<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1995
REGISTRATION NO. 33-61961
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
EXIDE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 3691 23-0552730
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
1400 NORTH WOODWARD AVENUE
BLOOMFIELD HILLS, MICHIGAN 48304
(810) 258-0080
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
BERNARD F. STEWART
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
EXIDE CORPORATION
1400 NORTH WOODWARD AVENUE
BLOOMFIELD HILLS, MICHIGAN 48304
(810) 258-0080
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
CARTER W. EMERSON
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(312) 861-2052
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
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- --------------------------------------------------------------------------------
<PAGE>
EXIDE CORPORATION
CROSS REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-4)
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
----------------------- ---------------------------------
<C> <S> <C>
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus..... Outside Front Cover Page
2. Inside Front and Outside Back Inside Front Cover Page; Outside Back Cover
Cover Pages of Prospectus.... Page
3. Risk Factors, Ratio of Summary; Risk Factors; Business; Selected
Earnings to Fixed Charges and Consolidated Financial Data; Pro Forma
Other Information............ Condensed Consolidated Financial Data; The
Exchange Offer; Tax Considerations
4. Terms of the Transaction...... Outside Front Cover Page; Summary; The
Exchange Offer; Description of the New
Notes; Tax Considerations
5. Pro-Forma Financial Summary--Summary Pro Forma and Historical
Information.................. Consolidated Financial Data; Pro Forma
Condensed Consolidated Financial Data
6. Material Contracts with the
Company Being Acquired....... Inapplicable
7. Additional Information
Required..................... Inapplicable
8. Interests of Named Experts and
Counsel...................... Legal Matters; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities.................. Inapplicable
10. Information with Respect to S- Incorporation of Certain Documents by
3 Registrants................ Reference
11. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference..... Reference
12. Information with Respect to S-
3 or S-2 Registrants......... Inapplicable
13. Incorporation of Certain
Information by Reference..... Inapplicable
14. Information with Respect to
Registrants other than S-3 or
S-2 Registrants.............. Inapplicable
15. Information with Respect to S-
3 Companies.................. Inapplicable
16. Information with Respect to S-
3 or S-2 Companies........... Inapplicable
17. Information with Respect to
Companies Other Than S-3 or
S-2 Companies................ Inapplicable
18. Information if Proxies,
Consents or Authorizations
are to be Solicited.......... Inapplicable
19. Information if Proxies,
Consents or Authorizations
are not to be Solicited or in Incorporation of Certain Documents by
an Exchange Offer............ Reference
</TABLE>
<PAGE>
PROSPECTUS
TENDER FOR ALL OUTSTANDING 10% SENIOR NOTES DUE 2005 IN EXCHANGE FOR 10% SENIOR
EXCHANGE NOTES DUE 2005 OF
EXIDE CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER 26,
1995, UNLESS EXTENDED.
--------------
Exide Corporation (the "Company"), a Delaware corporation, hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal" which, together with the Prospectus, constitutes the "Exchange
Offer") to exchange its 10% Senior Notes
due 2005 (the "New Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to the Registration
Statement of which this Prospectus is a part, for a like principal amount of
its issued and outstanding 10% Senior Notes due 2005 (the "Old Notes"), of
which an aggregate of $300 million in principal amount is outstanding. The New
Notes will evidence the same debt as the Old Notes (which they replace) and
will be issued under and be entitled to the benefits of the Indenture, dated as
of April 28, 1995 (the "Indenture"), between the
Company and The Bank of New York, as Trustee (the "Trustee"), which also
governs the Old Notes. The Old Notes and the New Notes are referred to herein
collectively as the "Notes." The form and terms of the New Notes will be
identical in all material respects to the form and terms of the Old Notes
except that the New Notes will have been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof and will
not contain certain provisions included in the terms of the Old Notes relating
to an increase in the interest rate in certain circumstances relating to the
timing of the consummation of the Exchange Offer. See "The Exchange Offer" and
"Description of the New Notes." It is expected that the Exchange Offer will be
consummated prior to October 28, 1995 and, therefore, holders of Old Notes,
whether or not tendered, will not be entitled to the contingent increase in the
interest rate provided for in the Old Notes.
The New Notes will be unsecured senior indebtedness of the Company, ranking
pari passu with the Company's unsubordinated indebtedness and senior in right
of payment to all of its subordinated indebtedness. At July 2, 1995, the
Company had approximately $1,171.4 million of senior indebtedness,
approximately $407.0 million of which is secured indebtedness, and
approximately $82.2 million of subordinated indebtedness. Holders of such
secured indebtedness will be entitled to payment out of the proceeds of their
collateral prior to any holders of general unsecured indebtedness, including
the New Notes, and will rank pari passu with the Notes with respect to any
claims not so satisfied. The New Notes will be effectively subordinated to all
third-party liabilities of the Company's subsidiaries and at July 2, 1995, the
Company's subsidiaries had approximately $1,588.6 million of such liabilities,
including approximately $833.6 million of indebtedness, which includes the
principal subsidiaries' guarantee of the Company's obligations under the Credit
Agreement.
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on October 26, 1995,
unless extended (such date, or such later date to which the Exchange Offer may
be extended, the "Expiration Date"). Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for exchange by the Company. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See "The Exchange Offer."
(Continued on next page)
--------------
See "Risk Factors" on page 22 for a discussion of certain risks to be
considered in connection with the Exchange Offer.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY 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 REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
September 28, 1995
<PAGE>
(Cover Page Continued)
Any waiver, extension or termination of the Exchange Offer will be publicly
announced by the Company through a release to the Dow Jones News Service and as
otherwise required by applicable law or regulations.
The New Notes will mature on April 15, 2005. Interest on the New Notes is
payable semi-annually on April 15 and October 15 of each year, commencing
October 15, 1995. The New Notes will be redeemable, in whole or in part, at the
option of the Company at any time on or after April 15, 2000, initially at 105%
of their principal amount, plus accrued interest, declining ratably to 100% of
their principal amount, plus accrued interest, on or after April 15, 2002.
Based on no-action letters issued by the staff of the Securities and Exchange
Commission (the "Commission") to third parties, the Company believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold, and otherwise transferred by a holder thereof
(other than broker-dealers, as set forth below, and any holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder is acquiring the New
Notes in the ordinary course of its business and has no arrangement or
understanding with any person to participate in the distribution of the New
Notes. Eligible Holders wishing to accept the Exchange Offer must represent to
the Company in the Letter of Transmittal that such conditions have been met.
See "The Exchange Offer--
Purpose and Effect of the Exchange Offer." Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering
such prospectus, such broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by such broker-
dealer in connection with resale of New Notes received for such broker-dealer's
own account in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date, it will make this Prospectus available to any such broker-
dealer for use in connection with any such resale. See "Plan of Distribution."
The New Notes constitute a new issue of securities with no established
trading market. The Company does not intend to list the New Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. Morgan Stanley & Co. Incorporated ("MS&Co.") has indicated to
the Company that it intends to effect offers and sales of the New Notes in
market-making transactions at negotiated prices related to prevailing market
prices at the time of sales, but is not obligated to do so and such market-
making activities may be discontinued at any time. MS&Co. may act as principal
or agent in such transactions. There can be no assurance that an active market
for the New Notes will develop. Any Old Notes not tendered and accepted in the
Exchange Offer will continue to accrue interest and will remain outstanding and
will be entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders of Old Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have no
further obligation to such holders to provide for the registration under the
Securities Act of the Old Notes held by them. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Notes could be adversely affected. It is not expected that an
active market for the Old Notes will develop while they are subject to
restrictions on transfer.
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of September 28, 1995.
2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form S-
4 (together with any amendments thereto, the "Registration Statement") under
the Securities Act covering the New Notes offered hereby. This Prospectus,
which constitutes a part of the Registration Statement, omits certain
information contained in the Registration Statement as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Exchange Offer, reference is made to the Registration Statement
and the exhibits and the financial statements, notes and schedules filed as a
part thereof, which may be inspected at the public reference facilities of the
Commission, at the addresses set forth below. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, the material terms of each of which are summarized in this
Prospectus, reference is made to the exhibit for a more complete description of
the document or matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. The
Registration Statement, as well as such reports and other information filed by
the Company pursuant to the Exchange Act, may be inspected and copied (at
prescribed rates) at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Regional Offices of the Commission at 75 Park Place, New York, New York
10007 and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. In addition, reports, proxy statements and other
information may be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005, upon which the common stock of the
Company is traded.
----------------
In this Prospectus, references to "dollar" and "$" are to United States
dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
The revenues and expenses of the Company's European operations are
denominated in numerous foreign currencies. Amounts shown herein are
denominated in U.S. dollars. Conversions of foreign currencies to U.S. dollars
in the pro forma financial information included herein have been calculated,
for income statement purposes, on the basis of average exchange rates over the
related periods and, for balance sheet purposes, on the date thereof. The
convenience U.S. dollar conversions accompanying the historical financial
statements of Tudor, incorporated by reference herein, have been calculated on
the basis of exchange rates in effect on September 30, 1994. The convenience
U.S. dollar conversions accompanying the historical audited financial
statements of CEAC for the year ended December 31, 1994 and the unaudited
financial statements for the three months ended March 31, 1995, each
incorporated by reference herein, have been calculated on the basis of exchange
rates in effect on March 31, 1995. Exchange rates per United States dollar as
of certain dates for certain currencies are set forth below.
<TABLE>
<CAPTION>
RATE AS OF RATE AS OF RATE AS OF RATE AS OF RATE AS OF
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, MARCH 31, JULY 2,
CURRENCY 1993 1994 1994 1995 1995
-------- ------------ ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
British Pound........... .676 .634 .639 .617 .627
French Franc............ 5.904 5.292 5.339 4.804 4.841
Spanish Peseta.......... 142.925 128.52 131.631 126.687 128.780
</TABLE>
Exide(R), Willard(R), Prestolite(R), Tudor(TM), LYAC Power(TM), SONNAK(TM),
Hagen Batterie(TM), Anker(TM), BIG(TM), Exide 911 Emergency Vehicle Battery(R),
Nautilus Mega Cycle(R), Ultra Start(R), Sure Start(R), Titan(R), Super
Power(TM), TS(TM), Exide Heat Guard(R), Exide Barium Plus(R), Power Probe(R),
Dry Safe(TM), CSM(TM), Speed Clip(R), Chloride Motive Power(TM), Fulmen(TM),
Sonnenschein(TM), Tudor(TM), Magneti Marelli(TM), ASTA(TM) and Bat'clean(R) are
trademarks or trade names of the Company or its subsidiaries that are
registered or otherwise protected under laws of various jurisdictions.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Summary................................................................... 5
Risk Factors.............................................................. 22
Use of Proceeds........................................................... 25
Capitalization............................................................ 26
Selected Consolidated Financial Data...................................... 27
Pro Forma Condensed Consolidated Financial Data........................... 30
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 36
Business.................................................................. 41
Management................................................................ 54
Beneficial Ownership of Capital Stock..................................... 59
Certain Transactions...................................................... 60
The Exchange Offer........................................................ 61
Description of the New Notes.............................................. 68
Description of Certain Indebtedness....................................... 95
Tax Considerations........................................................ 99
Plan of Distribution...................................................... 102
Legal Matters............................................................. 102
Experts................................................................... 103
Incorporation of Certain Documents By Reference........................... 104
Index to Consolidated Financial Statements................................ F-1
</TABLE>
4
<PAGE>
SUMMARY
This Summary is qualified in its entirety by the more detailed information
and financial statements and notes thereto that appear elsewhere in this
Prospectus.
THE COMPANY
Exide Corporation (together with its subsidiaries, "Exide" or the "Company")
is the leading manufacturer and marketer of starting, lighting and ignition
("SLI") batteries in the world. Through its acquisitions of B.I.G. Batteries
Group Limited ("BIG"), Sociedad Espanola del Acumulador Tudor, S.A. ("Tudor")
and Compagnie Europeenne d'Accumulateurs S.A. ("CEAC"), as well as its
assumption of the customers of Gemala Battery Company Limited ("Gemala
Battery"), the Company has become Europe's largest producer and marketer of SLI
batteries and industrial batteries.
RECENT DEVELOPMENTS
As a result of obtaining a contract with Sears, Roebuck & Co. in the second
quarter of fiscal 1995, the Company began (i) increasing production capacity
and incurring increased production costs to service the anticipated additional
volume of approximately three million SLI batteries associated with this
contract for fiscal 1995 and (ii) incurring associated start-up distribution,
marketing and promotion expenses. Due to unusually warm weather in North
America in the fourth fiscal quarter of 1995, the Company shipped approximately
20% fewer units in North America than expected, resulting in higher operating
and distribution costs from the increased production capacity. Primarily due to
these factors, the Company reported a net loss in the fourth fiscal quarter of
$16.0 million.
Net sales increased $267.3 million, or 162%, to $432.3 million in the first
three months of fiscal 1996 compared with the first three months of fiscal
1995. The sales increase was principally attributable to the acquisition of
CEAC in May 1995 and Tudor in October 1994 with net sales of $74.0 million and
$133.0 million, respectively. Sales in the first three months of fiscal 1996
were also favorably impacted by shipments to Sears Roebuck & Co., growth of the
Company's business in the United Kingdom (net sales increased $13.9 million),
and the inclusion of Evanite Fiber Corporation ("Evanite") with net sales of
$12.7 million, a February 1995 acquisition. Gross profit increased $48.5
million, while gross profit margin fell by 4% in the first three months of
fiscal 1996 versus the first three months of fiscal 1995. The increase in gross
profit was principally the result of the inclusion of CEAC's and Tudor's gross
profit of $18.9 million and $33.6 million, respectively, the growth of the
Company's business in the United Kingdom (gross profit increased $1.2 million)
and seasonality. The profit margin decline was attributable to higher lead
costs experienced in the first three months of fiscal 1996 versus 1995 as well
as the mix of product sales, including the European businesses where margins
are higher in the later quarters of the fiscal year. Selling, general and
administrative expenses increased $52.3 million in the first three months of
fiscal 1996, or 163.3%, compared to same period in the previous year. This is
attributable to inclusion of CEAC and Tudor of $15.6 million and $30.5 million,
respectively, and the growth in the United Kingdom business of $3.6 million.
Operating income decreased $3.9 million, or 45.2% primarily as a result of the
matters discussed above. Interest expense increased $17.4 million in the first
three months of fiscal 1996 compared to the first three months of fiscal 1995,
principally as a result of the inclusion of CEAC and Tudor of $1.2 million and
$3.3 million, respectively, the interest cost attributable to the financing of
Exide's European acquisitions and the carrying costs associated with the higher
working capital levels related to the growth of the U.S. and United Kingdom
businesses and higher inventory levels. Net income decreased $14.6 million, to
a loss of approximately $14.6 million in the first three months of fiscal 1996
compared with a loss of $.04 million in the first three months of fiscal 1995,
primarily as a result of the matters discussed above. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations."
5
<PAGE>
NORTH AMERICA
Exide and its affiliates have a unit market share in SLI batteries of
approximately 39% in the United States and Canada, based on information
provided by an industry trade association. The Company believes that it is the
lowest cost major producer in its North American markets. Over 80% of all
automotive batteries sold in the United States and Canada are sold in the
aftermarket, and in fiscal 1995 approximately 88% of the Company's unit sales
were of automotive replacement batteries. The aftermarket is influenced more by
the age and number of vehicles in service than new production levels and tends
to be less cyclical than the original equipment manufacturing ("OEM") market.
In April 1994, Sears, Roebuck & Co., one of the largest retailers of SLI
batteries in the United States, selected the Company as the primary supplier of
its batteries, including the Die Hard(R) brand. Exide is the leading supplier
for 17 of the 20 largest battery retailers in the United States, including NAPA
Distribution Centers, Kmart Corp., Northern Automotive Corporation, Montgomery
Ward & Co. and The Pep Boys-Manny, Moe & Jack.
The Company also produces SLI batteries for the OEM market in North America,
principally for Chrysler Corporation for whom it is the primary supplier. Other
products manufactured by Exide include batteries for trucks, farm and other
off-road vehicles, boats, garden tractors and golf carts, battery chargers and
accessories, wheel weights and remanufactured starters and alternators.
Current management, which is led by Arthur M. Hawkins, Chairman, President
and Chief Executive Officer, who joined Exide in 1985, has transformed the
Company into a marketing-driven business by developing a new customer base
focused on leading mass-merchandisers, auto supply chains and wholesalers and
introducing merchandise displays, innovative packaging and programs to assist
customers in marketing and inventory management. To support and expand this
customer base, Exide has expanded its Company-owned distribution system from 12
wholesale branch outlets in 1985 to over 130 today. These outlets, which
distribute Exide batteries to both large accounts and local dealers and other
small volume customers, also allow the Company to collect used batteries for
recycling in its lead smelters as part of its recycling program aimed at
reducing costs and protecting the environment. In addition, in recent years the
Company has introduced several new products including an advanced line of
maintenance-free batteries and an emergency vehicle battery. The Company, which
markets its products under various trademarks including Exide, Willard and
Prestolite, has strengthened its brand recognition through promotional
activities, including sponsoring the NASCAR Winston Cup racing team of Geoff
Bodine and an Indianapolis-type car.
The Company has realized significant cost savings through consolidations of
operations, particularly after it doubled its size by its acquisition of
General Battery Corporation in 1987, the installation of more efficient
equipment and processes and the addition of a technologically advanced
secondary lead smelter. The Company's relatively high level of vertical
integration, through lead smelting, plastics reclamation and separator
production, reduces the effects on Exide of changes in the market prices of raw
materials and can result in substantial raw material cost savings. In August
1995 the Company acquired Schuylkill Holdings, Inc. ("Schuylkill"), a U.S.
company that operates two secondary lead smelters; the Company paid $2 million
in cash for Schuylkill's stock, options and subordinated notes, and issued
593,210 shares of its common stock and a contingent note, the value of which
will be based on average market lead prices through 1999, for the secured debt
of Schuylkill's operating subsidiary, subject to certain adjustments plus the
assumption of certain liabilities. The Contingent Note operates in such a way
that if, for example, the average market lead price was $0.285 the note amount
would be $5.0 million and if the price was $0.365 the note amount would be
$14.7 million. Schuylkill has operated at a loss for the last four fiscal
years; losses for the previous three years were $4.3 million, $7.4 million and
$4.0 million for the fiscal years ended 1994, 1993 and 1992, respectively.
Exide operates 18 manufacturing facilities in the United States and Canada.
Exide continues to increase production at its Bristol, Tennessee battery
manufacturing facility, which the Company intends to be similar to its Salina,
Kansas plant. The Company believes its Salina plant is the highest volume and
one of the lowest cost automotive battery plants in the world.
6
<PAGE>
On a pro forma basis for the fiscal year ended March 31, 1995, Exide's North
American operations would have accounted for approximately 39.2% of the
combined net sales of such operations and those of the European businesses it
has acquired.
EUROPEAN STRATEGY
Exide has targeted the European market as an attractive opportunity for
growth because it is one of the largest battery markets outside of North
America and because the Company believes that its experience with
rationalization and consolidation of manufacturing and distribution operations
can be successfully applied in Europe. The Company believes the battery
manufacturing industry in Europe is undergoing rationalization and
consolidation activity similar to that which has occurred in the United States
over the last ten years. The key components of the Company's European
acquisition strategy include focusing on opportunities which provide Exide with
(i) strong market shares, (ii) broad geographic coverage, (iii) low production
costs or opportunities to achieve lower production costs, (iv) established
distribution systems, (v) strong customer relationships, and (vi) experienced
management.
In implementing this strategy, the Company acquired two European battery
manufacturers in 1994 and one in 1995. In March 1994, the Company acquired BIG,
an SLI battery manufacturer based in Wales, for approximately $35.0 million. In
October 1994, Exide acquired for approximately $229.0 million 89.4%
(subsequently increased to 95.7% as a result of a stock repurchase by Tudor and
open market purchases by Exide) of the outstanding capital stock and 25% of the
convertible bonds of Tudor, headquartered in Madrid, Spain, which is the third
largest lead acid battery producer in Western Europe. In addition, in September
1994 the Company assumed the customers of, and began to temporarily operate the
facilities of, Gemala Battery, a battery producer based in England. In this
transaction, the owner of Gemala Battery received an 18.5% interest in BIG. In
May 1995, the Company acquired 99.7% of the stock of CEAC, one of the largest
SLI producers and the largest industrial battery manufacturer in Europe, for
approximately $425.0 million in cash ($553.5 million less assumed debt plus
interest from March 31, 1995).
EUROPEAN OPERATIONS
Exide has major SLI battery and industrial battery market presences in many
Western European countries.
Exide's European operations had combined pro forma net sales of $1,395.0
million for the fiscal year ended March 31, 1995, of which approximately 53%
were of automotive batteries, 41% were of industrial batteries and 6% were of
other products. Similar to the United States, over 80% of all automotive
batteries sold in Europe are sold in the aftermarket and approximately 76% of
the automotive battery unit sales of Exide's operations in Europe were of
automotive replacement batteries during such twelve-month period. Wholesalers,
who sell to repair shops and service stations, and OEM dealers represent a
significant part of this market, but supermarket chains, replacement part
stores (which are represented by purchasing associations) and hypermarkets have
become increasingly important. Exide also produces SLI batteries for the
European OEM market and is one of the major suppliers to Fiat S.p.A. ("Fiat"),
the Volkswagen group (Volkswagen AG/AUDI AG/Seat/Skoda Automobilova AS), the
PSA group (Peugeot S.A./Citroen), the Renault group and Volvo. By assuming the
customers of Gemala Battery, the Company became a supplier to Ford Motor Co. in
Europe. Exide's automotive battery brand strategy in Europe is based on well
recognized brands, including Tudor, Hagen Batterie, LYAC Power, SONNAK, Anker,
BIG, Exide, Fulmen and Sonnenschein. In fiscal 1995, Exide's pro forma European
operations produced over 20.0 million automotive batteries.
The European industrial battery market is comprised of standby or stationary
batteries used in telecommunications equipment, uninterruptible power supplies,
back-up computer equipment and submarines and traction batteries used in
electric vehicles including forklifts, transporters, mine locomotives and cable
guided equipment. Standby batteries represented approximately 47% and traction
batteries
7
<PAGE>
represented approximately 53% of industrial battery sales of Exide's European
operations in 1994. Major standby battery customers include telecommunications
companies and European navies and major traction battery customers include the
electric vehicle operations of the Linde group (Still GmBH, LL Fenwicks, Fiat
and Lansing), Clark and Jungheinrich. As in the automotive market, Exide's
industrial battery brands, including TS, Hagen Batterie, Tudor, Fulmen,
Sonnenschein, Chloride Motive Power, Magneti Marelli and ASTA, are well
recognized in their markets.
Exide's European operations also manufacture or market other products,
including battery chargers and accessories, wheel weights, plastic components,
NiCd batteries and dry cell batteries. In addition, Tudor holds a portfolio of
land of which it divests portions from time to time.
The Company operates 32 lead acid battery manufacturing plants, including the
temporary operation of Gemala Battery's plant, in France, Italy, Spain,
Portugal, Germany, the United Kingdom and elsewhere in Europe, as well as three
secondary lead smelters. The Company believes its operations in Spain and
Portugal are among the lowest cost producers in Western Europe.
On a pro forma basis for the fiscal year ended March 31, 1995, Exide's
European operations would have represented approximately 60.8% of the combined
total of such revenues and those of Exide's North American operations.
RATIONALIZATION AND CONSOLIDATION STRATEGY
The Company believes the recently completed European acquisitions will enable
it to pursue a cohesive overall European rationalization and consolidation
strategy. The Company plans to lower fixed and variable production costs
through plant closings, thereby increasing capacity utilization, shifting
production to lower cost areas and reducing overhead. However, there are risks
associated with the integration of these businesses. See "Risk Factors--
European Acquisitions."
Tudor and CEAC have each independently initiated rationalization and
consolidation strategies over the past few years. Over the past five years
Tudor has closed three manufacturing plants and reduced the number of its
employees by more than 30% and CEAC has closed four manufacturing plants. Plans
have been announced to close additional manufacturing plants over the next
several years. The Company believes it has other significant opportunities to
rationalize and improve its operations across Europe as well.
----------------
The Company is a Delaware corporation organized in 1966 to succeed to the
business of a New Jersey corporation founded in 1888 by Thomas A. Edison. The
principal executive offices of the Company are located at 1400 North Woodward
Avenue, Bloomfield Hills, Michigan 48304, telephone number (810) 258-0080.
8
<PAGE>
THE OFFERING
Notes..................... The Old Notes were sold by the Company on April 28,
1995 to MS&Co. (in such capacity, the "Placement
Agent") pursuant to a Placement Agreement, dated as
of April 28, 1995 (the "Placement Agreement"). The
Placement Agent subsequently resold the Old Notes
to qualified institutional buyers pursuant to Rule
144A and to persons other than U.S. persons outside
the United States in reliance upon Regulation S un-
der the Securities Act and to a limited number of
institutional accredited investors that agreed to
comply with certain transfer restrictions and other
conditions (the "Offering").
Registration Rights Pursuant to the Placement Agreement, the Company
Agreement................ and the Placement Agent entered into a Registration
Rights Agreement, dated as of April 28, 1995 (the
"Registration Rights Agreement"), which grants the
holders of the Old Notes certain exchange and reg-
istration rights. The Exchange Offer is being made
pursuant to the Registration Rights Agreement and
such exchange rights terminate upon the consumma-
tion of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered........ $300,000,000 aggregate principal amount of 10% Se-
nior Notes due 2005, which have been registered un-
der the Securities Act.
The Exchange Offer........ $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes duly
tendered and not withdrawn prior to acceptance
thereof. The Company will issue the New Notes to
holders (who have properly tendered and not with-
drawn their Old Notes) as promptly as practicable
after the Expiration Date.
Transferability of New
Notes Under Federal
Securities Laws..........
Based on an interpretation by the staff of the Com-
mission set forth in no-action letters issued to
third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other
than broker-dealers, as set forth below, and any
such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that such New Notes are acquired in
the ordinary course of such holder's business, that
such holder has no arrangement or understanding
with any person to participate in the distribution
of such New Notes and that such holder is not en-
gaging in or intending to engage in the distribu-
tion of the New Notes. Each broker-dealer that re-
ceives New Notes for its own account in exchange
for Old Notes that were acquired as a result of
market-making or other trading activity must ac-
knowledge that it will deliver a prospectus in con-
nection with any resale of such New Notes. The Let-
ter of Transmittal states that by so acknowledging
and by delivering a prospectus, such broker-dealer
will not be deemed to admit that it is an
9
<PAGE>
"underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or sup-
plemented from time to time, may be used by such
broker-dealer in connection with resales of New
Notes received in exchange for Old Notes where such
New Notes were acquired by such broker-dealer as a
result of market-making activities or other trading
activities. The Company has agreed that, for a pe-
riod of 90 days after the Expiration Date, it will
make this Prospectus available to any such broker-
dealer for use in connection with any such resale.
See "Plan of Distribution." Any holder who tenders
in the Exchange Offer with the intention to partic-
ipate, or for the purpose of participating, in a
distribution of the New Notes or who is an affili-
ate of the Company may not rely on the position of
the staff of the Commission enunciated in Exxon
Capital Holdings Corporation (available May 13,
1988) or similar no-action letters and, in the ab-
sence of an exemption therefrom, must comply with
the registration and prospectus delivery require-
ments of the Securities Act in connection with a
secondary resale transaction. Failure to comply
with such requirements in such instance may result
in such holder incurring liability under the Secu-
rities Act for which the holder is not indemnified
by the Company.
This Exchange Offer is not being made to, nor will
the Company accept surrenders for exchange from,
holders of Old Notes in any jurisdiction in which
this Exchange Offer or the acceptance thereof would
not be in compliance with the securities or blue
sky laws of such jurisdiction.
Expiration Date...........
5:00 p.m., New York City time, on October 26, 1995
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is ex-
tended. The Company has no current intention to ex-
tend the Exchange Offer. Any extension, if made,
will be publicly announced through a release to the
Dow Jones News Service and as otherwise required by
applicable law or regulations.
Accrued Interest on the
New Notes and Old Notes..
Holders of Old Notes that are accepted for exchange
will not receive any accrued interest thereon. How-
ever, each New Note will bear interest from the
most recent date to which interest has been paid on
the Old Note for which such New Note was exchanged,
or if no interest has been paid, from the date of
original issuance of such Note.
Conditions to the The Exchange Offer is subject to certain customary
Exchange Offer........... conditions, which may be waived by the Company. See
"The Exchange Offer--Conditions to the Exchange Of-
fer" and "--Terms of the Exchange Offer."
Procedures for Tendering Each holder of an Old Note wishing to accept the
Notes.................... Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or
10
<PAGE>
such facsimile, together with the Old Notes and any
other required documentation to the Exchange Agent
at the address set forth herein prior to 5:00 p.m.,
New York City time, on the Expiration Date.
By executing a Letter of Transmittal, each holder
represents to the Company that, among other things,
the New Notes acquired pursuant to the Exchange Of-
fer are being obtained in the ordinary course of
business of the person receiving such New Notes,
whether or not such person is the holder, that nei-
ther the holders nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such New Notes,
that such holder is not engaging in or intending to
engage in the distribution of the New Notes and
that neither the holder nor any such other person
(other than MS&Co.) is an "affiliate" of the Compa-
ny, as defined under Rule 405 of the Securities
Act. See "The Exchange Offer--Purpose and Effect of
the Exchange Offer."
Special Procedure for
Beneficial Owners........
Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing
and executing a Letter of Transmittal and deliver-
ing Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such own-
er's name or obtain a properly completed bond power
from the registered holder. The transfer of regis-
tered ownership may take considerable time and may
not be able to be completed prior to the Expiration
Date. See "The Exchange Offer--Procedures for
Tendering."
Guaranteed Delivery Holders of Old Notes who wish to tender their Old
Procedures............... Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes, a
Letter of Transmittal or any other documents re-
quired by the Letter of Transmittal to the Exchange
Agent prior to the Expiration Date, must tender
their Old Notes according to the guaranteed deliv-
ery procedures set forth in "The Exchange Offer--
Procedures for Tendering."
Withdrawal Rights......... Subject to the conditions set forth herein, tenders
of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date. See "The Exchange Offer--Withdrawal of Ten-
ders."
Acceptance of Old Notes
and Delivery of New
Notes.................... Subject to the terms and conditions of the Exchange
Offer, including the reservation of certain rights
by the Company, the Company will accept for ex-
change any and all Old Notes which are properly
tendered in the Exchange Offer, and not withdrawn,
prior to 5:00 p.m., New York City time, on the Ex-
piration Date. Subject to such terms and condi-
tions, the New Notes issued pursuant to the Ex-
change
11
<PAGE>
Offer will be delivered promptly following the Ex-
piration Date. See "The Exchange Offer--Terms of
the Exchange Offer" and "--Conditions to the Ex-
change Offer."
Exchange Agent............ The Bank of New York is serving as Exchange Agent
(the "Exchange Agent") in connection with the Ex-
change Offer. The Exchange Agent's telephone number
is (212) 815-2742.
Certain Federal Income
Tax Considerations.......
Holders will not recognize gain for federal income
tax purposes in respect of the exchange of Old
Notes for New Notes. Each New Note will have the
same adjusted tax basis as the Old Note for which
it was exchanged. The holding period of each New
Note will include the holding period of the Old
Note for which it is exchanged. See "Tax Considera-
tions." Persons considering the exchange of Old
Notes for New Notes should consult their tax advi-
sors with regard to the application of the United
States federal income tax laws to their particular
situations as well as any tax consequences arising
under the laws of any state, local or foreign tax-
ing jurisdiction.
Untendered Notes.......... Following the consummation of the Exchange Offer,
holders of Old Notes will not have any further reg-
istration rights and such Old Notes will continue
to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such
Old Notes could be adversely affected. Old Notes
that are not exchanged pursuant to the Exchange Of-
fer will remain outstanding and continue to accrue
interest.
Consequences of Failure
to Exchange..............
The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted securi-
ties. Accordingly, such Old Notes may be resold
only (i) to the Company, (ii) pursuant to Rule 144A
or Rule 144 under the Securities Act or pursuant to
some other exemption from registration under the
Securities Act, (iii) outside the United States to
a foreign person pursuant to the requirements of
Regulation S under the Securities Act or (iv) pur-
suant to an effective registration statement under
the Securities Act. See "The Exchange Offer--Conse-
quences of Failure to Exchange."
NEW NOTES
General................... The form and terms of the New Notes are the
same as the form and terms of the Old Notes
(which they replace) except that (i) the New
Notes have been registered under the Securities
Act and, therefore, will not bear legends
restricting the transfer thereof, (ii) the New
Notes do not include provisions providing for
an increase in the interest rate in certain
circumstances relating to the consummation of
the Exchange Offer and (iii) the holders of New
Notes will not be entitled to certain rights
under the Registration Rights Agreement, which
rights will terminate when the Exchange Offer
is consummated. The New Notes will evidence the
same debt as the Old Notes and will be entitled
to the benefits of the Indenture. See
"Description of New Notes."
12
<PAGE>
Securities Offered........ $300,000,000 aggregate principal amount of 10%
Senior Notes due 2005, which have been
registered under the Securities Act.
Maturity..................
April 15, 2005.
Interest.................. 10% per annum payable semiannually in cash on
April 15 and October 15 of each year.
Optional Redemption....... The New Notes will be redeemable, in whole or
in part, at the option of the Company at any
time on or after April 15, 2000, initially at
105% of their principal amount, plus accrued
interest, declining ratably to 100% of their
principal amount, plus accrued interest, on or
after April 15, 2002.
Ranking; Secured
Indebtedness............. The New Notes will be senior unsecured
indebtedness of the Company, ranking pari passu
with the Company's existing and future
unsubordinated, unsecured indebtedness,
including, without limitation, the Company's
obligations under the 10 3/4% Senior Notes due
2002 (the "10 3/4% Notes") of the Company as
well as the Old Notes, if any. At July 2, 1995,
the Company had approximately $764.4 million of
senior unsecured indebtedness. The New Notes
will be effectively subordinated to the senior,
secured indebtedness of the Company, which as
of July 2, 1995, was $407.0 million. The New
Notes will be senior in right of payment to all
existing and future subordinated, unsecured
indebtedness of the Company, including the 12
1/4% Senior Subordinated Deferred Coupon
Debentures due 2004 (the "12 1/4% Debentures")
of the Company. At July 2, 1995, the Company
had approximately $82.2 million of
subordinated, unsecured indebtedness. See "Risk
Factors--Asset Encumbrances; Ranking." The New
Notes will be effectively subordinated to all
third-party liabilities of the Company's
subsidiaries and at July 2, 1995, the Company's
subsidiaries had approximately $1,588.6 million
of such liabilities, including approximately
$833.6 million of indebtedness, which includes
the principal subsidiaries' guarantee of the
Company's obligations under the Credit
Agreement. See "Risk Factors--High Leverage;
Liquidity" and "Asset Encumbrances; Ranking."
Certain Covenants......... The Indenture, under which the New Notes will be
issued, contains certain covenants for the benefit
of Holders, including, among others, covenants lim-
iting the incurrence of indebtedness, restricted
payments, dividend and other payment restrictions
affecting restricted subsidiaries, the issuance of
capital stock of restricted subsidiaries, transac-
tions with affiliates, liens, sale-leaseback trans-
actions, guarantees by restricted subsidiaries,
certain asset sales and certain mergers and consol-
idations. See "Description of the New Notes--Cove-
nants."
Change of Control.........
Upon a Change of Control Triggering Event, each
Holder will have the right to require the Company
to repurchase such Holder's New Notes at a redemp-
tion price of 101% of their principal amount, plus
accrued interest. A Change of Control Triggering
Event is defined to
13
<PAGE>
mean the occurrence of both a Change in Control and
a Rating Decline. A Change of Control is defined to
include certain mergers or consolidations of the
Company, certain changes in the composition of the
board of directors of the Company or certain acqui-
sitions of more than 50% of the Voting Power of the
Company's common stock. A Rating Decline means cer-
tain declines in the ratings of the New Notes fol-
lowing a Change in Control. In such circumstances,
there is no assurance that the Company will have,
or be able to obtain, the necessary funds to repur-
chase any New Notes required to be repurchased or
sufficient funds to fulfill other obligations aris-
ing from such Change in Control Triggering Event.
See "Description of the New Notes--Repurchase of
Notes upon a Change of Control." The indentures un-
der which the 10 3/4% Notes and the 12 1/4% Deben-
tures were issued contain substantially identical
repurchase requirements. A Change in Control would
constitute an Event of Default under the Credit
Agreement, permitting acceleration of all amounts
due thereunder, which amounts are secured and
therefore effectively senior to the obligation to
repurchse the New Notes. Unless the Company were
able to arrange for other financing, such accelera-
tion would have a material adverse effect on the
Company's financial condition and would prevent the
Company from honoring its obligation to repurchase
the New Notes. There can be no assurance that the
Company could arrange alternative financing.
RISK FACTORS
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO AN INVESTMENT IN THE NOTES,
SEE "RISK FACTORS."
14
<PAGE>
SUMMARY PRO FORMA AND HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL FISCAL FISCAL -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED JULY 3, JULY 2,
MARCH 31, MARCH 31, MARCH 31, 1994 1995
1993 1994 1995 (UNAUDITED) (UNAUDITED)
---------- ---------- ---------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales............... $578,755 $679,649 $1,198,546 $165,067 $432,320
Gross Profit............ 128,757 158,253 265,680 40,617 89,094
Selling General and
Administrative
Expenses............... 81,587 96,495 201,518 32,062 84,406
Operating Income........ 47,170 61,758 64,162 8,555 4,688
Interest Expense........ 35,261 33,150 52,565 7,731 25,125
Income Taxes (Benefit).. 3,400 10,794 5,160 547 (7,545)
Income (Loss) before
extraordinary loss and
cumulative effect of
accounting change...... 5,153 17,217 4,491 (41) (14,678)
Extraordinary Loss(a)... (10,363) -- (3,597) -- --
Cumulative effect of
accounting change(b)... -- (12,711) -- -- --
Net Income (Loss)....... (5,210) 4,506 894 (41) (14,678)
Preferred Dividends..... 4,996 -- -- -- --
OTHER DATA:
EBITDA(c)............... $ 72,427 $ 91,465 $ 106,878 $ 16,822 $ 28,989
Ratio of Earnings to
Fixed Charges(d)....... 1.2 1.7 1.2 1.0 0.2
EBITDA/Interest
Expense(e)............. 2.1 2.8 2.0 2.2 1.2
Capital Expenditures.... 20,266 47,164 61,257 17,585 19,590
Net cash provided by
(used in) operating
activities............. 24,959 49,364 (69,134) (24,226) (41,951)
Net cash used in
investing activities... (21,845) (54,859) (322,896) (51,819) (400,389)
Net cash provided by
(used in) financing
activities............. (2,948) 38,701 418,314 76,298 431,717
Units Sold.............. 18,075 21,896 32,309 5,386 9,359
<CAPTION>
JULY 2,
MARCH 31, MARCH 31, MARCH 31, 1995
1993 1994 1995 (UNAUDITED)
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital......... $132,339 $153,711 $ 395,875 $ 596,461
Property, Plant and
Equipment, net......... 136,392 181,147 423,876 587,955
Total Assets............ 474,868 629,090 1,637,589 2,603,742
Long-Term Debt
(Including Current
Maturities and Short-
term Borrowings)....... 305,562 291,821 645,135 1,276,462
Common Stockholders'
Equity................. 45,096 164,450 413,230 403,027
</TABLE>
- --------
(a) During fiscal 1993, the Company recorded a loss of $10.4 million (net of a
tax benefit of $1.9 million) resulting from the early extinguishment of
debt in connection with Exide's fiscal 1993 refinancing of its previously
existing debt and preferred stock (the "Refinancing"). During fiscal 1995,
the Company recorded a loss of $3.6 million (net of a tax benefit of $2.3
million) resulting from the early retirement of debt under the Company's
previous credit agreement.
(b) Effective April 1, 1993, the Company adopted SFAS 106, which resulted in a
charge of $12.7 million with no income tax effect because of the
uncertainty of deductibility at that time. See Note 8 to the Company's
consolidated financial statements incorporated by reference herein.
(c) Represents earnings before interest, taxes, depreciation of property, plant
and equipment, amortization of goodwill and equity in earnings (loss) of
joint ventures. EBITDA should not be considered as an alternative to net
income as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity. Interest expense does not include interest
earned on the collateral account of the Company's receivables sale
facility. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a discussion of other commonly used measures
of liquidity and operating performance.
(d) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes and equity in earnings of
joint ventures plus fixed charges (excluding capitalized interest) and
dividends from joint ventures. Fixed charges consist of interest expense,
amortization of debt expense, capitalized interest, and one-third of rent
expense, representative of the interest factor.
(e) The ratio of EBITDA to interest expense (in each case subject to certain
adjustments) will be used to determine compliance with certain covenants
contained in the Indenture. However, EBITDA should not be considered as an
alternative to net income as a measure of the Company's operating results
or to cash flow as a measure of the Company's liquidity.
15
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following pro forma condensed consolidated statement of income for the
fiscal year ended March 31, 1995 was prepared to illustrate the estimated
effects of the following events as if each event had occurred on April 1, 1994:
(i) the Tudor acquisition and its related borrowings under the Credit
Agreement, (ii) the purchase of Evanite, (iii) the CEAC acquisition and its
related financing including the application of the net proceeds from the
Company's December 1994 Common Stock offering and borrowings under the Credit
Agreement and the Facilities Agreement, and (iv) the acquisition of Schuylkill
and the related financing thereof.
The CEAC acquisition and its related financing was completed in May 1995 and
is included in Exide's reported results for the period from June 1, 1995
through July 2, 1995. The pro forma condensed consolidated statement of income
for the three months ended July 2, 1995 was prepared to illustrate the
estimated effects of the CEAC acquisition for the two-month period from April
1, 1995 through May 31, 1995 and the Schuylkill acquisition and related
financing thereof as if each event had occurred for income statement purposes
at the beginning of the period presented (April 1, 1995).
The Tudor, Evanite and CEAC acquisitions and their related financings were
completed by July 2, 1995 and have been included in Exide's unaudited balance
sheet as of July 2, 1995. The pro forma condensed consolidated balance sheet as
of July 2, 1995 was prepared to illustrate the effects of the Schuylkill
acquisition and related financing thereof as if it had occurred on July 2,
1995.
The pro forma financial information has been prepared on the basis of
assumptions described in the notes thereto and includes assumptions relating to
the allocation of the consideration paid for each of the acquisitions to their
respective assets and liabilities based on preliminary estimates of their
respective fair values. The actual allocation of such consideration may differ
from that reflected in the pro forma condensed consolidated financial
statements after valuations and other studies to be performed pursuant to post
closing adjustments related to the acquisitions have been completed. Amounts
allocated will be based upon the estimated fair values at the time of the
acquisitions which could vary significantly from the amounts as of July 2,
1995. In addition, the interest rates on the borrowings under the Credit
Agreement and the estimated transaction fees and expenses, are assumed solely
for the purpose of presenting the pro forma financial information set forth
below. The actual interest rates on borrowings under the Credit Agreement and
actual transaction fees and expenses will differ from the assumptions set forth
below.
The pro forma adjustments are based on currently available information and
upon certain assumptions that management believes are reasonable under the
circumstances.
THE PRO FORMA FINANCIAL DATA DO NOT PURPORT TO REPRESENT WHAT THE COMPANY'S
RESULTS OF OPERATIONS WOULD ACTUALLY HAVE BEEN IF THE TRANSACTIONS ABOVE IN
FACT HAD OCCURRED AT APRIL 1, 1994, APRIL 1, 1995 OR ON JULY 2, 1995 OR TO
PROJECT THE COMPANY'S RESULTS OF OPERATIONS FOR ANY FUTURE DATE OR PERIOD.
The following financial information should be read in conjunction with
"Capitalization," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and the related notes thereto of Exide,
Tudor and CEAC appearing elsewhere in this Prospectus or incorporated by
reference herein.
16
<PAGE>
EXIDE CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED MARCH 31, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TUDOR CEAC
TUDOR ACQUISITION EVANITE CEAC ACQUISITION SCHUYLKILL
ACTUAL ACQUISITION(A) ADJUSTMENTS(B) ACQUISITION(C) ACQUISITION(D) ADJUSTMENTS(E) ACQUISITION(F)
---------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales....... $1,198,546 $232,601 $ -- $43,480 $788,741 $ -- $45,653
Cost of Sales... 932,866 173,598 (4,800) 32,573 581,308 (1,600) 37,947
---------- -------- ------- ------- -------- -------- -------
Gross Profit.... 265,680 59,003 4,800 10,907 207,433 1,600 7,706
---------- -------- ------- ------- -------- -------- -------
Selling, General
& Administrative
Expenses........ 201,518 57,505 -- 7,645 165,263 -- 2,008
Restructuring
Expenses........ -- 994 -- -- 6,533 -- --
---------- -------- ------- ------- -------- -------- -------
201,518 58,499 -- 7,645 171,796 -- 2,008
---------- -------- ------- ------- -------- -------- -------
Operating Income
(Loss).......... 64,162 504 4,800 3,262 35,637 1,600 5,698
---------- -------- ------- ------- -------- -------- -------
Interest
Expense......... 52,565 6,505 9,800 2,089 13,465 30,900 8,536
Other (Income)
Expense......... 874 (685) 685 (1,197) 7,118 (4,543) 73
---------- -------- ------- ------- -------- -------- -------
53,439 5,820 10,485 892 20,583 26,357 8,609
---------- -------- ------- ------- -------- -------- -------
Income (Loss)
Before Income
Taxes, Minority
Interest and
Extraordinary
loss............ 10,723 (5,316) (5,685) 2,370 15,054 (24,757) (2,911)
Income Taxes(h). 5,160 (218) (3,186) 948 8,303 (7,825) 1,374
---------- -------- ------- ------- -------- -------- -------
Income (Loss)
Before Minority
Interest and
Extraordinary
loss............ 5,563 (5,098) (2,499) 1,422 6,751 (16,932) (4,285)
Minority
Interest........ 1,072 151 (310) -- 1,149 17 --
---------- -------- ------- ------- -------- -------- -------
Income (Loss)
before
Extraordinary
Loss............ $ 4,491 $ (5,249) $(2,189) $ 1,422 $ 5,602 $(16,949) $(4,285)
========== ======== ======= ======= ======== ======== =======
EBITDA(i)....... $ 106,878
Ratio of
Earnings to
Fixed
Charges(j)...... 1.2
EBITDA/Interest
Expense(k)...... 2.0
<CAPTION>
SCHUYLKILL PRO FORMA
ACQUISITION FOR THE
ADJUSTMENTS(G) ACQUISITIONS
-------------- ------------
<S> <C> <C>
Net Sales....... $(16,292) $2,292,729
Cost of Sales... (15,539) 1,736,353
-------------- ------------
Gross Profit.... (753) 556,376
-------------- ------------
Selling, General
& Administrative
Expenses........ -- 433,939
Restructuring
Expenses........ -- 7,527
-------------- ------------
-- 441,466
-------------- ------------
Operating Income
(Loss).......... (753) 114,910
-------------- ------------
Interest
Expense......... (8,395) 115,465
Other (Income)
Expense......... -- 2,325
-------------- ------------
(8,395) 117,790
-------------- ------------
Income (Loss)
Before Income
Taxes, Minority
Interest and
Extraordinary
loss............ 7,642 (2,880)
Income Taxes(h). 2,942 7,498
-------------- ------------
Income (Loss)
Before Minority
Interest and
Extraordinary
loss............ 4,700 (10,378)
Minority
Interest........ -- 2,079
-------------- ------------
Income (Loss)
before
Extraordinary
Loss............ $ 4,700 $ (12,457)
============== ============
EBITDA(i)....... $ 229,026
Ratio of
Earnings to
Fixed
Charges(j)...... 1.0
EBITDA/Interest
Expense(k)...... 2.0
</TABLE>
17
<PAGE>
EXIDE CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JULY 2, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
CEAC SCHUYLKILL PRO FORMA
CEAC ACQUISITION SCHUYLKILL ACQUISITION FOR THE
ACTUAL ACQUISITION(D) ADJUSTMENTS(E) ACQUISITION(F) ADJUSTMENTS(G) ACQUISITIONS
-------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales............... $432,320 $123,031 $ -- $9,907 $(3,765) $561,493
Cost of Sales........... 343,226 96,115 (300) 7,796 (3,083) 443,754
-------- -------- ------- ------ ------- --------
Gross Profit............ 89,094 26,916 300 2,111 (682) 117,739
-------- -------- ------- ------ ------- --------
Selling, General &
Administrative Expenses. 84,406 29,605 -- 746 -- 114,757
Restructuring Expenses.. -- 2,412 -- -- -- 2,412
-------- -------- ------- ------ ------- --------
84,406 32,017 -- 746 -- 117,169
-------- -------- ------- ------ ------- --------
Operating Income (Loss). 4,688 (5,101) 300 1,365 (682) 570
-------- -------- ------- ------ ------- --------
Interest Expense........ 25,125 2,907 7,400 2,269 (2,227) 35,474
Other (Income) Expense.. 2,253 (1,571) -- -- -- 682
-------- -------- ------- ------ ------- --------
27,378 1,336 7,400 2,269 (2,227) 36,156
-------- -------- ------- ------ ------- --------
Income (Loss) Before
Income Taxes and
Minority Interest....... (22,690) (6,437) (7,100) (904) 1,545 (35,586)
Income Taxes(h)......... (7,545) (2,294) (2,345) (45) 564 (11,665)
-------- -------- ------- ------ ------- --------
Income (Loss) Before
Minority Interest....... (15,145) (4,143) (4,755) (859) 981 (23,921)
Minority Interest....... (467) 373 (9) -- -- (103)
-------- -------- ------- ------ ------- --------
Net Income (Loss)....... $(14,678) $ (4,516) $(4,746) $ (859) $ 981 $(23,818)
======== ======== ======= ====== ======= ========
EBITDA(i)............... $ 28,989 $ 33,546
Ratio of Earnings to
Fixed Charges(j)........ 0.2 0.1
EBITDA/Interest
Expense(k).............. 1.2 1.0
</TABLE>
18
<PAGE>
EXIDE CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT JULY 2, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
SCHUYLKILL FOR THE
SCHUYLKILL ACQUISITION SCHUYLKILL
ACTUAL ACQUISITION(F) ADJUSTMENTS(G) ACQUISITION
---------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash & Equivalents..... $ 52,886 $ 312 $ -- $ 53,198
Receivables, net....... 581,269 7,335 (3,626) 584,978
Inventories............ 646,677 7,782 (626) 653,833
Prepaids & Other....... 69,943 1,158 -- 71,101
Deferred Income Taxes.. 33,333 -- 345 33,678
---------- -------- -------- ----------
1,384,108 16,587 (3,907) 1,396,788
---------- -------- -------- ----------
Property, Plant &
Equipment, net......... 587,955 11,486 -- 599,441
Other Assets:
Goodwill............... 499,988 -- 9,014 509,002
Other.................. 131,691 906 800 133,397
---------- -------- -------- ----------
631,679 906 9,814 642,399
---------- -------- -------- ----------
Total Assets......... $2,603,742 $ 28,979 $ 5,907 $2,638,628
========== ======== ======== ==========
LIABILITIES AND COMMON
STOCKHOLDERS' EQUITY
Current Liabilities:
Short Term Borrowings.. $ 111,878 $ -- $ -- $ 111,878
Current Maturities of
Long-Term Debt........ 30,524 58,532 (58,532) 30,524
Accounts Payable....... 305,366 2,621 (3,376) 304,611
Accrued Expenses....... 339,853 16,254 (10,121) 345,986
---------- -------- -------- ----------
787,621 77,407 (72,029) 792,999
---------- -------- -------- ----------
Long-Term Debt.......... 1,134,060 -- 2,000 1,136,060
Other Noncurrent
Liabilities............ 226,426 1,000 1,000 228,426
Deferred Income Taxes... 2,615 -- -- 2,615
Minority Interests...... 49,993 -- -- 49,993
Commitments and
Contingencies
Common Stockholders'
Equity:
Common Stock &
Surplus............... 443,646 5,155 20,353 469,154
Retained Earnings
(Deficit)............. (40,913) (54,583) 54,583 (40,913)
Other.................. 294 -- -- 294
---------- -------- -------- ----------
403,027 (49,428) 74,936 428,535
---------- -------- -------- ----------
Total Liabilities and
Common Stockholders'
Equity.............. $2,603,742 $ 28,979 $ 5,907 $2,638,628
========== ======== ======== ==========
</TABLE>
19
<PAGE>
NOTES TO PRO FORMA STATEMENTS
(a) Reflects the consolidated effect of the Tudor acquisition converted to
United States dollars. Spanish pesetas were translated to United States dollars
using the average translation rates for the six month preacquisition period
ended October 2, 1994 (132.82).
(b) Reflects the acquisition adjustments related to the Tudor acquisition
including (1) borrowing approximately $250 million under the Credit Agreement
and $89.5 million in letters of credit at average rates of 6.28% and 2.125%,
respectively, for the six month preacquisition period ended October 2, 1994,
(2) the amortization of deferred financing costs (included in Exide's actual
results) over principally 5 years (included in interest expense), (3)
recognition of $106.3 million of goodwill from the acquisition and related
amortization over 40 years, (4) the reduction in depreciation expense of $6.0
million related to the fair market value remeasurement of property, plant and
equipment for the six months ended October 2, 1994, and (5) the recognition of
the loss attributable to the minority shareholders interests (5.6%).
(c) Reflects the consolidated effect and related acquisition adjustments of
the Evanite acquisition. The adjustments for Evanite relate to (1) borrowing
approximately $35.4 million under the Credit Agreement at the average rate of
5.69% for the period from April 1, 1994 to February 22, 1995 (the
preacquisition period), (2) the elimination of $325,000 of cost of goods sold
and $673,000 of selling, general and administrative expense related primarily
to compensation paid to terminated members of management in duplicative
positions with the Company and excess lease costs incurred in the
preacquisition period, and (3) the elimination of approximately $25 million for
the preacquisition period of Evanite's sales which are "intercompany" sales.
(d) Reflects the consolidated effect of the CEAC acquisition, including its
acquisition of a 95% interest in Centra, converted to United States dollars.
French francs were translated to United States dollars using the average
translation rates for the fiscal year ended March 31, 1995 (5.3717) and the two
month preacquisition period ended May 31, 1995 (4.9213).
(e) Reflects the acquisition adjustments related to the CEAC acquisition
including (1) borrowing approximately $149.0 million under the Credit Agreement
at 7.057% and 8.380% for the fiscal year ended March 31, 1995 and the two month
preacquisition period ended May 31, 1995, respectively, (2) utilizing the
$247.5 million of net proceeds from the Company's December 1994 Common Stock
offering, (3) borrowing $300.0 million pursuant to the 10% Senior Notes issued
in April 1995, (4) refinancing existing CEAC debt of approximately $150 million
with borrowings under a new European Facilities Agreement, (5) the recognition
and amortization of $174.8 million of additional goodwill over 40 years, and
(6) the reduction of property, plant and equipment for $40 million related to
the remeasurement to fair market value and the related reduction of
depreciation expense of $4.0 million.
(f) Reflects the consolidated effect of the Schuylkill acquisition. The
Schuylkill information included in this column of the consolidated statement of
income for the fiscal year ended March 31, 1995 represents Schuylkill's
information for their fiscal year ended December 31, 1994.
(g) Reflects the acquisition adjustments related to the Schuylkill
acquisition including (1) issuing 593,210 shares of Exide's common stock ($43
per share as of July 2, 1995) to Schuylkill's lenders in exchange for all of
Schuylkill's outstanding long-term debt (including current maturities and
accrued interest), (2) borrowing approximately $2.0 million under the Credit
Agreement at 7.057% and 8.38% for the fiscal year ended March 31, 1995 and the
three months ended July 2, 1995, respectively, (3) the elimination of
Schuylkill's historical interest expense related to (1) above, (4) the
recognition of $2 million of additional environmental reserves, (5) the
recognition and amortization of $9.0 million of goodwill over 40 years, (6) the
elimination of approximately $16.3 million and $3.8 million of Schuylkill's
sales for the fiscal year ended March 31, 1995
20
<PAGE>
and for the three months ended July 2, 1995, respectively, which are
"intercompany" sales, (7) the elimination of approximately $.5 million and $.6
million of Schuylkill's gross profit for the fiscal year ended March 31, 1995
and for the three months ended July 2, 1995, respectively, which would have
been "deferred intercompany profit," (8) the elimination of approximately $3.6
million of intercompany receivables and payables related to intercompany
balances with Exide as of July 2, 1995, and (9) the elimination of common stock
and surplus and retained earnings (deficit).
(h) Reflects the adjustment of income taxes (using an estimated combined
federal and state rate of 40% for United States entities, an estimated rate of
35% for CEAC and Tudor) as a result of the pro forma adjustments described in
these notes.
(i) Represents earnings before interest, taxes, depreciation of property,
plant and equipment, amortization of goodwill and equity in earnings (loss) of
joint ventures. EBITDA should not be considered as an alternative to net income
as an indicator of the Company's operating performance or to cash flows as a
measure of liquidity. Interest expense does not include interest earned on the
collateral account of the Company's receivables sale facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for discussion of other commonly used measures of liquidity and
operating performance.
(j) For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income (loss) before income taxes and equity in earnings of
joint ventures plus fixed charges (excluding capitalized interest) and
dividends from joint ventures. Fixed charges consist of interest expense,
amortization of debt expense, capitalized interest, and one-third of rent
expense, representative of the interest factor.
(k) The ratio of EBITDA to interest expense (in each case subject to certain
adjustments) will be used to determine compliance with certain covenants
contained in the Indenture. However, EBITDA should not be considered as an
alternative to net income as a measure of the Company's operating results or to
cash flow as a measure of the Company's liquidity.
21
<PAGE>
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information in this Prospectus, the following factors before tendering their
Old Notes in the Exchange Offer.
EUROPEAN ACQUISITIONS
The acquisition of BIG, Tudor and CEAC and the assumption of Gemala Battery's
customers represent major investments in a region with which Exide has had
limited experience. The integration and consolidation of these separate
entities will require substantial management time and financial and other
resources, and may pose risks with respect to production, customer service and
market share. While the Company believes that it has sufficient financial and
management resources to accomplish the rationalization and integration of BIG,
Tudor and CEAC, and the integration of Gemala Battery's customer base, there
can be no assurance in this regard or that the Company will not experience
difficulties with customers, personnel or others.
BATTERY MARKET; PRICING PRESSURES; SEASONALITY
The replacement and OEM SLI battery and industrial battery markets in North
America and Europe are highly competitive and have seen consolidation.
Competition and increased pressure for cost reductions from large retail
customers in the SLI aftermarket and from automotive OEMs and other customers
in the industrial battery markets have resulted in declining prices over the
last several years. Pricing in the battery industry continues to be highly
competitive. Given the Company's leading market share in the North American SLI
battery aftermarket, pressure from competitors has become even more intense.
The battery business is subject to certain factors affecting pricing and
sales over which Exide has little or no control, such as the effect of weather
conditions on the demand for replacement automotive batteries and fluctuations
in the price of lead. See "Summary--The Company--Recent Developments" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality and Weather." In addition, the markets for the
Company's products, particularly SLI batteries for OEMs and industrial
batteries, are affected substantially by the health of the general economies of
the countries and regions in which Exide markets its products. See "Business--
Manufacturing, Raw Materials and Suppliers" and "--Competition."
ENVIRONMENTAL MATTERS
The Company, particularly as a result of its manufacturing and secondary lead
smelting operations, is subject to numerous domestic and foreign environmental
and occupational safety and health laws and regulations and is exposed to
liabilities and compliance costs arising from its past and current handling,
processing, recycling, storing and disposing of hazardous substances and
hazardous wastes.
The Company may have insurance coverage for certain environmental remediation
costs arising out of business activities in the United States during the
periods the Company was insured under past comprehensive general liability
policies that it obtained prior to 1982. However, since that time the Company
has not (consistent with the automotive battery industry in general) maintained
environmental impairment liability insurance in the United States due to the
unavailability of meaningful coverage and the prohibitive cost of obtaining
even limited coverage, except that the Company may have limited coverage for
certain costs under environmental impairment policies issued between 1983 and
1985. The Company's United States general liability policies have included
pollution exclusion clauses which may bar recovery for liabilities caused after
1985. The Company is currently involved in litigation with certain insurance
carriers concerning the issue of insurance coverage for environmental
liabilities. For a description of these and other risks applicable to the
business of the Company, see "Business--Environmental, Health and Safety
Matters." Except as disclosed herein, the Company believes that it is in
substantial compliance with all material statutes and regulations regarding
environmental and occupational safety and health matters.
22
<PAGE>
As of July 2, 1995, the Company has been advised by the U.S. Environmental
Protection Agency (the "EPA") and various state agencies that it is a
"Potentially Responsible Party" ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or similar state laws at 46
federally defined Superfund or state equivalent sites. At sixteen of these
sites, the Company has either paid or is in the process of paying its share of
liability. Liability for environmental remediation costs under such statutes
can be imposed on a joint and several basis. However, management believes that
its PRP status at these Superfund sites will not have a material adverse effect
on the Company's business or financial condition because, based on the
Company's experience, it is reasonable to expect that liability will be roughly
proportionate to its volumetric contribution of waste to the sites. The Company
is the primary PRP at four Superfund sites. Other than these four sites, the
Company's volumetric contribution exceeds 5% at only nine Superfund sites (with
respect to two of which the Company's share of liability has been paid) and its
volumetric contribution at the six sites where the Company's liability has not
been fully paid averages 13.4%. The Company also is involved in the assessment
and remediation of various other properties, including certain Company-owned or
- -operated facilities. At August 31, 1995, the Company had established reserves
of $24.8 million for offsite and onsite environmental remediation costs. See
"Business--Environmental, Health and Safety Matters" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Future Environmental Developments" for additional information on environmental
matters.
The Company completed its acquisition of CEAC in May 1995. The Company is
aware that the lead-acid battery manufacturing facilities in Auxere and Nimes,
France do not currently meet air emission standards established by the French
Ministry of Environment. The local enforcement authority is aware of the
situation in Nimes, and has granted the Company an additional two year period
within which to achieve compliance with those standards. Investigation of the
situation at the Auxere facility is continuing. Management believes that the
cost of achieving compliance with the air limits at both these facilities is
not material.
In addition, the lead-acid battery manufacturing facilities in Vierzon,
France and Weiden, Germany are not in compliance with certain limits contained
in these facilities' wastewater discharge permits. The German authorities are
aware of the situation with respect to the Weiden facility; negotiations to
resolve this matter are continuing. Investigation of the situation at the
Vierzon facility is continuing. The cost of any upgrades required to achieve
compliance at these facilities are not expected to cause the Company to incur
material costs.
CEAC's German subsidiary, Sonnenschein, GmbH, has signed a consent order with
the administrative enforcement authorities to complete remediation of a river
which flows along the lead-acid battery manufacturing facility in Budingen,
Germany. That cleanup is proceeding and CEAC has established a reserve to cover
the cost of completing the project.
The Company's Polish subsidiary, Centra, S.A. ("Centra"), is a former state-
owned entity. Under the sales agreement with the Polish State Treasury, the
Company is obligated to spend $1.0 million in capital improvements in
environmental controls at the Centra facilities. The funds needed to cover this
commitment are included in CEAC's capital budget. Management believes that
these funds will be needed to ensure compliance with anticipated new air
regulations in Poland.
HIGH LEVERAGE; LIQUIDITY
The Company has indebtedness which is substantial in relation to its
stockholders' equity and interest and debt service requirements which are
significant compared to its cash flow from operations. As of July 2, 1995, the
Company's total long-term indebtedness (including current installments and
short-term borrowings) was $1,276.5 million ($1,278.5 million pro forma for the
Schuylkill acquisition) and stockholders' equity was $403.0 million ($428.9
million pro forma for the Schuylkill acquisition). Approximately $704.0 million
of such indebtedness bears interest at variable rates, which causes the amount
of the Company's debt service requirements to be sensitive to interest rate
movements. In addition, the Indenture permits the Company to incur certain
additional indebtedness. See "Use of Proceeds," "Capitalization," "Pro Forma
Condensed
23
<PAGE>
Consolidated Financial Data," "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and "Description of the New Notes--
Covenants--Limitation on Indebtedness." For the three months ended July 2,
1995, the Company's ratio of EBITDA to interest expense was 1.2 to 1.
The Company's credit agreement (the "Credit Agreement") with a group of banks
led by Bankers Trust Co. ("Bankers Trust"), Bank of America National Trust and
Savings Association ("Bank of America") and Bank of Montreal contains certain
restrictions on, among other things, the ability of the Company and its
subsidiaries to incur additional indebtedness, make certain capital
expenditures, repay indebtedness prior to its stated maturity, create liens,
sell assets and engage in mergers or acquisitions. In addition, the Credit
Agreement requires the Company to maintain certain financial ratios such as
EBITDA to interest expense. Because lower than expected sales in the fourth
quarter of fiscal 1995 would have caused the Company to be in violation of
certain financial covenants in the Credit Agreement, the Company obtained an
amendment to such covenants in order to permit continued borrowing. The
indentures, as amended in January 1995, relating to the 10 3/4% Notes and the
12 1/4% Debentures also contain certain restrictive covenants which the Company
is and has been in compliance with, but which could, in combination with the
leveraged nature of the Company, limit Exide's ability to incur indebtedness,
grant liens and take other corporate actions.
In addition to the Company issuing the Notes and the borrowing of additional
amounts under the Credit Agreement for the purchase price of CEAC,
approximately $150 million of debt of CEAC and its subsidiaries was refinanced
under a Facilities Agreement (the "Facilities Agreement"). See "Description of
Certain Indebtedness--Facilities Agreement."
The Company expects that its operating cash flow will be sufficient to cover
its debt service obligations, subject to the Company's need to refinance its
outstanding indebtedness at or prior to maturity. The Company's ability to
satisfy its obligations will, however, be dependent upon its future
performance, which is subject to prevailing economic conditions and financial,
business and other factors, including factors beyond the Company's control such
as weather. If the Company is not able to satisfy its fixed charges, including
its interest payment obligations, it could default on its indebtedness,
including the New Notes, which would entitle holders of such indebtedness to
accelerate the maturity thereof. See "Description of Certain Indebtedness" and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
ASSET ENCUMBRANCES; RANKING
The New Notes are unsecured senior indebtedness of the Company. At July 2,
1995, the Company had approximately $1,171.4 million of senior indebtedness,
approximately $407.0 million of which is secured indebtedness, and
approximately $82.2 million of subordinated indebtedness. Holders of such
secured indebtedness will be entitled to payment out of the proceeds of their
collateral prior to any holders of general unsecured indebtedness, including
the New Notes. The Indenture also permits the Company and its subsidiaries to
incur additional secured indebtedness and grant additional liens. See
"Description of the New Notes--Certain Covenants." In the event of bankruptcy,
liquidation or reorganization of the Company, holders of secured indebtedness
will have a claim, prior to the claim of the holders of the New Notes on the
assets of the Company securing such indebtedness. In addition, to the extent
that the value of such collateral is insufficient to satisfy such secured
indebtedness, holders of amounts remaining outstanding on such secured
indebtedness (as well as other unsubordinated creditors of the Company) would
be entitled to share pari passu with the New Notes with respect to any other
assets of the Company. Assets remaining after satisfaction of the claims of
holders of secured indebtedness may not be sufficient to pay amounts due on any
or all of the New Notes then outstanding.
The New Notes are effectively subordinated to all third-party liabilities of
the Company's subsidiaries. At July 2, 1995, the Company's subsidiaries had
approximately $1,588.6 million of such liabilities, including approximately
$833.6 of indebtedness, which includes the principal subsidiaries' guarantee of
the Company's obligations under the Credit Agreement.
24
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of its management team,
including Arthur M. Hawkins, Chairman, President and Chief Executive Officer.
Although the Company believes it could replace key employees in an orderly
fashion should the need arise, the loss of such personnel could have an adverse
effect on the Company. The Company is insured under a $10.0 million "key-man"
policy covering Mr. Hawkins' life.
LIMITATION ON USE OF NET OPERATING LOSSES
Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"),
imposes limitations on a corporation's ability to use net operating loss
("NOL") carryforwards if the corporation experiences a more-than-50-percent
ownership change over a three-year testing period. In general, if such an
ownership change occurs, Section 382 limits the amount of NOL carried over from
pre-ownership change years that can be used in any one post-change year to an
amount equal to the product of the value of the corporation's stock (with
certain adjustments) at the time of the change multiplied by an interest rate
determined by the Internal Revenue Service (the "IRS") for the month of the
change.
The Company believes that its March 1994 Common Stock offering, in
combination with its initial public offering, resulted in a more-than-50-
percent ownership change for purposes of Section 382. The Company's use of its
NOLs is therefore subject to the limitations imposed by Section 382. However,
given the Company's current tax situation and its estimate of the Section 382
annual limitation, the Company does not believe that the application of Section
382 will have any material adverse effect on the Company's results of
operations or liquidity.
The Company does not believe that it experienced a more-than-50-percent
ownership change for purposes of Section 382 prior to the March 1994 Common
Stock offering and the initial public offering. No assurances, however, can be
given that the IRS will not assert that the Company's use of its NOL
carryforward is limited by Section 382 prior to such offerings. If the Section
382 limitations were held to have been imposed for years prior to such
offerings as a result of ownership changes of the level described above, the
Company's use of its NOL carryforwards could be materially reduced for years
after the change and the Company's effective tax rate for such years could be
increased. Moreover, if the date of the change was before the end of the
Company's taxable year ended March 31, 1992, such a change could limit the
Company's ability to use $132.2 million of NOL carryforwards existing at March
31, 1991, of which $106.0 million was used to offset the Company's taxable
income in fiscal 1992 and in fiscal 1994.
CURRENCY RISK
Because of its recent acquisitions of BIG, Tudor and CEAC, and the recent
assumption of Gemala Battery's customer base, substantial portions of the
Company's revenues and expenses will be denominated in currencies other than
U.S. dollars and changes in exchange rates will therefore have a greater effect
on the Company's results of operations.
In addition, a substantial portion of the Company's indebtedness relating to
foreign acquisitions is denominated in United States dollars and the related
revenues are in foreign currencies. Although the Company intends to hedge the
related foreign exchange risks, there can be no assurance that this can be
accomplished on satisfactory terms.
LACK OF PUBLIC MARKET
The New Notes constitute a new issue of securities with no established
trading market. The Company does not intend to list the New Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. MS&Co. has indicated to the Company that it intends to make a
market in the New Notes, but it is under no obligation to do so and such
market-making could be discontinued at any time. MS&Co. may act as principal or
agent in such transactions. No assurance can be given that an active trading
market for the New Notes will develop.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the Exchange Offer. The
net proceeds of the Offering were approximately $293.9 million and were used,
along with borrowings of approximately $131.1 million under the Credit
Agreement, to finance the CEAC acquisition.
25
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of July 2, 1995. This table should be read in conjunction with the
consolidated financial information and pro forma condensed consolidated
financial information included elsewhere in this Prospectus, including the
notes thereto.
<TABLE>
<CAPTION>
JULY 2, 1995
----------------------
(AMOUNTS IN THOUSANDS)
<S> <C>
Short-term borrowings.................................... $ 111,904
==========
Current Maturities of Long-Term Debt..................... $ 30,524
==========
Long-Term Debt:
U.S. Credit Agreement borrowings....................... $ 350,750
The Notes.............................................. 300,000
10 3/4% Notes.......................................... 150,000
12 1/4% Debentures..................................... 82,208
European Facilities Agreement.......................... 154,275
European Term Loans.................................... 79,033
Spanish Convertible Debentures......................... 24,858
Other.................................................. 23,434
----------
1,164,558
Less: Current Maturities of Long-Term Debt............. 30,524
----------
Long-Term Debt....................................... 1,134,034
----------
Common Stockholders' Equity:
Common Stock and Surplus............................... 443,646
Retained Earnings (Deficit)............................ (40,913)
Other.................................................. 294
----------
Total Common Stockholders' Equity.................... 403,027
----------
Total Capitalization................................. $1,537,061
==========
</TABLE>
26
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical consolidated financial data
of the Company for the years ended March 31, 1991, 1992, 1993, 1994 and 1995
that were derived from the consolidated financial statements of the Company
which statements have been audited by Arthur Andersen LLP, independent public
accountants. The reports of such accountants with respect to the Company's
Consolidated Financial Statements for the fiscal years ended March 31, 1993,
1994 and 1995 are incorporated by reference in this Prospectus. Reference is
made to the report on the consolidated financial statements, which includes an
explanatory paragraph with respect to the change in the method in accounting
for postretirement employee benefits other than pensions in fiscal 1994 as
discussed in Note 8 to the consolidated financial statements. The following
table also sets forth summary historical consolidated financial data of the
Company for the three-month periods ended July 3, 1994 and July 2, 1995. The
information presented for the interim periods is unaudited but, in the opinion
of management, such information reflects only normal recurring adjustments
necessary for a fair presentation of the financial data for the interim
periods. Due to the highly seasonal nature of the Company's business, the
results for the interim periods presented are not indicative of the results for
a full year.
The following information should be read in conjunction with "Pro Forma
Condensed Consolidated Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the consolidated
financial statements and related notes thereto included elsewhere in this
Prospectus or incorporated by reference herein.
27
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31, THREE MONTHS ENDED
------------------------------------------------------- -----------------------
JULY 3, JULY 2,
1994 1995
1991 1992 1993 1994 1995 (UNAUDITED) (UNAUDITED)
-------- -------- -------- -------- ---------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales (a)........... $742,671 $593,626 $578,755 $679,649 $1,198,546 $165,067 $ 432,320
Gross Profit............ 132,249 118,475 128,757 158,253 265,680 40,617 89,044
Selling, General and
Administrative
Expenses............... 98,081 83,645 81,587 96,495 201,518 32,062 84,406
Operating Income........ 34,168 34,830 47,170 61,758 64,162 8,555 4,688
Interest Expense........ 41,319 34,364 35,261 33,150 52,565 7,731 25,125
Income Taxes............ 450 14,100 3,400 10,794 5,160 547 (7,545)
Income (Loss) before
Extraordinary Loss and
Cumulative Effect of
Accounting Change...... (12,324) 6,656 5,153 17,217 4,491 (41) (14,678)
Extraordinary Loss...... -- -- (10,363)(b) -- (3,597)(c) -- --
Cumulative effect of
accounting change (d).. -- -- -- (12,711) -- -- --
Net Income (Loss)....... (12,324) 6,656 (5,210) 4,506 894 (41) (14,678)
Preferred dividends..... 6,440 6,986 4,996 -- -- -- --
BALANCE SHEET DATA
(AT END OF PERIOD):
Working Capital......... 142,514 122,906 132,339 153,711 395,875 596,461
Property, Plant and
Equipment, net......... 180,101 139,494 136,392 181,147 423,876 587,955
Total Assets............ 595,066 463,679 474,868 629,090 1,637,589 2,603,742
Long-Term Debt
(Including Current
Maturities and Short-
term Borrowings)....... 375,157 274,866 305,562 291,821 645,135 1,276,462
Preferred Stock......... 82,135 88,325 6,462 -- -- --
Common Stockholders'
Equity (Deficit)....... (10,580) (10,013) 45,096 164,450 413,230 403,027
OTHER DATA:
EBITDA (a)(e)........... 59,137 82,077(f) 72,427 91,465 106,878 16,822 28,989
Ratio of Earnings to
Fixed Charges(g)....... -- 1.5 1.2 1.7 1.2 1.0 0.2
EBITDA/Interest
Expense(h)............. 1.4 2.4 2.1 2.8 2.0 2.2 1.2
Capital Expenditures.... 24,470 15,426 20,266 47,164 61,257 17,585 19,590
Net cash provided by
(used in) operating
activities............. 1,887 7,931 24,959 49,364 (69,134) (24,226) (41,951)
Net cash used in
investing activities... (27,563) 100,807 (21,845) (54,859) (322,896) (51,819) (400,384)
Net cash provided by
(used in) financing
activities............. 28,181 (111,050) (2,948) 38,701 418,314 76,298 431,737
Units Sold.............. 17,838 17,483 18,075 21,896 32,309 5,386 9,359
</TABLE>
- --------
(a) The Company sold its North American industrial battery product line on June
10, 1991. Net sales and EBITDA for the period prior to June 1991 include
the North American industrial battery product line. If the North American
industrial battery product line were excluded, net sales would have been
$528.6 million, $581.6 million and $569.8 million and EBITDA would have
been $30.8 million, $39.6 million and $58.2 million for fiscal 1990, fiscal
1991 and fiscal 1992, respectively.
(b) During fiscal 1993, the Company recorded a loss of $10.4 million (net of a
tax benefit of $1.9 million) resulting from the early extinguishment of
debt in connection with the Refinancing.
(c) During fiscal 1995, the Company recorded a loss of $3.6 million (net of a
tax benefit of $2.3 million) resulting from the early retirement of debt in
connection with the Credit Agreement.
(d) Effective April 1, 1993, the Company adopted SFAS 106 which resulted in a
charge of $12.7 million with no income tax effect because of the
uncertainty of deductibility at that time. See Note 8 to the Company's
consolidated financial statements incorporated by reference herein.
(e) Represents earnings before interest, taxes, depreciation of property, plant
and equipment, amortization of goodwill and equity in earnings (loss) of
joint ventures. EBITDA should not be considered as an alternative to net
income as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity. Interest expense does not include interest
earned on the collateral account of the Company's receivable sales
facility. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a discussion of other commonly used measures
of liquidity and operating performance.
28
<PAGE>
(f) Includes the gain on the sale of the North American industrial battery
product line of $22.1 million.
(g) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes and equity in earnings of
joint ventures plus fixed charges (excluding capitalized interest) and
dividends from joint ventures. Fixed charges consist of interest expense,
amortization of debt expense, capitalized interest, and one-third of rent
expense, representative of the interest factor. Earnings were less than
fixed charges by approximately $13.4 million for the year ended March 31,
1991.
(h) The ratio of EBITDA to interest expense (in each case subject to certain
adjustments) will be used to determine compliance with certain covenants
contained in the Indenture. However, EBITDA should not be considered as an
alternative to net income as a measure of the Company's operating results
or to cash flow as a measure of the Company's liquidity.
29
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following pro forma condensed consolidated statement of income for the
fiscal year ended March 31, 1995 was prepared to illustrate the estimated
effects of the following events as if each event had occurred on April 1, 1994:
(i) the Tudor acquisition and its related borrowings under the Credit
Agreement, (ii) the purchase of Evanite, (iii) the CEAC acquisition and its
related financing including the application of the net proceeds from the
Company's December 1994 Common Stock offering and borrowings under the Credit
Agreement and the Facilities Agreement, and (iv) the acquisition of Schuylkill
and the related financing thereof.
The CEAC acquisition and its related financing was completed in May 1995 and
is included in Exide's reported results for the period from June 1, 1995
through July 2, 1995. The pro forma condensed consolidated statement of income
for the three months ended July 2, 1995 was prepared to illustrate the
estimated effects of the CEAC acquisition for the two-month period from April
1, 1995 through May 31, 1995 and the Schuylkill acquisition and related
financing thereof as if each event had occurred for income statement purposes
at the beginning of the period presented (April 1, 1995).
The Tudor, Evanite and CEAC acquisitions and their related financings were
completed by July 2, 1995 and have been included in Exide's unaudited balance
sheet as of July 2, 1995. The pro forma condensed consolidated balance sheet as
of July 2, 1995 was prepared to illustrate the effects of the Schuylkill
acquisition and related financing thereof as if it had occurred on July 2,
1995.
The pro forma financial information has been prepared on the basis of
assumptions described in the notes thereto and includes assumptions relating to
the allocation of the consideration paid for each of the acquisitions to their
respective assets and liabilities based on preliminary estimates of their
respective fair values. The actual allocation of such consideration may differ
from that reflected in the pro forma condensed consolidated financial
statements after valuations and other studies to be performed pursuant to post
closing adjustments related to the acquisitions have been completed. Amounts
allocated will be based upon the estimated fair values at the time of the
acquisitions which could vary significantly from the amounts as of July 2,
1995. In addition, the interest rates on the borrowings under the Credit
Agreement and the estimated transaction fees and expenses, are assumed solely
for the purpose of presenting the pro forma financial information set forth
below. The actual interest rates on borrowings under the Credit Agreement and
actual transaction fees and expenses will differ from the assumptions set forth
below.
The pro forma adjustments are based on currently available information and
upon certain assumptions that management believes are reasonable under the
circumstances.
THE PRO FORMA FINANCIAL DATA DO NOT PURPORT TO REPRESENT WHAT THE COMPANY'S
RESULTS OF OPERATIONS WOULD ACTUALLY HAVE BEEN IF THE TRANSACTIONS ABOVE IN
FACT HAD OCCURRED AT APRIL 1, 1994, APRIL 1, 1995 OR ON JULY 2, 1995 OR TO
PROJECT THE COMPANY'S RESULTS OF OPERATIONS FOR ANY FUTURE DATE OR PERIOD.
The following financial information should be read in conjunction with
"Capitalization," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and the related notes thereto of Exide,
Tudor and CEAC appearing elsewhere in this Prospectus or incorporated by
reference herein.
30
<PAGE>
EXIDE CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED MARCH 31, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TUDOR CEAC
TUDOR ACQUISITION EVANITE CEAC ACQUISITION SCHUYLKILL
ACTUAL ACQUISITION(A) ADJUSTMENTS(B) ACQUISITION(C) ACQUISITION(D) ADJUSTMENTS(E) ACQUISITION(F)
---------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales....... $1,198,546 $232,601 $ -- $43,480 $788,741 $ -- $45,653
Cost of Sales... 932,866 173,598 (4,800) 32,573 581,308 (1,600) 37,947
---------- -------- ------- ------- -------- -------- -------
Gross Profit.... 265,680 59,003 4,800 10,907 207,433 1,600 7,706
---------- -------- ------- ------- -------- -------- -------
Selling, General
& Administrative
Expenses........ 201,518 57,505 -- 7,645 165,263 -- 2,008
Restructuring
Expenses........ -- 994 (994) -- 6,533 (6,533) --
---------- -------- ------- ------- -------- -------- -------
201,518 58,499 (994) 7,645 171,796 (6,533) 2,008
---------- -------- ------- ------- -------- -------- -------
Operating Income
(Loss).......... 64,162 504 5,794 3,262 35,637 8,133 5,698
---------- -------- ------- ------- -------- -------- -------
Interest
Expense......... 52,565 6,505 9,800 2,089 13,465 30,900 8,536
Other (Income)
Expense......... 874 (685) 685 (1,197) 7,118 (4,543) 73
---------- -------- ------- ------- -------- -------- -------
53,439 5,820 10,485 892 20,583 26,357 8,609
---------- -------- ------- ------- -------- -------- -------
Income (Loss)
Before Income
Taxes, Minority
Interest and
Extraordinary
loss............ 10,723 (5,316) (4,691) 2,370 15,054 (18,224) (2,911)
Income Taxes(h). 5,160 (218) (2,838) 948 8,303 (5,538) 1,374
---------- -------- ------- ------- -------- -------- -------
Income (Loss)
Before Minority
Interest and
Extraordinary
loss............ 5,563 (5,098) (1,853) 1,422 6,751 (12,686) (4,285)
Minority
Interest........ 1,072 151 (310) -- 1,149 17 --
---------- -------- ------- ------- -------- -------- -------
Income (Loss)
before
Extraordinary
Loss............ $ 4,491 $ (5,249) $(1,543) $ 1,422 $ 5,602 $(12,703) $(4,285)
========== ======== ======= ======= ======== ======== =======
EBITDA(i)....... $ 106,878
Ratio of
Earnings to
Fixed
Charges(j)...... 1.2
EBITDA/Interest
Expense(k)...... 2.0
<CAPTION>
SCHUYLKILL PRO FORMA
ACQUISITION FOR THE
ADJUSTMENTS(G) ACQUISITIONS
-------------- ------------
<S> <C> <C>
Net Sales....... $(16,292) $2,292,729
Cost of Sales... (15,430) 1,736,462
-------------- ------------
Gross Profit.... (862) 556,267
-------------- ------------
Selling, General
& Administrative
Expenses........ -- 433,939
Restructuring
Expenses........ -- --
-------------- ------------
-- 433,939
-------------- ------------
Operating Income
(Loss).......... (862) 122,328
-------------- ------------
Interest
Expense......... (8,395) 115,465
Other (Income)
Expense......... -- 2,325
-------------- ------------
(8,395) 117,790
-------------- ------------
Income (Loss)
Before Income
Taxes, Minority
Interest and
Extraordinary
loss............ 7,533 4,538
Income Taxes(h). 2,942 10,133
-------------- ------------
Income (Loss)
Before Minority
Interest and
Extraordinary
loss............ 4,591 (5,595)
Minority
Interest........ -- 2,079
-------------- ------------
Income (Loss)
before
Extraordinary
Loss............ $ 4,591 $ (7,674)
============== ============
EBITDA(i)....... $ 229,026
Ratio of
Earnings to
Fixed
Charges(j)...... 1.0
EBITDA/Interest
Expense(k)...... 2.0
</TABLE>
31
<PAGE>
EXIDE CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JULY 2, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
CEAC SCHUYLKILL PRO FORMA
CEAC ACQUISITION SCHUYLKILL ACQUISITION FOR THE
ACTUAL ACQUISITION(D) ADJUSTMENTS(E) ACQUISITION(F) ADJUSTMENTS(G) ACQUISITIONS
-------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales............... $432,320 $123,031 $ -- $9,907 $(3,765) $561,493
Cost of Sales........... 343,226 96,115 (300) 7,796 (3,083) 443,754
-------- -------- ------- ------ ------- --------
Gross Profit............ 89,094 26,916 300 2,111 (682) 117,739
-------- -------- ------- ------ ------- --------
Selling, General &
Administrative Expenses. 84,406 29,605 -- 746 -- 114,757
Restructuring Expenses.. -- 2,412 -- -- -- 2,412
-------- -------- ------- ------ ------- --------
84,406 32,017 -- 746 -- 117,169
-------- -------- ------- ------ ------- --------
Operating Income (Loss). 4,688 (5,101) 300 1,365 (682) 570
-------- -------- ------- ------ ------- --------
Interest Expense........ 25,125 2,907 7,400 2,269 (2,227) 35,474
Other (Income) Expense.. 2,253 (1,571) -- -- -- 682
-------- -------- ------- ------ ------- --------
27,378 1,336 7,400 2,269 (2,227) 36,156
-------- -------- ------- ------ ------- --------
Income (Loss) Before
Income Taxes and
Minority Interest....... (22,690) (6,437) (7,100) (904) 1,545 (35,586)
Income Taxes(h)......... (7,545) (2,294) (2,345) (45) 564 (11,665)
-------- -------- ------- ------ ------- --------
Income (Loss) Before
Minority Interest....... (15,145) (4,143) (4,755) (859) 981 (23,921)
Minority Interest....... (467) 373 (9) -- -- (103)
-------- -------- ------- ------ ------- --------
Net Income (Loss)....... $(14,678) $ (4,516) $(4,746) $ (859) $ 981 $(23,818)
======== ======== ======= ====== ======= ========
EBITDA(i)............... $ 28,989 $ 33,546
Ratio of Earnings to
Fixed Charges(j)........ 0.2 0.1
EBITDA/Interest
Expense(k).............. 1.2 1.0
</TABLE>
32
<PAGE>
EXIDE CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT JULY 2, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
SCHUYLKILL FOR THE
SCHUYLKILL ACQUISITION SCHUYLKILL
ACTUAL ACQUISITION(F) ADJUSTMENTS(G) ACQUISITION
---------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash & Equivalents..... $ 52,886 $ 312 $ -- $ 53,198
Receivables, net....... 581,269 7,335 (3,626) 584,978
Inventories............ 646,677 7,782 (626) 653,833
Prepaids & Other....... 69,943 1,158 -- 71,101
Deferred Income Taxes.. 33,333 -- 345 33,678
---------- -------- -------- ----------
1,384,108 16,587 (3,907) 1,396,788
---------- -------- -------- ----------
Property, Plant &
Equipment, net......... 587,955 11,486 -- 599,441
Other Assets:
Goodwill............... 499,988 -- 9,014 509,002
Other.................. 131,691 906 800 133,397
---------- -------- -------- ----------
631,679 906 9,814 642,399
---------- -------- -------- ----------
Total Assets......... $2,603,742 $ 28,979 $ 5,907 $2,638,628
========== ======== ======== ==========
LIABILITIES AND COMMON
STOCKHOLDERS' EQUITY
Current Liabilities:
Short Term Borrowings.. $ 111,878 $ -- $ -- $ 111,878
Current Maturities of
Long-Term Debt........ 30,524 58,532 (58,532) 30,524
Accounts Payable....... 305,366 2,621 (3,376) 304,611
Accrued Expenses....... 339,853 16,254 (10,121) 345,986
---------- -------- -------- ----------
787,621 77,407 (72,029) 792,999
---------- -------- -------- ----------
Long-Term Debt.......... 1,134,060 -- 2,000 1,136,060
Other Noncurrent
Liabilities............ 226,426 1,000 1,000 228,426
Deferred Income Taxes... 2,615 -- -- 2,615
Minority Interests...... 49,993 -- -- 49,993
Commitments and
Contingencies
Common Stockholders'
Equity:
Common Stock &
Surplus............... 443,646 5,155 20,353 469,154
Retained Earnings
(Deficit)............. (40,913) (54,583) 54,583 (40,913)
Other.................. 294 -- -- 294
---------- -------- -------- ----------
403,027 (49,428) 74,936 428,535
---------- -------- -------- ----------
Total Liabilities and
Common Stockholders'
Equity.............. $2,603,742 $ 28,979 $ 5,907 $2,638,628
========== ======== ======== ==========
</TABLE>
33
<PAGE>
NOTES TO PRO FORMA STATEMENTS
(a) Reflects the consolidated effect of the Tudor acquisition converted to
United States dollars. Spanish pesetas were translated to United States dollars
using the average translation rates for the six month preacquisition period
ended October 2, 1994 (132.82).
(b) Reflects the acquisition adjustments related to the Tudor acquisition
including (1) borrowing approximately $250 million under the Credit Agreement
and $89.5 million in letters of credit at average rates of 6.28% and 2.125%,
respectively, for the six month preacquisition period ended October 2, 1994,
(2) the amortization of deferred financing costs (included in Exide's actual
results) over principally 5 years (included in interest expense), (3)
recognition of $106.3 million of goodwill from the acquisition and related
amortization over 40 years, (4) the reduction in depreciation expense of $6.0
million related to the fair market value remeasurement of property, plant and
equipment for the six months ended October 2, 1994, and (5) the recognition of
the loss attributable to the minority shareholders interests (5.6%).
(c) Reflects the consolidated effect and related acquisition adjustments of
the Evanite acquisition. The adjustments for Evanite relate to (1) borrowing
approximately $35.4 million under the Credit Agreement at the average rate of
5.69% for the period from April 1, 1994 to February 22, 1995 (the
preacquisition period), (2) the elimination of $325,000 of cost of goods sold
and $673,000 of selling, general and administrative expense related primarily
to compensation paid to terminated members of management in duplicative
positions with the Company and excess lease costs incurred in the
preacquisition period, and (3) the elimination of approximately $25 million for
the preacquisition period of Evanite's sales which are "intercompany" sales.
(d) Reflects the consolidated effect of the CEAC acquisition, including its
acquisition of a 95% interest in Centra, converted to United States dollars.
French francs were translated to United States dollars using the average
translation rates for the fiscal year ended March 31, 1995 (5.3717) and the two
month preacquisition period ended May 31, 1995 (4.9213).
(e) Reflects the acquisition adjustments related to the CEAC acquisition
including (1) borrowing approximately $149.0 million under the Credit Agreement
at 7.057% and 8.380% for the fiscal year ended March 31, 1995 and the two month
preacquisition period ended May 31, 1995, respectively, (2) utilizing the
$247.5 million of net proceeds from the Company's December 1994 Common Stock
offering, (3) borrowing $300.0 million pursuant to the 10% Senior Notes issued
in April 1995, (4) refinancing existing CEAC debt of approximately $150 million
with borrowings under a new European Facilities Agreement, (5) the recognition
and amortization of $174.8 million of additional goodwill over 40 years, and
(6) the reduction of property, plant and equipment for $40 million related to
the remeasurement to fair market value and the related reduction of
depreciation expense of $4.0 million.
(f) Reflects the consolidated effect of the Schuylkill acquisition. The
Schuylkill information included in this column of the consolidated statement of
income for the fiscal year ended March 31, 1995 represents Schuylkill's
information for their fiscal year ended December 31, 1994.
(g) Reflects the acquisition adjustments related to the Schuylkill
acquisition including (1) issuing 593,210 shares of Exide's common stock ($43
per share as of July 2, 1995) to Schuylkill's lenders in exchange for all of
Schuylkill's outstanding long-term debt (including current maturities and
accrued interest), (2) borrowing approximately $2.0 million under the Credit
Agreement at 7.057% and 8.38% for the fiscal year ended March 31, 1995 and the
three months ended July 2, 1995, respectively, (3) the elimination of
Schuylkill's historical interest expense related to (1) above, (4) the
recognition of $2 million of additional environmental reserves, (5) the
recognition and amortization of $9.0 million of goodwill over 40 years, (6) the
elimination of approximately $16.3 million and $3.8 million of Schuylkill's
sales for the fiscal year ended March 31, 1995 and for the three months ended
July 2, 1995, respectively, which are "intercompany" sales, (7) the elimination
of approximately $.5 million and $.6 million of Schuylkill's gross profit for
the fiscal year ended March 31,
34
<PAGE>
1995 and for the three months ended July 2, 1995, respectively, which would
have been "deferred intercompany profit," (8) the elimination of approximately
$3.6 million of intercompany receivables and payables related to intercompany
balances with Exide as of July 2, 1995, and (9) the elimination of common stock
and surplus and retained earnings (deficit).
(h) Reflects the adjustment of income taxes (using an estimated combined
federal and state rate of 40% for United States entities, an estimated rate of
35% for CEAC and Tudor) as a result of the pro forma adjustments described in
these notes.
(i) Represents earnings before interest, taxes, depreciation of property,
plant and equipment, amortization of goodwill and equity in earnings (loss) of
joint ventures. EBITDA should not be considered as an alternative to net income
as an indicator of the Company's operating performance or to cash flows as a
measure of liquidity. Interest expense does not include interest earned on the
collateral account of the Company's receivables sale facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for discussion of other commonly used measures of liquidity and
operating performance.
(j) For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income (loss) before income taxes and equity in earnings of
joint ventures plus fixed charges (excluding capitalized interest) and
dividends from joint ventures. Fixed charges consist of interest expense,
amortization of debt expense, capitalized interest, and one-third of rent
expense, representative of the interest factor.
(k) The ratio of EBITDA to interest expense (in each case subject to certain
adjustments) will be used to determine compliance with certain covenants
contained in the Indenture. However, EBITDA should not be considered as an
alternative to net income as a measure of the Company's operating results or to
cash flow as a measure of the Company's liquidity.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Due to the significant European acquisition activity by Exide, future
operating results of Exide will be materially different from, and will not be
comparable with, reported historical operating results. In addition, the
Company began incurring in the second quarter of fiscal 1995 expenses in
connection with the implementation of the Sears contract, including operating,
distribution, marketing and promotional expenses. These continuing expenses
are expected to affect operating margins and profitability at least through
fiscal 1996.
The unusually mild winter in early 1995 had a substantial adverse effect on
the Company's results of operations for the fourth quarter of fiscal 1995. See
"Summary--The Company--Recent Developments."
The Company through its European acquisitions is exposed to foreign currency
risk in most Western European countries principally France, Spain, Germany,
Italy and the UK. The Company does not have material operations in countries
whose economies can be classified as hyper-inflationary. Movements of exchange
rates vis-a-vis the US dollar can result in both unrealized and realized
exchange gains or losses. In some instances gains in one currency may be
offset by losses in another as all currencies may not move in unison vis-a-vis
the US dollar. Because it is impossible to forecast future movements in
foreign exchange rates it is the policy of the Company to reduce foreign
currency risk by balancing net foreign currency positions where possible. In
selected cases, net foreign currency positions are balanced through hedging
contracts with financial institutions where appropriate.
<TABLE>
<CAPTION>
ACTUAL
(UNAUDITED)
------------------
THREE MONTHS
YEAR ENDED MARCH 31, ENDED
------------------------------ ------------------
JUNE 3, JUNE 2,
1993 1994 1995 1994 1995
-------- -------- ---------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C>
Net Sales.................. $578,755 $679,649 $1,198,546 $165,067 $432,320
Cost of Sales.............. 449,998 521,396 932,866 124,450 343,226
Gross Profit............... 128,757 158,253 265,680 40,617 89,094
Gross Profit Percentages... 22.2% 23.3% 22.2% 24.6% 20.6%
Selling, General and
Administrative Expenses... 81,587 96,495 201,518 32,062 84,406
Operating Income........... 47,170 61,758 64,162 8,555 4,688
Interest Expense........... 35,261 33,150 52,565 7,731 25,125
Other Expenses, net........ 3,565 597 874 318 2,253
Income Taxes............... 3,400 10,794 5,160 547 (7,545)
Extraordinary Loss (a)..... (10,363) -- (3,597) -- --
Cumulative Effect of
Accounting Change (b)..... -- (12,711) -- -- --
Net Income (Loss).......... (5,210) 4,506 894 (41) (14,678)
EBITDA (c)................. 72,427 91,465 106,878 16,822 28,989
</TABLE>
- --------
(a) During fiscal 1993, the Company recorded a loss of $10.4 million (net of a
tax benefit of $1.9 million) resulting from the early extinguishment of
debt in connection with the Refinancing. During fiscal 1995, the Company
recorded a loss of $3.6 million (net of a tax benefit of $2.3 million)
resulting from the early retirement of debt. See Note 6 to the Company's
Consolidated Financial Statements incorporated by reference herein.
(b) Effective April 1, 1993, the Company adopted SFAS 106 which resulted in a
charge of $12.7 million with no income tax effect because of the
uncertainty of deductibility at that time. See Note 8 to the Company's
Consolidated Financial Statements incorporated by reference herein.
(c) Represents earnings before interest, taxes, depreciation of property,
plant and equipment, amortization of goodwill and equity in earnings
(loss) of joint ventures. EBITDA should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity. Interest expense
does not include interest earned on the collateral account of the
Company's receivables sale facility. See below for a discussion of other
commonly used measures of liquidity and operating performance.
RESULTS OF OPERATIONS
Three Months Ended July 2, 1995 Compared with Three Months Ended July 3, 1994
Net sales increased $267.3 million, or 162%, to $432.3 million in the first
three months of fiscal 1996 compared with the first three months of fiscal
1995. The sales increase was principally attributable to the acquisition of
CEAC in May 1995 and Tudor in October 1994 with net sales of $74.0 million and
$133.0 million, respectively, including their industrial battery sales, which
were $100.5 million for the three months ended July 2, 1995. Sales in the
first three months of fiscal 1996 were also favorably impacted by shipments to
Sears Roebuck & Co., which was a significant new customer added late in the
second quarter of fiscal 1995, growth of the Company's business in the United
Kingdom (net sales increased $13.9 million), and the inclusion of Evanite with
net sales of $12.7 million, a February 1995 acquisition.
36
<PAGE>
Gross profit increased $48.5 million, while gross profit margin fell by 4
percentage points in the first three months of fiscal 1996 versus the first
three months of fiscal 1995. The increase in gross profit was principally the
result of the inclusion of CEAC's and Tudor's gross profit of $18.9 million and
$33.6 million, respectively, the growth of the Company's business in the United
Kingdom (gross profit increased $1.2 million) and seasonality. The profit
margin decline was attributable to higher lead costs experienced in the first
three months of fiscal 1996 versus 1995 as well as the mix of product sales,
including the European businesses where margins are higher in the later
quarters of the fiscal year.
Selling, general and administrative expenses increased $52.3 million in the
first three months of fiscal 1996, or 163.3%, compared to same period in the
previous year. This is attributable to inclusion of CEAC and Tudor of $15.6
million and $30.5 million, respectively, and the growth in the United Kingdom
business of $3.6 million.
Operating income decreased $3.9 million, or 45.2%, primarily as a result of
the matters discussed above.
Interest expense increased $17.4 million in the first three months of fiscal
1996 compared to the first three months of fiscal 1995, principally as a result
of the inclusion of CEAC and Tudor of $1.2 million and $3.3 million,
respectively, the interest cost attributable to the financing of the Company's
European acquisitions and the carrying costs associated with the higher working
capital levels related to the growth of the U.S. and United Kingdom businesses
and higher inventory levels.
Net income decreased $14.6 million, primarily as a result of the matters
discussed above.
Sales and operating income (loss) in North America were $206.2 million and
$(2.8) million, respectively, for the three months ended July 2, 1995 and
$159.8 million and $9.7 million, respectively, for the three months ended July
3, 1994. Sales and operating income (loss) in Europe were $226.1 million and
$7.5 million, respectively, for the three months ended July 2, 1995 and $5.3
million and $(0.2) million for the three months ended July 3, 1994.
Year Ended March 31, 1995, Compared with Year Ended March 31, 1994
Net sales increased $518.9 million to $1,198.5 million in fiscal 1995
compared with fiscal 1994. The sales increase was principally attributable to
the acquisition of Tudor in October 1994 with net sales of $299.0 million,
including its industrial battery sales of $122.7 million during the period, the
acquisition of BIG on March 30, 1994 with net sales of $74.0 million; and the
full year impact of Battronics (now Exide Canada Ltd.) with net sales of $64.4
million, which was first included on a consolidated basis in October 1993. In
addition, during 1995 the Company began supplying a significant new customer,
Sears Roebuck & Co. Partially offsetting this increase was the adverse impact
of an abnormally warm winter which was experienced both in the Company's North
American and European markets.
Gross profit increased $107.4 million, while gross profit margin fell by 1.1
percentage points in fiscal 1995 versus 1994. The increase in gross profit was
principally the result of the inclusion of Tudor and BIG for $81.1 million and
$21.7 million, respectively, of gross profit. The decrease in profit margin was
due principally to one-time promotional costs associated with Exide's domestic
volume growth, and associated higher manufacturing and transportation costs.
Selling, general and administrative expenses increased $105.0 million, or
108.8%, compared to the previous year, primarily due to Tudor and BIG of $66.0
million and $14.1 million, respectively, which accounted for approximately
$80.1 million, or 76.3% of the increase. In addition, selling and advertising
increased due to higher sales volume on new and existing accounts, and other
sales promotional activities including racing sponsorships. General and
administrative expenses increased principally due to higher legal fees and
other professional services.
Operating income increased $2.4 million, or 3.9%, primarily as a result of
the matters discussed above.
Interest expense increased $19.4 million, or 58.6% in fiscal year 1995
compared to fiscal 1994, principally as a result of higher debt levels
associated with the financing of Exide's European acquisitions.
Sales and operating profit in North America were $825.1 million and $35.9
million, respectively, for the year ended March 31, 1995, and $679.6 million
and $61.8 million, respectively, for the year ended March 31,
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1994. Sales and operating profit in Europe were $373.4 million and $28.2
million, respectively, for the year ended March 31, 1995.
Year Ended March 31, 1994 Compared with Year Ended March 31, 1993
Net sales increased $100.9 million, or 17.4%, in fiscal 1994 compared to
fiscal 1993. The sales increase was the result of substantially higher sales to
new as well as existing customers and from new product introductions. Also,
fiscal 1994 results include Battronics on a consolidated basis since October
1993, whereas the Battronics results were previously reported as an equity
investment. Of the 17.4% sales increase in fiscal 1994, Battronics sales
accounted for 5.9% of such sales increase. Unit sales volume increased by
approximately 3,821,000 batteries, or 21.1% (16.0% without Battronics), over
the same period in the previous year. Unit sales growth exceeded the increase
in dollar sales due primarily to a change in product mix resulting principally
from the expiration of a defense-related contract. Additionally, pricing in the
battery industry continued to be highly competitive.
Gross profit increased $29.5 million ($23.7 million without Battronics) and
the gross profit margin improved by 1.1 percentage points (1.4 percentage
points without Battronics) in fiscal 1994 versus fiscal 1993. The increase in
gross profit margin was attributable principally to both higher unit sales and
production volume and the favorable impact of the Company's continuing cost
reduction program in its manufacturing and distribution process. The higher
production volume resulted in additional fixed cost absorption, further
reducing cost of sales as a percentage of net sales.
Selling, general and administrative expenses increased $14.9 million, or
18.3%, ($12 million or 14.7% without Battronics) compared to the previous year,
primarily due to increases in selling expenses associated with higher sales
volume of both large accounts and wholesale distribution outlets and the timing
of certain expenses. In addition, advertising expenses increased principally as
a result of promotional expenses connected with a marine battery program and
other programs.
Operating income increased $14.6 million, or 30.9% ($11.8 million or 25%
without Battronics), primarily as a result of the higher volume and continuing
cost reduction program discussed above.
Interest expense decreased $2.1 million or 6% in fiscal 1994 compared to
fiscal 1993, primarily as a result of the reduction in revolving loan
borrowings due to the application of the proceeds from equity offerings (see
Note 2 to the Company's Consolidated Financial Statements incorporated by
reference herein).
Income before extraordinary loss and the cumulative effect of an accounting
change increased in fiscal 1994 by $12.1 million, or 234%, over fiscal 1993.
Net income in fiscal 1994 of $4.5 million compares to a net loss in the
previous year of $5.2 million. The $12.7 million charge in fiscal 1994 for the
cumulative effect of an accounting change relates to the recognition of the
liability for postretirement benefits under SFAS 106 in fiscal 1994. In fiscal
1993, the extraordinary loss of $10.4 million resulted from the early
retirement of the debt as a result of the Refinancing, net of the associated
income tax benefit.
SEASONALITY AND WEATHER
The automotive aftermarket is seasonal as retail sales of replacement
batteries are generally higher in the fall and winter (the Company's second and
third fiscal quarters). Accordingly, demand for the Company's automotive
batteries is generally highest in the fall and early winter as retailers build
inventories for the winter season. In addition, demand for automotive batteries
is affected by weather conditions. Unusually cold winters or hot summers will
increase demand for automotive replacement batteries. Conversely, unusually
mild winters or cool summers will decrease demand for automotive replacement
batteries. See "Summary--The Company--Recent Developments."
The following table sets forth the net sales, gross profit and operating
income of the Company for each of the eight preceding fiscal quarters, ending
with the three months ended July 2, 1995.
<TABLE>
<CAPTION>
OCTOBER 3, JANUARY 2, MARCH 31, JULY 3, OCTOBER 2, JANUARY 1, MARCH 31, JULY 2,
1993 1994 1994 1994 1994 1995 1995 1995
---------- ---------- --------- -------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $177,868 $185,661 $185,359 $165,067 $233,142 $436,796 $363,541 $432,320
Gross Profit............ 47,224 46,086 36,674 40,617 56,007 98,530 70,526 89,094
Operating Income........ 25,695 20,892 9,024 8,555 26,363 36,360 (7,116) 4,688
</TABLE>
38
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise primarily from the funding of its
seasonal working capital needs, obligations on its indebtedness and capital
expenditures. In addition, the Company has paid quarterly cash dividends of
$0.02 per share on the Common Stock since its initial public offering.
Historically, the Company has met these liquidity requirements through cash
flow generated from operating activities and with borrowed funds and the
proceeds of sales of accounts receivable. Due to the seasonal demands of the
automotive battery industry, the Company builds inventory in advance of the
typically stronger selling periods during the fall and winter. The Company's
greatest cash demands from operations occur during the months of June through
October.
Funds generated (used) from continuing operations were $24.1 million, $52.9
million, $(69.1) million and $(42.0) million in fiscal 1993, fiscal 1994 and
fiscal 1995 and the first three months of fiscal 1996, respectively. Because of
the seasonality of the Company's business, more funds are typically generated
in its third and fourth fiscal quarters. The Company used the net proceeds of
its initial public offering, its March 1994 Common Stock offering and its
December 1994 Common Stock offering primarily to reduce revolving loans under
its credit agreements. The Company is party to a receivables purchase agreement
under which the other party has committed (subject to certain exceptions) to
purchase selected accounts receivable of the Company, up to a maximum
commitment of $40.0 million. See "Description of Certain Indebtedness--
Receivables Purchase Agreement."
Obligations under the Credit Agreement bear interest and the Facilities
Agreement bear interest at fluctuating rates. Increases in interest rates on
such obligations could adversely affect the Company's results of operations and
financial condition. See "Description of Certain Indebtedness" for information
with respect to the terms of the Credit Agreement and the Facilities Agreement.
The Company has three interest rate collar agreements and an interest rate swap
agreement which reduce the impact of changes in interest rates on a portion of
the Company's floating rate debt. The collar agreements effectively limit the
LIBOR base interest rate on $150.0 million of borrowings under the Credit
Agreement to no more than 8% through December 30, 1997 and on $50.0 million to
no more than 8% through July 17, 1998. See Note 6 to the Company's Consolidated
Financial Statements incorporated by reference herein. If interest rates fall
below certain levels, Exide is required to make payments to the counterparties
under the agreements. The Company also has a $50.0 million interest rate swap
agreement which effectively fixes LIBOR interest rates at 6.2% through May 16,
1997.
The Company's capital expenditures were $20.3 million in fiscal 1993, $47.2
million in fiscal 1994, $61.3 million in fiscal 1995 and $19.6 million in the
first three months of fiscal 1996, and the Company's budgeted capital
expenditures for the remainder of fiscal 1996 are approximately $79.4 million.
Capital expenditures increased in fiscal 1994 and 1995 principally due to the
acquisition of and improvements made at the Bristol, Tennessee battery
manufacturing facility, Tudor and the U.K. business and new facilities of the
Company's Sure Start Division. The Company's North American capital expenditure
budget for fiscal 1996 is approximately $30 million and the Company's European
capital expenditure budget for fiscal 1996 is approximately $69 million.
Capital expenditures will increase substantially in the future as a result of
the recent European acquisitions. The Credit Agreement limits the amounts of
capital expenditures which may be made by the Company and its subsidiaries.
Other non-capital expenditures for environmental matters in fiscal 1996 are
budgeted to be $4.1 million for North America and $5.0 million for Europe. See
"Description of Certain Indebtedness--Credit Agreement--Events of Default and
Covenants" regarding the limitations on capital expenditures imposed under the
Credit Agreement.
The Company borrowed $229.2 million under the Credit Agreement to finance its
acquisition of Tudor in October 1994 and is obligated with respect to letters
of credit currently totaling $63.9 million which guarantee indebtedness of
Tudor. The Company plans to cause Tudor to refinance such indebtedness, thereby
eliminating the requirement for such letters of credit and guarantees by the
Company. In December 1994, the Company completed a public offering of its
Common Stock with net proceeds of $215.0 million and in January 1995 sold
additional shares pursuant to the over-allotment option for net proceeds of
$32.5 million. The net proceeds of that offering were used to repay revolving
loans under the Credit Agreement and excess proceeds were invested in short-
term, interest bearing investment grade securities.
39
<PAGE>
The Company financed the CEAC acquisition through borrowings under the Credit
Agreement and with the proceeds of the Offering, and refinanced approximately
$150 million of indebtedness of CEAC pursuant to the Facilities Agreement. See
"Description of Certain Indebtedness--Facilities Agreement." At July 2, 1995,
the Company had $7.4 million available under its U.S. Credit Agreement, with
$62.0 million available on a pro forma basis after the Tudor refinancing as of
August 14, 1995, based on a facility size of $444 million. Availability from
other sources, such as Tudor bank facilities and other subsidiaries, was $92.6
million at July 2, 1995, and $64.3 million on August 14, 1995, including CEAC.
Because lower than expected sales in the fourth quarter of fiscal 1995 would
have caused the Company to be in violation of certain financial covenants in
the Credit Agreement, the Company obtained an amendment to such covenants in
order to permit continued borrowing. See "Risk Factors--High Leverage;
Liquidity."
At July 2, 1995, the Company had established reserves of $22.0 million for
offsite and onsite environmental remediation costs. See "Business--
Environmental, Health and Safety Matters" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Future Environmental
Developments."
As of March 31, 1995, for federal income tax purposes the Company had a NOL
carryforward of approximately $25.6 million which may be available, subject to
certain restrictions, to offset U.S. taxable income generated in the Company's
current and future taxable years. See "Risk Factors--Limitation on Use of Net
Operating Losses" and Note 10 to the Company's consolidated financial
statements incorporated by reference herein.
EFFECT OF INFLATION
Inflation has not had a material impact on the operations of the Company
during the past three years. The Company generally has been able to offset the
effects of inflation with price increases, cost-reduction programs and
operating efficiencies.
IMPACT OF ACCOUNTING STANDARDS
Accounting for Income Taxes. Effective April 1, 1991, the Company adopted the
provisions of SFAS 109, "Accounting for Income Taxes," which replaced SFAS 96.
Due to the similarities in methodology with SFAS 96 and the significant level
of operating loss carryforwards available to the Company, the effect of
adoption was not material.
Accounting for Postretirement Benefits. In December 1990, the Financial
Accounting Standards Board issued SFAS 106 which prescribes the accounting for
postretirement benefits other than pensions. This standard requires that the
expected cost of these benefits be charged to expense during the years that the
employees render service. This was a significant change from the Company's
previous policy of recognizing these costs as an expense when paid.
In fiscal 1994, the Company adopted SFAS 106. The Company elected to
recognize the cumulative effect of this accounting change by expensing $12.7
million, which represented the accumulated postretirement benefit obligation
for current and future retirees at the beginning of fiscal 1994. The net
periodic postretirement benefit cost in fiscal 1995 was $955, including $856
for interest and $99 for service.
FUTURE ENVIRONMENTAL DEVELOPMENTS
The Company is subject to extensive federal, state, local and foreign
environmental, health and safety laws and regulations. The Company expects
that, due to the nature of its business, it will in the future be subject to
more stringent environmental, health and safety standards. The Company
anticipates that these standards will cause an increase in the Company's
capital expenditures and operating costs. Until the standards are adopted it is
not possible to estimate these costs with any certainty or to predict whether
they will have a material effect on the Company's financial condition or
results of operation. See "Risk Factors--Environmental Matters" and "Business--
Environmental, Health and Safety Matters."
40
<PAGE>
BUSINESS
Exide is the leading manufacturer and marketer of SLI batteries in the world.
The Company's acquisitions of BIG, Tudor and CEAC, as well as its assumption of
the customers of Gemala Battery, have made it Europe's largest producer and
marketer of SLI batteries and industrial batteries.
For the year ended December 31, 1994, CEAC had consolidated net sales of
approximately $850 million. In September 1994, CEAC sold all of its interest in
CFEC, a French-based SLI battery manufacturer, pursuant to a ruling of the
competition authorities of the European Commission entered in connection with
Fiat's acquisition of CEAC in 1991. In the historical data relating to CEAC and
Exide's European operations, CFEC has been deconsolidated for all periods
presented and it has been recorded in the financial statements as an investment
held for sale. In 1994 and 1995, CEAC purchased a 50% interest in Inci Aku,
Turkey's second largest SLI battery manufacturer and a 95% interest in Centra,
a leading Polish battery manufacturer.
PRODUCTS
SLI Batteries. SLI batteries for the automotive aftermarket and the OEM
market represented 69% of the pro forma consolidated revenues of Exide for the
fiscal year ended March 31, 1995. In the United States and Canada, Exide has
the most complete line of automotive batteries, and the Company has introduced
numerous new products, including batteries for superior performance in hot and
cold climates, such as the Exide Heat Guard battery, the first climatized
battery, the Exide Barium Plus line maintenance-free batteries that have a
shelf life twice as long as conventional batteries and the Exide 911 Emergency
Vehicle Battery that employs patented technology to provide the high
performance required for emergency vehicles.
The Company also produces SLI batteries for commercial applications, such as
trucks, farm equipment, tractors and other off-road vehicles, as well as
specialty batteries for marine and garden tractor applications. For the marine
market, Exide has introduced the Nautilus Mega Cycle high performance, dual
terminal battery and the Power Probe battery which allows boaters to instantly
check their battery power. Yuasa Exide, in which the Company has a 13.5%
interest, is the leading producer of motorcycle batteries in the United States.
Industrial Batteries. Exide is the largest manufacturer and marketer in
Europe of industrial batteries. Sales of industrial batteries represented 25%
of the pro forma consolidated revenues of Exide for the fiscal year ended March
31, 1995. Standby (also known as "stationary") batteries are used primarily in
telecommunications, as well as electric installations, security and emergency
systems, such as for airports and hospitals, and uninterruptible power systems.
In the fiscal year ended March 31, 1995, Exide's pro forma sales of standby
batteries were approximately $271 million. Exide is one of Europe's leading
suppliers of submarine batteries and its customers include the navies of
Norway, Israel, Turkey, Sweden, Greece, Germany and Spain. Exide's European
operations have developed the Dry Safe line of maintenance-free standby
batteries, an improvement over existing sealed batteries.
Traction batteries are used to drive electric vehicles such as forklifts,
transporters, mine locomotives, electric cars and cable-guided equipment. In
the fiscal year ended March 31, 1995, Exide's traction battery pro forma sales
were $308 million. The traction battery market is divided into the OEM market,
comprised of the manufacturers of such electric vehicles, and the replacement
market, which includes large users of such electric vehicles as well as OEM
dealer networks. The most important recent development by Exide's European
operations in traction batteries is the CSM series of batteries which contain a
copper negative plate that increases their capacity.
Exide sold its North American industrial battery product line in 1991 to
Yuasa Exide. In addition to motorcycle batteries, Yuasa Exide produces sealed
lead-acid batteries used primarily for computer applications and security
systems.
41
<PAGE>
Other Products. The Company also produces battery chargers and, through
acquisitions, has expanded its presence in the North American automotive market
by adding its Speed Clip line of battery accessories and wheel weights and its
Sure Start line of remanufactured starters and alternators. Its European
operations also manufacture and market other products such as battery chargers
and accessories, wheel weights, plastic components, NiCd and lithium batteries
and dry cell batteries. Sales of products other than SLI and industrial
batteries represented 6% of the pro forma consolidated revenues of Exide for
fiscal year ended March 31, 1995.
MARKETS AND MARKETING
North America. Over 80% of all automotive batteries sold in the United States
and Canada are sold in the aftermarket, and in fiscal 1995 approximately 88% of
the Company's unit sales were of automotive replacement batteries. The
aftermarket is influenced more by the age and number of vehicles in service
than new production levels and tends to be less cyclical than the OEM market.
In April 1994, Sears, one of the largest retailers of SLI batteries in the
United States, selected the Company as the primary supplier of its batteries,
including the Die Hard brand. Exide is the leading supplier for 17 of the 20
largest battery retailers in the United States, including NAPA Distribution
Centers, Kmart Corp., Northern Automotive Corporation, Montgomery Ward & Co.
and The Pep Boys-Manny, Moe & Jack. The Company also produces SLI batteries for
the OEM market in North America, principally for Chrysler Corporation, for whom
it is the primary supplier, as well as Toyota Motor Corp., Mazda Motor Corp.,
Honda Motor Co., Ltd., Ford Tractor and others.
Current management, which is led by Arthur M. Hawkins, Chairman, President
and Chief Executive Officer, who joined Exide in 1985, has transformed the
Company into a marketing-driven business by development of a new customer base
focused on leading mass-merchandisers, auto supply chains and wholesalers and
introducing merchandise displays, innovative packing and programs to assist
customers in marketing and inventory management. To support and expand this
customer base, Exide has expanded its Company-owned distribution system from 12
wholesale branch outlets in 1985 to approximately 130 today. These outlets,
which distribute Exide batteries to both large accounts and local dealers and
other small volume customers, also allow Exide to collect used batteries for
recycling in the Company's lead smelters as part of its recycling program aimed
at reducing costs and protecting the environment. In addition, in recent years
the Company has introduced several new products including an advanced line of
maintenance-free batteries and an emergency vehicle battery. The Company, which
markets its products under various trademarks including Exide, Willard and
Prestolite, has strengthened its brand recognition through promotional
activities, including sponsoring the NASCAR Winston Cup racing team of Geoff
Bodine and an Indianapolis-type car. A 1992 Marketing Research Institute study
that surveyed 20,000 households showed that the Exide brand had the second
highest level of battery brand recognition in the United States.
Europe. Approximately 53% of the pro forma combined sales of Exide's European
operations in fiscal 1995 were of SLI batteries. Pro forma aftermarket sales
were approximately 40% of the pro forma combined sales of Exide's European
operations in fiscal 1995. The Company has a leading position in the
aftermarket in France, Italy, Belgium, the United Kingdom, Ireland, Finland,
Norway, Portugal and Spain. Exide's replacement SLI battery brands include
Fulmen, Sonnenschein, Tudor, Hagen Batterie, LYAC Power, SONNAK, Anker, BIG and
Exide. In addition to the markets in which it has a direct presence through
manufacturing subsidiaries, the Company markets batteries in and exports
batteries to approximately 50 other countries.
Approximately 13% of the pro forma combined fiscal 1995 sales of Exide's
European operations were to OEMs, including the Volkswagen group, the Renault
group, the PSA group, Opel, Iveco, Nissan Motor Co., Ltd., Porsche AG, Saab,
Suzuki Motor Corp., Rolls-Royce PLC in Europe, Volvo, Ford and Fiat. As
development supplier to the PSA group and several other automobile
manufacturers, Exide works closely with such customers as they develop new
models with varying requirements. As in the United States, OEM battery sales
are closely linked to new vehicle sales.
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<PAGE>
The Company's standby batteries are used for telecommunications,
uninterruptible power supplies, security systems, submarines, power plants,
railways and miscellaneous mobile applications (such as wheelchairs and golf
carts). The Company has the leading market share in both standby and traction
batteries in western Europe. Exide supplies traction batteries to some of the
major electric vehicle OEMs in Europe, including the Linde group, Clark, BT,
Hyster and Jungheinrich to a wide variety of customers in the aftermarket
ranging from large industrial concerns to small warehouses. Technical expertise
and assistance and customer service are more important in the industrial
battery markets than in the SLI battery markets and the Company has technical
service agreements with a number of its customers.
Customers. On a pro forma basis combining the operations of Exide's recently
acquired European operations, the Company's five largest customers accounted
for 13.5% of its fiscal 1995 net sales. The Company does not believe that a
material part of its business is dependent upon a single customer the loss of
which would have a material impact on the long-term business of the Company.
However, the loss of one or more of the Company's largest customers would have
a negative short-term impact on the Company's results of operations.
DISTRIBUTION NETWORKS
North America. As part of its program to improve its customer base and its
service to such customer base, the Company has developed a network of over 130
Company-owned wholesale distribution outlets throughout the United States and
Canada that sell and distribute Exide batteries to local auto part retailers,
service stations, local repair shops and other smaller volume customers as well
as collect used and spent batteries for recycling in the Company-owned lead
smelters. The Company's wholesale outlet distribution system has grown to
constitute the third largest distribution system of SLI batteries in the United
States. The development of its wholesale outlet distribution system, which is
supplemented by regional accounts, small battery wholesalers and battery
specialists, has been a key component in the Company's success and has enabled
the Company to provide cost effective product distribution to the Company's
national accounts, reduced the Company's reliance on small battery wholesalers
and retailers and increased the Company's margins.
Europe. Exide's European operations distribute their aftermarket SLI
batteries primarily through battery wholesalers, OEM dealer networks,
hypermarkets, European purchasing centers and oil companies. Battery
wholesalers sell and distribute batteries to a network of automotive parts
retailers, service stations, independent retailers and supermarkets throughout
Europe. The Company also distributes SLI batteries through its own branch
network. Wholesalers, who sell to repair shops and service stations, and OEM
dealers represent the large majority of this market, but supermarket chains,
replacement part stores (who are represented by purchasing associations) and
hypermarkets have become increasingly important.
Given the importance of service and technical assistance, Exide's European
operations generally ship standby batteries directly to system suppliers and
uninterruptible power supply manufacturers who include the standby batteries in
the equipment and distribute products to end users. Traction batteries are
distributed through OEM dealers and independent distributors and directly to
large fleet users. Exide's European operations also distribute both standby and
traction batteries through their own branch network. Exide has begun a
restructuring of its distribution network to better serve the mass
merchandising segment and currently plans to reduce the number of its warehouse
outlets and subcontract the rest of its company-owned distribution operations.
RESEARCH AND DEVELOPMENT; QUALITY
In North America, Exide has increased its number of engineers from only two
in 1985 to 73 today. This commitment to research and development has allowed
the Company to introduce more new products in the last five years than the rest
of the domestic SLI battery industry combined, including the Exide Barium
43
<PAGE>
Plus line and other batteries noted above. Exide has received over 100 new
patents since 1985 and is now working on the next generation of power
solutions, including solar photovoltaic energy. The Company's presence in the
North American OEM markets for automobiles and commercial vehicles,
particularly its close working relationship with Chrysler Corporation, helps it
to remain current with technological innovations. Similarly, Exide through its
European operations, devotes substantial efforts to research and development
and benefits from its appointment as development supplier to several major
automobile manufacturers. The Company has received the maximum research and
development rating from the PSA group and similar ratings from most of the
other European automobile companies it serves. For the SLI market, Exide is
developing lighter batteries which will result in lower fuel consumption and
recently developed a new line of very low maintenance batteries with higher
starting power. With respect to industrial batteries, Exide has focused on
improving efficiency and reducing maintenance.
Exide continues to devote substantial efforts to research and development for
batteries for electric cars and other vehicles. The Company participated in the
development of an electric vehicle which has set various speed and endurance
records and was demonstrated at the 1994 Indianapolis 500. The Company is
participating in electric vehicle battery search projects funded by the
European Union and a consortium of battery manufacturers and by the Spanish
Ministry of Industry and Energy.
Exide's performance and product quality has been widely recognized by its
customers. In recent years, in the United States, Exide has received the
"Desert Storm" Commendation from the United States military, Carport Vendor of
the Year Award, Chrysler Quality Excellence Award, Chrysler Preferred Supplier
Evaluation, Ford Q1 Award, Toyota President's Award, Navistar QA 7 Award, NAPA
Excellence Through Performance Award, Kmart Innovation of Products and
Marketing Award, Montgomery Ward Excellence in Vendor Performance, Quality
Stores Vendor of the Year, and the ADAP Stores Vendor of the Year.
Exide's European operations have received awards for quality automotive OEM
production, including the Formel Q and Most Value to Customer awards from
Volkswagen, and one of the Company's batteries was chosen as the best
replacement battery in France in a study conducted by Auto Plus, France's
highest circulation automobile magazine. In the industrial market, the
Company's standby batteries have received quality approval certificates from
such major telecommunications companies as the Deutsches Bundespost Telekom and
from European defense organizations.
MANUFACTURING, RAW MATERIALS AND SUPPLIERS
North America. The major reasons for the Company's emergence as the low-cost
producer in the United States and Canadian automotive battery industry have
been the achievement of economies of scale through strategic acquisitions, the
consolidation of facilities, the Company's relatively low labor costs and
increased vertical integration in the areas of lead smelting, plastics and
battery separators. Since 1985 and in association with the acquisition of
General Battery in May 1987, the Company consolidated the operations of seven
plants and eight distribution centers into larger, more efficient locations
with lower labor costs. This has led to a significant reduction in unit costs
and improved labor productivity. The Company also is a leader in developing
advanced production techniques, such as continuous plate processing,
statistical process control and computer-aided design and manufacturing. The
Company's manufacturing plant in Salina, Kansas is the highest volume and one
of the lowest cost automotive battery plants in the world. The Company
continues to increase production at its manufacturing facility in Bristol,
Tennessee, a modern, highly efficient battery manufacturing plant similar to
the Company's Salina, Kansas facility. Initial production at Bristol began in
July 1994 and production levels are presently over 10,000 units per day.
Exide believes its overall unit conversion costs (production costs other than
raw materials) are significantly below the conversion costs of its major United
States and Canadian competitors. These cost efficiencies result from the
Company's high volume of production, emphasis on cost control and competitive
44
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labor costs. The Company's relatively high level of vertical integration
reduces the effects of changes in the market prices of raw materials on
production costs and, when lead market prices are higher, may result in
substantial raw material cost savings. Lead is the principal raw material in
the manufacture of batteries, representing approximately one-third of the cost
of goods sold. The Company obtains a majority of its lead requirements through
the operation of two secondary lead smelters, which reclaim lead by recycling
spent lead-acid batteries. With the recent increases in sales, particularly as
a result of new customers, the Company has begun purchasing a larger portion of
its lead requirements, which causes the Company to be more sensitive to changes
in lead prices. Lead prices have recently been increasing. The Company obtains
batteries for recycling from its customers and through its wholesale outlet
distribution system. Exide obtains the balance of its lead from a number of
suppliers. The Company believes it has a significant competitive advantage from
its in-house lead smelting and from back hauling of spent batteries for
recycling through its distribution network and wholesale distribution outlets.
When lead market prices decline, the Company's lead cost advantage from
vertical integration can be reduced or eliminated. Because Exide adjusts its
pricing to a substantial number of customers pursuant to a formula based on a
published price of lead, if market prices were to decline below the Company's
lead production cost for an extended period of time, the Company could be
forced to obtain more of its requirements from third parties and to seek to
reduce its variable and fixed costs of conversion. In August 1995 the Company
acquired Schuylkill Holdings, Inc., a U.S. company that operates two secondary
lead smelters; the Company paid $2 million in cash for Schuylkill's stock,
options and subordinated notes, and issued 593,210 shares of its common stock
and a contingent note, the value of which will be based on average market lead
prices through 1999, for the secured debt of Schuylkill's operating subsidiary,
subject to certain adjustments. The Contingent Note operates in such a way that
if, for example, the average market lead price was $0.285 the note amount would
be $5.0 million and if the price was $0.365 the note amount would be $14.7
million. Schuylkill has operated at a loss for the last four fiscal years;
losses for the previous three years were $4.3 million, $7.4 million and $4.0
million for the fiscal years ended 1994, 1993 and 1992, respectively.
The Company also produces approximately 80% of its plastic molding
requirements in the United States. In addition, approximately 88% of the
Company's raw plastic requirements in the United States are obtained through
in-house reclamation of spent battery cases as part of its recycling program.
Other key raw materials and components in the production of batteries include
separators, lead oxide and chemicals, all of which are generally available from
multiple sources. The Company currently produces all of its United States
requirements of separators, one component in SLI batteries, through Evanite. In
order to further vertically integrate its operations and assure a portion of
its global separator needs, the Company consummated the acquisition of Evanite
in February 1995. The Company has not experienced any material stoppage or
slowdown in production as a result of the unavailability, or delays in the
availability, of raw materials.
Europe. The Company operates 32 manufacturing plants, including temporary
operation of Gemala Battery's plant, in France, Italy, Spain, Portugal,
Germany, the United Kingdom and elsewhere in Europe, as well as three secondary
lead smelters. Through CEAC's investment in Turkey and its recent acquisition
in Poland, and Tudor's investment in India, the Company has a presence in
Eastern Europe and Asia as well. CEAC has initiated a manufacturing and
production rationalization program to reduce production costs, improve
flexibility and improve product quality. Since 1989, CEAC has closed four
plants and restructured one plant. As a result of its rationalization program,
CEAC has substantially improved productivity and reduced costs. Tudor embarked
on a restructuring plan three years ago focused on streamlining manufacturing
through technology improvement, plant consolidation and personnel reduction.
The Company believes it has significant opportunities to rationalize and
improve its operations in the United Kingdom as it combines the operations of
BIG and its temporary operation of Gemala Battery's plant. Exide's European
operations currently operate at approximately 75% of SLI production capacity,
providing the opportunity for further consolidation of manufacturing.
Exide has three secondary lead smelters in Europe, one in Spain, one in
Portugal and one in France, that supply a significant portion of Exide's
European operations' lead requirements. Major investments have been made in
these plants in recent years to improve lead treatment and recycling processes.
Finally, the Company has plastic reclamation and reprocessing at each of the
smelters, as well as stand-alone facilities in Italy, supplying most of its own
plastic for cases.
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COMPETITION
North America. The United States and Canadian market for SLI and specialty
batteries is mature and highly competitive. Battery manufacturers compete
primarily on the basis of price, quality, service, warranty period and
timeliness of delivery. Generally, sales are made without long-term contracts.
Because the domestic industry had excess capacity, competition and increased
pressure for cost reduction from large retail customers in the SLI aftermarket
and from automotive OEMs and other customers in the OEM markets for SLI
batteries have resulted in declining prices in the last several years and some
smaller competitors were unable to survive.
The Company's primary domestic competitors are Johnson Controls, Inc., Delco
Remy (a division of General Motors Corporation) and GNB Incorporated (a
subsidiary of Pacific Dunlop, Ltd.). Regional manufacturers are also
significant, accounting for approximately 13% of the United States market.
Europe. The SLI and industrial battery markets are very competitive and
competition has intensified as a result of reduced demand due to the European
recession. As in the North American SLI and industrial battery market, European
manufacturers compete primarily on the basis of price, quality, service,
warranty period and timeliness of delivery. There is excess capacity in the
industry and competition and increased pressure for cost reduction from large
customers in both the SLI and industrial battery markets have resulted in
declining prices in recent years, particularly of SLI batteries. In certain
countries, lower cost imported brands from the Far East have increasingly
penetrated the automotive aftermarket. Currency fluctuations among the European
countries and as compared with other countries can also have considerable
competitive effects. Among Exide's competitors in Europe are VB Autobatterie
GmbH ("Varta/Bosch"), Hawker Siddeley, Fiamm, Delco Remy, Autosil, Hoppecke,
Yuasa Exide and Matsushita.
EMPLOYEES
North America. As of July 2, 1995, the Company employed approximately 1,659
salaried employees and approximately 4,840 hourly employees in North America.
Approximately 42% of such salaried employees are engaged in sales, service and
marketing and approximately 42% in engineering and manufacturing. Approximately
37% of its hourly employees are represented by unions. Relations with the
unions are generally good, and during the last four years the Company has
negotiated new agreements without labor disruptions. Contracts covering
approximately 244 of the Company's union employees expire in fiscal 1996.
Europe. As of July 2, 1995, the Company employed approximately 12,407
employees in Europe. The Company's hourly employees are generally represented
by unions. Relations with the unions are generally good. Contracts covering the
Company's European union employees expire on various dates through 1998.
TRADEMARKS AND PATENTS
The Company owns or has a license to use various trademarks which are of
value in the conduct of its business. While the Company believes such
trademarks and trade names enhance the brand recognition of its products and
therefore are important to its business, the Company also believes that its
products, engineering skills, reputation for quality and relationships with its
customers are equally important for the maintenance and growth of its business.
An unaffiliated firm has rights to the Exide mark in approximately 37 foreign
countries. In addition, Exide Electronics Group, Inc., an unaffiliated company,
is licensed to use the Exide name on certain devices.
Exide has been issued many patents worldwide, some of which are active, with
several additional patents in process covering design of lead acid batteries
and battery manufacturing equipment. While the Company believes that patents
are important to its business operations, it also believes that the loss of any
single patent or several patents would not have a material adverse effect on
the Company.
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PROPERTIES
The chart below lists the location of the principal facilities of the
Company. All of the facilities are owned unless otherwise indicated. In North
America, all of such owned properties and the leases for the leased properties
are subject to liens under the Credit Agreement. The leases for leased
facilities expire at various dates through 2001. In addition to these
properties, Tudor holds a portfolio of undeveloped land totaling approximately
2,500 acres of which it divests portions from time to time.
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FOOTAGE USE
- ------------------------ ---------------- ----------------------------------------------
<S> <C> <C>
North America:
Auburn Hills, MI....... 5,000 (leased) OEM Engineering and Sales
Bloomfield Hills, MI... 10,000 (leased) Executive Offices
Bristol, TN............ 120,000 (leased) Automotive Accessory Manufacturing
Bristol, TN............ 474,000 (leased) Battery Manufacturing (renovations in progress)
Burlington, IA......... 177,000 Battery Manufacturing
Cooper, TX............. 30,000 Starter and Alternator Manufacturing
Corvallis, OR.......... 332,000 Separator and Other Manufacturing
Corydon, IN............ 161,000 Separator Manufacturing
Denver, CO............. 64,000 Distribution Center
Drumondville, Quebec,
Canada................ 100,000 Battery Manufacturing
Frankfort, IN.......... 204,000 Battery Manufacturing
Frankfort, IN.......... 211,000 Distribution Center
Greer, SC.............. 126,000 Battery Manufacturing
Hamburg, PA............ 179,000 Battery Manufacturing
Hamburg, PA............ 30,000 Distribution Center
Indianapolis, IN....... 135,000 Starter and Alternator Manufacturing
Lampeter, PA........... 79,000 Battery Plastics Manufacturing
Logansport, IN......... 217,000 Battery Manufacturing
Manchester, IA......... 185,000 Battery Manufacturing
Maple, Ontario, Canada. 100,000 (leased) Distribution and Administration
Maple, Ontario, Canada. 179,000 Battery Manufacturing
Memphis, TN............ 4,000 Executive Offices and Distribution
Muncie, IN............. 124,000 Secondary Lead Smelting
North Bay, Ontario,
Canada................ 30,000 (leased) Battery Charger Manufacturing
Phoenix, AZ............ 31,000 (leased) Distribution Center
Reading, PA............ 72,000 (leased) Engineering and Research and Development
Reading, PA............ 92,000 Secondary Lead Smelting
Reading, PA............ 135,000 Administrative Offices
Reading, PA............ 215,000 Battery Manufacturing
Salina, KS............. 286,000 (leased) Battery Manufacturing
Sumner, WA............. 87,000 (leased) Distribution Center
Travelers Rest, SC..... 62,000 (leased) Distribution Center
Europe:
Graz, Austria.......... 144,000 Industrial Battery Manufacturing
Florival, Belgium...... 290,000 SLI Battery Manufacturing
Herlev, Denmark........ 15,000 Executive Offices
Witham Essex, England.. 20,000 (leased) Executive Offices
Bristol, England....... 5,000 Warehouse
Over Hulton, England... 279,000 Industrial Charger Manufacturing
Vantaa, Finland........ 133,000 (leased) SLI Battery Manufacturing
Auxerre, France........ 176,000 SLI Battery Manufacturing
Fougeres, France....... 38,000 Industrial Battery Manufacturing
Gennevilliers, France.. 55,000 Executive Offices
Lille, France.......... 484,000 Industrial Battery Manufacturing
Nanterre, France....... 169,000 SLI Battery Manufacturing
Nimes, France.......... 120,000 SLI Battery Manufacturing
Peronne, France........ 96,000 Battery Plastics Manufacturing
Pont Ste Maxence,
France................ 71,000 Secondary Lead Smelting
Vierzon, France........ 174,000 SLI Battery Manufacturing
Berlin, Germany........ 99,000 SLI Battery Manufacturing
Budingen, Germany
(two)................. 258,000 Industrial Battery Manufacturing
15,000 Lithium Cells Manufacturing
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FOOTAGE USE
- ------------------------ ---------------- -----------------------------------------------
<S> <C> <C>
Kassel, Germany........ 212,000 SLI Battery Manufacturing
Soest, Germany......... 386,000 Industrial Battery Manufacturing
Weiden, Germany........ 208,000 Industrial Battery Manufacturing
Schimatari, Greece..... 69,000 SLI Battery Manufacturing
Maarssen, Holland...... 26,000 Executive Offices
Avellino, Italy........ 35,000 Lids and Containers Manufacturing
Bergamo, Italy......... 203,000 Lids, Containers and Separators Manufacturing
Casalnuovo, Italy...... 483,000 Industrial Battery Manufacturing
Fumane, Italy.......... 65,000 SLI Battery Manufacturing
Romano Di Lombardia,
Italy................. 266,000 SLI Battery Manufacturing
Horten, Norway......... 108,000 (leased) Industrial Battery Manufacturing
Czarnkow, Poland....... 112,000 Sundry Batteries Manufacturing
Poznan, Poland (five).. 887,000 SLI Battery Manufacturing
Castanheira, Portugal.. 471,000 SLI and Industrial Battery Manufacturing
Ilhavo, Portugal....... 54,000 Manual Tools Manufacturing
Azambuja (Sonalur),
Portugal.............. 21,000 Recycling
Azambuja (Azai),
Portugal.............. 21,000 Lids and Containers Manufacturing
Lisbon, Portugal....... 12,000 Executive Offices
Azuqueca de Henares,
Spain................. 434,000 SLI Battery Manufacturing and Research
Torrejon de Ardoz,
Spain................. 54,000 Industrial Battery Manufacturing
Loeches, Spain......... 12,000 (leased) Traction Chargers Manufacturing
Malpica, Zaragoza,
Spain................. 213,000 SLI Battery Manufacturing
Hernani, Spain......... 22,000 SLI Battery Manufacturing
Hernani, Spain......... 13,000 (leased) Warehouse
S. Esteban de Gormaz,
Spain................. 63,000 Recycling
Madrid, Spain.......... 38,000 (leased) Executive Offices
Manzares, Spain........ 438,000 SLI Battery Manufacturing
Zaragoza, Spain........ 248,000 Industrial Battery Manufacturing
Nol, Sweden............ 447,000 SLI and Industrial Battery Manufacturing
Izmir, Turkey.......... 64,000 SLI Battery Manufacturing
Cwmbran, Wales......... 105,000 Executive Offices and SLI Battery Manufacturing
</TABLE>
In addition, the Company temporarily operates an SLI battery manufacturing
facility in Dagenham, England, which includes some executive offices. The
Company also operates over 130 wholesale distribution outlets in the U.S.,
virtually all of which are leased. The Company also leases distribution outlets
in Europe.
The Company believes that its facilities are in good operating condition,
adequately maintained, and suitable to meet its present needs and future plans.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
North America. The Company, particularly as a result of its manufacturing and
secondary lead smelting operations, is subject to numerous environmental laws
and regulations and is exposed to liabilities and compliance costs arising from
its past and current handling, processing, recycling, storing and disposing of
hazardous substances and hazardous wastes. The Company's operations are also
subject to federal, state and provincial occupational safety and health laws
and regulations, particularly relating to the monitoring of employee health.
Except as disclosed herein, the Company believes that it is in substantial
compliance with all material environmental, health and safety requirements. See
"Risk Factors--Environmental Matters" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Future Environmental
Developments."
As of August 31, 1995, the Company has been advised by the EPA and various
state agencies that it is a PRP under CERCLA or similar state laws at 47
federally defined Superfund or state equivalent sites. At sixteen of these
sites, the Company has either paid or is in the process of paying its share of
liability. In most
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<PAGE>
instances, the Company's obligations are not expected to be significant because
its portion of any potential liability appears to be minor to insignificant in
relation to the total liability of all PRPs that have been identified and which
are viable. The Company's share of the anticipated remediation costs associated
with all of the Superfund sites where it has been named a PRP, which share is
based on the Company's estimated volumetric contribution to each site, is
included in the environmental remediation reserves discussed below. Because the
Company's liability for environmental remediation costs under such statutes may
be imposed on a joint and several basis, the Company's liability may not
necessarily be based on volumetric contributions and could be greater than the
Company's estimates. Management believes, however, that its PRP status at these
Superfund sites will not have a material adverse effect on the Company's
business or financial condition because, based on the Company's experience, it
is reasonable to expect that liability will be roughly proportionate to its
volumetric contribution of waste to the sites.
The Company is the primary PRP at four Superfund sites (discussed below).
Other than these four sites, the Company's volumetric contribution exceeds 5%
at only nine Superfund sites (with respect to two of which the Company's share
of liability has been paid) and its volumetric contribution at six sites where
the Company's liability has not yet been fully paid averages 13.4%. At all
other sites, the Company's volumetric contribution is currently estimated to be
less than 5% of the total waste at the site. However, in some instances the
Company's volumetric share of the waste at a site is not the sole determinant
of the Company's share of the remediation costs because some PRPs are unable to
fund their allotted share and the shortfall is divided among the viable PRPs.
The Company is the primary PRP at four Superfund sites. The Brown's Battery
site, located in Pennsylvania, was operated by third party owners in the 1960's
and early 1970's. The EPA completed its study of this site and issued a final
Record of Decision ("ROD") outlining a remediation plan that employs an
innovative technology developed by the Company which has not yet been used for
lead remediation on a production volume basis. On May 18, 1995, the Company
signed a consent decree to remediate the site with EPA. Previously EPA had sued
the Company and the District Court held the Company liable for the site
cleanup. The Decree proposes remediation using the innovative technology. This
innovative technology approach is believed to be much lower in cost than other
prevailing options and offers to the Company and EPA additional significant
potential enhancements for remediation of other similar sites. The cost of
remediation for the innovative technology approach is estimated to be
approximately $16.0 million, a substantial portion of which would constitute
capital improvements. If the innovative technology is not feasible, the
alternative remediation plan, which entails relocation of contaminated soil,
would be employed at a cost (estimated by EPA) of approximately $30.0 million.
The Company has tested and is actively pursuing design, development and
additional testing of the innovative technology. The Company is also actively
pursuing recovery under prior insurance policies as discussed below. The
Company has established its reserves based upon the innovative technology
remediation plan, net of amounts to be capitalized and not considering
potential insurance recovery.
The Company is also the primary PRP at the Wortham Lead Salvage State
Superfund Site, located in Mabank, Texas, another site that was owned and
operated by third parties. The estimated cost of remediating the Wortham site
is between $520,000 and $770,000. The Texas Natural Resources Conservation
Commission ("TNRCC") has issued a revised Record of Decision for this site,
which adopts many of the changes previously advocated by the Company. The
Company believes that the revised approach would reduce the cost of remediating
this site by roughly 50%. The Company has made a good faith offer, which
incorporates further changes to the recommended remedial approach; the matter
is currently the subject of negotiations between the Company and the TNRCC.
Until those negotiations are completed, the Company cannot determine the cost
of remediating this site, but management does not expect this site to have a
material adverse effect on the Company's business or financial condition.
The Company is also the primary PRP at the Seventh Street Lead Site located
in Iowa, another site that was owned and operated by third parties. Remediation
of the Seventh Street Site was recently completed, and the Company paid $1.3
million as its share of liability. The EPA has determined that the Company is
in full compliance with the unilateral order issued by the EPA to the Company
and other PRPs. The Company is currently evaluating whether to pursue a cost
recovery action against potentially responsible third parties.
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<PAGE>
The fourth site at which the Company has been the primary PRP is the Jones
Tire & Battery Superfund Site in Alabama. Like the other sites listed above,
the Company never owned or operated this site. Accordingly, the Company's
volumetric share of the waste found at this site was fairly small. Because of
the large number of non-paying PRPs, however, the Company has paid the largest
single share of the expenses to date. The paying PRPs have collectively paid
nearly $4 million at this site, of which the Company has paid approximately
$1.3 million. As a result of the Company's efforts, the remediation of soils
and waste materials found at the site is nearly complete, and the EPA has
issued a letter stating that no further remedial or investigative action is
needed at this site. However, EPA has referred the matter to the State of
Alabama Department of Environmental Management ("ADEM") for closure. The
Company does not expect that any additional expenses associated with this site
will have a material adverse effect on the Company's business or financial
condition. The Company has commenced litigation against those PRPs who have
declined to fund their share of the cleanup and currently believes that much of
the additional funds which the Company has been forced to expend on this matter
will be recovered through that litigation as the Company estimates that there
are 46 known PRPs that are financially viable and may have relevant insurance
coverage.
The Company is also involved in the assessment and remediation of various
other properties, including certain Company-owned or -operated facilities. Such
assessment and remedial work is being conducted pursuant to a number of state,
federal and provincial environmental laws and with varying degrees of
involvement by state, federal and provincial authorities. Where reasonably
estimable, the costs of such projects have been accrued in reserves established
by the Company, as discussed further below. In addition, certain environmental
matters concerning the Company are pending with regulatory agencies.
South Carolina environmental officials have alleged that the Company
improperly disposed of soil from the Company's Greer, South Carolina facility
in 1991. Without acknowledging any wrongdoing on its part, the Company, in
consultation with South Carolina authorities, reexcavated and disposed of the
soil. Federal authorities are investigating this incident, which may result in
civil or criminal action being taken against the Company. The Company does not
now believe that this matter will result in any civil or criminal action having
a material adverse effect on its business or financial condition.
On January 14, 1994, the Company acquired a vacant manufacturing facility
located in Bristol, Tennessee which the Company has converted to a battery
manufacturing facility. While the facility was being used for manufacturing
operations by Unisys Corporation ("Operating Owner"), soil and groundwater
contamination was identified at the site which led to its designation by the
State of Tennessee as a state "Superfund" site in 1988. Under the direction of
the State of Tennessee, the Operating Owner has, at its own expense, completed
a soil remediation at the site and is in the process of completing a
groundwater cleanup. In 1990, the Operating Owner discontinued manufacturing at
the facility and in 1993 sold it to an investor ("Investor") who did not
operate it. The Company purchased the facility from a party ("Seller") who
obtained title to the property from the Investor. As part of the Company's
purchase, the Seller agreed to indemnify the Company with respect to
environmental conditions in existence at the time of purchase. The State of
Tennessee has informed the Company that it considers the Operating Owner to be
primarily responsible for any contamination existing at the facility at the
time of the Company's purchase. The Company is negotiating with the Operating
Owner regarding additional remediation the Company feels is required to restore
the property to environmentally acceptable condition. The Company does not
currently believe that the environmental condition of the facility will have a
material adverse effect on the Company's business or financial condition.
While the ultimate outcome of the foregoing environmental matters is
uncertain, after consultation with legal counsel, management does not believe
the resolution of these matters will have a material adverse effect on the
Company's business or financial condition. The Company's policy is to accrue
for environmental costs when it is probable that a liability has been incurred
and the amount of such liability is reasonably estimable.
Pursuant to a refinancing, the Company agreed with a former holder of its
preferred stock which had sold the Company a portion of its business to provide
certain environmental management services relating to
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<PAGE>
twelve landfills and other sites not operated by the Company at which lead
contamination by such businesses and others is alleged and to indemnify such
holder from certain potential environmental liabilities relating to such sites.
The Company established an additional environmental reserve of $6.0 million
with respect to this liability, which the Company believes will be adequate.
The Company has established reserves for onsite and offsite environmental
remediation costs and believes that such reserves are adequate. As of August
31, 1995, the amount of such reserves on the Company's balance sheet was $24.8
million. Of this total amount, $4.3 million was included in "Current
Liabilities" and $20.5 million was included in "Other Noncurrent Liabilities."
These reserves consist of amounts accrued for active Company facilities, closed
facilities, and 11 of the Superfund sites. They also include a general
allowance for other Superfund sites where the Company's exposure is estimated
to be less than $100,000 per site. Because environmental liabilities are not
accrued until liability is determined to be probable and reasonably estimable,
not all potential future environmental liabilities have been included in the
Company's environmental reserves and, therefore, additional earnings charges
are possible.
The Company believes it has insurance coverage for liability and defense
costs arising out of certain sites, and has put its insurance companies on
notice where applicable. While none of the Company's insurance carriers have
acknowledged coverage at any sites, certain of the Company's insurance carriers
have tendered defense costs under a reservation of rights at the Brown's
Battery site discussed above and the Granite City, Illinois (NL/Taracorp) site.
The Company also believes that it ultimately will be successful in establishing
coverage for liabilities for remediation arising out of those sites. The
Company is engaged in discussions with various insurers with respect to other
sites, although no agreements have been reached with respect to coverage for
those other sites. The Company does not currently maintain environmental
impairment liability insurance in light of the unavailability of meaningful
coverage and the prohibitive cost of obtaining even limited coverage. The
coverage the Company has results from insurance policies issued prior to 1982
for general liability, which policies included coverage for offsite liability.
The Company also may have limited coverage for certain costs under policies
issued between 1983 and 1985. Because anticipated insurance recoveries are not
assured, the Company's reserves for environmental costs do not include offsets
for insurance reimbursement.
In 1993, the CNA Insurance Companies filed a declaratory judgment action in
the Superior Court of Delaware, in Wilmington, Delaware. In the lawsuit,
Continental Casualty Company, et al. v. General Battery Corporation, et al.,
(the "CNA Action") CNA seeks to have the court determine that CNA owes no duty
to defend or reimburse General Battery Corporation, Dixie Metals Company or
certain other Exide subsidiaries for costs of defending environmental actions
against those companies and for response costs, property damage and bodily
injury claims arising from environmental conditions allegedly caused, suffered
or allowed by those companies. In addition to suing the Company, the CNA Action
names Northwest Industries, Fruit of the Loom and over 75 other insurance
companies as defendants. On January 19, 1994, Exide filed a cost recovery
action against CNA and other insurance companies with which Exide and its
subsidiaries have held policies, in the Circuit Court of Cook County, Illinois,
Chancery Division, in Chicago, Illinois. In that lawsuit, captioned Exide
Corporation, et. al. v. Admiral Ins. Co. et. al. (the "Company Recovery
Action"), the Company seeks to have the court determine that each of the
insurance companies owes the Company or one of its subsidiaries a duty to
defend and that the insurance companies are liable for certain response costs,
property damage and bodily injury arising from environmental conditions that
the Company or one of its subsidiaries allegedly caused, suffered or allowed.
The Company intends to vigorously defend the CNA Action and vigorously pursue
the Company Recovery Action. While the ultimate outcome of these lawsuits is
uncertain, after consultation with legal counsel, management does not believe
the resolution of these matters will have a material adverse effect on the
Company's business or financial condition or results of operations.
The Company has taken an active role in addressing environmental issues
associated with its business and has a staff of more than 70 persons, not
including consultants, focusing on environmental, safety and health matters.
The Company maintains numerous permits with the EPA, various state agencies and
provincial regulatory authorities which allow the Company to transport, store
and recycle spent lead acid batteries, lead-bearing hazardous wastes and
certain other hazardous wastes.
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<PAGE>
To protect the environment, minimize future liability and help ensure a
stable supply of lead to its battery manufacturing facilities, the Company has
developed a comprehensive materials recycling program. Under this program, the
Company obtains spent lead-acid batteries through its wholesale distribution
outlet system and lead-bearing materials from third parties. These materials
are transported to the Company's smelting facilities. These batteries are then
separated at the smelters into three constituent units: lead, dilute sulfuric
acid and plastic casing material. The lead is reclaimed and refined into lead
alloys for use at the Company's battery manufacturing facilities. The plastic
from battery cases is broken into pieces and extruded into pellets by adding
strengtheners and other additives. The pellets are then used at the Company's
battery casing molding facility to make new battery cases. The dilute sulfuric
acid solution is neutralized and discharged in accordance with Federal and
State permits. The Company is investigating methods of recycling spent battery
acid. As described above, the Company has been actively involved in the
development of a new technology for remediation of lead contaminated soils at
the Brown's Battery site, which, if successful, may have significant
application in the secondary smelting of lead generally.
Europe. With regard to its overseas operations, the Company is subject to
numerous environmental, health and safety requirements and is exposed to
differing degrees of liabilities and compliance costs arising from its past and
current manufacturing and recycling activities. The laws and regulations
applicable to such activities differ from country to country and also
substantially differ from United States laws and regulations. Except as
disclosed herein, the Company believes, based upon reports from its foreign
subsidiaries and/or independent qualified opinions, that it is in substantial
compliance with all material environmental, health and safety requirements in
each country. See "Risk Factors--Environmental Matters" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Future Environmental Developments."
At two lead-acid battery manufacturing facilities in Spain (Malpica and
Manzanares) and at the Sonalur secondary lead smelting facility in Azambuja,
Portugal, treated wastewater is discharged in excess of permit levels for lead.
At the Torrejon de Ardoz nickel-cadmium battery manufacturing facility, treated
wastewater is discharged in excess of permit levels for cadmium. The Company is
working cooperatively with appropriate authorities to make improvements to the
wastewater treatment plants at each facility. It is possible that the Company
could be subject to fines or penalties with regard to these violations. The
cost to upgrade the facilities to attain compliance is not expected to be
material. The subject violations are not expected to interfere with continued
operations at the subject facilities.
The Company expects that its overseas operations will continue to incur
capital and operating expenses in order to maintain compliance with evolving
environmental, health and safety requirements or more stringent enforcement of
existing requirements in each country. For example, Tudor's capital
expenditures for environmental improvements with respect to its operations are
currently expected to amount to roughly 10% to 12% of overall annual capital
expenditures. Tudor currently anticipates that its 1995 environmental capital
expenditures will be approximately $3.0 million. In addition, any further
consolidation of Exide's European operations could accelerate or increase its
environmental costs.
The Company completed its acquisition of CEAC in May 1995. The Company is
aware that the lead-acid battery manufacturing facilities in Auxere and Nimes,
France do not currently meet air emission standards established by the French
Ministry of Environment. The local enforcement authority is aware of the
situation in Nimes, and has granted the Company an additional two year period
within which to achieve compliance with those standards. Investigation of the
situation at the Auxere facility is continuing. Management believes that the
cost of achieving compliance with the air limits at both these facilities is
not material.
In addition, the lead-acid battery manufacturing facilities in Vierzon,
France and Weiden, Germany are not in compliance with certain limits contained
in these facilities' wastewater discharge permits. The German authorities are
aware of the situation with respect to the Weiden facility; negotiations to
resolve this matter are continuing. Investigation of the situation at the
Vierzon facility is continuing. The cost of any upgrades required to achieve
compliance at these facilities are not expected to cause the Company to incur
material costs.
52
<PAGE>
CEAC's German subsidiary, Sonnenschein, GmbH, has signed a consent order with
the administrative enforcement authorities to complete remediation of a river
which flows along the lead-acid battery manufacturing facility in Budingen,
Germany. That cleanup is proceeding and CEAC has established a reserve to cover
the cost of completing the project; the Company does not expect the costs of
such remediation to be material.
The Company's Polish subsidiary, Centra, is a former state-owned entity.
Under the sales agreement with the Polish State Treasury, the Company is
obligated to spend $1.0 million in capital improvements in environmental
controls at the Centra facilities. The funds needed to cover this commitment
are included in CEAC's capital budget. Management believes that these funds
will be needed to ensure compliance with anticipated new air regulations in
Poland.
OTHER LEGAL PROCEEDINGS
The Company is currently a defendant in a lawsuit brought by one of the
Company's competitors (GNB v. Exide and General Battery, U.S. District Court
for Delaware, filed July 1988) alleging patent infringement. The claim went to
trial and the jury ruled that one of the patents was valid and infringed. A
separate trial was held for the award of damages and, in April 1995, the
plaintiff was awarded damages and interest (through June 1995) of approximately
$5.3 million. The Company's outside counsel believes the verdict of the jury
trial was incorrect and has advised the Company that there is a high likelihood
that the Company will prevail on appeal.
A patent infringement suit was filed in the U.S. District Court in Oregon
against the Company in January 1995 by Tekmax, Inc. The suit alleges
infringement of Tekmax patents dealing with a device to insert battery plates
into battery separators and processes for doing so. The complaint alleges
damages in excess of the jurisdictional requirement of $50,000 (although
plaintiff requested $6 million before the suit was filed). Exide has denied
infringement and asserted that such patents are invalid. Discovery has begun
and will continue for the foreseeable future. An intelligent assessment of this
matter cannot now be made.
The Company is currently involved in three related lawsuits pending in state
and federal court in Alabama. The actions concern allegations that the Company
sold used batteries as new. Two of the actions are in state court. An action by
a purported nationwide class of more than 1,000 consumers of Exide batteries is
entitled Eddie Walton Davis, et al. v. Exide Corporation, et al. An action by a
purported nationwide class of more than 1,000 resellers of Exide batteries is
entitled Charlie Mathews v. Exide Corporation, et al. Neither class has been
certified. Both state court actions seek unspecified compensatory and punitive
damages and injunctive relief. The federal court action is a wrongful
termination suit by a former branch manager of Exide who claims he was
terminated for refusing to sell used batteries as new and is entitled Charles
Harris v. Exide Corporation. All three actions are in preliminary stages of
pretrial discovery. The Company disputes all allegations and intends to
vigorously defend itself.
In addition, the Company is involved in routine litigation incidental to the
conduct of its business. Based on consultation with legal counsel, management
does not believe that any of the litigation to which the Company is a party
will have a material adverse effect on the Company's business or financial
condition.
PROPERTIES AND MANUFACTURING
CEAC manufactures its batteries and other related products in 15 facilities
located in France, Italy, Germany and other countries in Europe.
53
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information and ages as of July 31,
1995 regarding each of the Company's directors and executive officers.
<TABLE>
<CAPTION>
NAME AND AGE POSITION WITH COMPANY
------------ ---------------------
<S> <C>
Arthur M. Hawkins (52)...... Chairman, President, Chief Executive Officer
and Director
Douglas N. Pearson (52)..... Executive Vice President and Director
William J. Rankin (57)...... Executive Vice President and Director
Alan E. Gauthier (47)....... Executive Vice President and
Chief Financial Officer
George J. Tinker (50)....... Vice President
Timothy O. Fisher (45)...... Director
Robert H. Irwin (67)........ Director
Lawrence M. Wagner (55)..... Director
Earl Dolive (77)............ Director
Arthur R. Taylor (66)....... Director
</TABLE>
Mr. Hawkins has been President, Chief Executive Officer and a director since
1985 and Chairman since October 1989. He is also a director of Yuasa Exide
which is 13.5% owned by the Company. Prior to joining Exide in June 1985, Mr.
Hawkins was Group Executive of ITT's worldwide automotive operations. He has
spent twenty years in the automotive industry including six years with Tenneco
Automotive as a Senior Vice President of their Automotive Division, General
Manager of Walker Manufacturing Company and Operations Vice President of Monroe
Automotive Equipment Company. Prior to joining Tenneco Automotive, Mr. Hawkins
held various managerial and executive positions with Chrysler Corporation,
including assignments to Latin America, Mexico, Australia, Europe and North
America.
Mr. Pearson has been Executive Vice President primarily responsible for the
Company's automotive business since June 1985 and has been a director since
March 1988. In 1995, he was given the additional title of President, North
American Operations. Prior to joining Exide, he was Vice President of Sales and
Marketing for the Monroe Automotive Equipment Company, a division of Tenneco
Automotive. Mr. Pearson spent fifteen years with Tenneco Automotive and held
various managerial and executive positions within their Automotive Division
including Regional Sales Manager, Vice President of National Account Sales and
Vice President of Corporate Planning, Development and Far East Operations.
Mr. Rankin has been an Executive Vice President since June 1987 and has been
a director since July 1993. His prior experience was with Monroe Automotive
Equipment Company, a division of Tenneco Automotive, where he served as Vice
President of Manufacturing as well as Vice President of Product Engineering.
Mr. Gauthier was appointed Executive Vice President and Chief Financial
Officer in October 1993. Prior to that time he had been Vice President--Finance
since May 1989. Prior to joining Exide, he was Senior Vice President and Chief
Financial Officer of Airwork Corporation and prior to that held senior
financial positions with Commodore Business Machines, Inc. and General Electric
Co.
Mr. Fisher has been a director since April 1993. He has been employed by The
Hillman Company ("Hillman") (diversified investments and operations) in various
capacities since 1972. Mr. Fisher has been a Vice President of Hillman since
1986 and also serves as a director of several private companies.
54
<PAGE>
Mr. Irwin has been a director since July 1990. He is currently retired and
serves various companies in a consulting capacity. Prior to his retirement, Mr.
Irwin held the office of President of the Batesville Casket Company, a
subsidiary of Hillenbrand Industries, for seven years. Mr. Irwin's career also
includes 30 years at Chrysler Corporation in a variety of engineering and
managerial positions. Mr. Irwin is a director of Le Roy Industries, Inc.
Mr. Wagner has been a director since August 1989. In December 1993, he became
President and Chief Operating Officer of Hillman. Prior to that time, he served
in various other capacities with Hillman, including Executive Vice President
and Chief Operating Officer, Chief Financial Officer and Treasurer.
Mr. Dolive has been a director since October 1993. Prior to his retirement,
Mr. Dolive had been employed by Genuine Parts Company since 1937. At Genuine
Parts Company, Mr. Dolive served in various capacities, including Executive
Vice President and Chief Operating Officer, Chief Financial Officer and
Treasurer.
Mr. Taylor has been a director since October 1993. Prior to his retirement,
Mr. Taylor gained 35 years of financial and manufacturing experience within the
automotive and aircraft industries in a variety of manufacturing and managerial
positions, including Director--Corporate Studies of Chrysler Corporation and
Director--Finance & Operations of Chrysler Corporation. Prior to his tenure at
Chrysler Corporation, Mr. Taylor served as the Canadian Representative for the
Vertol Division of The Boeing Company.
Directors hold office until the next annual meeting of stockholders or until
their successors are elected. Officers are elected by the Board of Directors to
serve until their successors are elected and qualified or until their earlier
resignation or removal.
The Company's Board of Directors has established a Compensation Committee
that currently is comprised of Mr. Irwin (Chairman), Mr. Fisher, Mr. Dolive and
Mr. Taylor. The Compensation Committee provides a general review of the
Company's compensation and benefit plans to ensure that they meet corporate
objectives. The Compensation Committee has the authority to administer the
Stock Award Plan and the Long Term Incentive Plan described below and to make
grants thereunder. In addition, the Compensation Committee reviews the
Chairman's recommendations on (i) compensation of all corporate officers, (ii)
granting of awards under the Company's compensation and benefit plans other
than the Stock Award Plan and the Long Term Incentive Plan and (iii) adopting
and changing major compensation policies and practices, and will report its
recommendations to the Board of Directors for approval and authorization of
action.
The Company's Board of Directors has also established an Audit Committee
comprised of Mr. Wagner (Chairman), Mr. Dolive and Mr. Taylor. The Audit
Committee recommends to the Board of Directors the selection of independent
certified public accountants to audit annually the books and records of the
Company, reviews the activities and the reports of the independent certified
public accountants and reports the results of such review to the Board of
Directors. The Audit Committee monitors the internal controls of the Company.
DIRECTOR COMPENSATION
Directors who are not currently receiving compensation as officers or
employees of the Company are entitled to a quarterly retainer fee of $7,000
plus reimbursement of expenses for attending each meeting of the Board of
Directors and each meeting of any committee that is held on a day when the
entire Board is not meeting.
55
<PAGE>
EXECUTIVE COMPENSATION
The table below shows information concerning cash and noncash compensation
for the Chief Executive Officer and the four most highly compensated executive
officers other than the Chief Executive Officer of the Company in office on
March 31, 1995 for each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
----------------- ------------
RESTRICTED
ALL OTHER STOCK
FISCAL COMPENSA- AWARD(S)
YEAR SALARY BONUS(1) TION(2) ($)(3)
------ -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Arthur M. Hawkins.............. 1995 $662,500 $349,900 $16,462 -0-
President and Chief Executive 1994 550,000 550,000 9,160 -0-
Officer 1993 512,500 625,000 8,697 -0-
Douglas N. Pearson............. 1995 $331,250 $174,900 $22,496 -0-
Executive Vice President 1994 275,000 275,000 20,166 -0-
1993 256,250 337,400 15,389 -0-
Alan E. Gauthier............... 1995 $206,200 $ 84,000 $22,806 -0-
Executive Vice President and 1994 155,400 129,720 20,529 -0-
Chief Financial Officer(4) 1993 137,700 129,600 13,502 -0-
George J. Tinker............... 1995
Vice President and Chairman 1994 $199,946 $140,040 $12,835 $64,500
Euro Exide Corporation, 1993 -0- -0- -0- -0-
Limited -0- -0- -0- -0-
William J. Rankin.............. 1995
Executive Vice President-- 1994 $170,260 $ 72,000 $21,493 -0-
Group 1993 150,250 120,000 19,071 -0-
Operations 144,130 120,400 12,237 -0-
</TABLE>
- --------
(1) Bonus amounts shown are those accrued for and paid in or after the end of
the fiscal year listed.
(2) Includes accrued contributions for the Exide Salaried Retirement and 401(k)
Plan for fiscal 1995, as follows: Mr. Hawkins, $7,950; Mr. Pearson, $8,250;
Mr. Gauthier, $8,250; and Mr. Rankin, $8,250. Also includes contributions
to an executive long-term Disability Plan for fiscal 1995 as follows: Mr.
Pearson, $6,987; Mr. Gauthier, $7,858; and Mr. Rankin, $5,141.
(3) The number and value (at March 31, 1995) of the aggregate restricted stock
holdings of each of the named executive officers at March 31, 1995 was as
follows: Mr. Hawkins, 240,406 ($8,834,921); Mr. Pearson, 61,840
($2,272,620); Mr. Gauthier, 30,920 ($1,136,310); Mr. Tinker, 20,000
($735,000); and Mr. Rankin, 30,920 ($1,136,310). The shares of restricted
stock held by Messrs. Hawkins, Pearson, Gauthier and Rankin will vest on
the fifth anniversary of the original grant date (April 1993). Twenty
percent of the shares of restricted stock held by Mr. Tinker will vest on
each anniversary of the grant date (December 1994). Each of the named
executive officers is entitled to dividends paid on such restricted stock
holdings.
(4) Mr. Gauthier was appointed Executive Vice President and Chief Financial
Officer in October 1993. Prior to that time, he served as Vice President-
Finance.
56
<PAGE>
The table below shows information concerning the grant of long-term incentive
compensation awards to the Company's executive officers in the last fiscal
year.
<TABLE>
<CAPTION>
PERIOD FROM
GRANT UNTIL
NUMBER OF FULL
NAME SHARES VESTING
---- --------- -----------
<S> <C> <C>
Arthur M. Hawkins.................................. -0- --
Douglas N. Pearson................................. -0- --
Alan E. Gauthier................................... -0- --
George J. Tinker................................... 20,000 5 years(1)
Restricted Stock Grants
William J. Rankin.................................. -0- --
</TABLE>
- --------
(1) Such grant was made under the Exide Corporation 1993 Long-Term Incentive
Plan and was effective December 1, 1994. 4,000 shares of such restricted
stock will vest on each anniversary of the grant so long as Mr. Tinker
remains employed by the Company or any of its subsidiaries.
CASH BONUS PROGRAM
The Company established a Cash Bonus Program for key and senior management in
1986. Awards under the Cash Bonus Program are based on Exide's quarterly
projected profit before interest and taxes. If the Company's projections are
achieved, the Company may, at its discretion, award a bonus based on a
percentage of base salary.
STOCK AWARD PLAN
ECA established an incentive stock plan (the "Stock Award Plan") effective
April 1993. Under this plan, ECA granted the equivalent of 811,662 shares of
Common Stock to a broad group of management employees (the "Grant Shares"). At
the time of the grants, the Company's Board of Directors believed that the
value of the Grant Shares was $2.26. The restricted stock agreements relating
to the Grant Shares require the holders thereof to pay $2.25 per share to the
Company prior to receiving the Grant Shares. The Grant Shares vest in full at
the fifth anniversary of the original grant date, and have certain restrictions
related to sale and transferability, as well as requirements of continued
employment with the Company.
The following grants were made to the persons named in the Summary
Compensation Table set forth above:
<TABLE>
<CAPTION>
SHARES
GRANTED
-------
<S> <C>
Mr. Hawkins....................................................... 240,406
Mr. Pearson....................................................... 61,840
Mr. Rankin........................................................ 30,920
Mr. Gauthier...................................................... 30,920
</TABLE>
LONG TERM INCENTIVE PLAN
The Compensation Committee of the Board of Directors approved and the Board
of Directors adopted the Company's Long Term Incentive Plan (the "Incentive
Stock Plan") in October 1993. The Incentive Stock Plan is administered by the
Compensation Committee which is comprised of outside directors. At its
discretion, the Compensation Committee may grant awards under the Incentive
Stock Plan to key employees of the Company or its subsidiaries.
Employee awards under the Incentive Stock Plan may be granted in the form of
incentive stock options, non-qualified stock options, restricted shares of
Common Stock or units valued on the basis of the long-term performance of the
Company ("Performance Units"). Options may be accompanied by the stock
appreciation rights ("Rights"). Rights may also be issued without accompanying
options. Certain non-qualified options
57
<PAGE>
and Rights may be awarded under the Incentive Stock Plan with an exercise price
not less than 50 percent of fair market value at the time of grant. Incentive
stock options, certain other non-qualified options and certain other Rights may
be awarded under the Incentive Stock Plan with an exercise price not less than
fair market value at the time of grant.
The maximum aggregate number of shares of Common Stock with respect to which
options, restricted shares, Performance Units and Rights granted without
accompanying options which may be granted pursuant to the Incentive Stock Plan
is 700,000 shares. There are additional limitations imposed by the Internal
Revenue Code on the amount of incentive stock options that may first become
exercisable by an employee in any calendar year. The maximum number of shares
with respect to which options, restricted shares, Performance Units and Rights
granted without accompanying options may be granted pursuant to the Incentive
Stock Plan to one employee in any one fiscal year is 150,000 shares. As of
March 31, 1995 only 40,000 restricted shares have been granted to date under
the Incentive Stock Plan.
RETIREMENT PLANS
The Company maintains the Exide Corporation Salaried Retirement and 401(k)
Plan, a noncontributory money purchase plan which also permits employees to
contribute a percentage of base pay on a pretax basis with a matching
contribution by the Company. Under the plan, the Company is required to
contribute 4% of each participant's eligible plan earnings. The rights of
participants to contributions vest gradually over five years. Eligible
participants may also elect to contribute a percentage of compensation, subject
to certain limitations contained in the Internal Revenue Code, on a pretax
basis. The Company makes matching contributions of up to $0.75 for every $1.00
a participant contributes up to 6% of a participant's compensation. The actual
level of matching contributions depends upon the Company's level of
profitability. Participants are at all times vested in their own contributions
and earnings thereon; Company matching contributions vest gradually over five
years.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Hawkins,
Pearson and Rankin. Such agreements currently provide for annual base salaries
of not less than $900,000, $450,000 and $230,000, respectively, with the
opportunity to earn bonuses under certain circumstances. These agreements do
not contain a stated termination date, but may be terminated by either party on
notice to the other. If the Company terminates an agreement without cause, the
Company will provide severance pay equal to one year's salary at the rate in
effect at the time of termination. These agreements also prohibit each
executive from engaging in certain competitive activities for two years after
termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1994, prior to the Company's initial public offering Messrs.
Hawkins, Pearson and Rankin participated in deliberations concerning executive
compensation in their capacity as directors of the Company.
58
<PAGE>
BENEFICIAL OWNERSHIP OF CAPITAL STOCK
The following table set forth certain information regarding the beneficial
ownership of the Company's Common Stock as of July 15, 1995 by (i) each person
known to the Company to own more than 5% of any class of the Company's voting
securities, (ii) each director of the Company, (iii) the executive officers of
the Company named in the Summary Compensation Table under "Management--
Executive Compensation" and (iv) all executive officers and directors of the
Company as a group. Except as indicated in the notes to the following table,
the holders listed below have sole voting power and investment power over the
shares beneficially held by them. Except as otherwise indicated, the address of
each person listed below is the address of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF
OF BENEFICIAL OWNER SHARES PERCENT
- ------------------- --------- -------
<S> <C> <C>
Arthur M. Hawkins(a).......................................... 2,415,942 12.1%
Douglas N. Pearson(a)......................................... 604,475 3.0%
William J. Rankin(a).......................................... 113,245 *
Alan E. Gauthier(a)........................................... 32,620 *
George J. Tinker(a)........................................... 20,000 *
Lawrence M. Wagner............................................ 1,000 *
Timothy O. Fisher............................................. 1,000 *
Robert H. Irwin............................................... 7,000 *
Earl Dolive................................................... 2,500 *
Arthur R. Taylor.............................................. -- --
All directors and executive officers as a group............... 3,197,782 16.0%
FMR Corp. (c)
82 Devonshire Street
Boston, MA 02109........................................... 2,257,040 11.3%
Wilmington Securities, Inc.
824 Market Street
Suite 900
Wilmington, DE 19801(b)..................................... 1,890,884 9.5%
Janus Capital Corporation(d)
100 Fillmore Street, Suite 300
Denver, CO 80206............................................ 1,492,730 7.5%
</TABLE>
- --------
* Less than 1%
(a) The following numbers of the shares shown as beneficially owned are subject
to vesting requirements: Mr. Hawkins--240,406; Mr. Pearson--61,840; Mr.
Rankin--30,920; Mr. Gauthier--30,920; Mr. Tinker--20,000; and all directors
and executive officers as a group--364,086. See "Management--Stock Award
Plan." Mr. Hawkins' shares include 5,000 shares owned by his children as to
which he disclaims beneficial ownership and Mr. Gauthier's shares include
700 shares held by his wife and children as to which he disclaims
beneficial ownership.
(b) This holder is an indirect wholly-owned subsidiary of Hillman, which is
controlled by a trust for the benefit of Henry L. Hillman. The trustees of
such trust are Mr. Hillman, C.G. Grefenstette and Elsie H. Hillman. Such
trustees share voting and investment power of the stock of Hillman. Mr.
Wagner, who is both a director and an officer of Hillman, and Mr. Fisher,
who is an officer of Hillman, disclaim beneficial ownership of the
securities of the Company owned by this holder.
(c) As reported in the Schedule 13G filed by this holder.
(d) According to the Schedule 13G filed by this holder, it is an investment
advisor with shared voting power and investment power over these shares.
59
<PAGE>
CERTAIN TRANSACTIONS
In November 1989, the Company loaned Mr. Pearson, an Executive Vice President
and Director of the Company, the principal sum of $150,000 in exchange for a
collateral mortgage bearing interest on such sum at the rate of 10% per annum.
The total amount owed, including accrued interest, was repaid in November 1993.
In fiscal 1991, an affiliate of Hillman ("WSI"), the Company and certain
lenders under the Company's previous credit agreement entered into a Standby
Note Facility Agreement (the "WSI Agreement") under which WSI committed to lend
up to $10.0 million to the Company through the purchase of promissory notes if
requested by such credit agreement lenders at a time when the Company was not
in compliance with certain financial covenants contained in such credit
agreement or certain other financial tests set forth in the WSI Agreement.
Interest on borrowings under the WSI Agreement accrued at a per annum rate
equal to the Adjusted Base Rate (as defined in the Company's previous credit
agreement) plus 2%. The WSI Agreement was terminated upon consummation of the
Company's initial public offering. The Company previously purchased certain
insurances through an affiliate of WSI, under an arrangement which was canceled
in June 1992. During the fiscal years 1991 and 1992, payments under such
arrangement aggregated approximately $715,000 and $884,000, respectively.
In July 1988, the Company entered into a net lease with a corporation whose
stockholders include Messrs. Hawkins, Pearson and Rankin. This corporation owns
approximately 70 acres of land in Michigan which the Company uses for customer
meetings and other business purposes. The lease expires in 1996 and provides
for rental payments during the term of $26,250 per quarter. In addition, the
Company has the option, exercisable at any time during the term, to purchase
the leased property at its appraised market value.
The Company used $6.5 million of the net proceeds from the initial public
offering to purchase all of the outstanding shares of preferred stock of a
predecessor, substantially all of which was held by WSI and certain members of
management.
The Company believes the terms of the foregoing transactions are no less
favorable to it than those which could be obtained from nonaffiliated parties.
60
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on April 28, 1995 to the Placement
Agent. The Placement Agent subsequently resold the Old Notes to qualified
institutional buyers pursuant to Rule 144A and to persons other than U.S.
persons outside the United States in reliance upon Regulation S under the
Securities Act and to a limited number of institutional accredited investors
that agreed to comply with certain transfer restrictions and other conditions.
In connection therewith, the Company entered into the Registration Rights
Agreement, which grants the holders of the Old Notes certain exchange and
registration rights. The Company agreed to commence the Exchange Offer promptly
after the Registration Statement has been declared effective. A copy of the
form of Registration Rights Agreement has been filed as an exhibit to the
Registration Statement and is available from the Company upon request. See
"Available Information." Unless the context requires otherwise, the term
"Holder" with respect to the Exchange Offer means any person in whose name Old
Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Old Notes are held of record by DTC who desires to deliver such
Old Notes by book-entry transfer at DTC.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may
be offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Based on an interpretation by the staff of the Commission set
forth in no-action letters issued to third parties, the Company believes that
the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by any Holder of
such New Notes (other than any such Holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act and except in
the case of broker-dealers, as set forth below) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such Holder's
business, that such Holder has no arrangement or understanding with any person
to participate in the distribution of such New Notes and that such holder is
not engaging in or intending to engage in the distribution of the New Notes.
Any Holder who tenders in the Exchange Offer for the purpose of participating
in a distribution of the New Notes or who is an affiliate of the Company may
not rely on such interpretation by the staff of the Commission and must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any secondary resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. Any resales or
other transfers of New Notes must also be conducted in compliance with
applicable state securities or blue sky laws. See "Plan of Distribution."
By tendering in the Exchange Offer, each Holder of Old Notes will represent
to the Company that, among other things, (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such person is such Holder,
(ii) neither the Holder of Old Notes nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such New Notes, (iii) that such holder is not engaging in or intending to
engage in the distribution of the New Notes and (iv) neither the Holder nor any
such other person is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act or, if such Holder is an "affiliate," that such
Holder will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable. If the tendering Holder is a
broker-dealer (whether or not it is also an "affiliate") that will receive New
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that is will deliver a prospectus in connection with
any resale of such New Notes.
61
<PAGE>
Following the consummation of the Exchange Offer, Holders of Old Notes not
tendered will not have any further registration rights and the Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for the Old Notes could be adversely affected.
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered Holders as of September 28, 1995.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. Subject to the minimum denomination requirements of the
New Notes, the Company will issue $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of outstanding Old Notes accepted in
the Exchange Offer. Holders may tender some or all of their Old Notes pursuant
to the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered for exchange. As of the
date hereof, $300,000,000 of the Old Notes were outstanding.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes except that (i) the New Notes
will have been registered under the Securities Act and, therefore, will not
bear legends restricting the transfer thereof, (ii) the New Notes will not
contain certain provisions included in the terms of the Old Notes relating to
an increase in the interest rate in certain circumstances relating to the
consummation of the Exchange Offer and (iii) the Holders of New Notes will not
be entitled to certain rights under the Registration Rights Agreement. The New
Notes will evidence the same debt as the Old Notes and will be entitled to the
benefits of the Indenture.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of the State of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and
the rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes when,
as and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering Holders for the
purpose of receiving the New Notes from the Company. If any tendered Old Notes
are not accepted for exchange because of an invalid tender, the occurrence of
certain other events set forth herein or otherwise, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering Holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
October 26, 1995, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. Although the Company has
no current intention to extend the Exchange Offer, the Company reserves the
right to extend the Exchange Offer at any time and from time to time by giving
oral or written notice to the Exchange Agent and by timely public announcement
communicated, unless otherwise required by applicable law or regulation, by
making a release to the Dow Jones News Service. During any extension of the
Exchange Offer, all Old Notes previously tendered pursuant to the Exchange
Offer and not withdrawn will remain subject to the Exchange Offer.
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The Company expressly reserves the right (i) to terminate the Exchange Offer
and not accept for exchange any Old Notes if any of the events set forth below
under "Conditions to the Exchange Offer" shall have occurred and shall not have
been waived by the Company and (ii) to amend the terms of the Exchange Offer in
any manner.
INTEREST ON THE NEW NOTES
Holders of Old Notes that are accepted for exchange will not receive accrued
interest thereon. However, each New Note will bear interest from the most
recent date to which interest has been paid on the Old Note for which such New
Note was exchanged, or if no interest has been paid, from the date of original
issuance of such Note.
PROCEDURES FOR TENDERING
The tender to the Company of Old Notes by a Holder thereof pursuant to one of
the procedures set forth below will constitute an agreement between such Holder
and the Company in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal. A Holder of the Old Notes may
tender the same by (i) properly completing and signing the Letter of
Transmittal or a facsimile thereof (all references in this Prospectus to the
Letter of Transmittal shall be deemed to include a facsimile thereof) and
delivering the same, together with the certificate or certificates representing
the Old Notes being tendered (if in certificated form) and any required
signature guarantees, to the Exchange Agent at its address set forth in the
Letter of Transmittal on or prior to the Expiration Date (or complying with the
procedure for book-entry transfer described below) or (ii) complying with the
guaranteed delivery procedures described below.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the New Notes to be issued in exchange therefor are to be
issued (and any untendered Old Notes are to be reissued) in the name of the
registered Holder (which term, for the purposes described herein, shall include
any participant in DTC whose name appears on a security listing as the owner of
Old Notes), the signature of such signer need not be guaranteed. In any other
case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed
by the registered Holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a commercial bank or trust company located or
having an office or correspondent in the United States, or by a member firm of
a national securities exchange or of the National Association of Securities
Dealers, Inc. (any of the foregoing hereinafter referred to as an "Eligible
Institution"). If the New Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered Holder appearing on
the register for the Old Notes, the signature in the Letter of Transmittal must
be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PRIOR INSURANCE OBTAINED,
AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO
PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. AS AN
ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF
TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO
EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instruction
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Owner" included with the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Old Notes at DTC for the purpose of facilitating the
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Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in DTC's system may make book-entry delivery
of Old Notes by causing DTC to transfer such Old Notes into the Exchange
Agent's account with respect to the Old Notes in accordance with DTC's
procedure for such transfer. Although delivery of the Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at DTC, an
appropriate Letter of Transmittal with any required signature guarantee and all
other required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at the address set forth in the Letter of
Transmittal on or prior to the Expiration Date, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under such procedures.
If the Holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its office on or prior to the Expiration Date, a letter, telegram or facsimile
transmission from an Eligible Institution setting forth the name and address of
the tendering Holder, the name(s) in which the Old Notes are registered and, if
possible, the certificate number(s) of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within
three New York Stock Exchange trading days after the date of execution of such
letter, telegram or facsimile transmission by the Eligible Institution, the Old
Notes, in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at DTC), will be delivered by
such Eligible Institution together with a properly completed and duly executed
Letter of Transmittal (and any other required documents). Unless Old Notes
being tendered by the above-described method are deposited with the Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents), the
Company may, at its option, reject the tender. Copies of a Notice of Guaranteed
Delivery which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendered Holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC) is received by the Exchange
Agent, or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) from an Eligible Institution
is received by the Exchange Agent. Issuances of New Notes in exchange for Old
Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram
or facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal (and
any other required documents) and the tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptance for exchange of which may, in the option of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or irregularity
in the tender of any Old Notes. None of the Company, the Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date and (b) to the extent permitted by applicable law, purchase
Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers will differ from the terms
of the Exchange Offer.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
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The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be assigned, transferred and exchanged. The
Transferor represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire New Notes
issuable upon the exchange of such tendered Old Notes, and that, when the same
are accepted for exchange, the Company will acquire good and unencumbered title
to the tendered Old Notes, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim. The Transferor also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
exchange, assignment and transfer of tendered Old Notes or transfer ownership
of such Old Notes on the account books maintained by DTC. All authority
conferred by the Transferor will survive the death, bankruptcy or incapacity of
the Transferor and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
By executing the Letter of Transmittal, each Holder will make to the Company
the representations set forth above under the heading "Purpose and Effect of
the Exchange Offer."
WITHDRAWAL OF TENDERS
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable, except
that Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
To be effective, a written, telegram, telex or facsimile transmission notice
of withdrawal must be received by the Exchange Agent at the address set forth
in the Letter of Transmittal not later than the close of business on the
Exchange Date. Any such notice of withdrawal must specify the Holder named in
the Letter of Transmittal as having tendered Old Notes to be withdrawn, the
certificate numbers of Old Notes to be withdrawn and the principal amount
thereof, a statement that such Holder is withdrawing his election to have such
Old Notes exchanged, and the name of the registered Holder of such Old Notes,
and must be signed by the Holder in the same manner as the original signature
on the Letter of Transmittal (including any required signature guarantees) or
be accompanied by evidence satisfactory to the Company that the person
withdrawing the tender has succeeded to the beneficial ownership of the Old
Notes being withdrawn. The Exchange Agent will return the properly withdrawn
Old Notes promptly following receipt of notice of withdrawal. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at DTC to be
credited with the withdrawn Old Notes or otherwise comply with DTC procedure.
All questions as to the validity of notices of withdrawal, including time of
receipt, will be determined by the Company, and such determination will be
final and binding on all parties.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue New Notes in
exchange for any properly tendered Old Notes not previously accepted and may
terminate the Exchange Offer (by oral or written notice to the Exchange Agent
and by timely public announcement communicated, unless otherwise required by
applicable law or regulation, by making a release to the Dow Jones News
Service), or, at its opinion, modify or otherwise amend the Exchange Offer, if
either of the following events occur:
(a) any statute, rule or regulation shall have been enacted, or any
action shall have been taken by any court or governmental authority,
including the staff of the Commission, which, in the sole judgment of the
Company, would prohibit, restrict or otherwise render illegal consummation
of the Exchange Offer, or
(b) there shall occur a change in the current interpretation by the staff
of the Commission which permits the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes to be offered
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for resale, resold and otherwise transferred by Holders thereof (other than
broker-dealers and any such Holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities
Act provided that such New Notes are acquired in the ordinary course of
such Holders' business and such Holders have no arrangement or
understanding with any person to participate in the distribution of such
New Notes.
The Company expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Old Notes upon the occurrence of either of the
foregoing conditions. In addition, the Company may amend the Exchange Offer at
any time prior to the Expiration Date if either of the conditions set forth
above occur. Moreover, regardless of whether either of such conditions has
occurred, the Company may amend the Exchange Offer in any manner which, in its
good faith judgment, is advantageous to Holders of the Old Notes.
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole or in part, in its sole discretion. The
foregoing conditions must be either satisfied or waived prior to termination of
the Exchange Offer. Any determination made by the Company concerning an event,
development or circumstance described or referred to above will be final and
binding on all parties.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Mail (registered or certified mail recommended):
By Overnight Courier or By Hand:
The Bank of New York The Bank of New York
Reorganization Section Reorganization Section
101 Barclay Street (7 East) 101 Barclay Street (7 East)
New York, New York 10286
New York, New York 10286
Attention: Enrique Lopez Attention: Enrique Lopez
By Facsimile: Confirm by Telephone:
212-571-3080
212-815-2742
Delivery to an address other than as set forth above, or transmission of
instructions via a facsimile number other than the one set forth above, will
not constitute a valid delivery.
FEES AND EXPENSES
The expense of soliciting tenders will be borne by the Company. The principal
solicitation is being made by mail; however, additional solicitation may be
made by telegraph, telephone or in person by officers and regular employees of
the Company and its affiliates. No additional compensation will be paid to any
such officers and employees who engage in soliciting tenders.
The Company has not retained any dealer-manager or other soliciting agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes, or Old Notes for principal amounts not tendered or
accepted for exchange, are to be delivered to, or are to be issued in the name
of, any person other
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than the registered Holder of the Old Notes tendered or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered Holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes as
reflected in the Company's accounting records on the date of the exchange
because the exchange of the Old Notes for the New Notes is the completion of
the selling process contemplated in the issuance of the Old Notes. Accordingly,
no gain or loss for accounting purposes will be recognized. The expenses of the
Exchange Offer will be amortized over the term of the New Notes.
OTHER
Participation in the Exchange Offer is voluntary and Holders should carefully
consider whether to accept. Holders of the Old Notes are urged to consult their
financial and tax advisors in making their own decisions on what action to
take.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the respective dates as of
which information is given herein. The Exchange Offer is not being made to (nor
will tenders be accepted from or on behalf of) Holders of Old Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction. However,
the Company may, at its discretion, take such action as it may deem necessary
to make the Exchange Offer in any such jurisdiction and extend the Exchange
Offer to Holders of Old Notes in such jurisdiction. In any jurisdiction the
securities laws or blue sky laws of which require the Exchange Offer to be made
by a licensed broker or dealer, the Exchange Offer is being made on behalf of
the Company by one or more registered brokers or dealers which are licensed
under the laws of such jurisdiction.
As a result of the making of the Exchange Offer, the Company will have
fulfilled a covenant contained in the terms of the Old Notes and the
Registration Rights Agreement. Holders of the Old Notes who do not tender their
certificates in the Exchange Offer will continue to hold such certificates and
will be entitled to all the rights, and limitations applicable thereto under
the Indenture except for certain registration rights under the Registration
Rights Agreement and except that the Old Notes will not be entitled to the
contingent increase in the interest rate provided for in the Old Notes relating
to the timing of consummation of the Exchange Offer. All untendered Old Notes
will continue to be subject to the restrictions on transfer set forth in the
Indenture and the Old Notes. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market, if any, for untendered Old
Notes could be adversely affected.
FOR INFORMATION CONCERNING THE TAX CONSEQUENCES OF THE EXCHANGE OFFER AND OF
HOLDING THE NEW NOTES, SEE "TAX CONSIDERATIONS."
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DESCRIPTION OF THE NEW NOTES
GENERAL
The Old Notes were issued, and the New Notes are issuable, under an
Indenture, dated as of April 28, 1995 (the "Indenture"), between the Company
and The Bank of New York, as Trustee (the "Trustee"), a copy of the form of
which has been filed as an exhibit to the Registration Statement. See
"Available Information." The form and terms of the New Notes will be identical
in all material respects to the form and terms of the Old Notes except that the
New Notes will have been registered under the Securities Act and, therefore
will not bear legends restricting transfer thereof and will not be entitled to
the contingent increase in the interest rate provided for in the Old Notes
relating to the timing of consummation of the Exchange Offer. The New Notes and
the Old Notes are deemed the same class of notes under the Indenture and are
entitled to the benefits thereof.
A copy of the form of the Indenture will be available from the Company upon
request. The following summaries of the material provisions of the Indenture
are accurate but do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part thereof by the Trust Indenture Act of 1939, as amended.
Principal of, premium, if any, and interest on the New Notes will be payable,
and the New Notes may be exchanged or transferred, at the office or agency of
the Company in the Borough of Manhattan, The City of New York (which initially
will be the corporate trust office of the Trustee, at 101 Barclay Street, Floor
21 West); provided that, at the option of the Company, payment of interest may
be made by check mailed to the address of the Holders as such address appears
in the Security Register.
The New Notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple of $1,000. No service
charge will be made for any registration of transfer or exchange of New Notes,
but the Company may require payment of a sum sufficient to cover any transfer
tax or other similar governmental charge payable in connection therewith.
The New Notes will be unsecured senior obligations of the Company, limited to
$300 million aggregate principal amount, and will mature on April 15, 2005.
Each New Note will bear interest at the rate per annum shown on the front cover
of this Prospectus from the most recent date to which interest has been paid on
the Old Note for which such New Note was exchanged, or if no interest has been
paid, from the date of original issuance of such Note, payable semiannually (to
Holders of record at the close of business on the April 1 or October 1
immediately preceding the Interest Payment Date) on April 15 and October 15 of
each year, commencing October 15, 1995.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time on or after April 15, 2000 and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice mailed by first class mail to each
Holder's last address as it appears in the Security Register, at the following
Redemption Prices (expressed in percentages of principal amount), plus accrued
and unpaid interest, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due
on an Interest Payment Date that is on or prior to the Redemption Date), if
redeemed during the 12-month period commencing on April 15 of the years set
forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000........................................................... 105.0%
2001........................................................... 102.5%
2002 and thereafter............................................ 100.0%
</TABLE>
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Selection. ln the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, on a
pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate; provided that no Note of
$1,000 in principal amount or less shall be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note.
The Credit Agreement contains a covenant prohibiting the optional redemption
of the Notes. See "Description of Certain Indebtedness--Credit Agreement."
RANKING
The Notes will be unsecured Indebtedness of the Company ranking pari passu
with the Company's unsubordinated, unsecured Indebtedness. At July 2, 1995, the
Company had approximately $1,171.4 million of senior indebtedness,
approximately $407.0 million of which is secured Indebtedness, and
approximately $82.2 million of subordinated, unsecured Indebtedness. Holders of
such secured Indebtedness will be entitled to payment out of the proceeds of
their collateral prior to any holders of general unsecured indebtedness,
including the Notes. The Notes will be effectively subordinated to all third-
party liabilities of the Company's subsidiaries and at July 2, 1995, the
Company's subsidiaries had approximately $1,588.6 million of such liabilities,
including approximately $833.6 million of indebtedness, which includes the
principal subsidiaries' guarantee of the Company's obligations under the Credit
Agreement.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all such terms as well as any other
capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" is defined to mean Indebtedness of a Person existing
at the time such Person became a Subsidiary and not Incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary.
"Acquisition Financing" is defined to mean the transactions pursuant to which
the Notes are issued, the Company Incurs Indebtedness under the revolving
credit portion of the Credit Agreement and CEAC and its Subsidiaries refinance
certain Indebtedness, in each case in connection with the CEAC Acquisition.
"Adjusted Consolidated Net Income" is defined to mean, for any period, the
aggregate net income (or loss) of any Person and its consolidated Subsidiaries
for such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income (or loss) of such Person (other than a
Subsidiary of such Person) in which any other Person (other than such Person or
any of its Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to such Person or any
of its Subsidiaries by such other Person during such period; (ii) solely for
the purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of the "Limitation on Restricted
Payments" covenant described below (and in such case, except to the extent
includible pursuant to the foregoing clause (i) above), the net income (or
loss) of such Person accrued prior to the date it becomes a Subsidiary of any
other Person or is merged into or consolidated with such other Person or any of
its Subsidiaries or all or substantially all of the property and assets of such
Person are acquired by such other Person or any of its Subsidiaries; (iii) the
net income (or loss) of any Subsidiary of any Person to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
of such net income is not at the time permitted by the operation of the terms
of its charter or any agreement, instrument, judgment,
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decree, order, statute, rule or governmental regulation applicable to such
Subsidiary; (iv) any gains or losses (on an after-tax basis) attributable to
Asset Sales; and (v) all extraordinary gains and extraordinary losses; provided
that, solely for purposes of calculating the Interest Coverage Ratio (and in
such case, except to the extent includible pursuant to clause (i) above),
"Adjusted Consolidated Net Income" of the Company shall include the amount of
all cash dividends received by the Company or any Subsidiary of the Company
from an Unrestricted Subsidiary.
"Affiliate" is defined to mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. For purposes of this
definition, neither any Bank Agent nor any Bank nor any affiliate of any of
them shall be deemed to be an Affiliate of the Company.
"Asset Acquisition" is defined to mean (i) an investment by the Company or
any of its Subsidiaries in any other Person pursuant to which such Person shall
become a Subsidiary of the Company or any of its Subsidiaries or shall be
merged into or consolidated with the Company or any of its Subsidiaries or (ii)
an acquisition by the Company or any of its Subsidiaries of the assets of any
Person other than the Company or any of its Subsidiaries that constitute
substantially all of a division or line of business of such Person.
"Asset Disposition" is defined to mean the sale or other disposition by the
Company or any of its Subsidiaries (other than to the Company or another
Subsidiary of the Company) of (i) all or substantially all of the Capital Stock
of any Subsidiary of the Company or (ii) all or substantially all of the assets
that constitute a division or line of business of the Company or any of its
Subsidiaries.
"Asset Sale" is defined to mean, with respect to any Person, any sale,
transfer or other disposition (including by way of merger, consolidation or
sale-leaseback transactions) in one transaction or a series of related
transactions by such Person or any of its Subsidiaries to any Person other than
the Company or any of its Subsidiaries of (i) all or any of the Capital Stock
of any Subsidiary of such Person, (ii) all or substantially all of the property
and assets of an operating unit or business of such Person or any of its
Subsidiaries or (iii) any other property and assets of such Person or any of
its Subsidiaries outside the ordinary course of business of such Person or such
Subsidiary and, in each case, that is not governed by the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of the Company; provided that
neither (A) sales or other dispositions of inventory, receivables and other
current assets nor (B) sales or other dispositions of surplus equipment,
furniture or fixtures in an aggregate amount not to exceed $5 million in any
fiscal year of the Company shall be included within the meaning of "Asset
Sale."
"Attributable Indebtedness" is defined to mean, when used in connection with
a sale-leaseback transaction referred to in the "Limitation on Sale-Leaseback
Transactions" covenant described below, at any date of determination; the
product of (i) the net proceeds from such sale-leaseback transaction and (ii) a
fraction, the numerator of which is the number of full years of the term of the
lease relating to the property involved in such sale-leaseback transaction
(without regard to any options to renew or extend such term) remaining at the
date of the making of such computation and the denominator of which is the
number of full years of the term of such lease (without regard to any options
to renew or extend such term) measured from the first day of such term.
"Average Life" is defined to mean, at any date of determination with respect
to any debt security, the quotient obtained by dividing (i) the sum of the
product of (A) the number of years from such date of determination to the dates
of each successive scheduled principal payment of such debt security multiplied
by (B) the amount of such principal payment by (ii) the sum of all such
principal payments.
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"Bank Agents" is defined to mean Bankers Trust Company, Bank of America
National Trust and Savings Association and Bank of Montreal, as agents for the
Banks pursuant to the Credit Agreement, and any successors thereto.
"Banks" is defined to mean the lenders who are from time to time parties to
the Credit Agreement.
"Board of Directors" is defined to mean the Board of Directors of the Company
or any committee of such Board of Directors duly authorized to act under the
Indenture.
"Business Day" is defined to mean any day except a Saturday, Sunday or other
day on which commercial banks in The City of New York, or in the city of the
Corporate Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's capital stock, whether now
outstanding or issued after the date of the Indenture, including, without
limitation, all Common Stock and Preferred Stock.
"Capitalized Lease" is defined to mean, as applied to any Person, any lease
of any property (whether real, personal or mixed) the discounted present value
of the rental obligations of such Person as lessee of which, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person; and
"Capitalized Lease Obligation" is defined to mean the rental obligations, as
aforesaid, under such lease.
"CEAC" is defined to mean Compagnie Europeene d'Accumulateurs S.A., a French
corporation.
"CEAC Acquisition" is defined to mean the acquisition by the Company or its
Subsidiaries of at least 98% of the Capital Stock of CEAC.
"Change of Control" is defined to mean such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d) of the Exchange Act), other
than the Original Investors and their respective Affiliates, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than fifty percent (50%) of the total voting power of the then outstanding
Voting Stock of the Company; or (ii) during any period of two consecutive
calendar years, individuals who at the beginning of such period constituted the
Company's Board of Directors (together with any new directors whose election by
the Company's Board of Directors or whose nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds of the
Directors then still in office who either were Directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors then
in office; or (iii) (A) the Company consolidates with or merges into any other
Person or conveys, transfers or leases all or substantially all of its assets
to any Person or (B) any Person merges into the Company, in either event
pursuant to a transaction in which any Voting Stock of the Company outstanding
immediately prior to the effectiveness thereof is reclassified or changed into
or exchanged for cash, securities or other property; provided that any
consolidation, conveyance, transfer or lease (x) between the Company and any of
its Subsidiaries or between Subsidiaries (including, without limitation, the
reincorporation of the Company in another jurisdiction) or (y) for the purpose
of creating a public holding company for the Company in another jurisdiction or
(z) for the purpose of creating a public holding company for the Company in
which all holders of the Company's Capital Stock would be entitled to receive
(other than cash in lieu of fractional shares) solely Capital Stock of the
holding company in amounts proportionate to their holdings of Capital Stock of
the Company immediately prior to such transaction, shall be excluded from the
operation of this clause (iii).
"Change of Control Triggering Event" is defined to mean the occurrence of
both a Change of Control and a Rating Decline.
"Closing Date" is defined to mean the date on which the Notes are originally
issued under the Indenture.
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"Commodity Agreement" is defined to mean any agreement or arrangement
designed to protect the Company or any of its Subsidiaries against fluctuations
in the prices of commodities used by the Company or any of its Subsidiaries in
the ordinary course of its business and entered into with any bank.
"Common Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the date of the Indenture, including, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" is defined to mean, with respect to any Person for any
period, the sum of the amounts for such period of (i) Adjusted Consolidated Net
Income, (ii) Consolidated Interest Expense, (iii) income taxes (other than
income taxes (either positive or negative) attributable to extraordinary and
nonrecurring gains or losses or sales of assets), (iv) depreciation expense,
(v) amortization expense and (vi) all other non-cash items reducing Adjusted
Consolidated Net Income, less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for such
Person and its Subsidiaries in conformity with GAAP; provided that, if a Person
has any Subsidiary that is not a Wholly Owned Subsidiary of such Person,
Consolidated EBITDA of such Person shall be reduced by an amount equal to (A)
the Adjusted Consolidated Net Income of such Subsidiary multiplied by (B) the
quotient of (1) the number of shares of outstanding Common Stock of such
Subsidiary not owned on the last day of such period by such Person or any
Subsidiary of such Person divided by (2) the total number of shares of
outstanding Common Stock of such Subsidiary on the last day of such period.
"Consolidated Interest Expense" is defined to mean, with respect to any
Person for any period, the aggregate amount of interest in respect of
Indebtedness (including amortization of original issue discount on any
Indebtedness and the interest portion of any deferred payment obligation,
calculated in accordance with the effective interest method of accounting; all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing; and the net costs associated with
Interest Rate Agreements) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by such Person and its consolidated subsidiaries during such
period; excluding, however, (i) any amount of such interest of any Subsidiary
of such Person if the net income (or loss) of such Subsidiary is excluded in
the calculation of Adjusted Consolidated Net Income for such Person pursuant to
clause (iii) of the definition thereof (but only in the same proportion as the
net income (or loss) of such Subsidiary is excluded from the calculation of
Adjusted Consolidated Net Income for such Person pursuant to clause (iii) of
the definition thereof) and (ii) any premiums, fees and expenses (and any
amortization thereof) payable in connection with the Refinancing and the
Acquisition Financing, all as determined on a consolidated basis in conformity
with GAAP.
"Consolidated Net Tangible Assets" is defined to mean the total amount of
assets of the Company and its Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
write-ups of capital assets (excluding write-ups in connection with accounting
for acquisitions in conformity with GAAP), after deducting therefrom (i) all
current liabilities of the Company and its consolidated Subsidiaries (excluding
intercompany items) and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recently available consolidated balance sheet of the Company
and its consolidated Subsidiaries, prepared in conformity with GAAP.
"Consolidated Net Worth" is defined to mean, at any date of determination,
shareholders' equity as set forth on the most recently available consolidated
balance sheet of the Company and its consolidated Subsidiaries (which shall be
as of a date not more than 60 days prior to the date of such computation), less
any amounts attributable to Redeemable Stock or any equity security convertible
into or exchangeable for Indebtedness, the cost of treasury stock and the
principal amount of any promissory notes receivable from the sale of Capital
Stock of the Company or any Subsidiary of the Company, each item to be
determined in accordance with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
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"Credit Agreement" is defined to mean the Credit Agreement, dated as of
August 30, 1994, as amended, among the Company, and certain of the Company's
Subsidiaries, as guarantors, and the Banks party thereto, the issuing bank
party thereto and the Bank Agents, together with all other agreements,
instruments and documents executed or delivered pursuant thereto or in
connection therewith (including, without limitation, any promissory notes,
Guarantees and security documents), in each case, as such agreements,
instruments and documents may be amended (including, without limitation, any
amendment and restatement thereof), supplemented, extended, renewed, replaced
or otherwise modified from time to time, including, without limitation, any
agreement increasing the amount of, extending the maturity of, refinancing or
otherwise restructuring (including, but not limited to, by the inclusion of
additional borrowers or Guarantors thereunder that are Subsidiaries of the
Company and whose obligations are Guaranteed by the Company thereunder or by
the requirement of additional collateral or other credit enhancement to support
the obligations thereunder) all or any portion of the Indebtedness under such
agreement or any successor agreement or agreements; provided that, with respect
to any agreement providing for the refinancing of Indebtedness under the Credit
Agreement, such agreement shall be the Credit Agreement under the Indenture
only if a notice to that effect is delivered by the Company to the Trustee and
there shall be at any time only one instrument that is the Credit Agreement
under the Indenture.
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any of its Subsidiaries against fluctuations in currency
values to or under which the Company or any of its Subsidiaries is a party or a
beneficiary on the date of the Indenture or becomes a party or a beneficiary
thereafter.
"GAAP" is defined to mean generally accepted accounting principles in the
United States of America as in effect as of the date of the Indenture,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios and
computations based on GAAP contained in the Indenture shall be computed in
conformity with GAAP, except that calculations made for purposes of determining
compliance with the terms of the covenants described below and with other
provisions of the Indenture shall be made without giving effect to (i) the
amortization of any expenses incurred in connection with the Refinancing and
the Acquisition Financing and (ii) except as otherwise provided, the
amortization of any amounts required or permitted by Accounting Principles
Board Opinion Nos. 16 and 17.
"Guarantee" is defined to mean any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Holder" or "Securityholder" is defined to mean the registered holder of any
Note.
"Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness; provided that neither the accrual of interest (whether such
interest is payable in cash or kind) nor the accretion of original issue
discount shall be considered an Incurrence of Indebtedness.
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"Indebtedness" is defined to mean, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person (other than a Lien permitted under the
second paragraph of the "Limitation on Liens" covenant), whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (viii) all obligations in respect of
borrowed money under the Credit Agreement and any Guarantees thereof and (ix)
to the extent not otherwise included in this definition, obligations under
Currency Agreements, Interest Rate Agreements and Commodity Agreements. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date; provided that the
amount outstanding at any time of any Indebtedness issued with original issue
discount is the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP.
"Interest Coverage Ratio" is defined to mean, with respect to any Person on
any Transaction Date, the ratio of (i) the aggregate amount of Consolidated
EBITDA of such Person for the four fiscal quarters for which financial
statements of the Company have been filed with the Commission pursuant to the
"Commission Reports and Reports to Holders" covenant immediately prior to such
Transaction Date to (ii) the aggregated Consolidated Interest Expense of such
Person during such four fiscal quarters. In making the foregoing calculation,
(A) pro forma effect shall be given to (1) any Indebtedness Incurred subsequent
to the end of the four-fiscal-quarter period referred to in clause (i) and
prior to the Transaction Date (other than Indebtedness Incurred under a
revolving credit or similar arrangement to the extent of the commitment
thereunder (or under any predecessor revolving credit or similar arrangement)
on the last day of such period), (2) any Indebtedness Incurred during such
period to the extent such Indebtedness is outstanding at the Transaction Date
and (3) any Indebtedness to be incurred on the Transaction Date, in each case
as if such Indebtedness had been Incurred on the first day of such four-fiscal-
quarter period and after giving pro forma effect to the application of the
proceeds thereof as if such application occurred on such first day; (B)
Consolidated Interest Expense attributable to interest on any Indebtedness
(whether existing or being Incurred) computed on a pro forma basis and bearing
a floating interest rate shall be computed as if the rate in effect on the
Transaction Date (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in
excess of 12 months) had been the applicable rate for the entire period; (C)
there shall be excluded from Consolidated Interest Expense any Consolidated
Interest Expense related to any amount of Indebtedness that was outstanding
during such four-fiscal-quarter period or thereafter but that is not
outstanding or is to be repaid on the Transaction Date, except for Consolidated
Interest Expense accrued (as adjusted pursuant to clause (B)) during such four-
fiscal-quarter period under a revolving credit or similar arrangement to the
extent of the commitment thereunder (or under any successor revolving credit or
similar arrangement) on the Transaction Date; (D) pro forma effect shall be
given to Asset Dispositions and Asset Acquisitions (including giving pro forma
effect to the application of proceeds of any Asset Disposition) that occur
during such four-fiscal-quarter period or thereafter and prior to the
Transaction Date as if they had occurred and any such proceeds had been applied
on the first day of such four-fiscal-quarter period; (E) with respect to any
such four-fiscal-quarter period commencing prior to the Acquisition Financing,
the Acquisition Financing shall be deemed to have taken place on the first day
of such period; and (F) pro forma effect shall be given to asset dispositions
and asset acquisitions that have been made by any Person that has become a
Subsidiary of the Company or has been merged with or into the
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Company or any Subsidiary of the Company during the four-fiscal-quarter period
referred to above or subsequent to such period and prior to the Transaction
Date and that would have been Asset Dispositions or Asset Acquisitions had such
transactions occurred when such Person was a Subsidiary of the Company as if
such asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such period.
"Interest Rate Agreement" is defined to mean any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect the Company or any of its Subsidiaries against
fluctuations in interest rates to or under which the Company or any of its
Subsidiaries is a party or a beneficiary on the date of the Indenture or
becomes a party or a beneficiary thereafter.
"Investment" is defined to mean any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of any Person or its Subsidiaries)
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, bonds, notes, debentures or other similar instruments issued by
any other Person. For purposes of the definition of "Unrestricted Subsidiary"
and the "Limitation on Restricted Payments" covenant described below, (i)
"Investment" shall include the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary of the Company is
designated an Unrestricted Subsidiary and shall exclude the fair market value
of the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Subsidiary of the Company and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
by the Board of Directors in good faith.
"Investment Grade" is defined to mean BBB- or higher by S&P or Baa3 or higher
by Moody's or the equivalent of such ratings by S&P or Moody's. In the event
that the Company shall select any other Rating Agency, the equivalent of such
ratings by such Rating Agency shall be used.
"Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"Moody's" is defined to mean Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" is defined to mean, with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Subsidiary
of the Company) and proceeds from the conversion of other property received
when converted to cash or cash equivalents, net of (i) brokerage commissions
and other fees and expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
(whether or not such taxes will actually be paid or are payable) as a result of
such Asset Sale without regard to the consolidated results of operations of the
Company and its Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Subsidiary of the Company as a reserve against
any liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP.
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"Operating Lease" is defined to mean, as applied to any Person, any lease of
any property (whether real, personal or mixed) that is not a Capitalized Lease.
"Original Investors" is defined to mean, collectively, Wilmington Securities,
Inc., ECA Partners, L.P., Chemical Fund Investments, Inc. and officers and
directors of the Company who beneficially owned Voting Stock of EC Acquisition,
Inc., the Company's predecessor, on December 17, 1992, or, upon the death of
such an officer or director, such persons, executors, administrators,
testamentary trustees, heirs, legatees or beneficiaries.
"Permitted Liens" is defined to mean (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (ii) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (iii) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers' acceptances, surety and
appeal bonds, government contracts, performance and return-of-money bonds and
other obligations of a similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (v)
easements, rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Subsidiaries; (vi) Liens (including extensions and renewals thereof) upon real
or tangible personal property acquired after the Closing Date; provided that
(a) such Lien is created solely for the purpose of securing Indebtedness
Incurred (1) to finance the cost (including the cost of improvement or
construction) of the item of property or assets subject thereto and such Lien
is created prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Indebtedness previously so
secured, (b) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (c) any such Lien shall not extend to or cover
any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company or
any of its Subsidiaries; (viii) Liens encumbering property or assets under
construction arising from progress or partial payments by a customer of the
Company or any of its Subsidiaries relating to such property or assets; (ix)
any interest or title of a lessor in the property subject to any Capitalized
Lease or Operating Lease; provided that any sale-leaseback transaction related
thereto complies with the "Limitation on Sale-Leaseback Transactions" covenant
described below; (x) Liens arising from filing Uniform Commercial Code
financing statements regarding leases; (xi) Liens on property of, or on shares
of stock or Indebtedness of, any Person existing at the time such Person
becomes, or becomes a part of, any Restricted Subsidiary; (xii) Liens in favor
of the Company or any Restricted Subsidiary; (xiii) Liens securing any real
property or other assets of the Company or any Subsidiary of the Company in
favor of the United States of America or any State, or any department, agency,
instrumentality or political subdivision thereof, in connection with the
financing of industrial revenue bond facilities or of any equipment or other
property designed primarily for the purpose of air or water pollution control;
provided, however, that any such Lien on such facilities, equipment or other
property shall not apply to any other assets of the Company or such Subsidiary
of the Company; (xiv) Liens arising from the rendering of a final judgment or
order against the Company or any Subsidiary of the Company that does not give
rise to an Event of Default; (xv) Liens securing reimbursement obligations with
respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (xvi)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(xvii) Liens encumbering customary initial deposits and margin deposits, and
other Liens that are either within the general parameters customary in the
industry and incurred in the
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ordinary course of business or otherwise permitted under the terms of the
Credit Agreement, in each case securing Indebtedness under Interest Rate
Agreements and Currency Agreements and forward contracts, options, futures
contracts, futures options or similar agreements or arrangements designed to
protect the Company or any of its Subsidiaries from fluctuations in the price
of commodities; (xviii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by the
Company or any of its Subsidiaries in the ordinary course of business in
accordance with the past practices of the Company and its Subsidiaries prior to
the Closing Date; and (xix) Liens on or sales of receivables.
"Person" is defined to mean an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plans" is defined to mean any employee benefit plan, pension plan, stock
option plan or similar plan or arrangement of the Company or any Subsidiary of
the Company, or, in the case of the ECA Stock Award Plan, of EC Acquisition,
Inc., or, in each case, any successor plan thereof including, without
limitation, the Exide Corporation Salaried Retirement Plan, the Exide
Retirement Income Security Plan, the Exide Corporation Long Term Incentive
Compensation Plan, the ECA Stock Award Plan and the Exide Savings Plan.
"Preferred Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether now outstanding or issued after the date of the Indenture, including,
without limitation, all series and classes of such preferred or preference
stock.
"Principal Property" is defined to mean any manufacturing, processing or
smelting plant, warehouse or other building used by the Company or any
Restricted Subsidiary, other than a plant, warehouse or other building that, in
the good faith opinion of the Board of Directors as reflected in a Board
Resolution, is not of material importance to the respective businesses
conducted by the Company or any Restricted Subsidiary as of the date such Board
Resolution is adopted.
"Rating Agencies" is defined to mean (i) S&P and (ii) Moody's or (iii) if S&P
or Moody's or both shall not make a rating of the Notes publicly available, a
nationally recognized securities rating agency or agencies, as the case may be,
selected by the Company, which shall be substituted for S&P or Moody's or both,
as the case may be.
"Rating Category" is defined to mean (i) with respect to S&P, any of the
following categories: BB, B, CCC, CC, C and D (or equivalent successor
categories); (ii) with respect to Moody's, any of the following categories: Ba,
B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the
equivalent of any such category of S&P or Moody's used by another Rating
Agency. In determining whether the rating of the Notes has decreased by one or
more gradations, gradations within Rating Categories (+ and - for S&P; 1, 2 and
3 for Moody's; or the equivalent gradations for another Rating Agency) shall be
taken into account (e.g., with respect to S&P, a decline in a rating from BB+
to BB, as well as from BB- to B+, will constitute a decrease of one gradation).
"Rating Date" is defined to mean the date which is 90 days prior to the
earlier of (i) a Change of Control and (ii) public notice of the occurrence of
a Change of Control or of the intention by the Company to effect a Change of
Control.
"Rating Decline" is defined to mean the occurrence of the following on, or
within 90 days after, the date of public notice of the occurrence of a Change
of Control or of the intention by the Company to effect a Change of Control
(which period shall be extended so long as the rating of the Notes is under
publicly announced consideration for possible downgrade by any of the Rating
Agencies): (a) in the event the Notes are rated by either Moody's or S&P on the
Rating Date as Investment Grade, the rating of the Notes by both Rating
Agencies shall be below Investment Grade, or (b) in the event the Notes are
rated below Investment Grade by both Rating Agencies on the Rating Date, the
rating of the Notes by either Rating Agency shall be
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decreased by one or more gradations (including gradations within Rating
Categories as well as between Rating Categories).
"Redeemable Stock" is defined to mean any class or series of Capital Stock of
any Person that by its terms or otherwise is (i) required to be redeemed prior
to the Stated Maturity of the Notes, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a
scheduled maturity prior to the Stated Maturity of the Notes; provided that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require the Company to repurchase
or redeem such Capital Stock upon the occurrence of an "asset sale" occurring
prior to the Stated Maturity of the Notes shall not constitute Redeemable Stock
if the asset sale provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions contained in
the "Limitations on Asset Sales" covenant described below and such Capital
Stock specifically provides that the Company will not repurchase or redeem any
such stock pursuant to such provisions prior to the Company's repurchase of
such Notes as are required to be repurchased pursuant to the provisions of the
"Limitation on Asset Sales" covenant described below.
"Refinancing" means the refinancing of the Company in 1992, consisting of the
issuance of the 10 3/4% Notes and the Senior Subordinated Debentures, the
amendments to, and repayment of certain Indebtedness outstanding under, the
Company's then existing credit agreement, the repayment of loans to the Company
from Wilmington Securities, Inc., the redemption of preferred stock of EC
Acquisition, Inc. and the redemption of the 12 7/8% Subordinated Notes due June
15, 1997 of the Company.
"Restricted Subsidiary" is defined to mean any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Senior Subordinated Debentures" is defined to mean the 12 1/4% Senior
Subordinated Deferred Coupon Debentures Due June 2004 of the Company.
"Significant Subsidiary" is defined to mean, at any date of determination,
any Subsidiary of the Company that, together with its Subsidiaries, (i) for the
most recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company or (ii) as of the end of such fiscal year,
was the owner of more than 10% of the consolidated assets of the Company, all
as set forth on the most recently available consolidated financial statements
of the Company for such fiscal year.
"Sonnenschein" is defined to mean Sonnenschein GmbH and its successors.
"S&P" is defined to mean Standard & Poor's Ratings Group and its successors.
"Stated Maturity" is defined to mean, (i) with respect to any debt security,
the date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subsidiary" is defined to mean, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the outstanding
Voting Stock is owned, directly or indirectly, by such Person or one or more
other Subsidiaries of such Person; provided that, with respect to the Company,
except as the term "Subsidiary" is used in the definition of "Unrestricted
Subsidiary" described below, an Unrestricted Subsidiary shall not be deemed to
be a Subsidiary of the Company for purposes of the Indenture.
"10 3/4% Notes" means the 10 3/4% Senior Notes Due 2002 of the Company.
"Trade Payables" is defined to mean, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or
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any of its Subsidiaries arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Transaction Date" is defined to mean, with respect to the Incurrence of any
Indebtedness by the Company or any of its Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Tudor" is defined to mean Sociedad Espanola del Acumulador Tudor, S.A. and
its successors.
"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any other Subsidiary of the Company that is not a Subsidiary
of the Subsidiary to be so designated; provided that either (A) the Subsidiary
to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, that such designation would be
permitted under the "Limitation on Restricted Payments" covenant described
below. The Board of Directors may designate any Unrestricted Subsidiary to be a
Subsidiary of the Company; provided that immediately after giving effect to
such designation (x) the Company could Incur $1.00 of additional Indebtedness
under the first paragraph of the "Limitation on Indebtedness" covenant
described below and (y) no Event of Default, or event or condition that after
notice or passage of time or both would become an Event of Default, shall have
occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"Voting Stock" is defined to mean Capital Stock of any class or kind
ordinarily having the power to vote for the election of directors.
"Wholly Owned Subsidiary", solely as used in clause (ii) of the second
paragraph of the "Limitation on Indebtedness" covenant means, with respect to
any Person, any Subsidiary of such Person if at least 98.5% of the Common Stock
or other similar equity ownership interests (but not including Preferred Stock)
in such Subsidiary (other than any director's qualifying shares or Investments
by foreign nationals mandated by applicable law) is owned directly or
indirectly by such Person; provided that (i) with respect to Tudor, the Company
directly or indirectly owns at least 89% of the Common Stock or other similar
equity ownership interest (but not including Preferred Stock) in Tudor (other
than director's qualifying shares or Investments by foreign nationals mandated
by applicable law) and (ii) with respect to Sonnenschein, the Company directly
or indirectly owns at least 74.5% of the Common Stock or other similar equity
ownership interest (but not including Preferred Stock) in Sonnenschein (other
than director's qualifying shares or Investments by foreign nationals mandated
by applicable law).
COVENANTS
Limitation on Indebtedness
Under the terms of the Indenture, the Company shall not, and shall not permit
any Restricted Subsidiary to, Incur any Indebtedness (other than the Notes and
Indebtedness existing on the Closing Date); provided that the Company may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the Interest Coverage
Ratio of the Company would be greater than 2.0:1.
Notwithstanding the foregoing, under the Indenture (except as expressly
provided otherwise below), the Company and any Restricted Subsidiary may Incur
each and all of the following: (i) Indebtedness outstanding
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at any one time in an aggregate principal amount not to exceed the greater of
(A) $255 million or (B) 30% of accounts receivable and 20% of inventory, in
each case net of reserves and as shown on the consolidated balance sheet of the
Company and most recently (as of the date of the Incurrence under this clause
(a)(i)(B)) filed on Form 10-Q or 10-K by the Company with the Commission;
provided that the aggregate principal amount of Indebtedness of Restricted
Subsidiaries pursuant to this clause (i) shall not exceed $100 million at any
one time outstanding; (ii) Indebtedness of the Company to any of its Restricted
Subsidiaries that is a Wholly Owned Subsidiary of the Company, or of a
Restricted Subsidiary to the Company or to any other Restricted Subsidiary that
is a Wholly Owned Subsidiary of the Company; (iii) Indebtedness the net
proceeds of which are used to refinance outstanding Indebtedness of the Company
or any of its Restricted Subsidiaries, other than Indebtedness Incurred under
clause (i), (iv), (vi), (viii), (ix) or (x) of this covenant and any
refinancings thereof, in an amount (or, if such new Indebtedness provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, with an original issue price) not to
exceed the amount so refinanced (plus premiums, accrued interest, fees and
expenses); provided that Indebtedness the proceeds of which are used to
refinance the Notes or other Indebtedness of the Company that is subordinated
in right of payment to the Notes shall only be permitted under this clause
(iii) if (A) in case the Notes are refinanced in part, such Indebtedness, by
its terms or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, is expressly made pari passu with, or subordinate in
right of payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to which
such Indebtedness is issued, is expressly made subordinate in right of payment
to the Notes at least to the extent that the Indebtedness to be refinanced is
subordinated to the Notes and (C) in case the Notes are refinanced in part or
the Indebtedness to be refinanced is subordinated in right of payment to the
Notes, such Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to one year after the Stated Maturity of
the Indebtedness being refinanced and the Average Life of such Indebtedness is
equal to or greater than the remaining Average Life of the Indebtedness being
refinanced plus one year; and provided further that in no event may
Indebtedness of the Company that is pari passu with, or subordinated in right
of payment to, the Notes be refinanced by means of Indebtedness of any
Subsidiary of the Company pursuant to this clause (iii); (iv) unsecured
Indebtedness, in an aggregate principal amount not to exceed $2 million at any
one time outstanding, Incurred by the Company in connection with the purchase,
redemption, acquisition, cancellation or other retirement for value of shares
of Capital Stock of the Company, options on any such shares or related stock
appreciation rights or similar securities held by officers or employees or
former officers or employees (or their estates or beneficiaries under their
estates) or by any Plan, upon death, disability, retirement, termination of
employment or pursuant to the terms of such Plan, or any other agreement under
which such shares of stock or related rights were issued; provided that (A)
such Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, is expressly made subordinate in
right of payment to the Notes, at least to the extent that the Senior
Subordinated Debentures are subordinated to Senior Indebtedness (as defined in
the Indenture pursuant to which the Senior Subordinated Debentures were issued
("Senior Indebtedness")), (B) such Indebtedness, by its terms or by the terms
of any agreement or instrument pursuant to which such Indebtedness is issued,
provides that no payments of principal of such Indebtedness by way of sinking
fund, mandatory redemption or otherwise (including defeasance) may be made by
the Company at any time prior to one year after the Stated Maturity of the
Notes, and (C) the scheduled maturity of all principal of such Indebtedness is
one year beyond the Stated Maturity of the Notes; (v) Indebtedness (A) in
respect of performance bonds, bankers' acceptances, letters of credit and
surety or appeal bonds provided in the ordinary course of business and letters
of credit under the Credit Agreement, (B) under Currency Agreements, Interest
Rate Agreements and Commodity Agreements; provided that, in the case of
Currency Agreements that relate to other Indebtedness, such Currency Agreements
do not increase the Indebtedness of the Company outstanding at any time other
than as a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder and (C) arising
from agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any Subsidiary of
the Company pursuant to such agreements, in any case Incurred in connection
with the
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disposition of any business, assets or Subsidiary of the Company (other than
Guarantees of Indebtedness Incurred by any Person acquiring all or any portion
of such business, assets or Subsidiary of the Company for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition; (vi) Indebtedness under Guarantees Incurred
by the Company in respect of obligations of Unrestricted Subsidiaries
outstanding at any time in an aggregate amount not to exceed $10 million; (vii)
Acquired Indebtedness; provided that, after giving pro forma effect to the
Incurrence of such Indebtedness, the Company could Incur at least $1.00 of
Indebtedness under the first paragraph of this "Limitation on Indebtedness"
covenant; and refinancings thereof, provided that such refinancing Indebtedness
may not be Incurred by any Person other than the Company or the Restricted
Subsidiary that is the obligor on such Acquired Indebtedness; (viii) unsecured
Indebtedness of the Company outstanding at any time in an aggregate amount not
to exceed $25 million; provided that such Indebtedness, (A) by its terms or by
the terms of any agreement or instrument pursuant to which such Indebtedness is
issued, is expressly made subordinate in right of payment to the Notes, at
least to the extent the Senior Subordinated Debentures are subordinated to
Senior Indebtedness, (B) determined as of the date of Incurrence of such
Indebtedness, does not mature prior to one year after the Stated Maturity of
the Notes, and the Average Life of such Indebtedness is one year beyond the
remaining Average Life of the Notes, (C) by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, provides
that no payments of principal of such Indebtedness by way of sinking fund,
mandatory redemption or otherwise (including defeasance) may be made by the
Company (including, without limitation, at the option of the holder thereof,
other than an option given to a holder pursuant to an "asset sale" provision
that is no more favorable to the holders of such Indebtedness than the
provisions contained in the "Limitation on Asset Sales" covenant described
below and such Indebtedness specifically provides that the Company will not
repurchase or redeem such Indebtedness pursuant to such provision prior to the
Company's repurchase of the Notes required to be repurchased by the Company
under the "Limitation on Asset Sales" covenant) at any time prior to the Stated
Maturity of the Notes; and provided further that after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, the Interest Coverage Ratio of the Company would be at least 1.25:1;
(ix) Indebtedness under any revolving credit or other working capital facility
in an aggregate amount not to exceed, at any one time outstanding, $40 million;
(x) other Indebtedness in an aggregate principal amount not to exceed $200
million at any one time outstanding; and (xi) Guarantees, existing as of
November 1, 1994, by Restricted Subsidiaries of Indebtedness of the Company,
which Guarantees, to the extent Incurred or outstanding under this clause (xi),
do not exceed $50 million; and refinancings thereof.
Notwithstanding any other provision of this "Limitation on Indebtedness"
covenant, (i) the maximum amount of Indebtedness that the Company or any
Restricted Subsidiary may Incur pursuant to this "Limitation on Indebtedness"
covenant shall not be deemed to be exceeded due solely to the result of
fluctuations in the exchange rates of currencies and (ii) the Company shall not
Incur any Indebtedness that is expressly subordinated to any other Indebtedness
of the Company unless such Indebtedness, by its terms or the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is also
expressly made subordinate to the Notes at least to the extent it is
subordinated to such other Indebtedness.
For purposes of determining any particular amount of Indebtedness under this
"Limitation on Indebtedness" covenant, (1) Indebtedness Incurred pursuant to
the revolver, including swingline, portion of the Credit Agreement prior to or
on the Closing Date shall be treated as Incurred pursuant to clause (i) of the
second paragraph of this "Limitation on Indebtedness" covenant, (2) Guarantees
of, or obligations with respect to letters of credit supporting, Indebtedness
otherwise included in the determination of such particular amount shall not be
included, (3) any Liens granted pursuant to the equal and ratable provisions
referred to in the first paragraph or clause (i) of the second paragraph of the
"Limitation on Liens" covenant shall not be treated as Indebtedness and (4)
Indebtedness Incurred under clauses (iv), (vi), (viii), (ix), (x) and (xi) of
the second paragraph of the "Limitation on Indebtedness" covenant contained in
the indenture for the 10 3/4% Notes, as amended through the Closing Date (which
clauses are substantially similar (other than certain dollar amounts) to the
clauses referred to above), and outstanding on the Closing Date, shall be
treated as
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Incurred pursuant to clauses (iv), (vi), (viii), (ix), (x) and (xi),
respectively, of the second paragraph of this "Limitation on Indebtedness"
covenant. For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, (x) in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses and (y) the amount of Indebtedness issued
at a price that is less than the principal amount thereof shall be equal to the
amount of the liability in respect thereof determined in conformity with GAAP.
Limitation on Restricted Payments
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any
dividend or make any distribution on its Capital Stock (other than dividends or
distributions payable solely in shares of its or such Restricted Subsidiary's
Capital Stock (other than Redeemable Stock) of the same class or in options,
warrants or other rights to acquire such shares of Capital Stock) held by
Persons other than the Company or another Restricted Subsidiary and other than
pro rata dividends or distributions on Common Stock of Restricted Subsidiaries
(provided that the Company owns, directly or indirectly, at least 74.5% of the
Voting Stock of such Restricted Subsidiaries) payable to the holders thereof
(provided that the amount of such dividends and distributions paid to Persons
other than the Company and its Restricted Subsidiaries shall be applied to
reduce the amount available for Restricted Payments under clause (C) below),
(ii) purchase, redeem, retire or otherwise acquire for value any shares of
Capital Stock of the Company, Restricted Subsidiary or any Unrestricted
Subsidiary (including options, warrants or other rights to acquire such shares
of Capital Stock) held by Persons other than the Company or another Restricted
Subsidiary, (iii) make any voluntary or optional principal payment, or
voluntary or optional redemption, repurchase, defeasance, or other acquisition
or retirement for value, of Indebtedness of the Company that is subordinated in
right of payment to the Notes, or (iv) make any Investment in any Affiliate
(other than the Company or a Restricted Subsidiary) or any Unrestricted
Subsidiary (such payments or any other actions described in clauses (i) through
(iv) being collectively "Restricted Payments") if, at the time of, and after
giving effect to, the proposed Restricted Payment: (A) an Event of Default or
event that, after notice or passage of time or both would become an Event of
Default, shall have occurred and be continuing, (B) the Company could not Incur
at least $1.00 of Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant or (C) the aggregate amount expended for all Restricted
Payments (the amount so expended, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution) after the date of the Indenture shall
exceed the sum of (1) 50% of the aggregate amount of Adjusted Consolidated Net
Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100% of
such amount) of the Company (determined by excluding income resulting from the
transfers of assets received by the Company or a Restricted Subsidiary from an
Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the month immediately
following December 17, 1992 and ending on the last day of the last fiscal
quarter preceding the Transaction Date plus (2) the aggregate net proceeds
(including the fair market value of non-cash proceeds as determined in good
faith by the Board of Directors) received by the Company from the issuance and
sale permitted by the Indenture of its Capital Stock to a Person who is not a
Subsidiary of the Company (not including Redeemable Stock), including an
issuance or sale permitted by the Indenture for cash or other property upon the
conversion of any Indebtedness of the Company subsequent to December 17, 1992,
or from the issuance of any options, warrants or other rights to acquire
Capital Stock of the Company (in each case, exclusive of any Redeemable Stock
or any options, warrants or other rights that are redeemable at the option of
the holder, or are required to be redeemed, prior to the Stated Maturity of the
Notes) plus (3) an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from payments of interest on Indebtedness,
dividends, repayments of loans or advances, or other transfers of assets, in
each case to the Company or any Restricted Subsidiary from Unrestricted
Subsidiaries, or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed in the case of any Unrestricted Subsidiary the
amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary plus (4) $15 million.
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The foregoing provision shall not take into account and shall not be violated
by reason of (i) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such payment would comply
with the foregoing provision; (ii) the redemption, repurchase, defeasance or
other acquisition or retirement for value of Indebtedness that is subordinated
in right of payment to the Notes, including premium, if any, and accrued and
unpaid interest, with the proceeds of Indebtedness Incurred under clause (iii)
or (viii) of the second paragraph of the "Limitation on Indebtedness" covenant;
(iii) the declaration or payment of dividends on the Capital Stock of the
Company, following any issuance of the Capital Stock of the Company subsequent
to December 17, 1992, of up to 6% per annum of the net proceeds received by the
Company in such issuance of the Capital Stock of the Company; (iv) the
purchase, redemption, acquisition, cancellation or other retirement for value
of shares of Capital Stock of the Company, options on any such shares or
related stock appreciation rights or similar securities held by officers or
employees or former officers or employees (or their estates or beneficiaries
under their estates) or by any Plan, upon death, disability, retirement,
termination of employment or pursuant to the terms of such Plan or any other
agreement under which such shares of stock or related rights were issued;
provided that the aggregate cash consideration paid for such purchase,
redemption, acquisition, cancellation or other retirement of such shares of
Capital Stock after the date of the Indenture does not exceed $5 million and
that any consideration in excess of such $5 million is in the form of
Indebtedness that would be permitted to be Incurred under clause (iv) of the
second paragraph of the "Limitation on Indebtedness" covenant; (v) the
repurchase, redemption or other acquisition of Capital Stock of the Company in
exchange for, or out of the proceeds of a substantially concurrent offering of,
shares of Capital Stock of the Company (other than Redeemable Stock); (vi) the
acquisition of Indebtedness of the Company that is subordinated in right of
payment to the Notes in exchange for, or out of the proceeds of a substantially
concurrent offering of, shares of the Capital Stock of the Company (other than
Redeemable Stock); and (vii) payments or distributions pursuant to or in
connection with a consolidation, merger or transfer of assets that complies
with the provisions of the Indenture applicable to mergers, consolidations and
transfers of all or substantially all of the property and assets of the
Company; and provided that, in the case of each of the foregoing clauses of
this paragraph, other than clause (i), no Event of Default, or event that after
notice or passage of time or both would become an Event of Default, shall have
occurred and be continuing or shall occur as a consequence thereof.
Notwithstanding the foregoing, in the event of an issuance of Capital Stock
of the Company and (1) the repurchase, redemption or other acquisition of
Capital Stock out of the proceeds of such issuance or (2) the acquisition of
Indebtedness that is subordinated in right of payment to the Notes out of the
proceeds of such issuance, as permitted by clause (v) or (vi) above, then, in
calculating whether the conditions of clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant have been met with respect to any
subsequent Restricted Payments, both the proceeds of such issuance and the
application of such proceeds shall be included under clause (C).
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provision shall not restrict or prohibit any encumbrances or
restrictions: (i) existing on the Closing Date in the Credit Agreement, the
Notes or any other agreements in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements thereof, provided that the
encumbrances and restrictions in any such extensions, refinancings, renewals or
replacements are no less favorable in any material respect to the Holders than
those encumbrances or restrictions that are then in effect and that are
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being extended, refinanced, renewed or replaced; (ii) existing or created under
or by reason of applicable law; (iii) with respect to any Person or the
property or assets of such Person acquired by the Company or any Restricted
Subsidiary and existing at the time of such acquisition, which encumbrances or
restrictions are not applicable to any Person or the property or assets of any
Person other than such Person or the property or assets of such Person so
acquired; (iv) in the case of clause (iv) above of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset, (B) by virtue of any
transfer of, agreement to transfer, option or right with respect to, or Lien
on, any property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by the Indenture or (C) arising or agreed to in the
ordinary course of business and that do not, individually or in the aggregate,
detract from the value of property or assets of the Company or any Restricted
Subsidiary in any manner material to the Company or such Restricted Subsidiary;
(v) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary; or (vi) existing or created with respect to Tudor or any
of its Restricted Subsidiaries, related to Indebtedness of Tudor or any of its
Restricted Subsidiaries, and which expressly provides that (except in the case
of (x) an event of default which has led to an acceleration of such
Indebtedness or (y) the failure to pay such Indebtedness in full at the final
maturity of such Indebtedness) Tudor or such Restricted Subsidiary, as the case
may be, may make such payments, loans, advances and transfers in an amount
equal to 100% of its Adjusted Consolidated Net Income subsequent to October 2,
1994 (provided that in the event such payments, loans, advances and transfers
are made in the form of asset transfers, such assets shall be valued at the
value of such assets set forth on the Company's books under GAAP). Nothing
contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent the Company or any
Restricted Subsidiary from (1) entering into any agreement permitting the
incurrence of Liens otherwise permitted in the "Limitation on Liens" covenant
or (2) restricting the sale or other disposition of property or assets of the
Company or any of its Subsidiaries that secure Indebtedness of the Company or
any of its Subsidiaries.
Limitation on the Issuance of Capital Stock of Restricted Subsidiaries
Under the terms of the Indenture, the Company will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell any shares of its Capital
Stock (including options, warrants or other rights to purchase shares of such
Capital Stock) except (i) to the Company or another Restricted Subsidiary that
is a Wholly Owned Subsidiary of the Company or (ii) if, immediately after
giving effect to such issuance or sale, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary.
Repurchase of Notes upon Change of Control Triggering Event
Under the terms of the Indenture, upon the occurrence of a Change of Control
Triggering Event, each Holder shall have the right to require the repurchase of
its Notes by the Company in cash pursuant to the offer described below (the
"Change of Control Offer") at a purchase price equal to 101% of the principal
amount of such Notes plus accrued interest (if any) to the date of purchase
(the "Change of Control Payment"). In such circumstances, there is no assurance
that the Company will have, or be able to obtain, the necessary funds to
repurchase any New Notes required to be repurchased or sufficient funds to
fulfill other obligations arising from such Change in Control.
Within 30 days following any Change of Control Triggering Event, the Company
shall mail a notice to the Trustee and each Holder stating: (i) that a Change
of Control Triggering Event has occurred, that the Change of Control Offer is
being made pursuant to this "Repurchase of Notes upon Change of Control"
covenant and that all Notes validly tendered will be accepted for payment; (ii)
the purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Change of Control Payment Date"); (iii) that any Note not
tendered will continue
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to accrue interest pursuant to its terms; (iv) that, unless the Company
defaults in the payment of the Change of Control Payment, any Note accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date; (v) that Holders electing to have any
Note purchased pursuant to the Change of Control Offer will be required to
surrender such Note, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of such Note completed, to the Paying Agent
at the address specified in the notice prior to the close of business on the
Business Day immediately preceding the Change of Control Payment Date; (vi)
that Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the third Business Day
immediately preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Notes delivered for purchase and a statement that such
Holder is withdrawing his election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount at maturity of $1,000 or integral multiples thereof.
On the Change of Control Payment Date, the Company shall: (i) accept for
payment Notes or portions thereof tendered pursuant to the Change of Control
Offer; (ii) deposit with the Paying Agent money sufficient to pay the purchase
price of all Notes or portions thereof so accepted; and (iii) deliver, or cause
to be delivered, to the Trustee all Notes or portions thereof so accepted
together with an Officers' Certificate specifying the Notes or portions thereof
accepted for payment by the Company. The Paying Agent shall promptly mail to
the Holders of Notes so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail to such Holders a
new Note equal in principal amount to any unpurchased portion of the Note
surrendered; provided that each Note purchased and each new Note issued shall
be in a principal amount at maturity of $1,000 or integral multiples thereof.
The Company will publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date. For
purposes of this "Repurchase of Notes upon Change of Control Triggering Event"
covenant, the Trustee shall act as Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control Triggering
Event occurs under this "Repurchase of Notes upon Change of Control Triggering
Event" covenant and the Company is required to repurchase Notes as described
above.
The indentures under which the 10 3/4% Notes and the 12 1/4% Debentures were
issued contain substantially identical repurchase requirements. A Change in
Control would constitute an Event of Default under the Credit Agreement,
permitting acceleration of all amounts due thereunder, which amounts are
secured and therefore effectively senior to the obligation to repurchse the New
Notes. Unless the Company were able to arrange for other financing, such
acceleration would have a material adverse effect on the Company's financial
condition and would prevent the Company from honoring its obligation to
repurchase the New Notes. There can be no assurance that the Company could
arrange alternative financing.
Limitation on Transactions with Shareholders and Affiliates
Under the terms of the Indenture, the Company will not, and will not permit
any Subsidiary of the Company to, directly or indirectly, enter into, renew or
extend any transaction (including, without limitation, the purchase, sale,
lease or exchange of property or assets, or the rendering of any service) with
any holder (or any Affiliate of such holder) of 5% or more of any class of
Capital Stock of the Company (other than any Bank Agent, Bank or any of their
respective Affiliates) or any Subsidiary of the Company or with any Affiliate
of the Company or any Subsidiary of the Company, except upon fair and
reasonable terms no less favorable to the Company or such Subsidiary of the
Company than could be obtained in a comparable arm's-length transaction with a
Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Subsidiary delivers to the
Trustee a written opinion of a nationally recognized investment banking firm
stating that the transaction is fair to the Company or such Subsidiary of the
Company from a financial point of view; (ii) any transaction between the
Company and any Wholly Owned Restricted Subsidiary or between Wholly Owned
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Restricted Subsidiaries; (iii) the payment of reasonable and customary regular
fees to directors of the Company who are not employees of the Company; (iv) any
payments or other transactions pursuant to any tax-sharing agreement between
the Company and any other Person with which the Company is required or
permitted to file a consolidated tax return or with which the Company is or
could be part of a consolidated group for tax purposes; or (v) any Restricted
Payments not prohibited by the "Limitation on Restricted Payments" covenant.
Notwithstanding the foregoing, any transaction covered by the first paragraph
of this "Limitation on Transactions with Shareholders and Affiliates" covenant
and not covered by clauses (ii) through (v) of this paragraph the aggregate
amount of which exceeds $1 million in value must be approved in the manner
provided for in clause (i) above.
Limitation on Liens
Under the terms of the Indenture, the Company may not, and may not permit any
Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on
any Principal Property, or any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, without making effective provision for all of the Notes
and all other amounts due under the Indenture to be directly secured equally
and ratably with (or prior to) the obligation or liability secured by such Lien
unless, after giving effect thereto, the aggregate amount of any Indebtedness
so secured, plus the Attributable Indebtedness for all sale-leaseback
transactions restricted as described in the "Limitation on Sale-Leaseback
Transactions" covenant, does not exceed 10% of Consolidated Net Tangible
Assets.
Under the terms of the Indenture, the foregoing limitation does not apply to
(i) Liens securing obligations under the Credit Agreement, the Notes or up to
$10 million of other Indebtedness at any one time outstanding; (ii) other Liens
existing on the Closing Date; (iii) Liens with respect to the assets of a
Restricted Subsidiary granted by such Restricted Subsidiary to the Company or a
Restricted Subsidiary that is a Wholly-Owned Subsidiary of the Company to
secure Indebtedness owing to the Company or such other Restricted Subsidiary by
such Restricted Subsidiary; (iv) Liens securing Indebtedness (other than
subordinated Indebtedness) Incurred under clause (v) of the second paragraph of
the "Limitation on Indebtedness" covenant; (v) Liens granted in connection with
the extension, renewal or refinancing, in whole or in part, of any Indebtedness
described in clauses (i) through (iv) above; provided that (1) such new
Indebtedness is permitted to be Incurred under the "Limitation on Indebtedness"
covenant and (2) the amount of Indebtedness secured by such Lien is not
increased thereby (except to the extent that Indebtedness under clause (i)
above is increased to the extent permitted by clause (i) of the second
paragraph of the "Limitation on Indebtedness" covenant); and provided further
that the extension, renewal or refinancing of Indebtedness of the Company may
not be secured by Liens on assets of any Restricted Subsidiary other than to
the extent the Indebtedness being extended, renewed or refinanced was at any
time previously secured by Liens on assets of such Restricted Subsidiary; (vi)
Liens with respect to Acquired Indebtedness and refinancings thereof permitted
under clause (vii) of the second paragraph of the "Limitation on Indebtedness"
covenant; provided that such Liens do not extend to or cover any property or
assets of the Company or any Restricted Subsidiary of the Company other than
the property or assets of the Subsidiary acquired; (vii) Liens securing
Indebtedness which is Incurred to refinance secured Indebtedness and which is
permitted to be Incurred under clause (i) or (iii) of the second paragraph of
the "Limitation on Indebtedness" covenant; provided that such Liens do not
extend to or cover any property or assets of the Company or any Restricted
Subsidiary other than the property or assets securing the Indebtedness being
refinanced; (viii) Liens securing obligations under any revolving credit or
other working capital facility Incurred under clause (ix) of the second
paragraph of the "Limitation on Indebtedness" covenant; (ix) Permitted Liens;
(x) Liens on (A) the stock of Restricted Subsidiaries, provided that each such
Restricted Subsidiary is either (x) acquired after January 3, 1995 or (y)
formed for the purpose of holding stock referred to in clause (x) and holds no
assets other than such stock, its minimum statutory capital, intercompany
notes, assets having a value not in excess of $10,000 and dividends,
distributions or advances received; provided that such dividends, distributions
or advances are promptly paid to such Restricted Subsidiary's parent; and (B)
intercompany notes; provided that with respect to each of clause (A) and clause
(B) above, such intercompany notes and stock of Restricted Subsidiaries are
only used to secure Indebtedness, all or a substantial portion of which
constituted a substantial portion of the financing of an acquisition of, or
relating to the acquisition of, a Restricted Subsidiary (or a direct or
indirect parent of such Restricted Subsidiary), and refinancings of such
Indebtedness; and provided further that with
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respect to each of clause (A) and clause (B) above, (1) any such refinancing
Indebtedness shall have (A) an Average Life no less than the Indebtedness being
refinanced, (B) a Stated Maturity no earlier than the Indebtedness being
refinanced and (C) a principal amount not in excess of the Indebtedness being
refinanced (plus premiums, accrued interest, fees and expenses) and (2) in no
event shall Indebtedness of the Company be refinanced by Indebtedness of a
Restricted Subsidiary pursuant to this clause and this clause (x) shall not be
construed to permit Liens on property other than such stock or such
intercompany notes; or (xi) Liens on assets of each Restricted Subsidiary
acquired on or subsequent to the Closing Date that are incurred for the purpose
of securing Indebtedness, all or a portion of which constituted a substantial
portion of the financing of the acquisition of, or relating to the acquisition
of, such Restricted Subsidiary (or a direct or indirect parent of such
Restricted Subsidiary) and refinancings of such Indebtedness; provided that, in
the case of each such Restricted Subsidiary, the Indebtedness secured by the
Principal Property of such Restricted Subsidiary that is subject to any Lien
incurred pursuant to this clause (xi) shall not exceed 80% of the fair market
value (as determined by the Board of Directors of the Company in good faith as
of the date of incurrence of such Lien) of the Principal Property of such
Restricted Subsidiary; provided that fluctuations in such fair market values
shall be deemed not to result in a violation of this "Limitations on Liens"
covenant.
Limitation on Sale-Leaseback Transactions
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, enter into any sale-leaseback transaction
involving any Principal Property, unless the aggregate amount of all
Attributable Indebtedness with respect to such transactions, plus all
Indebtedness secured by Liens on Principal Properties (excluding secured
Indebtedness that is excluded as described in the "Limitation on Liens"
covenant) does not exceed 10% of Consolidated Net Tangible Assets.
The foregoing restriction does not apply to, and any computation of
Attributable Indebtedness under such limitation shall exclude, any sale-
leaseback transaction if (i) the lease is for a period, including renewal
rights, of not in excess of three years; (ii) the sale or transfer of the
Principal Property is entered into prior to, at the time of, or within 12
months after the later of the acquisition of the Principal Property or the
completion of construction thereof; (iii) the lease secures or relates to
industrial revenue or pollution control bonds; (iv) the transaction is between
the Company and any Restricted Subsidiary or between Restricted Subsidiaries;
or (v) the Company or such Restricted Subsidiary, within 12 months after the
sale of any Principal Property is completed, applies an amount not less than
the net proceeds received from such sale to the retirement of Senior
Indebtedness, to Indebtedness of a Restricted Subsidiary or to the purchase of
other property that will constitute Principal Property or improvements thereto.
Limitation on Asset Sales
Under the terms of the Indenture, in the event and to the extent that the Net
Cash Proceeds received by the Company or any of its Restricted Subsidiaries
from one or more Asset Sales occurring on or after the Closing Date in any
period of 12 consecutive months (other than Asset Sales by the Company or any
Restricted Subsidiary to the Company or another Restricted Subsidiary) exceed
15% of Consolidated Net Tangible Assets in any one fiscal year (determined as
of the date closest to the commencement of such 12-month period for which a
balance sheet of the Company and its Subsidiaries has been prepared), then the
Company shall, or shall cause such Restricted Subsidiary to, (i) within 12
months after the date Net Cash Proceeds so received exceed 15% of Consolidated
Net Tangible Assets in any one fiscal year (determined as of the date closest
to the commencement of such 12-month period for which a balance sheet of the
Company and its Subsidiaries has been prepared) (A) apply an amount equal to
such excess Net Cash Proceeds to repay unsubordinated Indebtedness or
Indebtedness of any Restricted Subsidiary, in each case owing to a Person other
than the Company or any of its Subsidiaries or (B) invest an equal amount, or
the amount not so applied pursuant to clause (A) (or enter into a definitive
agreement committing to so invest within 12 months after the date of such
agreement), in property or assets of a nature or type or that are used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the
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nature or type of the property and assets of, or the business of, the Company
and its Subsidiaries existing on the date thereof (as determined in good faith
by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) apply such excess Net Cash Proceeds
(to the extent not applied pursuant to clause (i)) as provided in the following
paragraphs of this "Limitation on Asset Sales" covenant. The amount of such
excess Net Cash Proceeds required to be applied (or to be committed to be
applied) during such 12-month period as set forth in clause (A) or (B) of the
preceding sentence and not applied as so required by the end of such period
shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of Excess
Proceeds not theretofore subject to an Excess Proceeds Offer (as defined below)
totals at least $5 million, the Company must, not later than the fifteenth
Business Day of such month, make an offer (an "Excess Proceeds Offer") to
purchase from the Holders on a pro rata basis an aggregate principal amount of
Notes equal to the Excess Proceeds on such date, at a purchase price equal to
101% of the principal amount of such Notes, plus, accrued interest (if any) to
the date of purchase (the "Excess Proceeds Payment").
The Company shall commence an Excess Proceeds Offer by mailing a notice to
the Trustee and each Holder stating: (i) that the Excess Proceeds Offer is
being made pursuant to this "Limitation on Asset Sales" covenant and that all
Notes validly tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Excess Proceeds Payment Date"); (iii) that any Note not tendered
will continue to accrue interest pursuant to its terms; (iv) that, unless the
Company defaults in the payment of the Excess Proceeds Payment, any Note
accepted for payment pursuant to the Excess Proceeds Offer shall cease to
accrue interest after the Excess Proceeds Payment Date; (v) that Holders
electing to have a Note purchased pursuant to the Excess Proceeds Offer will be
required to surrender the Note, together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of the Note completed, to the
Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Excess Proceeds Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Excess Proceeds Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his election to have such Notes
purchased; and (vii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount at maturity of $1,000 or integral
multiples thereof.
On the Excess Proceeds Payment Date, the Company shall (i) accept for payment
on a pro rata basis Notes or portions thereof tendered pursuant to the Excess
Proceeds Offer; (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and (iii) deliver,
or cause to be delivered, to the Trustee all Notes or portions thereof so
accepted together with an Officers' Certificate specifying the Notes or
portions thereof accepted for payment by the Company. The Paying Agent shall
promptly mail to the Holders of Notes so accepted payment in an amount equal to
the purchase price, and the Trustee shall promptly authenticate and mail to
such Holders a new Note equal in principal amount to any unpurchased portion of
the Note surrendered; provided that each Note purchased and each new Note
issued shall be in an original principal amount at maturity of $1,000 or
integral multiples thereof. The Company will publicly announce the results of
the Excess Proceeds Offer as soon as practicable after the Excess Proceeds
Payment Date. For purposes of this "Limitation on Asset Sales" covenant, the
Trustee shall act as the Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that such Excess Proceeds are received
by the Company under this "Limitation on Asset Sales" covenant and the Company
is required to repurchase Notes as described above. The Credit Agreement
prohibits purchases of Notes prior to their Stated Maturity.
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COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not the Company is required to file reports with the Commission,
if any Notes are outstanding the Company shall file with the Commission all
such reports and other information as it would be required to file with the
Commission by Sections 13(a) or 15(d) under the Securities Exchange Act of
1934, as amended. See "Available Information." The Company shall supply the
Trustee and each Holder, or shall supply to the Trustee for forwarding to each
Holder, without cost to such Holder, copies of such reports or other
information.
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the Indenture:
(a) the Company defaults in the payment of the principal of (or premium, if
any, on) any Note when the same becomes due and payable at maturity, upon
acceleration, redemption (including, without limitation, the Special
Redemption) or otherwise; (b) the Company defaults in the payment of interest
on any Note, when the same becomes due and payable, and such default continues
for a period of 30 days; (c) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in the Indenture or
under the Notes and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount of the Notes; (d) there occurs with respect
to any issue or issues of Indebtedness of the Company and/or one or more
Significant Subsidiaries having an outstanding principal amount of $5 million
or more individually or $10 million or more in the aggregate for all such
issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, an event of default that has caused the holder thereof to
declare such Indebtedness to be due and payable prior to its Stated Maturity
and such Indebtedness has not been discharged in full or such acceleration has
not been rescinded or annulled within 30 days of such acceleration; (e) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $5 million individually or $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Subsidiary and shall not be discharged, and there
shall be any period of 30 consecutive days following entry of the final
judgment or order in excess of $5 million individually or that causes the
aggregate amount for all such final judgments or orders outstanding against all
such Persons to exceed $10 million during which a stay of enforcement of such
final judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; (f) a court having jurisdiction in the premises enters a decree
or order for (i) relief in respect of the Company or any Significant Subsidiary
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (ii) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or substantially all of
the property and assets of the Company or any Significant Subsidiary or (iii)
the winding up or liquidation of the affairs of the Company or any Significant
Subsidiary and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; (g) the Company or any Significant
Subsidiary (i) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such law, (ii)
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Company
or any Significant Subsidiary or for all or substantially all of the property
and assets of the Company or any Significant Subsidiary or (iii) effects any
general assignment for the benefit of creditors; (h) the Company and/or one or
more Significant Subsidiaries fails to make (i) at the final (but not any
interim) fixed maturity of an issue of Indebtedness a principal payment of $5
million or more or (ii) at the final (but not any interim) fixed maturity of
more than one issue of such Indebtedness principal payments aggregating $10
million or more and, in the case of clause (i), such defaulted payment shall
not have been made, waived or extended within 30 days of the payment default
and, in the case of clause (ii), all such defaulted payments shall not have
been made, waived or extended within 30 days of the payment default that causes
the amount described in clause (ii) to exceed $10 million; or (i) the
nonpayment of any three or more items of Indebtedness that would constitute at
the time of such nonpayments, but for the individual amounts of such
Indebtedness, an Event of Default under clause (d) or clause (h) above, or
both, and which items of Indebtedness aggregate $10 million or more.
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If an Event of Default (other than an Event of Default specified in clause
(f) or (g) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee thereunder or the Holders of at
least 25% of the aggregate principal amount of the Notes then outstanding, by
written notice to the Company (and to the Trustee if such notice is given by
the Holders (the "Acceleration Notice")), may, and the Trustee at the request
of the applicable Holders shall, declare the entire unpaid principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal of, premium, if
any, and accrued interest shall be immediately due and payable. In the event of
a declaration of acceleration because an Event of Default set forth in clause
(d) or (h) above has occurred and is continuing, such declaration of
acceleration shall be automatically rescinded and annulled if the event of
default triggering such Event of Default pursuant to clause (d) or (h) shall be
remedied, cured by the Company or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of acceleration with respect
thereto. If an Event of Default specified in clause (f) or (g) above occurs
with respect to the Company, all unpaid principal of, premium, if any, and
accrued interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of at least a majority in principal
amount of the outstanding Notes by written notice to the Company and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if (i) all existing Events of Default, other
than the non-payment of the principal of, premium, if any, and interest on
Notes that have become due solely by such declaration of acceleration, have
been cured or waived and (ii) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction. For information as to
the waiver of defaults, see "--Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith may
be unduly prejudicial to the rights of Holders of Notes not joining in the
giving of such direction. A Holder may not pursue any remedy with respect to
the Indenture or the Notes unless: (i) the Holder gives to the Trustee written
notice of a continuing Event of Default; (ii) the Holders of at least 25% in
aggregate principal amount of outstanding Notes make a written request to the
Trustee to pursue the remedy; (iii) such Holder or Holders offer to the Trustee
indemnity satisfactory to the Trustee against any costs, liability or expense;
(iv) the Trustee does not comply with the request within 60 days after receipt
of the request and the offer of indemnity; and (v) during such 60-day period,
the Holders of a majority in aggregate principal amount of the outstanding
Notes do not give the Trustee a direction that is inconsistent with the
request. However, such limitations do not apply to the right of any Holder of a
Note to receive payment of the principal of, premium, if any, or interest on
such Note or to bring suit for the enforcement of any such payment, on or after
the respective due dates expressed in the Notes which right shall not be
impaired or affected without the consent of the Holder.
The Indenture will require certain officers of the Company to certify, on or
before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Subsidiaries
and the Company's and its Subsidiaries' performance under the Indenture and
that the Company has fulfilled all obligations thereunder, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default and the nature and status thereof. The Company will also be obligated
to notify the Trustee of any default or defaults in the performance of any
covenants or agreements under the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company shall not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person (other than a
Restricted Subsidiary that is a
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Wholly Owned Subsidiary of the Company with a positive net worth; provided
that, in connection with any merger of the Company with a Restricted Subsidiary
that is a Wholly Owned Subsidiary of the Company, no consideration (other than
Common Stock in the surviving Person or the Company) shall be issued or
distributed to the stockholders of the Company) or permit any Person to merge
with or into the Company unless: (i) the Company shall be the continuing
Person, or the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or that acquired or leased such property
and assets of the Company shall be a corporation organized and validly existing
under the laws of the United States of America or any jurisdiction thereof and
shall expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company on all of the Notes and under the Indenture; (ii) immediately after
giving effect to such transaction, no Event of Default and no event that, after
notice or passage of time or both, will become an Event of Default, shall have
occurred and be continuing; (iii) immediately after giving effect to such
transaction on a pro forma basis, the Company (or any Person becoming the
successor obligor of the Notes) could Incur $1.00 of Indebtedness under the
first paragraph of the "Limitation on Indebtedness" covenant; (iv) immediately
after giving effect to such transaction on a pro forma basis, the Company (or
any Person that becomes the successor obligor of the Notes) shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Company immediately prior to such transaction; and (v) the Company delivers
to the Trustee an Officers' Certificate (attaching the arithmetic computations
to demonstrate compliance with clauses (iii) and (iv)) and an Opinion of
Counsel, in each case stating that such consolidation, merger or transfer and
such supplemental indenture comply with this provision and that all conditions
precedent provided for herein relating to such transaction have been complied
with; provided, however, that clauses (iii) and (iv) above do not apply if, in
the good faith determination of the Board of Directors, whose determination
shall be evidenced by a Board Resolution, the principal purpose of such
transaction is to change the state of incorporation of the Company; and
provided further that any such transaction shall not have as one of its
purposes the evasion of the foregoing limitations.
DEFEASANCE
Defeasance and Discharge
The Indenture will provide that the Company will be deemed to have paid and
will be discharged from any and all obligations in respect of the Notes and the
provisions of the Indenture will no longer be in effect with respect to the
Notes on the 123rd day after the deposit described below (except for, among
other matters, certain obligations to register the transfer or exchange of the
Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies
and to hold monies for payment in trust) if, among other things, (A) the
Company has deposited with the Trustee, in trust, money and/or U.S. Government
Obligations that through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on
the Notes on the Stated Maturity of such payments in accordance with the terms
of the Indenture and the Notes, (B) the Company has delivered to the Trustee
(i) either an Opinion of Counsel to the effect that Holders will not recognize
income, gain or loss for federal income tax purposes as a result of the
Company's exercise of its option under this "Defeasance" provision and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit, defeasance and
discharge had not occurred, which Opinion of Counsel must be accompanied by a
ruling of the IRS to the same effect unless there has been a change in
applicable federal income tax law after the date of the Indenture such that a
ruling from the IRS is no longer required or a ruling directed to the Trustee
received from the IRS to the same effect as the aforementioned Opinion of
Counsel and (ii) an Opinion of Counsel to the effect that the creation of the
defeasance trust does not violate the Investment Company Act of 1940 and after
the passage of 123 days following the deposit, the trust fund will not be
subject to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law, (C) immediately after
giving effect to such deposit on a pro forma basis, no Event of Default, or
event that after the giving of notice or lapse of time or both would become an
Event of Default, shall have occurred and be continuing on the date of such
deposit or during the period ending on the 123rd day after the date of such
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deposit, and such deposit shall not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which the
Company is a party or by which the Company is bound, and (D) if at such time
the Notes are listed on a national securities exchange, the Company has
delivered to the Trustee an Opinion of Counsel to the effect that the Notes
will not be delisted as a result of such deposit, defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default
The Indenture further will provide that the provisions of the Indenture will
no longer be in effect with respect to clauses (iii) and (iv) under
"Consolidation, Merger and Sale of Assets" and all the covenants described
herein under "Covenants," clause (iii) under "Events of Default" with respect
to such covenants and clauses (iii) and (iv) under "Consolidation, Merger and
Sale of Assets," and clauses (d), (e) and (h) under "Events of Default" shall
be deemed not to be Events of Default, upon, among other things, the deposit
with the Trustee, in trust, of money and/or U.S. Government Obligations that
through the payment of interest and principal in respect thereof in accordance
with their terms will provide money in an amount sufficient to pay the
principal of, premium, if any, and accrued interest on the Notes on the Stated
Maturity of such payments in accordance with the terms of the Indenture and the
Notes, the satisfaction of the provisions described in clauses (B)(ii), (C) and
(D) of the preceding paragraph and the delivery by the Company to the Trustee
of an Opinion of Counsel to the effect that, among other things, the Holders
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance of certain covenants and Events of
Default and will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such deposit
and defeasance had not occurred.
Defeasance and Certain Other Events of Default
In the event the Company exercises its option to omit compliance with certain
covenants and provisions of the Indenture as described in the immediately
preceding paragraph and the Notes are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Notes at the time of their Stated Maturity
but may not be sufficient to pay amounts due on the Notes at the time of the
acceleration resulting from such Event of Default. However, the Company shall
remain liable for such payments.
The Credit Agreement contains a covenant prohibiting defeasance of the Notes
without the consent of a specified percentage of lenders under the Credit
Agreement.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, (ii) reduce the principal amount of, or premium, if
any, or interest on, any Note, (iii) change the place or currency of payment of
principal of, or premium, if any, or interest on, any Note, (iv) impair the
right to institute suit for the enforcement of any payment on or after the
Stated Maturity (or, in the case of a redemption, on or after the Redemption
Date) of any Note, (v) reduce the above-stated percentage of outstanding Notes
the consent of whose Holders is necessary to modify or amend the Indenture,
(vi) waive a default in the payment of principal of, premium, if any, or
interest on the Notes or (vii) reduce the percentage of aggregate principal
amount of outstanding Notes, the consent of whose Holders is necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults.
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The Credit Agreement contains a covenant prohibiting the Company from
consenting to any modification of the Indenture or waiver of any provision
thereof without the consent of a specified percentage of the lenders under the
Credit Agreement. See "Description of Certain Indebtedness--Credit Agreement."
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on any of the Notes, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the Notes, or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, shareholder, officer, director, employee
or controlling person of the Company or of any successor Person thereof. Each
Holder, by accepting any Note, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in such Indenture. If an Event of Default has occurred and is continuing,
the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein contain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received
by it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest, it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM; THE GLOBAL NOTE
The New Notes will be represented by a single, permanent global note in
definitive, fully registered form without coupons (the "Global Note") unless
otherwise directed by a holder. The Global Note will be deposited with the
Trustee as custodian for DTC and will be registered in the name of a nominee of
DTC.
Upon the issuance of the Global Note, DTC or its custodian will credit, on
its internal system, the respective principal amount of the individual
beneficial interests represented by such Global Note to the accounts of persons
who have accounts with such depositary. Such accounts initially will be
designated by or on behalf of the holders tendering Old Notes. Ownership of
beneficial interests in a Global Note will be limited to persons who have
accounts with DTC ("participants") or persons who hold interests through
participants. Ownership of beneficial interests in the Global Note will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Holders may hold their interests in the
Global Note directly through DTC if they are participants in such system, or
indirectly through organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the New Notes represented by such Global Note for all
purposes under the Indenture and the New Notes. No beneficial owner of an
interest in the Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture.
Payments of the principal of, and interest on, the Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor any paying agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account
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of beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any records relating to such beneficiary ownership
interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records
of DTC or its nominee. The Company also expects that payments by participants
to owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way in
accordance with DTC rules and will be settled in next-day funds. If a Holder
requires physical delivery of a certificated New Note ("Certificated Note") for
any reason, including to sell New Notes to persons in states which require such
delivery of such New Notes or to pledge such New Notes, such holder must
transfer its interest in the Global Note in accordance with the normal
procedures of DTC and the procedures set forth in the Indenture.
The Company understands that DTC will take any action permitted to be taken
by a holder of New Notes (including the presentation of New Notes for exchange)
only at the direction of one or more participants to whose account the DTC
interests in the Global Notes is credited and only in respect of such portion
of the aggregate principal amount of New Notes as to which such participant or
participants has or have given such direction. However, if there is an Event of
Default under the New Notes, DTC will exchange the Global Notes for
Certificated Notes which it will distribute to its participants.
The Company understands that DTC is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meaning of New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the Uniform Commercial Code and a
"Clearing Agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
will have any responsibility for the performance by DTC or its respective
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
CERTIFICATED NOTES
If (i) DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by the Company
within 90 days, (ii) an Event of Default has occurred and is continuing and the
registrar of the New Notes has received a request from DTC or (iii) upon the
request of a holder, the Company will issue Certificated Notes in exchange for
the Global Notes.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a brief description of the basic terms of and the
instruments governing certain indebtedness of the Company. Capitalized terms
used but not defined herein have the meanings ascribed to them in such
instruments.
10 3/4% SENIOR NOTES AND 12 1/4% SENIOR SUBORDINATED DEBENTURES
The Company issued $150,000,000 in aggregate principal amount of the 10 3/4%
Notes under an Indenture dated as of December 17, 1992, between the Company and
the Bank of Montreal Trust Company, as Senior Note Trustee (the "10 3/4% Note
Indenture"). In addition, in connection with the Refinancing, the Company
issued $60,700,000 in aggregate principal amount ($110,000,000 face amount
discounted to $60,700,000) of the 12 1/4% Debentures under an Indenture dated
as of December 17, 1992, between the Company and the Bank of New York, as
Subordinated Debenture Trustee (the "12 1/4% Debenture Indenture").
The 10 3/4% Notes and the 12 1/4% Debentures are unsecured obligations of the
Company. The 10 3/4% Notes are unsubordinated indebtedness of the Company and
rank pari passu in right of payment with the Company's other unsubordinated
indebtedness, including, among other things, the New Notes offered hereby and
the Company's indebtedness under the Credit Agreement. The 12 1/4% Debentures
are subordinated in right of payment to all of the Company's existing or future
Senior Indebtedness (as defined in the 12 1/4% Debenture Indenture) including,
among other things, the New Notes offered hereby, the Old Notes, if any, the 10
3/4% Notes and the Company's indebtedness under the Credit Agreement.
The 10 3/4% Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after December 15, 1997, initially at 105.375% of their
principal amount, plus accrued interest, declining to 100% of their principal
amount, plus accrued interest, on or after December 15, 1999. The 12 1/4%
Debentures are redeemable at the option of the Company, in whole or in part, at
any time at 100% of their principal amount, plus accrued interest.
The 10 3/4% Note Indenture and the 12 1/4% Debenture Indenture each contains
certain restrictive covenants, which are substantially similar to those
relating to the Notes, that among other things, limit the ability of the
Company and its subsidiaries to incur indebtedness, make restricted payments,
engage in transactions with stockholders and affiliates, issue capital stock of
subsidiaries, create liens, sell assets, engage in mergers and consolidations
and make investments in unrestricted subsidiaries. In December 1994, the
Company entered into supplemental indentures to the 10 3/4% Note Indenture and
the 12 1/4% Debenture Indenture, with consent of the holders of the securities
issued thereunder, which clarified certain terms thereof and modified others to
give the Company greater financing flexibility.
CREDIT AGREEMENT
In August 1994, the Company entered into the Credit Agreement with a group of
lenders led by Bankers Trust, Bank of America and Bank of Montreal to refinance
existing bank debt and finance the Tudor acquisition and the Company's working
capital needs. The following summarizes the current terms of the Credit
Agreement. The maximum amount which may be borrowed under the Credit Agreement,
together with the amount of letters of credit which may be issued thereunder,
is currently $443.6 million.
Facilities; Repayment. The Credit Agreement provides for a revolving loan
facility with a current maximum commitment of up to approximately $251.8
million and a maturity of September 30, 1999. The revolving loan facility
commitment will be reduced to $207 million on December 31, 1995, to $192
million on September 30, 1996, to $177 million on September 30, 1997, to $162
million on September 30, 1998. The Credit Agreement also has two term loan
facilities, one of which ("Tranche A") has current outstandings of
approximately $92.5 million and provides for scheduled repayments of $2.5
million on September 30, 1995,
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$3.75 million at the end of each of the four quarters ending September 30,
1996, $5.0 million at the end of each of the four quarters ending September 30,
1997, $6.25 million at the end of the four quarters ending September 30, 1998
and $7.5 million at the end of each of the four quarters ending September 30,
1999. The other term loan facility ("Tranche B") has current outstandings of
approximately $99.25 million and provides for scheduled repayments of $250,000
at the end of each of the 17 quarters ending September 30, 1999, $11.25 million
at the end of each of the four quarters ending September 30, 2000, and $12.5
million at the end of each of four quarters ending September 30, 2001. Loans
under the Credit Agreement must be prepaid, with certain exceptions, to the
extent of 66 2/3% of the net proceeds of sales of equity securities, 75% of
Excess Cash Flow for each fiscal year (reduced to 50% if the Company meets
certain tests) and 100% of the net proceeds from the issuance of new debt
(excluding the Notes), sales of assets and insurance recoveries. The definition
of Excess Cash Flow is complex, but generally means net income, plus (i) non-
cash charges and non-cash losses, (ii) the annual reduction of net working
capital, and (iii) the proceeds of asset sales not already required to be
applied to repayment, less (a) non-cash gains, (b) the annual increase in net
working capital, (c) capital expenditures to the extent not financed with
indebtedness or capitalized leases and (d) permanent reductions in debt and
capitalized leases (except loans under the Credit Agreement). Prepayments are
applied to the Tranche A and Tranche B term loans pro rata based upon the then
remaining principal amounts of the respective Tranches. The prepayments are
then applied to reduce the remaining scheduled repayments of the respective
Tranche on a pro rata basis. To the extent that the foregoing prepayment events
relate to Tudor, CEAC or their respective subsidiaries, the required
prepayments may be applied to certain obligations of Tudor, CEAC and their
respective subsidiaries, with the excess to be applied, less any amounts
required to be repatriated pursuant to relevant local law, in the manner
provided in the Credit Agreement.
Interest and Fees. Loans under the Credit Agreement bear interest, at the
Company's option, at the Base Rate or the Eurodollar Rate, plus in each case
the Applicable Margin. The Base Rate is the higher, from time to time of (i)
0.5% plus the Federal Reserve certificate of deposit rate or (ii) the prime
lending rate of Bankers Trust. The Eurodollar Rate is such rate determined by
Bankers Trust for the respective interest period. The Applicable Margin for
Base Rate loans (other than Trance B loans) is 1.25%. The Applicable Margin for
Eurodollar Rate loans (other than Tranche B loans) is 2.50%. The Applicable
Margin for Tranche B loans is (x) in the case of Base Rate loans, 1.75% and (y)
in the case of Eurodollar Rate loans, 3.0%. Interest rates for the loans (other
than Tranche B loans) are reduced, unless a default or event of default exists,
in increments of 0.25% up to a maximum of 1.25%, in the case of Base Rate
loans, and 1.50%, in the case of Eurodollar Rate loans, based on the
achievement of specified increases in the ratio of earnings before interest,
taxes, amortization and depreciation ("EBITDA") to interest expense and
decreases in total debt. The Company is required to pay a commitment fee of
0.5% of the unused revolving loan commitment (subject to reduction to 0.375%
after September 30, 1995 upon the achievement of a specified ratio of EBITDA to
interest expense, a specified decrease in total debt and the absence of a
default or event of default). In addition, the Company must pay a fee for each
letter of credit issued equal to the Applicable Margin for Eurodollar Rate
loans under the revolving facility on outstanding stated amounts plus a fee of
0.125% to the issuing bank.
Collateral. The Company's wholly owned U.S. Subsidiaries have provided
limited guarantees of the obligations of the Company under the Credit
Agreement. In addition, Tudor is required to guarantee obligations of the
Company under the Credit Agreement in respect of letter of credits issued to
support certain of Tudor's debt obligations. Borrowings under the Credit
Agreement are collateralized by substantially all of the Company's assets,
including accounts receivable (other than those sold by the Company under the
receivables purchase agreement described below), inventories, property, plant
and equipment, and 100% of the capital stock of the Company's domestic
subsidiaries and 65% of the capital stock of the Company's foreign
subsidiaries. Obligations of the Company's wholly owned U.S. subsidiaries under
their guarantees are collateralized by certain assets of such subsidiaries.
However, the amount of the obligations of the Company and its subsidiaries
secured by "Principal Properties" (generally including all material
manufacturing, processing or smelting plants, warehouses or other buildings
used by the Company or its subsidiaries) and capital stock and indebtedness of
subsidiaries is limited as provided in the Credit Agreement. In addition,
Tudor's obligations under its guarantee are required to be collateralized by
certain of its assets.
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Events of Default and Covenants. The Credit Agreement includes customary
events of default, including upon a change in control, and also includes
various restrictive covenants which, subject to certain exceptions, impose
certain limitations on the ability of the Company and its subsidiaries to,
among other things: (a) incur indebtedness and guaranties; (b) incur liens: (c)
enter into sale-leaseback transactions and incur lease obligations; (d) invest
in other entities; (e) merge or consolidate with or acquire other entities,
enter into joint ventures and sell, transfer or otherwise dispose of assets;
(f) pay dividends and redeem or repurchase capital stock; (g) engage in certain
transactions with affiliates; (h) enter into new lines of business; (i)
voluntarily pay, prepay, repurchase or retire the principal of any of the
Company's debt securities; (j) prepay and amend the terms of certain of the
Company's indebtedness; (k) issue capital stock (other than Common Stock); and
(l) make intercompany loans and capital contributions and engage in other
intercompany transactions. In addition, the Credit Agreement limits the amounts
of capital expenditures which the Company and its subsidiaries, except for
Tudor, CEAC and their respective subsidiaries, may make, subject to certain
exceptions such as for expenditures on the Bristol facility and rights to carry
over unused amounts, to $30.0 million in fiscal 1996, $32.0 million in fiscal
1997 and $40.0 million in each fiscal year thereafter. The limitations on
capital expenditures by Tudor and its subsidiaries for such periods are,
subject to rights to carry over unused amounts, $25.0 million per fiscal year.
The limitations on capital expenditures by CEAC and its subsidiaries for such
periods are, subject to the rights to carry over unused amounts, $50.0 million
per fiscal year, subject to proportionate reduction in fiscal 1996 based on the
actual closing date for the CEAC acquisition.
The Credit Agreement also includes financial covenants requiring the Company
to meet and maintain certain financial criteria. The Company must not permit
the Consolidated Fixed Charge Coverage Ratio for the period of four consecutive
fiscal quarters (taken as one accounting period) ended on (a) September 30,
1995, to be less than .70 to 1, (b) December 31, 1995, to be less than .75 to
1, (c) March 31, 1996 to and including December 31, 1996, to be less than 1.00
to 1, (d) March 31, 1997 to and including December 31, 1997, to be less than
1.05 to 1 and (e) March 31, 1998 and thereafter, to be less than 1.25 to 1.
Such ratio is generally defined as the ratio of the "Company's Consolidated
EBITDA", less capital expenditures, to fixed charges (excluding the EBITDA,
capital expenditures and fixed charges of Tudor, CEAC and their respective
subsidiaries). The Company also must not permit its Company Consolidated EBITDA
for each four quarter period to be less than specified amounts, which increase
from $70 million for the four quarters ending in December 1995 to $145 million
for each four quarter period ending after December 1998. The Company must not
permit the "Combined Consolidated EBITDA" for any four consecutive fiscal
quarters to be less than the following specified amounts: for the four
consecutive fiscal quarters ended in September 1995, $175 million; for the four
consecutive fiscal quarters ended in December 1995, $200 million; for the four
consecutive fiscal quarters ended in March 1996, June 1996, September 1996 and
December 1996, $225 million; for the four consecutive fiscal quarters ended in
March 1997, June 1997, September 1997 and December 1997, $275 million; and
thereafter, $300 million. "Company Consolidated EBITDA" is generally defined as
EBITDA excluding Tudor and CEAC and their subsidiaries and "Combined
Consolidated EBITDA" generally has the same meaning except that Tudor and CEAC
and their subsidiaries are included. In addition, the Company must not permit
the ratio of Company Consolidated Indebtedness to Company Consolidated EBITDA
for the four quarters ended prior to the determination date to exceed 14.0 to 1
for determination dates from April 1995 to but excluding the last day of the
fiscal quarter ended at September 1995, declining each year to 4.5 to 1 for
determination dates beginning with the last day of the fiscal quarter ended in
March 2000 and thereafter. The Company also must not permit the ratio of
Combined Consolidated Indebtedness to Combined Consolidated EBITDA for the four
quarters ended prior to the determination date to exceed 7.25 to 1 for the
initial determination dates from declining first quarterly and then annually to
3.0 to 1 for determination dates beginning with the last day of the fiscal
quarter ended in March 2000 and thereafter. "Company Consolidated Indebtedness"
is generally defined to mean the consolidated indebtedness of the Company,
excluding Tudor, CEAC and their respective subsidiaries, determined in
accordance with generally accepted accounting principles, plus an amount
attributable to receivables sold under the Receivables Purchase Facility and
letters of credit outstanding, and Combined Consolidated Indebtedness generally
has the same meaning except indebtedness of Tudor and CEAC and their
subsidiaries is included.
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FACILITIES AGREEMENT
On February 28, 1995, the Company entered into a Facilities Agreement with a
group of lenders arranged by Bankers Trust Company and lead managed by Bankers
Trust Company, Bank of America, N.T. & S.A., Bank of Montreal and Dresdner Bank
Luxembourg S. A. for the purpose of refinancing certain existing indebtedness
of CEAC and certain of its subsidiaries upon the acquisition of CEAC and
thereafter providing working capital for the CEAC group. The maximum amount
which may be borrowed under the Facilities Agreement (including the amounts of
letters of credit and revolving credit guarantees which may be issued
thereunder) is 785 million French francs ("FF") or the equivalent in certain
other currencies. Neither Exide nor any of its subsidiaries other than the CEAC
group is a borrower or guarantor under this agreement, although Exide and one
of its subsidiaries have made certain covenants. See "Obligations of Exide"
below.
Facilities Repayment. The Facilities Agreement provides for a revolving
credit facility with a maximum commitment of up to 415 million FF and a term
loan facility which has current outstandings of approximately 370 million FF.
Term loan borrowings are due in the amounts of 25 million FF on December 31,
1995 and June 30, 1996, 35 million FF on December 31, 1996 and June 30, 1997,
47.5 million FF on December 31, 1997 and June 30, 1998 and 50 million FF at the
end of each subsequent six-month period through December 31, 1999 and 5 million
FF on April 30, 2000. All revolving loans are due on April 30, 2000 (and no
further revolving borrowing can be made after March 31, 2000). Prepayments are
required out of the proceeds of certain asset disposals, receivables
financings, pension plan reversions and warranty claims, if any, against Fiat
under the CEAC purchase agreement.
Interest and Fees. Loans under the Facilities Agreement bear interest at a
rate equal to a margin of 1% (plus (i) LIBOR for advances other than in FF or
(ii) for FF advances, a rate ("PIBOR") based on offered quotations for FF in
the Paris Interbank Market for lenders who have notified the agent for the
lenders that they can fund such advances in the Paris market, and LIBOR for
other lenders, and for British pound advances and advances in certain other
currencies, additional costs incurred by lenders in complying with Bank of
England or analogous reserve requirements). Generally, overdue amounts bear
interest at 2% over the rate otherwise applicable. Such agreement also requires
the borrowers to pay a commitment fee of 0.5% per annum on undrawn commitments
to all lenders, 1% per annum on all issued letters of credit and revolving
credit guarantees to all lenders and an additional fee to each lender issuing a
letter of credit or revolving credit guarantee of 1/8% per annum of the amount
thereof.
Collateral. Other than guarantees by members of the CEAC group of obligations
of other members of such group, borrowings under the Facilities Agreement are
not be secured or collateralized.
Events of Default and Covenants. The Facilities Agreement includes customary
events of default, including environmental noncompliance or costs having a
material adverse effect, and various restrictive covenants which will limit the
ability of CEAC and its subsidiaries to, among other things, (a) enter into
transactions or arrangements other than on an arm's-length basis, (b) create
liens on their assets and grant negative pledge covenants to others, (c) incur
indebtedness and guarantees, (d) make loans to others, (e) merge or
consolidate, (f) dispose of assets other than in the ordinary course, (g) make
acquisitions, (h) redeem shares, and (i) make investments. The Facilities
Agreement also limits the amount of dividends and loans by CEAC and its
subsidiaries to Exide to dividends and loans by CEAC up to 75% of CEAC's net
income after the acquisition.
The Facilities Agreement also contains financial covenants. CEAC agrees to
maintain: a ratio of "EBIT" (generally, consolidated earnings before interest,
taxes and certain depreciation, amortization and other deductions) to "Total
Interest" (generally, interest expense, including guarantees and similar fees
net of interest income) of at least 2.5 to 1 until the end of 1995, 3.0 to 1
until the end of 1996 and 4.0 to 1 thereafter; consolidated net worth (less
loans to Exide and its other subsidiaries) in an amount equal to at least 1.45
billion FF plus 25% of CEAC's consolidated positive net income for fiscal years
beginning after the acquisition; the ratio of consolidated "Total Borrowings"
(generally, financial debt) less cash and certain cash equivalents to
consolidated net worth at not more than 0.50 to 1 through 1996, 0.35 to 1
through 1998 and 0.25 thereafter.
98
<PAGE>
Obligations of Exide. Although Exide and its subsidiaries (other than CEAC
and its subsidiaries) are not guarantors or borrowers under the Facilities
Agreement and are not subject to the financial and other covenants described
above, Exide and its subsidiary which owns the CEAC shares have entered into
certain covenants with the Facilities Agreement lenders, including agreeing to
(a) continue to own at least 99.7% of CEAC's equity and 89% of Tudor's and (b)
contribute to CEAC as equity 43% of any money recovered for breach of contract
under the CEAC acquisition agreement. A breach by Exide and/or such subsidiary
of such covenants constitute events of default under the Facility Agreement,
subject to certain cure periods in certain circumstances.
RECEIVABLES PURCHASE AGREEMENT
On February 17, 1994, the Company entered into a receivables purchase
agreement with a special purpose financial entity which issues commercial paper
secured by accounts receivable. Under this receivables purchase agreement, such
entity has committed (subject to certain exceptions) to purchase, with limited
recourse to the Company, selected accounts receivable of the Company, up to a
maximum commitment of $40.0 million (effective August 30, 1994).
OTHER OBLIGATIONS
The Company is a party to several Industrial Development Bond transactions
wherein the Company leases facilities or equipment financed through such
transactions. These obligations are accounted for as capital leases. The
original obligations under these transactions, entered between 1974 and 1979,
were $22.2 million. The interest rates on these obligations range from 6.1% to
10.0%, due in installments through 2001. In addition, the Company has other
capitalized leases, lines of credit and credit agreements for the working
capital requirements of its European and Canadian subsidiaries and Tudor's
remaining convertible bonds (the holder of which has agreed not to convert).
See the notes to the consolidated financial statements incorporated by
reference herein.
TAX CONSIDERATIONS
The following is a general discussion of the material federal income tax
consequences of the acquisition, ownership and disposition of the New Notes.
This discussion does not address all aspects of United States federal income
taxation which may be important to particular Holders in light of their
individual circumstances or to certain types of Holders, such as financial
institutions, insurance companies, tax-exempt organizations and broker-dealers,
that are subject to special treatment under the United States federal income
tax laws. In addition, this discussion does not address any foreign, state or
local tax considerations. This discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), the Treasury Regulations promulgated
thereunder, and administrative and judicial authorities, all as in effect as of
the date hereof and all of which are subject to change, possibly retroactively.
Accordingly, prospective holders of the New Notes should consult their own tax
advisors as to the United States or other tax consequences of the acquisition,
ownership and disposition of the New Notes in light of their particular
circumstances, including the effect of any foreign, state or local tax laws.
This summary applies only to a holder of Old Notes that acquired such Old Notes
from the Company pursuant to their original issuance and that will be an
initial holder of the New Notes pursuant to the exchange of the Old Notes for
the New Notes hereunder.
As used herein, the term "United States Initial Holder" means an Initial
Holder of New Notes that is for United States federal income tax purposes (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source.
As used herein, the term "United States Alien Initial Holder" means an
Initial Holder of New Notes that is, for United States federal income tax
purposes, (i) a nonresident alien individual, (ii) a foreign corporation, (iii)
a nonresident alien fiduciary of a foreign estate or trust or (iv) a foreign
partnership one or more of the members of which is, for United States federal
income tax purposes, a nonresident alien individual, a foreign corporation or a
nonresident alien fiduciary of a foreign estate or trust.
99
<PAGE>
TAX CONSEQUENCES TO UNITED STATES INITIAL HOLDERS
Exchange of Old Notes for New Notes. A United States Initial Holder will not
recognize gain for federal income tax purposes in respect of the exchange of
Old Notes for New Notes. Each New Note will have the same adjusted tax basis as
the Old Note for which it was exchanged. The holding period of each New Note
will include the holding period of the Old Note for which it is exchanged if
such Old Note was held as a capital asset.
Sale, Exchange or Retirement of the New Notes. Upon the sale, exchange or
retirement of a New Note, a United States Initial Holder will recognize taxable
gain or loss equal to the difference between the amount realized on the sale,
exchange or retirement and such Initial Holder's adjusted tax basis in the New
Note. Gain or loss realized on the sale, exchange or retirement of a New Note
will be capital gain or loss and will be long-term capital gain or loss if at
the time of sale, exchange or retirement the holding period of the New Note is
more than one year.
Interest on the New Notes. Stated interest on the New Notes should be taxable
to a United States Initial Holder when such interest is received or accrued by
such Holder in accordance with the Holder's method of tax accounting.
TAX CONSEQUENCES TO UNITED STATES ALIEN INITIAL HOLDERS
Payments of principal and interest on the New Notes by the Company or any
paying agent to any United States Alien Holder will not be subject to United
States federal withholding tax, provided that, in the case of amounts paid with
respect to interest, (i) such Initial Holder does not own, actually or
constructively, 10 percent or more of the total combined voting power of all
classes of stock of the Company entitled to vote and is not a controlled
foreign corporation related, directly or indirectly, to the Company through
stock ownership and (ii) the beneficial owner thereof provides the required IRS
statement to the Company.
If a United States Alien Initial Holder of a New Note is engaged in a trade
or business in the United States, and if interest on the New Note is
effectively connected with the conduct of such trade or business, the United
States Alien Initial Purchaser, although exempt from the withholding tax
discussed in the preceding paragraph, will generally be subject to regular
United States income tax on interest and on any gain realized on the sale,
exchange or other disposition of a New Note in the same manner as if it were a
United States Initial Holder. See "Tax Consequences to United States Initial
Holders" above. In lieu of the IRS statement described in the preceding
paragraph, such an Initial Holder will be required to provide to the Company a
properly executed Internal Revenue Service Form 4224 in order to claim an
exemption from withholding tax. In addition, if such United States Alien
Initial Holder is a foreign corporation, it may be subject to a branch profits
tax with respect to such interest income.
A United States Alien Initial Holder of a New Note will not be subject to
United States federal income tax on gain realized on the sale, exchange or
other disposition of such New Note, unless (i) such Initial Holder is an
individual who is present in the United States for 183 days or more in the
taxable year of disposition and either such individual has a "tax home" (as
defined in Code Section 911(d)(3)) in the United States (unless such gain is
attributable to a fixed place of business in a foreign country maintained by
such individual and has been subject to foreign tax of at least 10%) or the
gain is attributable to an office or other fixed place of business maintained
by such individual in the United States or (ii) such gain is effectively
connected with the conduct by such United States Alien Initial Holder of a
trade or business in the United States (as described in the preceding
paragraph).
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of principal and interest (including original issue discount, if
any) made on the New Notes and payments made on the sale, exchange, retirement
or other disposition of the New Notes may be subject to certain United States
federal income tax information reporting requirements. In addition, if such
payments
100
<PAGE>
are made to Holders who are United States persons, the payment of such amounts
may be subject to a "backup withholding" tax of 31% unless such Holder provides
its correct taxpayer identification number or otherwise establishes an
exemption from backup withholding. While United States Alien Initial Holders
are generally exempt from these withholding and reporting requirements
(assuming the payment of such amounts is otherwise exempt from United States
federal income and withholding taxes), such Holders may be required to
complete, and provide the payor with, a Form W-8, or other documentary
evidence, certifying that the United States Alien Initial Holder is an exempt
foreign person.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment made to a Holder will be refunded or
credited against the Holder's United States federal income tax liability.
101
<PAGE>
PLAN OF DISTRIBUTION
Except as described below, a broker-dealer may not participate in the
Exchange Offer in connection with a distribution of the New Notes, such broker-
dealer would be deemed an underwriter in connection with such distribution, and
such broker-dealer would be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transactions. A broker-dealer may, however, receive New Notes
for its own account pursuant to the Exchange Offer in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. Each such broker-dealer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer (other than an "affiliate" of the Company) in connection
with resales of such New Notes. The Company has agreed that, for a period of 90
days after the Expiration Date, it will make this Prospectus available to any
such broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal.
MS&Co. has indicated to the Company that it intends to effect offers and
sales of the New Notes in market-making transactions at negotiated prices
related to prevailing market prices at the time of sale, but is not obligated
to do so and such market-making activities may be discontinued at any time.
MS&Co. may act as principal or agent in such transactions. There can be no
assurance that an active market for the New Notes will develop.
LEGAL MATTERS
Certain legal matters with respect to the New Notes offered in exchange
hereby will be passed upon for the Company by Kirkland & Ellis, Chicago,
Illinois.
102
<PAGE>
EXPERTS
The audited consolidated financial statements and schedules of the Company
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto dated June 27, 1995, also incorporated by reference in reliance
upon the authority of such firm as experts in giving said report. Reference is
made to said report on the consolidated financial statements, which includes an
explanatory paragraph with respect to the change in the method in accounting
for postretirement employee benefits other than pensions in fiscal 1994 as
discussed in Note 8 to the consolidated financial statements.
The audited consolidated financial statements of Tudor incorporated by
reference in this Prospectus have been audited by Arthur Andersen, independent
auditors, as indicated in their report with respect thereto dated March 23,
1994 (except with respect to the matter discussed in Note 21 and Note 22-J, as
to which the date is October 30, 1994), and is also incorporated by reference.
The consolidated statements of CEAC incorporated by reference in this
Prospectus for the three years ended December 31, 1994, 1993 and 1992 have been
audited by Ernst & Young Audit, independent accountants, as indicated in their
report with respect thereto dated March 31, 1995 and are incorporated by
reference.
The financial statements of Schuylkill and its subsidiary as of December 31,
1994 and for the year then ended included in this prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein (which report expresses an unqualified opinion and includes an
explanatory paragraph regarding the ability of the Schuylkill to continue as a
going concern), and has been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
103
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-11263) are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1995, as amended by the Company's Annual
Report on Form 10-K/A filed on July 21, 1995, (ii) the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended July 2, 1995 filed on August
16, 1995, as amended by the Company's Quarterly Report on Form 10-Q/A filed on
September 26, 1995 and (iii) the Company's Current Report on Form 8-K filed on
June 2, 1995, as amended by the Company's Current Report on Form 8-K/A filed on
July 31, 1995, and the Company's Current Report on Form 8-K filed on November
1, 1994, as amended by the Company's Current Report on Form 8-K/A filed on
December 9, 1994.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the date on which the Exchange Offer is consummated shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any subsequently filed document which also
is or is deemed to be incorporated by reference herein modified or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE FROM
BERNARD F. STEWART, EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL, EXIDE
CORPORATION, 1400 NORTH WOODWARD AVENUE, BLOOMFIELD HILLS, MICHIGAN, 48304,
TELEPHONE (810) 258-0080. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
104
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SCHUYLKILL HOLDINGS, INC.
Independent Auditors' Report............................................. F-2
Consolidated balance sheets.............................................. F-3
Consolidated statements of operations and accumulated deficit............ F-4
Consolidated statements of cash flows.................................... F-5
Notes to consolidated financial statements............................... F-6
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Schuylkill Holdings, Inc.
Baton Rouge, Louisiana
We have audited the accompanying consolidated balance sheet of Schuylkill
Holdings, Inc. and subsidiary as of December 31, 1994, and the related
consolidated statements of operations and accumulated deficit and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Schuylkill Holdings, Inc. and
subsidiary at December 31, 1994, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company is not in compliance with certain covenants
of its debt agreements. The Company's difficulties in meeting its debt
agreement covenants, its recurring losses from operations, and its deficiency
in assets raise substantial doubt about its ability to continue as a going
concern. Management's plans concerning these matters are also described in
Notes 10 and 12. In addition, as discussed in Note 9, management is unable to
predict the outcome of certain issues relating to the Environmental Protection
Agency and certain litigation matters. Unsuccessful resolution of these matters
could have a material adverse impact on the Company. The financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.
Deloitte & Touche LLP
Baton Rouge, Louisiana
April 25, 1995
F-2
<PAGE>
SCHUYLKILL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 514,723 $ 312,167
Accounts receivable, net......................... 7,483,305 7,335,267
Inventories...................................... 7,150,122 7,781,646
Prepaid expenses and other....................... 1,935,939 1,157,574
------------ ------------
Total current assets........................... 17,084,089 16,586,654
Property, plant and equipment--net................. 11,720,717 11,486,266
Non-compete agreements............................. 2,053,335 853,333
Financing costs.................................... 102,343 19,356
Other assets....................................... 72,074 33,102
------------ ------------
Total assets................................... $ 31,032,558 $ 28,978,711
============ ============
LIABILITIES AND DEFICIENCY IN ASSETS
Current liabilities:
Note payable..................................... $ 4,863,810 $ 4,264,506
Managed cash overdraft........................... 940,813 429,764
Accounts payable................................. 3,132,656 2,191,660
Accrued expenses................................. 4,696,721 3,953,860
Accrued interest................................. 8,780,994 10,120,950
Income tax and interest payable.................. 1,929,575 2,178,740
Current portion of long-term debt................ 53,233,738 54,267,034
------------ ------------
Total current liabilities...................... 77,578,307 77,406,514
Capital appreciation rights........................ 1,000,000 1,000,000
Commitments and contingencies (Notes 9 and 10)..... -- --
Deficiency in assets:
Preferred stock.................................. 300 300
Common stock..................................... 10,752 10,752
Additional paid-in-capital....................... 5,144,099 5,144,099
Accumulated deficit.............................. (52,700,900) (54,582,954)
------------ ------------
Total deficiency in assets..................... (47,545,749) (49,427,803)
------------ ------------
Total liabilities and deficiency in assets......... $ 31,032,558 $ 28,978,711
============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
SCHUYLKILL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED JUNE 30,
DECEMBER 31, --------------------------
1994 1994 1995
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues:
Sales.............................. $ 43,898,257 $ 19,624,944 $ 20,509,851
Other revenue...................... 1,754,272 662,764 669,990
------------ ------------ ------------
Total............................ 45,652,529 20,287,708 21,179,841
Cost of goods sold................... 35,546,981 16,914,480 16,258,566
------------ ------------ ------------
Gross profit......................... 10,105,548 3,373,228 4,921,275
General and administrative expenses.. 2,007,981 949,442 1,211,514
------------ ------------ ------------
Operating income..................... 8,097,567 2,423,786 3,709,761
Other income (expense):
Interest income.................... 63,936 34,247 31,115
Amortization of non-compete
agreements........................ (2,400,000) (1,200,000) (1,200,000)
Amortization of deferred financing
costs............................. (271,619) (147,334) (82,987)
Interest expense................... (8,328,907) (4,329,384) (4,285,112)
Other.............................. (72,665) 13,185 1,717
------------ ------------ ------------
Total other expenses--net........ (11,009,255) (5,629,286) (5,535,267)
------------ ------------ ------------
Loss before income taxes............. (2,911,688) (3,205,500) (1,825,506)
Income tax expense................... 1,373,723 1,311,500 56,548
------------ ------------ ------------
Net loss............................. (4,285,411) (4,517,000) (1,882,054)
Accumulated deficit, beginning of
period.............................. (48,415,489) (48,415,489) (52,700,900)
------------ ------------ ------------
Accumulated deficit, end of period... $(52,700,900) $(52,932,489) $(54,582,954)
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
SCHUYLKILL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED 30,
DECEMBER 31, ------------------------
1994 1994 1995
------------ ----------- ----------- ---
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Operating activities:
Net loss.......................... $(4,285,411) $(4,517,000) $(1,882,054)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation.................... 2,231,975 1,117,810 1,133,555
Amortization.................... 2,907,502 1,347,334 1,282,989
Provision for doubtful accounts. -- -- 40,000
Changes in assets and
liabilities:
(Increase) decrease in
accounts receivable.......... (1,034,529) 293,196 108,038
(Increase) decrease in
inventories.................. (2,233,300) 641,550 (631,524)
Increase (decrease) in other
current assets............... (600,562) 375,074 778,365
Increase in accrued interest
payable...................... 2,412,542 1,111,782 1,339,956
Decrease in other assets...... 20,957 87,115 38,972
Net increase (decrease) in
other current liabilities.... 1,994,084 318,897 (1,683,857)
Decrease (increase) in income
taxes receivable............. 1,578,169 (79,538) --
Increase in income tax and
interest payable............. 1,929,575 2,044,432 249,165
----------- ----------- -----------
Net cash provided by
operating activities....... 4,921,002 2,740,652 773,605
----------- ----------- -----------
Investing activities:
Purchase of property, plant and
equipment........................ (1,511,019) (417,348) (899,104)
----------- ----------- -----------
Net cash used in investing
activities................. (1,511,019) (417,348) (899,104)
----------- ----------- -----------
Financing activities:
Increase (decrease) in managed
cash overdraft................... 940,813 286,431 (511,049)
Net payments on working capital
revolving debt................... (5,999,287) (3,604,907) (599,304)
Issuance of long-term debt........ 1,629,498 897,687 1,033,296
----------- ----------- -----------
Net cash used in financing
activities................. (3,428,976) (2,420,789) (77,057)
----------- ----------- -----------
Net decrease in cash and cash
equivalents........................ (18,993) (97,485) (202,556)
Cash and cash equivalents, beginning
of period.......................... 533,716 533,716 514,723
----------- ----------- -----------
Cash and cash equivalents, end of
period............................. $ 514,723 $ 436,231 $ 312,167
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
SCHUYLKILL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1994
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation--The consolidated financial statements include the accounts of
Schuylkill Holdings, Inc. (Holdings) and its wholly-owned subsidiary,
Schuylkill Metals Corporation (SMC) (collectively, the Company). All
significant intercompany transactions and balances have been eliminated in
consolidation. SMC is engaged in the business of recycling and selling lead.
Sales to two individual major customers amounted to $16,292,351 and $7,667,936
in 1994.
Accounts receivable--The Company establishes an allowance for doubtful
accounts based on individual invoices considered to be uncollectible. At
December 31, 1994, the allowance account had a balance of $1,400.
Inventories--Inventories are valued at the lower of cost or market with cost
being determined on a weighted average method.
Property, plant and equipment--Property, plant and equipment is stated at
cost, less accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. The
estimated useful lives used in computing depreciation are as follows:
<TABLE>
<S> <C>
Landfill................................................... 25 years
Buildings and improvements................................. 10 to 20 years
Machinery, furniture, fixtures and equipment............... 3 to 7 years
</TABLE>
Non-compete agreement--During 1990, the Company entered into a non-compete
agreement with the previous and current stockholders of Holdings for a period
of five years. The cost of the agreement, $12,000,000, is being amortized by
the straight-line method over the life of the agreement. The unamortized
balance at December 31, 1994 was $2,053,333.
Landfill operations--The Environmental Protection Agency has issued the
Company a permit to dispose of hazardous waste materials in a qualified
landfill owned by the Company.
The construction cost of the landfill is being amortized over its estimated
useful life of 25 years using the straight-line method. Certain costs
associated with inspecting and maintaining landfills after their closure are
provided for over the life of the landfill. Additional costs not accrued are
expensed as incurred.
Pension plan--The Company has a defined benefit pension plan covering
substantially all of its employees. The Company's policy is to fund pension
costs in accordance with contribution guidelines established by the Employee
Retirement Income Security Act of 1974, as amended.
Income taxes--The Company files a consolidated Federal income tax return.
Deferred income taxes are provided for all temporary differences between book
and tax bases of assets and liabilities, and all carryforwards, based on
enacted tax laws and rates. Temporary differences result primarily from
differences in depreciation and in the timing of the recognition of reserves
and other liabilities.
Capital appreciation rights--During 1990, SMC granted certain capital
appreciation rights valued at $1,000,000 to Heller Financial in conjunction
with the Term C note. The rights are being accounted for as an original issue
discount on the Term C note and the discount is being amortized over the life
of the Term C note using the effective interest method.
Financing costs--Financing costs are being amortized over the lives of the
term notes using the effective interest method.
F-6
<PAGE>
SCHUYLKILL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Environmental liabilities--The Company's operations are subject to extensive
and rapidly changing federal and state environmental regulations. Environmental
liabilities are recorded when environmental assessments and/or remedial efforts
are probable, and the costs can be reasonably estimated. The liabilities for
environmental costs recorded at December 31, 1994 was $2,172,000.
Cash equivalents--The Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents.
2. INVENTORIES
Inventories at December 31, 1994 consists of the following:
<TABLE>
<S> <C>
Raw materials.................................................. $3,169,548
Work-in-process................................................ 1,865,089
Finished goods................................................. 2,115,485
----------
$7,150,122
==========
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31, 1994:
<TABLE>
<S> <C>
Land......................................................... $ 555,232
Landfill..................................................... 2,592,423
Buildings and improvements................................... 9,074,948
Machinery, furniture, fixtures and equipment................. 22,633,334
Construction in process...................................... 569,449
-----------
Total ................................................... 35,425,386
Less accumulated depreciation................................ 23,704,669
-----------
Total property, plant and equipment--net................. $11,720,717
===========
</TABLE>
At December 31, 1994, substantially all property is pledged as collateral for
the senior credit facilities.
4. NOTE PAYABLE
The Company has a revolving debt agreement providing for a line of credit
totaling $10,000,000 to be utilized for working capital requirements.
Borrowings under the line bear an interest rate of 1.5% above the First
National Bank of Chicago prime lending rate. At December 31, 1994, this
interest rate was 10%. For 1994, the weighted average interest rate was 8.65%.
The borrowing arrangement provides for a fee equal to one-half of one percent
per year on any portion of the available line of credit not used.
5. DEBT
Effective May 1, 1993, the Company restructured its financing agreements. In
connection with the restructuring, the Company retained its outstanding Term
Loan "A" and its Term Loan "B" in substantially the same form as before the
restructuring. The working capital revolving debt totaling $10,000,000 was
F-7
<PAGE>
SCHUYLKILL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
converted into a Revolving Loan "A" with virtually the same terms as the
previously outstanding agreement. In addition, the Company entered into a
Revolving Loan "B" agreement providing a graduating availability of credit
maximizing at $9,500,000 in 1994. The Term Loan "C" was converted into two Term
Loans; Term Loan "C" and Term Loan "D" each with $5,000,000 outstanding. The
remaining unamortized original issue discount associated with the original Term
Loan "C" will continue to be amortized over the lives of the Term Loan "C" and
Term Loan "D".
Long-term debt at December 31, 1994 consists of the following:
<TABLE>
<S> <C>
Term loan "A" due November 1, 1995 bearing a floating interest
rate equal to the sum of the First National Bank of Chicago
prime rate plus 1.75% with interest payable monthly.......... $18,500,000
Term loan "B" due November 1, 1995 bearing an interest rate
equal to the sum of the First National Bank of Chicago prime
rate plus 2% with interest payable monthly................... 10,000,000
Term loan "C", due November 1, 1995 bearing an interest rate
of 13.61% with interest payable monthly...................... 6,354,996
Term Loan "D" due November 1, 1995 bearing an interest rate of
13.61% with interest payable monthly......................... 6,354,996
Senior subordinated promissory note due November 9, 1995
bearing an interest rate of 14% with interest payable on
April 10, 1993 and thereafter on the 10th day of April and
August in each year commencing on April 10, 1994 and on the
maturity date................................................ 6,752,233
Senior subordinated promissory note due May 9, 1991 bearing an
interest rate of 10%......................................... 500,000
Junior subordinated promissory note due November 9, 1995
bearing an interest rate of 12.5% with interest payable on
April 10, 1993, April 10, 1994, and thereafter on the 10th
day of April and August in each year commencing on November
10, 1994 and on the maturity date............................ 5,000,000
-----------
Total..................................................... 53,462,225
Less unamortized original issue discount...................... 228,487
-----------
Current portion of long-term debt............................. $53,233,738
===========
</TABLE>
Under the agreements covering the notes payable and working capital revolving
debt, the Company is required to maintain certain specified financial ratios
and is prohibited from paying dividends on any class of its stock unless
certain net worth requirements are met, incurring additional debt over
specified amounts, making capital expenditures over specified amounts, or
issuing any additional shares of stock.
As discussed in Note 10, the Company was not in compliance with required
earnings calculations, the Senior interest expense coverage requirement and the
total interest expense coverage requirement. Noncompliance gives the lenders
the right to accelerate payment of principal and interest. As a result, all of
the Company's debt is classified in current liabilities in the accompanying
consolidated balance sheets.
During the year ended December 31, 1994, the Company paid $6,110,178 in
interest.
The senior credit facility is secured by substantially all of the Company's
assets and by all of the outstanding SMC stock.
F-8
<PAGE>
SCHUYLKILL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. CAPITAL STOCK
Capital stock at December 31, 1994 consists of the following:
<TABLE>
<S> <C>
Cumulative 12.5% preferred stock--$.01 par value, authorized
60,000 shares, issued 30,000 shares......................... $ 300
Common stock--$.01 par value, authorized 1,200,000 shares,
issued 1,075,269 shares..................................... 10,752
Additional paid-in-capital................................... 5,144,099
----------
Total.................................................... $5,155,151
==========
</TABLE>
The Cumulative 12.5% preferred stock outstanding at December 31, 1994 may be
redeemed, in whole or in part, at the Company's option, at any time after
November 10, 1995 at a price equal to the stated value of each share plus
accrued dividends.
7. INCOME TAXES
Deferred income taxes at December 31, 1994 consisted of:
<TABLE>
<S> <C>
Deferred tax assets:
Depreciation............................................... $ 841,137
Environmental reserves..................................... 738,480
Inventory--uniform capitalization.......................... 18,045
Other accrued liabilities.................................. 426,533
AMT tax credit carryforwards............................... 540,357
Net operating losses carryforwards......................... 2,155,398
Other...................................................... 636
-----------
Total deferred tax assets................................ 4,720,586
-----------
Deferred tax liabilities..................................... --
-----------
Net deferred tax asset before valuation allowance.......... 4,720,586
Valuation allowance........................................ (4,720,586)
-----------
Net deferred tax asset..................................... $ --
===========
</TABLE>
Income tax expense of $1,373,723 for the year ended December 31, 1994
consisted primarily of provisions relating to the IRS examination referred to
in Note 9 and state income taxes. In 1994, the Company provided approximately
$1,200,000 relating to estimated taxes resulting from the IRS examination
referred to in Note 9.
At December 31, 1994, the Company had a Federal net operating loss
carryforward for tax purposes of approximately $6,400,000 which is available to
reduce future taxable income. This carryforward will expire if it is not
utilized by the year 2008. The tax benefit of this carryforward has not been
recognized in the accompanying financial statements because its realization is
not reasonably assured.
Income taxes received during the year ended December 31, 1994 was $1,388,000.
F-9
<PAGE>
SCHUYLKILL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. PENSION PLAN
The Company's pension plan, as amended, covers substantially all employees of
the Company. Benefits are based on years of service and the employee's highest
average annual compensation for any period of five consecutive calendar years
before age 65. The Company's policy is to fund pension costs in accordance with
contribution guidelines established by the Employee Retirement Income Security
Act of 1974, as amended.
The plan is administered by a trustee who is responsible for pension payments
to retired employees. An investment manager has responsibility for management
of the plan's assets, which consist primarily of common and convertible
preferred stock. In addition, an independent actuary performs the necessary
actuarial valuations for the Company's plan. The 1994 pension cost, as
determined by the actuary, are as follows (amounts are estimated):
<TABLE>
<S> <C>
Service cost--benefits earned during the period................ $ 234,000
Interest cost on projected benefit obligation.................. 316,000
Actual return on plan assets................................... (192,000)
Amortization of unrecognized prior service costs............... (273,000)
---------
Net pension cost........................................... $ 85,000
=========
</TABLE>
The funded status of the plan at December 31, 1994 is presented below
(amounts are approximate):
<TABLE>
<S> <C>
Actuarial present value of accumulated pension plan
benefits:
Vested.................................................. $ 2,966,000
Non-Vested.............................................. 410,000
-----------
Total................................................. $ 3,376,000
===========
Projected benefit obligation.............................. $(4,146,000)
Plan assets at fair value................................. 5,192,000
-----------
Plan assets in excess of projected benefit obligation..... 1,046,000
Prior service cost........................................ (935,000)
Unrecognized net gain..................................... (408,000)
-----------
Accrued pension cost.................................. $ (297,000)
===========
</TABLE>
The weighted average discount rate and rate of increase in future
compensation used in determining the actuarial present values of the projected
benefit obligation were 8.50% and 4.75%, respectively for 1994. The expected
long-term rate of return on plan assets was 8%. Transition assets are being
amortized over 24 years.
9. COMMITMENTS AND CONTINGENCIES
Environmental Issues--The Company is subject to federal and state laws and
regulations establishing standards and requirements for the protection of the
environment. As such, the Company has certain obligations, based on these
regulations, concerning the discharge of certain materials into the environment
and is required to make capital and other expenditures on an ongoing basis in
order to comply with such regulations. These environmental obligations include
the remediation or mitigation of the effects on the environment of the disposal
or release of certain substances at properties owned by the Company, and other
facilities that were operating or closed. The Company cannot predict the future
impact of governmental standards and requirements as they are subject to change
and may be applied retroactively.
F-10
<PAGE>
SCHUYLKILL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Environmental Protection Agency (EPA) has notified the Company that it
proposes changes to several permits relating to waste and stormwater discharge.
The Company has filed a request for review and evidentiary hearing. This
hearing is still pending. Management is unable to predict whether the Company
will prevail in its challenges of the permit modifications. However, in the
event the Company is unsuccessful, the imposition of the limits proposed by the
EPA may have a material adverse impact on the Company.
During 1994, federal and state agencies identified the Company as potentially
responsible under the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) with respect to several sites in Texas and it has also
been named a third-party defendant in a civil action relating to these sites.
In addition to the above, there are other claims and lawsuits pending against
the Company.
The Company maintains a reserve for anticipated expenditures over the next
several years in connection with remedial investigations, remedial design and
remediation relating to the clean-up and prevention of contamination at several
sites. The Company conducts a review of its reserves each year and makes
adjustments to its estimates based upon this review. The amount of the reserve
at December 31, 1994 was $2,172,000. The Company expects to continue to incur
professional fees, expenses and capital expenditures in connection with its
environmental compliance efforts.
The reserves for these liabilities can change substantially due to such
factors as additional information on the nature or extent of contamination,
methods of remediation required and other actions by governmental agencies or
private parties. Although the amount of ultimate liability, if any, at December
31, 1994, with respect to environmental matters, claims and lawsuits cannot be
ascertained, the disposition of these matters, in the opinion of management, on
the basis of information furnished by counsel, should not have a material
effect on the Company's consolidated financial position. In the event that any
additional accruals should be required in the future with respect to such
matters, the amounts of such additional accruals could have a material impact
on the results of operations to be reported for a specific accounting period.
IRS Examinations--The Internal Revenue Service (IRS) has completed
examinations of the Company's federal income tax returns for the years 1988 and
1989 and has proposed various adjustments to increase taxable income. Protest
of certain items has been filed with the Appellate Division of the IRS and are
pending final resolution. During the course of this appeal, the IRS extended to
the Company an offer to settle on the deductibility of certain intangibles
relating to non-compete covenants. This offer has been tentatively agreed to
except for the timing of the amortization of the intangibles. IRS examinations
are currently in process for the years 1990 and 1991. The Company has been
notified by the IRS that the years 1992 and 1993 will be reviewed as well.
Management continues to believe that the Company has meritorious defenses to
the adjustments proposed by the IRS and meritorious positions with respect to
its claims. Management has analyzed all of these matters and has provided
amounts, including interest, which it currently believes are adequate to cover
the adjustments proposed by the IRS.
10. GOING CONCERN CONSIDERATIONS
As indicated in the accompanying consolidated financial statements, the
Company has experienced recurring losses and has a deficiency in assets at
December 31, 1994. Additionally, the Company has not been able to comply with
certain covenants of its debt agreements, relating to earnings, coverage ratios
and failure to make certain payments under said agreements when due. As a
result of this lack of compliance, the lender has the right to accelerate
payments of principal and interest under said agreements. If the lender were to
exercise this right, the Company would not be able to make the accelerated
payments, and foreclosure or liquidation of the Company's assets could occur.
F-11
<PAGE>
SCHUYLKILL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
Management is in the process of addressing these circumstances through
working with the Company's lender to amend the Company's debt agreements in
order to remove the events of noncompliance and, eventually, to restructure the
Company's debt. Management is also working to further improve the efficiency of
the Company's operations. There can be no assurance, however, that all of these
efforts will be successful.
The Company's ability to continue as a going concern is dependent upon the
restructuring of its obligations and, ultimately, a return to profitability.
11. STOCK OPTION
During 1994, the Company adopted a nonqualified stock option plan (the Plan).
Under the Plan, options may be granted to directors, officers or other key
employees of the Company or its subsidiary. The Plan calls for up to an
aggregate of 1,075,268 shares of the Company's common stock to be available for
issuance upon the exercise of options. The Board of Directors of the Company
may grant options under the Plan under certain terms and conditions specified
in the Plan; provided, however, that no more than 215,053 shares may be granted
during any one fiscal year. The Plan provides that options be granted at an
exercise price of $.10 per share. Options granted become exercisable in one-
third increments after each of the first three anniversaries of the date of
grant and generally expire five years after the date of grant. Options under
the Plan become immediately and fully exercisable before the consummation of
any agreement for the merger or consolidation of the Company with another
company. During 1994, 215,053 options were granted. None of these options were
exercisable at December 31, 1994.
12. SUBSEQUENT EVENT
In April 1995, the Company signed a letter of intent to sell all of its
outstanding common and preferred stock to Exide Battery Corporation. The
proceeds of the sale will be used to pay the Company's creditors, debt holders,
optionees and stockholders. Completion of the sale is contingent upon approval
by the debt holders and stockholders and upon the Company effecting the
assignment and transfer of all operating permits, registrations and licenses.
13. INTERIM PERIODS (UNAUDITED)
The information presented for the interim periods is unaudited but in the
opinion of management, such information reflects only normal recurring
adjustments necessary for a fair presentation of the financial data for such
interim periods. The results of the interim periods presented may not be
indicative of the results for a full year.
* * * * * *
F-12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPO-
RATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, THE
NEW NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOGO
---------------------
PROSPECTUS
---------------------
OFFER TO EXCHANGE ITS
10% SENIOR NOTES DUE 2005
FOR ANY AND ALL OF ITS
OUTSTANDING 10% SENIOR NOTES DUE 2005
SEPTEMBER 28, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides, in
effect, that any person made a party to any action by reason of the fact that
he is or was a director, officer, employee or agent of the Company may and, in
certain cases, must be indemnified by the Company against, in the case of a
non-derivative action, judgments, fines, amounts paid in settlement and
reasonable expenses (including attorney's fees) incurred by him as a result of
such action. In the case of a derivative action, such person must be
indemnified against expenses (including attorney's fees). In either type of
action the person must have acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the Company. This
indemnification does not apply, in a derivative action, to matters as to which
it is adjudged that the director, officer, employee or agent is liable to the
Company, unless upon court order it is determined that, despite such
adjudication of liability, but in view of all the circumstances of the case,
such director, officer, employee or agent is fairly and reasonably entitled to
indemnity for expenses. In a non-derivative action this indemnification does
not apply to any criminal proceeding in which such person had reasonable cause
to believe his conduct was unlawful.
Article Tenth of the Company's Certificate of Incorporation and Article V of
the Company's Bylaws provide that the Company shall indemnify each person who
is or was an officer or director of the Company to the fullest extent permitted
by Section 145 of the DGCL as currently in effect or as the same may be amended
(but only to provide fuller indemnification) in the future.
Article Ninth of the Company's Restated Certificate of Incorporation provides
that to the fullest extent permitted by the DGCL, a director of the Company
shall not be liable to the Company or its stockholders for monetary damages for
a breach of fiduciary duty as a director.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<S> <C>
4.1 Indenture, dated as of April 28, 1995, between the Company and The Bank of
New York, as trustee, filed as Exhibit 99.3 to the Company's 8-K dated
June 2, 1995, is incorporated by reference.
4.2** First Supplemental Indenture, dated as of August 16, 1995, between the
Company and The Bank of New York, as Trustee.
4.3 Form of New Note (included in Exhibit 4.1).
4.4** Registration Rights Agreement, dated as of April 28, 1995, among the
Company and Morgan Stanley & Co. Incorporated.
4.5 Senior Note Indenture (including form of Senior Note), filed as Exhibit
4.1 to the Company's Registration Statement on Form S-2 (File No. 33-
53666), as amended (the "S-2 Registration Statement"), is incorporated by
reference.
4.6 Senior Subordinated Deferred Coupon Debenture Indenture (including form of
Senior Subordinated Debenture), filed as Exhibit 4.2 to the S-2
Registration Statement, is incorporated by reference.
4.7 Agreement, dated as of December 7, 1992, between the Company and Inco
United States, Inc., relating to the assumption of certain liabilities,
filed as Exhibit 10.30 to the S-2 Registration Statement, is incorporated
by reference.
5* Opinion of Kirkland & Ellis.
8* Opinion of Kirkland & Ellis.
12** Statement of Computation of Ratios.
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
23.1* Consent of Kirkland & Ellis (included in Exhibit 5).
23.2* Consent of Arthur Andersen LLP.
23.3* Consent of Arthur Andersen.
23.4* Consent of Ernst & Young Audit.
23.5* Consent of Deloitte & Touche.
23.6* Consent of Kirkland & Ellis (included in Exhibit 8).
24** Power of Attorney.
25** Statement of Eligibility of Trustee.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Form of Instructions to Registered Holder.
</TABLE>
- --------
*Filed herewith.
**Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
Not Applicable.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
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 described under Item 20, 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 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 of 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:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any
II-2
<PAGE>
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) ((S) 230.424(b) of this chapter) if,
in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the registration statement is on Form S-3
((S) 239.13 of this chapter), Form S-8 ((S) 239.16b of this chapter) or
Form F-3 ((S) 239.33 of this chapter), and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the Company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF READING, STATE OF
PENNSYLVANIA, ON SEPTEMBER 26, 1995.
EXIDE CORPORATION
/s/ Alan E. Gauthier
By: _________________________________
Alan E. Gauthier
Executive Vice President and Chief
Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President, Chairman of the September 26, 1995
By: ___________________________________ Board and Director
Arthur M. Hawkins (Principal Executive
Officer)
/s/ Alan E. Gauthier Executive Vice President, September 26, 1995
By: ___________________________________ Chief Financial Officer
Alan E. Gauthier and
Director (Principal
Financial and Accounting
Officer)
* Executive Vice President, September 26, 1995
By: ___________________________________ President--North American
Douglas N. Pearson Operations and Director
* Executive Vice President and September 26, 1995
_______________________________________ Director
William J. Rankin
Director September 26, 1995
_______________________________________
Timothy O. Fisher
* Director September 26, 1995
_______________________________________
Robert H. Irwin
* Director September 26, 1995
_______________________________________
Arthur R. Taylor
* Director September 26, 1995
_______________________________________
Lawrence M. Wagner
/s/ Alan E. Gauthier
*By: __________________________________
Alan E. Gauthier
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.1 Indenture, dated as of April 28, 1995, between the **
Company and The Bank of New York, as trustee, filed
as Exhibit 99.3 to the Company's 8-K dated June 2,
1995, is incorporated by reference.
4.2 First Supplemental Indenture, dated as of August 16, ***
1995, between the Company and The Bank of New York,
as Trustee.
4.3 Form of New Note (included in Exhibit 4.1).
4.4 Registration Rights Agreement, dated as of April 28, ***
1995, among the Company and Morgan Stanley & Co. In-
corporated.
4.5 Senior Note Indenture (including form of Senior **
Note), filed as Exhibit 4.1 to the Company's Regis-
tration Statement on Form S-2 (File No. 33-53666), as
amended (the "S-2 Registration Statement"), is incor-
porated by reference.
4.6 Senior Subordinated Deferred Coupon Debenture Inden- **
ture (including form of Senior Subordinated Deben-
ture), filed as Exhibit 4.2 to the S-2 Registration
Statement, is incorporated by reference.
4.7 Agreement, dated as of December 7, 1992, between the **
Company and Inco United States, Inc., relating to the
assumption of certain liabilities, filed as Exhibit
10.30 to the S-2 Registration Statement, is incorpo-
rated by reference.
5 Opinion of Kirkland & Ellis. *
8 Opinion of Kirkland & Ellis. *
12 Statement of Computation of Ratios. ***
23.1 Consent of Kirkland & Ellis (included in Exhibit 5). *
23.2 Consent of Arthur Andersen LLP. *
23.3 Consent of Arthur Andersen. *
23.4 Consent of Ernst & Young Audit. *
23.5 Consent of Deloitte & Touche LLP. *
23.6 Consent of Kirkland & Ellis (included in Exhibit 8). *
24 Power of Attorney. ***
25 Statement of Eligibility of Trustee. ***
99.1 Form of Letter of Transmittal. *
99.2 Form of Notice of Guaranteed Delivery. *
99.3 Form of Instructions to Registered Holder. *
</TABLE>
- --------
*Filed herewith.
**Incorporated by reference.
***Previously filed.
<PAGE>
Exhibit 5
[Kirkland & Ellis Letterhead]
September 26, 1995
Exide Corporation
1400 North Woodward Avenue
Bloomfield Hills, Michigan 48304
Re: Exide Corporation
Registration Statement on Form S-4
Registration No. 33-61961
Ladies and Gentlemen:
We are acting as special counsel to Exide Corporation, a Delaware
corporation (the "Company"), in connection with the proposed registration by the
Company of up to $300,000,000 principal amount of the Company's 10% Senior Notes
due 2005 (the "New Notes") pursuant to a Registration Statement on Form S-4
(Registration No. 33-61961) filed with the Securities and Exchange Commission
(the "Commission") on August 21, 1995 under the Securities Act of 1933, as
amended (the "Act") (such Registration Statement, as amended or supplemented, is
hereinafter referred to as the "Registration Statement"). The New Notes are to
be issued pursuant to the Indenture, dated as of April 28, 1995 (the
"Indenture"), between the Company and The Bank of New York, as Trustee, in
exchange for and in replacement of the Company's outstanding 10% Senior Notes
due 2005 (the "Old Notes"), of which $300,000,000 principal amount is
outstanding.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the Restated Certificate of Incorporation and By-laws,
each as amended to date, of the Company, (ii) minutes and records of the
corporate proceedings of the Company with respect to the
<PAGE>
Exide Corporation
September 26, 1995
Page 2
issuance of the New Notes, (iii) the Registration Statement and exhibits
thereto, (iv) the Indenture and (v) the Registration Rights Agreement, dated as
of April 28, 1995, between the Company and Morgan Stanley & Co. Incorporated.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have further assumed the genuineness of
the signatures of persons signing all documents and instruments in connection
with which this opinion is rendered, the authority of such persons signing on
behalf of the parties thereto and the due authorization, execution and delivery
of all documents by the parties thereto other than the Company. As to any facts
material to the opinions expressed herein which we have not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Company and others.
Our opinions expressed below are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of:
(i) any bankruptcy, insolvency, reorganization, fraudulent transfer and
conveyance, moratorium and other similar laws affecting the rights of creditors
generally, (ii) general principles of equity, regardless of whether
enforceability of any obligation is considered in a proceeding in equity or at
law, (iii) implied covenants of good faith, diligence, reasonableness and fair
dealing, (iv) public policy considerations which may limit the rights of parties
to obtain certain remedies and (vii) any laws except the General Corporation Law
of the State of Delaware and the federal laws of the United States.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that when (i) the Registration
<PAGE>
Exide Corporation
September 26, 1995
Page 3
Statement becomes effective, (ii) the Indenture has been duly qualified under
the Trust Indenture Act of 1939, as amended, and (iii) the New Notes have been
duly executed and authenticated in accordance with the provisions of the
Indenture and duly delivered to the respective persons in exchange for the Old
Notes, the New Notes will be legally issued, fully paid and non-assessable and
will be binding obligations of the Company.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion in the event of a
change in law as a result of legislative action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Very truly yours,
/s/ Kirkland & Ellis
--------------------
KIRKLAND & ELLIS
<PAGE>
[KIRKLAND & ELLIS LETTERHEAD]
Exhibit 8
September 26, 1995
Exide Corporation
1400 North Woodward Avenue
Bloomfield Hills, Michigan 48304
Re: Exide Corporation
Registration Statement on Form S-4
Registration No. 33-61961
Ladies and Gentlemen:
We are acting as special counsel to Exide Corporation, a Delaware
corporation (the "Company"), in connection with the proposed registration by the
Company of up to $300,000,000 principal amount of the Company's 10% Senior Notes
due 2005 pursuant to a Registration Statement on Form S-4 (Registration No.
33-61961) filed with the Securities and Exchange Commission (the "Commission")
on August 21, 1995 under the Securities Act of 1933, as amended (the "Act")
(such Registration Statement, as amended or supplemented, is hereinafter
referred to as the "Registration Statement"). Capitalized terms used herein that
are not specifically defined have the same meaning as in the Registration
Statement.
We have examined the Prospectus, the Registration Statement and such other
documents and such legal authorities as we have deemed relevant for purposes of
expressing the opinion contained herein. Our opinion is based upon the
applicable provisions of the Internal Revenue Code of 1986, as amended through
the date hereof, Treasury regulations promulgated and proposed thereunder,
current positions of the Internal Revenue Service (the "IRS") contained in
published Revenue Rulings and Revenue Procedures and existing judicial
decisions. No tax rulings have been or will be sought from the IRS with respect
to any of the matters discussed herein.
Based on the foregoing, it is our opinion that the discussions set forth
under the caption "Tax Considerations" in the Prospectus accurately reflect our
views on the matters discussed therein and are based upon reasonable
interpretations of existing law. There can be no assurance, however, that such
views will not be successfully challenged by the IRS or significantly altered by
new legislation, changes in IRS positions or judicial decisions, any of which
challenges or alterations may be applied retroactively with respect to completed
transactions.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 8 to the Registration Statement.
<PAGE>
Exide Corporation
September 26, 1995
Page 2
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion in the event of a
change in law as a result of legislative action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Very truly yours,
/s/ Kirkland & Ellis
Kirkland & Ellis
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our report dated June
27, 1995 included in Exide Corporation's Form 10-K for the fiscal year ended
March 31, 1995 and to all references to our Firm included in this Registration
Statement.
Arthur Andersen LLP
Philadelphia, Pa.,
September 26, 1995
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the incorporation by reference
in this Registration Statement on Form S-4 of our report dated March 23, 1994
(except with respect to the matter discussed in Note 21 and Note 22-J, as to
which the date is October 30, 1994) included in Exide Corporation's Form 8-K
filed November 1, 1994, subsequently amended by Form 8-K/A filed December 9,
1994 and to all references to our Firm included in this Registration Statement.
Arthur Andersen
Madrid, Spain
September 26, 1995
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference of our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related prospectus of Exide Corporation
dated September 1995, and to the incorporation by reference therein of our
report dated March 31, 1995 with respect to the consolidated financial
statements of Compagnie Europeenne d'Accumulateurs, S.A. and its Subsidiaries
as of December 31, 1994 and for the year then ended, included in Exide
Corporation's Current Report (Form 8-K/A) dated July 31, 1995, filed with the
Securities and Exchange Commission.
Ernst & Young Audit
Represented by
John MACKEY
Paris, France
September 26, 1995
3
<PAGE>
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement,
relating to $300,000,000 10% Senior Notes, on Form S-4 of our report of
Schuylkill Holdings, Inc. dated April 25, 1995, (which expresses an unqualified
opinion and includes an explanatory paragraph regarding the ability of the
Company to continue as a going concern) appearing in the prospectus, which is
part of this registration statement. We also consent to the reference to us
under the headings "Experts" in such Prospectus.
Deloitte & Touche LLP
Baton Rouge, Louisiana
September 26, 1995
4
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10% SENIOR NOTES DUE 2005
OF
EXIDE CORPORATION
PURSUANT TO THE PROSPECTUS DATED SEPTEMBER 28, 1995
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ONOCTOBER
26, 1995, UNLESS EXTENDED.
To: The Bank of New York, the Exchange Agent
By Registered or Certified Mail, Overnight Courier or Hand:
The Bank of New York
Reorganization Section
101 Barclay Street (7 East)
New York, New York 10286
Attention: Enrique Lopez
or
By Facsimile: Confirm by Telephone:
(212) 571-3080 (212) 815-2742
Attention: Enrique Lopez
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF THIS INSTRUMENT VIA A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus dated September 28,
1995 (the "Prospectus") of Exide Corporation (the "Company") and this Letter of
Transmittal (the "Letter of Transmittal"), which together describe the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its 10% Senior Notes due 2005 (the "New Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant
to a Registration Statement, for each $1,000 principal amount of its
outstanding 10% Senior Notes due 2005 (the "Old Notes"), of which $300,000,000
principal amount is outstanding. The term "Expiration Date" shall mean 5:00
p.m., New York City time, on October 26, 1995, unless the Company extends the
Exchange Offer, in which case the term shall mean the latest date and time to
which the Exchange Offer is extended. The term "Holder" with respect to the
Exchange Offer means any person in whose name Old Notes are registered on the
books of the Company or any other person who has obtained a properly completed
bond power from the registered holder. Capitalized terms used but not defined
herein have the respective meanings set forth in the Prospectus.
This Letter of Transmittal is to be used by holders of Old Notes if (i)
certificates representing the Old Notes are to be physically delivered to the
Exchange Agent herewith, (ii) tender of the Old Notes is to be made by book-
entry transfer to the Exchange Agent's account at DTC pursuant to the
procedures set forth in the Prospectus under the caption "Exchange Offer--
Procedures for Tendering" by any financial institution that is a participant in
DTC and whose name appears on a security position listing as the owner of Old
Notes or (iii) tender of the Old Notes is to be made according to the
guaranteed delivery procedures described in the Prospectus under the caption
"Exchange Offer--Procedures for Tendering." See Instruction 2. Delivery of
documents to DTC does not constitute delivery to the Exchange Agent.
<PAGE>
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution: ______________________________________________
Account Number: _____________________________________________________________
Transaction Code Number: ____________________________________________________
Principal Amount of Tendered Old Notes: _____________________________________
If Holders desire to tender Old Notes pursuant to the Exchange Offer and (i)
time will not permit this Letter of Transmittal, certificates representing Old
Notes or other required documents to reach the Exchange Agent prior to the
Expiration Date or (ii) the procedures for book-entry transfer cannot be
completed prior to the Expiration Date, such Holders may effect a tender of
such Notes in accordance with the guaranteed delivery procedures set forth in
the Prospectus under the caption "Exchange Offer--Procedures for Tendering."
See Instruction 2 below.
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (See Instruction 2):
Name of Registered Holder(s): _______________________________________________
Window Ticket No. (if any): _________________________________________________
Date of Execution of Notice of Guaranteed Delivery: _________________________
Name of Eligible Institution
that Guaranteed Delivery: ___________________________________________________
If Delivered by Book Entry Transfer,
the Account Number: _________________________________________________________
Transaction Code Number: ____________________________________________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _______________________________________________________________________
Address: ____________________________________________________________________
----------------------------------------------------------------------
Attention: __________________________________________________________________
Listed below are the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the certificate numbers and
principal amount of Old Notes should be listed on a separate signed schedule
affixed hereto.
2
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF 10% SENIOR NOTES DUE 2005*
<TABLE>
- ---------------------------------------------------------------------------------------
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF PRINCIPAL TENDERED (MUST BE
REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED AN INTEGRAL MULTIPLE
(PLEASE FILL IN, IF BLANK) NUMBER(S) BY CERTIFICATE(S) OF $1,000)**
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
TOTAL
- ---------------------------------------------------------------------------------------
</TABLE>
*Need not be completed by Holders tendering by book-entry transfer.
**Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of 10% Senior Notes due 2005 will be deemed to have
tendered the entire aggregate principal amount represented by the column
labeled "Aggregate Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of 10% Senior
Notes due 2005. All tenders must be in integral multiples of $1,000.
BOX 2 BOX 3
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE
(SEE INSTRUCTIONS 4, 5 AND 6) INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if To be completed ONLY if
certificates for Old Notes in a certificates for Old Notes in a
principal amount not tendered, or principal amount not tendered, or
New Notes issued in exchange for New Notes issued in exchange for
Old Notes accepted for exchange, Old Notes accepted for exchange,
are to be issued in the name of are to be sent to someone other
someone other than the than the undersigned, or to the
undersigned. undersigned at an address other
than that shown above.
Issue certificate(s) to:
Deliver certificate(s) to:
Name: _____________________________
(Please Print) Name: _____________________________
(Please Print)
Address: __________________________
Address: __________________________
-----------------------------------
----------------------------------- (Include Zip Code)
(Include Zip Code)
-----------------------------------
----------------------------------- (Tax Indemnification or Social
(Tax Indemnification or Social Security Number)
Security Number)
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to Exide Corporation, a Delaware corporation (the "Company"),
the principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Old Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Old Notes with
the full power of substitution to (i) present such Old Notes and all evidences
of transfer and authenticity to, or transfer ownership of, such Old Notes on
the account books maintained by DTC to, or upon, the order of, the Company,
(ii) deliver certificates for such Old Notes to the Company and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company and (iii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claims, when the same are acquired by the
Company. By tendering, each holder of Old Notes represents to the Company that
(i) the New Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the person receiving such New Notes, whether
or not such person is such holder, (ii) neither the holder of Old Notes nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, (iii) that such holder is
not engaging in or intending to engage in the distribution of the New Notes and
(iv) neither the holder nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or, if such
holder is an "affiliate," that such holder will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable. If the tendering holder is a broker-dealer (whether or not it is
also an "affiliate") that will receive New Notes for its own account in
exchange for Old Notes, it represents that the Old Notes to be exchanged for
the New Notes were acquired by it as a result of marketing-making activities or
other trading activities, and acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes, the undersigned is not deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. In addition, the
undersigned and any such person acknowledge that (a) any person participating
the Exchange Offer for the purpose of distributing the New Notes must, in the
absence of an exemption therefrom, comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the New Notes and cannot rely on the position of the staff of the
Commission enunciated in no-action letters and (b) failure to comply with such
requirements in such instance could result in the undersigned or such person
incurring liability under the Securities Act for which the undersigned or such
person is not indemnified by the Company. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or
the Company to be necessary or desirable to complete the assignment, transfer
and purchase of the Old Notes tendered hereby. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in and does
not intend to engage in, a distribution of New Notes.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent.
4
<PAGE>
If any Old Notes tendered herewith are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Old
Notes will be returned, without expense, to the undersigned at the address
shown below or to a different address as may be indicated herein in Box 3 under
"Special Delivery Instructions" as promptly as practicable after the Expiration
Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption
"Exchange Offer--Withdrawal of Tenders."
Unless indicated in Box 2 under "Special Registration Instructions" or
otherwise directed, please issue the certificates or electronic transfers
representing the New Notes issued in exchange for the Old Notes accepted for
exchange and any certificates or electronic transfers for Old Notes not
tendered or not exchanged, in the name(s) of the undersigned. Similarly, unless
otherwise indicated in Box 3 under "Special Delivery Instructions," please send
the certificates, if any, representing the New Notes issued in exchange for the
Old Notes accepted for exchange and any certificates for Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below in the undersigned's signature(s). In
the event that both "Special Registration Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the New
Notes, if any, issued in exchange for the Old Notes accepted for exchange in
the name(s) of, and return any certificates for Old Notes not tendered or not
exchanged to, the person(s) so indicated. The undersigned understands that the
Company has no obligation pursuant to the "Special Registration Instructions"
and "Special Delivery Instructions" to transfer any Old Notes from the name of
the registered Holder(s) thereof if the Company does not accept for exchange
any of the Old Notes so tendered.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver the Old Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "Exchange
Offer--Procedures for Tendering." See Instruction 2 regarding the completion of
this Letter of Transmittal printed below.
The Exchange Offer is subject to certain customary conditions as set forth in
the Prospectus under the caption "Exchange Offer--Conditions to the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Company), as more particularly set
forth in the Prospectus, the Company may not be required to exchange any of the
Old Notes tendered hereby and, in such event, the Old Notes not exchanged will
be returned to the undersigned at the address shown below the signature of the
undersigned.
5
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X
- --------------------------------------------------------------- --------------
Date
X
- --------------------------------------------------------------- --------------
Date
Area Code and Telephone Number: _______________________________
The above lines must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Old Notes or by a participant in DTC, exactly as such
participant's name appears on a security position listing as the owner of the
Old Notes, or by person(s) authorized to become registered holder(s) by a
properly completed bond power from the registered holder(s), a copy of which
must be transmitted with this Letter of Transmittal. If Old Notes to which this
Letter of Transmittal relate are held of record by two or more joint holders,
then all such holders must sign this Letter of Transmittal. If signature is by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) submit
evidence satisfactory to the Company of such person's authority so to act. See
Instruction 5 regarding the completion of this Letter of Transmittal printed
below.
Name(s): _______________________________________________________________________
(Please Print)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(Include Zip Code)
- --------------------------------------------------------------------------------
SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution: ____________________________
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address, Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: _________________________________________________________________________
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR OLD NOTES OR
BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Old Notes (or
a confirmation of book-entry transfer into the Exchange Agent's account with
DTC for tendered Old Notes transferred electronically), as well as a properly
completed and duly executed copy of this Letter of Transmittal (or facsimile
thereof), a Substitute Form W-9 (or facsimile thereof) and any other documents
required by this Letter of Transmittal must be received by the Exchange Agent
at its address set forth herein prior to the Expiration Date. The method of
delivery of certificates for Old Notes and all other required documents is at
the election and sole risk of the tendering holder and delivery will be deemed
made only when actually received by the Exchange Agent. If delivery is by mail,
registered mail with return receipt requested, properly insured, is
recommended. As an alternative to delivery by mail, the holder may wish to use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. Neither the Company nor the Exchange Agent
is under an obligation to notify any tendering holder of the Company's
acceptance of tendered Old Notes prior to the consummation of the Exchange
Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old Notes
but whose Old Notes are not immediately available and who cannot deliver their
certificates for Old Notes (or comply with the procedures for book-entry
transfer prior to the Expiration Date), the Letter of Transmittal and any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Old Notes according to the guaranteed
delivery procedures set forth below. Pursuant to such procedures:
(i) such tender must be made through an Eligible Institution;
(ii) on or prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery or notice substantially
equivalent thereto (by letter, telex, telegram or facsimile transmission)
setting forth the name and address of the holder, the certificate number or
numbers of the tendered Old Notes, and the principal amount of tendered Old
Notes and stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof), together
with the tendered Old Notes (or a confirmation of book-entry transfer into
the Exchange Agent's account with DTC for Old Notes transferred
electronically) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) such properly completed and executed Letter of Transmittal and
certificates representing the tendered Old Notes in proper form for
transfer (or a confirmation of book-entry transfer into the Exchange
Agent's account with DTC for Old Notes transferred electronically) and all
other documents required by this Letter of Transmittal must be received by
the Exchange Agent within three New York Stock Exchange trading days after
the Expiration Date.
Any holder who wishes to tender Old Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery or notice substantially equivalent thereto
relating to such Old Notes prior to the Expiration Date. Failure to complete
the guaranteed delivery procedures outlined above will not, of itself, affect
the validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by a Holder who attempted to use the guaranteed delivery
person.
3. TENDER BY HOLDER. Only a holder of Old Notes may tender such Old Notes in
the Exchange Offer. Any beneficial owner of Old Notes who is not the registered
holder and who wishes to tender should arrange with such holder to execute and
deliver this Letter of Transmittal on such owner's behalf or must, prior to
7
<PAGE>
completing and executing this Letter of Transmittal and delivering such Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such owner's name or obtain a properly completed bond power from the
registered holder.
4. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted only
in integral multiples of $1,000 in principal amount. If less than the entire
principal amount of Old Notes is tendered, the tendering holder should fill in
the principal amount tendered in the column labeled "Aggregate Principal Amount
Tendered" of the box entitled "Description of 10% Senior Notes due 2005" (Box
1) above. The entire principal amount of Old Notes delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated. If the
entire principal amount of Old Notes is not tendered, Old Notes for the
principal amount of Old Notes not tendered and New Notes exchanged for any Old
Notes tendered will be sent to the holder at his or her registered address (or
transferred to the account of DTC designated above), unless a different address
(or account) is provided in the appropriate box on this Letter of Transmittal,
as soon as practicable following the Expiration Date.
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable, except
that Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. To be effective, a written, telegraphic,
telex or facsimile transmission notice of withdrawal must be timely received by
the Exchange Agent. Any such notice of withdrawal must specify the person named
in the Letter of Transmittal as having tendered Old Notes to be withdrawn, the
certificate numbers of the Old Notes to be withdrawn, the principal amount of
Old Notes delivered for exchange, a statement that such a holder is withdrawing
its election to have such Old Notes exchanged and the name of the registered
holder of such Old Notes and must be signed by the holder in the same manner as
the original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the Company
that the person withdrawing the tender has succeeded to the beneficial
ownership of the Old Notes being withdrawn. The Exchange Agent will return the
properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. If Old Notes have been tendered pursuant to the procedure for book-
entry transfer, any notice of withdrawal must specify the name and number of
the account at DTC to be credited with the withdrawn Old Notes or otherwise
comply with DTC's procedures.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Old Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Old Notes
without alteration, enlargement, or any change whatsoever. If this Letter of
Transmittal is signed by a participant in DTC, the signature must correspond
with the name as it appears on the security position listing as the owner of
the Old Notes.
If any of the tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Old Notes are held in different names on several Old Notes, it will be
necessary to complete, sign, and submit as many separate copies of the Letter
of Transmittal documents as there are names in which tendered Old Notes are
held.
If this Letter of Transmittal is signed by the registered holder, and New
Notes are to be issued and any untendered or unaccepted principal amount of Old
Notes are to be reissued or returned to the registered holder, then the
registered holder need not and should not endorse any tendered Old Notes nor
provide a separate bond power. In any other case the registered holder must
either properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal (in either case, executed
exactly as the name(s) of the registered holder(s) appear(s) on such Old Notes,
and, with respect to a participant in DTC whose name appears on a security
position listing as the owner of Old Notes, exactly as the name(s) of the
participant(s) appear(s) on such security position listings), with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution unless such certificates or bond powers are signed by an Eligible
Institution.
8
<PAGE>
If this Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and evidence satisfactory to the
Company of their authority to so act must be submitted with this Letter of
Transmittal.
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered holder(s) of the Old Notes tendered herewith (or by a
participant in DTC who appears on a security position listing as the owner of
the Old Notes) and the issuance of New Notes (and any Old Notes not tendered or
not accepted) are to be issued directly to such registered holder(s) (or, if
signed by a participant in DTC, any New Notes or Old Notes not tendered or not
accepted are to be deposited to such participant's account at DTC) and neither
the "Special Delivery Instructions" (Box 3) nor the "Special Registration
Instructions" (Box 2) has been completed or (ii) such Old Notes are tendered
for the account of an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address or account at DTC in
which the New Notes and/or substitute Old Notes for principal amounts not
tendered or not accepted for exchange are to be sent or deposited, if different
from the name and address or account of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the employer
identification number or social security number of the person named must also
be indicated and the indicated and the tendering holders should complete the
applicable box.
If no such instructions are given, the New Notes (and any Old Notes not
tendered or not accepted) will be issued in the name of and sent to the holder
of the Old Notes or deposited at such holders' account at DTC.
7. TRANSFER TAXES. The Company shall pay all transfer taxes, if any,
applicable to the transfer and exchange of Old Notes to it or its order
pursuant to the Exchange Offer. If, however, New Notes are to be delivered to,
or are to be registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if a transfer tax is
imposed for any reason other than the transfer of Old Notes to the Company or
its order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exception therefrom is not submitted herewith the amount of such transfer taxes
will be billed directly to such tendering holder.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
of any Old Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual is his or her social security number. If
the Company is not provided with the correct TIN, the holder may be subject to
a $50 penalty imposed by Internal Revenue Service. (If withholding results in
an over-payment of taxes, a refund may be obtained.) Certain holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the Old Notes are registered in more than one name or are not
in the name of the actual owner, see the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9
<PAGE>
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of tendered Old Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Old
Notes not validly tendered or any Old Notes, the Company's acceptance of which
would, in the opinion of the Company or its counsel, be unlawful. The Company
also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Old Notes as to any ineligibility of
any holder who seeks to tender Old Notes in the Exchange Offer. The
interpretation of the terms and conditions of the Exchange Offer (including
this Letter of Transmittal and the instructions hereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Notes must be cured within such time as the
Company shall determine. The Company will use reasonable efforts to give
notification of defects or irregularities with respect to tenders of Old Notes,
but shall not incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the right to waive, in whole
or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Old Notes on transmittal of this Letter of Transmittal
will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED OLD NOTES. Any tendering holder
whose Old Notes have been mutilated, lost, stolen, or destroyed should contact
the Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED OLD NOTES AND ISSUANCE OF NEW NOTES; RETURN OF OLD
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Old Notes as soon as practicable
after the Expiration Date and will issue New Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Old Notes when, as and if the Company has
given written and oral notice thereof to the Exchange Agent. If any tendered
Old Notes are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Old Notes will be returned, without expense, to the undersigned at
the address shown above (or credited to the undersigned's account at DTC
designated above) or at a different address as may be indicated under "Special
Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "Exchange
Offer--Withdrawal of Tenders."
10
<PAGE>
PAYOR'S NAME: EXIDE CORPORATION
- --------------------------------------------------------------------------------
Name (if joint names, list
first and circle the name
of the person or entity
whose number you enter in
Part 1 below. See
instructions if your name
has changed.)
SUBSTITUTE --------------------------------------------------------
FORM W-9 Address
--------------------------------------------------------
DEPARTMENT OF THE TREASURY
City, State and Zip Code
INTERNAL REVENUE SERVICE
--------------------------------------------------------
PAYER'S REQUEST FOR --------------------------------------------------------
PART 2--Check the box if you are NOT subject to
backup withholding under the provisions of section
3408(a)(1)(C) of the Internal Revenue Code because
(1) you have not been notified that you are subject
to backup withholding as a result of failure to
report all interest of dividends or (2) the Internal
Revenue Service has notified you that you are no
longer subject to backup withholding. [_]
TAXPAYER List account number(s) here (optional)
IDENTIFICATION --------------------------------------------------------
NUMBER (TIN) PART 1--PLEASE PROVIDE Social Security Number or
YOUR TAXPAYER TIN
IDENTIFICATION NUMBER
("TIN") IN THE BOX AT
RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW
--------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE.
PART 3--
Awaiting
TIN [_]
SIGNATURE ___________DATE ____________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10% SENIOR NOTES DUE 2005
OF
EXIDE CORPORATION
Registered holders of outstanding 10% Senior Notes due 2005 (the "Old Notes")
who wish to tender their Old Notes in exchange for a like principal amount of
10% Senior Notes due 2005, which have been registered under the Securities Act
of 1933, as amended (the "New Notes") and, in each case, whose Old Notes are
not immediately available or who cannot deliver their Old Notes and a Letter of
Transmittal (and any other documents required by the Letter of Transmittal) to
The Bank of New York (the "Exchange Agent") prior to the Expiration Date, may
use this Notice of Guaranteed Delivery or one substantially equivalent hereto.
This Notice of Guaranteed Delivery may be delivered by hand or sent by
facsimile transmission (receipt confirmed by telephone and an original
delivered by guaranteed overnight delivery) or mail to the Exchange Agent. See
"The Exchange Offer--Procedures for Tendering" in the Prospectus. Capitalized
terms not defined herein have the meanings ascribed to them in the Prospectus
or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON OCTOBER 26, 1995, UNLESS EXTENDED (THE "EXPIRATION DATE").
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
By Mail, Overnight Courier or By Hand: By Facsimile:
The Bank of New York (For Eligible
Reorganization Section Institutions Only)
101 Barclay Street (212) 571-3080
(7 East)
New York, NY 10286 Confirm by Telephone:
Attention: Enrique Lopez (212) 815-2742
Attention: Enrique Lopez
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
CERTIFICATE NUMBER(S) (IF KNOWN) OF
OLD NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT DTC AMOUNT REPRESENTED AMOUNT TENDERED
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) Date: ________________________, 1995
or
Address: ___________________________
Authorized Signature: ______________ ------------------------------------
------------------------------------
------------------------------------ Area Code and Telephone No. ________
Name(s) of Registered Holder(s): ___
------------------------------------
------------------------------------
------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security
position listing as the owner of Old Notes, or by person(s) authorized to
become Holder(s) by endorsements and documents transmitted with this Notice
of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in
a fiduciary or representative capacity, such person must provide the
following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): _____________________________________________________________________
-----------------------------------------------------------------------------
Capacity: ____________________________________________________________________
Address(es): _________________________________________________________________
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office, branch,
agency or correspondent in the United States guarantees deposit with the
Exchange Agent of the Letter of Transmittal (or facsimile thereof), together
with the Old Notes tendered hereby in proper form for transfer (or
confirmation of the book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC) and any other required documents, all by 5:00 p.m.,
New York City time, on the third New York Stock Exchange trading day
following the Expiration Date.
Name of Firm: ______________________ ------------------------------------
Authorized Signature
Address: ___________________________ Name: ______________________________
------------------------------------
Title: _____________________________
Area Code and Telephone No.: _______
Date: ________________________, 1995
DO NOT SEND OLD NOTES WITH THIS FORM, ACTUAL SURRENDER OF OLD NOTES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
2
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
DTC whose name appears on a security position listing as the owner of Old
Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed or a participant of DTC, this
Notice of Guaranteed Delivery must be accompanied by appropriate bond powers,
signed as the name of the registered holder(s) appears on the Old Notes or
signed as the name of the participant shown on DTC's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
3
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
EXIDE CORPORATION
10% SENIOR NOTES DUE 2005
To Registered Holder and/or Participant of The Depository Trust Company:
The undersigned hereby acknowledges receipt of the Prospectus dated September
28, 1995 (the "Prospectus") of Exide Corporation, a Delaware corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the 10% Senior Notes due 2005 (the "Old Notes")
held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of the
undersigned is (fill in amount):
$ of the 10% Senior Notes due 2005.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] TO TENDER the following Old Notes held by you for the account of the
undersigned (insert principal amount of Old Notes to be tendered if any): $
[_] NOT TO TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to, the representations that (i)
the New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the undersigned, (ii) neither the undersigned
nor any such other person has an arrangement or understanding with any person
to participate in the distribution of such New Notes, (iii) if the undersigned
is not a broker-dealer, or is a broker-dealer but will not receive New Notes
for its own account in exchange for Old Notes, neither the undersigned nor any
such other person is engaged in or intends to participate in the distribution
of such New Notes and (iv) neither the undersigned nor any such other person is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or, if the undersigned is an "affiliate," that the undersigned
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable; (b) to agree, on behalf of the
undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Old Notes. If the undersigned is a broker-
dealer (whether or not it is also an "affiliate") that will receive New Notes
for its own account in exchange for Old Notes, it represents that such Old
Notes were acquired as a result of market-making activities or other trading
activities, and it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s): _______________________________________________
Signature(s): ______________________________________________________________
Name (please print): _______________________________________________________
Address: ___________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Telephone Number: __________________________________________________________
Taxpayer Identification or Social Security Number: _________________________
Date: ______________________________________________________________________
