreement).
8.8. Waiver of Jury Trial. EACH OF ORIGINATOR AND THE COMPANY HEREBY
--------------------
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER TRANSACTION
DOCUMENT OR ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY BE IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING OR
OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT A JURY.
8.9. Consent To Jurisdiction; Waiver Of Immunities. EACH OF ORIGINATOR AND
---------------------------------------------
THE COMPANY HEREBY ACKNOWLEDGES AND AGREES THAT:
(a) IT IRREVOCABLY (i) SUBMITS TO THE JURISDICTION, FIRST, OF
ANY UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL
JURISDICTION IS NOT AVAILABLE, OF ANY PENNSYLVANIA STATE COURT, IN
EITHER CASE SITTING IN PHILADELPHIA, PENNSYLVANIA IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, (ii)
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED ONLY IN SUCH PENNSYLVANIA STATE OR FEDERAL
COURT AND NOT IN ANY OTHER COURT, AND (iii) WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
24
<PAGE>
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
(b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO
EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER
OR IN CONNECTION WITH THIS AGREEMENT.
8.10. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
when taken together shall constitute one and the same Agreement.
25
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
YUASA EXIDE, INC.
By:____________________________
Name:
Title:
Yuasa Exide, Inc.
2366 Bernville Road
Reading, PA 19612
Telephone: (610) 208-1761
Facsimile: (610) 208-1671
YESCO, INC.
By:____________________________
Name:
Title:
Yesco, Inc.
c/o Yuasa Exide, Inc.
2366 Bernville Road
Reading, PA 19612
Telephone: (610) 208-1761
Facsimile: (610) 208-1671
Acknowledged and consented by:
YUASA EXIDE, INC., as Servicer
By:___________________________
Name:
Title:
Yuasa Exide, Inc.
2366 Bernville Road
Reading, PA 19612
Telephone: (610) 208-1761
Facsimile: (610) 208-1671
26
<PAGE>
SCHEDULE 4.13
OFFICE LOCATIONS
27
<PAGE>
SCHEDULE 4.14
TRADE NAMES
28
<PAGE>
SCHEDULE 4.22
SUBSIDIARIES AND OUTSTANDING STOCK OF ORIGINATOR
29
<PAGE>
EXHIBIT A
FORM OF PURCHASE REPORT
30
<PAGE>
EXHIBIT B
FORM OF COMPANY NOTE
31
<PAGE>
EXHIBIT C
CLOSING DATE REPORT
I. Calculation of Fair Market Value of Receivables transferred on Closing Date:
(i) aggregate unpaid scheduled debt service payments (excluding financing
charges): $_______________, minus
(ii) allocated loss contingency reserve: $_____________
Total Fair Market Value: $_______________
II.Fair Market Value of contributed Receivables: $______________
Fair Market Value of sold Receivables: $____________
(i) Cash purchase price: $______________
(ii) Initial principal amount of Company Note: $_____________
32
<PAGE>
Exhibit 10.7
General Unsecured Loan Agreement
----------------------------------------------
THE ASAHI BANK, LTD.
New York Branch
One World Trade Center, Suite 6011
New York, NY 10048-0476
<PAGE>
The Asahi Bank, Ltd.
New York Branch
One World Trade Center, Suite 6011
New York, NY 10048-0476
Gentlemen:
In consideration of the extension and use of various financial accommodations
given, to be given, or continued to or for the account of YUASH, INC.
hereinafter "Borrower," by The Asahi Bank, Ltd., New York Branch, hereinafter
"Bank,"
BORROWER AND BANK MUTUALLY AGREE: that the following terms and conditions shall
apply to any and all Obligations, as hereinafter defined, whether now existing
or hereafter incurred, whether contracted with Bank directly or indirectly,
whether absolute or contingent and whether matured or not:
1. OBLIGATIONS. Except as otherwise specified, the term Obligations as used
herein shall include any and all indebtedness, notes, bonds, debentures.
obligations and liabilities of Borrower owed to Bank directly or indirectly,
conditionally, or as security from another, whether liquidated or
unliquidated, whether at law, in equity or in admiralty, whether due or not
due, and whether heretofore, presently or hereafter incurred or given by
Borrower as principal, surety, endorser, or otherwise.
2. ASSIGNMENT OR TRANSFER BY BANK. flank may wholly or partially negotiate or
assign any Obligations.
3. PAYMENT TO BANK. Borrower agrees to pay to Bank at its office listed above in
United States legal tender any and all principal of and interest on
Obligations when due. If any amount of Obligations is payable in foreign
currency, an equal amount of such currency will be deposited by Borrower in
an account designated by Bank not later than one business day prior to
maturity. If Borrower fails to provide such foreign currency, and if Bank
agrees to provide such currency in its discretion, Bank will obtain such
currency on the maturity date at the prevailing market exchange rate and
Borrower will be liable for all costs in connection with Bank's obtaining
such currency. Any amount which shall be due on a Saturday, Sunday or other
day on which the Bank is closed shall be payable on the next succeeding
business day, but such additional time shall be included in the computation
of interest. All such amounts shall be due and payable at 12:00 noon local
time on the due date.
Borrower further agrees to pay all reasonable charges, fees, commissions and
expenses (including legal expenses) of Bank in connection with any
Obligations hereunder, or incidental to the enforcement of any of the
provisions hereof, and all such charges, fees, commissions and expenses shall
be Obligations within the terms of this agreement.
4. INTEREST AFTER DUE DATE. Except as otherwise provided in a separate agreement
creating or evidencing any of the Obligations, interest on any amounts of the
Obligations outstanding after their due date (whether at the stated maturity,
by acceleration or otherwise), including principal, interest and fees, shall
be immediately payable without demand at a rate equal to 15% per annum above
the rate prevailing prior to maturity of the obligations.
5. REPRESENTATIONS AND WARRANTIES OF BORROWER.
(a) The Borrower is a corporation or partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is in good standing in every jurisdiction where the nature of its
business requires it to be so qualified and the failure to so qualify
will have a material adverse effect on the Borrower.
(b) The execution, delivery and performance by the Borrower of this Agreement
are within the Borrower's corporate or other powers, have been duly
authorized by all necessary corporate or other action, and do not
contravene (i) the Borrower's charter, by-laws or partnership agreement,
(ii) applicable law, or (iii) any contractual restriction binding on or
affecting the Borrower or any of its properties.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Borrower of this
Agreement.
(d) This Agreement is the legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms.
(e) There is no pending or threatened action or proceeding affecting the
Borrower before any court, governmental agency or arbitrator, which, if
adversely determined, would, in the opinion of the Borrower, materially
adversely affect the financial condition or operations of the Borrower or
which purports to affect the legality, validity or enforceability of this
Agreement or the ability of the Borrower to perform any of the
Obligations.
6. COVENANTS OF THE BORROWER. Until all of the Borrower's Obligations have been
repaid in full, the Borrower shall promptly notify the Bank of:
-1-
<PAGE>
(a) (i) any change in the Borrower's business which could impair the
Borrower's ability to repay amounts outstanding under its Obligations as
and when due;
(ii) the occurrence of any default, or any event which, with the passage
of time or the giving of notice (or both), would result in any default,
under any mortgage, indenture or instrument under which there may be
issued, or by which there may be incurred or evidenced, any of the
Borrower's indebtedness for borrowed money; and
(iii) all pending or threatened actions, suits or proceedings before any
court, arbitrator or governmental or administrative body or agency which
might result in any material adverse change in the Borrower's business,
operations, properties or assets or in the Borrower's condition,
financial or otherwise.
(b) Keep at all times books of records and accounts in which full, true and
correct entries shall be made of all dealings and transactions in
relation to the Borrower's business and affairs;
(c) Maintain the Borrower's existence and keep all property which is required
for the Borrower's ongoing operations, business or condition (financial
or otherwise) in good repair, working order and condition:
(d) Pay and discharge all taxes, assessments and governmental charges or
levies imposed upon the Borrower or the Borrower's income or profits, or
upon any of the Borrower's property, prior to the date on which penalties
attach thereto, unless the Borrower shall contest in good faith and by
proper proceedings the payment of any such tax, assessment, charge or
levy and the Borrower shall maintain adequate reserves therefor;
(e) Keep all of the Borrower's properties adequately insured at all times
with responsible insurance carriers against loss or damage by fire and
other hazards, maintain adequate insurance at all times with responsible
insurance carriers against liability on account of damage to persons and
property and under all workmen's compensation laws and maintain adequate
insurance covering such other risks as the Bank may reasonably request;
(f) Allow the Bank to visit and inspect any of the Borrower's properties,
examine the Borrower's books of account and other records and files and
make copies thereof, and to discuss the Borrower's business affairs and
finances with the Borrower's officers and employees, at such reasonable
times as the Bank shall request, and
(g) Comply with the requirements of all laws, rules, regulations and orders
applicable to the Borrower or its business.
7. RIGHT TO DEBIT ACCOUNTS OF BORROWER. Without notice to Borrower, Bank may
appropriate and apply to the total or partial payment of any and all
Obligations any and all monies credited to or belonging to Borrower and which
are now or hereafter held by Bank, on deposit or otherwise.
8. EVENTS OF DEFAULT. Upon the occurrence of any of the following, any and all
existing Obligations shall immediately become due and payable;
A. The nonpayment of any Obligations that are due and payable; or
B. The failure of Borrower to perform any act or duty as specified in this
agreement or any Obligations; or
C. Any written statement, representation or warranty furnished to Bank by
Borrower in any financial statement, agreement or similar document is
found to be untrue in any material respect; or
D. The insolvency, suspension of the usual business, assignment of a
significant portion of the assets (whether generally or for the benefit of
creditors), material deterioration in the financial condition or merger or
consolidation of Borrower, or
E. The attachment or distraint of any material funds or other material
property of Borrower by any parties or any domestic or foreign government
or governmental agency or department; or
F. The filing of a petition in bankruptcy or the commencement of any similar
proceeding by or against Borrower under any bankruptcy or debtor's law for
the composition, extension, arrangement or readjustment of debts; or
G. The appointment of a trustee, receiver, conservator, rehabilitator or
similar officer for Borrower or all or a substantial part of its assets.
H. The occurrence of any of the foregoing events described in subsections C
through G of this article, mutatis mutandis with respect to the holder at
any time of a majority of Borrower's outstanding capital stock.
9. WAIVER. Any delay, extension of time, renewal, compromise or other indulgence
which may occur or be granted by Borrower or Bank to a third party shall not
impair the rights or powers of the other party hereto against such third
party. Notwithstanding anything to the contrary, Borrower hereby waives its
right to require from Bank notice, presentment, demand or protest of
Obligations.
10.CUMULATIVE REMEDIES. The rights, remedies, powers and privileges provided
herein shall be cumulative and not exclusive of those provided by law or
equity.
-2-
<PAGE>
The obligations of this agreement shall extend to and unconditionally bind
the successors and assigns of Borrower and Bank. The rights, remedies, powers
and privileges contained herein similarly shall enure to the benefit of and
may be enforced by their respective successors and assigns.
11.TERMINATION. This is a continuing agreement and shall remain in full force
and effect until written notice shall have been received by either party from
the other that it has been terminated, but any such notice shall not
discharge, release, change, or reduce Borrower's liability for or on any
outstanding Obligations.
12.MODIFICATION. This agreement may not be modified or terminated nor may any
rights be waived except by a writing signed by the duly authorized
representative of the party against whom enforcement of such modification,
termination or waiver is sought. However, even a written waiver shall not be
effective as to any transaction occurring subsequent to the date of such
waiver, nor as to any continuance of a breach after such waiver.
13.GOVERNING LAW. All rights, obligations and liabilities arising under this
agreement or any Obligations shall be governed by and construed in accordance
with the laws of the Sate of New York.
14.FINANCIAL INFORMATION. Borrower shall furnish to Bank within 180 days after
the end of each of its fiscal years its audited consolidated statement of
income and retained earnings in respect of, and its balance sheet as at the
end of, each such year, and shall furnish to Bank such further information as
may be reasonably requested from time to time by Bank.
15.SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall be deemed to be ineffective only in
such jurisdiction and only to the extent of such prohibition or
unenforceability, and shall not affect or invalidate the remaining provisions
of this Agreement, which shall be construed so as to preserve to the greatest
extent possible their original purpose and effect.
16.SURVIVAL All covenants, representations, warranties and other agreements made
in this Agreement shall survive and shall continue in full force and effect
so long as any Obligations remain outstanding and unpaid. Each time the Bank
shall make a new advance to the Borrower or a new Obligation shall be
created, the Borrower shall be deemed to have reconfirmed to the Bank that
the representations made herein remain true and correct.
17.CONFLICT. This Agreement shall apply only to unsecured loans, credits and
advances made by the Bank to the Borrower from time to time and shall not
affect the terms of any secured loan arrangement between the Bank and the
Borrower, which shall be construed in accordance with its own terms. In
addition, if the Borrower has entered into any other written agreement with
the Bank evidencing any unsecured Obligation, and if the terms of such other
written agreement shall conflict with the terms hereof, the terms in conflict
shall be reconciled with each other to give effect to both provisions to the
greatest extent possible, but any conflicts which cannot be reconciled shall
be resolved by reference to the terms of the other written agreement which
shall be deemed to be controlling.
IN WITNESS WHEREOF, the undersigned Borrower has caused this agreement to be
executed and its corporate seal to be affixed and attested to as of the 8th day
of May, l998
Yuasa, INC.
(Seal) --------------------------------
Borrower's Name
ATTEST:
/s/ Michael T. Philion
- ----------------------------- 2366 Bernville Road
Title: Secretary Reading, PA 19605-9457
--------------------------------
Address
By: /s/ Patrick J. McClafferty
--------------------------------
Title: Treasurer
ACCEPTED:
THE ASAHI BANK, LTD.
New York Branch
By:
---------------------------
Title:
-3-
<PAGE>
PO Box [LOGO OF CORESTATES BANK
600 Penn Street APPEARS HERE]
Reading PA 19603
610 655 2919
Fax 610 655 3300
Philip B Shober
Vice President
March 16, 1998
Mr. Patrick McClafferty
Treasurer
Yuasa-Exide, Inc.
P.O. Box 14145
Reading, PA 19612
Dear Patrick:
I am very pleased to inform you that CoreStates Bank N.A. ("the Bank") has
approved a new credit facility for use by Yuasa-Exide, Inc. ("the Borrower") as
follows:
Amount: $10,000,000.00
Term: 8 years
Repayment: Interest monthly. Principal in 20 consecutive quarterly
installments of $500,000 per quarter beginning July 1, 2001
with a final payment of all remaining principal and accrued
interest due April 1, 2006.
Collateral: Unsecured
Interest Rates: The Bank's "Overnight Base Rate" (OBR) as quoted and made
available by the Bank from time to time, plus .70%.
Fixed rate/OBR Swap to be provided by the Bank and, as a
condition hereof, to be established solely between the
Borrower and the Bank as pertains specifically to this
credit facility.
Conditions: A. Financial reporting, quarterly and annual in form
acceptable to the Bank
B. Financial covenants
1. Minimum "Cash Flow to Debt Service" ratio of 1.00
to 1, tested annually (See attached
calculation/definition, Exhibit 1)
2. Maximum "total debt to Tangible Net Worth" ratio of
12 to 1 as of 3/31/98 (see attached proforma
<PAGE>
calculations/definitions, Exhibit 2) and
thereafter, tested quarterly (to be reset prior to
3/31/99, or following the IPO).
C. Cross default -- a default by the Borrower under this
credit facility shall at the Bank's option constitute a
default under any other credit facilities between the
Bank and the Borrower, and vice versa.
D. The Borrower agrees that it's Accounts Receivable,
Inventory, Intellectual Property, and the majority of
it's equipment and real estate, will remain
unencumbered.
E. Such other terms and conditions as contained in the
standard bank loan documentation as required by the Bank
("Related Documentation").
Representations
and Warranties: The Borrower hereby represents and warrants to the Bank that:
a) Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the
state in which it is incorporated.
b) The execution and delivery of this letter and the
Related Documentation and the consummation of the
matters described herein have been duly approved by the
Borrower;
c) All financial statements previously or hereafter given
by or on behalf of the Borrower to the Bank are or will
be (when furnished) true, correct, and substantially
complete as of the date of their preparation.
d) To the knowledge of the Borrower, there are no suits,
investigations, tax claims, or other legal proceedings
now pending which would materially adversely affect the
financial conditions of the Borrower.
e) The "Certified Copy of Borrowing Resolutions and
Certificates of Incumbency" dated June 3, 1996 was and
continues to be true and correct.
<PAGE>
Please indicate your acceptance of the above by signing the enclosed copy of
this letter and returning it to my attention no later than March 31, 1998. Upon
acceptance of the within commitment and the delivery of the Related
Documentation, this document shall be deemed a Letter Agreement ("Letter
Agreement") by and between the Bank and the Borrower as of the date of such
acceptance. The terms and conditions of the Letter Agreement shall survive both
the execution of the Letter Agreement and the execution and/or delivery of any
Related Documentation and shall remain in full force and effect until all
obligations of the Borrower to the Bank hereunder are performed and paid in
full. Any failure by the Borrower to fulfill and perform all obligations of the
Borrower to the Bank hereunder ("Default"), whether of payment or performance,
shall be deemed a Default hereunder and under the Related Documentation. Any
Default under or pursuant to any of the Related Documentation shall be deemed a
Default hereunder. Settlement shall occur on or before March 31, 1998.
Very truly yours,
/s/ Philip B. Shober
Philip B. Shober
Vice President
/pjt
The undersigned, intending to be legally bound hereby, acknowledge and accept
the terms and conditions outlined above, as of this 17 day of March 1998.
YUASA-EXIDE, INC.
/s/ Patrick J. McClafferty
--------------------------------------
Patrick J. McClafferty, Treasurer
<PAGE>
Exhibit I
---------
(Part of Letter Agreement between Yuasa-Exide, Inc.
and CoreStates Bank N.A. dated 3/17/98
-----------------
"Cash Flow"
- -----------
97 96
----- -----
NI 5035 3438
+Dep 10044 11074
+AM 4403 3926
-Dividends (1200) (400)
-Unfunded Capx* (9443) 0
----- -----
8839 18034
----- -----
*Capital expenditures paid "out of pocket": (i.e. not financed with debt)
Debt Service
- ------------
(Actual principal repayment on LTD, does not include refinanced or rolled-
over debt, or repayment on lines)
97 96
-- --
8033 6000
"Cash Flow" to "Debt Service" Ratio
97 96
-- --
1.10 3.00
<PAGE>
Exhibit 2
---------
(Part of Letter Agreement between Yuasa-Exide, Inc. and
CoreStates Bank N.a. dated 3/17/98
-----------
"Total Debt" to Tangible Net Worth" Ratio
Total Debt = Total Liabilities
TNW = Total Shareholders Equity, minus
intangible assets
97 96
-- --
182,274 = 12.48 186,150 = 25.99
------- -------
14,605 7,192
Proforma with `98 NI - Divs. (Liabilities unchanged)
182,274 = 9.09
-------
20,032
Proforma with IPO proceeds (Liabilities unchanged)
182,274 = 2.60
-------
70,032
<PAGE>
PO Box 1102
600 Penn Street
Reading PA 19603 [LOGO OF CORESTATES BANK
610 655 2919 APPEARS HERE]
Fax 610 655 3300
Philip B Shober
Vice President
December 23, 1997
Mr. Patrick McClafferty
Yuasa Exide Inc.
P.O. Box 14145
Reading, PA 19612
Dear Patrick:
I am pleased to advise you that CoreStates Bank N.A. (The "Bank") has approved
an increase to the existing line of credit to Yuasa-Exide, Inc. (The "Company"),
from $5,000,000 to $10,000,000, subject to the following terms and conditions:
Amount: $10,000,000.00
Purpose: Miscellaneous working capital support
Repayment: Interest monthly, Principal payable upon demand
Interest: LIBOR-based rates as quoted by the Bank and accepted by the
Company for such terms as made available at the sole
discretion of the Bank.
Other Conditions:
A. Negative Pledge -- Company agrees that any and all lines of credit
extended by any bank to the Company shall at all times be on an
unsecured basis.
B. Company to provide to the Bank advance written notice of any event
that could result in a material change to the financial condition of
the Company, including but not limited to material acquisitions.
C. Company to provide immediate notice to the Bank in the event that the
Company is in violation of any terms and conditions of any other Bank
financing arrangements.
This facility is also subject to all terms and conditions as outlined in the
"Master Demand Note" and any addendums thereto.
<PAGE>
Please indicate your acceptance of the above by signing the acknowledgment
below.
Very truly yours,
/s/ Philip B. Shober
Philip B. Shober
Vice President
PBS/pjt
Acknowledged and accepted this 23 day of December, 1997.
YUASA-EXIDE INC.
/s/ Michael T. Philion
-------------------------------------
Michael T. Philion VP & CFO
/s/ Patrick J. McClafferty
-------------------------------------
Patrick J. McClafferty Treasurer
<PAGE>
- --------------- --------------- -------------------- ------------------------
- --------------- --------------- -------------------- ------------------------
LIS NO. LOAN NO. BORROWER APPROVAL SIGNATURE
================================================================================
[LOGO OF CORESTATES APPEARS HERE]
MASTER DEMAND NOTE
$ 10,000,000.00 12/23 , 1997
------------------------- ------------ --
FOR VALUE RECEIVED, each of the undersigned, jointly and severally if more than
one (hereinafter collectively referred to as "Borrower"), promises to pay to the
order of CoreStates Bank, N.A.*, a national banking association (the "Bank"), at
any of its banking offices in Pennsylvania, the principal amount of
Ten Million and 00/100---------------------------------------------------DOLLARS
- -------------------------------------------------------------------------
in lawful money of the United States, or, if less, the outstanding principal
balance on all loans and advances made by Bank evidenced by this Note
("Loans"), plus interest. Said principal and interest shall be payable ON DEMAND
Interest shall accrue at a rate per annum which is at all times equal to SEE
---
ATTACHED NOTE ADDENDUM OF EVEN DATE HEREWITH Bank's Prime Rate, such rate to
- --------------------------------------------
change each time the Prime Rate changes, effective on and as of the date of the
change.
INTEREST - Interest shall be calculated on the basis of a 360 day year and shall
be charged for the actual number of days elapsed.
Accrued interest shall be payable monthly. Accrued interest shall also be
payable on demand and when the entire principal balance of this Note is paid to
Bank. The term "Prime Rate" is defined as the rate of interest for loans
established by Bank from time to time as its prime rate. Interest shall accrue
on each disbursement hereunder from the date such disbursement is made by Bank,
provided, however, that to the extent this Note represents a replacement,
substitution, renewal or refinancing of existing indebtedness, interest shall
accrued from the date hereof. Interest shall accrue on the unpaid balance hereof
at the rate provided for in this Note until the entire unpaid balance has been
paid in full, notwithstanding the entry of any judgment against Borrower.
BANK'S LOAN RECORDS - The actual amount due and owing from time to time under
this Note shall be evidenced by Bank's books and records of receipts and
disbursements hereunder. Bank shall set up and establish an account on the books
of Bank in which will be recorded Loans evidenced hereby, payments on such Loans
and other appropriate debits and credits as provided herein, including any Loans
which represent reborrowings of amounts previously repaid. Bank shall also
record, in accordance with customary accounting practice, all other interest,
charges, expenses and other items properly chargeable to Borrower hereunder, and
other appropriate debits and credits. Such books and records of Bank shall be
presumed to be complete and accurate and shall be deemed correct, except to the
extent shown by Borrower to be manifestly erroneous.
NOTE NOT A COMMITMENT TO LEND - Borrower acknowledges and agrees that no
provision hereof, and no course of dealing by Bank in connection herewith, shall
be deemed to create or shall imply the existence of any commitment or obligation
on the part of Bank to make Loans. Except as otherwise provided in a currently
effective written agreement by Bank to make Loans, each Loan shall be made
solely at Bank's discretion.
PREPAYMENT - Borrower may at its option prepay all or any portion of the
principal balance of any Loans at any time without premium or penalty.
COLLATERAL - As security for all indebtedness to Bank now or hereafter incurred
by Borrower, under this Note or otherwise, Borrower grants Bank a lien upon and
security interest in any securities, instruments or other personal property of
Borrower now or hereafter in Bank's possession and in any deposit balances now
or hereafter held by Bank for Borrower's account and in all proceeds of any;
such personal property or deposit balances. Such liens and security interests
shall be independent of Bank's right of setoff. This Note and the indebtedness
evidenced hereby shall be additionally secured by any lien or security interest
evidenced by a writing (whether now existing or hereafter executed) which
contains a provision to the effect that such lien or security interest is
intended to secure (a) this Note or indebtedness evidenced hereby or (b) any
category of liabilities, obligations or the indebtedness of Borrower to Bank
which includes this Note or the indebtedness evidenced hereby, and all property
subject to any such lien or security interest shall be collateral for this Note.
CONFESSION OF JUDGMENT - Borrower irrevocably authorizes and empowers any
attorney or any clerk of any court of record to appear for and confess judgment
against Borrower for such sums as are due and owing on this Note, with or
without declaration, with costs of suit, without stay of execution and with an
amount not to exceed the greater of fifteen percent (15%) of the principal
amount of such judgment or $5,000 added for collection fees. If a copy of this
Note, verified by affidavit by or on behalf of Bank, shall have been filed in
such action, it shall not be necessary to file the original of this Note. The
authority granted hereby shall not be exhausted by the initial exercise thereof
and may be exercised by Bank from time to time. There shall be excluded from
the lien of any judgment obtained solely pursuant to this paragraph all improved
real estate in any area identified under regulations promulgated under the Flood
Disaster Protection Act of 1973, as having special flood hazards if the
community in which such area is located is participating in the National Flood
Insurance Program. Any such exclusion shall not affect any lien upon property
not so excluded.
DEMAND NOTE - This Note is and shall be construed as a "demand instrument" under
the Uniform Commercial Code. Bank may demand payment of the indebtedness
outstanding under this Note or any portion thereof at any time.
BANK'S REMEDIES - In the event that any payment hereunder is not made when due
or demanded, Bank may, immediately or any time thereafter, exercise any or all
of its rights hereunder or under any agreement or otherwise under applicable law
against Borrower, against any person liable, either absolutely or contingently,
for payment of any indebtedness evidenced hereby, and in any collateral, and
such rights may be exercised in any order and shall not be prejudiced by any
delay in Bank's exercise thereof. At any time after such non-payment, Bank may,
at its option and upon five days written notice to Borrower, begin accruing
interest on this Note at a rate not to exceed five percent (5%) per annum in
excess of the rate of interest provided for above on the unpaid principal
balance hereof; provided, however, that no such interest shall accrue hereunder
in excess of the maximum rate permitted by law. All such additional interest
shall be payable upon demand.
NOTICE TO BORROWER - Any notice required to be given by Bank under the
provisions of this Note shall be effective as to each Borrower when addressed to
Borrower and deposited in the mail, postage prepaid, for delivery by first class
mail at Borrower's mailing address as it appears on Bank's records.
DISBURSEMENTS AND PAYMENTS - The proceeds of any Loan may be credited by Bank to
the deposit of Borrower or disbursed in any other manner requested by Borrower
and approved by Bank. All payments due under this Note are to be made in
immediately available funds. If Bank accepts payment in any other form, such
payment shall not be deemed to have been made until the funds comprising such
payment have actually been received by or made available to Bank. If Borrower is
not an individual, Borrower authorizes Bank (but Bank shall have no obligation)
- --------------------------------------------------------------------------------
* CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as
CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank
<PAGE>
ADDENDUM TO MASTER DEMAND NOTE
IN AMOUNT OF $10,000,000.00
This note will bear interest at a LIBOR based interest rate as quoted by the
Bank and accepted by the Borrower from time to time for specified terms.
PREPAYMENT:
- ----------
If this Note bears interest at a floating or variable rate and no floor or
minimum rate is specified, Borrower may prepay all or any portion of the
principal balance of this Note at any time, without premium or penalty. If not
permitted under the preceding sentence, any prepayment of principal (including
any principal repayment as a result of acceleration by Bank of this Note) shall
require immediate payment to Bank of a prepayment fee equal to the amount, if
any, by which the aggregate present value of scheduled principal and interest
payments eliminated by the prepayment exceeds the principal amount being
prepaid. Said present value shall be calculated by application of a discount
rate determined by Bank in its reasonable judgment to be the yield-to-maturity
at the time of prepayment on U. S. Treasury securities having a maturity which
most closely approximates the final maturity date of the principal balance then
outstanding. Whether or not a prepayment fee is required hereunder, prepayments
shall be applied to scheduled installments of principal in the inverse order of
their maturity, shall be accompanied by payment of accrued interest on the
principal amount being prepaid and, unless this Note has been accelerated by
Bank, shall not be permitted in an amount less than the scheduled principal
installment immediately prior to final maturity of the outstanding principal
balance.
YUASA-EXIDE, INC.
By: /s/ Michael T. Philion
------------------------------------
Michael T. Philion, Pres. -Finance
By: /s/ Patrick J. McClafferty
------------------------------------
Patrick J. McClafferty, Treasurer
Date: 12/23/97
----------------------------------
<PAGE>
EXPLANATION AND WAIVER OF RIGHTS
REGARDING CONFESSION OF JUDGMENT
1. On the date hereof, Yuasa-Exide, Inc. , a(an) corporation
---------------------- ----------------------
(the "Obligor") is signing and delivering to CoreStates Bank, N.A. (the "Bank")
a
[X] Promissory note in the principal sum of Ten Million & 00/100---- Dollars
------------------------
($10,000,000.00)
----------------
[_] Guaranty of Obligations of
-----------------------------------------------
[_] Other
--------------------------------------------------------------------
(as the same may be renewed, modified, amended, extended, restated or replaced,
whether one or more, the "Obligation"). The Obligor has been advised by the Bank
(and by the Obligor's legal counsel, if applicable) that the Obligation contains
a clause that provides that the Bank may confess judgment against the Obligor.
The Obligor has read the Obligation and clearly and specifically understands
that by signing the Obligation which contains such confession of judgment
clause:
(a) The Obligor is authorizing the Bank to enter a judgment against
the Obligor and in favor of the Bank, which will give the Bank a lien upon any
real estate which the Obligor may own in any county where the judgment is
entered;
(b) The Obligor is giving up an important right to any notice or
opportunity for a hearing before the entry of this judgment on the records of
the Court;
(c) The Obligor is agreeing that the Bank may enter this judgment
and understands that the Obligor will be unable to contest the validity of the
judgment, should the Bank enter it, unless the Obligor successfully challenges
entry of the judgment through a petition to open or strike the judgment, which
will require the Obligor to retain counsel at the Obligor's expense;
(d) The Obligor may be giving up an important right to any notice
or opportunity for a hearing before the Bank may request and use the power of
the state government to deprive the Obligor of its property pursuant to the
judgment by seizing or having the Sheriff or other official seize the Obligor's
bank accounts, inventory, equipment, furnishings, or any other personal property
that the Obligor may own, to satisfy the Obligation;
(e) The Obligor may be immediately deprived of the use of any
property that is seized by the Bank pursuant to the judgment without notice or a
hearing, and the procedural rules of Pennsylvania's court system do not
guarantee that the Obligor will receive a prompt hearing after the Obligor's
property is seized; and
(f) If the Obligation is the Bank's printed form of Master Demand
Note, Commercial Promissory Note or Security Agreement, or a Master Note
Agreement prepared by the Bank, the Obligor is agreeing that the Bank may enter
judgment whether or not there is a default under the Obligation.
2. The Obligor knows and understands that it is the confession of
judgment clause in the Obligation which gives the Bank the rights described in
subparagraphs (a) through (f) of paragraph 1 above.
<PAGE>
3. Fully and completely understanding the rights which are being given
up if the Obligor signs the Obligation containing the confession of judgment,
the Obligor nevertheless freely, knowingly and voluntarily waives said rights
and chooses to sign the Obligation.
4. The Obligor acknowledges that the proceeds of the Obligation are to
be used for business purposes.
5. If the Obligor is an individual, the Obligor certifies that his/her
annual income exceeds $10,000.00.
Dated this 23 day of December ,1997.
---------- ------------ --
THE OBLIGOR HAS READ THIS EXPLANATION AND WAIVER PRIOR TO SIGNING THE OBLIGATION
AND FULLY UNDERSTANDS ITS CONTENTS.
YUASA-EXIDE, INC.
-------------------------------------
[Name of Corporation/Partnership]
By /s/ Michael T. Philion By /s/ Patrick J. McClafferty
-------------------------------------- -------------------------------
Michael T. Philion, Vice President - Finance Patrick J. McClafferty, Treasurer
- ---------------------------------------- ---------------------------------
(Print Name and Title) (Print Name and Title)
INDIVIDUALS OR PROPRIETORS SIGN BELOW
-------------------------------- ---------------------------------
(Witness Signature) (Signature of Individual Obligor)
-------------------------------- ---------------------------------
(Witness Signature) (Signature of Individual Obligor)
<PAGE>
CORPORATE ACKNOWLEDGMENT
------------------------
COMMONWEALTH OF PENNSYLVANIA :
:ss
COUNTY OF Berks :
On the 23rd day of December,1997 before me, a notary public for said
Commonwealth and County, the undersigned officer, personally appeared M.T.
Philion & P.J. McClafferty who acknowledged himself/herself to be the officers
of Yuasa-Exide, Inc., and that he/she, as such officer being authorized to do
so, executed the foregoing Explanation and Waiver of Rights Regarding Confession
of Judgment for the purposes therein contained by signing the name of the
corporation by himself/herself as such officer. And said officers did further
certify and acknowledge that he/she received a true, correct and complete copy
of the foregoing Explanation and Waiver of Rights Regarding Confession of
Judgment.
In WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Kathleen M. Killian -------------------------------------
- ----------------------- Notarial Seal
Notary Public Kathleen M. Killian, Notary Public
Laureldale Boro, Berks County
[SEAL OF NOTARY PUBLIC APPEARS HERE] My Commission Expires June 13, 1998
-------------------------------------
My Commission Expires:
Seal
PARTNERSHIP ACKNOWLEDGMENT
--------------------------
COMMONWEALTH OF PENNSYLVANIA :
:ss
COUNTY OF :
On the ________ day of________, 19__, before me, a notary public for said
Commonwealth and County, the undersigned officer, personally appeared
________________________________ who acknowledged himself/herself/themselves to
be General Partner(s) of _________________________, a partnership, and who, I am
satisfied is/are the person(s) named in and who executed the within Explanation
and Waiver of Rights Regarding Confession of Judgment and he/she/they did
severally acknowledge that he/she/they signed. sealed and delivered the same as
the act and deed of the said partnership for the uses and purposes therein
expressed by signing the name of the partnership by himself/herself/themselves
as partner(s). And said______________________________each did further certify
and acknowledge that he/she/they received a true, correct and complete copy of
the within Explanation and Waiver of Rights Regarding Confession of Judgment.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
- -----------------------------------------
Notary Public
My Commission Expires:
Seal
INDIVIDUAL ACKNOWLEDGMENT
-------------------------
COMMONWEALTH OF PENNSYLVANIA :
:ss
COUNTY OF :
On the _____ day of_____________, 19__, before me, a notary public for said
Commonwealth and County, the undersigned officer, personally
appeared___________________________who, I am satisfied is/are the person(s)
named in and who executed the within Explanation and Waiver of Rights Regarding
Confession of Judgment and he/she/they did severally acknowledge that
he/she/they signed. sealed and delivered the same as his/her/their act and deed
for the uses and purposes therein expressed. And said _______________________
did further certify and acknowledge that he/she/they received a true, correct
and complete copy of the within Explanation and Waiver of Rights Regarding
Confession of Judgment.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
- -------------------------------------
Notary Public
My Commission Expires:
Seal
<PAGE>
EXHIBIT "A"
-----------
[LINE No.L-4760 ]
----------
REVOLVING CREDIT GRID NOTE
--------------------------
US$ 25.000.000.00 [amount of credit line] 7/16 ,1997
--------------------------------- ------- --
New York, New York.
-------------------
FOR VALUE RECEIVED, the undersigned Yuasa Exide, Inc.
-----------------------------------
(the "BORROWER"), HEREBY PROMISES TO PAY to the order of The SAKURA BANK,
LIMITED, NEW YORK BRANCH (the "BANK"), at its office at 277 Park Avenue, New
York, N.Y. 10172, in lawful money of the United States and in immediately
available funds, each principal amount of each LOAN listed on the schedule
attached to this NOTE (the "GRID") made to the BORROWER by the BANK from time
to time during the period from the date of this NOTE up to and including
June 30, 1998 [date] pursuant to the CREDIT AGREEMENT (as defined hereafter),
- -------------
on the repayment date corresponding to such LOAN on the GRID, respectively, and
to pay interest (computed on the basis of a year 360 days and actual number of
days elapsed) from the date made until the repayment date therefore at the rate
per annum set forth for such LOAN on the GRID. Interest shall be payable by the
BORROWER to the BANK on the repayment date for such LOAN.
Notwithstanding, the foregoing to the contrary, the outstanding principal
balance of this NOTE shall at no time exceed Twenty Five Million DOLLARS
-------------------
($25,000,000.00)[amount of credit line], and the duration of each LOAN under the
--------------
NOTE shall at no time exceed six (6) [number] calendar months pursuant to the
--- ---
CREDIT AGREEMENT. Any amount of principal hereof which is not paid when due,
whether stated maturity, by acceleration, or otherwise, shall bear interest from
the date when due until said principal amount is paid in full, payable on
demand, at the DEFAULT RATE.
The BORROWER hereby authorizes the BANK to endorse on the Schedule annexed
to this NOTE all LOANS made to the BORROWER and all payments of principal
amounts in respect of such LOANS, which endorsements shall, in absence of
manifest error, be conclusive as to the outstanding principal amounts of all
LOANS; provided, however, that the failure to make such notation with respect to
any LOAN or payment thereof shall not limit or otherwise affect the obligations
of the BORROWER under the CREDIT AGREEMENT and this NOTE.
This NOTE is the NOTE referred to in the REVOLVING CREDIT LINE AGREEMENT
dated as of July 1, 1997, between the BORROWER and the BANK (the "CREDIT
------- --
AGREEMENT"). The CREDIT AGREEMENT, among other things, contains provisions for
acceleration of the maturity of this NOTE upon the happening of certain stated
events and also for payments on account of the principal amounts of this NOTE
prior to the maturity of this NOTE upon the terms and conditions specified in
the CREDIT AGREEMENT. Unless otherwise defined herein, terms defined in the
CREDIT AGREEMENT are used herein as therein defined.
The BORROWER hereby waives presentment, demand, protest or notice of any
kind with respect to this
NOTE.
THIS NOTE SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
Yuasa--Exide, Inc.
------------------------------
[name of borrower]
By: /s/ Patrick J. McClafferty
---------------------------
Title: PATRICK J. MCCLAFFERTY
TREASURER
<PAGE>
THE SAKURA BANK, LIMITED
REVOLVING CREDIT LINE AGREEMENT
THIS REVOLVING CREDIT LINE AGREEMENT dated as of
July 1, 1997 between The Sakura Bank, Limited, New York Branch, having its
offices at 277 Park Avenue, New York, N.Y., 10172 (the "BANK") and
Yuasa-Exide, Inc.
- --------------------------------------------------------------------------------
a California (state of incorporation) corporation having its offices at
--------------------
2400 Bernville Road, Reading, PA 19605 (The "BORROWER").
- --------------------------------------------------------------
The parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. DEFINED TERMS. As used in this AGREEMENT, the following terms have
the following meanings (terms defined in the singular to have the same meaning
when used in the plural and vice versa);
"AGREEMENT" means this REVOLVING CREDIT LINE AGREEMENT, as amended,
supplemented, or modified from time to time.
"BUSINESS DAY" means any day other than a Saturday, Sunday, or other day on
which commercial banks in the City of New York are authorized or required to
close under the laws of the State of New York.
"CREDIT LINE" means a line of credit which the BANK establish for the BORROWER
pursuant to SECTION 2.01 hereof in the amount referred to therein, but which
will be terminated in whole or reduced in part pursuant to SECTION 2.02 hereof.
This CREDIT LINE shall not be construed as the commitment of the BANK to make a
LOAN.
"DEBT" means (1) indebtedness or liability for borrowed money or for the
deferred purchase price of property or services (including trade obligations);
(2) obligations as lessee under capital leases; (3) current liabilities in
respect of unfunded vested benefits under any plan established, maintained, or
to which contributions have been made by the BORROWER or any ERISA AFFILIATE;
(4) obligations under letters of credit issued for the account of any PERSON;
(5) all obligations arising under acceptance facilities; (6) all guaranties,
endorsements (other than for collection or deposit in the ordinary course of
business), and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any PERSON, or otherwise to assure a
creditor against loss; and (7) obligations secured by any LIEN on property owned
by the PERSON, whether or not the obligations have been assumed.
"DEFAULT" or "EVENT OF DEFAULT" shall mean any of the events specified in
SECTION 4.01 hereof, whether or not any requirement for the giving of notice,
the lapse of time, or both, or any other condition, has been satisfied.
"DEFAULT RATE" shall have the meaning assigned to such term in SECTION 2.04 (b)
hereof.
"DOLLARS", "U.S. DOLLARS", "U.S.$", and "$" shall mean the lawful currency of
the United States of America at any relevant time hereunder.
"ERISA AFFILIATE" means any trade or business (whether or not incorporated)
which together with the BORROWER would be treated as a single employer under
Section 4001 of ERISA (the Employee Retirement Income Security Act).
"FEDERAL FUNDS RATE" shall mean, respect to any LOAN for any INTEREST PERIOD, a
fluctuating interest rate per annum quoted to the BANK by federal funds brokers;
plus a margin.
"INTEREST PERIOD" shall mean each INTEREST PERIOD of any day or days from one
day (overnight) to six (6) months for which FEDERAL FUNDS RATE will apply;
provided that all of the foregoing provisions relating to the INTEREST PERIOD
are subject to the following: i) INTEREST PERIOD shall at no time exceed the
duration of each LOAN specified in SECTION 2.03 hereof, ii) if any such INTEREST
PERIOD for LOAN would otherwise expire on a day which is not a BUSINESS DAY,
such INTEREST PERIOD shall expire on the next succeeding BUSINESS DAY, and iii)
interest accrued on the LOANS shall be payable on the last day of the INTEREST
PERIOD applicable thereto.
"LOAN" or "LOANS" shall have the meaning assigned to such term in SECTION 2.01
hereof.
"LOAN DOCUMENTS" means this AGREEMENT and the NOTE.
"NOTE" shall have the meaning assigned to such term in SECTION 2.05 hereof
"PERSON" means an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, governmental
authority, or other entity of whatever nature.
"REGULATION D" shall mean REGULATION D of the Board of Governors of the Federal
Reserve System as from time to time in effect establishing reserve requirements
"REGULATION U" shall mean REGULATION U of the Board of Governors of the Federal
Reserve System as from time to time in effect related to margin stock
transactions.
ARTICLE II
AMOUNT AND TERMS OF LOANS
-------------------------
SECTION 2.01. REVOLVING CREDIT. The BANK agrees on the terms and conditions
hereinafter set forth, to make one or more loans (the "LOANS") to the
BORROWER from time to time during the period from the date of this AGREEMENT up
to and including June 30, 1998 [date] in an aggregate
----------------------------------
amount not to exceed at any time outstanding Twenty Five Million DOLLARS
--------------------------
($ 25,000,000.00), as such amount may be advised to the BORROWER pursuant to
- -----------------
the last paragraph of this SECTION and as such amount may be reduced pursuant to
SECTION 2.02 hereof (the CREDIT LINE). Within the limits of the CREDIT LINE, the
BORROWER may borrow pursuant to SECTION 2.03 hereof, and pay pursuant to SECTION
2.07 hereof, and re-borrow and pay under SECTION 2.03 and 2.07 hereof,
respectively.
Notwithstanding any provision in this AGREEMENT to the contrary, it is clearly
understood and agreed by the BANK and the BORROWER that the BANK does not commit
to make a LOAN hereunder and that the BANK is not required to make any LOAN to
the BORROWER hereunder.
In the event that the BANK determines to extend a CREDIT LINE to the BORROWER,
the BANK shall notify the BORROWER in writing of such intention and shall in
such writing specify to the BORROWER the period for which such CREDIT LINE is to
be extended and the amount of such CREDIT LINE.
SECTION 2.02. REDUCTION AND TERMINATION OF CREDIT LINE. The BANK shall have the
right, upon notice to the BORROWER, to terminate in whole or reduce in part the
unused portion of the CREDIT LINE.
SECTION 2.03. NOTICE AND MANNER OF BORROWING. The BORROWER shall give the BANK
telephonic (confirmed in writing or by facsimile notice, although, the failure
to give any such confirmation to the BANK shall not release or diminish any of
the BORROWER's obligations hereunder), written or facsimile notice (effective
upon receipt) of any LOAN under this AGREEMENT; specifying (1) the date of such
LOAN; (2) the amount of such LOAN; (3) the duration of the INTEREST PERIOD
applicable thereto. Not later than 3:00 p.m. on the date of such LOAN and upon
fulfillment of the applicable conditions set forth in ARTICLE III hereof, the
BANK will, subject to its sole discretion and subject to the provision of
SECTION 2.01 hereof, make such LOAN available to the BORROWER in immediately
available funds by crediting the amount thereof to the BORROWER'S account with
the BANK. All notices given under this SECTION 2.03 shall be irrevocable and
shall be given not later than 3:00 p.m. on the date of each LOAN. The duration
of each LOAN under this AGREEMENT and the NOTE shall at no time exceed six ( 6 )
---------
[number] calendar months.
<PAGE>
SECTION 2.04. INTEREST. (a) The BORROWER shall pay interest to the BANK on the
outstanding and unpaid principal amount of each of the LOANS made under this
AGREEMENT at the FEDERAL FUNDS RATE. Interest shall be calculated on the basis
of a year of 360 days for the actual number of days elapsed. Interest shall be
paid in immediately available funds on the last day of each INTEREST PERIOD with
respect thereto.
(b) To the extent permitted by applicable law, any amount of principal of the
LOAN and interest thereon which is not paid when due, whether at stated
maturity, acceleration or otherwise, shall bear interest, payable on demand, at
the INTEREST RATE per annum equal to 1.5% per annum above the rate of interest
announced by the New York branch of The Sakura Bank, Limited from time to time
as The Sakura Bank's prime rate (DEFAULT RATE) until paid in full.
SECTION 2.05. NOTE. All the LOANS made by the BANK under this AGREEMENT shall
be evidenced by, and repaid with interest in accordance with, a single
promissory note of the BORROWER in substantially the form of EXHIBIT "A"
attached hereto duly completed, in the principal amount of the CREDIT LINE,
dated the date of this AGREEMENT, payable to the BANK (the "NOTE"). The BANK is
hereby authorized by the BORROWER to endorse on the schedule attached to the
NOTE the amount of each LOAN and of each payment of principal received by the
BANK on account of the LOANS (such endorsement may be by means of a computer
printout), which endorsement shall, in the absence of manifest error, be
conclusive as to the outstanding balance of the LOANS made by the BANK;
provided, however, that the failure to make such notation with respect to any
LOAN or payment thereof shall not limit or otherwise affect the obligations of
the BORROWER under this AGREEMENT or the NOTE. Any payment of interest and
any other amount payable under this AGREEMENT shall, in the absence of
mathematical error, be conclusive and final.
SECTION 2.06. FUNDING LOSS, INDEMNIFICATION; CAPITAL ADEQUACY AND OTHER COSTS.
(a) The BORROWER shall pay to the BANK, upon the request of the BANK, such
amount as shall be sufficient (in the reasonable opinion of the BANK) to
compensate it for any loss, cost, or expense incurred as a result of any payment
of a LOAN on a date other than the last day of the INTEREST PERIOD for such
LOAN, including but not limited to, acceleration of the LOANS by the BANK
pursuant to SECTION 4.01 hereof.
(b) If the BANK determines at any time that any applicable law or governmental
rule, regulation, guideline or order concerning capital adequacy, reserves or
similar requirements, or any change in interpretation or administration thereof
by any governmental authority, central bank or comparable agency, will have the
effect of increasing the cost to the BANK or the amount of capital required or
expected to be maintained by the BANK as a result of the making or continuance
of the LOANS then the BORROWER agrees to pay to the BANK, upon its written
demand therefor, such additional amounts as shall be required to compensate the
BANK for the increased cost to the BANK as a result of such increase of
capital, reserves or similar requirements. The BANK, upon determining that any
additional amounts will be payable to the BANK pursuant to this paragraph will
give prompt written notice thereof to the BORROWER which notice shall show in
reasonable detail the basis for calculation of such additional amounts, although
the failure to give any such notice shall not release or diminish any of the
BORROWER's obligations to pay additional amounts pursuant to this paragraph.
SECTION 2.07. METHOD OF PAYMENT. The BORROWER shall make each payment of
principal or interest of the LOANS under this AGREEMENT and under the NOTE not
later than 3:00 P.M. on the date when due with respect to the principal and on
the last day of the INTEREST PERIOD, as case may be, in lawful money of the
United States to the BANK in immediately available funds. The BORROWER hereby
authorizes the BANK, if and to the extent payment is not made when due under
this AGREEMENT or, under the NOTE, to charge from time to time against any
account of the BORROWER with the BANK any amount so due. Whenever any payment to
be made under this AGREEMENT or under the NOTE shall be stated to be due on a
non-BUSINESS DAY, such payment shall be made on the next succeeding BUSINESS
DAY. The BORROWER may not prepay the outstanding principal of each LOAN in whole
or in part prior to its due date.
SECTION 2.08 USE OF PROCEEDS. The BORROWER will not, directly or indirectly,
use any part of the LOAN proceeds for the purpose of purchasing or carrying any
margin stock with the meaning of REGULATION U of the Board of the Governors of
the Federal Reserve System or to extend credit to any PERSON for the purpose of
purchasing or carrying any such margin stock.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
SECTION 3.01. CONDITION PRECEDENT TO INITIAL AND ALL LOANS. (a) The BANK
shall make the initial LOAN available to the BORROWER subject to the conditions
precedent that the BANK shall have received on or before the day of such LOAN
each of the following, in form and substance satisfactory to the BANK.
(1) AGREEMENT AND NOTE. This AGREEMENT and the NOTE duly executed by the
BORROWER;
(2) EVIDENCE OF ALL CORPORATE ACTION BY THE BORROWER. Certified copies of all
corporate action taken by the BORROWER, including resolutions of its BOARD of
DIRECTORS, authorizing the execution, delivery, and performance of the LOAN
DOCUMENTS to which it is a party and each other document to be delivered
pursuant to this AGREEMENT;
(3) INCUMBENCY AND SIGNATURE CERTIFICATE OF THE BORROWER. A certificate of the
PRESIDENT or VICE PRESIDENT of the BORROWER certifying the names and true
signatures of the officers of the BORROWER authorized, pursuant to the Board of
Directors resolutions in paragraph (2) above, to sign the LOAN DOCUMENTS to
which it is a party and the other documents to be delivered by the BORROWER
under this AGREEMENT;
(b) The BANK shall make any LOAN available to the BORROWER subject to the
condition precedent that no EVENT of DEFAULT, or event which with the giving of
notice or the passage of time or both, would be an EVENT of DEFAULT, shall have
occurred and be continuing or shall result from the making of the LOAN.
ARTICLE IV
EVENTS OF DEFAULT
-----------------
SECTION 4.01. EVENTS OF DEFAULT. If any of the following events ("EVENTS OF
DEFAULT") shall occur:
(1) The BORROWER shall fail to pay the principal of, or interest on, the
NOTE, or any LOAN as and when due and payable;
(2) The BORROWER shall fail to perform or observe any term, covenant, or
agreement contained in any LOAN DOCUMENT to which it is a party on its part to
be performed or observed;
(3) The BORROWER shall (a) fail to pay any indebtedness for borrowed money
(other than the NOTE) of the BORROWER or any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise), or (b) fail to perform or observe any term, covenant, or
condition on its part to be performed or observed under any agreement or
instrument relating to any such indebtedness, when required to be performed or
observed, if the effect of such failure to perform or observe is to accelerate,
or to permit the acceleration after the giving of notice or passage of time, or
both, of the maturity of such indebtedness, whether or not such failure to
perform or observe shall be waived by the holder of such indebtedness; or any
such indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required payment), prior to the
stated maturity thereof;
(4) The BORROWER (a) shall generally not, or shall be unable to, or shall
admit in writing its inability to pay its DEBTS as such DEBTS become due; or (b)
shall make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver, or trustee for it or a
substantial part of its assets; or (c) shall commence any proceeding under any
bankruptcy, reorganization, arrangements, readjustment of DEBTS, dissolution, or
liquidation under laws or statutes of any jurisdiction, whether now or hereafter
in effect; or (d) shall have any such petition or application filed or any
such proceeding commenced against it in which an order for relief is
undismissed for a considerable period of days; or (e) by any act or omission
shall indicate its consent to, approval of, or acquiescence in any such
petition, application, or proceeding, or order for relief, or the appointment of
a custodian, receiver, or trustee for all or any substantial part of its
properties; or (f) shall
<PAGE>
suffer any such custodianship, receivership, or trusteeship to continue
undischarged for a considerable period of days; then, and in any such event,
the BANK may, by notice to the BORROWER, (except in respect of paragraph (4)
above, the events set forth in the following items (1) and (2) shall occur
automatically) (1) declare the CREDIT LINE to make LOANS to be terminated,
whereupon the same shall forthwith terminate, and (2) declare the NOTE, together
with all interest thereon, and all other amounts payable under this AGREEMENT to
be forthwith due and payable, whereupon the NOTE, all the LOANS, all such
interest, and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest, or further notice of any kind, all of
which are hereby expressly waived by the BORROWER.
ARTICLE V
MISCELLANEOUS
-------------
SECTION 5.01. AMENDMENTS, ETC. No amendment, modification, termination, or
waiver of any provision of any LOAN DOCUMENT to which the BORROWER is a party,
nor consent to any departure by the BORROWER from any LOAN DOCUMENT to which it
is a party, shall in any event be effective unless the same shall be in writing
and signed by the BANK, and then such waiver or consent shall be effective only
in the specific instance and for the specific instance and for the specific
purpose for which it is given.
SECTION 5.02. REPORTING REQUIREMENTS. The BORROWER shall furnish to the BANK;
(1) NOTICE OF LITIGATION. Promptly after the commencement thereof, notice of
all actions, suits, and proceedings before any court, governmental department,
commission, board, bureau, agency, or instrumentality domestic or foreign
affecting the BORROWER which, if determined adversely to the BORROWER, could
have a material reverse effect on financial condition, properties or operations
of the BORROWER;
(2) NOTICE OF DEFAULT and EVENT OF DEFAULT. As soon as possible after the
occurrence of each DEFAULT or EVENT OF DEFAULT, a written notice setting for the
details of such DEFAULT or EVENT OF DEFAULT and the action which is proposed
to be taken by the BORROWER to remedy said DEFAULT or EVENT OF DEFAULT.
(3) GENERAL INFORMATION. Such other information representing the condition or
operations, financial or otherwise, of the BORROWER as the BANK may from time to
time reasonably request.
SECTION 5.03. NOTICES, ETC. All notices and other communications provided for
under this AGREEMENT and under the other LOAN DOCUMENTS to which the BORROWER is
a party shall be in writing, delivered in person, sent by certified mail
(postage prepaid), or sent by telegram, telex or facsimile and promptly
confirmed by letter. Any such notice shall be effective when so given
If to the BORROWER:
Name: Yuasa-Exide, Inc.
------------------------------------
Address: P.O. Box 14145
------------------------------------
Reading, PA 19612-4145
------------------------------------
------------------------------------
Attention: PATRICK J. MCCLAFFERTY
------------------------------------
Facsimile: (610) 208-1671
------------------------------------
Telephone: (610) 208-1761
------------------------------------
If to the BANK:
The Sakura Bank, Limited, New York Branch
277 Park Avenue
New York, New York 10172
Attention: CORPORATE FINANCE - 1 DEPT. or CUSTOMER DESK.
Facsimile: (212) 644-3188 (212) 754-6690
Telephone: (212) 756-6730-6738 (212) 756-6881-5
6745-6754
or, as to each party, at such other address as shall be designated by such
partt in a written notice to the other party complying as to delivery with the
terms of this SECTION 5.03. All such notices and communications shall, when
mailed or telegraphed, be effective when deposited in the mails or delivered to
the telegraph company, respectively, addressed as aforesaid, except that notices
to the BANK pursuant to the provisions of ARTICLE II hereof shall not be
effective until received by the BANK.
SECTION 5.04. NO WAIVER; REMEDIES. No failure on the part of the BANK to
exercise, and no delay in exercising, any right, power, or remedy under any LOAN
DOCUMENT shall operate as waiver thereof; nor shall any single or partial
exercise of any right under any LOAN DOCUMENT preclude any other or further
exercise thereof or exercise of any other right. The remedies provided in the
LOAN DOCUMENTS are cumulative and not exclusive of any remedies provided by law.
SECTION 5.05. SUCCESSORS AND ASSIGNS. This AGREEMENT shall be binding upon and
inure to the benefit of the BORROWER and the BANK and their respective
successors and assigns, except that the BORROWER may not assign or transfer any
of its rights under any LOAN DOCUMENT to which the BORROWER is a party without
the prior written consent of the BANK.
SECTION 5.06. COSTS, EXPENSES, AND TAXES. The BORROWER agrees to pay on demand
all costs and expenses in connection with the preparation, execution, delivery,
filing, recording, and administration of any of the LOAN DOCUMENTS, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the BANK, and local counsel who may be retained by said counsel, with
respect thereto and with respect to advising the BANK as to its rights and
responsibilities under any of the LOAN DOCUMENTS, and all costs and expenses, if
any, in connection with enforcement of any of the LOAN DOCUMENTS. In addition,
the BORROWER shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing, and
recording of any of the LOAN DOCUMENTS and the other documents to be delivered
under any of the LOAN DOCUMENTS, and agrees to save the BANK harmless from
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
SECTION 5.07. DEDUCTIONS. All payments by the BORROWER to the BANK under this
AGREEMENT are to be made net and free of any and all taxes (except for taxes
based upon the overall net income of the BANK), duties, imposts, fees,
withholdings or deductions (the "DEDUCTIONS") of any nature now or hereafter
imposed. IF ANY DEDUCTION is, by law, required to be made from any payment
hereunder, then the BORROWER shall pay to the BANK such additional amount as
will result in receipt by the BANK of a net amount equal to the amount the BANK
would have received hereunder had no such DEDUCTION been required. In such event
the BORROWER shall, as soon as practical, deliver to the BANK a receipt issued
by the relevant taxing authority evidencing the amount of such DEDUCTION and its
payment. If the BORROWER is required to pay an additional amount on account of
any such DEDUCTION, the BORROWER shall have the right, on not less than
<PAGE>
three BUSINESS DAYS' prior written notice of the BANK, to repay the applicable
LOAN.
SECTION 5.08. RIGHT OF SET OFF. Upon the occurrence and during the
continuance of any EVENT OF DEFAULT the BANK is hereby authorized at any time
and from time to time, without notice to the BORROWER (any such notice being
expressly waived by the BORROWER), to set off and apply any and all deposits
(general and social, time or demand, provisional or final) at any time held, and
other indebtedness at any time owing by the BANK to or for the credit or the
account of the BORROWER against any and all of the obligations of the BORROWER
now or hereafter existing under this AGREEMENT or the NOTE or any other LOAN
DOCUMENTS, irrespective of whether or not the BANK shall have made any demand
under this AGREEMENT or such other LOAN DOCUMENTS and although such obligations
may be unmatured. The BANK agrees promptly to notify the BORROWER after such set
off and application, provided that the failure to give such notice shall not
affect the validity of such set off and application. The rights of the BANK
under this SECTION 5.08 are in addition to other rights and remedies (including,
without limitation, other rights of set off) which the BANK may have.
SECTION 5.09. GOVERNING LAW. This AGREEMENT and the NOTE shall be governed
by, and construed in accordance with, the laws of the state of New York. Any
legal action or proceedings with respect to this AGREEMENT against the BORROWER
may be brought in the courts of the United States of America of the State of New
York as the BANK may elect, and, by execution and delivery of this AGREEMENT,
the BORROWER hereby (i) accepts for itself, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, (ii) irrevocably agrees to
be bound by any judgement of any such court with respect to this AGREEMENT or
the NOTE and (iii) irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of venue of any
suit, action or proceedings with respect to this AGREEMENT brought in any court
of the United States of America or the State of New York located in the City of
New York, and further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
In the case of the courts of the United States of America and the State of New
York the BORROWER herby agree to receive service of process in any legal action
or proceedings with respect to this AGREEMENT at its offices at 277 Park Avenue,
New York, N.Y., 10172. Nothing herein shall affect the right to serve process in
any other manner permitted by the law. The BORROWER hereby agrees that the
mailing of such process to the BORROWER shall be deemed personal service and
accepted by the BORROWER for any legal action or proceedings with respect to
this AGREEMENT.
SECTION 5.10. SEVERABILITY OF PROVISIONS. Any provision of any LOAN
DOCUMENT which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such LOAN
DOCUMENT or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 5.11. HEADINGS. ARTICLE and SECTION headings in this AGREEMENT are
for the convenience of reference only and shall not constitute a part of the
applicable LOAN DOCUMENTS for any other purpose.
IN WITNESS WHEREOF, the parties hereto caused this AGREEMENT to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
Yuasa-Exide, Inc.
----------------------------------
(name of borrower)
By: /s/ Patrick J. McClafferty
-------------------------------
Title: PATRICK J. MCCLAFFERTY
TREASURER
The Sakura Bank Limited
New York Branch
By: /s/ Yoshimi Miura
-------------------------------
Title: Yoshimi Miura
Senior Vice President
<PAGE>
MASTER NOTE
-----------
New York, N.Y.
August 8, 1996
----------
FOR VALUE RECEIVED, the undersigned Yuasa Exide, Inc. hereby promises to
pay to the order of The Sumitomo Trust & Banking Co., Ltd. New York Branch
(hereinafter the "Bank"), at its office at 527 Madison Avenue, New York, New
York 10022, on the due date for each advance made by the Bank to the undersigned
(each, an "Advance") or on demand (as recorded on the grid on the reverse side
hereof including additional pages, if any) in lawful money of the United States,
and in immediately available funds, the unpaid principal amount of that Advance
(as recorded on the grid on the reverse side hereof including additional pages,
if any) made by the Bank to the undersigned. The undersigned further promises to
pay interest (computed on the basis of the actual number of days elapsed over a
period of 360 days) on the due date for each Advance at the rate of interest
that is recorded on the grid on the reverse side hereof including additional
pages, if any, on the unpaid principal amount of such Advance but in no event
higher than the maximum permitted under applicable law. Where Advances are based
on the Prime Rate, that rate shall be defined as the rate of interest as is
established at the Bank from time to time as its base or Prime Rate. Each
payment received by the Bank shall be applied to Advances payable on demand and
then in the order of the maturity of their respective due dates.
In the event the undersigned fails to pay any amount of principal or
interest when due, the entire unpaid principal and accrued interest for all
Advances shall forthwith become absolutely due and payable without any notice,
demand, protest or presentment whatsoever, all of which are expressly waived.
The Bank shall and is hereby authorized by the undersigned to record on the
grid on the reverse side hereof including additional pages, if any, an
appropriate notation evidencing date, amount, rate and due date (or if payable
on demand) of each Advance as well as the date and amount of each payment by the
undersigned in respect hereof, whether by prepayment or payment when due or late
payment. The records of the Bank with respect to the Advances and payments made
thereon shall, absent manifest error, be conclusive evidence of the existence
and the amount of the obligations of the undersigned to the Bank hereunder,
including all interest thereon, and all payments and prepayments made by the
undersigned with respect thereto.
<PAGE>
The undersigned shall not have the right to prepay any Advance prior to its
maturity date; however, if the undersigned does prepay any Advance, the
undersigned shall reimburse the Bank on demand for any loss incurred or to be
incurred by it as a result of such prepayment including without limitation, the
breaking of any deposits, the reemployment of funds released by any prepayment
or otherwise.
The obligations of the undersigned under this Note are absolute and
unconditional, and shall not be subject to any right of offset or counterclaim.
The provisions of this Note shall be construed and interpreted and all
rights and obligations hereunder determined in accordance with the laws of the
State of New York.
Yuasa Exide, Inc.
By: /s/ Patrick J. McClafferty
------------------------------
Name: Patrick J. McClafferty
Title: Treasurer
<PAGE>
THE SUMITOMO TRUST & BANKING CO., LTD.
NEW YORK BRANCH
GENERAL SECURITY AGREEMENT
YUASA-EXIDE, INC.
-----------------------------------------------------------
(BORROWER'S NAME)
<PAGE>
In consideration of one or more loans, letters of credit or other financial
accommodation made, issued or extended by The Sumitomo Trust & Banking Co.,
Ltd., New York Branch (hereinafter called the "Bank"), the undersigned hereby
agree(s) that the Bank shall have the rights, remedies and benefits hereinafter
set forth.
The term "Liabilities" shall include any and all indebtedness, obligations
and liabilities of any kind of the undersigned to the Bank and also to others to
the extent of their participations granted to or interests therein created or
acquired for them by the Bank, now or hereafter existing, arising directly
between the undersigned and the Bank or acquired outright, conditionally or as
collateral security from another by the Bank, absolute or contingent, joint
and/or several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, direct or
indirect, including, but without limiting the generality of the foregoing,
indebtedness, obligations or liabilities to the Bank of the undersigned as a
member of any partnership, syndicate, association or other group, and whether
incurred by the undersigned as principal, surety, indorser, guarantor,
accommodation party or otherwise.
The term "Security" shall mean every deposit, now or hereafter existing,
of the undersigned with the Bank and any other claim of the undersigned against
the Bank, now or hereafter existing, and all money, instruments, securities,
documents (including the goods covered thereby), chattel paper, credits, claims,
demands and any other property, rights and interests of the undersigned which at
any time shall come into the possession or custody or under the control of the
Bank or any of its agents, associates or correspondents, for any purpose, and
shall include any of the foregoing from time to time made available to the
undersigned by the Bank pursuant to a trust receipt or other security agreement
the effect of which is to continue the Bank's security interest therein and
shall also include the proceeds, products and accessions of and to any thereof.
The term "Security" shall also include all personal property and fixtures of the
undersigned, whether now or hereafter existing or now owned or hereafter
acquired and wherever located, of every kind and description, tangible or
intangible, including, but not limited to, all money, goods, instruments,
securities, documents, chattel paper, accounts, contract rights, general
intangibles, credits, claims, demands and any other property, rights and
interests of the undersigned, and shall include the proceeds, products and
accessions of and to any thereof.
As security for the payment of all the Liabilities, the undersigned hereby
grant(s) to the Bank a security interest in, a general lien upon and/or right of
set-off of, the Security.
At any time and from time to time, upon the demand of the Bank, the
undersigned will: (1) deliver and pledge to the Bank, indorsed and/or
accompanied by such instruments of assignment and transfer in such form and
substance as the Bank may request any and all instruments, documents and/or
chattel paper as the Bank may specify in its demand; (2) give, execute, deliver,
file and/or record any notice, statement, instrument, document, agreement or
other papers that may be necessary or desirable, or that the Bank may request,
in order to create, preserve, perfect or validate any security interest granted
pursuant hereto or to enable the Bank to exercise and enforce its rights
hereunder or with respect to such security interest; (3) keep and stamp or
otherwise mark any and all documents and chattel paper and its individual books
and records relating to inventory, accounts and contract rights in such manner
as the Bank may require; and (4) permit representatives of the Bank at any time
to inspect its inventory and to inspect and make abstracts from the
undersigned's books and records pertaining to inventory, accounts, contract
rights, chattel paper, instruments and documents. The right is expressly granted
to the Bank, at its discretion, to file one or more financing statements naming
the undersigned as debtor and the Bank as secured party and indicating therein
the types or describing the items of Security herein specified. Without the
prior written consent of the Bank the undersigned will not create, grant or
permit to exist any security interest in any property of the undersigned other
than purchase money security interests and security interests originally
perfected by possession (whether or not there was also a filing), including
security interests in the proceeds, products and accessions of and to any of the
foregoing. With respect to the Security, or any part thereof, which at any time
shall come into the possession or custody or under the control of the Bank or
any of its agents, associates or correspondents, for any purpose, the right is
expressly granted to the Bank, at its discretion, to transfer to or register in
the name of itself or its nominee any of the Security, and whether or not so
transferred or registered to receive the income and dividends thereon, including
stock dividends and rights to subscribe, and to hold the same as a part of the
Security and/or apply the same as hereinafter provided; to exchange any of the
Security for other property upon the reorganization, recapitalization or other
readjustment and in connection therewith to deposit any of the Security with any
committee or depository upon such terms as it may determine; to vote the
Security so transferred or registered and to exercise or cause its nominee to
exercise all or any powers with respect thereto with the same force and effect
as an absolute owner thereof; all without notice and without liability except to
account for property actually received by it. The Bank shall be deemed to have
possession of any of the Security in transit to or set apart for it or any of
its agents, associates or correspondents.
The Bank at its discretion may, whether any of the Liabilities be due, in
its name or in the name of the undersigned or otherwise, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of or in exchange for, or make any compromise or settlement deemed
desirable with respect to, any of the Security, but shall be under no obligation
to do so, or the Bank may extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, or release, any of the Security,
without thereby incurring responsibility to, or discharging or otherwise
affecting the liability of, the undersigned. The Bank shall not be required to
take any steps necessary to preserve any rights against prior parties to any of
the Security. Upon default hereunder or in connection with any of the
Liabilities (whether such default be that of the undersigned or of any other
party obligated thereon), the undersigned shall, at the request of the Bank,
<PAGE>
assemble the Security at such place or places as the Bank designates in its
request. The Bank shall have the rights and remedies with respect to the
Security of a secured party under the New York Uniform Commercial Code (whether
or not such Code is in effect in the jurisdiction where the rights and remedies
are asserted). In addition, with respect to the Security, or any part thereof,
which shall then be or shall thereafter come into the possession or custody of
the Bank or any of its agents, associates or correspondents, the Bank may sell
or cause to be sold in the borough of Manhattan, New York City, or elsewhere, in
one or more sales or parcels, at such price as the Bank may deem best, and for
cash or on credit or for future delivery, without assumption of any credit risk,
all or any of the Security, at any broker's board or at public or private sale,
without demand of performance or notice of intention to sell or of time or place
of sale (except such notice as is required by applicable statute and cannot be
waived), and the Bank or anyone else may be the purchaser of any or all of the
Security so sold and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any equity of redemption, of the
undersigned, any such demand, notice or right and equity being hereby expressly
waived and released. The undersigned will pay to the Bank all expenses including
expense for legal services of every kind) of, or incidental to, the enforcement
of any of the provisions hereof or of any of the Liabilities, or any actual or
attempted sale or any exchange, enforcement, collection, compromise or
settlement of any of the Security or receipt of the proceeds thereof, and for
the care of the Security and defending or asserting the rights and claims of the
Bank in respect thereof, by litigation or otherwise, including expense of
insurance; and all such expenses shall be Liabilities within the terms of this
agreement. The Bank at any time, at its option, may apply the net cash receipts
from the Security to the payment of principal of and/or interest on any of the
Liabilities, whether or not then due, making proper rebate of interest or
discount. Notwithstanding that the Bank, whether in its own behalf and/or in
behalf of another or others, may continue to hold Security and regardless of the
value thereof, the undersigned shall be and remain liable for the payment in
full, including both principal and interest, of any balance of the Liabilities
and expenses at any time unpaid.
If at any time the Security shall be unsatisfactory to the Bank, upon the
demand of the Bank the undersigned will furnish such further security or make
such payment on account of any of the Liabilities as will be satisfactory to the
Bank, and if the undersigned fail(s) forthwith to furnish such security or to
make such payment; or if any sum payable upon any of the Liabilities be not paid
when due; or if the undersigned shall default in the performance of any of its
agreements herein or in any instrument or document delivered pursuant hereto; or
if the undersigned or any maker, drawer, acceptor, indorser, guarantor, surety,
accommodation party or other person liable upon or for any of the Liabilities or
Security shall die, become insolvent (however such insolvency may be evidenced),
commit any act of bankruptcy, or make a general assignment for the benefit of
creditors; or if the undersigned or any copartnership of which the undersigned
is (are) a member (or members) shall suspend the transaction of his, its or
their usual business, or be expelled from or suspended by any stock or
securities exchange or other exchange, or any proceeding, procedure or remedy
supplementary to or in enforcement of judgment shall be resorted to or commenced
against, or with respect to any property of, the undersigned or any such
copartnership, maker, drawer, acceptor, indorser, guarantor, surety,
accommodation party or other person; or if a petition in bankruptcy or for any
relief under any law relating to the relief of debtors, readjustment of
indebtedness, reorganization, composition or extension shall be filed, or any
proceeding shall be instituted under any such law, by or against the undersigned
or any such copartnership, maker, drawer, acceptor, indorser, guarantor, surety,
accommodation party or other person; or if any governmental authority or any
court at the instance thereof shall take possession of any substantial part of
the property of, or assume control over the affairs or operations of, or a
receiver shall be appointed of, or of any substantial part of the property of,
or a writ or order of attachment or garnishment shall be issued or made against
any of the property of, the undersigned or any such copartnership, maker,
drawer, acceptor, indorser, guarantor, surety, accommodation party or other
person, or if any indebtedness of the undersigned or of any such copartnership,
maker, drawer, acceptor, indorser, guarantor, surety, accommodation party or
other person for borrowed money shall become due and payable by acceleration of
maturity thereof; or if the undersigned (if a corporation) shall be dissolved or
be a party to any merger or consolidation without the written consent of the
Bank; or if the Bank, for any reason, deems itself insecure; thereupon, unless
and to the extent that the Bank shall otherwise elect, all of the Liabilities
shall become and be due and payable forthwith.
The Bank may assign, transfer and/or deliver to any transferee of any of
the Liabilities any or all of the Security and thereafter shall be fully
discharged from all responsibility with respect to the Security so assigned,
transferred and or delivered. Such transferee shall be vested with all the
powers and rights of the Bank hereunder with respect to such Security, but the
Bank shall retain all rights and powers hereby given with respect to any of the
Security not so assigned, transferred or delivered. No delay on the part of the
Bank in exercising any power or right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any power or right
hereunder preclude other or further exercise thereof or the exercise of any
other power or right. The rights, remedies and benefits herein expressly
specified are cumulative and not exclusive of any rights, remedies or benefits
which the Bank may otherwise have. The undersigned hereby waive(s) presentment,
notice of dishonor and protest of all instruments included in or evidencing the
Liabilities or the Security and any and all other notices and demands
whatsoever, whether or not relating to such instruments.
Unless otherwise agreed, loans, advances or credits heretofore or hereafter
obtained from or through the Bank by the undersigned shall be repayable with
interest at the Branch of the Bank in the City of New York upon demand.
The undersigned hereby assents to any agreement the Bank may elect to enter
into with any other banks or trust companies to which the undersigned is
indebted providing for sharing Security or any realizations thereon.
<PAGE>
No provision hereof shall be modified or limited except by a written
instrument executed by the Bank, expressly referring hereto and to the provision
so modified or limited. The undersigned, if more than one, shall be jointly and
severally liable hereunder and all provisions hereof regarding the Liabilities
or Security of the undersigned shall apply to any Liability or any Security of
any or all of them. This agreement shall be binding upon the heirs, executors,
administrators, assigns or successors of the undersigned; shall constitute a
continuing agreement, applying to all future as well as existing transactions,
whether or not of the character contemplated at the date of this agreement, and
if all transactions between the Bank and the undersigned shall be at any time
closed, shall be equally applicable to any new transactions thereafter; shall so
continue in force notwithstanding any change in any partnership party hereto,
whether such change occurs through death, retirement or otherwise; and shall be
construed according to the laws of the State of New York. Unless the context
otherwise requires, all terms used herein which are defined in the New York
Uniform Commercial Code shall have the meanings therein stated.
This agreement shall become effective immediately upon execution by the
undersigned, and the execution of the Bank shall not be required as a condition
to the effectiveness of this agreement.
New York JULY 23, 1996
------- --
YUASA--EXIDE, INC.
-----------------------------------------
(BORROWER'S NAME)
By /s/ Patrick J. McClafferty
---------------------------------------
(AUTHORIZED SIGNATURE) (TITLE)
PATRICK J. MCCLAFFERTY TREASURER
BORROWER'S ADDRESS
P. 0. BOX 14145
---------------------------------------
(NUMBER AND STREET)
READING, PA 19612-4145
---------------------------------------
(CITY, STATE)
<PAGE>
PROMISSORY NOTE
New York, New York
1/30 1998
--------,-------
FOR VALUE RECEIVED, the undersigned by this promissory note (this "Note") hereby
unconditionally promises to pay to the order of THE BANK OF TOKYO-MITSUBISHI,
LTD., NEW YORK BRANCH, THE BANK OF TOKYO-MITSUBISHI, LTD., CAYMAN BRANCH, BANK
OF TOKYO-MITSUBISHI TRUST COMPANY or BROADWAY CAPITAL CORPORATION (collectively
referred to herein as the "Bank"), as appropriate, on the respective "Due Dates"
below at 1251 Avenue of the Americas, New York, New York 10020 (the "Bank's
Office"), or at such place as may be designated, the principal amount of all
indebtedness outstanding designated on the grid below (or on pages attached
hereto) in lawful money of the United States of America and in immediately
available funds. The undersigned further agrees to pay interest on such
principal amounts on the dates at the rates specified below.
Unless otherwise agreed, interest shall be computed on the basis of a 360-day
year and the actual number of days elapsed. Notwithstanding the foregoing, any
principal, interest, or other amount owing hereunder which is unpaid when due
shall bear interest from the date of default to the actual date of payment
(before as well as after judgment) at a rate per annum equal to the higher of
(x) the rate of interest per annum otherwise applicable hereunder plus 2% and
(y) the Bank's prevailing "prime" rate of interest plus 2%. In any event, the
rate of interest payable under this Note shall not exceed the maximum rate
permitted by law. The undersigned agrees to pay all costs and expenses
(including the reasonable fees and disbursements of counsel) incurred by the
Bank in connection with the enforcement of this Note and the collection of
amounts payable hereunder. All amounts payable in respect of this Note shall be
paid free and clear of any set-off, counterclaim or other deduction or
withholding and free and clear taxes, duties and imposts (including withholding
or retention taxes) which may be levied by any jurisdiction, except such as are
levied by the United States of America or the State or City of New York on the
income of the Bank. The undersigned hereby waives presentment, demand, protest,
notice of dishonor, and any other notice of any kind. The undersigned hereby
authorized the Bank, if and to the extent any payment due the Bank hereunder is
not otherwise made when due, to charge any amount so due against the accounts of
the undersigned or any of its wholly-owned subsidiaries maintained with the Bank
or the Bank's affiliates (as if the Bank its affiliates were one and same
entity), with undersigned remaining liable for any deficiency.
If, after the date hereof, the adoption of any law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by the Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency (a) subjects the Bank to any charge
with respect to this Note or changes the basis of taxation of payments to the
Bank of principal, interest or other amounts due hereunder (except for changes
in the rate of tax on the overall net income of the Bank) or (b) imposes,
modifies or makes applicable any reserve, special deposit insurance assessment
or similar requirement against the assets of, deposits with or for the accounts
of, or credit extended by, the Bank, and the result or any of the foregoing is
to increase the cost to the Bank of making, funding or maintaining the loan(s)
evidenced by this Note, to reduce any amount received or receivable by the Bank
hereunder or to reduce the rate of return on the Bank's capital in respect of
such loan(s), then upon demand by the Bank, the undersigned shall pay to the
Bank such additional amount or amounts as will compensate the bank for such
increased cost or reduction. The Bank's determination of the amount of such
increased cost or reduction shall be conclusive, absent manifest error.
The undersigned represents and warrants to the Bank (effective as of the date of
each disbursement made hereunder) that it is a corporation, partnership or other
organization duly incorporated or created and validly existing under the laws of
the jurisdiction of its incorporated or creation; that the execution, delivery
and performance by the undersigned of this Note are within the corporate,
partnership or other organizational powers of the undersigned, have been duly
authorized by all necessary corporate, partnership or other organizational
action, and do not contravene any charter or other organizational documents of
the undersigned; and that this Note is a legal, valid and binding obligation of
the undersigned enforceable against the undersigned in accordance with its
terms.
It is further agreed that upon the occurrence of any of the following events any
and all principal, interest and other amounts payable hereunder shall
automatically become immediately due and payable without any action by the
Bank:(a) the undersigned shall fail to pay full when and as due any principal,
interest or other amount due hereunder; or (b) any representation or warranty
made by the undersigned in connection with or related to this Note shall prove
to be incorrect in any material respect when made or deemed to have been made;
or (c) the undersigned, any of its wholly-owned subsidiaries or any guarantor of
this Note (i) shall not, or be unable to, or shall admit in writing its
inability to, pay its debts as such debts become due, or (ii) shall make an
assignment for the benefit of creditors or petition or apply to any tribunal for
the appointment of a custodian, receiver, trustee or the like for a substantial
part of its assets or properties, domestic or foreign, or (iii) shall commence,
or have commenced against it, any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or liquidation
law or statue of any jurisdiction, whether foreign or domestic and whether now
or hereinafter in effect, (iv) suffer any custodianship, receivership,
trusteeship, seizure, forfeiture or divestiture of all or a substantial part of
its assets or (v) dissolve, liquidate or otherwise discontinue its business; or
(d) the undersigned, any of its wholly-owned subsidiaries or any guarantor of
this Note shall fail to pay when due and payable any principal, premium or
interest on any indebtedness other than the indebtedness owned hereunder or the
maturity of any such indebtedness shall, in whole or in part, have been
accelerated or required to be prepaid prior to the stated maturity thereof.
The rights of the Bank under this Note shall inure to the benefit of the
successors and assigns of the Bank. The undersigned shall not assign or transfer
its rights or obligations under this Note without the prior written consent of
the Bank. the Bank may assign, or grant participation interests in, all or a
portion of this Note without the undersigned's consent.
<PAGE>
PROCEEDING TO ENFORCE THIS NOTE OR RELATED TO THIS NOTE. THE VALIDITY,
INTERPRETATION AND ENFORCEMENT OF THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF. THE UNDERSIGNED SUBMITS, IN ANY LEGAL ACTION RELATED HERETO, TO THE
NON-EXCLUSIVE JURISDICTION OF STATE AND FEDERAL COURTS LOCATED IN THE CITY OF
NEW YORK AND WAIVES ANY OBJECTION IT MAY HAVE AS TO THE BRINGING OR MAINTAINING
OF ANY SUCH ACTION WITH ANY SUCH COURT.
[SIGNATURE APPEARS HERE]
----------------------------------
(Borrower's name)
By: YUASA-EXIDE, INC.
-------------------------------
Name: PATRICK J. McCLAFFERTY
Title: TREASURER
GRID
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<PAGE>
MEMORANDUM OF UNDERSTANDING FOR TRANSACTIONS
The undersigned Customer (the "Customer") agrees that regarding its
transactions and commercial relationships with Bank of Tokyo-Mitsubishi Trust
Company and The Bank of Tokyo-Mitsubishi, Ltd., New York Branch (collectively,
the "Bank") of every kind and description (unless otherwise noted), and in
consideration of such transactions and relationships, the following provisions
will apply.
1. Unless the Customer shall have notified the Bank otherwise, each
person listed on the opposite side of this page shall be an "Authorized
Representative" and shall be authorized to give and receive notices and
instructions on behalf of the Customer and to otherwise act on behalf of the
Customer by telephone or facsimile. The Customer may from time to time designate
additional Authorized Representatives and withdraw the designations of
previously designated Authorized Representatives. The Bank shall be entitled to
rely without investigation on the information entered on the opposite side of
this page, as the same may be updated from time to time as provided above. The
Bank may rely upon, and shall be authorized in acting or refraining from acting
in reliance upon, any telephone or facsimile communication in good faith
believed by it to be genuine and made by an Authorized Representative. In the
event that a telephone or facsimile communication is confirmed in writing and
there is a discrepancy between such telephonic or facsimile communication and a
valid written confirmation thereof, such written confirmation will be deemed
effective notice, except when the Bank has acted in reliance on the telephonic
or facsimile communication.
2. In connection with, and in consideration of, any short-term loans made
by the Bank to the Customer pursuant to the Bank's standard form of Revolving
Credit Promissory Note, the Customer agrees that its obligation to make payments
to the Bank in respect thereof may be evidenced by such a note and the records
of the Bank. All entries made in the records of the Bank shall be evidence of
the accuracy of the information set forth therein. The records of the Bank
include, without limitation, all books and records in any form (including
computer disks and related data processing software) which at any time may
evidence or contain information relating to such short-term loans.
3. In consideration of any credit extensions made, and other financial
services provided, by the Bank to the Customer, the Customer hereby agrees to
indemnify the Bank against, and hold the Bank harmless from, any and all losses,
costs and expenses arising out of the transactions and relationships described
in the introductory paragraph above, except to the extent any such loss, cost or
expense is proven to be the direct result of the Bank's gross negligence or
willful misconduct. The Bank will not be responsible for the acts or omissions
of the Customer or any other party. The Customer will not sue for, and the Bank
will not be liable for, any consequential, special, punitive or indirect damages
suffered in connection with the transactions and or relationships described in
the introductory paragraph. Without limiting the generality of the foregoing,
the Bank will not be liable for any failure to act or delay in acting caused by
any legal constraint, interruption of telephone or other transmission or
communications facilities, equipment failure, emergency conditions or other Acts
of God or circumstances beyond the Bank's control. This memorandum of
understanding shall be governed by, and construed in accordance with, the laws
of the State of New York.
IN WITNESS WHEREOF, a duly authorized officer of the Customer listed on the
corporate resolutions provided to the Bank has executed this Memorandum of
Understanding for Transactions as of this 16th day of January, 1998.
---- -------------
Yuasa -- Exide, Inc.
-------------------------------
Customer Name
By: /s/ Patrick J. McClafferty
----------------------------
Name: Patrick J. McClafferty
Title: Treasurer
<PAGE>
Authorized Representatives
--------------------------
FACSIMILE &
TELEPHONE
NAME TITLE NUMBERS
- ---- ----- -------
(Please type or print)
Michael T. Philion Vice-President Finance (610) 208-1864
- ----------------------- -------------------------- --------------
Patrick J. McClafferty Treasurer (610) 208-1761
- ----------------------- -------------------------- --------------
John Phillips Treasury Analyst (610) 208-1739
- ----------------------- -------------------------- --------------
Mary F. Adam Treasury Analyst (610) 208-1740
- ----------------------- -------------------------- --------------
Facsimile # for all (610) 208-1671
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<PAGE>
For Bank Use Only
- ----------- -------------- --------------- -------------------
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LIS NO. LOAN NO. BORROWER APPROVAL SIGNATURE
- --------------------------------------------------------------------------------
[CORESTATES LOGO
APPEARS HERE]
COMMERCIAL PROMISSORY NOTE
$10,000,000.00 3/17, 1998
FOR VALUE RECEIVED, each of the undersigned, jointly and severally if more
than one (hereinafter collectively referred to as "Borrower"), promises to pay
to the order of CORESTATES BANK, N.A.*, a national banking association (the
"Bank"), at any of its banking offices in Pennsylvania, the principal amount of
Ten Million and 00/100 DOLLARS, in lawful money of the United States, plus
interest, or be paid as follows:
Interest on this loan shall be payable monthly. The principal balance on this
loan shall be payable in 20 equal consecutive quarterly installments each in the
amount of $500,000 payable on the first day of each quarter beginning July 1,
2001. The final principal installment of $500,000 will be due and payable on
April 1, 2006 along with all accrued and unpaid interest to fully pay this Note.
This loan will accrue interest at a rate of .70% in excess of the Overnight Base
Rate (OBR), as established by the Bank.
ADDITIONAL TERMS OF THIS NOTE - Each of the following provisions shall apply to
this Note, to any extension or modification hereof and to the indebtedness
evidenced hereby, except as otherwise expressly stated above or in a separate
writing signed by Bank and Borrower.
INTEREST - Interest shall be calculated on the basis of a 360-day year and shall
be charged for the actual number of days elapsed. Accrued interest shall be
payable monthly. Accrued interest shall also be payable when the entire
principal balance of this Note becomes due and payable (whether by demand,
stated maturity or acceleration) or, if earlier, when such principal balance is
actually paid to Bank. If the rate at which interest accrues is based on the
"Prime Rate", that term is defined as the rate of interest for loans established
by Bank from time to time as its prime rate. Said per annum rate of interest
shall change each time Bank's prime rate shall change, effective on and as of
the date of the change. Interest shall accrue on each disbursement hereunder
from the date such disbursement is made by Bank, provided, however, that to the
extent this Note represents a replacement, substitution, renewal or refinancing
of existing indebtedness, interest shall accrue from the date hereof. Interest
shall accrue on the unpaid balance hereof at the rate provided for in this Note
until the entire unpaid balance has been paid in full, notwithstanding the entry
of any judgment against Borrower.
PREPAYMENT - If this Note bears interest at a floating or variable rate and no
floor or minimum rate is specified. Borrower may prepay all or any portion of
the principal balance of this Note at any time, without premium or penalty. If
not permitted under the preceding sentence, any prepayment of principal
(including any principal repayment as a result of acceleration by Bank of this
Note) shall require immediate payment to Bank of a prepayment fee equal to the
amount, if any, by which the aggregate present value of scheduled principal and
interest payments eliminated by the prepayment exceeds the principal amount
being prepaid. Said present value shall be calculated by application of a
discount rate determined by Bank in its reasonable judgment to be the yield-to-
maturity at the time of prepayment on U.S. Treasury securities having a maturity
which most closely approximates the final maturity date of the principal balance
then outstanding. Whether or not a prepayment fee is required hereunder,
prepayment shall be applied to scheduled installments of principal in the
inverse order of their maturity, shall be accompanied by payment of accrued
interest on the principal amount being prepaid and, unless this Note has been
accelerate by Bank, shall not be permitted in an amount less than the scheduled
principal installment immediately prior to final maturity of the outstanding
principal balance.
COLLATERAL - As security for all indebtedness to Bank now or hereafter incurred
by Borrower, under this Note or otherwise. Borrower grants Bank a lien upon and
security interest in any securities, instruments or other personal property of
Borrower now or hereafter in Bank's possession and in any deposit balances now
or hereafter held by Bank for Borrower's account, and in all proceeds of any
personal property or deposit balances. Such liens and security interest shall be
independent of Bank's right of setoff. This Note and the indebtedness evidenced
hereby shall be additionally secured by any lien or security interest evidenced
by a writing (whether now existing or hereafter executed) which contains a
provision to the effect that such lien or security interest is intended to
secure (a) this Note or the indebtedness evidenced hereby or (b) any category of
liabilities, obligations or indebtedness of Borrower to Bank which includes this
Note or the indebtedness evidenced hereby, and all property subject to any such
lien or security interest shall be collateral for this Note.
EVENTS OF DEFAULT - Each of the following shall be an Event of Default
hereunder: (a) the nonpayment when due of any amount payable under this Note or
under any obligation or indebtedness to Bank of Borrower or any person liable,
either absolutely or contingently, for payment of any indebtedness evidenced
hereby, including endorsers, guarantors and sureties (each such person is
referred to as an "Obligor"); (b) if Borrower or any Obligor has failed to
observe or perform any other existing or future agreement with Bank of any
nature whatsoever; (c) if any representation, warranty, certificate, financial
statement or other information made or given by Borrower or any Obligor to Bank
is materially incorrect or misleading; (d) if Borrower or any Obligor shall
become insolvent or make an assignment for the benefit of creditors or if any
petition shall be filed by or against Borrower or any Obligor under any
bankruptcy or insolvency law; (e) the entry of any judgment against Borrower or
any Obligor which remains unsatisfied for 15 days of the issuance of any
attachment, tax lien, levy or garnishment against any property of material value
in which Borrower or any Obligor has and interest; (f) if any attachment, levy,
garnishment or similar legal process is served upon Bank as a result of any
claim against Borrower or any Obligor or against any property of Borrower or any
Obligor; (g) the dissolution merger, consolidation, or the sale or change in
control (as controlled is defined in Rule 12b-2 under the Securities Exchange
Act of 1934) of any Borrower which is a corporation or partnership, or transfer
of any substantial portion of any of Borrower's assets, or if any agreement for
which dissolution, merger, consolidation, change in control, sale or transfer is
entered into by Borrower, without the written consent of Bank; (h) the death of
any Borrower or Obligor who is a natural person; (i) if Bank determines
reasonably and in good faith that an event has occurred or a condition exists
which has had, or is likely to have, a material adverse effect on the financial
condition or creditworthiness of Borrower or any Obligor, or on the ability of
Borrower or any Obligor to perform its obligation evidenced by this Note; (j) if
Borrower shall fail to remit promptly when due to the appropriate government
agency or authorized depository, any amount collected or withheld from any
employee of Borrower for payroll taxes, Social Security payments or similar
payroll deductions; (k) if any Obligor shall attempt to terminate or disclaim
such Obligor's liability for the indebtedness evidenced by this Note; (l) if
Bank shall reasonably and in good faith determine and notify Borrower that any
collateral for this Note or for the indebtedness evidenced hereby is
insufficient as to quality or quantity; (m) if Borrower shall fail to pay when
due any material indebtedness for borrowed money other than to Bank; or (n) if
Borrower shall be notified of the failure of Borrower or any Obligor to provide
such financial and other information promptly when reasonably requested by
Bank. If this Note is payable on demand, Bank's right to demand payment hereof
shall not be restricted or impaired by the absence, non-occurrence or waiver of
an Event of Default, and it is understood that if this Note is payable on
demand, Bank may demand payment at any time.
BANK'S REMEDIES - Upon the occurrence of one or more Events of Default
(including, if this Note is payable on demand, any Event of Default resulting
from Borrower's failure to make any payment hereunder when demanded), unless
Bank elects otherwise, the entire unpaid balance of this Note and all accrued
interest shall be immediately due and payable without notice to Borrower or any
Obligor, and Bank may, immediately or at any time thereafter, exercise any or
all of its rights and remedies hereunder or under any agreement or otherwise
under applicable law against Borrower, any Obligor and any collateral. Bank may
exercise its rights and remedies in any order and may, at its option, delay in
or refrain from exercising some or all of its rights and remedies without
prejudice thereto. Upon the occurrence of any such Event of Default or at any
time thereafter, Bank may, at its option, and upon five days' written notice to
Borrower, begin accruing interest on this Note, at a rate not to exceed five
percent (5%) per annum in excess of the greater of (a) the rate of interest
provided for above, or (b) the Prime Rate in effect from time to time on the
unpaid principal balance hereof;
- --------------------------------------------------------------------------------
* CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as
CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank.
<PAGE>
P.O. Box 7648
Philadelphia, PA 19101
215 585 5000 Tel
[LOGO OF PNC BANK APPEARS HERE]
February 11, 1998
Yuasa-Exide, Inc.
P.O. Box 14145
2366 Bernville Road
Reading, PA 19612
Attention: Michael T. Philion,
Vice President-Finance and Chief Financial Officer
Re: $10,000,000 Discretionary Line of Credit
----------------------------------------
Dear Mr. Philion:
I am pleased to confirm that PNC Bank, National Association (the "Bank") has
approved a $10,000,000 discretionary line of credit to Yuasa-Exide, Inc. (the
"Company"). Advances made under the line of credit, if any, shall be due and
payable on the last day of the applicable interest period, and all obligations
of the Company to the Bank shall be due and payable upon the occurrence of an
event of default. All advances will bear interest and be subject to the terms
and conditions set forth herein and in the enclosed Note. The line of credit
will be reviewed by the Bank from time to time and in any event prior to its
expiration on January 31, 1999 (the "Expiration Date") to determine whether it
should be continued or renewed.
This is not a committed line of credit. The Company acknowledges and agrees that
advances made under this line of credit, if any, shall be made at the sole
discretion of the Bank. The Bank may decline to make advances under the line or
terminate the line at any time and for any reason without prior notice to the
Company. This letter sets forth certain terms and conditions solely to assure
that the parties understand each other's expectations and to assist the Bank in
evaluating the status, on an ongoing basis, of the line of credit.
The Bank's willingness to consider making advances under this facility is
subject to the Company's ongoing agreement (a) to furnish the Bank with its
audited annual financial statements within 90 days after the end of its fiscal
year, its unaudited quarterly financial statements within 45 days after the end
of each fiscal quarter and such other financial information as the Bank may
reasonably request from time to time promptly after receipt of each request, (b)
to notify the Bank as soon as practicable of the following: (i) the occurrence
of any default (or event which, with the passage of time or giving of notice or
both, would become a default) under any direct or contingent obligation of the
Company, or (ii) any reduction in the Company's net worth from the Company's
prior financial reporting period (if there are any outstanding balances under
the line
<PAGE>
Yuasa-Exide, Inc.
February 11, 1998
Page 2
of credit during the then current reporting period), and (c) upon the Bank's
request, to furnish copies of any covenant compliance certificates prepared in
connection with any such obligations.
Enclosed for execution is the Note evidencing this facility. Please indicate the
Company's agreement to the terms and conditions of this letter by having the
enclosed copy of this letter executed where indicated and returning it to me.
Prior to the making of any advances hereunder, the Company must deliver to the
Bank a duly executed original of the Note and a certified copy of resolutions
and an incumbency certificate, each in form and substance satisfactory to the
Bank.
I am pleased to offer support for your banking needs and look forward to working
with you.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Amy T. Petersen
----------------------------
Title: Vice President
-------------------------
Agreed and accepted this 14th day of February, 1998.
YUASA-EXIDE, INC.
By: /s/ Patrick J. McClafferty
----------------------------
Title: Treasurer
-------------------------
<PAGE>
DISCRETIONARY LINE OF CREDIT NOTE
$10,000,000 February 11, 1998
FOR VALUE RECEIVED, YUASA-EXIDE, INC. (the "Borrower"), with an address at P.O.
Box 14145, 2366 Bernville Road, Reading, Pennsylvania 19612, promises to pay to
the order of PNC BANK, NATIONAL ASSOCIATION (the "Bank"), in lawful money of the
United States of America in immediately available funds at its offices located
at 1600 Market Street, Philadelphia, Pennsylvania 19103, or at such other
location as the Bank may designate from time to time, the principal sum of TEN
MILLION DOLLARS ($10,000,000) (the "Facility") or such lesser amount as may be
advanced to or for the benefit of the Borrower hereunder, together with interest
accruing on the outstanding principal balance from the date hereof, as provided
below:
1. Rate of Interest. Each advance outstanding under this Note will bear
----------------
interest for the interest period requested, not to exceed ninety (90) days, at a
per annum rate equal to the Bank's fully absorbed cost of funds (as determined
by Bank in its sole discretion) plus thirty (30) basis points. Interest will be
calculated on the basis of a year of 360 days for the actual number of days in
each interest period. In no event will the rate of interest hereunder exceed the
maximum rate allowed by law.
2. Discretionary Advances. THIS IS NOT A COMMITTED LINE OF CREDIT AND
----------------------
ADVANCES UNDER THIS NOTE, IF ANY, SHALL BE MADE BY THE BANK IN ITS SOLE
DISCRETION. NOTHING CONTAINED IN THIS NOTE OR ANY OTHER LOAN DOCUMENTS SHALL BE
CONSTRUED TO OBLIGATE THE BANK TO MAKE ANY ADVANCES. THE BANK SHALL HAVE THE
RIGHT TO REFUSE TO MAKE ANY ADVANCES AT ANY TIME WITHOUT PRIOR NOTICE TO THE
BORROWER.
The Borrower may request advances, repay and request additional advances
hereunder, subject to the terms and conditions of this Note and the Loan
Documents (as defined herein). In no event shall the aggregate unpaid principal
amount of advances under this Note exceed the face amount of this Note.
3. Payment Terms. The principal amount of each advance and interest accrued
-------------
thereon shall be payable on the last day of the applicable interest period for
such advance.
If any payment under this Note shall become due on a Saturday, Sunday or public
holiday under the laws of the State where the Bank's office indicated above is
located, such payment shall be made on the next succeeding business day and such
extension of time shall be included in computing interest in connection with
such payment. The Borrower hereby authorizes the Bank to charge the Borrower's
deposit account at the Bank for any payment when due hereunder. Payments
received will be applied to charges, fees and expenses (including attorneys'
fees), accrued interest and principal in any order the Bank may choose, in its
sole discretion.
<PAGE>
4. Default Rate. If any advance or other amount is not paid when due, the
------------
Borrower shall pay interest on such amount until it is paid in full at a rate
per annum (based on a year of 360 days and actual days elapsed) (the "Default
Rate") equal to three (3%) percentage points above the Prime Rate but not more
than the maximum rate allowed by law. As used herein, "Prime Rate" shall mean
the rate publicly announced by the Bank from time to time as its prime rate. The
Prime Rate is determined from time to time by the Bank as a means of pricing
some loans to its borrowers. The Prime Rate is not tied to any external rate of
interest or index, and does not necessarily reflect the lowest rate of interest
actually charged by the Bank to any particular class or category of customers.
If and when the Prime Rate changes, the rate of interest on this Note will
change automatically without notice to the Borrower, effective on the date of
any such change. The Default Rate shall continue to apply whether or not
judgment shall be entered on this Note.
5. Prepayment. The Borrower shall have the right to prepay at any time and from
----------
time to time, in whole or in part, without penalty, any advance hereunder which
is accruing interest at a rate based upon a floating rate. If the Borrower
prepays all or any part of any advance which is accruing interest at a fixed
rate on other than the last day of the applicable interest period, the Borrower
shall also pay to the Bank, on demand therefor, the Cost of Prepayment. "Cost of
Prepayment" means an amount equal to the present value, if positive, of the
product of (a) the difference between (i) the yield, on the beginning date of
the applicable interest period, of a U.S. Treasury obligation with a maturity
similar to the applicable interest period minus (ii) the yield, on the
-----
prepayment date, of a U.S. Treasury obligation with a maturity similar to the
remaining maturity of the applicable interest period, and (b) the principal
amount to be prepaid, and (c) the number of years, including fractional years
from the prepayment date to the end of the applicable interest period. The yield
on any U.S. Treasury obligation shall be determined by reference to Federal
Reserve Statistical Release H.15(519) "Selected Interest Rates". For purposes
of making present value calculations, the yield to maturity of a similar
maturity U.S. Treasury obligation on the prepayment date shall be deemed the
discount rate. The Cost of Prepayment shall also apply to any payments made
after acceleration of the maturity of this Note.
6. Other Loan Documents. This Note is issued pursuant to the confirmation
--------------------
letter dated even date herewith, and the other documents referred to therein,
the terms of which are incorporated herein by reference (the "Loan Documents").
7. Advance Procedures. A request for advance made by telephone must be promptly
------------------
confirmed in writing by such method as the Bank may require. The Borrower
authorizes the Bank to accept telephonic requests for advances, and the Bank
shall be entitled to rely upon the authority of any person providing such
instructions. The Borrower hereby indemnifies and holds the Bank harmless from
and against any and all damages, losses, liabilities, costs and expenses
(including reasonable attorneys' fees and expenses) which may arise or be
created by the acceptance of such telephone requests or making such advances.
The Bank will enter on its books and records, which entry when made will be
presumed correct, the date and amount of each advance, the interest rate and
interest period applicable thereto, as well as the date and amount of each
payment made by the Borrower.
2
<PAGE>
8. Yield Protection. The undersigned shall pay to the Bank, on written demand
----------------
therefor, together with the written evidence of the justification therefor, all
direct costs incurred, losses suffered or payments made by Bank by reason of any
change in law or regulation or its interpretation imposing any reserve, deposit,
allocation of capital, or similar requirement (including without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) on the
Bank, its holding company or any of their respective assets.
9. Right of Setoff. In addition to all liens upon and rights of setoff against
---------------
the money, securities or other property of the Borrower given to the Bank by
law, the Bank shall have, with respect to the Borrower's obligations to the Bank
under this Note and to the extent permitted by Jaw, a contractual possessory
security interest in and a contractual right of setoff against, and the Borrower
hereby assigns, conveys, delivers, pledges and transfers to the Bank all of the
Borrower's right, title and interest in and to, all deposits, moneys, securities
and other property of the Borrower now or hereafter in the possession of or on
deposit with, or in transit to, the Bank whether held in a general or special
account or deposit, whether held jointly with someone else, or whether held for
safekeeping or otherwise, excluding, however, all IRA, Keogh, and trust
accounts. Every such security interest and right of setoff may be exercised
without demand upon or notice to the Borrower. Every such right of setoff shall
be deemed to have been exercised immediately upon the occurrence of an Event of
Default hereunder without any action of the Bank, although the Bank may enter
such setoff on its books and records at a later time.
10. Miscellaneous. No delay or omission of the Bank to exercise any right or
-------------
power arising hereunder shall impair any such right or power or be considered to
be a waiver of any such right or power nor shall the Bank's action or inaction
impair any such right or power. The Borrower agrees to pay on demand, to the
extent permitted by law, all costs and expenses incurred by the Bank in the
enforcement of its rights in this Note and in any security therefor, including
without limitation reasonable fees and expenses of the Bank's counsel. If any
provision of this Note is found to be invalid by a court, all the other
provisions of this Note will remain in full force and effect.
The Borrower and all other makers and indorsers of this Note hereby forever
waive presentment, protest, notice of dishonor and notice of non-payment. The
Borrower also waives all defenses based on suretyship or impairment of
collateral.
If this Note is executed by more than one Borrow, the obligations of such
persons or entities hereunder will be joint and several. This Note shall bind
the Borrower and its heirs, executors, administrators, successors and assigns,
and the benefits hereof shall inure to the benefit of Bank and its successors
and assigns.
This Note has been delivered to and accepted by the Bank and will be deemed to
be made in the State where the Bank's office indicated above is located. THIS
NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK AND THE
BORROWER DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK'S
OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. The
Borrower hereby irrevocably consents to the
3
<PAGE>
exclusive jurisdiction of any state or federal court located for the county or
judicial district where the Bank's office indicated above is located, and
consents that all service of process be sent by nationally recognized overnight
courier service directed to the Borrower at the Borrower's address set forth
herein and service so made will be deemed to be completed on the business day
after deposit with such courier; provided that nothing contained in this Note
will prevent the Bank from bringing any action, enforcing any award or judgment
or exercising any rights against the Borrower individually, against any security
or against any property of the Borrower within any other county, state or other
foreign or domestic jurisdiction. The Borrower acknowledges and agrees that the
venue provided above is the most convenient forum for both the Bank and the
Borrower. The Borrower waives any objection to venue and any objection based on
a more convenient forum in any action instituted under this Note.
11. WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS THE
--------------------
BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
The Borrower acknowledges that it has read and understood all the provisions of
this Note, including the waiver of jury trial, and has been advised by counsel
as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the date first
written above, with the intent to be legally bound hereby.
(CORPORATE SEAL] YUASA-EXIDE, INC.
Attest: John Phillips By: Patrick J. McClafferty
---------------------- -----------------------------------
Print Name: John Phillips Print Name: Patrick J. McClafferty
------------------ ---------------------------
Title: Sr. Treasury Analyst Title: Treasurer
----------------------- --------------------------------
4
<PAGE>
TERM LOAN AGREEMENT
This TERM LOAN AGREEMENT (this "Agreement") is made as of the 30th day of
October 1995, between YUASA EXIDE, INC. (the "Borrower") and THE SAKURA BANK,
LIMITED (together with its successors and assigns, the "Bank").
IN CONSIDERATION of the mutual promises and covenants contained in
this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 As used herein, and unless otherwise defined herein, the
following terms have the following respective meanings;
"Accounting Terms" - All accounting terms not specifically defined herein
----------------
shall be construed in accordance with generally accepted accounting principles
and all financial data, if any, submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
"Agreement" shall mean this Term Loan Agreement.
---------
"Applicable Law" shall mean all provisions of statutes, rules, regulations,
--------------
ordinances, decrees and orders of governmental bodies or regulatory agencies
applicable to a Person, and all orders and decrees of all courts and arbitrators
in proceedings or actions in which the person in question is a party.
"Business Day" shall mean any day other than a Saturday, Sunday or other
------------
day on which banks in New York, New York are authorized or required by law to
close; and in the case of LIBOR Loans shall mean any day on which U.S. Dollar
Transactions are carried out in the London Interbank Market.
"Default Rate" shall mean the rate of interest per annum as defined in
------------
Section 2.03(b).
"Dollars" or "U.S.$" shall mean lawful money of the United States of
------- -----
America in freely transferable form.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended, together with such regulations as may, from time to time, be
promulgated thereunder.
1
<PAGE>
"Event of Default" is defined in Article VI.
----------------
"Interest Payment Date" shall mean the last Business Day of each Interest
---------------------
period for a BOT LIBOR Priced Loan, and in the case of any Interest Period of
more than three months duration, on the last Business Day of each successive
period of three months starting from the beginning of such Interest Period.
"Interest Period" shall mean one of periods of one, two, three or six
---------------
months, the first of which shall begin on the day on which the BOT LIBOR Priced
Loan is made and succeeding of which shall commence on the last day of the
immediately preceding Interest Period in respect of such BOT LIBOR Priced Loan
provided that:
- --------
(x) any Interest Period which would otherwise end on a day which is
not a Business Day shall be extended so as to end on the next succeeding
Business Day, unless (with respect to BOT LIBOR Priced Loans only) such
succeeding Business Day falls in a succeeding calendar month, in which case
the Interest Period shall end on the preceding Business Day, and
(y) notwithstanding the foregoing, each Interest Period shall end when
the Bank demands repayment of the applicable Loans.
and, each Interest Period applicable to the Loan shall be specified by the
Company in a notice to the Bank at least three Business Days prior to the
commitment.
"Lending Office" shall mean the Bank's New York Branch office located at
--------------
277 Park Avenue, New York, New York 10172 or such other office of the Bank as
the Bank shall specify from time to time.
"BOT LIBOR" shall mean, in respect of each Interest Period applicable to a
---------
BOT LIBOR Priced Loan, the interest rate per annum equal to the arithmetic mean
(rounded upwards, if necessary, to the nearest whole multiple of 1/32 of 1%) of
the rates of interest at which deposits in UTS. Dollars are offered to the Bank
by Bank of Tokyo in the London interbank market at or about 11:00 a.m. (London
time) two Business Days before the first day of such Interest Period and in an
amount comparable to the principal amount of such BOT LIBOR Priced Loan, for a
term equal to the applicable Interest period.
"Loan" or "Loans" shall mean Loan made pursuant to Article II.
---- -----
"Note" shall mean the promissory note made by the Borrower as provided in
----
Section 2.01 hereof and substantially in the form of Exhibit A hereof.
"Prime Rate" shall mean for each day the rate per annum announced from time
----------
to time by the New York Branch of the Bank as
2
<PAGE>
its prime rate in effect for such day.
ARTICLE II
LOAN
SECTION 2.01 Term Loan
---------
(a) Subject to the terms and conditions of this Agreement, the Bank hereby
agrees to make a loan (the "Loan") to the Borrower on October 30 1995 in a
principal amount of $20,000,000.
(b) The Borrower's obligation to pay the principal of and interest on the
Loan shall be evidenced by its promissory note (the "Note") in the form of
Exhibit A hereto, dated the date of the Loan and payable to the order of the
Bank. Unless accelerated in accordance with the provisions of Section 6.02
hereof, the principal amount of the Loan and the Note shall be repaid in 10
equal semi-annual installments of U.S. $2,000,000.00, and such installments
shall be payable on 30th day of April and October, starting as of April 30, 1998
and ending as of October 30, 2002 (the "Repayment Dates", with the last
Repayment Date being called the "Maturity Date") and with the last such semi-
annual installment to equal the outstanding principal balance of the Loan. All
payments made hereunder by the Borrower shall be made without counterclaim,
deduction or offset in lawful money of the United States of America to the Bank
at its Lending Office in immediately available funds by 11:00 a.m. (New York
time) on the date or dates when due. If any payment would otherwise be due
hereunder on a day which is not a Business Day, the due date of such payment
shall be extended to the next succeeding Business Day unless such next
succeeding Business Day falls in a succeeding calendar month in which case the
due date of such payment shall be on the preceding Business Day and such
extension of time shall in such case be included in computing interest and fees,
if any, in connection with such payment.
SECTION 2.02 Method of Borrowing. The Borrower shall give to the Bank
-------------------
irrevocable written or telephonic (promptly to be confirmed in writing) notice
of its request for the making of the Loan by 11:00 a.m. (New York time) three
(3) Business Days prior to the date on which the Loan is to be made. Such notice
shall specify the date, the duration of the initial Interest Period therefore.
Not later than 1:00 p.m. (New York time) on the date so specified in such
notice, the Bank shall make available to the Borrower at the Lending Office, in
immediately available funds, the proceeds of the Loan.
SECTION 2.03 Interest
--------
(a) The Loan shall bear interest from the date made until due in accordance
with the provisions hereof and of the Note at a rate per annum equal to the sum
of BOT LIBOR Rate plus 0.375% p.a., for
3
<PAGE>
Interest Periods specified by the Borrower from time to time.
(b) Any amount which is not paid when due hereunder or under the Note shall
(to the extent not prohibited by law) bear interest until paid in full at a rate
equal to the greater of (i) 2% above the Prime Rate or (ii) 2% above the rate
applicable to such amount immediately prior to its becoming due (the "Default
Rate").
(c) Interest shall be calculated on the basis of a 360-day year for the
exact number of days elapsed (including the first day of any period, but
excluding the last) and shall be payable:
(i) on the Interest Payment Date;
(ii) at the time of any payment of principal; and
(iii) in respect of interest accrued pursuant to Section 2.03(b), on
the demand of the Bank.
SECTION 2.04 Prepayment of the Loan.
----------------------
(a) The Borrower shall have the right, upon not less than three (3)
Business Days prior irrevocable written notice (effective upon receipt), to
prepay the Loan in whole or in part, provided however, that if in part, the
prepayment must be in a minimum aggregate amount of $2,000,000 or a greater
multiple thereof.
(b) All payments shall be accompanied by payment to the Bank of accrued
interest on the principal amount so prepaid to and including the date of such
prepayment. Prepayment shall only be permitted on an Interest Payment Date. In
addition, the Borrower agrees to reimburse the Bank on demand for any loss or
expense incurred or sustained by the Bank, as reasonably determined by the Bank,
as a result of the prepayment of the Loan, or a part thereof.
(c) Each partial prepayment shall be applied to the installments due on the
Repayment Dates in the inverse order of their maturity.
(d) Amounts prepaid may not be reborrowed hereunder.
SECTION 2.05 Changes in Circumstances Affecting Loan. If, after the date
---------------------------------------
hereof, the introduction of, or any change in, any applicable law, rule or
regulation, or in the interpretation or administration thereof by any
governmental authority charges with the interpretation or administration
thereof, shall make it unlawful for the Bank to maintain or fund the Loan, the
Bank shall forthwith give notice thereof to the Company, and the Company shall
as promptly as possible repay in full the unpaid principal amount of the Loan,
together with accrued interest thereon to such date of repayment and all other
amounts due hereunder.
SECTION 2.06 Funding Indemnity. The Borrower hereby agrees to pay to the
-----------------
Bank on demand such amount or amounts as shall
4
<PAGE>
compensate the Bank for any loss, cost or expense incurred by the Bank, as
reasonably determined by the Bank and agreed to by the Borrower, as a result of:
(a) any payment or prepayment of a Loan on a date other than, the last day
of the Interest Period for the Loan, or
(b) the failure to borrow a Loan pursuant to a notice given as set forth in
Section 2.02 hereof, which amount shall include, but not be limited to, expenses
incurred by the Bank in connection with the redeployment of funds prepaid,
repaid, or not borrowed, as the case may be, and an amount equal to the
deficiency, if any, (as determined in good faith by the Bank) of the actual
return on funds so redeployed below the amount of interest and commission which
would have been earned thereon hereunder to the last day of such Interest Period
or such maturity date, as the case may be. The Bank shall provide the Borrower
with a detailed summary of the method by which it calculated the amount claimed
from the Borrower under this section, and provide the Borrower with an
opportunity to review such calculation.
SECTION 2.07 Use of Proceeds. The proceeds of the Loan shall be used by the
---------------
Borrower for operating funds.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01 Conditions Precedent to the Loan. The obligation of the
------------------------------------
Bank to make the Loan shall be subject to the Bank having received the following
in form and substance satisfactory to it:
(a) The Note, duly executed by authorized signatories of the Borrower,
payable to the order of the Bank and dated the date on which the Loan is to be
made;
(b) Copies of all the proceedings taken by the Borrower to authorize the
execution and delivery of this Agreement and the Note including:
(i) a duly certified copy of the Corporate By-Laws of the Borrower
and its Certificate and Articles of Incorporation;
(ii) a copy of this Agreement duly signed by authorized officers of
the Borrower;
(iii) a duly certified resolution of the Board of Directors of the
Borrower, authorizing the establishment of this Agreement under the
terms and conditions of this Agreement and designating the signatories
authorized to
5
<PAGE>
execute, in the name of the Borrower, this Agreement and the Note and
any other documents submitted by the Borrower in connection with this
Agreement;
SECTION 3.02 Additional Conditions Precedent to the Loan. The obligation of
-------------------------------------------
the Bank to make the Loan shall be subject to the further conditions precedent
that the Bank shall have received the following, and that the statements therein
shall be true and correct as of the date of such Loan:
(a) a certificate of the Borrower's Chief Financial Officer to the effect
that:
(i) the representations and warranties contained in Section 4.01 are true
and correct on and as of such date as though made on and as of such date;
and
(ii) no event has occurred and is continuing, or would result from the
making of such Loan which constitutes, or would, with the passage of time
or notice or both, constitute an Event of Default, and
(iii) since March 31, 1995, there has been no material adverse change in
the financial condition, operations, business or business prospects of the
Borrower.
(b) All such other approvals, opinions or documents as the Bank may
reasonably request, certified by an appropriate governmental official or officer
of the Borrower, if so requested.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Borrower. The Borrower
----------------------------------------------
represents and warrants to the Bank, as of the closing of the Loan, as follows:
(a) Organization. Incorporation. Etc. The Borrower is a corporation duly
--------------------------------
incorporated, validly existing and in good standing under the laws of the State
of California and has all requisite power and authority to own its property and
assets and to carry on its business as it is presently being conducted and as it
intends to carry on. The Borrower is qualified to do business and is in good
standing in all states where the nature of the Borrower's business and the
ownership of its property require it to become so qualified, and where the
failure to be so qualified would have a material adverse impact on the
Borrower's ability to repay the Loan. Complete and correct copies of the
Borrower's Certificate and Articles of Incorporation and By Laws and all
amendments to these documents have been delivered to the Bank.
6
<PAGE>
(b) Authorization. The execution, delivery and performance by the Borrower
-------------
of this Agreement and the Note are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, and do not contravene
any law or regulation known to the Borrower or any contractual restriction
binding on or affecting the Borrower or its assets, and will not result in the
creation or imposition of any lien or encumbrance affecting the assets of the
Borrower.
(c) Compliance with Law, etc. of Agreement and Note; Approvals.
----------------------------------------------------------
i) The execution, delivery and performance by the Borrower of this
Agreement and the Note and the Loan under this Agreement do not and will
not, to the Borrower's knowledge, (A) violate any Applicable Law, or (B)
conflict with, result in a breach of or constitute a default under (x) the
Certificate or Articles of Incorporation or By Laws of the Borrower, (y)
any statute, rule, governmental decree, or resolution, or (z) any
indenture, agreement, order, judgment, contract, understanding or other
instrument to which the Borrower is a party or by which it or any of its
property may be bound or affected.
ii) No licenses, permits, consents, orders, approvals or authorizations
by, or registrations, declarations, withholdings of objection or filings
with any governmental bodies, or regulatory, banking or supervisory bodies,
or any other Person are necessary or appropriate in connection with the due
execution, delivery and performance by the Borrower of this Agreement.
(d) Binding Obligations. This Agreement has been duly executed and
-------------------
delivered by the duly authorized officers of the Borrower and is, and the Note
when executed and delivered hereunder will be, legal, valid and binding
obligations of the Borrower as the case may be, enforceable against the Borrower
as the case may be, in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally.
(e) Financial Statements. The financial statements which the Borrower has
--------------------
submitted to the Bank were prepared in accordance with generally accepted
accounting principles consistently applied and fully and fairly reflect the
financial condition of the Borrower at the dates thereof, and no material
adverse change in the financial condition, operations or business of the
Borrower has occurred since March 31, 1994.
(f) Litigation. Except as otherwise previously notified in writing to the
----------
Bank, there is no litigation or governmental
7
<PAGE>
proceeding pending, nor to the knowledge of Borrower threatened, against or in
any other manner relating adversely to the Borrower or any of the Borrower's
property in court or before any arbitrator of any kind or before any
governmental body, which if adversely determined would, singly or in the
aggregate, have a material adverse effect on the financial condition or
properties, business or operations of the Borrower or on the ability of the
Borrower to perform its obligations under this Agreement.
(g) Use of the Proceeds. The Borrower will use the proceeds of any Loan
-------------------
solely for the purpose set out in Section 2.07 or for such other purposes that
the Bank may approve in writing. In addition, the Borrower is not engaged
principally in, nor does it have as one of its important activities, the
business of extending credit for the purpose of "purchasing" or "carrying" any
"margin stock" (each within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Loan will be used to purchase or carry any margin stock or extend credit to
others for a purpose which violates Regulation U or Regulation X (of said Board
of Governors) or any other provision of law or governmental regulation.
(h) Compliance with Law. The Borrower is in substantial compliance with all
-------------------
Applicable Laws, non-compliance with which could, singularly or in the
aggregate, have a materially adverse effect on the ability of the Borrower to
perform its obligations under this Agreement or the Note.
(i) Filings. All filings, recordations, notifications, registrations,
-------
notarizations, authentications or other formalities necessary or appropriate to
be accomplished and all stamp or similar taxes or duties to be paid in
connection with the execution, delivery, validity and enforceability of this
Agreement, the Note and the Loan hereunder have been accomplished or paid.
(j) Absence of Default. The Borrower is in compliance with all of the
------------------
provisions of its Certificate of Incorporation and By Laws, and no event or
condition has occurred, or failed to occur, which has not been remedied or
waived, the occurrence or non-occurrence of which constitutes, or which with the
passage of time or giving of notice or both would constitute, a default by the
Borrower, under any indenture, lease, agreement or other instrument, or any
judgment, decree, resolution or order to which the Borrower or any of its
property may be bound or affected, which default could have a material adverse
effect on the ability of the Borrower to perform its obligations under this
Agreement or the Note.
(k) Material Obligations. The Borrower, is neither a party to nor bound by
--------------------
any loan or credit agreement, or any material franchise agreement, deed, lease
or other instrument, or subject to any Charter, By Laws or other corporate
restriction or judgment,
8
<PAGE>
decree or order of any court or governmental body which may have a materially
adverse effect on the ability of the Borrower to perform its obligations under
this Agreement or the Note.
(l) Accuracy and Completeness of Information. All information, reports
--------------------------------------------
and other papers and data relating to the Borrower furnished to the Bank were,
at the time the same were so furnished, complete and correct in all material
respects to the extent necessary to give the Bank true and accurate knowledge of
the subject matter. No fact is currently known to the Borrower which materially
and adversely affects the business, assets, liabilities, financial position or
business prospects of the Borrower or the ability of the Borrower to perform its
obligations under this Agreement or the Note which has not been set forth or
referred to herein or in such information, reports, or other papers or data or
otherwise specifically disclosed in writing to the Bank.
(m) ERISA. No "plan" (as such term is defined in Section 4021 (a) of
-----
"ERISA" of the Borrower or any of its Subsidiaries) has incurred an "accumulated
funding deficiency" for which any excise tax or penalty is due under the United
States Internal Revenue Code, no Reportable Event (as defined in ERISA) has
occurred and is continuing in respect of any such plan, and the Borrower and
each of its Subsidiaries are in compliance, in all material respects, with the
provisions of ERISA.
(n) Subsidiary. The Borrower is a 86.5% owned subsidiary of Yuasa
----------
Corporation.
(o) Rank of the Loans. All obligations to pay the principal of and interest
-----------------
on the Loan and the Note and other charges made hereunder constitute direct,
unconditional and general obligations of the Borrower, and will rank prior to or
pari passu with all other foreign and domestic indebtedness for borrowed money
- ----------
of the Borrower.
SECTION 4.02 Survival of Representations and Warranties. All statements
------------------------------------------
contained in any certificate, financial statement, legal opinion or other
document delivered by or on behalf of the Borrower pursuant to or in connection
with this Agreement shall constitute representations and warranties made under
this Agreement. All representations and warranties made under this Agreement
shall survive, and not be waived by the execution and delivery of this
Agreement, any investigation by the Bank or the making of any Loan under this
Agreement.
ARTICLE V
AFFIRMATIVE COVENANTS OF THE BORROWER
From and after the date hereof and so long as the Loan or any amount
payable hereunder or under the Note is outstanding and
9
<PAGE>
unpaid or this Agreement is in effect and unless the Bank shall otherwise
consent in writing, the Bank will require the Borrower's adherence to the
following:
SECTION 5.01 Annual Financial Statement. The Borrower shall deliver to
----------------------------
the Bank:
(a) within 120 days after the end of each fiscal year of the Borrower,
deliver to the Bank consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at the end of such year consolidated and
consolidating statements of income and of sources and applications of funds of
the Borrower and its Subsidiaries for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and accompanied by the opinion thereof of independent public accountants
of recognized national standing, which opinion shall state that such balance
sheets, statements of income and statements of sources and uses of funds have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with that of the preceding fiscal year, and
present fairly and accurately the financial position of the Borrower as of their
date, and that the audit by such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and
(b) permit representatives of the Bank during business hours and upon
reasonable notice to (a) visit and inspect the books, records, and properties
of the Borrower and (b) discuss with its principal and officers its affairs,
finances and accounts.
SECTION 5.02 Corporate Existence: Continuity of Operations. Maintain its
---------------------------------------------
corporate existence in good standing and comply with all laws, directives,
regulations or interpretations thereof which are or purport to be applicable to
it; conduct its business substantially as such business is now conducted; and
maintain its assets in good repair, working order and condition.
SECTION 5.03 Notice of Events.
----------------
(a) Upon the occurrence of an Event of Default, give written notice thereof
to the Bank, providing details of such occurrence and setting forth the action
it intends or proposes to take to remedy said Events of Default.
(b) Give prompt written notice to the Bank of (i) any substantial dispute
between the Borrower and any governmental authority with respect to taxes or any
other matter; (ii) any substantial dispute threatening the continued normal
business operations of the Borrower; (iii) any material loss or damage to
property resulting from any casualty; (iv) the commencement of any litigation
proceeding (whether by service of process or by
10
<PAGE>
attachment of any asset) which could have a material adverse effect on the
Borrower's business, operations, properties, assets or condition (financial or
otherwise); and (v) any other material adverse change in the Borrower's
consolidated financial condition or operations.
SECTION 5.04 ERISA. Comply in all material respects with the provisions of
-----
ERISA with respect to each of its employee plans.
SECTION 5.05 Performance of Obligations; Taxes.
---------------------------------
(a) Pay all its indebtedness and perform all contractual obligations
promptly pursuant to agreements to which it is a party or by which it or any of
its properties or assets is bound at any time during the term of the Agreement.
(b) Pay, before any penalty attaches, all general taxes and all special
taxes, special assessments, water charges, drainage and sewer charges and all
other charges of any kind whatsoever, ordinary or extraordinary, which may be
levied, assessed, imposed or charged on or against the property and will, upon
written request, exhibit to the Bank official receipts evidencing such payments.
If the Borrower desires to contest any such tax or assessment, it shall do so in
a manner which prevents enforcement of any lien for taxes and shall deposit with
the Bank such security for the payment of the tax as the Bank may reasonably
require to assure payment of the matter under contest in the event of a
determination of the matter under contest adverse to Borrower.
SECTION 5.06 Approvals. Obtain and promptly renew all consents, licenses
---------
and authorizations as may be required at any time hereunder or under any
applicable law to enable the Borrower to perform its obligations under this
Agreement and the Note or required for the validity or enforceability of this
Agreement and the Note, and the Borrower will comply with the terms of all
governmental consents in relation to this Agreement and the Note.
SECTION 5.07 Insurance. The Borrower will maintain insurance to such extent
---------
and covering such risks as is usual for companies engaged in the same or similar
businesses.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 Events of Default. The following shall constitute Events of
------------------
Default (and, an "Event of Default") under this Agreement:
(a) The Borrower shall default in any payment when due of principal of the
Loan or the Note; or shall default in the payment of interest on the Loan or the
Note, or any other amount payable
11
<PAGE>
under this Agreement or the Note; for more than five (5) Business Days after
such principal, interest or other amount becomes due or is demanded;
(b) Any representation or warranty made by the Borrower under this
Agreement or any statement in any certificate or financial statement furnished
to the Bank shall prove incorrect, untrue or misleading in any material respect
when made or deemed made;
(c) The Borrower shall default in the performance or observance of any
covenant or agreement contained in this Agreement, and such default shall
continue for a period of thirty (30) days after written notice thereof has been
given to the Borrower by the Bank requesting that the same be cured, unless such
default cannot be cured within such 30-day period, in which event the Borrower
shall have 90 days to cure such default, and provided further that the Borrower
promptly commences such cure within such 30-day period and continuously proceeds
with such cure in a diligent manner; or
(d) The Borrower shall: (i) fail to pay any Indebtedness (excluding
Indebtedness evidenced by the Note) of the Borrower in excess of $5,000,000.00
or any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Indebtedness; or (ii) fail to perform any term,
covenant or condition on its part to be performed under any agreement or
instrument relating to any such Indebtedness in excess of $5,000,000.00 when
required to be performed, and such failure shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such failure to perform is to accelerate, or permit the acceleration of the
maturity of such Indebtedness in excess of $5,000,000.00; or any such
Indebtedness in excess of $5,000,000.00 shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof; or
(e) The Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee, intervenor, or liquidator of itself, or of any of its
property, (ii) be unable, or admit in writing its inability, to pay its debts as
they mature, (iii) make a general assignment for the benefit of its creditors,
(iv) be adjudicated a bankrupt or insolvent, or (v) file a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any insolvency law or any answer
admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding, or corporate action shall
be taken by it for the purpose of effecting any of the foregoing; or
12
<PAGE>
(f) The commencement of a case or other proceeding, without the
application or consent of the Borrower, as appropriate, in any court of
competent jurisdiction, seeking the liquidation, reorganization, dissolution,
winding up or composition or readjustment of debts, of the Borrower, as
appropriate, the appointment of a trustee, receiver, custodian, liquidator or
the like for the Borrower, as appropriate or for all or any substantial part of
their respective assets, or any similar action with respect to the Borrower or
the Guarantor, as appropriate under any laws relating to bankruptcy, insolvency,
reorganization, winding up or composition or readjustment of debts, and such
case or proceeding shall continue undismissed, or unstayed and in effect, for a
period of 120 consecutive days or any order for relief in respect of the
Borrower as appropriate shall be entered in an involuntary case under the
Federal bankruptcy laws (as now or hereafter in effect); or
(g) A final judgment or order for the payment of money in excess of
$5,000,000.00 not covered by insurance shall be rendered against the Borrower
and such judgment or order shall continue unsatisfied and in effect for a period
of 30 consecutive days; or
(h) Any reportable event under ERISA shall have occurred and be continuing
for 15 days which the Bank in good faith determines constitutes grounds for the
imposition of liability in excess of $5,000,000.00 against the Borrower under
Part IV, Subtitle D or ERISA; or
(i) The Borrower shall cease to be a 51% owned Subsidiary of Yuasa
Corporation; or
(j) Any competent governmental authority takes (i) any action to condemn,
seize, requisition or otherwise appropriate any substantial portion of the
properties or assets of the Borrower (without payment of compensation), or (ii)
any action to dissolve, liquidate or terminate the existence of the Borrower or
to divest any material portion of its properties or assets.
SECTION 6.02 Remedies.
--------
(a) Upon the occurrence of:
(i) any Event of Default referred to in subsection 7.01(e) or (f), the
Note, all interest thereon, and all other amounts payable under this
Agreement shall become forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower; or
(ii) any other Event of Default, the Bank may by 30 days written notice to
the Borrower declare the principal of and interest accrued on the Note and
all other amounts hereunder
13
<PAGE>
and under the Note to be, and the same shall become and be, forthwith due
and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower.
(b) The Borrower agrees to pay to the Bank on demand all reasonable costs
and expenses which the Bank may incur as a result of the occurrence of an Event
of Default or the failure of the Borrower to pay any amount when due hereunder
or under the Note.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Notices, Etc. Except as is otherwise provided in this
------------
Agreement, all notices and other communications provided hereunder shall be in
writing (including telefaxed communication) and mailed or telegraphed or
delivered, if to the Borrower, at its address at 645 Penn Street P.O.Box 14145,
Reading, PA 19612-4145, Attention: Mr. Michael T. Phillion, Vice President,
Finance & CFO or Mr. Patrick J. McClafferty, Assistant Controller; if to the
Bank at its address at 277 Park Avenue, New York, NY 10172, Attention: Mr.
Takashi Abe; or as to each party, at such other address as shall be designated
by such party in a written notice to the other party. All such notices and
communications shall be effective when received by the party to whom sent.
SECTION 7.02 Survival. The representations and warranties of the Borrower
--------
contained herein shall survive the making of the Loan and, shall remain
effective until all obligations of the Borrower hereunder, and under the Note
shall have been paid by Borrower in full.
SECTION 7.03 Amendments and Waivers. The provisions of this Agreement and
----------------------
the Note may be amended or modified, or the provisions of either waived only by
an instrument in writing signed by the Borrower and the Bank.
SECTION 7.04 Entire Agreement. This Agreement and the documents referred to
----------------
herein embody the entire agreement and understanding between the parties hereto
and supersede all prior agreements and understandings relating to the subject
matter hereof.
SECTION 7.05 No Waiver. No failure to exercise, and no delay in exercising
---------
any right, power or remedy hereunder, under the Note, or under any other
document delivered pursuant hereto shall impair any right, power or remedy which
the Bank may have, nor shall any such delay be construed to be a waiver of any
such right, power or remedy, or an acquiescence in any breach or default under
this Agreement or the Note or under any other document delivered
14
<PAGE>
pursuant hereto, nor shall any waiver by the Bank of any breach or default
hereunder be deemed a waiver of any default or breach subsequently occurring.
The rights and remedies herein specified are cumulative and not exclusive of any
rights or remedies which the Bank would otherwise have.
SECTION 7.06 Separability of Provisions. In case one or more of the
--------------------------
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
SECTION 7.07 Binding Effect; Assignment. All the provisions of this
--------------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns when it shall have been executed by
the Borrower and the Bank. The Borrower shall not have the right to assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Bank.
SECTION 7.08 Submission to Jurisdiction. Any legal action or proceedings
--------------------------
with respect to this Agreement against the Borrower may be brought in the courts
of the United States of America or the State of New York as the Bank may elect,
and, by execution and delivery of this Agreement, the Borrower hereby, (i)
accepts for itself, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts, and (ii) irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceedings with respect to
this Agreement brought in any court of the United States of America or the State
of New York located in the City of New York, and further irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. In the case of the courts of the United
States of America and the State of New York the Borrower hereby agrees to
receive service of process in any legal action or proceedings with respect to
this Agreement. Nothing herein shall affect the right to serve process in any
other manner permitted by law. The Borrower hereby agrees that the mailing of
such process to the Borrower shall be deemed personal service and accepted by
the Borrower for any legal action or proceedings with respect to this Agreement.
SECTION 7.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
SECTION 7.10 Governing Law. This Agreement and the Note shall be construed
-------------
in accordance with and governed by the laws of the State of New York.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
caused it to be executed by their duly authorized officers, as of the date first
above written.
Yuasa Exide, Inc.
By /s/ Michael T. Philion
----------------------------------
Name MICHAEL T. PHILION
--------------------------------
Title VICE PRESIDENT, FINANCE & CFO
-------------------------------
THE SAKURA BANK, LIMITED
By /s/ Yoshimi Miura
---------------------------
Name Yoshimi Miura
-------------------------
Title Senior Vice President
------------------------
16
<PAGE>
EXHIBIT A
PROMISSORY NOTE
---------------
US $20,000,000 .00
Dated: October 30, 1995
FOR VALUE RECEIVED, the undersigned, YUASA EXIDE, INC. a California
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of THE SAKURA
BANK, LIMITED (the "Bank") the principal sum of Twenty Million Dollars
($20,000,000.00), or such lesser outstanding amount which the Bank shall have
advanced to the Borrower as the Loan, in immediately available funds, in
consecutive 10 equal semi-annual - installments of $2,000,000.00 on the
Repayment Dates (the 30th day of April and October, commencing April 30, 1998),
and to pay interest from the date hereof on said principal sum or the unpaid
balance hereof, in like money and funds, at the rates and at the times specified
in the Credit Agreement (as hereinafter defined), provided that any amount which
--------
is not paid when due hereunder shall bear interest (to the extent not prohibited
by law) until paid in full, payable on demand, at a rate per annum equal to the
higher of (i) the Prime Rate plus 2% or (ii) 2% above the rate applicable to
such amount immediately prior to its becoming due. Interest shall be computed on
the basis of a year of 360 days for the actual number of days elapsed.
Both principal and interest are payable in lawful money of the United
States of America to the office of the Bank located at 277 Park Avenue, New
York, New York 10172 (or any successor office notified to the Borrower by the
Bank).
17
<PAGE>
This Promissory Note is the Note referred to in, and is entitled to the
benefits of, the Term Loan Agreement dated as of October 30, 1995, (the "Credit
Agreement") between the Borrower and the Bank, which Credit Agreement, among
other things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
the principal hereof prior to the maturity hereof upon the terms and conditions
therein specified. Terms defined in the Credit Agreement and used herein shall
have their respectively defined meanings herein unless the contrary is expressly
indicated.
The Borrower hereby waives presentment, demand, protest or notice of any
kind with respect to this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
YUASA EXIDE, INC.
By /s/ Michael T. Philion
-------------------------------------
Name: MICHAEL T. PHILION
----------------------------------
Title: VICE PRESIDENT, FINANCE & CFO
---------------------------------
18
<PAGE>
PROMISSORY NOTE
---------------
US $20,000,000.00
Dated: October 30, 1995
FOR VALUE RECEIVED, the undersigned, YUASA EXIDE, INC. a California
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of THE SAKURA
BANK, LIMITED (the "Bank") the principal sum of Twenty Million Dollars
($20,000,000.00), or such lesser outstanding amount which the Bank shall have
advanced to the Borrower as the Loan, in immediately available funds, in
consecutive 10 equal semi-annual - installments of $2,000,000.00 on the
Repayment Dates (the 30th day of April and October, commencing April 30, 1998),
and to pay interest from the date hereof on said principal sum or the unpaid
balance hereof, in like money and funds, at the rates and at the times specified
in the Credit Agreement (as hereinafter defined), provided that any amount which
--------
is not paid when due hereunder shall bear interest (to the extent not prohibited
by law) until paid in full, payable on demand, at a rate per annum equal to the
higher of (i) the Prime Rate plus 2% or (ii) 2% above the rate applicable to
such amount immediately prior to its becoming due. Interest shall be computed on
the basis of a year of 360 days for the actual number of days elapsed.
Both principal and interest are payable in lawful money of the United
States of America to the office of the Bank located at 277 Park Avenue, New
York, New York 10172 (or any successor office notified to the Borrower by the
Bank) .
<PAGE>
This Promissory Note is the Note referred to in, and is entitled to the
benefits of, the Term Loan Agreement dated as of October 30, 1995, (the "Credit
Agreement") between the Borrower and the Bank, which Credit Agreement, among
other things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
the principal hereof prior to the maturity hereof upon the terms and conditions
therein specified. Terms defined in the Credit Agreement and used herein shall
have their respectively defined meanings herein unless the contrary is expressly
indicated.
The Borrower hereby waives presentment, demand, protest or notice of any
kind with respect to this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
YUASA EXIDE, INC.
By /s/ Michael T. Philion
-----------------------------------
Name: MICHAEL T. PHILION
--------------------------------
Title: VICE PRESIDENT, FINANCE & CFO
-------------------------------
<PAGE>
CERTIFICATE
-----------
The undersigned is the Chief Financial Officer of YUASA-EXIDE, INC. (the
"Company"), and does hereby, pursuant to Paragraph 3.02 of the Term Loan
Agreement dated as of October 30, 1995 (the "Agreement") by and between the
company and THE SAKURA BANK, LIMITED, certify for and on behalf of the Company
as follows:
1. The representations and warranties contained in Section 4.01 of the
Agreement are true and correct in all material respects on and as of the date
hereof as though made on and as of this date.
2. No event has occurred and is continuing, or would result from the
making of the Loan under the Agreement which constitutes or would, with the
passage of time or notice or both, constitute an Event of Default under the
Agreement.
3. Since March 31, 1995, there has been no material adverse change in the
financial condition, operations or business of the Company.
Dated: October 30, 1995.
YUASA-EXIDE, INC.
By: /s/ Michael T. Philion
--------------------------------
Michael T. Philion
Chief Financial Officer
<PAGE>
YESCO, INC.
Suite 130
1325 Airmotive Way
Reno, Nevada 89502
Jeffrey Naugle Date: March 16, 1998
CoreStates Bank
600 Penn Street
Reading, PA 19603
Dear Mr. Naugle:
Reference is made to our lock-box account no. 81266700 (the "Account") which
receive deposits through the Lock Box (the "Lock Box") maintained with you.
Pursuant to a Securitization Agreement dated as of March, 1998, (as the same may
be amended, modified or otherwise supplemented from time to time, the
"Securitization Agreement") among us, as seller. Yuasa Exide, Inc., as servicer,
Prominent Funding Corporation, as purchaser (the "Purchaser"), and The Sakura
Bank, Limited, acting through its New York Branch, as agent for Purchaser (the
"Agent"), we have assigned and/or may hereafter assign to Purchaser an undivided
percentage interest in certain of the accounts, chattel paper, instruments or
general intangibles (collectively, "Receivables") and Related Property (as
defined in the Securitization Agreement), with respect to which payments are or
may hereafter be made to the Account and Lock Box, and have granted to
Purchaser a security interest in our retained interest in such Receivables and
the Related Property. Your execution of this letter agreement is a condition
precedent to our continued maintenance of the Account and Lock Box with you.
We hereby transfer exclusive ownership and control of the Account and Lock
Box effective March 16, 1998, to the Agent subject only to the condition
subsequent that the Agent shall have given you notice of its election to assume
such ownership and control, which notice may be in the form attached hereto as
Annex A or in any other form that gives you reasonable notice of such election.
We hereby irrevocably instruct you, at all times from and after the date of
your receipt of notice from the Agent as described above, to make all payments
to be made by you out of or in connection with the Account directly to the
Agent, at its address set forth below its signature hereto or as die Agent
otherwise notifies you, for the account of the Purchaser - account number
81266700, or otherwise in accordance with the instructions of the Agent.
1
<PAGE>
We also hereby notify you that, at all times from and after the date of your
receipt of notice from the Agent as described above, the Agent shall be
irrevocably entitled to exercise in our place and stead any and all rights in
respect of or in connection with the Account and Lock Box, including, without
limitation, (a) the right to specify when payments are to be made out of or in
connection with the Account and (b) the right to require preparation of
duplicate monthly bank statements on the Account for the Agent's audit purposes
and mailing of such statements directly to an address specified by the Agent.
Notice from the Agent may be personally served or sent by Telex, facsimile or
U.S. mail, certified return receipt requested or by express mail or courier, to
the address, Telex or facsimile number set forth under your signature to this
Letter agreement (or to such other address, Telex or facsimile number as to
which you shall notify the Agent in writing). If notice is given by Telex or
facsimile, it will be deemed to have been received when the notice is sent and
the answerback is received (in the case of Telex) or receipt is confirmed by
telephone or other electronic means (in the case of facsimile). All other
notices will be deemed to have been received when actually received or, in the
case of personal delivery, delivered.
By executing this Letter agreement, you acknowledge the existence of the Agent's
right to ownership and control of the Account and Lock Box and its ownership of
and security interest in the accounts from time to time on deposit therein and
agree that from the date hereof the Account and Lock Box shall be maintained by
you for the benefit of, and amounts from time to time therein held by you as
agent for, the Agent on the terms provided herein. The Account is to be entitled
"Yesco, Inc. and The Sakura Bank, Limited, acting through its New York Branch as
Agent for Prominent Funding Corporation". Except as otherwise provided in this
letter agreement, payments to the Account and Lock Box are to be processed in
accordance with the standard procedures currently in effect. All service charges
and fees with respect to the Account and Lock Box shall continue to be payable
by us as under the arrangements currently in effect.
By executing this letter agreement, you irrevocably waive and agree not to
assert, claim or endeavor to exercise, irrevocably bar and estop yourself from
asserting, claiming or exercising and acknowledge that you have not heretofore
received a notice, writ, order or any form of legal process from any other party
asserting, claiming or exercising, any right of set-off, banker's lien or other
purported form of claim with respect to the Account or the Lock Box or any
funds from time to time therein. Except for your right to payment of your
service charges and fees and to make deductions for returned items, you shall
have no rights in the Account or the Lock Box or funds therein. To the extent
you may ever have such rights, you hereby expressly subordinate all such rights
to all rights of the Agent.
2
<PAGE>
You may terminate this Letter agreement by canceling the Account and Lock Box
maintained with you, which cancellation and termination shall become effective
only upon thirty days' prior written notice thereof from you to the Agent.
Incoming mail addressed to or wire transfers to the Account or Lock Box received
after such cancellation shall be forwarded in accordance with the Agent's
instructions. This letter agreement may also be terminated upon written notice
to you by the Agent stating that the Securitization Agreement pursuant to which
this letter agreement was obtained is no longer in effect. Except as otherwise
provided in this paragraph, this letter agreement may not be terminated or
amended without the prior written consent of the Agent.
Please acknowledge your agreement to the terms set forth in this letter
agreement by signing the two copies of this letter agreement enclosed herewith
in the space provided below, sending one such signed copy to the Agent at the
address provided below its signature and returning the other signed copy to us.
Very truly yours,
YESCO, INC.
/s/ Patrick McClafferty
By: Patrick McClafferty
Title: Assistant Secretary
3
<PAGE>
Accepted and confirmed as of the date first written above:
PROMINENT FUNDING CORPORATION,
as Purchaser
By:
-----------------------------
Name:
Title:
THE SAKURA BANK, LIMITED, acting through
its New York Branch, as Agent
By:
-----------------------------
Name:
Title:
Address for notice:
277 Park Avenue
New York, New York 10172-0121
Attention: Michael E. Fitzgerald and Toshiharu Sakuragi
Acknowledged and agreed to as of the date first written above: - - subject to
the
additional
terms and
conditions as
outlined on
the attached
addendum.
CORESTATES BANK N.A.
By: [SIGNATURE APPEARS HERE]
-----------------------------
Title:
--------------------------
Address for notice:
600 Penn Street
P.O. Box 1102
Reading, PA 19603
<PAGE>
Addendum
--------
To Letter Agreement between YESCO Inc., Prominent Funding Corporation, The
Sakura Bank Limited, and CoreStates Bank, N.A.,
Dated March 16, 1998
Notwithstanding any other provisions of this letter agreement,
(1) unless you are grossly negligent or engage in willful misconduct in
performance or non-performance in connection `with this letter agreement,
the Account or the Lock Box, we, the Purchaser and the Agent agree to hold
you harmless from any claims, damages, losses or expenses incurred by any
party in connection herewith in the event you breach the standard of care
set forth herein, we, the Purchaser and the Agent expressly agree that
your liability shall be limited to damages directly caused by such breach
and in no event shall you be liable for any incidental indirect, punitive
or consequential damages whatsoever,
(2) we agree that you may act on the instructions of the Agent without
making any special inquiry into the authority of the Agent, and you will
not be held liable for reasonable reliance on such instructions;
(3) you shall not be liable for any failure, inability to perform, or
delay in performance hereunder, if such failure, inability or delay is due
to acts of God, war, civil commotion governmental action, fire, explosion,
strikes, other industrial disturbances, equipment malfunction, action,
non-action or delayed action on our part or the part of the Agent or any
other entity or any other causes that are beyond your reasonable control;
(4) in the event insufficient funds are available in the Account for
return items or uncollected or fees and charges owed to you with respect
to the Account or the Lock Box and charged by you in the normal course of
business, we shall pay all such amounts to you on demand. If we fall to
pay such items Agent agrees that it will reimburse you for all such
amounts on demand.
Our responsibility and the Purchaser's and the Agent's respective
responsibilities under this paragraph shall survive the termination of this
letter agreement.
Prominent Funding Corporation: YESCO, Inc.,
By: By: /s/ Robert E. Miller
----------------------------- -----------------------------
Name Name ROBERT E. MILLER
Title Title Treasurer
The Sakura Bank Limited CoreStates Bank N.A.
By: By:[SIGNATURE APPEARS HERE]
----------------------------- -----------------------------
Name Name
Title Title
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("Agreement") dated as of December 10, 1991 is
entered into by YUASA-EXIDE, INC., a California corporation (the "Borrower"),
and THE MITSUI TRUST & BANKING CO., LTD. (the "Bank").
ARTICLE 1.
DEFINITIONS; INTERPRETATION
Section 1.1 Definitions. The following terms are used in this Agreement
-----------
with the following meanings:
"Business Day" means any day other than a Saturday, a Sunday or any
other day on which banks in Los Angeles, California and New York, New York are
authorized or required by law to close.
"Debt" of any person or entity means (i) indebtedness for borrowed
money or for the deferred purchase price of property or services in respect of
which such person or entity is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which such person or entity otherwise
assures a creditor against loss, and (ii) obligations under leases that shall
have been or should be, in accordance with generally accepted accounting
principles, recorded as capital leases, in respect of which obligations such
person or entity is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which obligations such person or entity otherwise
assures a creditor against loss.
"Event of Default" has the meaning set forth in Section 6.1.
"Guarantor" means Yuasa Battery Co., Ltd., the Japanese parent of the
Borrower.
"Guaranty" means the letter of guaranty dated December 10, 1991 from
the guarantor to the Bank.
"Loan" has the meaning set forth in Section 2.1.
"Loan Documents" means this Agreement, the Note, the Guaranty and any
other document, guaranty or similar instrument delivered pursuant to this
Agreement or any other Loan Document.
"Note" has the meaning set forth in section 3.1(a).
1
<PAGE>
"Subsidiary" means (i) a corporation of which the Borrower and/or its
other Subsidiaries own, directly or indirectly, such number of outstanding
shares as have more than 50% of the ordinary voting power for the election of
directors and (ii) a partnership directly or indirectly controlled or managed by
the Borrower and/or its other Subsidiaries.
Section 1.2 Accounting Terms. Unless otherwise specified in this
----------------
Agreement, all accounting terms used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made and all financial
statements required to be delivered by the Borrower pursuant to this Agreement
shall be prepared in accordance with generally accepted accounting principles as
in effect from time to time applied on a basis consistent with the most recent
audited consolidated financial statements of the Borrower delivered to the Bank.
Section 1.3 Interpretation. In this Agreement, the singular includes the
--------------
plural and the plural the singular; words importing any gender include the other
genders; references to statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute referred to;
references to "writing" include printing, typing, lithography and other means of
reproducing words in a tangible, visible form; references to sections (or any
subdivision of a section), articles, schedules, recitals, annexes and exhibits
are to those of this Agreement unless otherwise indicated; the words
"including," "includes", "include" shall be deemed to be followed by the words
"without limitation"; and references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement.
ARTICLE 2.
AMOUNTS AND TERMS OF THE LOAN
Section 2.1 The Loan. The Bank agrees, on the terms and conditions
--------
hereinafter set forth, to make a term loan in the amount of $30,000,000 (the
"Loan") to the Borrower on December 10, 1991.
Section 2.2 Repayment of the Loan; Optional Prepayments. (a) If not sooner
-------------------------------------------
prepaid, the borrower shall repay the outstanding principal amount of the Loan
and any and all accrued but unpaid interest on the Maturity Date, as defined and
as provided in the Note.
(b) The Borrower may, subject to the provisions of the Note, prepay
the Loan without premium or penalty in whole at any time or from time to time in
part, by paying the principal amount being prepaid together with accrued
interest thereon to the date of prepayment.
2
<PAGE>
Section 2.3 Interest. The Borrower shall pay interest on the unpaid
--------
principal amount of the Loan from the date of the Loan until such principal
amount is paid in full, at the interest rate specified in the Note and at the
times and in the manner specified in the Note.
[Section 2.4 Note Payments. (a) The Bank Shall submit to the Borrower, on
-------------
or prior to the Closing Date, two duly completed and signed copies of Form 4224
(relating to all payments to be made to the Bank by the Borrower pursuant to
this Agreement) of the United States Internal Revenue Service. Thereafter and
from time to time, upon notice from or upon any change in the Bank's
circumstances as reflected in the prior such form delivered by it, the Bank
shall submit to the Borrower, such additional duly completed and signed copies
of such form (or such successor forms as shall be adopted from time to time by
the relevant United States taxing authorities) as may be required under
then-current United States laws or regulations to avoid United States
withholding taxes on payments in respect of all payments to be made to the Bank
by the Borrower pursuant to the Loan Documents.
(b) All payments by or on behalf of the Borrower under the Loan
Documents shall be made without set-off or counterclaim and in such amounts as
may be necessary in order that all such payments (after deduction or withholding
for or on account of any present or future taxes, levies, imposts, duties or
other charges of whatsoever nature imposed by any government, any political
subdivision or any taking authority, other than any tax on or measured by the
overall net income of the Bank pursuant to the income tax laws of the United
States or the jurisdiction where the Bank's principal office is located
(collectively, the "Taxes") shall not be less than the amounts otherwise
specified to be paid under the Loan documents. A certificate as to any
additional amounts payable to the Bank under this Section 2.4 submitted to the
Borrower by the Bank shall show in reasonable detail the amount payable and the
calculations used to determine in good faith such amount and shall be conclusive
absent manifest error. Any amounts payable by the Borrower hereunder with
respect to past payments shall be due within five (5) Business Days following
receipt by the Borrower of such certificate from the Bank; and such amounts
payable with respect to future payments shall be due concurrently with such
future payments. With respect to each deduction or withholding for or on
account of any Taxes, the Borrower shall promptly furnish to the Bank such
certificates, receipts and other documents as may be required (in the reasonable
judgment of the Bank) to establish any tax credit to which the Bank may be
entitled. Without in any way affecting any of its rights hereunder, the Bank
agrees that, upon its becoming aware that any of the present or future payments
due it under the Loan Documents would be subject to deduction for Taxes, it will
notify the Borrower in writing and the Bank further agrees that it will use
reasonable efforts not disadvantageous to it (in its sole determination) in
3
<PAGE>
order to avoid or minimize, as the case may be, the payment by the Borrower of
any additional amounts for Taxes pursuant to this Section 2.4. The agreements
and obligations of the Borrower under this Section 2.4. The agreements and
obligations of the Borrower under this Section 2.4 shall survive the payment in
full of the Loan.]
ARTICLE 3.
CONDITIONS OF LENDING
Section 3.1 Documentary Conditions Precedent to the loan. The obligation of
--------------------------------------------
the Bank to make the Loan is subject to the conditions precedent that the Bank
shall have received on or before the day of the Loan the following documents, in
form and substance satisfactory to the Bank:
(a) a Promissory Note in the form attached hereto as exhibit A (the
"Note"), duly executed by the Borrower;
(b) the Guaranty, duly executed by the Guarantor;
(c) certified copies of Borrower's charter, by laws and resolutions of
the Board of Directors of the Borrower approving the execution, delivery and
performance of the Loan Documents to which the Borrower is party, and of all
documents evidencing other necessary corporate or other action with respect to
the Loan Documents to which the Borrower is party;
(d) certified copies of all necessary governmental authorizations and
approvals with respect to the Loan Documents;
(e) a certificate of the Secretary of the Borrower certifying the
names and specimen signatures of the officers or partners of the Borrower duly
authorized to sign the Loan Documents; and
(f) such other approvals, opinions and documents as the Bank may
reasonably request.
Section 3.2 Circumstantial Conditions Precedent to the Loan. The
-----------------------------------------------
obligation of the Bank to make the Loan shall be subject to the further
conditions precedent that, on the date of the Loan, the following statements
shall be true (and the Acceptance by the Borrower of the Loan shall be deemed to
be a confirmation of the truth of such statements):
(a) the representations and warranties contained in Section 4.1 are
correct on and as of the Loan as though made on and as of such date; and
(b) no event has occurred and is continuing, or would result from the
Loan, that constitutes an Event of Default or would
4
<PAGE>
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
Article 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Borrower. The Borrower
----------------------------------------------
represents and warrants as follows:
(a) the Borrower is duly organized, validly existing and in good
standing under the laws of California;
(b) the execution, delivery and performance by the Borrower of the Loan
documents to which the Borrower is a party are within the Borrower's powers,
have been duly authorized by all necessary action and do not contravene law or
any contractual restriction binding on or affecting Borrower;
(c) no authorization, approval or other action by, or notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Borrower of the Loan documents to
which the Borrower is a party;
(d) each of the Loan Documents to which the Borrower is party is the
legal, valid and binding obligation of the Borrower, enforceable against
Borrower in accordance with its terms, and such obligation ranks at least pari
----
passu in all respects with all other unsecured obligations of the Borrower;
- -----
(e) the balance sheet of the Borrower and its Subsidiaries as of end of
March, and the related statements of income and retained earnings of the
Borrower and its Subsidiaries for the fiscal period then ended, copies of which
have been furnished to the Bank, fairly present the financial condition of the
Borrower and its Subsidiaries as of such date and the results of the operations
of the Borrower and its subsidiaries for the period ended on such dated, all in
accordance with generally accepted accounting principles consistently applied,
and since____________________ there has been no material adverse change in such
condition or operations;
(f) there is no pending or, to the Borrower's knowledge and belief,
threatened action or proceeding affecting the Borrower, or any of its
Subsidiaries before any court, governmental agency or arbitrator that may
materially and adversely affect the financial condition or operations of the
Borrower or any such Subsidiary;
(g) the Borrower and its Subsidiaries have filed all national, federal,
state, and local income tax returns required to have been filed by them and have
paid all taxes, assessments,
5
<PAGE>
charges and other amounts due thereunder, except to the extent disputed by
appropriate proceedings diligently pursued and except to the extent that
appropriate reserves are being maintained with respect to any amounts so
disputed;
(h) no proceeds of the Loan will be used to acquire any security in
any transaction which is subject to Section 13 and 14 of the Securities Exchange
Act of 1934; and
(i) the Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System),
and no proceeds of the Loan will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying any
margin stock. Proceeds of the Loan will be used only to acquire the industrial
division of Exide Corporation.
ARTICLE 5.
COVENANTS OF THE BORROWER
Section 5.1 Covenants. So long as the Loan shall remain unpaid, the
---------
Borrower will, unless the Bank shall otherwise consent in writing:
(a) comply, and cause each of its Subsidiaries to comply, in all
material respects with all applicable laws, rules, regulations and orders, such
compliance to include paying when due all taxes, assessments and governmental
charges imposed upon them or upon their property, except to the extent disputed
by appropriate proceedings diligently pursued and except to the extent that
appropriate reserves are being maintained with respect to any amounts so
disputed;
(b) furnish to the Bank: (i) as soon as available and in any event
within 90 days after the end of each fiscal year of the Borrower, a balance
sheet of the Borrower and its Subsidiaries as of the end of such year and
statements of income and retained earnings of the Borrower and its Subsidiaries
for such year, certified in a manner acceptable to the Bank by independent
public accountants acceptable to the Bank; and (ii) such other information
respecting the condition or operations, financial or otherwise, of the Borrower
or any of its Subsidiaries as the Bank may from time to time reasonably request;
and
(c) not (i) dissolve or consolidate with or merge into any other
entity or (ii) sell, lease or otherwise transfer, all or any substantial part of
its assets to any other entity. The Borrower will not permit any Subsidiary to
dissolve or consolidate with, merge into or transfer all or any substantial part
of its assets to any entity other than the Borrower or a wholly-owned
consolidated Subsidiary.
6
<PAGE>
ARTICLE 6.
EVENTS OF DEFAULT
Section 6.1 Events of Default. If any of the following events (each an
-----------------
"Event of Default") shall occur and be continuing:
(a) the Borrower shall fail to make any payment of, or principal of,
interest on, the Loan when due;
(b) any representation or warranty made by the Borrower (or any of
its officers) under or in connection with any Loan Document shall prove to have
been incorrect or misleading in any material respect when made or deemed made;
(c) the Borrower shall fail to perform or observe any other term,
covenant or agreement contained in any Loan Document on its part to be performed
or observed, and any such failure shall remain unremedied for ten (10) days
after written notice thereof shall have been given to the Borrower by the Bank;
(d) the Borrower, the Guarantor or any of their respective
Subsidiaries shall (i) fail to pay any Debt (excluding Debt resulting from the
Loan) of the Borrower, the Guarantor or such Subsidiary (as the case may be), or
any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any specified in the agreement or
instrument relating to such Debt, or (ii) fail to perform or observe any term,
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any such Debt, when required to be performed
or observed, and such failure shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such failure
is to accelerate, or to permit the acceleration of, the maturity of such Debt;
or any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof;
(e) the Borrower, the Guarantor or any of their respective
Subsidiaries shall admit in writing its inability to pay its debts or shall make
a general assignment for the benefit of creditors; any proceeding shall be
instituted by or against the Borrower, the Guarantor or any of their respective
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, seeking
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking appointment of a receiver, trustee or other similar official
for it or for any substantial part of its property; or the Borrower, the
Guarantor or
7
<PAGE>
any of their Subsidiaries shall take any Corporate action to authorize any of
the actions set forth above in this subsection (e);
(f) an extraordinary event shall occur, or a change affecting the
functions of the Borrower or the Guarantor shall occur, which event or change
gives reasonable grounds to conclude, in the judgment of the Bank, that the
Borrower or the Guarantor may not, or may be unable to, perform or observe in
the normal course its obligations under any Loan Document; or
(g) any judgment or order for the payment of money in excess of
$10,000.- shall be rendered against the Borrower, the Guarantor or any of their
respective Subsidiaries and such judgment shall continue unsatisfied and
unstayed for a period of ten (10) days;
then, (1) in the case of any Event of Default specified in paragraphs (d) or (e)
above, the Loan, the Note and all interest thereon and all other amounts payable
under the Loan Documents shall automatically become due and payable without
presentment, demand, protest or noire of any kind, all of which are expressly
waived and (2) in the case of any other Event of Default specified above, the
Bank may, be notice to the Borrower, declare the Loan and the Note, all interest
thereon and all other amounts payable under this Agreement to be forthwith due
and payable, whereupon the Loan and the Note, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower.
ARTICLE 7.
MISCELLANEOUS
Section 7.1 Amendments, Etc. No amendment or waiver of any provision of any
---------------
Loan Document, or consent to any departure by the Borrower therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
party or parties charge therewith, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 7.2 Notices, Etc. All notices and other communications provided for
------------
hereunder shall be in writing and mailed, telecopied or delivered to the
addresses and telecopier numbers for the parties set forth on the signature
pages hereof or to such other address or telecopier number as a party may
specify by notice given in accordance with the provisions hereof. All such
notices and communications shall, when mailed or telecopier, be effective when
deposited in the mails or telecopied, respectively.
8
<PAGE>
Section 7.3 No Waiver; Remedies. No failure on the part of the Bank or the
-------------------
Borrower to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein are cumulative and not exclusive of any
remedies provided by law.
Section 7.4 Currency Equivalent. For purposes of the Loan Documents, the
-------------------
equivalent in another currency of an amount in United States dollars shall be
determined at the rate of exchange quote by the Bank in Los Angeles for
conversion of such other currency into United States dollars on the date of
determination.
Section 7.5 Costs, Expenses and Taxes. The Borrower agrees to pay on demand
-------------------------
all costs and expenses in connection with the preparation, execution, delivery
and administration of the Loan Documents, including the reasonable fees and out-
of-pocket expenses of counsel for the Bank with respect thereto and with respect
to advising the Bank as to its rights and responsibilities under this agreement
and such instruments and documents. The Borrower further agrees to pay on demand
all losses, costs and expenses, if any, in connection with the enforcement of
the Loan documents, including Losses, costs and the performance of its
obligations contained in any Loan Document. In addition, the Borrower shall pay
any and all stamp and other taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing and recording of the Loan
Documents, and agrees to save the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees. The obligations of the Borrower under this Section 7.5
shall survive payment in full of the Loan.
Section 7.6 Right of Setoff. Upon the occurrence and during the continuance
---------------
of any Event of Default, the bank is hereby authorized at any time and from time
to time, without notice to the borrower (any such notice being expressly waived
by the Borrower), to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Bank to or for the credit or the account of the Borrower
against any and all of the obligations of the borrower now or hereafter existing
under any Loan Document, irrespective of whether or not the Bank shall have made
any demand under such Loan Document and although such obligations may be
unmatured. The Bank agrees to notify the Borrower promptly after any such setoff
and application; provided that the failure to give such notice shall not affect
--------
the validity of such setoff and application. The rights of the Bank under this
Section are in addition to other rights and remedies (including other rights of
setoff) that the Bank may have.
9
<PAGE>
Section 7.7 Judgment. If, for the purpose of obtaining judgment in any
--------
court, it is necessary to convert a sum due under any Loan document in United
States dollars into another currency (the "other currency"), the rate of
exchange used shall be that at which in accordance with normal banking
procedures the Bank could purchase United States dollars with the other currency
on the Business Day preceding that on which final judgment is given. The
obligation of the Borrower in respect of any such sum due from it to the Bank
under any Loan Document shall, notwithstanding any judgment in such other
currency, be discharged only to the extent that on the Business Day following
receipt by the Bank of any sum adjudged to be so due in the other currency the
Bank may in accordance with normal banking procedures purchase United States
dollars with the other currency; if the United States dollars so purchased are
less that the sum originally due to the Bank in United States dollars, the
Borrower agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify the Bank against such loss, and if the United States
dollars so purchased exceed the sum originally due to the Bank in United States
dollars, the Bank agrees to the Borrower such excess.
Section 7.8 Binding effect; Governing Law. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of the borrower and the bank and their respective
successors and assigns, except that the borrower shall not have the right to
assign its rights and obligations hereunder or any interest herein. The Bank may
assign to any other financial institution all or any part of, or any interest
in, the Bank's rights and benefits hereunder and under any other Loan Document,
and to the extent of such assignment such assignee shall have the same rights
and benefits against the Borrower as it would have had if it were the Bank
hereunder.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be executed by their respective duly authorized representatives, as of the date
first above written.
"BORROWER"
YUASA-EXIDE, INC.
a CALIF. corporation
----------
By: YUASA-EXIDE, INC.
----------------------------
Name: BRUCE A. SMITH
--------------------------
Title: Treasurer
-------------------------
/s/ Bruce A. Smith
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Borrower's address for notices:
YUASA-EXIDE, INC.
-------------------------------
645 PENN STREET
-------------------------------
READING, PA 19601
-------------------------------
Attention: BRUCE A. SMITH
---------------------
Telecopier No.: (215)-378-0603
----------------
"BANK"
THE MITSUI TRUST & BANKING CO.,
LTD.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Bank's address for notices:
611 West Sixth Street, Suite 3800
Los Angeles, California 90017
Attention: S. Ashiba
---------
Telecopier No.: (213) 624-0378
--------------
11
<PAGE>
ADDENDUM TO CREDIT AGREEMENT
[To be attached if Borrower is not a California corporation]
Consent to Jurisdiction; waiver of Immunities.
----------------------------------------------
(a) the Borrower hereby irrevocably submits to the jurisdiction
of any California or Federal court sitting in Los Angeles over any action or
proceeding arising out of or relating to the Loan documents. The Borrower hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or proceeding. The
Borrower hereby irrevocably appoints __________________________, (the "process
agent"), with an office on the date hereof at _________________, Los Angeles,
California, United States of America, as its agent to receive on behalf of the
Borrower and its property service of copies of the summons and complaint and any
other process which may be served in any such action or proceeding. As an
alternative method of service, the Borrower also irrevocably consents to the
service of any and all process in any such action or proceeding by the mailing
of copies of such process to the Borrower at its address as set forth on the
signature page hereof. The Borrower agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Nothing in this Addendum shall affect the right of the Bank
to serve legal process in any other manner permitted by law or affect the right
of the Bank to Bring any action or proceeding against the Borrower or its
property in the courts of any other jurisdictions.
(c) To the extent that the borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment otherwise) with respect to itself
or its property, the borrower hereby irrevocably waives such immunity in respect
of its obligations under the Loan Documents.
(d) This Addendum is for all purposes a part of the Credit
agreement to which it is attached.
Bank's initials: Borrower's initials:
- ------------------------------- ----------------------------------
12
<PAGE>
EXHIBIT A
PROMISSORY NOTE
U.S. $30,000,000 Date: December 10, 1991
Los Angeles, California
FOR VALUE RECEIVED, the undersigned, YUASA-EXIDE, INC. (the "Borrower"),
hereby promises to pay to the order of the MITSUI TRUST & BANKING CO., LTD. (the
"Bank"), on or prior to December 10, 1998 (the "Maturity Date"), the aggregate
unpaid principal amount of the Loan made by Bank to Borrower pursuant terms used
and not defined herein have the meanings specified in the Credit Agreement.
Borrower shall pay interest on the unpaid principal amount of the Loan from
the data of disbursement of the Loan until such principal amount is paid in
full, at an interest rate per annum equal to 7.9% (the "Interest Rate").
--- -----
Interest on the Loan shall be payable semi-annually in arrears, commencing
on June 10, 1992, at the end of each six-month period thereafter and on the
Maturity Date. The outstanding principal amount of the Loan shall be due and
payable upon the Maturity Date. Overdue principal of, and to the extent
permitted by law, overdue interest on the Loan and other amounts overdue under
the Credit Agreement shall bear interest at the higher of (i) the Prime Rate (as
defined below) plus 1.5% per annum, and (ii) 9% per annum, payable on demand.
--- ----- --- -----
All interest on the Loan shall be computed on the basis of a year of 360 days,
and paid for actual days elapsed, and the term "per annum" shall be deemed to
--- -----
refer to a year so calculated. "Prime Rate" means the rate of interest announced
by the Bank from time to time as its base rate. The Prime Rate is determined by
Bank from time to time as a means of pricing credit extensions to some customers
and is neither tied to any external rate or interest or index or necessarily the
lowest rate of interest charged by Bank at any given time for any particular
class of customers or credit extensions.
Borrower may, upon at least two (2) Business Days' notice to Bank, prepay
the outstanding amount of the Loan in whole or in part on any Business Day with
accrued interest to the date of such prepayment on the amount prepaid.
Borrower shall make each payment under this Note or the Credit Agreement
not later than 12:00 noon, Los Angeles time, on the day when due. Borrower
hereby authorizes Bank, if and to the extent payment is not made when due under
this Note or the Credit Agreement, to charge from time to time against any or
all of Borrower's accounts with Bank any amount so due.
<PAGE>
Whenever any payment to be made under the Credit Agreement or under this
Note shall be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall in such case by included in the computation of payment of interest.
All amounts payable under this Note are payable in lawful money of the
United States of America (in freely transferable United States dollars) in
immediately available funds at Bank's office at 611 West Sixth Street, Suite
3800, Los Angeles, California 90017 (unless and until notified otherwise by
Bank), free and clear of and without deduction for any and all present and
future taxes, levies, imposts, deductions, charges and withholdings, and all
liabilities with respect thereto.
This Note is the "Note" referred to in, and is entitled to the benefits of,
the Credit Agreement dated as of December 9, 1991 between Borrower and Bank (the
"Credit Agreement"), which making of the Loan by Bank to Borrower, and (ii)
contains provisions for acceleration of the maturity of the Loan and this
provisions of the Credit Agreement are incorporated herein by reference.
This Note shall be construed in accordance with and governed by the law of
the State of California without reference to the choice of law principles
thereof.
BORROWER:
YUASA-EXIDE, INC.
a CALIFORNIA corporation
----------
By: /s/ Bruce A. Smith
---------------------------
Name: BRUCE A. SMITH
-------------------------
Title: Treasurer
------------------------
By:
---------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
TERM LOAN AGREEMENT
This TERM LOAN AGREEMENT (this "Agreement) is made as of the 10th day of
November 1995, between YUASA-EXIDE, INC. (the "Borrower") and THE MITSUI TRUST &
BANKING CO., LTD. (together with its successors and assigns, the "Bank").
IN CONSIDERATION of the mutual promises and covenants contained in this
Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 As used herein, and unless otherwise defined herein, the following
terms have the following respective meanings:
"Accounting Terms" All accounting terms not specifically defined herein
----------------
shall be construed in accordance with generally accepted accounting principles
and all financial data, if any, submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
"Agreement" shall mean this Term Loan Agreement.
---------
"Applicable Law" shall mean all provisions of statutes, rules regulations,
--------------
ordinances, decrees and orders of governmental bodies or regulatory agencies
applicable to a Person and all orders and decrees of all courts and arbitrators
in proceedings or actions in which the person in question is a party.
"Business Day" shall mean any day excluding Saturday, Sunday or any day on
------------
which (i) banking institutions in New York City or (solely in connection with
matters relating to the London interbank market) London are authorized or
required by law or any governmental action to close, or (ii) substantially all
banking institutions in New York City or (solely in connection with matters
relating to the London interbank market) London are in fact closed.
"Default Rate" shall mean the rate or interest per annum as defined in
------------
Section 2.03(b).
"Dollars" or "U.S. $" shall mean lawful money of the United States of
-------------------
America in freely transferable form.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended, together with such regulations as may, from time to time, be
promulgated thereunder.
"Event of Default" is defined in Article VI.
----------------
<PAGE>
"Interest Payment Date" shall mean (i) the last Business Day of each
---------------------
Interest Period, (ii) the date of any prepayment (on the amount prepaid) and
(iii) at maturity (whether acceleration or otherwise) and, after such maturity,
on demand.
"Interest Period" shall mean one of period of one (1), two (2), three (3),
---------------
or six (6) month, the first of which shall begin on the day on which the loan is
made and succeeding of which shall commence on the last day of the immediately
preceding Interest Period, provided that:.
(x) any Interest Period which would otherwise end on a day which is
not a Business Day, unless such next succeeding Business Day falls in a
succeeding calendar month, in which case the Interest Period shall end of
the next preceding Business Day,
(y) the duration of the Interest Periods shall be selected by the
Borrower so that an Interest Period shall end in any event on each
Repayment Date, and
(z) notwithstanding the foregoing, each Interest Period shall end
when the Bank demands repayment of the applicable Loans.
and, each Interest Period applicable to the Loan shall be specified by the
Borrower in a notice to the Bank at least three (3) Business Days prior to the
commencement of such Interest Period.
"Lending Office" shall mean the Bank's New York Branch Office located at
--------------
One World Financial Center, 200 Liberty Street, 21st Floor, New York, New York
10281 or such other office of the Bank as the Bank shall specify from time to
time.
"LIBOR" shall mean, in respect of each Interest Period, the rate per
-----
annum quoted by Bank of Tokyo, London Branch at approximately 11:00 am. London
time, two (2) Business Days prior to the commencement of such Interest Period
for the offering by Bank of Tokyo, London Branch to leading banks in the London
interbank market of United States dollar deposits having a term comparable to
such Interest Period and in an amount comparable to the outstanding principal
amount of the Loan for which an interest rate is then being determined.
"Loan" shall mean the Loan made pursuant to Article II.
----
"Note" shall mean the promissory note made by the Borrower as provided in
----
Section 2.01 hereof and substantially in the form of Exhibit A hereof.
"Prime Rate" shall mean for each day the rate per annum announced from
----------
tine to time by the New York Branch of the Bank as its prime rate in effect for
such day.
"Repayment Dates or" Repayment Date" shall mean the dates of repayment of
--------------- --------------
the Loan as defined in Section 2.01 (b).
2
<PAGE>
ARTICLE II
LOAN
SECTION 2.01 Term Loan
---------
(a) Subject to the terms and conditions of this Agreement, the Bank hereby
agrees to make a loan (the "Loan") to the Borrower on November 10, 1995 in a
principal amount of Ten Million United States Dollars (US$10,000,000.00).
(b) The Borrower's obligation to pay the principal of and interest of the
Loan shall be evidenced by its promissory note (the "Note") in the form of
Exhibit A hereto, dated the date of the Loan and payable to the order of the
Bank. Unless accelerated in accordance with the provisions of Section 6.02
hereof, the principal amount of the Loan and the Note shall be paid in 10 equal
semi-annual installments of U.S. $1,000,000.00, and such installments shall be
payable on 10th day of May and November, starting as of May 10, 1998 and ending
as of November 10, 2002, (the "Repayment Dates", with the last Repayment Date
being called the "Maturity Date") and with the last such semi-annual installment
to equal the outstanding principal balance of the Loan. (Refer to the Payment
Schedule in the form of Exhibit B hereof.) All payments made hereunder by the
Borrower shall be made without counterclaim, deduction or offset in lawful money
of the United States of America to the Bank at its Lending Office in immediately
available funds by 3:00 p.m. (New York time) on the date or dates when due. If
any payment would otherwise be due hereunder on a day which is not a Business
Day, the due date of such payment shall be extended to the next succeeding
Business Day.
SECTION 2.02 Method of Borrowing The Borrower shall give to the Bank
-------------------
irrevocable written or telephonic (promptly to be confirmed in writing) notice
of its request for the making of the Loan by 11:00 am. (New York time) three (3)
Business Days prior to the date on which the Loan is to be made. Such notice
shall specify the date, the duration of the initial Interest Period therefore.
Not later than 1:00 p.m. (New York time) on the date so specified in such
notice, the Bank shall make available to the Borrower at the Lending Office, in
immediately available funds, the proceeds of the Loan.
SECTION 2.03 Interest
--------
(a) The Loan shall bear interest from the date made until due in
accordance with the provisions hereof and of the Note an a rate per annum equal
to the sum of BOT LIBOR Rate plus 0.375 p.a., for Interest Periods specified by
the Borrower from time to time.
(b) Any amount which is not paid when due hereunder or under the Note
shall (to the extent not prohibit by law) bear interest until paid in full at a
rate equal to the grater of (i) 2% above the Prime Rate or (ii) 2% above the
rate applicable to such amount immediately prior to its becoming due (the
"Default Rate").
3
<PAGE>
(c) Interest shall be calculated on the basis of a 360-day year for the
exact number of days elapsed (including the first day of any period, but
excluding the last) and shall be payable:
(i) on the Interest Payment Dates;
(ii) at the time of any payment of principal; and
(iii) in respect of interest accrued pursuant to Section 2.03 (b),
on the demand of the Bank.
(d) At any time the Loan is outstanding, upon the request of the Borrower,
the Bank shall provide the Borrower with a rate quote for an interest rate swap
transaction (the "Swap Transaction") between the Bank and the Borrower, in which
the Borrower may pay a fixed rate and receive a floating rate, and on the other
side the Bank may receive a fixed rate and pay a floating rate. The Swap
Transaction would be entered into pursuant to documentation in form and
substance, and containing terms and conditions satisfactory to the Bank and the
Borrower; provided that the basic condition for the Swap Transaction shall be as
follows:
(i) The notional principal amount shall be US$10,000,000.00. Such
notional amount shall be decreased by the principal
repayment of the Loan pursuant to Section 2.01 (b).
(ii) The term of the Swap Transaction shall be the same as the
remaining term of the Loan.
(iii) After the Swap Transaction is made, the Interest Period of the
Loan shall be each successive six (6) month period.
SECTION 2.04 Prepayment of the Loan
----------------------
(a) The Borrower shall have the right, upon not less than three (3)
Business Days prior irrevocable written notice (effective upon receipt) to
prepay the Loan in whole or in part without premium or penalty, provided,
however, that if in part, the prepayment must be in a minimum aggregate amount
of $1,000,000 or a greater multiple thereof, provided further, however, that the
-------- ------- -------
Borrower may prepay the Loan, in whole or in part, only on an Interest Payment
Date.
(b) All payments shall be accompanied by payment to the Bank of accrued
interest on the principal amount so prepaid to an including the date of such
prepayment. Prepayment shall only be permitted on an Interest Payment Date.
(c) Each partial prepayment shall be applied to the installments due on
the Repayment Dates in the inverse order of their maturity.
(d) Amounts prepaid may not be reborrowed hereunder.
4
<PAGE>
SECTION 2.05 Change in Circumstances Affection Loan. If, after the date
--------------------------------------
hereof, the introduction of, or any change in, any applicable law, rule or
regulation, or in the interpretation or administration thereof by any
governmental authority changes with the interpretation or administration
thereof, shall make it unlawful for the Bank to maintain or fund the Loan, the
Bank shall forthwith give notice thereof to the Borrower, and the Borrower shall
as promptly as possible repay in full the unpaid principal amount of the Loan,
together with accrued interest thereon to such date of repayment.
SECTION 2.06 Funding Indemnity. The Borrower hereby agrees to pay to the
-----------------
Bank on demand such amount or amounts as shall compensate the Bank for any loss,
cost or expense incurred by the Bank, as reasonably determined by the Bank, as a
result of(a) the failure to borrow a Loan pursuant to a notice given as set
forth in Section 2.02 hereof, (b) the failure of the Borrower to make any
prepayment after the Borrower has give notice requesting the same in accordance
with Section 2.04 (a) hereof, or (c) the making of a payment or prepayment of
the Loan on any day which is not the last day of an Interest Period with respect
thereto, which amount shall include, but not be limited to, expenses incurred by
the Bank in connection with the liquidating or redeploying deposits as
determined in good faith by the Bank, and an amount equal to the actual return
on funds so redeployed below the amount of interest and commission which would
have been earned thereon hereunder to the last day of such Interest Period or
such maturity date, as the case may be. The Bank shall provide the Borrower with
a detailed summary of the method by which it calculated the amount claimed from
the Borrower under this section, and provide the Borrower with an opportunity to
review such calculation.
SECTION 2.07 Use of Proceeds. The proceeds of the Loan shall be used by the
---------------
Borrower for operating funds.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01 Conditions Precedent to the Loan. The obligation of the Bank
--------------------------------
to make the Loan shall be subject to the Bank having received the following in
form and substance satisfactory to it:
(a) The Note duly executed by authorized signatories of the Borrower,
payable to the order of the Bank and dated the date on which the Loan is to be
made;
(b) Copies of all the proceedings taken by the Borrower to authorize the
execution an delivery of this Agreement and the Note including;
(i) a duly certified copy of the Corporate By-Laws of the Borrower
its Certificate and Article of Incorporation.
5
<PAGE>
(ii) a copy of this Agreement duly signed by authorized officers of
the Borrower;
SECTION 3.02 Additional Conditions Precedent to the Loan. The obligation
-------------------------------------------
of the Bank to make the Loan shall be subject to the further conditions
precedent that the Bank shall have received the following, and that the
statements therein shall be true and correct as of the date of such Loan:
(a) a certificate of the Borrower's Chief Financial Officer to the
effect that:
(i) the representations and warranties contained in Section 4.01
are true and correct on and as of such date as through made on and
as of such date; and
(ii) no event has occurred and is continuing, or would result from
the making of such Loan which constitutes, or would, with the
passage of time or notice or both, constitute an Event of Default,
and,
(iii) since March 31, 1995, there has been no material adverse
change in the financial condition, operations, business or business
prospects of the Borrower.
(b) All such other approvals, opinions or documents as the Bank may
reasonably request, certified by an appropriate governmental official or officer
of the Borrower, if so requested.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Borrower. The Borrower
----------------------------------------------
represents and warrants to the Bank as of the closing of the Loan, as follows:
(a) Organization, Incorporation. Etc. The Borrower is a corporation
--------------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of California and has all requisite power and authority to own its
property and assets and to carry on its business as it is presently being
conducted and as it intends to carry on. The Borrower is qualified to do
business and is in good standing in all states where the nature of the
Borrower's business and the ownership of its property require it to become so
qualified, and where the failure to be so qualified would have a material
adverse impact on the Borrower's ability to repay the Loan. Complete and correct
copies of the Borrower's Certificate and Articles of Incorporation and By Laws
and all amendments to these documents have been delivered to the Bank.
6
<PAGE>
(b) Authorization. The execution, delivery and performance
-------------
Borrower of this Agreement and the Note are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate action, and do not
contravene any law or regulation known to the Borrower or any contractual
restriction binding on or affecting the Borrower or its assets, and will not
result in the creation or imposition of any lien or encumbrance affecting the
assets of the Borrower.
(c) Compliance with Law. etc. of Agreement and Note: Approvals.
----------------------------------------------------------
(i) The execution, delivery and performance by the Borrower of this
Agreement and the Note and the Loan under this Agreement do not and
will not, to the Borrower's knowledge, (A) violate any Applicable
Law, or (B) conflict with, result in a breach of or constitute a
default under (x) the Certificate or Articles of Incorporation or By
Laws of the Borrower, (y) any statute, rule , governmental decree,
or resolution, or (z) any indenture, agreement, order, judgment,
contract, understanding or other instrument to which the Borrower is
a party or by which it or any of its property may be bound or
affected.
(ii) No license, permits, consents, orders, approvals or
authorizations by, or registrations, declarations, withholdings of
objection or filings with any governmental bodies, or regulatory,
banking or supervisory bodies, or any other Person are necessary or
appropriate in connection with the due execution, delivery and
performance by the Borrower of this Agreements.
(d) Binding Obligations. This Agreement has been duly executed and
-------------------
delivered by the duly authorized officers of the Borrower and is, and the Note
when executed and delivered hereunder will be, legal valid and binding
obligations of the Borrower, as the case may be, enforceable against the
Borrower as the case may be, in accordance with their respective terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganizations,
moratorium or other similar laws affecting the rights of creditors generally.
(e) Financial Statements. The financial statements which the Borrower
--------------------
has submitted to the Bank were prepared in accordance with generally accepted
accounting principles consistently applied and fully and fairly reflect the
financial condition of the Borrower at the dates thereof, and no material
adverse change in the financial condition, operations or business of the
Borrower has occurred since March 31, 1994.
(f) Litigation. Except as otherwise previously notified in writing to
----------
the Bank, there is no litigation or governmental proceeding pending, not to the
knowledge of Borrower threatened, against or in any other manner relating
adversely to the Borrower or any of the Borrower's property in court or before
any arbitrator of any kind or before any governmental body, which if adversely
determined would, singly or in the aggregate, have a material adverse effect on
the financial condition or properties, business or operations of the Borrower or
on the ability of the Borrower to perform its obligations under this Agreement.
7
<PAGE>
(g) Use of the Proceeds. The Borrower will use the proceeds of any Loan
-------------------
solely for the purpose set out in Section 2.07 or for such other purposes that
the Bank may approve in writing. In addition, the Borrower is not engaged
principally in, nor does it have as one of its important activities, the
business of extending credit for the purpose of "purchasing" or "carrying" any
"margin stock" (each within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Loan will be used to purchase or carry any margin stock or extend credit to
others for a purpose which violates Regulation U or Regulation X (of said Board
of Governors) or any other provision of law or governmental regulation.
(h) Compliance with Law. The Borrower is in substantial compliance with
-------------------
all Applicable Laws, non-compliance with which could, singularly or in the
aggregate, have a materially adverse effect on the ability of the Borrower to
perform its obligations under this Agreement or the Note.
(i) Filings. All filings, recordations, notifications, registrations,
-------
notarizations, authentications or other formalities necessary or appropriate to
be accomplished and all stamp or similar taxes or duties to be paid in
connection with the executive, delivery, validity and enforceability of the
Agreement, the Note and the Loan hereunder have been accomplished or paid.
(j) Absence of Default. The Borrower is in compliance with all of the
------------------
provisions of its Certificate of Incorporation and By Laws, and no event or
conditions has occurred, or failed to occur, which has not been remedied or
waive, the occurrence or nonoccurrence of which constitutes, or which with the
passage of time or giving of notice or both would constitute, a default by the
Borrower, under any indenture, lease, agreement or other instrument, or any
judgment, decree, resolution or order to which the Borrower or any of its
property may be bound or affected, which default could have a material adverse
effect on the ability of the Borrower to perform its obligations under this
Agreement or the Note.
(k) Material Obligations. The Borrower, is neither a party to nor bound
--------------------
by any loan or credit agreement, or any material franchise agreement, deed,
lease or other instrument, or subject to any Charter, By Laws or other corporate
restriction or judgment, decree or order of any court or governmental body which
may have a materially adverse effect on the ability of the Borrower to perform
its obligations under this Agreement or the Note.
(l) Accuracy and Completeness of Information. All information, reports and
----------------------------------------
other papers and data relating to the Borrower furnished to the Bank were, at
the time the same were so furnished, complete and correct in all material
respects to the extent necessary to give the Bank true and accurate knowledge of
the subject matter. No fact is currently known to the Borrower which materially
and adversely affects the business, assets, liabilities, financial position or
business prospects of the Borrower the ability of the Borrower to perform its
obligations under this Agreement or the Note which has not been set forth or
referred to herein or in such information, reports or other papers or data or
otherwise specifically disclosed in writing to the Bank.
8
<PAGE>
(m) ERISA. No "plan" (as such term is defined in Section 4021 (a) of
-----
"ERISA" of the Borrower or any of its Subsidiaries) has incurred an "accumulated
funding deficiency" for which any excise tax or penalty is due under the United
States Internal Revenue Code, no Reportable Event (as defined in ERISA) has
occurred an is continuing in respect of any such plan, and the Borrower and each
of its Subsidiaries are in compliance, in all material respects, with the
provisions of ERISA
(n) Subsidiary. The Borrower is a 86.5% owned subsidiary of Yuasa
----------
Corporation.
(o) Rank of the Loans. All obligations to pay the principal of and
-----------------
interest of the Loan and the Note and other charges made hereunder constitute
direct, unconditional and general obligations of the Borrower, and will rank
prior to or pari passu with all other foreign and domestic indebtedness for
----------
borrowed money of the Borrower.
SECTION 4.02 Survival of Representations and Warranties. All statements
------------------------------------------
contained in any certificate, financial statement, legal opinion or other
document delivered by or on behalf of the Borrower pursuant to or in connection
with this Agreement shall constitute representations and warranties made under
this Agreement. All representations and warranties made under this Agreement
shall survive, and not be waived by the execution and delivery of this
Agreement, any investigation by the Bank or the making of any Loan under this
Agreement.
ARTICLE V
AFFIRMATIVE COVENANTS OF THE BORROWER
From and after the date hereof and so long as the Loan or any amount
payable hereunder or under the Note is outstanding and unpaid or this Agreement
is in effect and unless the Bank shall otherwise consent in writing, the Bank
will require the Borrower's adherence to the following:
SECTION 5.01 Annual Financial Statement. The Borrower shall deliver to
--------------------------
the Bank:
(a) within 120 days after the end of each fiscal year of the Borrower,
deliver to the Bank consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at the end of such year consolidated and
consolidating statement of income and of sources and applications of funds of
the Borrower and its Subsidiaries for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and accompanied by the opinion thereof of independent public accountants
of recognized national standing, which opinion shall state that such balance
sheets, statements of income and statements of sources and uses of funds have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with that of the preceding position of the
Borrower as of their date, and that the audit by such accountants in connection
with such financial statements has been made in accordance with generally
accepted auditing standards; and,
9
<PAGE>
(b) permit representatives of the Bank during business hours and upon
reasonable notice to (i) visit and inspect the books, records and properties of
the Borrower and (ii) discuss with its principal and offices its affairs,
finances and accounts.
SECTION 5.02 Corporate Existence; Continuity of Operations. Maintain its
---------------------------------------------
corporate existence in good standing and comply with all laws, directives,
regulations or interpretations thereof which are or purport to be applicable to
it; conduct its business substantially as such business is now conducted; and
maintain its assets in good repair, working order and condition.
SECTION 5.03 Notice of Events.
----------------
(a) Upon the occurrence of an Event of Default, give written notice
thereof to the Bank, providing details of such occurrence and setting forth the
action it intends or proposes to take to remedy said Events of Default.
(b) Give prompt written notice to the Bank of(i) any substantial dispute
between the Borrower and any governmental authority with respect to taxes or any
other matter; (ii) any substantial dispute threatening the continued normal
business operations of the Borrower; (iii) any material loss or damage to
property resulting from any casualty; (iv) the commencement of any litigation
proceeding (whether by service of process or by attachment of any asset) which
could have a material adverse effect on the Borrower's business, operations,
properties, assets or condition (financial or otherwise); and (v) any other
material adverse change in the Borrower's consolidated financial condition or
operations.
SECTION 5.04 ERISA. Comply in all material respects with the provisions of
-----
ERISA with respect to each of its employee plans.
SECTION 5.05 Performance of Obligations; Taxes.
---------------------------------
(a) Pay all its indebtedness and perform all contractual obligations
promptly pursuant to agreements to which it is a party or by which it or any of
its properties or assets is bound at any time during the term of the Agreement.
(b) Pay, before any penalty attaches, all general taxes and all special
taxes, special assessments, water charges, drainage and sewer charges and all
other charges of any kind whatsoever, ordinary or extraordinary, which may be
levied, assessed, imposed or charged on or against the property and will, upon
written request, exhibit to the Bank official receipts evidencing such payments.
If the Borrower desires to contest any such tax or assessment, it shall do so in
a manner which prevents enforcement of any lien for taxes and shall deposit with
the Bank such security for the payment of the tax of the Bank may reasonably
require to assure payment of the matter under contest in the event of a
determination of the matter under contest adverse to Borrower.
10
<PAGE>
SECTION 5.06 Approvals. Obtain and promptly renew all consents, licenses
---------
and authorizations as may be required at any time hereunder or under any
applicable law to enable the Borrower to perform its obligations under this
Agreements and the Note or required for the validity or enforceability of this
Agreement and the Note, and the Borrower will comply with the terms of all
governmental consents in relation to the Agreement and the Note.
SECTION 5.07 Insurance. The Borrower will maintain insurance to such
---------
extent and covering such risks as is usual for companies engaged in the same or
similar businesses.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 Events of Default. The following shall constitute Events of
-----------------
Default (and, an "Event of Default") under this Agreement:
(a) The Borrower shall default in any payment when due of principal of the
Loan or the Note; or shall default in the payment of interest on the Loan or the
Note or any other amount payable under this Agreement or the Note;
(b) Any representation or warranty made by the Borrower under this
Agreement or any statement in any certificate or financial statement furnished
to the Bank shall prove incorrect, untrue or misleading in any material respect
when made or deemed made;
(c) The Borrower shall default in the performance or observance of any
covenant or agreement contained in this Agreement, and such default shall
continue for a period of ten (10) days after written notice thereof has been
given to the Borrower by the Bank requesting that the same be cured unless such
default cannot be cured within such ten (10) day period, in which event, to the
extent acceptable to the Bank, the Borrower shall have a reasonable amount of
time to cure such default and provided further that the Borrower promptly
commences such cure within that reasonable time period and continuously proceeds
with such cure in a diligent manner;
(d) The Borrower shall; (i) fail to pay any indebtedness (excluding
Indebtedness evidenced by the Note) of the Borrower in excess of $500,000.00 or
any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Indebtedness; or (ii) fail to perform any term,
covenant or condition on its part to be performed under any agreement or
instrument relating to any such indebtedness in excess of $500,000.00 when
required to be performed, and such failure shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such failure to perform is to accelerate, or permit the acceleration of the
maturity of such indebtedness in excess of $500,000.00; or any such indebtedness
in excess of $500,000.00 shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment) prior to
the stated maturity thereof; or
11
<PAGE>
(e) The Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee, intervenor, or liquidator of itself, or of any of its
property, (ii) be unable, or admit in writing its inability, to pay its debts as
they mature, (iii) make a general assignment for the benefit if its creditors,
(iv) be adjudicated a bankrupt or insolvent, or (v) file a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any insolvency law or any answer
admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding, or corporate action shall
be taken by it for the purpose of effecting any of the foregoing; or
(f) The commencement of a case or other proceeding, without the
application or consent of the Borrower, as appropriate, in any court of
competent jurisdiction, seeking the liquidation, reorganization, dissolution,
winding up or composition or readjustment of debts, of the Borrower, as
appropriate, the appointment of a trustee, receiver, custodian, liquidator or
the like for the Borrower, as appropriate or for all or any substantial part of
their respective assets, or any similar action with respect to the Borrower or
the Guarantor, as appropriate under any laws relating to bankruptcy, insolvency
reorganization, winding up or composition or readjustment of debts, and such
case or proceeding shall continue undismissed, or unstayed and in effect, or any
order for relief in respect of the Borrower as appropriate shall be entered in
an involuntary case under the Federal bankruptcy laws (as now or hereafter in
effect); or
(g) A final judgement or order for the payment of money in excess of
$500,000.00 not covered by insurance shall be rendered against the Borrower and
such judgment or order shall continue unsatisfied, or
(h) Any reportable event under ERISA shall have occurred and be continuing
for 15 days which the Bank in good faith determines constitutes grounds for the
imposition of liability in excess of $500,000.00 against the Borrower under Part
IV, Subtitle D or ERISA; or
(i) The Borrower shall cease to be a 51% owned Subsidiary of Yuasa
Corporation; or
(j) Any competent governmental authority takes (i) any action to condemn,
seize, requisition or otherwise appropriate any substantial portion of the
properties or assets of the Borrower (without payment of compensation), or (ii)
any action to dissolve, liquidate or terminate the existence of the Borrower or
to divest any material portion of its properties or assets.
SECTION 6.02 Remedies.
--------
(a) Upon the occurrence of:
(i) any Event of Default referred to in subsection 6.01(d), (e) or
(f), the Note, all interest thereon, and all other amounts payable under this
Agreement shall become forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrower; or
12
<PAGE>
(ii) any other Event of Default, the Bank may by written notice to
the Borrower declare the principal of and interest accrued on the Note and all
other amounts hereunder and under the Note to be, and the same shall become and
be, forthwith due and payable, without presentment, demand, protest or further
notice of any kinds, all of which are hereby expressly waived by the Borrower.
(b) The Borrower agrees to pay to the Bank on demand all reasonable costs
and expenses which the Bank may incur as a result of the occurrence of an Event
of Default or the failure of the Borrower to pay any amount when due hereunder
or under the Note.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Notices, Etc. Except as is otherwise provided in this
------------
Agreement, all notices and other communications provided hereunder shall be in
writing (including telefaxed communication) and mailed or telegraphed or
delivered, if to the Borrower, at its address at 2400 Bernville Road 19605-9607,
P.O. Box 14145, Reading, PA 19612-4145, Attention: Mr. Michael T. Philion, Vice
President, Finance & CFO or Mr. Patrick J. McClafferty, Treasurer; if to the
Bank at its address at One World Financial Center, 200 Liberty Street, 21st
Floor, New York, NY 10281, Attention: Mr. Masao Kambayashi, Vice President; or
as to each party, at such other address as shall be designated by such party in
a written notice to the other party. All such notices and communications shall
be effective when received by the party to whom sent.
SECTION 7.02 Survival. The representations and warranties of the Borrower
--------
contained herein shall survive the making of the Loan and, shall remain
effective until all obligations of the Borrower hereunder, and under the Note
shall have been paid by Borrower in full.
SECTION 7.03 Amendments and Waivers. The provisions of this Agreement and
----------------------
the Note may be amended or modified, or the provisions of either waived only by
an instrument in writing signed by the Borrower and the Bank.
SECTION 7.04 Entire Agreement. This Agreement and the documents referred
----------------
to herein embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings relating to the
subject matter hereof.
SECTION 7.05 No Waiver. No Failure to exercise, and no delay in exercising
---------
any right, power or remedy hereunder, under the Note, or under any other
document delivered pursuant hereto shall impair any right, power or remedy which
the Bank may have, nor shall any such delay be construed to be a waiver of any
such right, power or remedy, or an acquiescence in any breach or default under
this Agreement or the Note or under any other document delivered pursuant
hereto, nor shall any waiver by the Bank of any breach or default hereunder be
deemed a waiver of any default or breach subsequently occurring. The rights and
remedies herein specified are cumulative and not exclusive of any rights or
remedies which the Bank would otherwise have.
13
<PAGE>
SECTION 7.06 Separability of Provisions. In case one or more of the
--------------------------
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
SECTION 7.07 Binding Effect; Assignment. All the provisions of this
--------------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns when it shall have been executed by
the Borrower and the Bank. The Borrower shall not have the right to assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Bank.
SECTION 7.08 Governing Law; Submission to Jurisdiction.
-----------------------------------------
(a) THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE
NOTE OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS
FOR ITSELF AND IN RESPECT FOR ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS.
(c) THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING, (I) ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS, (II) THE RIGHT TO
INTERPOSE ANY SETOFF, NON-COMPULSORY COUNTERCLAIM OR CROSS-CLAIM AND (III) TRIAL
BY JURY.
(d) THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER
AT ITS ADDRESS SET FORTH IN SECTION 7.01 HEREOF. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY
OTHER JURISDICTION.
14
<PAGE>
SECTION 7.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or caused
it to be executed by their duly authorized officers, as of the date first above
written.
YUASA-EXIDE, INC.
By /s/ Michael T. Philion
-------------------------
Name MICHAEL T. PHILION
-----------------------
Title V.P. OF FINANCE
----------------------
THE MITSUI TRUST & BANKING
COMPANY LIMITED
NEW YORK BRANCH
By /s/ Tadanori Minegishi
--------------------------
Name: Tadanori Minegishi
Title: Senior Vice President & Manager
15
<PAGE>
EXHIBIT A
PROMISSORY NOTE
---------------
US$10,000,000.00
Dated: November 10, 1995
FOR VALUE RECEIVED, the undersigned, YUASA-EXIDE, INC. a California
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of THE MITSUI
TRUST & BANKING CO., LTD. (the "Bank") the principal sum of Ten Million Dollars
($10,000,000.00), or such lesser outstanding amount which the Bank shall have
advanced to the Borrower as the Loan, in immediately available funds, in
consecutive 10 equal semi-annual installments of $1,000,000.00 on the Repayment
Dates (the 10th day of May and November, commencing May 10, 1998), and to pay
interest from the date hereof on said principal sum or the unpaid balance
hereof, in like money and funds, at the rates and at the times specified in the
Credit Agreement (as hereinafter defined), provided that any amount which is not
paid when due hereunder shall bear interest (to the extent not prohibited by
law) until paid in full, payable on demand, at a rate per annum equal to the
higher of (i) the Prime Rate plus 2% or (ii) 2% above the rate applicable to
such amount immediately prior to its becoming due. Interest shall be computed
on the basis of a year of 360 days for the actual number of days elapsed.
Both principal and interest are payable in lawful money of the United
States of America to the office of the Bank located at One World Financial
Center, 200 Liberty Street, 21st Floor, New York, New York 10281 (or any
successor office notified to the Borrower by the Bank).
This Promissory Note is the Note referred to in, and is entitled to the
benefits of, the Term Loan Agreement dated as of November 10, 1995, (the "Credit
Agreement") between the Borrower and the Bank, which Credit Agreement, among
other things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
the principal hereof prior to the maturity hereof upon the terms and conditions
therein specified. Terms defined in the Credit Agreement and used herein shall
have their respectively defined meanings herein unless the contrary is expressly
indicated.
The Borrower hereby waives presentment, demand, protest or notice of any
kind with respect to this Note.
<PAGE>
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
YUASA-EXIDE, INC.
By /s/ Michael T. Philion
-----------------------
Name MICHAEL T. PHILION
---------------------
Title V.P. OF FINANCE
--------------------
<PAGE>
EXHIBIT B
REPAYMENT SCHEDULE
------------------
Repayment Date Repayment Date
-------------- --------------
1. May 10, 1998 $1,000,000.00
2. November 10, 1998 $1,000,000.00
3. May 10, 1999 $1,000,000.00
4. November 10, 1998 $1,000,000.00
5. May 10, 2000 $1,000,000.00
6. November 10, 2000 $1,000,000.00
7. May 10, 2001 $1,000,000.00
8. November 10, 2001 $1,000,000.00
9. May 10, 2002 $1,000,000.00
10. November 10, 2002 $1,000,000.00
---------------------------------------
Total $10,000,000.00
<PAGE>
Exhibit 10.8
TRADEMARK AND TRADE NAME LICENSE AGREEMENT
------------------------------------------
This Trademark and Trade Name License Agreement (the "Trademark License")
is made this 10th day of June, 1991, by and between Exide Corporation, a
Delaware corporation (the "Licensor"), and Yuasa Battery (America), Inc., a
California corporation (the "Licensee").
WHEREAS, Licensor has used the trade name "EXIDE" (the "Licenses Trade
Name") and used and registered the trademarks (the "Licensed Marks") listed on
Schedule 9.5 attached hereto; and
WHEREAS, pursuant to that certain Asset Purchase Agreement dated June 10,
1991, between Licensor and Licensee (the "Asset Purchase Agreement"), Licensor
has agreed to grant to Licensee the right to use the Licensed Trade Name and the
Licensed Marks within the scope of Licensed Business (as defined herein);
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. DEFINITIONS
-----------
Terms used herein with initial capital letters, if not defined herein,
shall have the meanings set forth in the Asset Purchase Agreement.
<PAGE>
A. "Products" shall mean any batteries, battery products or battery
chargers for any and all industrial battery uses including, without limitation,
electric vehicle batteries (other than golf cart batteries manufactured at the
plant in Sumter, South Carolina), but excluding automotive, motorcycle, garden
tractor and marine use SLI batteries and battery products.
B. "Licensed Business" shall mean the design, research and development,
manufacture, marketing, sale and distribution of (i) Products manufactured by
Licensee as a result of the foregoing activities, to the extent such activities
were conducted by Licensor immediately prior to the Closing; (ii) Products
derived directly from research and development acquired from Licensor at the
Closing; and (iii) Products developed directly from the Products described in
Sub-clauses (i) and (ii).
2. GRANT
-----
Licensor hereby grants to Licensee, and Licensee hereby accepts from
Licensor, pursuant to the terms and conditions of this Trademark License, a
perpetual, exclusive, world-wide, royalty-free license to use the Licensed Trade
Name as a corporate name or trade name within the scope of the Licensed
Business, and a non-exclusive, perpetual, world-wide, royalty-free license to
use Licensed Trade Name in connection with the motorcycle battery business, but
only as part of the trade name or corporate name "Yuasa-Exide, Inc." While
retaining the corporate name "Yuasa-Exide, Inc.", Licensee may sell products in
businesses other than the Licensed Business and the motorcycle battery business
but Licensee shall not sell such products under
-2-
<PAGE>
the Licensed Trade Name and shall sell such products under an assumed name,
fictitious name or through some other mechanism whereby the Licensed Trade Name
is not used before the public or trade in relation to such products.
Licensor hereby grants to Licensee, and Licensee hereby accepts from
Licensor, pursuant to the terms and conditions of this Trademark License, a
perpetual, exclusive, world-wide royalty-free license to use the Licensed Marks
within the scope of the Licensed Business on and in connection with the goods
for which such Licensed Marks are registered or as otherwise permitted under
applicable law within the scope of the Licensed Business, together with the
right to sublicense such right as set forth herein.
The rights granted to Licensee herein are subject to any rights to the
Licensed Trade Name or the Licensed Marks granted by Licensor or its
predecessors before the execution of this Trademark License. Licensor
represents to Licensee that to Licensor's Best Knowledge, any such third party
rights have been disclosed to Licensee in connection with the Asset Purchase
Agreement or on the Schedule hereto. The rights granted herein are further
limited to only those goods and territories in which Licensor has rights to the
Licensed Trade Name and the Licensed Marks as of the date of execution of this
Trademark License. During the term of this Trademark License, Licensor will not
grant any third party any new license which would be inconsistent with
Licensee's exercise of its rights hereunder. Licensee shall provide such
assistance as Licensor may reasonably request to
-3-
<PAGE>
fulfill Licensor's obligations under agreements with third parties which relate
to the Licensed Trade Name or the Licensed Mark.
3. FUTURE ACQUISITION OF RIGHTS
----------------------------
In those jurisdictions wherein Licensor does not have legal ownership or
control of the marks "EXIDE" and "WILLARD" as of the effective date of this
Trademark License, Licensee shall be free to take all necessary steps and action
to effect the acquisition of legal ownership or control of such marks for itself
within the scope of the Licensed Business and Licensor agrees to assist in, at
Licensee's expense, and not oppose any such steps or action by Licensee.
In turn, Licensee will not oppose any steps or action of Licensor to effect
the acquisition of legal ownership or control of such marks for itself outside
the scope of the Licensed Business and Licensee agrees to assist in, at
Licensor's expense, and not oppose any such steps or action by Licensor.
In the event that either party hereto effects the acquisition of legal
ownership or control of such marks under the provisions of this Paragraph 3,
such party shall, at the other party's request, grant to the other party
a license or other document necessary to allow such party to use such acquired
mark in a manner consistent with the terms and conditions set forth in this
Trademark License. Each of the parties acknowledges that in acquiring rights to
such marks, it may be unable to limit the scope of the rights acquired to the
Licensed Business, in the case of Licensee's acquisition, or outside the scope
of the
-4-
<PAGE>
Licensed Business, in the case of Licensor's acquisition, but that each party
will only use such acquired rights in a manner consistent with this Trademark
License.
4. NEW USES OF THE NAME
--------------------
Licensee shall submit any proposed new uses of the Licensed Trade name
to Licensor for its approval, which approval shall be obtained in writing before
each such proposed new use is commenced; provided, however, that Licensor shall
not unreasonably withhold its approval.
5. QUALITY STANDARDS
-----------------
Licensee shall maintain the standards of quality set by Licensor for
the conduct of the Licensed Business under the Licensed Trade Name and the goods
bearing the Licensed Marks which Licensor established prior to the execution of
this Trademark License (the "Quality Standards").
Licensee agrees to furnish to Licensor, upon Licensor's request,
representative samples of all labels, advertising materials and other associated
materials used in the sale, offering for sale, or marketing of goods bearing the
Licensed Trade Name or Licensed Marks to enable Licensor to confirm that the
labeling and advertising meet the Quality Standards.
6. INDEMNIFICATION
---------------
A. Licensee hereby indemnifies Licensor and undertakes to defend
itself against, and to hold Licensor harmless from any claims, suits, losses or
damages arising out of any use of the Licensed Trade Name or the Licensed Marks
outside the scope of the licenses granted pursuant to the terms of this
-5-
<PAGE>
Trademark License or arising out of any alleged defects in products of the
Licensee marketed and sold in connection with the Licensed Trade Name or
Licensed Marks.
B. In the event that any other claim or suit arising out of use of the
Licensed Trade Name or the Licensed Marks by Licensee within the scope of the
licenses granted pursuant to the terms of this Trademark License (an "Authorized
Use Claim") is made or filed against Licensee or Licensor but not against the
other party, then the defending party shall not take any steps to include or
have included the other party in such claim or suit or to seek indemnity from
such other party, provided that such other party shall provide the defending
party with reasonable assistance in the defense of such claim or suit at the
defending party's expense.
C. In the event that any Authorized Use Claim is made against both
Licensor and Licensee, then each party shall defend itself without seeking
indemnity from the other (except in relation to damages paid on the other's
behalf) but each shall provide the other with reasonable assistance in such
defense at the other party's expense.
D. The provisions of this Paragraph 6 shall survive any termination of
this Trademark License.
7. TRADEMARK NOTICE
----------------
Licensee shall label all goods sold in connection with the Licensed Marks
in accordance with Licensor's reasonable instructions as they relate to
trademark notices or legends.
-6-
<PAGE>
8. TERMINATION
-----------
Licensor shall have the right to terminate this Trademark License if (a)
products covered hereunder and sold by Licensee in connection with the Licensed
Marks fail to meet the Quality Standards, or (b) Licensee uses, assigns or
sublicenses its rights under the Licensed Trade Name or the Licensed Marks
outside the scope of the Licensed Business and, in either such case, reasonable
measures are not initiated to cure such failure or improper use within ninety
(90) days after written notice from Licensor. Upon termination of this Trademark
License, Licensee and its sublicensees shall, within a reasonable period of time
not to exceed two (2) years, discontinue all use of the Licensed Marks and
Licensee shall discontinue all use of the Licensed Trade Name and shall cancel
all filings or registrations made pursuant to Paragraph 10 hereof and change its
corporate or trade name registrations, if any, to exclude the Licensed Trade
Name; provided, however, that it any failure to meet Quality Standards or
improper use of, or assignment or sublicense of rights under, the Licensed Trade
Name or Licensed Marks occurs in any jurisdiction other than the United States
and is not remedied as permitted hereunder, this Trademark License will
terminate only with respect to the jurisdiction in which such failure or
improper use occurred.
In the event of receivership or bankruptcy of Licensee, the licenses
granted herein shall terminate immediately.
-7-
<PAGE>
9. VALIDITY OF AND RIGHTS IN MARKS
-------------------------------
Licensee shall acquire no right, title or interest with respect to the
Licensed Marks or the Licensed Trade Name as a result of Licensee's use thereof
in commerce or otherwise and Licensee acknowledges and agrees that all rights in
and to the Licensed Marks and the Licensed Trade Name and the good will
pertaining thereto belong exclusively to, and shall inure to the benefit of,
Licensor; provided, however, that the license of the marks "EXIDE-IRONCLAD" and
"IRONCLAD-EXIDE" by Licensor under this Trademark License is without prejudice
to Licensee's exclusive ownership of rights in and to the mark "IRONCLAD"
separate from the mark "EXIDE."
Licensee agrees not to raise or cause to be raised any questions concerning
or objections to the validity of the Licensed Marks or the Licensed Trade Name
or to the right of the Licensor thereto, on any grounds whatsoever.
10. REGISTRATION; REGISTERED USER AGREEMENTS
----------------------------------------
Licensee agrees that it will make no application for or otherwise attempt
to register the Licensed Marks or the Licensed Trade Name in the United States
Patent and Trademark Office or in a similar agency or office in any foreign
country or in any state, except where Licensee is required by law to register a
mark (even as a licensee) or pursuant to Paragraphs 3 or 12 of this Trademark
License. In those countries which require registration of the use of trademarks
under license, Licensee shall execute and obtain registered user agreements to
properly record in such country Licensor as the owner of the Licensed
-8-
<PAGE>
Marks and Licensor shall provide, at Licensee's expense, reasonable cooperation
in connection with such recordation.
11. TRANSFERABILITY
---------------
This Trademark License shall be assignable by Licensee with Licensor's
consent and Licensee shall have the right to grant sublicenses of the Licensed
Marks within the scope of the Licensed Business. Licensee will ensure that any
sublicensee of the Licensed Marks will adhere to terms and conditions similar to
those contained in this Trademark License. The Licensed Marks and Licensed
Trade Name shall be assignable by Licensor in which event Licensor shall require
that the assignee assume the obligations of Licensor under this Trademark
License.
12. WARRANTY
--------
Licensor represents and warrants that to its Best Knowledge, except as
disclosed in connection with the Asset Purchase Agreement or as set forth on the
Schedule hereto, Licensor has good title to the Licensed Trade Name and the
Licensed Marks. Licensor further represents and warrants that to its Best
Knowledge, subject to any rights to the Licensed Trade Name and the Licensed
Marks granted by Licensor or its predecessors prior to the date hereof, and
subject to other disclosures made in connection with the Asset Purchase
Agreement or on the Schedule hereto, the use of the Licensed Trade Name and the
Licensed Marks as licensed pursuant to the terms of this Trademark License does
not infringe any third party's rights.
Licensor otherwise makes no other representation or warranty to Licensee
with respect to the title or validity of the
-9-
<PAGE>
Licensed Trade Name or the Licensed Marks or that the use of the Licensed Trade
Name or the Licensed Marks by Licensee will not infringe any third party's
rights.
Licensor shall maintain the Licensed Marks in accordance with Licensor's
usual and customary business practices. In the event that Licensor intends in
good faith to cease payment of maintenance fees for or otherwise allow to lapse
any of the Licensed Marks in a particular country, Licensor will notify Licensee
of its intention to take such action at least one hundred twenty (120) days in
advance so that, except in the case where Licensor intends to refile an
application to register such Licensed Mark covering goods within the scope of
the Licensed Business, Licensee may, at Licensee's option (a) require Licensor
to assign to Licensee, to the extent possible by Licensor and at Licensee's
expense, all right, title and interest in and to any such Licensed Mark in such
country, or (b) pay the maintenance fees, and Licensor agrees to provide all
reasonable cooperation in connection therewith at Licensee's expense.
In the case where Licensor intends in good faith to refile a registration
application, but does not intend that such application cover goods within the
scope of the Licensed Business, then, at Licensee's expense, the parties shall
take such steps as may be possible and reasonable to file and prosecute such
registration application in either Licensor's or Licensee's name, as the case
may be, covering goods within the scope of the Licensed Business.
-10-
<PAGE>
13. NO AGENCY
---------
Nothing herein shall be construed to create any relationship of agent and
principal, partnership or joint venture between the parties. Neither party shall
have the authority to bind or obligate or represent that it has authority to
bind or obligate the other party.
14. SEVERABILITY
------------
The provisions of this Trademark License shall be severable and if any
provision of this Trademark License is declared or held to be illegal, invalid
or unenforceable, such illegality, invalidity or unenforceability shall not
affect any other provision hereof, and the remainder of this Trademark License
shall continue in full force and effect as though such illegal, invalid or
unenforceable provision had not been contained herein.
15. ENTIRE AGREEMENT
----------------
This Trademark License, the Asset Purchase Agreement and the Schedules
attached hereto and thereto contain and constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and supersede and
cancel any and all previous written or oral understandings, agreements and any
other writings or communications with respect thereto. This Trademark License
may not be released, discharged, abandoned, changed or modified in any manner
except by an instrument in writing signed by a duly authorized representative of
each of the parties hereto.
-11-
<PAGE>
16. GOVERNING LAW
-------------
This Trademark License will be governed by, and construed and interpreted
in accordance with, the internal laws of the State of New York, without giving
effect to the principles of conflicts of law applied thereby.
17. PROSECUTION OF INFRINGERS
-------------------------
Licensee agrees to cooperate with Licensor in the prosecution or defense of
any proceeding concerning the Licensed Trade Name or the Licensed Marks and
Licensor, at the request and expense of Licensee, agrees to prosecute all
substantial claims of infringement and to oppose all attempted registrations of
potentially confusingly similar trademarks, trade names or service marks used in
the field of the Licensed Business.
18. ARBITRATION
-----------
The parties shall submit any controversy, claim or dispute under this
Trademark License to arbitration as provided for in the Asset Purchase
Agreement.
* * *
IN WITNESS WHEREOF, the parties have executed this Trademark and Trade Name
License Agreement as of the day and year first written above.
EXIDE CORPORATION YUASA BATTERY (AMERICA), INC.
By:/s/ [SIGNATURE APPEARS HERE] By:/s/ [SIGNATURE APPEARS HERE]
---------------------------- ------------------------------
Title: Title:
------------------------- ---------------------------
-12-
<PAGE>
Yuasa Battery Co., Ltd., a corporation organized and existing under the
laws of Japan, executes and joins in this Trademark and Trade Name License
Agreement soley for the purpose of securing the compliance of Licensee with the
provisions of Paragraph 8 of this Trademark and Trade Name License Agreement.
YUASA BATTERY CO., LTD.
By: [SIGNATURE APPEARS HERE]
--------------------------
Title:
-----------------------
-13-
<PAGE>
SCHEDULE OF EXCEPTIONS
----------------------
to the
Trademark and Trade Name License Agreement
dated June 10, 1991
by and between
Exide Corporation
and
Yuasa Battery (America), Inc.
1. Exide Electronics Corporation has certain rights pursuant to that certain
Agreement by and between Exide Corporation and Exide Electronics
Corporation, a Delaware corporation, effective as of July 1, 1982.
2. Chloride, Ltd. ("Chloride") has certain rights pursuant to that certain
Agreement dated July 9, 1949, between The Electric Storage Battery Company
and The Chloride Electrical Storage Company, Limited. In addition,
Chloride has independent rights to the Licensed Trade Name and the
trademark "EXIDE" in a number of countries.
Chloride and others have filed various cancellation and opposition
proceedings throughout the world, including Colombia, relating the Licensed
Trade Name and the trademark "EXIDE." Such third parties may have rights
in the Licensed Trade Name and the trademark "EXIDE."
3. See generally, the intellectual property contracts listed on Schedules
5.6(b) and 5.22(b) of the Asset Purchase Agreement.
4. Seller may be subject to certain restrictions relating to conducting
business in Brazil.
5. The chain of title of certain or all of the Licensed Marks is not current.
6. The renewal status of certain of the Licensed Marks is not known.
7. The Licensed Trade Name and certain or all of the Licensed Marks are
encumbered by security interests in favor of Chemical Bank, a New York
banking corporation.
-14-
<PAGE>
8. The Licensed Trade Name and certain or all of the Licensed Marks are
encumbered by a security interest in favor of Citicorp Industrial Credit.
9. Licensor has granted certain exclusive rights to use the Licensed Trade
Name and the Licensed Marks in certain countries in fields outside the
Licensed Business. Certain of such arrangements may restrict the rights of
Licensor hereunder.
10. The Licensed Trade Name and certain or all of the Licensed Marks are
encumbered by a security interest in favor of the National Bank of Canada
and Congress Financial Corporation.
-15-
<PAGE>
SCHEDULE 9.5
(Licensed Marks Schedule)
to Asset Purchase Agreement by and between
Exide Corporation
and
Yuasa Battery (America), Inc.
dated June 10, 1991
Application or
Mark Registration No. Country
- ---- ---------------- -------
Exide 36507 Algeria
Exide 32760 Algeria
Exide 159203 Angola
Ironclad-Exide 159202 Angola
Willard 134687 Angola
Exide 1121097 Argentina
Exide 1200102 Argentina
Exide 1200103 Argentina
Willard 952959 Argentina
Willard A33194 Australia
Exide 13592 Austria
Exide-Ironclad 13590 Austria
Willard 48134 Austria
Exide TM5947 Bahrain
Willard 10977 Bangladesh
Willard 6820 Bangladesh
Exide 1283 Barbados
Exide 62674 Benelux
Exide 317573 Benelux
Ironclad-Exide 62669 Benelux
Willard 62696 Benelux
Exide C-24S7YA-25832 Bolivia
Willard in Panel C-4400YA-27472 Bolivia
Willard 475/23 Bophuthatswana
Willard 437/51 Bophuthatswana
Exide 002543192 Brazil
Exide 002554771 Brazil
Exide 002621177 Brazil
Exide (Special Form) 810025990 Brazil
Exide-Ironclad 00259730B Brazil
Exide-Ironclad 002554887 Brazil
Exide-Ironclad 002563797 Brazil
Willard 810025957 Brazil
Exide 1032 Bulgaria
Exide 14677 Bulgaria
Exide 220,662 Canada
Exide (Stylized) 41/9847 Canada
Hybernator 237,977 Canada
Willard 193,812 Canada
Willard 259/55673 Canada
Exide 159/203 Cape Verde
Willard 134,687 Cape Verde
Exide 225,245 Chile
Exide 283,115 Chile
Willard 272,276 Chile
Exide 153,599 China
Willard 153,597 China
<PAGE>
Schedule 9.5 (Cont'd.) -Page 2-
----------------------
Application or
Mark Registration No. Country
- ---- ---------------- -------
Exide 6740 Colombia
Willard 32895 Colombia
Exide 4753/9484 Costa Rica
Exide 52756 Cuba
Willard 94034 Cuba
Exide 101,900 Czechoslovakia
Willard 89041 Czechoslovakia
Exide 2054/1987 Denmark
Exide 28/1929 Denmark
Ironclad-Exide 833/1919 Denmark
Willard 515/1962 Denmark
Exide 3009 Dominican Rep.
Willard 9037 Dominican Rep.
Exide 418/51 Ecuador
Willard 244/60 Ecuador
Exide 18584 Egypt
Exide 1090 Egypt
Exide-Ironclad 18585 Egypt
Exide-Ironclad 6615 Egypt
Willard 26559 Egypt
Exide 2953 El Salvador
Exide 3144 Ethiopia
Exide 22261 Finland
Exide 1,583,153 France
Exide 1,228,282 France
Ironclad-Exide 1,529,614 France
Exide 77,961 Greece
Exide 16,203 Greece
Willard 29,727 Greece
Exide 3,954 Guatemala
Willard 2130/47 Guinea
Exide 159,203 Guinea Bissau
Willard in Panel 175 Guyana
Exide 484REG67 Haiti
Exide 2233 Honduras
Exide 76494/120114 Hungary
Exide 123835 Hungary
Exide 84/1951 Iceland
Willard 136/1963 Iceland
Exide 185,179 Indonesia
Exide 699 Iran
Willard 48,793 Ireland
Exide Ap. 71672 Israel
Exide 459,609 Italy
Exide 460,540 Italy
Ironclad-Exide 460,541 Italy
Willard 314,953 Italy
<PAGE>
Schedule 9.5 (Cont'd.) -Page 3-
----------------------
Application or
Mark Registration No. Country
- ---- ---------------- -------
Willard (& Des.) 459,535 Italy
Exide 3093 Jamaica
Exide 2,290,488 Japan
Exide Logo 2272629 Japan
Willard 2259036 Japan
Exide 1583 Jordan
Willard 9239 Jordan
Exide 7538 Korea
Willard 7581 Korea
Exide 3154 Kuwait
Willard 3153 Kuwait
Exide 33812 Lebanon
Exide 38412 Lebanon
Willard 45149 Lebanon
Exide 159203 Macao
Ironclad-Exide Ap. #10.478J Macao
Willard 134687 Macao
Willard 1912/59 Malawi
Willard M/B1421 Malaya
Willard 5933 Mali
Exide 31116 Mexico
Exide 23028 Morocco
Willard 23074 Morocco
Exide 159203 Mozambique
Willard 134687 Mozambique
Exide 1282 Nether Antilles
Willard 3828 Nether Antilles
Willard 19228 New Zealand
Exide 6680B Nicaragua
Willard 11145 Nicaragua
Willard 15385 Nigeria
Exide 36886 Norway
Exide-Ironclad 36889 Norway
Willard 47379 Norway
Exide Ap. #3041 Oman
Willard Ap. #3042 Oman
Willard 46046 Pakistan
Willard 2318 Pakistan
Exide 3499 Panama
<PAGE>
Schedule 9.5 (Cont'd) -Page 4-
---------------------
Application or
Mark Registration No. Country
- ---- ---------------- -------
Willard 7881 Panama
Willard A 5777 R Papua New Guinea
Exide 107553 Paraguay
Willard 103411 Paraguay
Willard 104284 Paraguay
Exide 15120 Peru
Willard 24987 Peru
Exide 3189 Philippines
Exide 34442 Poland
Exide-Ironclad 34441 Poland
Exide 159203 Portugal
Ironclad-Exide Ap. #267.969Y Portugal
Willard 134687 Portugal
Exide 749 Puerto Rico
Willard 11174 Puerto Rico
Exide 2526 Ras Al-Khaimah
Willard 2532 Ras Al-Khaimah
Willard 437/51 Rep. of S. Africa
Willard 475/23 Rep. of S. Africa
Exide 2R 1442 Roumania
Willard In Panel 2R 42 Roumania
Exide 159203 Saotome Island
Willard 134687 Saotome Island
Exide 5/45 Saudi Arabia
Willard 5/46 Saudi Arabia
Willard B 1421 Singapore
Exide 35902 Spain
Exide 1095706 Spain
Ironclad-Exide 1095705 Spain
Willard 45847 Spain
Willard (& Des.) 2447 Sri Lanka
Exide 7274 Surinam
Willard 2698 Surinam
Exide 65376 Sweden
Exide-Ironclad 65377 Sweden
Exide 368851 Switzerland
Willard 311446 Switzerland
Exide 5311 Syria
Exide 6371 Syria
Willard 7090 Syria
Exide 3183 Taiwan
Willard 293,303 Taiwan
Exide 7553 Tangiers
Willard 3868 Tangiers
Exide 17184/11368 Thailand
Willard 132572 Thailand
<PAGE>
Schedule 9.5 (Cont'd) -Page 5-
---------------------
Application or
Mark Registration No. Country
- ---- ---------------- -------
Willard 50272/31699 Thailand
Exide 159203 Timor
Willard 134687 Timor
Willard 475/23 Transkei
Willard 437/51 Transkei
Exide 12 Trinidad & Tobago
Exide 79366 Turkey
Willard B 524159 United Kingdom
Exide 206627 Uruguay
Willard 201780 Uruguay
Exide 5285 U.S.S.R.
Willard 437/51 Venda
Willard 475/23 Venda
Exide 26696 Venezuela
Willard 29458 Venezuela
Exide *13314 Viet Nam
Exide 343459 West Germany
Ironclad-Exide 406554 West Germany
Willard 1081530 West Germany
Exide Ap. #1815 Yemen Arab Rep.
Exide 11877 Yugoslavia
Exide 16291 Yugoslavia
Willard 16290 Yugoslavia
Exide 579/B Zaire
Willard 1912/59 Zambia
* New appln. filed; this number can't be renewed.
<PAGE>
Schedule 9.5 (Cont'd) -Page 6-
---------------------
Application or
Mark Registration No. Country
- ---- ---------------- -------
ESB 729,379 U.S.
ESB (& Des.) 730,323 U.S.
Exide 298,776 U.S.
Exide 973,740 U.S.
Exide 986,660 U.S.
Exide 986,811 U.S.
Exide (Stylized) Ap. 74/026356 U.S.
Exide (Stylized) 1,545,246 U.S.
Exide-Ironclad 321,694 U.S.
GBC 833,610 U.S.
Liberator 983,193 U.S.
Oasis 939,660 U.S.
Titan 404,261 U.S.
Titan 835,007 U.S.
Willard 502,333 U.S.
Liberator 354,401 Banelux
GBC Titan Ever Ful 278,151 Canada
Libarateur 228,575 Canada
Liberator 216,430 Canada
Liberator 1,486,279 France
Liberator 988,648 West Germany
Unregistered Marks
------------------
Application or
Mark Registration No. Country
- ---- ---------------- -------
Exide (None) United Arab
No Trademark Emirates
Laws - Covered
by Cautionary
Notice
Exide (None) United Arab
No Trademark Emirates
Laws - Covered
by Cautionary
Notice
<PAGE>
Exhibit 21
Subsidiaries
------------
Jurisdiction of
---------------
Subsidiary Organization
- ---------- -------------
Yuasa-Exide, Inc. (d/b/a Yuasa, Inc.) Delaware
YEFCO, Inc. Delaware
YESCO, Inc. Nevada
YERMCO, Inc. Delaware
Yuasa-Exide (Canada), Inc. Canada
Yuasa-Exide de Mexico S.A. de. C.V. Mexico
H&R Metal Products, Inc. Pennsylvania
(d/b/a Sumter Metal Products)
Hertner, Inc. California
Tucker Telecommunications, Inc. Texas
Yuasa-Exide Argentina, A.S. Argentina
Yuasa-GBC, Inc. Pennsylvania
Yuasa Network System, Inc. Pennsylvania
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of Amendment
No. 2 to the Registration Statement on Form S-1 of our report dated May 27,
1997, except for Note 16, which is as of March 26, 1998, relating to the
consolidated financial statements of Yuasa, Inc., which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedule for the two years ended March 31, 1997, listed under Item
16(b) of this Registration Statement when the schedule is read in conjunction
with the financial statements referred to in our report. The audits referred to
in such report also included this schedule. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Philadelphia, PA
May 20, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated May 6, 1998, in Amendment No. 2 to the Registration
Statement (Form S-1 No. 333-48881) and related Prospectus of Yuasa, Inc. for the
registration of 4,392,000 shares of its common stock.
/s/ Ernst & Young LLP
Harrisburg, Pennsylvania
May 20, 1998
