-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wq/cO558gizYWsagJl88s4ZaK0HHQfd4WsbVYu9vmCJs25DgM1jNiCrvxMP8xyOU CMRa3LYF46AH8kR8X/NSyg== 0000808064-01-500102.txt : 20020413 0000808064-01-500102.hdr.sgml : 20020413 ACCESSION NUMBER: 0000808064-01-500102 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011031 FILED AS OF DATE: 20011213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: C&D TECHNOLOGIES INC CENTRAL INDEX KEY: 0000808064 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 133314599 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09389 FILM NUMBER: 1812756 BUSINESS ADDRESS: STREET 1: 1400 UNION MEETING ROAD STREET 2: PO BOX 3053 CITY: BLUE BELL STATE: PA ZIP: 19422 BUSINESS PHONE: 2156192700 MAIL ADDRESS: STREET 1: 1400 UNION MEETING ROAD STREET 2: PO BOX 3053 CITY: BLUE BELL STATE: PA ZIP: 19422 10-Q 1 q3-10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission File No. 1-9389 C&D TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) Delaware 13-3314599 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1400 Union Meeting Road Blue Bell, Pennsylvania 19422 (Address of principal executive office) (Zip Code) (215) 619-2700 (Registrant's telephone number, including area code) _____________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO_____ Number of shares of the Registrant's Common Stock outstanding on December 6, 2001: 26,095,751 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Page No. Item 1 - Financial Statements Consolidated Balance Sheets - October 31, 2001 and January 31, 2001................. 3 Consolidated Statements of Income - Three and Nine Months Ended October 31, 2001 and 2000........... 5 Consolidated Statements of Cash Flows - Nine Months Ended October 31, 2001 and 2000........... 6 Consolidated Statements of Comprehensive Income - Three and Nine Months Ended October 31, 2001 and 2000 8 Notes to Consolidated Financial Statements............. 9 Report of Independent Accountants...................... 18 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations...... 19 PART II. OTHER INFORMATION.................................... 24 SIGNATURES.................................................... 25 2 PART I. FINANCIAL INFORMATION Item 1 - Financial Statements C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) (Unaudited) October 31, January 31, 2001 2001 ---- ---- ASSETS Current assets: Cash and cash equivalents................... $ 5,501 $ 7,709 Accounts receivable, less allowance for doubtful accounts of $2,937 and $4,121, respectively........................... 61,030 88,596 Inventories................................. 67,093 77,493 Deferred income taxes....................... 12,331 10,990 Other current assets........................ 4,156 1,459 ------- ------- Total current assets............. 150,111 186,247 Property, plant and equipment, net................ 131,769 130,387 Intangible and other assets, net.................. 21,880 23,309 Goodwill, net..................................... 110,549 115,576 ------- ------- Total assets..................... $414,309 $455,519 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt............................. $ 12,503 $ 18,172 Accounts payable............................ 21,090 45,935 Accrued liabilities......................... 29,594 34,918 Income taxes................................ - 2,533 Other current liabilities................... 7,697 8,794 ------- ------- Total current liabilities........ 70,884 110,352 Deferred income taxes ............................ 2,063 1,135 Long-term debt.................................... 73,365 98,849 Other liabilities................................. 17,718 20,133 ------- ------- Total liabilities................ 164,030 230,469 ------- ------- The accompanying notes are an integral part of these statements. 3 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (continued) (Dollars in thousands, except per share data) (Unaudited) October 31, January 31, 2001 2001 ---- ---- Commitments and contingencies Minority interest................................. 8,077 6,996 Stockholders' equity: Common stock, $.01 par value, 75,000,000 shares authorized; 28,396,761 and 28,276,917 shares issued, respectively.. 284 283 Additional paid-in capital.................. 65,304 62,908 Treasury stock, at cost, 2,209,821 and 1,986,038 shares, respectively.......... (25,295) (17,750) Accumulated other comprehensive loss........ (2,651) (1,231) Retained earnings........................... 204,560 173,844 ------- ------- Total stockholders' equity....... 242,202 218,054 ------- ------- Total liabilities and stockholders' equity........... $414,309 $455,519 ======= ======= The accompanying notes are an integral part of these statements. 4 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)
(Unaudited) (Unaudited) Three months ended Nine months ended October 31, October 31, 2001 2000 2001 2000 ---- ---- ---- ---- Net sales*........................... $102,505 $161,922 $383,381 $452,089 Cost of sales*....................... 80,395 116,511 277,729 324,428 ------- ------- ------- ------- Gross profit..................... 22,110 45,411 105,652 127,661 Selling, general and administrative expenses.......... 13,965 16,353 39,390 49,605 Research and development expenses......................... 2,461 2,514 7,895 7,522 ------- ------- ------- ------- Operating income................. 5,684 26,544 58,367 70,534 Interest expense, net................ 1,593 1,215 5,351 4,679 Other expense (income), net.......... 706 (29) 832 121 ------- ------- ------- ------- Income before income taxes and minority interest............. 3,385 25,358 52,184 65,734 Provision for income taxes........... 1,252 9,746 19,308 24,847 ------- ------- ------- ------- Net income before minority interest...................... 2,133 15,612 32,876 40,887 Minority interest.................... 285 867 1,081 1,698 ------- ------- ------- ------- Net income....................... $ 1,848 $ 14,745 $ 31,795 $ 39,189 ======= ======= ======= ======= Net income per share - basic......... $ .07 $ .56 $ 1.22 $ 1.50 ======= ======= ======= ======= Net income per share - diluted....... $ .07 $ .54 $ 1.19 $ 1.44 ======= ======= ======= ======= Dividends per share.................. $ .01375 $ .01375 $ .04125 $ .04125 ======= ======= ======= =======
* Reclassified for comparative purposes. The accompanying notes are an integral part of these statements. 5 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Nine months ended October 31, 2001 2000 ---- ---- Cash flows provided (used) by operating activities: Net income...................................... $ 31,795 $ 39,189 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest......................... 1,081 1,698 Depreciation and amortization............. 23,192 19,488 Deferred income taxes..................... (413) (276) Loss on disposal of assets................ 219 593 Changes in: Accounts receivable................. 27,153 (14,103) Inventories......................... 10,159 (8,142) Other current assets................ (471) 263 Accounts payable.................... (20,355) (352) Accrued liabilities................. (4,739) 9,576 Income taxes payable................ (4,125) 1,557 Other current liabilities........... (1,098) 641 Other liabilities................... (2,415) (434) Other, net................................ (464) 1,054 ------- ------- Net cash provided by operating activities........... 59,519 50,752 ------- ------- Cash flows provided (used) by investing activities: Acquisition of property, plant and equipment.... (22,473) (29,406) Proceeds from disposal of property, plant and equipment................................ 38 154 ------- ------- Net cash used by investing activities............... (22,435) (29,252) ------- ------- Cash flows provided (used) by financing activities: Repayment of debt............................... (43,632) (22,364) Proceeds from new borrowings.................... 11,786 1,200 Financing costs of long-tem debt................ - (244) Proceeds from issuance of common stock, net..... 1,439 3,935 Purchase of treasury stock...................... (7,427) (3,790) Payment of common stock dividends............... (1,441) (1,443) ------- ------- The accompanying notes are an integral part of these statements. 6 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Dollars in thousands) (Unaudited) Nine months ended October 31, 2001 2000 ---- ---- Net cash used by financing activities............. (39,275) (22,706) ------- ------- Effect of exchange rate changes on cash........... (17) (219) ------- ------- Decrease in cash and cash equivalents............. (2,208) (1,425) Cash and cash equivalents at beginning of period...................................... 7,709 7,121 ------- ------- Cash and cash equivalents at end of period........ $ 5,501 $ 5,696 ======= ======= SCHEDULE OF NON CASH INVESTING AND FINANCIAL ACTIVITIES Decrease in property, plant, and equipment acquisitions in accounts payable............................... $ (4,435) $ - ======= ======= The accompanying notes are an integral part of these statements. 7 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands)
(Unaudited) (Unaudited) Three months ended Nine months ended October 31, October 31, 2001 2000 2001 2000 ---- ---- ---- ---- Net income........................................ $ 1,848 $14,745 $31,795 $39,189 Other comprehensive (expense) income, net of tax: Cumulative effect of accounting change.......... - - (103) - Net unrealized loss on derivative instruments... (1,016) - (1,491) - Foreign currency translation adjustments........ 947 (562) 174 (1,205) ------ ------ ------ ------ Total comprehensive income........................ $ 1,779 $14,183 $30,375 $37,984 ====== ====== ====== ======
The accompanying notes are an integral part of these statements. 8 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) (UNAUDITED) 1. INTERIM STATEMENTS The accompanying interim consolidated financial statements of C&D Technologies, Inc. (together with its operating subsidiaries, the "Company") should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report to Stockholders for the fiscal year ended January 31, 2001. The January 31, 2001 amounts were derived from the Company's audited financial statements. The consolidated financial statements presented herein are unaudited but, in the opinion of management, include all necessary adjustments (which comprise only normal recurring items) required for a fair presentation of the consolidated financial position as of October 31, 2001 and the related consolidated statements of income and comprehensive income for the three and nine month periods ended October 31, 2001 and 2000 and the related consolidated statements of cash flow for the nine month periods ended October 31, 2001 and 2000. However, interim results of operations may not be indicative of results for the full fiscal year. 2. RECLASSIFICATIONS The Company adopted Emerging Issues Task Force Issue 00-10, "Accounting for Shipping and Handling Revenue and Costs," which requires amounts charged to customers for shipping and handling be classified as revenue. The associated shipping costs, previously classified as an offset against revenue, are now classified as cost of goods sold. The consolidated financial statements for the three and nine month periods ended October 31, 2000 have been adjusted to conform to the fiscal 2002 presentation. 3. INVENTORIES Inventories consisted of the following: October 31, January 31, 2001 2001 ---- ---- Raw materials............................ $27,014 $38,349 Work-in-progress......................... 14,440 18,703 Finished goods........................... 25,639 20,441 ------ ------ $67,093 $77,493 ====== ====== 9 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 4. INCOME TAXES A reconciliation of the provision for income taxes from the statutory rate to the effective rate is as follows: Nine months ended October 31, 2001 2000 ---- ---- U.S. statutory income tax....................... 35.0% 35.0% State tax, net of federal income tax benefit.... 2.4 3.3 Foreign sales corporation....................... (0.3) (0.3) Tax effect of foreign operations................ 0.4 - Research and development credit................. (0.1) (0.4) Other........................................... (0.4) 0.2 ---- ---- 37.0% 37.8% ==== ==== 5. NET INCOME PER COMMON SHARE Net income per share - basic for the three and nine months ended October 31, 2001 and 2000 is based on the weighted average number of shares of Common Stock outstanding. Net income per share - diluted reflects the potential dilution that could occur if stock options were exercised. Weighted average common shares and common shares - assuming dilution were as follows: Three months ended Nine months ended October 31, October 31, 2001 2000 2001 2000 ---- ---- ---- ---- Weighted average shares of common stock outstanding............. 26,178,156 26,227,774 26,166,802 26,199,028 Assumed exercise of stock options, net of shares assumed reacquired...... 323,749 1,196,027 604,906 1,040,937 ---------- ---------- ---------- ---------- Weighted average common shares - assuming dilution................ 26,501,905 27,423,801 26,771,708 27,239,965 ========== ========== ========== ========== 10 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 6. CONTINGENT LIABILITIES With regard to the following contingent liabilities, there have been no material changes since January 31, 2001. Legal: In January 2000, the Company was sued in an action captioned Puerto Rico Electric Power Authority v. C&D Technologies, Inc., Case No. 00-1104 in the United States District Court for the District of Puerto Rico for an alleged breach of contract in connection with the sale of certain batteries dating back to the mid-1990s. In August 2000 the Company entered into a settlement agreement with respect to this claim, the cost of which was recovered from our insurance carriers in the first quarter of fiscal 2002. We are in discussion with respect to financial responsibility for alleged inventory commitments related to our Power Electronics Division, and, accordingly, the outcome is not certain at this time. Environmental: The Company is subject to extensive and evolving environmental laws and regulations regarding the clean-up and protection of the environment, worker health and safety and the protection of third parties. These laws and regulations include, but are not limited to: (i) requirements relating to the handling, storage, use and disposal of lead and other hazardous materials used in manufacturing processes and solid wastes; (ii) record keeping and periodic reporting to governmental entities regarding the use of hazardous substances and disposal of hazardous wastes; (iii) monitoring and permitting of air and water emissions; and (iv) monitoring worker exposure to hazardous substances in the workplace, and protecting workers from impermissible exposure to hazardous substances, including lead, used in our manufacturing process. Notwithstanding the Company's efforts to maintain compliance with applicable environmental requirements, if injury or damage to persons or the environment arises from hazardous substances used, generated or disposed of in the conduct of the Company's business (or that of a predecessor to the extent the Company is not indemnified therefor), the Company may be held liable for certain damages and for the costs of investigation and remediation, which could have a material adverse effect on the Company's business, financial condition, or results of operations. However, under the terms of the purchase agreement with Allied Corporation ("Allied") for the acquisition of the Company (the "Acquisition Agreement"), Allied is obligated to indemnify the Company for any liabilities of this type resulting from conditions existing at January 28, 1986 that were not disclosed by Allied to the Company in the schedules to the Acquisition Agreement. The Company, along with numerous other parties, has been requested to provide information to the United States Environmental Protection Agency (the "EPA") in connection with investigations of the source and extent of contamination at two lead smelting facilities (the "Third Party Facilities") to which the Company had made scrap lead shipments for reclamation prior to the date of the acquisition. 11 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 6. CONTINGENT LIABILITIES (continued) The Company and four other potentially responsible parties ("PRPs") have agreed upon a cost sharing arrangement for the design and remediation phases of a project related to one of the Third Party Facilities, the former NL Industries in Pedricktown, New Jersey. A reliable range of the potential cost to the Company for the ultimate remediation of the site cannot currently be determined, nor have all the PRPs been identified. Accordingly, the Company has not established a reserve for this potential exposure. The Company responded to requests for information from the EPA and the state environmental agency with regard to another Third Party Facility, the "Chicago Site", in October 1991. Based on currently available information, the Company believes that the potential cost of the remediation at the Chicago Site is likely to range between $8,000 and $10,500 (based on the preliminary estimated cost of the remediation approach negotiated with the EPA). Sufficient information is not available to determine the Company's allocable share of this cost. Based on currently available information, however, the Company believes that its most likely exposure with respect to the Chicago Site will be the approximately $283 previously reserved. Allied has accepted responsibility under the Acquisition Agreement for potential liabilities relating to all Third Party Facilities other than the aforementioned sites. The Company is also aware of the existence of potential contamination at its Huguenot, New York facility which may require expenditures for further investigation and remediation. Fluoride contamination in an inactive lagoon exceeding the state's groundwater standards, which existed prior to the Company's acquisition of the site, has resulted in the site being listed on the registry of inactive hazardous waste disposal sites maintained by the New York State Department of Environmental Conservation. The prior owner of the site ultimately may bear some, as yet undetermined, share of the costs associated with this matter. The Company has established what it believes to be an adequate reserve for all but the remediation costs, the extent of which are not known, as a remediation plan has not yet been finalized with or approved by the State of New York. 12 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 6. CONTINGENT LIABILITIES (continued) The Company, together with Johnson Controls, Inc. ("JCI"), is conducting an assessment and remediation of contamination at its Dynasty Division facility in Milwaukee, Wisconsin. The majority of this project was completed as of October 2001. Under the purchase agreement with JCI, the Company is responsible for (i) one-half of the cost of the on-site assessment and remediation, with a maximum liability of $1,750, (ii) any environmental liabilities at the facility that are not remediated as part of the current project and (iii) environmental liabilities for claims made after the fifth anniversary of the closing that arise from migration from a pre-closing condition at the Milwaukee facility to locations other than the Milwaukee facility, but specifically excluding liabilities relating to pre-closing offsite disposal. JCI has retained all other environmental liabilities, including off-site assessment and remediation. In January 1999, the Company received notification from the EPA of alleged violations of permit effluent and pretreatment discharge limits at its plant in Attica, Indiana. The Company submitted a compliance plan to the EPA. A penalty assessment could be made, however there is insufficient information currently available to permit the Company to estimate the potential penalty, if any. The Company accrues reserves for liabilities in the Company's consolidated financial statements and periodically reevaluates the reserved amounts for these liabilities in view of the most current information available. Based on currently available information, management of the Company believes that the foregoing contingent liabilities will not have a material adverse effect on the Company's business, financial condition or results of operations. 13 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 7. OPERATIONS BY INDUSTRY SEGMENT The Company has identified the following four reportable business segments: The Powercom Division manufactures and markets integrated reserve power systems and components for the standby power market which includes telecommunications, uninterruptible power supplies and utilities. Integrated reserve power systems monitor and regulate electric power flow and provide backup power in the event of a primary power loss or interruption. The Powercom Division also produces the individual components of these systems, including reserve batteries, power rectifiers, system monitors, power boards and chargers. The Dynasty Division manufactures and markets industrial batteries primarily for the uninterruptible power supply ("UPS"), telecommunications and broadband cable markets. Major applications of these products include wireless and wireline telephone infrastructure, CATV signal powering, corporate data center powering and computer network back-up for use during electric utility outages. The Power Electronics Division manufactures and markets custom, standard and modified standard electronic power supply systems, including DC to DC converters, for large original equipment manufacturers ("OEMs") of telecommunications equipment, office equipment, workstations and other applications. The Motive Power Division manufactures complete systems and individual components (including power electronics and batteries) to power, monitor, charge and test the batteries used in electric industrial vehicles, including fork-lift trucks, automated guided vehicles and airline ground support equipment. These products are marketed to end users in a broad array of industries, dealers of fork-lift trucks and other material handling vehicles, and, to a lesser extent, OEMs. Summarized financial information related to the Company's business segments for the three and nine month periods ended October 31, 2001 and 2000 is shown below:
Power Motive Powercom Dynasty Electronics Power Division Division Division Division Consolidated -------- -------- ----------- -------- ------------ Three months ended October 31, 2001: Net sales................................ $ 51,009 $ 27,431 $10,785 $13,280 $102,505 Operating income (loss).................. $ 9,622 $ 2,564 $(5,105) $(1,397) $ 5,684 Three months ended October 31, 2000: Net sales*............................... $ 68,551 $ 42,805 $30,927 $19,639 $161,922 Operating income (loss).................. $ 12,921 $ 10,538 $ 4,507 $(1,422) $ 26,544 Nine months ended October 31, 2001: Net sales................................ $194,607 $ 89,574 $51,068 $48,132 $383,381 Operating income (loss).................. $ 49,667 $ 13,499 $(4,733) $ (66) $ 58,367 Nine months ended October 31, 2000: Net sales*............................... $197,966 $119,444 $75,408 $59,271 $452,089 Operating income (loss).................. $ 37,591 $ 26,759 $ 6,748 $ (564) $ 70,534
* Reclassified for comparative purposes. 14 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 8. DERIVATIVE INSTRUMENTS On February 1, 2001, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments. Specifically, SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either stockholders' equity or net income depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. As of February 1, 2001, the adoption of the new standard resulted in a cumulative effect net-of-tax increase of $103 to accumulated other comprehensive loss. In the normal course of business, the Company uses a variety of derivative financial instruments primarily to manage currency exchange rate and interest rate risk. All derivatives are recognized on the balance sheet at fair value and are generally reported in accrued liabilities. To qualify for hedge accounting, the Company requires that the instruments are effective in reducing the risk exposure that they are designated to hedge. For instruments that are associated with the hedge of an anticipated transaction, hedge effectiveness criteria also require that it be probable that the underlying transaction will occur. Instruments that meet established accounting criteria are formally designated as hedges at the inception of the contract. These criteria demonstrate that the derivative is expected to be highly effective at offsetting changes in fair value of the underlying exposure both at inception of the hedging relationship and on an ongoing basis. The assessment for effectiveness is formally documented at hedge inception and reviewed at least quarterly throughout the designated hedge period. The Company applies hedge accounting in accordance with SFAS No. 133, whereby the Company designates each derivative as a hedge of (i) the fair value of a recognized asset or liability or of an unrecognized firm commitment ("fair value" hedge); or (ii) the variability of anticipated cash flows of a forecasted transaction or the cash flows to be received or paid related to a recognized asset or liability ("cash flow" hedge). From time to time, however, the Company may enter into derivatives that economically hedge certain of its risks, even though hedge accounting is not allowed by SFAS No. 133 or is not applied by the Company. In these cases, there generally exists a natural hedging relationship in which changes in fair value of the derivative, which are recognized currently in earnings, act as an economic offset to changes in the fair value of the underlying hedged item(s). The Company did not apply hedge accounting to currency forward contracts with a combined fair value of $(20) as of October 31, 2001. Changes in the fair value of these currency forward contracts are recorded in earnings. Changes in the value of a derivative that is designated as a fair value hedge, along with offsetting changes in fair value of the underlying hedged exposure, are recorded in earnings each period. Changes in the value of a derivative that is designated as a cash flow hedge is recorded in accumulated other comprehensive income (loss). When earnings are affected by the variability of the underlying cash flow, the applicable amount of the gain or loss from the derivative that is deferred in stockholders' equity is released to earnings. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are 15 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 8. DERIVATIVE INSTRUMENTS (continued) included in earnings each period until the instrument matures. When the underlying transaction ceases to exist, a hedged asset or liability is no longer adjusted for changes in its fair value. Derivatives that are not designated as hedges, as well as the portion of a derivative excluded from the effectiveness assessment and changes in the value of derivatives which do not offset the underlying hedged item throughout the designated hedge period, are recorded in earnings each period. In the normal course of business, the Company is exposed to the impact of interest rate changes and foreign currency fluctuations. The Company limits these risks by following established risk management policies and procedures including use of derivatives and, where cost-effective, financing with debt in the currencies in which assets are denominated. For interest rate exposures, derivatives are used to manage the Company's exposure to fluctuations in interest rates on the Company's underlying variable rate debt instruments. The Company employs separate swap transactions rather than fixed rate obligations to take advantage of the lower borrowing costs associated with floating rate debt while also eliminating possible risk related to refinancing in the fixed rate market. For currency exposures, derivatives are used to limit the effects of foreign exchange rate fluctuations on financial results. The Company does not use derivatives for trading or speculative purposes, nor is it a party to leveraged derivatives. Further, the Company has a policy of only entering into contracts with major financial institutions. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Company has not sustained a material loss from these instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives. The following table includes all interest rate swaps as of October 31, 2001. These interest rate swaps are designated as cash flow hedges and, therefore, changes in the fair value are recorded in accumulated other comprehensive loss. Fixed Variable Interest Interest Notional Origination Maturity Rate Rate Fair Amount Date Date Paid Received Value -------- ----------- -------- -------- -------- ----- $ 6,500 12/20/95 12/20/02 6.01% LIBOR $ (260) 20,000 03/11/99 03/11/02 5.58% LIBOR (239) 20,000 02/05/01 03/01/03 5.24% LIBOR (745) 20,000 04/11/01 04/11/06 5.56% LIBOR (1,286) ----- $(2,530) ===== 16 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 9. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations." This statement addresses financial accounting and reporting for business combinations. All business combinations in the scope of this statement are to be accounted for using only the purchase method. The provisions of this statement apply to all business combinations initiated after June 30, 2001. Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets. Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. Goodwill and other intangible assets acquired prior to July 1, 2001 will continue to be amortized through January 31, 2002. After January 31, 2002, such goodwill and indefinite lived intangible assets will cease being amortized. The Company is currently evaluating the potential impact, if any, of the application of the goodwill impairment provisions of the new rules on its financial position and results of operations. Based on acquisitions completed as of October 31, 2001, application of the goodwill non-amortization provisions of these rules, without considering any of the potential impairment, is expected to result in an increase in income before income taxes of approximately $6,200 for fiscal 2003. In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting requirements for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The Company is currently in the process of evaluating the impact that SFAS No. 143 will have on its financial position and results of operations, if any. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121 and the accounting and reporting provisions of the Accounting Principles Board ("APB") Opinion No. 30. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Company is currently in the process of evaluating the impact that SFAS No. 144 will have on its financial position and results of operations, if any. 17 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of C&D Technologies, Inc. We have reviewed the accompanying consolidated balance sheet of C&D Technologies, Inc. and Subsidiaries (the "Company") as of October 31, 2001 and the related consolidated statements of income and comprehensive income for each of the three-month and nine-month periods ended October 31, 2001 and 2000, and the consolidated statement of cash flows for the nine-month periods ended October 31, 2001 and 2000. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We previously audited in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of January 31, 2001 and the related consolidated statements of income, stockholders' equity, cash flows, and comprehensive income for the year then ended (not presented herein), and in our report dated March 6, 2001 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of January 31, 2001, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ PricewaterhouseCoopers LLP - ------------------------------ PRICEWATERHOUSECOOPERS LLP Philadelphia, Pennsylvania November 20, 2001 18 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) Within the following discussion, unless otherwise stated, "quarter" and "nine-month period" refer to the third quarter of fiscal 2002 and the nine months ended October 31, 2001. All comparisons are with the corresponding periods in the prior year, unless otherwise stated. In December 2000 (effective as of November 26, 2000), we acquired the Newport Components Division of Newport Technology Group Limited, a producer of electronic power conversion products (primarily DC to DC converters) based in the United Kingdom. For reporting purposes, this acquisition is included as part of the Power Electronics Division and is referred to as C&D Technologies (NCL) Limited ("NCL"). Net sales decreased $59,417 or 37% for the quarter and $68,708 or 15% for the nine-month period. The decrease in sales during the quarter was the result of lower sales by all divisions. Sales of the Power Electronics Division decreased $20,142 or 65% during the quarter, primarily due to lower DC to DC converter sales partially offset by sales recorded by NCL. Sales of the Powercom Division decreased $17,542 or 26% during the quarter, primarily due to lower sales to the telecommunications market. Sales of the Dynasty Division decreased $15,374 or 36% during the quarter, primarily as a result of lower sales to the UPS, CATV and telecommunications markets. Motive Power divisional sales decreased $6,359 or 32% during the quarter, due to lower battery and charger sales. The decrease in sales during the nine-month period was also the result of lower sales by all divisions. Sales of the Dynasty Division decreased $29,870 or 25% during the nine-month period, primarily as a result of lower sales to the UPS, CATV and telecommunications markets. Power Electronics divisional sales decreased $24,340 or 32% during the nine-month period, primarily due to lower DC to DC converter sales, partially offset by sales recorded by NCL. Sales of the Motive Power Division decreased $11,139 or 19% during the nine-month period, due to lower battery and charger sales. Sales of the Powercom Division decreased $3,359 or 2% during the nine-month period, primarily due to lower sales to the telecommunications market, partially offset by higher sales to the UPS and control markets. Gross profit for the quarter decreased $23,301 or 51% to $22,110 from $45,411 in the third quarter of the prior year, resulting in a gross margin of 21.6% versus 28.0% in the third quarter of fiscal 2001. Gross profit (loss) during the quarter was lower for all divisions, primarily due to the decreased sales volumes generated by all of the divisions, coupled with an inventory-related charge in our Power Electronics Division. Gross profit for the nine-month period decreased $22,009 or 17% to $105,652 from $127,661 in the comparable period of the prior year, resulting in a decrease in gross margin from 28.2% in the first nine months of fiscal 2001 to 27.6% in the first nine months of the current year. Gross profit for the nine-month period was lower in the Dynasty, Power Electronics and Motive Power divisions, primarily as a result of lower sales volumes. Gross profit of the Power Electronics Division was also negatively impacted by the aforementioned inventory-related charge. These decreases were partially offset by higher gross margin in the Powercom Division. Selling, general and administrative expenses for the quarter decreased $2,388 or 15% compared to the comparable quarter of the prior year. This decrease was primarily due to: (i) lower variable selling costs associated with the decreased sales volumes; (ii) lower fixed selling costs (primarily personnel costs, warranty and advertising); and (iii) lower bonus accruals. Partially offsetting this decrease were costs related to a potential acquisition that did not close, coupled with selling, general and administrative expenses related to the recent acquisition of NCL, including amortization of goodwill and other intangible assets. For the nine-month period, selling, general and administrative expenses decreased $10,215 or 21%. This decrease was primarily due to: (i) the reduction of general and administrative expenses associated with the full recovery of litigation settlement costs from our insurance carriers in the first quarter of fiscal 2002 which was reserved for in the nine-month period ended October 31, 2000; (ii) lower fixed selling costs (primarily personnel costs, warranty and advertising); (iii) lower bonus accruals; and (iv) lower variable selling costs associated with the decreased sales volume. Partially offsetting this decrease were costs related to the aforementioned potential acquisition that did not close, coupled with selling, general and administrative expenses related to the recent acquisition of NCL, including amortization of goodwill and other intangible assets. 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) (Dollars in thousands, except per share data) Research and development expenses remained proportional to sales as a relative percentage of sales for the quarter and nine-month period at approximately 2% of sales. Operating income for the quarter decreased $20,860 or 79% to $5,684 as a result of lower operating income generated by the Dynasty and Powercom divisions, coupled with an operating loss by the Power Electronics Division during the quarter, as compared to operating income in the prior year, partially offset by a decrease in the operating loss in the Motive Power Division. For the nine-month period, operating income decreased $12,167 or 17% to $58,367 as a result of lower operating income generated by the Dynasty Division, coupled with an operating loss by the Power Electronics Division, as compared to operating income in the prior year. These decreases were partially offset by an increase in operating income generated by the Powercom Division, coupled with a decrease in the operating loss generated by the Motive Power Division. Operating income for the quarter and for the nine-month period was negatively impacted by a pre-tax charge of $4,000, primarily due to costs related to a potential acquisition that did not close. Interest expense, net, increased $378 in the quarter and $672 in the nine-month period, primarily due to higher debt balances outstanding related to the acquisition of NCL in the fourth quarter of fiscal 2001, partially offset by lower effective interest rates. Income tax expense decreased $8,494 for the quarter and $5,539 for the nine-month period, primarily as a result of lower income before income taxes. The effective tax rate consists of statutory rates adjusted for the tax impacts of our foreign sales corporation, foreign operations and research and development credits. The effective tax rate for the first nine months of fiscal 2002 decreased to 37.0% from 37.8% in the comparable period of the prior year. Minority interest decreased $582 for the quarter and $617 for the nine-month period as a result of lower profitability of our joint venture battery business located in Shanghai, China. As a result of the above, net income decreased $12,897 or 87% in the quarter to $1,848 or $.07 per share - basic and per share - diluted. For the nine-month period, net income decreased $7,394 or 19% to $31,795 or $1.22 per share - basic and $1.19 per share - diluted. Net income for the quarter and nine-month period include the aforementioned charge, which was $2,520 on an after-tax basis. Liquidity and Capital Resources Net cash provided by operating activities increased $8,767 or 17% to $59,519 for the nine-month period ended October 31, 2001 compared to $50,752 for the comparable period of the prior year. This increase in net cash provided by operating activities was primarily due to: (i) a decrease in accounts receivable and inventory in the first nine months of the current year compared to an increase in the same period of the prior year; and (ii) an increase in depreciation and amortization during the nine-month period. These changes resulting in higher net cash provided by operating activities were partially offset by: (i) a larger reduction in accounts payable; (ii) a decrease in accrued liabilities and current taxes payable in the first nine months of fiscal 2002 compared to an increase in the comparable period of the prior year; and (iii) a decrease in net income. Net cash used by investing activities in the first nine months of fiscal 2002 decreased $6,817 over the comparable period of the prior year primarily due to lower capital spending. Net cash used by financing activities in the nine-month period increased $16,569 over the comparable period of the prior year primarily due to: (i) higher debt repayments; (ii) higher treasury stock purchases; and (iii) lower proceeds from the issuance of common stock. These changes resulting in higher cash used by financing activities were partially offset by higher proceeds from new borrowings. During the period, we obtained a 22 million British Pound Sterling line of credit of which approximately 8.2 million British Pounds Sterling (or $11,921) of the loan was outstanding at October 31, 2001. The availability under our current loan agreements is expected to be sufficient to meet our ongoing cash needs for working capital requirements, debt service, capital expenditures and possible strategic acquisitions. Capital expenditures during the first nine months of fiscal 2002 were incurred primarily to fund capacity expansion, a continuing series of cost reduction programs, normal maintenance capital, and regulatory compliance. Fiscal 2002 capital expenditures are expected to total approximately $25,000. 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) (Dollars in thousands, except per share data) NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In June 2001, the FASB issued SFAS No. 141, "Business Combinations." This statement addresses financial accounting and reporting for business combinations. All business combinations in the scope of this statement are to be accounted for using only the purchase method. The provisions of this statement apply to all business combinations initiated after June 30, 2001. Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets. Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. Goodwill and other intangible assets acquired prior to July 1, 2001 will continue to be amortized through January 31, 2002. After January 31, 2002, such goodwill and indefinite lived intangible assets will cease being amortized. We are currently evaluating the potential impact, if any, of the application of the goodwill impairment provisions of the new rules on our financial position and results of operations. Based on acquisitions completed as of October 31, 2001, application of the goodwill non-amortization provisions of these rules, without considering any of the potential impairment, is expected to result in an increase in income before income taxes of approximately $6,200 for fiscal 2003. In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting requirements for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. We are currently in the process of evaluating the impact SFAS No. 143 will have on our financial position and results of operations, if any. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121 and the accounting and reporting provisions of APB Opinion No. 30. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. We are currently in the process of evaluating the impact SFAS No. 144 will have on our financial position and results of operations, if any. 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) (Dollars in thousands, except per share data) FORWARD-LOOKING STATEMENTS Certain of the statements and information contained in this Quarterly Report on Form 10-Q, including, without limitation, information appearing under Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," are "forward-looking statements" (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) and, accordingly, are subject to risks and uncertainties. For such statements, C&D claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Act of 1995. The factors that could cause actual results to differ materially from anticipated results expressed or implied in any forward-looking statement include those referenced in the forward-looking statement, following the forward-looking statement, described in the notes to the Consolidated Financial Statements and other factors discussed in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q. Forward-looking statements may be identified by their use of words like "plans," "expects," "will," "anticipates," "intends," "projects," "estimates" or other words of similar meaning. All statements that address expectations or projections about the future, including statements about our strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. We cannot guarantee that these assumptions and expectations are accurate or will be realized. Following are some of the important factors that could cause our actual results to differ materially from those projected in any such forward-looking statements: o We operate worldwide and derive a portion of our revenue from sales outside the United States. Changes in the laws or policies of governmental and quasi-governmental agencies, as well as social and economic conditions, in the countries in which we operate could affect our business in these countries and our results of operations. In addition, economic factors (including inflation and fluctuations in interest rates and foreign currency exchange rates) and competitive factors (such as price competition, business combinations of competitors or a decline in industry sales from slowing economic growth) in the countries in which we conduct business could affect our results of operations. o Our results of operations could be significantly impacted by adverse conditions in the domestic and global economies or the markets in which we conduct business, such as telecommunications, UPS, CATV, switchgear and control and material handling. 22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) (Dollars in thousands, except per share data) FORWARD-LOOKING STATEMENTS (continued) o Our ability to grow earnings could be affected by increases in the cost of raw materials, particularly lead. We may not be able to fully offset the effects of higher raw material costs through price increases or productivity improvements. o Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of parts and components from our suppliers and internal manufacturing capacity. Although we work closely with our suppliers to avoid shortages, there can be no assurance that we will not encounter shortages in the future. A reduction or interruption in component supply or a significant increase in the price of one or more components could have a material adverse effect on our operations. o Our growth objectives are largely dependent on our ability to renew our pipeline of new products and to bring these products to market. This ability may be adversely affected by difficulties or delays in product development, such as the inability to: identify viable new products; successfully complete research and development projects; obtain adequate intellectual property protection; or gain market acceptance of the new products. Our growth objectives are also largely dependent upon our ability to successfully expand our production capacity. o As part of our strategy for growth, we have made and may continue to make acquisitions, and in the future, may make divestitures and form strategic alliances. There can be no assurance that these will be completed or beneficial to us. o Our facilities are subject to a broad array of environmental laws and regulations. The costs of complying with complex environmental laws and regulations, as well as internal voluntary programs, are significant and will continue to be so for the foreseeable future, and may increase as a result of any future changes to those laws and regulations or in enforcement practices. Our accruals for such costs and liabilities may not be adequate since the estimates on which the accruals are based depend on a number of factors including the nature of the problem, the complexity of the site, the nature of the remedy, the outcome of discussions with regulatory agencies and other PRPs at multiparty sites, and the number and financial viability of other PRPs. o Our business, results of operations and financial condition could be affected by significant pending and future litigation adverse to C&D, such as, without limitation, product liability, contract and employment-related claims and claims arising from any injury or damage to persons or the environment from hazardous substances used, generated or disposed of in the conduct of C&D's business (or that of a predecessor to the extent C&D is not indemnified for those liabilities). o Our performance depends on our ability to attract and retain qualified personnel. We cannot assure that we will be able to continue to attract and retain qualified personnel. The foregoing list of important factors is not all-inclusive, or necessarily in order of importance. 23 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 10.1 Agreement and Release dated August 16, 2001 between John Rich and C&D (filed herewith). 10.2 Employment Agreement dated August 6, 2001 between James D. Johnson and C&D (filed herewith). 15. Letter from PricewaterhouseCoopers LLP, independent accountants for C&D, regarding unaudited interim financial information (filed herewith). 24 SIGNATURES - ------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. C&D TECHNOLOGIES, INC. December 13, 2001 BY: /s/ Wade H. Roberts, Jr. --------------------------------- Wade H. Roberts, Jr. President, Chief Executive Officer and Director (Principal Executive Officer) December 13, 2001 BY: /s/ Stephen E. Markert, Jr. ---------------------------------- Stephen E. Markert, Jr. Vice President Finance (Principal Financial and Accounting Officer) 25 EXHIBIT INDEX 10.1 Agreement and Release dated August 16, 2001 between John Rich and C&D. 10.2 Employment Agreement dated August 6, 2001 between James D. Johnson and C&D. 15. Letter from PricewaterhouseCoopers LLP, independent accountants for C&D, regarding unaudited interim financial information. 26 EX-10 3 exbt10-1.txt Exhibit 10.1 AGREEMENT AND RELEASE --------------------- This is an Agreement and Release ("Agreement") between John Rich ("Dr. Rich") and C&D Technologies, Inc. (referred to herein as "C&D" or "Company"). WITNESSETH WHEREAS, Dr. Rich is the Vice President, General Manager for the Power Electronics Division of C&D ; WHEREAS, Dr. Rich and C&D are parties to that certain employment agreement dated March 31, 2000, as amended April 6, 2000 (collectively, the "Employment Agreement"); and WHEREAS, given current business conditions and performance, C&D and Dr. Rich have elected to terminate the Employment Agreement and the employment relationship and to amicably settle and resolve the terms of the separation from employment of Dr. Rich as an officer of C&D. NOW, THEREFORE, Dr. Rich and C&D, intending to be legally bound and in consideration of the mutual promises set forth below, hereby agree as follows. 1. Terms of Continuation and Termination of Employment. --------------------------------------------------- a. Dr. Rich's employment by C&D will terminate on the earlier of (i) the date that Dr. Rich becomes self-employed; (ii) the date on which Dr. Rich commences employment for any third party; or (iii) March 4, 2002 (hereinafter the "Effective Date"). C&D will characterize Dr. Rich's termination of employment with C&D as a voluntary resignation. Dr. Rich's service on the Board of Directors for Inrad, Inc. shall have no effect on Dr. Rich's employment status under this Agreement. b. Dr. Rich will be paid, in accordance with the regular payroll practices of C&D, his regular salary through the Effective Date, subject to standard deductions, including those which are consistent with the provisions of Dr. Rich's then applicable Form W-4. c. Beginning August 7, 2001 (the "Transition Date") and until the Effective Date, Dr. Rich's current job title shall be Vice President, Special Projects; however, Dr. Rich shall not be required to regularly attend work, but shall occasionally perform such job duties, if any, as may be communicated to him, in writing, by any of Wade H. Roberts, Jr., Mark Sappir, or the Board of Directors of C&D. d. Dr. Rich shall refrain from communicating with any employee, customer, supplier or any other party with whom C&D has a commercial relationship regarding the details of his employment or the anticipated cessation thereof or the subject matter of this Agreement without the prior written consent of Wade H. Roberts, Jr., Mark Sappir, or the C&D Board of Directors, other than to say that the relationship between Dr. Rich and C&D is being or was terminated amicably. e. Dr. Rich and C&D hereby agree to refrain from making any negative, disparaging, defamatory or slanderous comments, references or characterizations concerning the other party and, in Dr. Rich's case, concerning C&D's officers, directors, employees, agents, products or services, either verbally, in writing, or in any other manner, to any third party for any purpose whatsoever, unless a legal duty to do so is imposed. 2. Fringe Benefits. --------------- a. Through the Effective Date, Dr. Rich may continue to participate in the Company's medical, dental, and life insurance programs at the same level and costs as Dr. Rich participated on January 31, 2001. Thereafter, Dr. Rich may continue, at his expense, his medical and dental insurance benefits to the extent permitted by the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). b. On or about the next pay period following the Transition Date, Dr. Rich shall be paid for nineteen (19) vacation days, subject to standard deductions, which Dr. Rich agrees constitute all vacation days for which compensation is due and owing. No additional vacation time shall accrue or be paid for by C&D. c. Through the Effective Date, Dr. Rich may continue to participate in the C&D Savings Plan (also known as the 401(k) plan) and Pension Plan for salaried employees in accordance with the terms and provisions of the respective Plans as they may be amended from time to time. Dr. Rich may also continue to participate in the Deferred Compensation Plan in accordance with the terms of the Plan. Dr. Rich may also continue to participate in the Supplemental Executive Retirement Plan in accordance with the terms of the plan through the Effective Date. d. Dr. Rich may exercise options, granted to him under any C&D Stock Option Plan, which have vested or which may vest on or prior to the Effective Date in accordance with the terms and provisions of the applicable Plans and consistent with the characterization of his termination of employment with C&D as a voluntary resignation on the Effective Date. Through the Effective Date, Dr. Rich may, from time to time, be considered an "insider" as defined in the C&D Insider Trading Policy, as it may be amended from time to time; provided, however, that following the Transition Date he shall not be considered an Executive Officer for Section 16 reporting purposes under the Securities Exchange Act of 1934. Notwithstanding the foregoing, Dr. Rich may have continuing reporting obligations under Section 16 with respect to purchases and sales of C&D stock that occur within six months after an opposite way transaction that preceded the date of this Agreement and he remains subject to the Company's inside trading policy; accordingly, all purchases and sales of C&D stock must be pre-cleared with either of the Vice President, Finance or Vice President, General Counsel of C&D. e. Dr. Rich will be eligible to receive pro-rata earned amounts, if any, under the Management Incentive Compensation Plan for the period February 1, 2001 through the Transition Date. Thereafter, Dr. Rich shall have no further eligibility to participate in any C&D management incentive compensation plan. 2 f. Dr. Rich shall not be eligible to continue to receive reimbursement for executive financial planning assistance following the Transition Date. Dr. Rich shall be eligible for reimbursement for executive financial planning assistance for fees reasonably incurred before the Transition Date. g. All other employee benefits not specifically continued by this Agreement shall terminate on the Effective Date. h. C&D shall reimburse Dr. Rich for reasonable legal fees incurred in connection with the review of this Agreement in an amount not to exceed $1,000 as soon as administratively practicable following submission of documentation therefor. 3. Execution of a Release by Dr. Rich. ---------------------------------- In consideration of the additional consideration described in Paragraphs 1(b) and (c) and 2 (a), (c), (d) and (e) hereof, which Dr. Rich acknowledges that C&D is not obligated to pay or otherwise provide for, Dr. Rich agrees to execute the Release which is attached hereto as Exhibit A within five (5) days of the Effective Date. 4. General Release. --------------- After having had a reasonable opportunity to review this Agreement and an opportunity to consult with an advisor or an attorney of his choice, Dr. Rich, on his own behalf, and on behalf of his heirs, administrators, and assigns, knowingly and voluntarily releases, remises and forever discharges C&D, its subsidiary and related companies and their predecessors, successors and assigns, and each of their respective officers, directors, employees, agents and attorneys and all those charged or chargeable with liability on their behalf (collectively "Releasees"), from any and all rights or claims, of any nature whatsoever whether known or unknown which he has or may have against Releasees, including, but not limited to those rights or claims arising out of or in any way connected with Dr. Rich's employment by C&D or his separation from employment by C&D, including, but not limited to claims for wrongful discharge, breach of contract, claims for wages, stock or profits, breach of the covenant of good faith, intentional or negligent infliction of emotional distress, defamation, negligence, misrepresentation, fraud, discrimination on the basis of race, gender, color, religion, marital status, national origin, handicap or disability, or veteran's status, including, but not limited to all rights or claims under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. ss. 2000e-1, et seq., the Americans With Disabilities Act, 42 U.S.C. ss. 12101, et seq., and the Arizona Civil Rights Act, A.R.S. ss.41-1401, et seq., Pennsylvania Human Relations Act, 43 P.S. ss.951 et seq., as well as any other claim arising under any other federal, state, or local statute, ordinance, regulation, or common law that Dr. Rich now has or ever had against Releasees from the beginning of time to the date of this Agreement. It is expressly understood and agreed that the foregoing is a general release of all claims and rights against C&D. 5. Release of Age Discrimination Claims. ------------------------------------ After having had a reasonable opportunity to review this Agreement and an opportunity to consult with an attorney or adviser of his choice, Dr. Rich, his heirs, administrators, and assigns, knowingly and voluntarily releases, remises and forever discharges 3 C&D, its subsidiary and related companies, and each of their respective officers, directors, employees, agents and attorneys and all those charged or chargeable with liability on their behalf, of and from any and all rights or claims which he may have against any of them under the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. ss. 621 et. seq. or under any other federal or state law prohibiting discrimination based upon age, from the beginning of time to the date of this Agreement. 6. Compliance with Older Workers Benefit Protection Act. ---------------------------------------------------- This Agreement is intended to comply with Section 201 of the Older Workers Benefit Protection Act of 1990, 29 U.S.C. ss.626(f). Accordingly, Dr. Rich acknowledges and represents as follows: a. he waives all rights or claims against C&D under the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C ss.621, et seq. ("ADEA") knowingly and voluntarily in exchange for consideration of value to which he is not otherwise entitled; b. he has been advised in writing by C&D to consult with an attorney in connection with this Agreement and his decision to waive his rights or claims under the ADEA; c. he has been given a period of at least twenty-one (21) days within which to consider this Agreement and his decision to waive his rights or claims under the ADEA; and d. he has been informed by C&D and understands that he may revoke this Agreement for a period of seven (7) calendar days after signing it and that this Agreement will not become effective or enforceable until after this seven (7) day period has expired. 7. Revocation of this Agreement. ---------------------------- In the event that Dr. Rich chooses to revoke his acceptance of this Agreement, he will provide C&D with written notice of the revocation, which shall be sent by United States mail, certified, return receipt requested, post-marked within seven (7) days of the date that he signs this Agreement. Notice to C&D shall be given to Mark Sappir, Vice President - Human Resources, 1400 Union Meeting Road, Blue Bell, Pennsylvania 19422. 8. Covenant Not To Sue. ------------------- Dr. Rich agrees and covenants that he has not and will not bring any action in any forum, or file any claims against C&D or its subsidiary and related companies, or any of their respective officers, directors, employees or agents, past and present, individually or collectively, or any insurer of C&D which relates in any way to his employment, his separation from employment by C&D or any matter which is associated either directly or indirectly with his employment. 4 9. Nondisclosure of Information. ---------------------------- Dr. Rich acknowledges that he signed an "Agreement Relating to Intellectual Property and Confidential Information" with C&D on February 11, 2000 ("Confidentiality Agreement"). A copy is attached to this Agreement as Exhibit "1." Dr. Rich reaffirms the obligations and duties he assumed under the Confidentiality Agreement and agrees that he shall continue to abide by the terms of the Confidentiality Agreement after the termination of his employment. 10. Return of Property. ------------------ Dr. Rich represents that he has returned to C&D or will return prior to the Effective Date all materials in his possession or within his control which relate to the business of C&D, including, but not limited to, data, documents, reports, programs, diskettes, computer printouts, program listings, computer hardware and/or software, memoranda, notes, records, reports, plans, studies, price lists, customer lists, customer contact and other information, and any and all similar information without regard to the form in which it is maintained. Dr. Rich acknowledges that all such materials are the sole property of C&D and that he has no right, title, or other interest in or to such materials. Dr. Rich further agrees to return all Company credit cards, computers, printers, telephones and any similar or dissimilar items. 11. Non-Solicitation of Employees and Customers. ------------------------------------------- a. Dr. Rich agrees that beginning on the date hereof and for a period of one-hundred eighty (180) days after the Effective Date, he shall not, either directly or indirectly, induce, suggest, encourage, entice, or solicit any employee of C&D to leave the employ of C&D. b. Dr. Rich agrees that beginning on the date hereof and for a period of six months from the Effective Date, he will not, either directly or indirectly or by acting in concert with others, solicit, influence, or attempt to solicit or influence, any customers of C&D or any customer prospects of C&D with whom Dr. Rich had any contact during the eighteen month period prior to his separation from employment by C&D to purchase from any other person, partnership, corporation or other entity any products which are the same, similar to or marketed as competitive with products sold by C&D. 12. Non-Competition. --------------- a. Dr. Rich agrees that during such time as he shall be employed by the Company, and for the applicable Restricted Period (as defined below) thereafter, he shall not, without the written consent of the Board of Directors, directly or indirectly, become associated with, render services to, invest in, represent, advise or otherwise participate as an officer, employee, director, stockholder, partner, agent of or consultant for, any business that, at the time his employment with the Company ceases, is competitive with the business in which the Company is engaged or in which the Company has taken affirmative steps to engage (a "Competitive Business") in the United States, Mexico or the United Kingdom; provided, however, that nothing herein (i) shall prevent Dr. Rich from investing without limit in the securities of any company listed on a national securities exchange, provided that his involvement 5 with any such company is solely that of a stockholder, and (ii) is intended to prevent him from being employed during the applicable Restricted Period by any business other than a Competitive Business. The applicable Restricted Period shall be the one-hundred eighty (180) day period following the Effective Date. b. The parties hereto intend that the covenant contained in this Section 12 shall be deemed a series of separate covenants for each state, county and city. If, in any judicial proceeding, a court shall refuse to enforce all the separate covenants deemed included in this Section 12, because, taken together, they cover too extensive a geographic area, the parties intend that those of such covenants (taken in order of the states, counties and cities therein which are least populous), which, if eliminated, would permit the remaining separate covenants to be enforced in such proceeding, shall, for the purpose of such proceeding, be deemed eliminated from the provisions of this Section 12. 13. Enforcement. ----------- Dr. Rich acknowledges that he has received sufficient consideration for the covenants and restrictions contained in this Agreement including, without limitation, those set forth in Sections 8, 9, 11 and 12 of this Agreement; that such restrictions are reasonable in time and scope, and are necessary for the reasonable protection of the business of C&D. Dr. Rich also acknowledges that monetary damages would be an inadequate remedy for a breach by Dr. Rich of the promises contained in Sections 8, 9, 11, and 12 of this Agreement and, if found by a court of competent jurisdiction to have breached any of these restrictions, consents to the entry of an order granting injunctive relief to prevent further violations of those restrictions by Dr. Rich. Dr. Rich agrees that the time period of the obligations set forth in Sections 8, 9, 11 and 12 of this Agreement shall be extended by any amount of time during which he is in violation of the obligations set forth therein. Dr. Rich also agrees that any award of injunctive relief shall be in addition to, and in no way shall serve as, a limitation on any and all other remedies C&D may have for enforcement of the obligations set forth in Sections 8, 9, 11, and 12 of this Agreement. 14. Cooperation with C&D/Acknowledgement of Payment. ----------------------------------------------- Dr. Rich will fully cooperate with and assist C&D or any other company affiliated with C&D in connection with its defense or prosecution of any civil action or other legal proceeding or other business matter involving C&D, of which C&D believes Dr. Rich has knowledge or information. This cooperation shall include, but it is not limited to, being reasonably available to participate in depositions, providing accurate and truthful information about C&D, complying with requests by C&D to meet with its attorneys for the purpose of providing information to them, and providing any other form of reasonable assistance requested. Dr. Rich acknowledges that all monies that he has earned in connection with his employment with C&D have been paid, with the exception of his incentive bonus for fiscal year 2002 which shall be paid, if at all, in accordance with the customary practices of C&D. 15. Terms Confidential. ------------------ Dr. Rich agrees to keep confidential and not disclose the financial terms of this Agreement except to his immediate family (who agree to comply with this obligation of confidentiality) and tax and legal advisers. 6 16. Reemployment or Reinstatement. ----------------------------- Dr. Rich shall not seek employment with C&D and hereby forever releases and discharges C&D from any and all liability to reinstate or reemploy him in any capacity and any and all claims of a right to reinstatement. 17. Breach. ------ Dr. Rich and C&D agree that in the event one party breaches any part or parts of this Agreement, legal proceedings may be instituted against that party for breach of contract. In the event that a party institutes legal proceedings for breach of this Agreement, it is agreed that the sole remedy available to said party shall be enforcement of the terms of this Agreement and/or a claim for damages resulting from a breach of this Agreement, but that under no circumstances shall the party be entitled to revive, reassert or assert any claims that the party has released or abandoned under this Agreement in accordance with the provisions of paragraphs 4, 5, 6 and 8. 18. Nature of Agreement. ------------------- It is understood and agreed by Dr. Rich and C&D that this Agreement is a settlement of claims, if any, that may exist between them; that this settlement does not constitute an admission of liability or wrongdoing on the part of either party; and that by entering into this settlement neither party admits that there has been any unlawful or wrongful act committed against the other which makes it liable in any manner, but that this settlement is only a compromise. 19. Entire Agreement. ---------------- Except as specifically set forth in Section 9 of this Agreement, this Agreement replaces and supercedes all prior agreements between the parties and constitutes the entire agreement between the parties. No modification to this Agreement shall be effective unless it is in writing and signed by an officer of C&D and Dr. Rich. 20. Choice of Law and Selection of Forum. ------------------------------------ This Agreement shall be interpreted, enforced, and governed under the laws of the State of Arizona. If any provision of this Agreement, or the application thereof to any person, place or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, the remainder of this Agreement and such provisions as applied to other persons, places and circumstances shall remain in full force and effect. 21. Agreement Entered Knowingly and Voluntarily. ------------------------------------------- Dr. Rich acknowledges that he has been given a reasonable opportunity to discuss this Agreement with an attorney or advisor of his choice; that he has carefully read and fully understands all of the provisions of this Agreement; and that he is entering into this Agreement knowingly, voluntarily and of his own free will. 7 22. Miscellaneous. ------------- a. Except as expressly set forth in this Agreement, this Agreement contains the final and entire agreement of the parties and is intended to be an integration of all prior agreements, negotiations and understandings. Neither C&D nor Dr. Rich shall be bound by any covenants, agreements, statements, representations or warranties, oral or written, not contained in this Agreement or any attachment or exhibit hereto. No change or modification to this Agreement shall be valid unless the same is in writing and signed by the parties. No waiver of any of the provisions of this Agreement shall be valid unless the same is in writing and is signed by the party against whom it is sought to be enforced. b. This Agreement shall inure to the benefit of the respective parties hereto and their respective heirs, administrators, successors and assigns. IN WITNESS WHEREOF, the parties hereto have signed this Agreement on the dates indicated next to their respective signature. 8/16/01 /s/ John Rich - ---------------------- ---------------------------- Date John Rich C&D TECHNOLOGIES, INC. 8/20/01 /s/ Wade Roberts ________________________ By:_________________________ Date Title: President & CEO 8 EXHIBIT A RELEASE This Release is made this _____ day of _______________, 2002 by and between C&D Technologies, Inc. ("Employer") and John Rich ("Employee"). Recitals: -------- WHEREAS, Employer and Employee are parties to an Agreement and Release dated as of__________________________, 2001 ("Agreement and Release") the terms of which specifically contemplate the execution of this Release; and NOW THEREFORE, the parties hereto, intending to be legally bound, in consideration of the mutual promises and undertakings set forth herein, do hereby agree as follows: 1. General Release. For and in consideration of the monies and benefits paid to Employee by Employer, as more fully described in the Agreement and Release dated ______, 2001, and for other good and valuable consideration, Employee knowingly and voluntarily releases, remises and forever discharges Employer, its subsidiary and related companies and their predecessors, successors and assigns, and each of their respective officers, directors, employees, agents and attorneys and all those charged or chargeable with liability on their behalf (hereinafter collectively referred to as "Releasees"), from any and all rights or claims, of any nature whatsoever whether known or unknown, which he has or may have against Releasees including, but not limited to, those rights or claims arising out of or in any way connected with his employment by C&D or his separation from employment by C&D, including but not limited to claims for wrongful discharge, breach of contract, claims for wages, stock or profits, breach of the covenant of good faith, intentional or negligent infliction of emotional distress, defamation, negligence, misrepresentation, fraud, discrimination on the basis of race, gender, color, religion, marital status, national origin, handicap or disability or veteran status, including but not limited to all rights or claims under Title VII of the Civil Rights Acts of 1964, as amended, 42 U.S.C. ss. 2000e-1, et seq., the Americans With Disabilities Act, 42 U.S.C. ss.12101, et seq., and the Arizona Civil Rights Act, A.R.S. ss.41-1401, Pennsylvania Human Relations Act, 43 P.S. ss.951 et seq., as well as any other claim arising under any other federal, state or local statute, ordinance, regulation or common law that he now has or ever had against Releasees from the beginning of time to the date of this Release. It is expressly understood and agreed that the foregoing is a general release of all claims and rights against C&D. 2. Release of Age Discrimination Claims. After having had a reasonable opportunity to review this Agreement and an opportunity to consult with an attorney or adviser of his choice, Employee, his heirs, administrators, and assigns, knowingly and voluntarily releases, remises and forever discharges C&D, its subsidiary and related companies, and each of their respective officers, directors, employees, agents and attorneys and all those charged or chargeable with liability on their 9 behalf, of and from any and all rights or claims which he may have against any of them under the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. ss. 621 et. seq. or under any other federal or state law prohibiting discrimination based upon age, from the beginning of time to the date of this Agreement. 3. Compliance with Older Workers Benefit Protection Act. ---------------------------------------------------- This Agreement is intended to comply with Section 201 of the Older Workers Benefit Protection Act of 1990, 29 U.S.C. ss.626(f). Accordingly, Employee acknowledges and represents as follows: a. he waives all rights or claims against C&D under the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C ss.621, et seq. ("ADEA") knowingly and voluntarily in exchange for consideration of value to which he is not otherwise entitled; b. he has been advised in writing by C&D to consult with an attorney in connection with this Agreement and his decision to waive his rights or claims under the ADEA; c. he has been given a period of at least twenty-one (21) days within which to consider this Agreement and his decision to waive his rights or claims under the ADEA; and d. he has been informed by C&D and understands that he may revoke this Agreement for a period of seven (7) calendar days after signing it and that this Agreement will not become effective or enforceable until after this seven (7) day period has expired. 4. Revocation of this Release. -------------------------- In the event that Employee chooses to revoke his acceptance of this Release, he will provide C&D with written notice of the revocation, which shall be sent by United States mail, certified, return receipt requested, post-marked within seven (7) days of the date that he signs this Agreement. Notice to C&D shall be given to Mark Sappir, Vice President - Human Resources, 1400 Union Meeting Road, Blue Bell, Pennsylvania 19422. 5. Covenant Not To Sue. ------------------- Employee agrees and covenants that he has not and will not bring any action in any forum, or file any claims against C&D or its subsidiary and related companies, or any of their respective officers, directors, employees or agents, past and present, individually or collectively, or any insurer of C&D which relates in any way to his employment, his separation from employment by C&D or any matter which is associated either directly or indirectly with his employment. 6. Employee agrees that the payments made and other consideration received pursuant to this Release are not to be construed as an admission of legal liability by Releasees or any of them and that no person or entity shall utilize this Release or the consideration received pursuant to this Release as evidence of any admission of liability since Releasees expressly deny liability. 10 7. Employee affirms that the only consideration for the signing of this Release are the terms stated herein and in the Agreement and Release and that no other promise or agreement of any kind has been made to Employee by any person or entity whatsoever to cause Employee to sign this Release. 8. Employee and Employer affirm that the Agreement and Release (and the document specifically incorporated therein) and this Release set forth the entire agreement between the parties with respect to the subject matter contained herein and supersede all prior or contemporaneous agreements or understandings between the parties with respect to the subject matter contained herein. Further, there are no representations, arrangements or understandings, either oral or written, between the parties, which are not fully expressed herein. Finally, no alteration or other modification of this Release shall be effective unless made in writing and signed by both parties. 9. Employee certifies that Employee has returned to Employer all keys, identification cards, credit cards, computer and telephone equipment and other property or information of Employer in Employee's possession, custody, or control including, but not limited to, any information contained in any computer files maintained by Employee during Employee's employment with Employer. Employee certifies that Employee has not kept the originals or copies of any documents, files, or other property of Employer which Employee obtained or received during Employee's employment with Employer. 10. Employee acknowledges that Employer advised Employee to consult with an attorney prior to executing this Release. 11. Employee affirms that Employee has carefully read this Release, that Employee fully understands the meaning and intent of this document, that Employee has signed this Release voluntarily and knowingly, and that Employee intends to be bound by the promises contained in this Release for the consideration described in the Agreement and Release. IN WITNESS WHEREOF, Employee and the authorized representative of Employer have executed this Release on the dates indicated below: Dated:_____________________ ______________________________ John Rich C&D TECHNOLOGIES, INC. Dated:_____________________ By:___________________________ Title: 11 ENDORSEMENT I, John Rich, hereby acknowledge that I was given 21 days to consider the foregoing Agreement and Release and voluntarily chose to sign the Agreement and Release prior to the expiration of the 21 day period. I declare under penalty of perjury under the laws of the State of Arizona that the foregoing is true and correct. EXECUTED this __16th__ day of _August___, 2001, at ___Pima County_______________, Arizona. /s/ John Rich ------------------------------ John Rich 12 EX-10 4 exbt10-2.txt Exhibit 10.2 August 6, 2001 Mr. James D. Johnson 11068 N. Cloudview Place Tucson, AZ 85737 Dear J.D.: You are presently employed by C&D Technologies, Inc., a Delaware corporation (the "Company"), in a senior position and the Company desires to promote you to an executive capacity and to encourage your continued employment by providing certain protections for you by entering into this Agreement with you, in return for which you agree to continue to be employed by the Company on the terms set forth herein, to refrain from certain competitive activity and to provide the Company with certain assurances upon your departure. In consideration of same, the Company agrees to employ you, and you agree to accept such employment, under the following terms and conditions: 1. TERM OF EMPLOYMENT. (a) Except for earlier termination as is provided in Section 9 or 10 below, your employment under this Agreement shall be automatically renewed for successive terms of one month each, unless either party shall have given to the other party at least 30 days' prior written notice of the termination of this Agreement (a "Termination Notice"). If such 30 days' prior written notice is given by either party, (i) the Company shall, without any liability to you, have the right, exercisable at any time after such notice is sent, to elect any other person to the office or offices in which you are then serving and to remove you from such office or offices, but (ii) all other obligations each of you and the Company have to the other, including the Company's obligation to pay your compensation and make available the medical and dental insurance to which you are entitled hereunder, shall continue until the date your employment terminates as specified in such notice. 2. COMPENSATION. (a) You shall be compensated for all services rendered by you under this Agreement at the rate of $149,510 per annum (such salary, as it is from time to time adjusted, is herein referred to as the ("Base Salary"). Such Base Salary shall be payable in periodic installments twice monthly in accordance with the Company's payroll practices for salaried employees. The Compensation Committee of the Board of Directors shall review such Base Salary prior to April 1, 2002 and each year thereafter during the term of this Agreement, including any renewal term, and shall make such adjustments, if any, as the Compensation Committee shall determine; provided, however, that no adjustment shall reduce the Base Salary. (b) If your employment hereunder shall be terminated (i) by the Company without notice of Cause (as defined in Section 9(c)) therefor having been given to you (other than pursuant to Section 9(a) or 9(b), or (ii) as a result of the non-renewal of this Agreement pursuant to a Termination Notice given by the Company under Section 1(a), then, in addition to paying you the Accrued Obligations (as hereinafter defined), for a 180 day period after the effective date of such termination, the Company shall pay you at the rate of your Base Salary in effect at the time of such termination in periodic payments in accordance with the Company's payroll practices for salaried employees; provided, however, that your right to receive such payments, other than the Accrued Obligations, shall be conditioned upon your execution of a Release (the "Release"). Such Release shall be substantially in the form of Exhibit A hereto but may be modified by the Company in its sole discretion as it deems appropriate to reflect changes in law or circumstances arising after the date of this Agreement; provided, however, that no such modification shall increase any of your obligations to the Company over those contemplated by this Agreement, including Exhibit A hereto. The term "Accrued Obligations" shall mean (i) your Base Salary through the date of termination and (ii) all benefits that have accrued to you under the terms of all employee benefits plans of the Company in which you are entitled to participate. 3. DUTIES. (a) During the term of your employment hereunder, including any renewal thereof, you agree to serve as the Vice President, General Manager of C&D Technologies, Inc.'s Power Electronics Division or in such other capacity with duties and responsibilities of a similar nature as those initially undertaken by you hereunder as the President of the Company may from time to time determine. Your duties may be changed at any time and from time to time hereafter, upon mutual agreement, consistent with office or offices in which you serve as deemed necessary by the President of the Company. You also agree to perform such other services and duties consistent with the office or offices in which you are serving and its responsibilities as may from time to time be prescribed by the Board of Directors, and you also agree to serve, if elected, as an officer and/or director of the Company and/or any of the Company's other direct or indirect subsidiaries without additional compensation, in all cases in conformity to the by-laws of each such corporation. Unless you otherwise agree, you shall not be required to relocate your place of business to a location that would increase your commuting distance by greater than 25 miles. (b) You shall devote your full employment energies, interest, abilities, time and attention during normal business hours (excluding the vacation periods provided in Section 4(b) below) exclusively to the business and affairs of the Company, its parent corporation and subsidiaries, if any, and shall not engage in any activity that conflicts or interferes with the performance of duties hereunder. -2- (c) You agree to cooperate with the Company, including taking such reasonable medical examinations as may be necessary, in the event the Company shall desire or be required (such as pursuant to the terms of any bank loan or any other agreement) to obtain life insurance insuring your life. (d) You shall, except as otherwise provided herein, be subject to the Company's rules, practices and policies applicable to the Company's senior executive employees. Without limiting the generality of the foregoing, you shall, with respect to the Company and its parents, subsidiaries, assets and stockholders, act in a manner consistent with your fiduciary responsibilities as an executive of the Company. 4. BENEFITS. (a) You shall have the benefit of such life and medical insurance, bonus, stock option and other similar plans as the Company may have or may establish from time to time, and in which you would be entitled to participate by reason of your position with the Company, pursuant to the terms thereof. Also, to the extent you have met the qualifications required, you may participate in the Company's savings and retirement plans. The foregoing, however, shall not be construed to require the Company to establish any such plans or to prevent the Company from modifying or terminating any such plans, and no such action or failure thereof shall affect this Agreement. (b) You shall be entitled to a vacation of four weeks each year. (c) The Company will provide you with an annual physical examination. 5. EXPENSES. The Company will reimburse you for reasonable expenses (consistent with Company policy), including traveling expenses, incurred by you in connection with the business of the Company, upon the presentation by you of appropriate substantiation for such expenses. 6. RESTRICTIVE COVENANTS. (a) During such time as you shall be employed by the Company, and for the applicable Restricted Period (as defined below) thereafter, you shall not, without the written consent of the Board of Directors, directly or indirectly, become associated with, render services to, invest in, represent, advise or otherwise participate as an officer, employee, director, stockholder, partner, agent of or consultant for, any business that, at the time your employment with the Company ceases, is competitive with the business in which the Company is engaged or in which the Company has taken affirmative steps to engage in the United States, Canada, Mexico, England, Ireland, China or any other country in which the Power Electronics Division then conducts business (a "Competitive Business"); provided, however, that nothing herein (i) shall prevent you from investing without limit in the securities of any company listed on a national securities exchange, provided that your involvement with any such company is solely that of a stockholder, and (ii) is intended to prevent you from being employed during the applicable Restricted Period by any business other than a Competitive Business. With respect to any termination of your employment other than upon a -3- Change of Control pursuant to Section 10, the applicable Restricted Period shall be the period following the date your employment terminates during which you are receiving the payments described in Section 2(b) hereof, and with respect to a termination of your employment upon a Change of Control pursuant to Section 10, the applicable Restricted Period shall be the two-year period following the date your employment terminates. (b) The parties hereto intend that the covenant contained in this Section 6 shall be deemed a series of separate covenants for each state, county and city. If, in any judicial proceeding, a court shall refuse to enforce all the separate covenants deemed included in this Section 6, because, taken together, they cover too extensive a geographic area, the parties intend that those of such covenants (taken in order of the states, counties and cities therein which are least populous), which, if eliminated, would permit the remaining separate covenants to be enforced in such proceeding, shall, for the purpose of such proceeding, be deemed eliminated from the provisions of this Section 6. 7. CONFIDENTIALITY, NON-INTERFERENCE, INVENTIONS AND PROPRIETARY INFORMATION. (a) In the course of (i) your employment with the Company hereunder, and (ii) any prior employment with the Company, you will have and have had access to Confidential or Proprietary Data or Information of the Company. You shall not at any time divulge or communicate to any person nor shall you direct any Company employee to divulge or communicate to any person (other than to a person bound by confidentiality obligations similar to those contained herein and other than as necessary in performing your duties hereunder) or use to the detriment of the Company any of such Confidential or Proprietary Data or Information, except to the extent the same (i) becomes publicly known other than through a breach of this Agreement by you, (ii) was known to you prior to the disclosure thereof by the Company to you from a source that was entitled to disclose it or (iii) is subsequently disclosed to you by a third party who shall not have received it under any obligation of confidentiality to the Company. The term "Confidential or Proprietary Data or Information" as used in this Agreement, shall mean data or information not generally available to the public, including personnel information, financial information, customer lists, supplier lists, product and tooling specifications, trade secrets, information concerning product composition and formulas, tools and dies, drawings and schematics, manufacturing processes, information regarding operations, systems and services, knowhow, computer and any other electronic, processed or collated data, computer programs, and pricing, marketing, sales and advertising data. -4- (b) You shall not, during the term of this Agreement and for the applicable Restricted Period after the termination of your employment by the Company, for your own account or for the account of any other person, (i) solicit or divert to any Competitive Business any individual or entity who is a customer of the Company or any subsidiary or affiliate of the Company or who was a customer of the Company or any subsidiary or affiliate during the preceding twelve-month period, (ii) employ, retain as a consultant, attempt to employ or retain as a consultant, solicit or assist any Competitive Business in employing or retaining as a consultant any current employee of the Company or any subsidiary or affiliate or any person who was employed by the Company or any subsidiary or affiliate during the preceding twelve-month period or (iii) otherwise interfere with the Company's relationship with any of its suppliers, customers, employees or consultants; provided, however, that you shall not be prohibited from contacting suppliers or customers after termination of your employment with regard to matters that do not violate your noncompetition or confidentiality obligations contained in Sections 6(a) and 7(a) or interfere with the Company's relationship with such parties. (c) It is understood that you may, during your employment, conceive or develop certain inventions, innovations or discoveries related to any business in which the Company may be engaged, either solely or jointly with others. In connection with the conception or development thereof, you agree to disclose promptly to the Company all such inventions, innovations and discoveries, to assign, and hereby do assign, to the Company all of your right, title and interest in and to said inventions, innovations and discoveries, and to do all things and sign all documents deemed by the Company to be necessary or appropriate to vest in the Company, its successors and assigns, all of your right, title and interest in and to such inventions, innovations or discoveries, and to procure for the Company, at the Company's expense, patents, copyrights and/or trademarks covering such inventions, innovations or discoveries in the United States and its possessions and in foreign countries, at the discretion and under the direction of the Company. In the event the Company is unable for any reason to assure your signature on such documents, you irrevocably appoint the Company and its duly authorized officers and agents as your agents and attorneys-in-fact to execute such documents and to do such things with the same legal force and effect as if executed or done by you. (d) All written, electronic and other tangible materials, records and documents made by you or coming into your possession during your employment concerning any products, processes or equipment, manufactured, used, developed, investigated or considered by the Company, or otherwise concerning the business or affairs of the Company, shall be the sole property of the Company, and upon termination of your employment, or upon request of the Company during your employment, you shall promptly deliver the same to the Company. In addition, upon termination of your employment, or upon request of the Company during your employment, you will deliver to the Company all other Company property in your possession or under your control, including, but not limited to, financial statements, marketing and sales data, patent applications, drawings and other documents, and all Company keys, credit cards, computer and telephone equipment and automobiles. -5- 8. EQUITABLE RELIEF. With respect to the covenants contained in Sections 6 and 7 of this Agreement, you agree that any remedy at law for any breach of said covenants may be inadequate and that the Company shall be entitled to specific performance or any other mode of injunctive and/or other equitable relief to enforce its rights hereunder or any other relief a court might award. 9. EARLIER TERMINATION. Your employment hereunder shall terminate prior to the Initial Term (or any renewal term, in the event of renewal) on the following terms and conditions: (a) This Agreement shall terminate automatically on the date of your death. Notwithstanding the foregoing, if you die during the term of this Agreement, the Company shall (i) continue to make payments to your estate of your Base Salary as then in effect pursuant to this Agreement for 180 days after the date of your death, and (ii) pay your estate any reimbursable expenses which otherwise would have been paid to you to the date of your death. (b) This Agreement shall be terminated if you are unable to perform your duties hereunder for a period of any 180 days in any 365 consecutive day period by reason of physical or mental disability. Notwithstanding the foregoing, if this Agreement is terminated pursuant to this Section 9(b), the Company shall pay any accrued but unpaid Base Salary through the date of termination and any reimbursable expenses due to you hereunder. For purposes of this Agreement "physical or mental disability" shall mean your inability, due to health reasons, to discharge properly your duties of employment, supported by the opinion of a physician satisfactory to both you and the Company. If the parties do not agree on a physician mutually satisfactory to both of you and the Company within ten days of written demand by one or the other, a physician shall be selected by the president of the Pennsylvania Medical Association, and the physician shall, within 30 days thereafter, make a determination as to whether disability exists and certify the same in writing. Services of the physician shall be paid for by the Company. You shall fully cooperate with the examining physician including submitting yourself to such examinations as may be requested by the physician for the purpose of determining whether you are disabled. (c) This Agreement shall terminate immediately upon the Company's sending you written notice terminating your employment hereunder for Cause. The Company may terminate this Agreement for Cause, but only after written notice specifying the Cause of such action shall have been rendered to you by the President of the Company. "Cause" shall mean any of the following: (i) Breach of this Agreement. (ii) Refusal or inability (other than pursuant to Section 9(a) or 9(b)) to perform duties assigned to you in accordance with the terms of this Agreement or overt and willful disobedience of orders or directives issued to you by the Company and within the scope of your duties to the Company. (iii) Willful misconduct in the performance of your duties, functions and responsibilities. -6- (iv) Commission of acts that are illegal in connection with the performance of your duties, functions and responsibilities under this Agreement. (v) Commission of acts that would constitute a felony offense during the term of this Agreement. (vi) Violation of Company rules and regulations concerning conflict of interest. (vii) Gross mismanagement of the assets of the Company. (viii) Gross incompetence, gross insubordination or gross neglect in the performance of your duties hereunder or being under the habitual influence of alcohol while on duty or possession, use, manufacture, distribution, dispensation or sale of illegal drugs while on or off duty. (ix) Any act or omission, whether or not included in the foregoing, that a court of competent jurisdiction would determine to constitute cause for termination. Existence of Cause shall be conclusively determined for all purposes hereunder by the President of the Company. Such advice and consultation shall be utilized as such officer regards as appropriate, and no obligation or duty with respect to any procedure or formality is created by this Agreement. If the Company terminates this Agreement for Cause under this Section 9(c), the Company shall not be obligated to make any further payments under this Agreement except for the Accrued Obligations. (d) Except as set forth in Section 10, your coverage under the benefits program provided by the Company will cease effective on your termination date. You will be entitled to elect continuation of your medical and dental benefits at the same cost the Company pays, pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). Details with regard to COBRA continuation coverage will be provided to you shortly after your termination date. (e) Except as set forth in Section 10, life insurance coverage will cease upon your termination date. You may, however, apply to General American Life Insurance Company (or such other insurance company as may provide group life insurance to the Company's employees at the time) for an individual converted life policy, with such application and payment of the first premium required to be accomplished within 31 days after your termination date. Details regarding this conversion option will be provided to you shortly after your termination date. (f) Accidental death and dismemberment and long term disability coverages cease with your termination date and may not be extended or converted. 10. TERMINATION UPON A CHANGE OF CONTROL. (a) In the event a Change of Control (as defined below) occurs, and within 24 months after such Change of Control: (i) your employment with the Company is terminated by you pursuant to a Termination for Good Reason (as defined below); or (ii) your employment with the Company is -7- terminated by the Company for any reason other than death, disability or for Cause pursuant to Sections 9(a), (b) or (c); or (iii) this Agreement is not renewed due to a Termination Notice given by the Company, as provided in Section 1(a), (the events under clauses (i), (ii) and (iii) herein collectively called a "Change of Control Termination"), you shall be entitled to receive the payments and benefits set forth in Section 10(e) and (f) below, which payments and benefits shall be in substitution for, and not in addition to, the payments and benefits otherwise payable under Section 2(a) or 2(b) of this Agreement in the event of termination. Your right to receive such payments and benefits, other than the Accrued Obligations, shall be in consideration of your agreements under this Agreement, including but not limited to your agreement not to compete with the Company for two years after a Change of Control pursuant to Section 6, and shall be conditioned upon your execution of a Release. Such Release shall be substantially in the form of Exhibit A but may be modified by the Company as it deems appropriate to reflect changes in law or circumstances arising after the date of this Agreement; provided that no such modification shall increase any of your obligations to the Company over those contemplated by this Agreement, including Exhibit A hereto. (b) For purposes of the Agreement, a "Change of Control" shall be deemed to have occurred if: (i) any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d) and 14(d) thereof)), excluding the Company, any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of any such plan acting in his capacity as trustee), but including a "group" as defined in Section 13(d)(3) of the Exchange Act, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of shares of the Company having at least 30% of the total number of votes that may be cast for the election of directors of the Company; (ii) the shareholders of the Company shall approve any merger or other business combination of the Company, sale of all or substantially all of the Company's assets or combination of the foregoing transactions (a "Transaction"), other than a Transaction involving only the Company and one or more of its subsidiaries, or a Transaction immediately following which the shareholders of the Company immediately prior to the Transaction continue to have a majority of the voting power in the resulting entity (excluding for this purpose any shareholder of the Company owning directly or indirectly more than 10% of the shares of the other company involved in the Transaction) and no person is the beneficial owner of at least 30% of the shares of the resulting entity as contemplated by Section 10(b)(i) above; or (iii) within any 24-month period beginning on or after the date hereof, the persons who were directors of the Company immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the Board of Directors of the Company or the board of directors of any successor to the Company, provided that any director who was not a director as of the date hereof shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually or by prior operation of this Section 10(b)(iii), unless such election, recommendation or approval was the result of an actual or threatened election contest of the type contemplated by Regulation 14a-11 under the Exchange Act or any successor provision. Notwithstanding the foregoing, no Change of Control of the Company shall be deemed to have occurred for purposes of this Agreement by reason of any actions or events in which you participate in a capacity other than in your capacity as an executive or director of the Company. -9- (c) For purposes of the Agreement, a "Termination for Good Reason" means a termination by you by written notice given within 90 days after the occurrence of the Good Reason event. A notice of Termination for Good Reason shall indicate the specific termination provision in Section 10(d) relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination for Good Reason. Your failure to set forth in such notice any facts or circumstances that contribute to the showing of Good Reason shall not waive any of your rights hereunder or preclude you from asserting such fact or circumstance in enforcing your rights hereunder. The notice of Termination for Good Reason shall provide for a date of termination not less than 10 nor more than 60 days after the date such Notice of Termination for Good Reason is given. (d) For purposes of the Agreement, "Good Reason" shall mean the occurrence, without your express written consent, of any of the following circumstances, unless such circumstances are fully corrected prior to the date of termination specified in the notice of Termination for Good Reason as contemplated in Section 10(c) above: (i) any material diminution of your positions, duties or responsibilities hereunder (except in each case in connection with the termination of your employment for Cause pursuant to Section 9(c) or due to disability or death pursuant to Section 9(a) or 9(b) or temporarily as a result of your illness or other absence), or the assignment to you of duties or responsibilities that are inconsistent with your position under the Agreement at the time of a Change of Control; (ii) your removal from, or your nonreelection to, the officer positions with the Company specified in this Agreement; (iii) relocation of the Company's principal executive offices to a location more than 25 miles from its location at the time of the Change of Control; (iv) failure by the Company, after a Change of Control, (A) to continue any bonus plan, program or arrangement in which you are entitled to participate immediately prior to the Change of Control (the "Bonus Plans"), provided that any such Bonus Plans may be modified at the Company's discretion from time to time but shall be deemed terminated if (x) any such plan does not remain substantially in the form in effect prior to such modification and (y) if plans providing you with substantially similar benefits are not substituted therefor ("Substitute Plans"), or (B) to continue you as a participant in the Bonus Plans and Substitute Plans on at least the same basis as to potential amount of the bonus and substantially the same level of criteria for achievability thereof as you participated in immediately prior to any change in such plans or awards, in accordance with the Bonus Plans and the Substitute Plans; (v) any material breach by the Company of any provisions of this Agreement; or (vi) failure of any successor to the Company to promptly acknowledge in writing the obligations of the Company hereunder. (e) Upon a Change of Control Termination, as provided in Section 10(a), the Company shall pay or provide you the following payments and benefits: (i) The Company shall pay to you the Accrued Obligations in a lump sum within five business days after the date of termination. -9- (ii) The Company shall pay to you as severance pay, not later than the tenth day following the date of your execution and delivery of the Release required pursuant to Section 10(a) of this Agreement: (A) a lump sum payment in an amount equal to two years of your Base Salary; and (B) a lump sum payment in an amount equal to two of your annual incentive bonuses, such payment to be equal to the greater of (i) the amount of all incentive bonuses paid to you with respect to each of the two most recently completed fiscal years of the Company for which a bonus has been paid or (ii) the incentive bonus paid to you with respect to the most recently completed fiscal year of the Company for which a bonus has been paid plus an amount equal to your Target Bonus (as hereinafter defined); provided, however, that if you have been employed by the Company for less than two years, such payment shall be equal to the greater of (x) the amount of the incentive bonus paid to you with respect to the most recently completed fiscal year of the Company for which a bonus has been paid plus your Target Bonus or (y) the amount of your Target Bonus multiplied by two. The term "Target Bonus" shall mean the incentive bonus that would have been payable for the fiscal year that includes the date on which your employment terminates under the incentive bonus program in effect as of the date of the Change of Control, assuming that you had been entitled to receive an amount in respect of such bonus based solely upon the target percentage applicable to employees in the same employment grade as you and your Base Salary as of the date of termination (or if greater, your Base Salary as of the date on which occurred an event giving rise to a Change of Control Termination), and without regard to actual performance. (iii) The Company shall continue the participation of you and your dependents for a period of two years after the date of termination in all health, medical and accident, life and other welfare plans (as defined in Section 3(l) of ERISA), in which you were participating immediately prior to the date of termination, except for any disability plans; provided, however, that to the extent the Company's plans do not permit such continued participation or such participation would have an adverse tax impact on such plans or on the other participants in such plans, the Company may instead provide materially equivalent benefits to you outside of such plans; provided, further, that under such circumstances, (i) medical insurance benefits may be provided by the Company paying any COBRA premiums (COBRA coverage, in any event, to be measured from the date of termination of employment) and (ii) if the Company is unable to continue your life insurance coverage, the Company shall pay you an amount equal to twice the premium paid during the year prior to termination or if you convert the insurance to an individual policy, the Company shall pay the premium for such insurance for two years. You shall complete such forms and take such physical examinations as reasonably requested by the Company. To the extent you incur any tax obligation as a result of the provisions of this Section 10(e) that you would not have incurred if you remained an employee of the Company and had continued to participate in the benefit plans as an employee, the Company shall pay to you, at the time the tax is due, an amount to cover such taxes and the taxes on the amount paid to cover such taxes. (iv) All outstanding stock options and restricted stock awards that have been granted to you by the Company at any time but have not yet vested and upon which vesting depends -10- solely upon the passage of time, shall immediately vest or become nonforfeitable, as the case may be. In the event the foregoing sentence becomes applicable, the Company agrees to cause the Board of Directors to take all steps necessary to implement the foregoing sentence. (v) All amounts payable to you upon a Change of Control under the Company's Supplemental Executive Retirement Plan and Deferred Compensation Plan shall be paid to you in accordance with the respective terms of those plans. (vi) The Company, at its expense, shall provide you with outplacement services at a level appropriate for the most senior executive employees through an outplacement firm of your choice for a period of up to one year after the date of the Change of Control Termination. (f) (i) In the event that any payment, coverage or benefit (collectively, the "Covered Benefits") provided to you by the Company or an Affiliate (as defined below) is or becomes subject to the excise tax imposed under Section 4999 or any successor provision of the Internal Revenue Code of 1986, as amended (the "Code"), or you incur interest or penalties with respect to that excise tax (that excise tax, together with any interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), the Company shall pay you an additional amount (a "Gross-Up Bonus") at the time or times specified in Section 10(f)(iii)(z) below. The amount of the Gross-Up Bonus shall equal the quotient determined by dividing (x) the Excise Tax attributable to the Covered Benefits by (y) one minus the highest marginal income tax rate, where the term "highest marginal income tax rate" means the sum of the highest combined local, state and federal personal income tax rates (including any state unemployment compensation tax rate, any surtax rate as well as the Medicare hospital insurance tax rate imposed on employees under the Federal Insurance Contributions Act) as in effect for the calendar year to which the Excise Tax attributable to the Covered Benefits relates, provided that in determining the highest tax rate for federal purposes both the deductibility of state and local income tax payments and the reduction in the deductibility of itemized deductions shall be taken into account; it being the intention of the parties hereto that your net after tax position (after taking into account any interest or penalties imposed with respect to such taxes) upon receipt of the Covered Benefits is no less advantageous to you than the net after tax position you would have had if Section 4999 of the Code had not been applicable to any portion of the Covered Benefits. (ii) All determinations to be made under this Section 10(f), including the determination of whether an Excise Tax is payable and the amount thereof, shall be made by a law firm practicing in the Philadelphia, Pennsylvania metropolitan area that is knowledgeable in tax law matters, which firm shall be selected and paid for by the Company and acceptable to you. If tax counsel's determinations are not finally accepted by the Internal Revenue Service upon audit, then appropriate adjustments shall be computed (with a Gross-Up Bonus, if applicable) by that tax counsel based upon the final amount of the Excise Tax so determined. (iii) For purposes of this Section 10(f): (x) An "Affiliate" shall mean any successor to the Company, any member of an affiliated group including the Company (determining using the definition in Section 1504 of -11- the Code) or any entity that becomes a member of such an affiliated group as a result of the transaction causing the Change of Control. (y) When determining the amount of the Gross-Up Bonus, you will be deemed to have otherwise allowable deductions for federal, state and local tax purposes at least equal to those disallowed because of the inclusion of the Gross-Up Bonus in your adjusted gross income. (z) The portion of the Gross-Up Bonus attributable to a Covered Benefit shall be paid to you within 10 business days following the provision to you of the Covered Benefit. In the event that the amount of Excise Tax due exceeds the amount of Excise Tax determined by tax counsel, the Company shall pay you an additional Gross-Up Bonus in respect of that excess at the time that the amount of the excess is determined under Section 10(f)(ii). In the event the amount of Excise Tax due is less than the amount of Excise Tax determined by tax counsel, you shall repay the Company the portion of the Gross-Up Bonus attributable thereto at the time that the amount of the reduction in Excise Tax is determined under Section 10(f)(ii); provided, however, that if any portion of the amount you must repay to the Company has been paid to any federal, state or local tax authority, your repayment of that portion shall be postponed until the tax authority has actually refunded or credited that amount to you. (g) Upon the occurrence of a Change of Control, if the Company fails to perform any of its obligations under this Agreement or the Company or any other person asserts the invalidity of any provision of this Agreement and you incur any costs in successfully enforcing or defending any of the provisions of this Agreement, including legal fees and expenses and court costs, the Company shall reimburse you for all such costs incurred by you. 11. ENTIRE AGREEMENT; MODIFICATION. This Agreement, together with Exhibit A hereto and all rights to which you are entitled under all employee benefit plans in which you participate, constitutes the full and complete understanding of the parties, and will, on the Effective Date, supersede all prior agreements and understandings, oral or written, between the parties, except for the Agreement Relating to Intellectual Property and Confidential Information dated August 31, 1998 ("Confidentiality Agreement") between you and the Company; provided, however, that if the terms of any of such employee benefit plan or the Confidentiality Agreement shall be inconsistent with the provisions of this Agreement, the provisions of this Agreement shall prevail, and if the terms of the Severance Agreement shall be inconsistent with the provisions of this Agreement, the terms of the Severance Agreement shall prevail. This Agreement may not be modified or amended except by an instrument in writing signed by the party against which enforcement thereof may be sought. Each party to this Agreement, acknowledges that no representations, inducements, promises or agreements, oral or written, have been made by either party or anyone acting on behalf of either party, which are not embodied herein and that no other agreement, statement or promise not set forth or referred to in this Agreement shall be valid or binding. 12. SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and -12- provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. 13. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement shall not operate as or be construed as a waiver of any subsequent breach. 14. NO MITIGATION REQUIRED. Upon a termination of your employment by the Company without Cause pursuant to Section 2(b) or upon a Change of Control pursuant to Section 10, you shall have no obligation to seek other employment but shall not be prohibited from doing so, and no compensation paid to you as the result of any other employment shall reduce any payment required to be made by the Company hereunder. 15. NOTICES. All notices hereunder shall be in writing and shall be sent by express mail or by certified or registered mail, postage prepaid, return receipt requested: if to you, to your residence as listed in the Company's records; and if to the Company, to the address set forth above with copies to the President. 16. ASSIGNABILITY; BINDING EFFECT. This Agreement shall not be assigned by either party, except that it may be assigned by the Company to an acquirer of all or substantially all of the assets of the Company or other successor to the Company, subject to your rights arising from a change of control as provided in Section 10. This Agreement shall be binding upon and inure to the benefit of you, your legal representatives, heirs and distributees, and shall be binding upon and inure to the benefit of the Company, its successors and assigns. 17. NONDISPARAGEMENT. You agree not to publicly or privately disparage the Company, its personnel, products or services either during or upon termination of your employment with the Company. 18. SURVIVAL. All of the provisions of this Agreement that by their terms are to be performed or that otherwise are to endure after the termination of your employment by the Company shall survive the termination of your employment and shall continue in effect for the respective periods therein provided or contemplated. 19. GOVERNING LAW. All questions pertaining to the validity, construction, execution and performance of this Agreement shall be construed and governed in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to the conflicts or choice of law provisions thereof. 20. HEADINGS. The headings of this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 21. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. - -13- If this Agreement correctly sets forth our understanding, please sign the duplicate original in the space provided below and return it to the Company, whereupon this shall constitute the employment agreement between you and the Company effective and for the term as stated herein. C&D TECHNOLOGIES, INC. By: /s/ Wade Roberts, Jr. -------------------------- Title: ----------------------- Agreed as of the date first above written: /s/ James D. Johnson - -------------------------------- James D. Johnson -14- EX-15 5 exb15.txt EXHIBIT 15 December 13, 2001 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 Commissioners: We are aware that our report dated November 20, 2001 on our review of interim financial information of C&D Technologies, Inc. and Subsidiaries (the "Company") as of and for the period ended October 31, 2001 and included in the Company's quarterly report on Form 10-Q for the quarter then ended is incorporated by reference in the Company's Forms S-8 (Registration Nos. 33-31978, 33-71390, 33-86672, 333-17979, 333-38891, 333-59177, 333-42054, 333-56736, 333-69264 and 333-69266) and Form S-3 (Registration No. 333-38893). Very truly yours, /s/ PRICEWATERHOUSECOOPERS LLP - ------------------------------ PricewaterhouseCoopers LLP -----END PRIVACY-ENHANCED MESSAGE-----