-----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, SfwXuoxIVzC0CP4P5xXOWzFP14cA7EIxA9i7rjSCjR5wpa+cxmLcwQjk0moc7d7i KoyngZr3TrtmihGAIokCGg== 0000808064-02-000089.txt : 20020913 0000808064-02-000089.hdr.sgml : 20020913 20020913153313 ACCESSION NUMBER: 0000808064-02-000089 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020731 FILED AS OF DATE: 20020913 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: 02763689 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 q2-10q.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 July 31, 2002 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) _________________N/A_________________ (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 August 30, 2002: 25,714,435 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Page No. Item 1 - Financial Statements Consolidated Balance Sheets - July 31, 2002 and January 31, 2002.................. 3 Consolidated Statements of Income - Three and Six Months Ended July 31, 2002 and 2001.................. 5 Consolidated Statements of Cash Flows - Six Months Ended July 31, 2002 and 2001.............. 6 Consolidated Statements of Comprehensive Income - Three and Six Months Ended July 31, 2002 and 2001.... 8 Notes to Consolidated Financial Statements............ 9 Report of Independent Accountants..................... 17 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations... 18 Item 3 - Quantitative and Qualitative Disclosures About Market Risk............................... 24 PART II. OTHER INFORMATION................................... 25 SIGNATURES................................................... 26 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) July 31, January 31, 2002 2002 ---- ---- ASSETS Current assets: Cash and cash equivalents................... $ 8,296 $ 8,781 Accounts receivable, less allowance for doubtful accounts of $2,218 and $2,278, respectively........................... 45,782 44,968 Inventories................................. 53,470 61,674 Deferred income taxes....................... 9,650 10,156 Other current assets........................ 1,126 6,754 ------- ------- Total current assets............. 118,324 132,333 Property, plant and equipment, net................ 122,154 131,207 Intangible and other assets, net.................. 22,829 24,659 Goodwill, net..................................... 112,890 107,359 ------- ------- Total assets..................... $376,197 $395,558 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt............................. $ 14,823 $ 27,255 Accounts payable............................ 17,120 19,640 Accrued liabilities......................... 20,248 22,210 Income taxes................................ 2,218 - Other current liabilities................... 8,199 8,214 ------- ------- Total current liabilities........ 62,608 77,319 Deferred income taxes ............................ 2,653 2,602 Long-term debt.................................... 35,511 46,892 Other liabilities................................. 19,458 18,574 ------- ------- Total liabilities................ 120,230 145,387 ------- ------- 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) July 31, January 31, 2002 2002 ---- ---- Commitments and contingencies Minority interest................................. 8,202 8,313 Stockholders' equity: Common stock, $.01 par value, 75,000,000 shares authorized; 28,471,669 and 28,431,728 shares issued, respectively.. 285 284 Additional paid-in capital.................. 66,522 65,893 Treasury stock, at cost, 2,717,034 and 2,414,161 shares, respectively.......... (35,054) (29,743) Accumulated other comprehensive loss........ (228) (3,057) Retained earnings........................... 216,240 208,481 ------- ------- Total stockholders' equity....... 247,765 241,858 ------- ------- Total liabilities and stockholders' equity........... $376,197 $395,558 ======= ======= 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 Six months ended July 31, July 31, 2002 2001 2002 2001 ---- ---- ---- ---- Net sales............................ $ 84,292 $125,493 $168,354 $280,876 Cost of sales........................ 64,090 87,984 129,506 197,334 ------- ------- ------- ------- Gross profit..................... 20,202 37,509 38,848 83,542 Selling, general and administrative expenses.......... 9,044 11,716 17,853 25,425 Research and development expenses......................... 2,532 2,727 4,894 5,434 ------- ------- ------- ------- Operating income................. 8,626 23,066 16,101 52,683 Interest expense, net................ 822 1,708 2,006 3,758 Other expense, net................... 116 68 110 126 ------- ------- ------- ------- Income before income taxes and minority interest............. 7,688 21,290 13,985 48,799 Provision for income taxes........... 2,844 7,740 5,174 18,056 ------- ------- ------- ------- Net income before minority interest...................... 4,844 13,550 8,811 30,743 Minority interest.................... 140 450 (17) 796 ------- ------- ------- ------- Net income....................... $ 4,704 $ 13,100 $ 8,828 $ 29,947 ======= ======= ======= ======= Net income per share - basic......... $ .18 $ .50 $ .34 $ 1.14 ======= ======= ======= ======= Net income per share - diluted....... $ .18 $ .49 $ .34 $ 1.11 ======= ======= ======= ======= Dividends per share.................. $ .02750 $ .01375 $ .04125 $ .02750 ======= ======= ======= =======
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) Six months ended July 31, 2002 2001 ---- ---- Cash flows provided (used) by operating activities: Net income...................................... $ 8,828 $ 29,947 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest......................... (17) 796 Depreciation and amortization............. 12,250 15,414 Deferred income taxes..................... 557 70 Loss on disposal of assets................ 320 102 Changes in: Accounts receivable................. (393) 17,160 Inventories......................... 8,829 2,201 Other current assets................ 38 (913) Accounts payable.................... (680) (15,469) Accrued liabilities................. (1,914) (4,407) Income taxes payable................ 7,857 (2,137) Other current liabilities........... (13) (2,572) Other liabilities................... 891 108 Other, net................................ (2,636) 583 ------- ------- Net cash provided by operating activities........... 33,917 40,883 ------- ------- Cash flows provided (used) by investing activities: Acquisition of property, plant and equipment.... (3,551) (16,774) Proceeds from disposal of property, plant and equipment................................ 602 28 ------- ------- Net cash used by investing activities............... (2,949) (16,746) ------- ------- Cash flows provided (used) by financing activities: Repayment of debt............................... (24,411) (32,117) Proceeds from new borrowings.................... - 27,852 Financing cost of long-term debt................ (118) - Proceeds from issuance of common stock, net..... 419 1,268 Purchase of treasury stock...................... (6,402) (7,280) Payment of common stock dividends............... (1,073) (1,081) ------- ------- 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) Six months ended July 31, 2002 2001 ---- ---- Net cash used by financing activities............. (31,585) (11,358) ------- ------- Effect of exchange rate changes on cash........... 132 (55) ------- ------- (Decrease) increase in cash and cash equivalents.. (485) 12,724 Cash and cash equivalents at beginning of period...................................... 8,781 7,709 ------- ------- Cash and cash equivalents at end of period........ $ 8,296 $ 20,433 ======= ======= SCHEDULE OF NON CASH INVESTING AND FINANCIAL ACTIVITIES Decrease in property, plant, and equipment acquisitions in accounts payable............................... $ (957) $ (4,543) ======= ======= 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 Six months ended July 31, July 31, 2002 2001 2002 2001 ---- ---- ---- ---- Net income............................................... $ 4,704 $13,100 $ 8,828 $29,947 Other comprehensive (expense) income, net of tax: Cumulative effect of accounting change................. - - - (103) Net unrealized loss on derivative instruments.......... (286) (264) (67) (475) Foreign currency translation adjustments............... 1,981 (144) 2,896 (773) ------ ------ ------ ------ Total comprehensive income............................... $ 6,399 $12,692 $11,657 $28,596 ====== ====== ====== ======
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, 2002. The January 31, 2002 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 July 31, 2002 and the related consolidated statements of income and comprehensive income for the three and six month periods ended July 31, 2002 and 2001 and the related consolidated statements of cash flow for the six months ended July 31, 2002 and 2001. However, interim results of operations may not be indicative of results for the full fiscal year. 2. NEW ACCOUNTING PRONOUNCEMENTS On February 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets. As required by SFAS No. 142, the Company discontinued amortizing the remaining balance of goodwill. All remaining and future acquired goodwill will be subject to an impairment test annually (or more frequently if impairment indicators arise), using a fair value-based approach. Other intangible assets will continue to be amortized over their estimated useful lives and assessed for impairment under SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets." SFAS No. 144 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 Accounting Principles Board Opinion No. 30. In August 2001, the Financial Accounting Standards Board ("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 SFAS No. 143 will have on its financial position and results of operations, if any. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses the recognition, measurement and reporting of costs associated with exit or disposal activities, and supersedes Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The principal difference between SFAS No. 146 and EITF No. 94-3 relates to the requirements for recognition of a liability for a disposal activity, (including those related to employee termination benefits and obligations under operating leases and other contracts), be recognized when the liability is incurred, and not necessarily the date of an entity's commitment to an exit plan, as under EITF No. 94-3. SFAS No. 146 also establishes that the initial measurement of a liability recognized under SFAS No. 146 be based on fair value. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. 9 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) (UNAUDITED) 3. GOODWILL AND IDENTIFIED INTANGIBLE ASSETS Goodwill: In conjunction with the implementation of SFAS No. 142, the Company has completed the transitional goodwill impairment test as of February 1, 2002 and has determined that no impairment to goodwill existed. Net income and net income per common share adjusted to exclude goodwill amortization is as follows:
Three months ended Six months ended July 31, July 31, 2002 2001 2002 2001 ---- ---- ---- ---- Reported net income...................... $4,704 $13,100 $8,828 $29,947 Goodwill amortization, net of tax........ - 933 - 1,956 ----- ------ ----- ------ Adjusted net income...................... $4,704 $14,033 $8,828 $31,903 ===== ====== ===== ====== Reported net income per common share - basic.................... $ .18 $ .50 $ .34 $ 1.14 Goodwill amortization, net of tax........ - .04 - .08 ----- ------ ----- ------ Adjusted net income per common share - basic.................... $ .18 $ .54 $ .34 $ 1.22 ===== ====== ===== ====== Reported net income per common share - diluted.......... $ .18 $ .49 $ .34 $ 1.11 Goodwill amortization, net of tax........ - .03 - .08 ----- ------ ----- ------ Adjusted net income per common share - diluted.................. $ .18 $ .52 $ .34 $ 1.19 ===== ====== ===== ======
10 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) (UNAUDITED) 3. GOODWILL AND IDENTIFIED INTANGIBLE ASSETS (continued) During the six months ended July 31, 2002, no goodwill was acquired, impaired or written off. Goodwill by operating segment was adjusted as follows:
Power Motive Powercom Dynasty Electronics Power Total -------- ------- ----------- ----- ----- Goodwill, January 31, 2002........................... $1,376 $57,939 $47,551 $493 $107,359 Assembled workforce reclassified..................... - - 879 - 879 Effect of exchange rate changes on goodwill.......... 1 105 4,546 - 4,652 ----- ------ ------ --- ------- Goodwill, July 31, 2002.............................. $1,377 $58,044 $52,976 $493 $112,890 ===== ====== ====== === =======
Identified Intangible Assets: During the six months ended July 31, 2002, no acquisition-related intangibles were acquired, impaired or written off. Identified intangible assets as of July 31, 2002 consisted of the following: Accumulated Gross Assets Amortization Net ------------ ------------ --- Trade names................. $17,840 $(3,048) $14,792 Intellectual property....... 7,737 (5,111) 2,626 Other....................... 2,407 (927) 1,480 ------ ------ ------ Total intangible assets..... $27,984 $(9,086) $18,898 ====== ====== ====== Identified intangible assets as of January 31, 2002 consisted of the following: Accumulated Gross Assets Amortization Net ------------ ------------ --- Trade names................. $17,840 $(2,602) $15,238 Intellectual property....... 7,601 (4,706) 2,895 Other....................... 3,675 (1,251) 2,424 ------ ------ ------ Total intangible assets..... $29,116 $(8,559) $20,557 ====== ====== ====== Based on intangibles recorded at July 31, 2002, the annual amortization expense is expected to be as follows (assuming current exchange rates): 2003 2004 2005 2006 2007 ---- ---- ---- ---- ---- Trade names................. $ 892 $ 892 $ 892 $ 892 $ 892 Intellectual property....... 772 772 408 355 180 Other....................... 128 128 79 76 35 ----- ----- ----- ----- ----- Total intangible assets..... $1,792 $1,792 $1,379 $1,323 $1,107 ===== ===== ===== ===== ===== Amortization of identified intangibles was $898 for the six months ended July 31, 2002. 11 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) (UNAUDITED) 4. INVENTORIES Inventories consisted of the following: July 31, January 31, 2002 2002 ---- ---- Raw materials............................ $21,409 $26,202 Work-in-progress......................... 12,277 12,830 Finished goods........................... 19,784 22,642 ------ ------ $53,470 $61,674 ====== ====== 5. INCOME TAXES A reconciliation of the provision for income taxes from the statutory rate to the effective rate is as follows: Six months ended July 31, 2002 2001 ---- ---- U.S. statutory income tax....................... 35.0% 35.0% State tax, net of federal income tax benefit.... 1.8 2.5 Foreign sales corporation....................... (0.4) (0.5) Tax effect of foreign operations................ (0.1) (0.6) Research and development credit................. (0.1) (0.1) Other........................................... 0.8 0.7 ---- ---- 37.0% 37.0% ==== ==== 6. NET INCOME PER COMMON SHARE Net income per share - basic for the three and six month periods ended July 31, 2002 and 2001 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 - diluted were as follows:
Three months ended Six months ended July 31, July 31, 2002 2001 2002 2001 ---- ---- ---- ---- Weighted average shares of common stock outstanding................................... 25,915,083 26,149,099 25,943,416 26,161,223 Assumed exercise of stock options, net of shares assumed reacquired............................ 225,323 702,586 263,766 745,484 ---------- ---------- ---------- ---------- Weighted average common shares - diluted.............................. 26,140,406 26,851,685 26,207,182 26,906,707 ========== ========== ========== ==========
12 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 7. CONTINGENT LIABILITIES 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 the Company's 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 was 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. These obligations have since been assumed by Allied's successor in interest, Honeywell ("Honeywell"). 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 three 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. The Company and four other potentially responsible parties ("PRPs") 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 site in Pedricktown, New Jersey, acting pursuant to a Consent Decree. The PRPs identified and sued additional PRPs for contribution. In April 2002 one of the original four PRPs, Exide Technologies ("Exide"), filed for relief under Chapter 11 of Title 11 of the United States Code. On August 6, 2002, Exide notified the PRPs that it will no longer be taking an active role in any further action at the site and discontinued its financial participation. This results in a pro rata increase in the liabilities of the other PRPs, including the Company. The Company also 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. In August 2002, the Company was notified of its involvement as a PRP at the NL Atlanta, Northside Drive Superfund site. The Company is currently reviewing information regarding its involvement at this site. Allied and/or Honeywell has accepted responsibility under the Acquisition Agreement for potential liabilities relating to all Third Party Facilities other than the aforementioned sites. 13 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 7. CONTINGENT LIABILITIES (continued) 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 and other 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 ("NYSDEC"). The prior owner of the site is expected to ultimately bear some, as yet undetermined, share of the costs associated with this matter. The NYSDEC has issued a Record of Decision for the soil remediation portion of this site. However, a final remediation plan for the ground water portion has not yet been finalized with or approved by the State of New York. The Company, together with Johnson Controls, Inc. ("JCI"), is conducting an assessment and remediation of contamination at the Company's 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, i.e. March 2004, 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 in April 2002. The Company is in active negotiations with both the EPA and Department of Justice regarding a potential resolution of this matter, which is likely to result in a penalty assessment. 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 in accordance with SFAS No. 5. Based on currently available information, management of the Company believes that appropriate reserves have been established with respect to the foregoing contingent liabilities and that they are not expected to have a material adverse effect on the Company's business, financial condition or results of operations. 14 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 8. OPERATIONS BY INDUSTRY SEGMENT The Company has 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, telecommunications and 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 power 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 products, computers and industrial 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 six months ended July 31, 2002 and 2001 is shown below:
Power Motive Powercom Dynasty Electronics Power Division Division Division Division Consolidated -------- -------- ----------- -------- ------------ Three months ended July 31, 2002: Net sales................................ $ 35,668 $23,054 $12,493 $13,077 $ 84,292 Operating income (loss).................. $ 5,306 $ 4,018 $ 440 $(1,138) $ 8,626 Three months ended July 31, 2001: Net sales................................ $ 65,673 $28,706 $15,187 $15,927 $125,493 Operating income (loss).................. $ 18,655 $ 4,885 $ (783) $ 309 $ 23,066 Six months ended July 31, 2002: Net sales................................ $ 72,156 $44,110 $25,336 $26,752 $168,354 Operating income (loss).................. $ 11,310 $ 6,410 $ 576 $(2,195) $ 16,101 Six months ended July 31, 2001: Net sales................................ $143,598 $62,143 $40,283 $34,852 $280,876 Operating income......................... $ 40,045 $10,935 $ 372 $ 1,331 $ 52,683
15 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 9. DERIVATIVE INSTRUMENTS The following table includes all interest rate swaps as of July 31, 2002 and January 31, 2002. These interest rate swaps are designated as cash flow hedges and, therefore, changes in the fair value, net of tax, are recorded in accumulated other comprehensive loss. Fixed Variable Fair Fair Interest Interest Value Value Notional Origination Maturity Rate Rate At At Amount Date Date Paid Received 7/31/02 1/31/02 - -------- ----------- -------- -------- -------- ------- ------- $ 6,500 12/20/95 12/20/02 6.01% LIBOR $ (106) $ (240) 20,000 03/11/99 03/11/02 5.58% LIBOR - (77) 20,000 02/05/01 03/01/03 5.24% LIBOR (396) (783) 20,000 04/11/01 04/11/06 5.56% LIBOR (1,431) (735) ------- ------- $(1,933) $(1,835) ======= ======= The Company does not invest in derivative securities for speculative purposes, but does enter into hedging arrangements in order to reduce its exposure to fluctuations in interest rates as well as to fluctuations in exchange rates. 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 $(1,060)and $(34) as of July 31, 2002 and January 31, 2002. Changes in the fair value of these currency forward contracts are recorded in earnings. 16 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 its subsidiaries (the "Company") as of July 31, 2002, and the related consolidated statements of income and comprehensive income for each of the three-month and six-month periods ended July 31, 2002 and 2001, and the consolidated statement of cash flows for the six-month periods ended July 31, 2002 and 2001. 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, 2002, 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 5, 2002 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of January 31, 2002, 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 August 21, 2002 17 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 "six-month period", refer to the second quarter of fiscal 2003 and the six months ended July 31, 2002. All comparisons are with the corresponding periods in the prior year, unless otherwise stated. Net sales decreased $41,201 or 33% for quarter and $112,522 or 40% for the six-month period. The decrease in sales for the quarter resulted from lower customer demand for products of all divisions. Sales of the Powercom Division decreased $30,005 or 46% during the quarter, mainly due to lower demand from the telecommunication and UPS markets. The reduced level of capital spending in the telecommunications sector continues to affect sales. Sales by the Dynasty Division declined $5,652 or 20% during the quarter, due to lower sales to the telecommunications market, partially offset by increased sales to the mobility market. Reduced demand in our sealed product line continues to affect this division. Motive Power divisional sales decreased $2,850 or 18% during the quarter, primarily consisting of lower battery and charger sales. Power Electronics divisional sales decreased $2,694 or 18% during the quarter, primarily due to a decline in DC to DC converter sales to key telecommunications customers. The decrease in sales for the six-month period also resulted from lower customer demand for products of all divisions. Sales of the Powercom Division decreased $71,442 or 50% during the six-month period, mainly due to lower demand from the telecommunication and UPS markets. Sales by the Dynasty Division declined $18,033 or 29% during the six-month period, due to lower sales to the telecommunications and UPS markets, partially offset by increased sales to the mobility market. Motive Power divisional sales decreased $8,100 or 23% during the six-month period, primarily consisting of lower battery and charger sales. Power Electronics divisional sales decreased $14,947 or 37% during the quarter, primarily due to a decline in DC to DC converter sales to key telecommunications customers. We continue to see no near term, meaningful, improvement in the financial performance of the Power Electronics Division. However, quotation activity has increased, numerous design wins have been registered and more than 10% of sales in the six-month period ended July 31, 2002 have come from newly introduced products. Gross profit for the quarter decreased $17,307 or 46% to $20,202 from $37,509 in the same quarter of the prior year, resulting in a decrease in gross margin from 29.9% to 24.0% in the second quarter of fiscal 2003. Gross profit during the quarter was lower in all divisions, primarily as a result of lower sales, partially offset by cost savings initiatives. Also contributing to the lower gross profit in the Motive Power Division during the quarter was continuing plant operational difficulties. Gross profit for the six-month period decreased $44,694 or 53% to $38,848 from $83,542 in the prior year, resulting in a decrease in gross margin from 29.7% to 23.1%. Gross profit was lower in the six-month period in all divisions primarily as a result of lower sales volumes, coupled with the aforementioned plant operational difficulties in the Motive Power Division, and partially offset by cost savings initiatives. The second quarter's gross margin percentage of 24.0% was an increase over the first quarter's gross margin of 22.2%. This is primarily due to prices that have held up reasonably well coupled with aggressive cost reduction/containment initiatives that have taken effect. Material costs, including lead, remain relatively stable at this time. Additionally, the aforementioned new product introductions at our Power Electronics Division, along with new product introductions at our Powercom and Dynasty divisions, are having a positive effect on our gross margins. 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) (Dollars in thousands, except per share data) Selling, general and administrative expenses for the second quarter of fiscal 2003 decreased $2,672 or 23%. This decrease was primarily due to lower variable selling costs associated with the decreased sales volumes and the implementation of SFAS No. 142, which discontinued the amortization of goodwill. Selling, general and administrative expenses for the six-month period decreased $7,572 or 30% due to: (i) lower variable selling costs associated with the decreased sales volumes; (ii) the implementation of SFAS No. 142 and (iii) lower salary expenses. This decrease was partially offset by the positive effect of the full recovery of certain litigation and settlement costs from our insurance carriers during the first quarter of fiscal 2002. Research and development expenses for the second quarter of fiscal 2003 decreased $195 or 7%, mainly as a result of lower spending by the Power Electronics and Powercom divisions. As a percentage of sales, research and development expenses increased from 2% in the second quarter of fiscal 2002 to 3% in the second quarter of fiscal 2003 as a result of lower sales volumes. For the six-month period, research and development expenses decreased $540 or 10%, primarily as a result of lower spending by the Power Electronics and Powercom divisions. As a percentage of sales, research and development expenses increased from 2% in the first six months of fiscal 2002 to 3% in the first six months of fiscal 2003 as a result of lower sales volumes. Operating income for the quarter decreased $14,440 or 63% to $8,626 from $23,066 in the second quarter of the prior year. This decrease was the result of lower operating income generated by the Powercom and Dynasty divisions, coupled with an operating loss generated by the Motive Power Division (compared to an operating profit in the second quarter of the prior fiscal year), partially offset by operating income in the Power Electronics Division (compared to an operating loss in the second quarter of fiscal 2002). For the six-month period, operating income decreased $36,582 or 69% to $16,101 from $52,683 in the six months ended July 31, 2001. This decrease was the result of lower operating income generated by the Powercom and Dynasty divisions coupled with an operating loss generated by the Motive Power Division (compared to an operating profit in the first six months of the prior fiscal year), partially offset by higher operating income generated by the Power Electronics Division. With respect to the Motive Power Division, the operational difficulties are in the process of being resolved. Interest expense, net, decreased $886 in the quarter and $1,752 in the six-month period, primarily due to lower average debt balances outstanding, coupled with lower effective interest rates. Income tax expense for the quarter decreased $4,896 as a result of lower income before income taxes, partially offset by a slightly higher effective tax rate. For the six-month period, income tax expense decreased $12,882 due to lower income before income taxes. The effective tax rate consists of statutory rates adjusted for the tax impact of our foreign sales corporation, research and development credits and foreign operations. The effective tax rate for the second quarter of fiscal 2003 was 37.0% compared to 36.4% in the second quarter of the prior fiscal year. For the first six months of the current and prior year, the effective tax rate was 37.0%. Minority interest decreased $310 in the quarter and $813 in the six-month period, primarily due to lower income recorded by the Shanghai, China joint venture. Minority interest reflects the 33% ownership of the joint venture that is not owned by C&D. As a result of the above, net income decreased $8,396 or 64% in the second quarter of fiscal 2003 to $4,704 or 18 cents per share - basic and diluted. For the six-month period, net income decreased $21,119 or 71% to $8,828 or 34 cents per share - basic and diluted. Due to our cost containment initiatives and a business environment that appears to have bottomed, we anticipate our third quarter earnings to be in the range of 18 to 21 cents per share. 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) (Dollars in thousands, except per share data) Liquidity and Capital Resources Net cash provided by operating activities decreased $6,966 or 17% to $33,917 for the six-month period ended July 31, 2002, compared to $40,883 for the same period of the prior year. This decrease in net cash provided by operating activities was primarily due to: (i) a decrease in net income; and (ii) an increase in accounts receivable during the six months ended July 31, 2002 versus a decrease in the comparable period of the prior year (due to the slowdown in business that occurred in the prior year). These changes, resulting in lower net cash provided by operating activities, were partially offset by: (i) a smaller decrease in accounts payable (due to the slowdown in business that occurred in the prior year); (ii) an increase in current taxes payable versus a decrease in the prior year; and (iii) a larger decrease in inventory. Our inventory has decreased by more than $8,000 for the six-month period ended July 31, 2002, with over 50% of this reduction coming from the Power Electronics Division. Net cash used by investing activities decreased $13,797 or 82% to $2,949 in the six months ended July 31, 2002 compared to $16,746 in the same period of the prior year, primarily due to lower capital spending. Net cash used by financing activities increased $20,227 or 178% to $31,585 in the first six months of fiscal 2003 compared to $11,358 in the prior year This increase was due to an increase in debt payments coupled with less proceeds from new borrowings. New borrowings for the first six months of fiscal 2002 related to a 22 million British Pound Sterling line of credit, the proceeds of which were used to pay down debt denominated in U.S. Dollars. 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. These agreements contain restrictive covenants that require us to maintain minimum ratios such as fixed charges coverage and leverage ratios, as well as minimum consolidated net worth. We were in compliance with our loan agreement covenants at July 31, 2002. Capital expenditures during the first six months of fiscal 2003 were incurred to fund, a continuing series of cost reduction programs, normal maintenance and regulatory compliance. Total fiscal 2003 capital expenditures are expected to be approximately $7,000 for similar purposes. On July 24, 2002 our Board of Directors terminated the previous stock buy-back program announced in February 2000, after having purchased approximately 852,000 shares of the authorized 1,000,000 shares at a total price of approximately $23,300. At the same time, our Board of Directors announced a new buy-back program for 1,000,000 shares. We intend to continue making prudent purchases of our Company stock while paying down debt, and to selectively pursue complementary acquisition prospects. Strategic acquisition opportunities will be expected to enhance C&D's long-term competitive position and growth prospects, and may require prudent external financing. We cannot assure, however, that we will be able to make any such acquisitions. Our bank loan agreement permits quarterly dividends to be paid on our Common Stock as long as there is no default under that agreement. Subject to that restriction and the provisions of Delaware law, our Board of Directors currently intends to continue paying quarterly dividends. We cannot assure you that we will continue to do so since future dividends will depend on our earnings, financial condition and other factors. During the second quarter of fiscal 2002, quarterly dividends were declared twice, once in May for payment in July and once in July for payment in October. Therefore, there will not be a quarterly dividend declaration during the third quarter of fiscal 2003. The next quarterly dividend declaration is expected to occur in the fourth quarter of fiscal 2003. 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) (Dollars in thousands, except per share data) NEW ACCOUNTING PRONOUNCEMENTS On February 1, 2002, we adopted SFAS No. 142, "Goodwill and Other Intangible Assets." This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets. As required by SFAS No. 142, we discontinued amortizing the remaining balance of goodwill. All remaining and future acquired goodwill will be subject to an impairment test annually (or more frequently if impairment indicators arise), using a fair value-based approach. Other intangible assets will continue to be amortized over their estimated useful lives and assessed for impairment under SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets." SFAS No. 144 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 Accounting Principles Board Opinion No. 30. In conjunction with the implementation of SFAS No. 142, we have completed the transitional goodwill impairment test as of February 1, 2002 and have determined that no impairment to goodwill existed. Net income and net income per common share adjusted to exclude goodwill amortization is as follows:
Three months ended Six months ended July 31, July 31, 2002 2001 2002 2001 ---- ---- ---- ---- Reported net income...................... $4,704 $13,100 $8,828 $29,947 Goodwill amortization, net of tax........ - 933 - 1,956 ----- ------ ----- ------ Adjusted net income...................... $4,704 $14,033 $8,828 $31,903 ===== ====== ===== ====== Reported net income per common share - basic.................... $ .18 $ .50 $ .34 $ 1.14 Goodwill amortization, net of tax........ - .04 - .08 ----- ------ ----- ------ Adjusted net income per common share - basic.................... $ .18 $ .54 $ .34 $ 1.22 ===== ====== ===== ====== Reported net income per common share - diluted.......... $ .18 $ .49 $ .34 $ 1.11 Goodwill amortization, net of tax........ - .03 - .08 ----- ------ ----- ------ Adjusted net income per common share - diluted.................. $ .18 $ .52 $ .34 $ 1.19 ===== ====== ===== ======
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. 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) (Dollars in thousands, except per share data) In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses the recognition, measurement, and reporting of costs associated with exit or disposal activities, and supersedes Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The principal difference between SFAS No. 146 and EITF No. 94-3 relates to the requirements for recognition of a liability for a disposal activity, (including those related to employee termination benefits and obligations under operating leases and other contracts), be recognized when the liability is incurred, and not necessarily the date of an entity's commitment to an exit plan, as under EITF No. 94-3. SFAS No. 146 also establishes that the initial measurement of a liability recognized under SFAS No. 146 be based on fair value. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. FORWARD-LOOKING STATEMENTS Certain of the statements and information contained in this Quarterly Report on Form 10-Q, 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, we claim 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," "believes" 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) both in the United States and other 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 could also be affected by new competitive products and technologies. 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. 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 We are exposed to the credit risk of some of our customers including risk of insolvency and bankruptcy. Although we have programs in place to monitor and mitigate the associated risk, there can be no assurance that such programs will be effective in reducing our credit risks. o Our business, results of operations and financial condition could be affected by significant pending and future litigation adverse to us, 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 our business (or that of a predecessor to the extent we are 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 Item 3. Quantitative and Qualitative Disclosure About Market Risk We are exposed to various market risks. The primary financial risks include fluctuations in interest rates and changes in currency exchange rates. We manage these risks by using derivative instruments. We do not invest in derivative securities for speculative purposes, but do enter into hedging arrangements in order to reduce our exposure to fluctuations in interest rates as well as to fluctuations in exchange rates. Our financial instruments subject to interest rate risk consist of debt instruments and interest rate swap contracts. The debt instruments are subject to variable rate interest, and therefore the market value is not sensitive to interest rate movements. Interest rate swap contracts are used to manage our exposure to fluctuations in interest rates on our underlying variable rate debt instruments. Additional disclosure regarding our various market risks are set forth in our fiscal 2002 Form 10-K filed with the Securities and Exchange Commission. 24 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders Reference is made to Item 4 of the Company's Form 10-Q Quarterly Report for the period ended April 30, 2002, which is incorporated by reference. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 10.1 Seventh Amendment dated as of June 21, 2002, to the credit agreement, dated as of March 1, 1999 among C&D, as borrower, certain subsidiaries and affiliates of C&D, as guarantors, the lenders named therein, and Bank of America, as administrative agent (filed herewith). 10.2 Employee Separation Agreement dated June 21, 2002 between Mark Amatrudo and C&D (filed herewith). 10.3 Employment Agreement dated July 24, 2002 between Robert Scott and C&D (filed herewith). 15. Letter from PricewaterhouseCoopers LLP, independent accountants for C&D, regarding unaudited interim financial information (filed herewith). 99.1 Certification of the President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 99.2 Certification of the Vice President, Finance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 25 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. September 13, 2002 BY: /s/ Wade H. Roberts, Jr. --------------------------------- Wade H. Roberts, Jr. President, Chief Executive Officer and Director (Principal Executive Officer) September 13, 2002 BY: /s/ Stephen E. Markert, Jr. ---------------------------------- Stephen E. Markert, Jr. Vice President Finance (Principal Financial and Accounting Officer) CERTIFICATION ------------- I, Wade H. Roberts, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of C&D Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. Date: September 13, 2002 /s/ Wade H. Roberts, Jr. -------------------- ----------------------------- Wade H. Roberts, Jr. President and Chief Executive Officer (Principal Executive Officer) CERTIFICATION ------------- I, Stephen E. Markert, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of C&D Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. Date: September 13, 2002 /s/ Stephen E. Markert, Jr. -------------------- ----------------------------- Stephen E. Markert, Jr. Vice President Finance (Principal Financial and Accounting Officer) 26 EXHIBIT INDEX 10.1 Seventh Amendment dated as of June 21, 2002, to the credit agreement, dated as of March 1, 1999 among C&D, as borrower, certain subsidiaries and affiliates of C&D, as guarantors, the lenders named therein, and Bank of America, as administrative agent. 10.2 Employee Separation Agreement dated June 21, 2002 between Mark Amatrudo and C&D. 10.3 Employment Agreement dated July 24, 2002 between Robert Scott and C&D. 15. Letter from PricewaterhouseCoopers LLP, independent accountants for C&D, regarding unaudited interim financial information. 99.1 Certification of the President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of the Vice President, Finance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 27 EX-10 3 exb10-1.txt Exhibit 10.1 SEVENTH AMENDMENT THIS SEVENTH AMENDMENT (this "Amendment") dated as of June 21, 2002, to the Credit Agreement referenced below, is by and among C&D Technologies, Inc., a Delaware corporation (the "Borrower"), the Subsidiaries of the Borrower identified as "Guarantors" on the signature pages hereto, the Lenders identified on the signature pages hereto, and Bank of America, NA., a national banking association formerly known as NationsBank, N.A., as Administrative Agent (in such capacity, the "Administrative Agent"). Capitalized terms used herein but not otherwise defined herein shall have the meanings provided to such terms in the Credit Agreement. WITNESSETH WHEREAS, a $220 million credit facility has been extended to the Borrower pursuant to the terms of that Credit Agreement (as amended and modified from time to time, the "Credit Agreement") dated as of March 1, 1999 among the Borrower, the Guarantors identified therein, the Lenders identified therein and the Administrative Agent; WHEREAS, the Borrower has requested certain modifications to the Credit Agreement; WHEREAS, the Required Lenders have agreed to the requested modifications on the terms and conditions set forth herein. NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENTS. Clause (b) of Section 7.9 of the Credit Agreement is amended to read as follows: (b) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. As of the end of each fiscal quarter, the Consolidated Fixed Charge Coverage Ratio shall not be less than 2.0:1.0. 2. CONDITIONS PRECEDENT. This Amendment shall be effective as of the date hereof upon satisfaction of each of the following conditions precedent: (a) the execution of this Amendment by the Credit Parties and the Required Lenders; (b) receipt by the Administrative Agent, for the ratable benefit of the Lenders that executed and deliver this Amendment on or before June 21st, 2002, of an amendment fee of five basis points (0.05%) on the aggregate of the Revolving Commitments and outstanding Term Loans of such Lenders; and (c) receipt by the Administrative Agent of all other fees and expenses owing in connection with this Amendment. 3. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. The Credit Parties hereby represent and warrant that each of the representations and warranties set forth in the Credit Documents are true and correct as of the date hereof after giving effect to this Amendment (except those which expressly relate to an earlier period). 4. REAFFIRMATION OF GUARANTY. Each of the Guarantors (i) acknowledges and consents to all of the terms and conditions of this Amendment, (ii) affirms all of its obligations under the Credit Documents and (iii) agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge the Guarantors' obligations under the Credit Agreement or the other Credit Documents. 5. REAFFIRMATION OF LIENS. Each Credit Party (i) affirms that each of the security interests granted in or pursuant to the Security Agreement and Pledge Agreement are valid and subsisting and (ii) agrees that this Amendment shall in no manner impair or otherwise adversely effect any of the security interests granted in or pursuant to the Security Agreement and Pledge Agreement. 6. NO OTHER CHANGES. Except as modified hereby, all of the terms and provisions of the Credit Agreement and the other Credit Documents (including the schedules and exhibits thereto) shall remain in full force and effect. 7. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and it shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart. 8. GOVERNING LAW. This Amendment shall be deemed to be a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of New York. [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Seventh Amendment to be duly executed and delivered as of the date first above written. BORROWERS: C&D TECHNOLOGIES, INC., a Delaware corporation By: \S\ Stephen E. Markert, Jr. --------------------------- Name: Stephen E. Markert, Jr. Title: Chief Financial Officer GUARANTORS: C&D CHARTER HOLDINGS, INC. a Delaware corporation C&D INTERNATIONAL INVESTMENT HOLDINGS, INC., a Delaware corporation By: \S\ Robert T. Marley --------------------------- Name: Robert T. Marley Title: Vice President and Treasurer [Signature Pages Continue] LENDERS: BANK OF AMERICA, N.A., individually in its capacity as a Lender and in its capacity as Administrative Agent By: \S\ Robert M. Searson --------------------------- Name: Robert M. Searson Title: Senior Vice President CITIZENS BANK By: \S\ Mark Torie ------------------------- Name: Mark Torie Title: Vice President COMERICA BANK By: \S\ Robert P. Wilson ------------------------- Name: Robert P. Wilson Title: Vice President ALLFIRST BANK By: \S\ Kellie M. Matthews ------------------------- Name: Kellie M. Matthews Title: Senior Vice President THE BANK OF NEW YORK By: \S\ Evan M. Graham ------------------------- Name: Evan M. Graham Title: Vice President LASALLE NATIONAL BANK By: \S\ Stephen L. Mayer ------------------------- Name: Stephen L. Mayer Title: First Vice President [Signature Pages Continue] WACHOVIA BANK, NATIONAL ASSOCIATION By: \S\ Donald E. Sellers, Jr. ------------------------- Name: Donald E. Sellers, Jr. Title: Director PNC BANK, NATIONAL ASSOCIATION By: \S\ Daniel K. Fitzpatrick ------------------------- Name: Daniel K. Fitzpatrick Title: Vice President JP MORGAN CHASE By: \S\ Thomas F. Conroy, Jr. ------------------------- Name: Thomas F. Conroy, Jr. Title: Vice President FLEET BANK, N.A. By: \S\ Stacey A. Hamilton ------------------------- Name: Stacey A. Hamilton Title: Vice President EX-10 4 exb10-2.txt Exhibit 10.2 EMPLOYEE SEPARATION AGREEMENT This is an Employee Separation Agreement ("Agreement") between Mark Amatrudo (referred to herein as "Mr. Amatrudo" or "Employee") and C&D Technologies, Inc. (referred to herein as "C&D" or "Company") setting forth the terms of separation from employment of Employee. WITNESSETH WHEREAS, Employee is the Vice President, General Manager of the Motive Power Division for C&D, based in Blue Bell, Pennsylvania; and WHEREAS, the parties have mutually agreed to terminate the employment relationship on the terms set forth herein; WHEREAS, C&D has agreed to grant Employee certain consideration, set forth herein, which Employee acknowledges that C&D is not required to grant; and NOW, THEREFORE, Employee 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 Termination of Employment. ---------------------------------- a. Employee's employment by C&D will terminate on the earlier of (i) the date that Mr. Amatrudo commences full time employment with any third party; or (ii) 364 days following the Transition Date, as defined in Section 1(b) below (the "Effective Date"). C&D's records will reflect that this termination is a result of a voluntary resignation. b. Beginning July 1, 2002 or such later date as the parties may agree, but in any event no later than September 1, 2002 (the "Transition Date") and until the Effective Date, Mr. Amatrudo's job title shall be Vice President, Special Projects; however, effective upon the Transition Date, employee shall not be required to regularly attend work, but shall occasionally perform such assignments, if any, as may be communicated to him in writing, by either of the President and Chief Executive Officer or the Board of Directors of C&D. 2. Additional Consideration. ------------------------ Provided that Mr. Amatrudo accepts all of the terms and conditions of this Agreement and does not revoke his acceptance as provided in Section 8, below, C&D shall provide salary continuation, paid bi-weekly, through the Effective Date, at the rate of one-half of Mr. Amatrudo's then-current annual base salary (less applicable federal, state, and local payroll and other taxes as well as deductions for outstanding loan payments under that certain Promissory Note dated January 11, 2002, which is incorporated herein by reference), in addition to certain other consideration described below, all of which shall collectively be referred to as the "Additional Consideration". Employee acknowledges C&D is not obligated to grant the Additional Consideration. Employee's current base salary, stated in annual terms, shall be deemed to be $150,000 for any period of time during which Motive Power employees are subject to a salary reduction action and $160,000, stated in annual terms, for any periods thereafter during which he is entitled to be paid salary continuation pursuant to the terms of this Agreement. 3. Fringe Benefits. --------------- a. Through the Effective Date, Mr. Amatrudo may continue to participate in the Company's medical, dental and life insurance programs as Mr. Amatrudo participated on May 24, 2002, the costs for which shall be those applicable to employees earning $100,000 or greater per year. Thereafter, Mr. Amatrudo may continue, at his expense, his medical and dental insurance benefits to the extent permitted by the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). If Mr. Amatrudo should make application for and be determined to be eligible to receive short-term disability payments, qualifying payments would be made by the Company in accordance with the terms of the Plan, and at the bi-weekly rate specified in Section 2 of this Agreement (i.e., no double payments). Provided that Mr. Amatrudo does not notify C&D in writing to cancel and cease taking payroll deductions for his long-term disability insurance coverage before such date, Mr. Amatrudo may participate in the company-sponsored long-term disability plan through the Effective Date in accordance with its terms. If requested to do so, C&D will report truthfully to the carrier that Mr. Amatrudo's annualized base salary during his employment with C&D was $160,000. b. Employee's earned but unused vacation time, if any, shall be subsumed within the time between the Transition Date and the Effective Date and shall not be separately paid for. No additional vacation time shall accrue through the Effective Date. c. Through the Effective Date, Mr. Amatrudo may continue to participate in the C&D Savings 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. Mr. Amatrudo may also continue to participate in the Deferred Compensation Plan and Supplemental Executive Retirement Plan in accordance with the terms of the respective Plans through the Effective Date. d. Mr. Amatrudo 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, Mr. Amatrudo 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, Mr. Amatrudo 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 Insider Trading Policy; accordingly, all purchases and sales of C&D stock 2 must be pre-cleared with either of the Vice President, Finance or Vice President, General Counsel of C&D. From the Transition Date through the Effective Date, Employee will not be subject to the Company's Executive Stock Ownership guidelines. e. Mr. Amatrudo will not be eligible to participate in, and acknowledges that he is not entitled to receive any payments or other awards under any Management Incentive Compensation Plan ("MICP") or any other bonus arrangement with C&D; provided, however, (i) that in its sole discretion, the President, Chief Executive Officer and/or the Compensation Committee of the Board of Directors may consider whether any discretionary bonus will be paid; and (ii) C&D agrees to pay Mr. Amatrudo the sum of $12,500, net of standard deductions ("Agreed Bonus") within ten (10) business days following the execution of the Release referred to in Section 4 hereof. Notwithstanding the preceding sentence, in the event that MICP bonuses are paid to C&D senior management, generally, prior to the Effective Date, Mr. Amatrudo shall be entitled to receive one-half of the Agreed Bonus, net of standard deductions, upon execution of an interim Release (in a form satisfactory to C&D) covering the period from the Transition Date through the date on which the Agreed Bonus is paid. Mr. Amatrudo will not be eligible to receive any further stock option grants or salary increases through the Effective Date, nor, except as otherwise noted in Section 2 hereof, will Mr. Amatrudo be subject to salary reductions or unpaid time off for furloughs that may apply to the Motive Power Division or C&D employees, generally. Mr. Amatrudo shall not be eligible for a Company-paid executive physical examination prior to the Effective Date. f. Mr. Amatrudo shall not be eligible to continue to receive reimbursement for executive financial planning following the Transition Date. Mr. Amatrudo shall be eligible for reimbursement for financial planning assistance for fees reasonably incurred before the Transition Date. g. Except for accrued benefits under C&D employee benefit plans in which Employee may currently participate, all other employee benefits not specifically continued by this Agreement shall terminate on the Effective Date. h. Mr. Amatrudo acknowledges that the Company may, from time to time, in its sole discretion, modify or amend any or all of the plans in which he may participate to apply to C&D employees generally (including Mr. Amatrudo). 4. Execution of a Release by Mr. Amatrudo. -------------------------------------- In consideration of the Additional Consideration described in Sections 1, (a) and (b), 2, 3 (a), (c), (d) and (e) hereof, which Mr. Amatrudo acknowledges that C&D is not required or obligated to pay or otherwise provide for, Mr. Amatrudo agrees to executive the release which is attached hereto as Exhibit A within five (5) days following the Effective Date. 3 5. General Release. --------------- After having had a reasonable opportunity to review this Agreement and an opportunity to consult with an advisor or an attorney of Employee's choice, Employee on Employee's own behalf, and on behalf of Employee's heirs, administrators and assigns, knowingly and voluntarily releases, remises and forever discharges C&D, its subsidiaries, parent and related companies and their predecessors, successors and assigns, and each of their respective officers, directors, employees, stockholders, insurers agents and attorneys and all those charged or chargeable with liability on their behalf (collectively "Releasees"), from any and all rights or claims, causes of action, liability, damages, attorneys' fees and costs of any kind or nature which Employee has or may have against Releasees, including, but not limited to those rights or claims arising out of or in any way connected with Employee's employment by C&D or Employee's separation from employment by C&D, claims for wages, stock or profits, claims of wrongful discharge in violation of public policy or on any other grounds, breach of contract (whether express or implied), breach of the covenant of good faith and fair dealing, intentional or negligent infliction of emotional distress, defamation, negligence, misrepresentation, fraud, violation of public policy, other torts (whether based on statute or common law), claims for payment of attorneys' fees (whether based on contract, statute or common law), claims of discrimination on the basis of race, gender, color, religion, marital status, national origin, handicap or disability, or veteran's status, and any and all claims arising out of or relating to any federal, Pennsylvania, Connecticut, other state or local statutes, ordinances, regulations, orders or common law, labor relations, fair employment and equal employment laws, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. ss. 2000e-1, et seq., 42 U.S.C. ss. 12101, et seq., the Family and Medical Leave Act of 1993, the Employee Retirement Income Security Act of 1974, the Consolidated Omnibus Budget Reconciliation Act of 1985, the National Labor Relations Act, the Fair Labor Standards Act, the Occupational Safety and Health Act, the Pennsylvania Wage and Hour laws, the Pennsylvania Wage Payment and Collection Law (PWPCL), the Pennsylvania Human Relations Act (PHRA) that Employee 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. 6. 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 Employee's choice, Employee, Employee's 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 and agents and all those charged or chargeable with liability on their behalf, of and from any and all rights or claims which Employee 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. 4 7. 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 that Employee: a. 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 Employee is not otherwise entitled; b. has been advised in writing by C&D to consult with an attorney in connection with this Agreement and Employee's decision to waive Employee's rights or claims under the ADEA; c. has been given a period of at least twenty-one (21) days within which to consider this Agreement and Employee's decision to waive Employee's rights or claims under the ADEA; and d. has been informed by C&D and understands that Employee 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. 8. Revocation of this Agreement. ---------------------------- In the event that Employee chooses to revoke Employee's acceptance of this Agreement, Employee 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) calendar days of the date that Employee signs this Agreement. Notice to C&D shall be given to the Vice President, Human Resources, C&D Technologies, 1400 Union Meeting Road, Blue Bell, Pennsylvania 19422. 9. Covenant Not To Sue. ------------------- Employee agrees and covenants that Employee has not and will not bring any action, or file any claims against C&D and its subsidiary and related companies, or any of their respective officers, directors, employees or agents, past and present, individually or collectively, which relates in any way to Employee's employment or Employee's separation from employment by C&D. 10. Non-Disparagement. ----------------- Employee 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 Employee's case, concerning C&D's officers, directors, employees, agents, products or services, either verbally, in 5 writing, or in any other manner, to any third party for any purpose whatsoever, unless a legal duty to do so is imposed. 11. Nondisclosure of Information. ---------------------------- a. Employee acknowledges that by reason of his employment with C&D, Employee came into possession of confidential information regarding the business and operations of C&D, including, without limitation, trade secrets, proprietary information, internal financial information, financial, marketing and strategic plans, product costs, customer lists, pricing, and key contact information, dealer and supplier data, inventions, new product plans, pending patent applications, formulas, proprietary compounds, product styles, manufacturing processes, manufacturing equipment, present or anticipated methods of doing business, key personnel information, organizational charts, and database information, whether or not marked "confidential" ("Confidential Business Information"), and that unauthorized use or disclosure of Confidential Business Information would irreparably damage C&D. Employee agrees that he will forever keep confidential all Confidential Business Information of which Employee learned or came into possession while an employee of C&D, and Employee will not disclose or use C&D's Confidential Business Information. b. Employee acknowledges that Employee signed an "Agreement Relating to Intellectual Property and Confidential Information" with C&D on December 28, 2000 ("Confidentiality Agreement"). Employee acknowledges and reaffirms the obligations and duties Employee assumed under the Confidentiality Agreement and agrees that Employee shall continue to abide by the terms of the Confidentiality Agreement after the termination of Employee's employment. 12. Return of Property. ------------------ Mr. Amatrudo 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 or dissimilar information without regard to the form in which it is maintained. Mr. Amatrudo 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. Mr. Amatrudo further agrees to return all Company credit cards, computers, printers, cellular telephones and any similar or dissimilar items prior to the Effective Date and that he will use them exclusively for the conduct of C&D business. 13. Non-Solicitation of Employees and Customers. ------------------------------------------- a. Mr. Amatrudo 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. 6 b. Mr. Amatrudo agrees that beginning on the Transition Date and for a period of one-hundred eighty (180) days after the Effective Date, he shall 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 Mr. Amatrudo had any contact during the eighteen month period prior to the Transition Date 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. 14. Non-Competition. --------------- a. Mr. Amatrudo 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, as of the Effective Date, 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; provided, however, that nothing herein (i) shall prevent Mr. Amatrudo from investing without limit in the securities of any company listed on a national securities exchange, provided that his involvement 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. The parties hereto intend that the covenant contained in this Section 14 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 14, 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 14. 15. Enforcement. ----------- Mr. Amatrudo acknowledges that he has received sufficient consideration for the covenants and restrictions contained in this Agreement including, without limitation, those set forth in Sections 9, 11, 13 and 14 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. Mr. Amatrudo also acknowledges that monetary damages would be an inadequate remedy for a breach by Mr. Amatrudo of the promises contained in Sections 9, 11, 13 and 14 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 Mr. Amatrudo. Mr. Amatrudo agrees that the time period of the obligations set forth in Sections 9, 11, 13 and 14 of this Agreement shall be extended 7 by any amount of time during which he is in violation of the obligations set forth therein. Mr. Amatrudo 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 9, 11, 13 and 14 of this Agreement. 16. Cooperation with C&D/Acknowledgement of Payment. ----------------------------------------------- a. Mr. Amatrudo 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 Mr. Amatrudo 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. C&D shall reimburse Mr. Amatrudo for any out-of-pocket expenses incurred in connection therewith b. Mr. Amatrudo acknowledges that all monies that he has earned in connection with his employment with C&D have been paid. 17. Reemployment or Reinstatement. ----------------------------- Mr. Amatrudo acknowledges that he has been advised that he should have no expectation whatever of future 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. 18. Breach. ------ Mr. Amatrudo 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 Sections 5, 6, 7 and 9. 19. Nature of Agreement. ------------------- It is understood and agreed by Mr. Amatrudo 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. 8 20. Choice of Law and Selection of Forum. ------------------------------------ This Agreement shall be interpreted, enforced, and governed under the laws of the Commonwealth of Pennsylvania. 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. ------------------------------------------- Mr. Amatrudo 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. 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 Mr. Amatrudo 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. /s/ Mark Amatrudo 6/21/02 ---------------------------- ---------------------- Mark Amatrudo Date C&D TECHNOLOGIES, INC. By: /s/ Linda R. Hansen 6/21/02 ------------------------------ ---------------------- Title: Vice President Date ------------------------ 9 EX-10 5 exb10-3.txt Exhibit 10.3 July 24, 2002 Mr. Robert Scott 4210 Evasdale Road Columbus, OH 43214 Dear Bob: 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, effective as of July 15, 2002, 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 and will terminate on September 30, 2003 (the "Termination Date"), 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") prior to the Termination Date. 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 $140,000 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, 2003 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 period equal to the lesser of (a) the 180 day period after the effective date of such termination; and (b) the period of time between the effective date of such termination and September 30, 2003 , 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) Effective July 15, 2002 and during the term of your employment hereunder, including any renewal thereof, you agree to serve as the Vice President, Motive Power Division of C&D Technologies, Inc. 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, based in such C&D location as the parties mutually agree. 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. (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 and its subsidiaries, if any, and shall not engage in any activity that conflicts or interferes with the performance of duties hereunder. (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 -2- 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. (d) You shall be eligible to participate in the Company's Management Incentive Compensation Plan for FY'03 on a pro-rata basis commencing on July 1, 2002 in accordance with the terms of the plan. Individual objectives will be established following the effective date of your employment. 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. In addition, you will be reimbursed for your living accommodations, meals and mileage up to a total aggregate limit of $2,500 per month, as soon as reasonably practicable following submission of documentation required by C&D standard policies and procedures. 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 or Canada, or any other country in which the -3- Motive Power 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 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, know-how, 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 (orany 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. -8- (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 -11- of 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 At-Will Employment and Intellectual Property and Confidential Information Protection dated April 3, 2002 ("Confidentiality Agreement") between you and the Company; provided, however, that if the terms of the Confidentiality Agreement shall be inconsistent with the provisions of this Agreement, the provisions of this Agreement shall prevail. In consideration of the execution of this Agreement, you agree to waive any entitlement to a "Success Bonus" or any other payments or claims pursuant to the Offer Letter dated April 2, 2002 and hereby release C&D from any liability therefor. 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 -12- invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and 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. -13- 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. 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 H. Roberts ----------------------------- Title: President -------------------------- Agreed as of the date first above written: /s/ Robert Scott - ------------------------------------------ Robert Scott -14- EXHIBIT A RELEASE This Release is made this _____ day of _______________, ____ by and between C&D Technologies, Inc. ("Employer") and _________________ ("Employee"). RECITALS: WHEREAS, the parties are parties to an Employment Agreement (the "Employment Agreement") dated __________, pursuant to which Employee was employed by Employer; and WHEREAS, the Employment Agreement has terminated; and WHEREAS, your execution and delivery of this Release is a condition to the Employer's obligations to pay certain compensation and benefits to you under the Employment Agreement; 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 As of _____________________, ____, Employee's employment with Employer shall terminate, and Employee shall have no further job responsibilities to perform for Employer; provided, however, that Employee shall cooperate with Employer in transitioning Employee's job responsibilities as Employer shall reasonably request, provided that Employee shall be entitled to receive reasonable compensation for any services rendered after such date and shall not be obligated to take any action that would interfere with any subsequent employment of Employee or otherwise result in economic hardship to Employee. 2 Employer shall pay to the Employee the amounts contemplated pursuant to Section __ of the Employment Agreement, less applicable deductions; provided however, the first payment shall not be due and payable until ten days after the execution by Employee and delivery to Employer of this Release. 3 For and in consideration of the monies and benefits paid to Employee by Employer, as more fully described in Section 2 above, and for other good and valuable consideration, Employee hereby waives, releases and forever discharges Employer, its assigns, predecessors, successors, and affiliated entities, and its current or former stockholders, officers, directors, administrators, agents, servants and employees, individually and as representatives of the corporate entity (hereinafter collectively referred to as "Releasees"), from any and all claims, suits, debts, dues, accounts, reckonings, bonds, bills, specialties, covenants, contracts, bonuses, controversies, agreements, promises, charges, complaints, damages, sums of money, interest, attorney's fees and costs, or causes of action of any kind or nature whatsoever whether in law or equity, including, but not limited to, all claims arising out of his/her employment or termination of employment with Employer, such as all A-1 claims for wrongful discharge, breach of contract, either express or implied, interference with contract, emotional distress, fraud, misrepresentation, defamation, claims arising under the Civil Rights Acts of 1964 and 1991 as amended, the Americans With Disabilities Act, the Age Discrimination in Employment Act (ADEA), the National Labor Relations Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974 (ERISA), the Family and Medical Leave Act, the Pennsylvania Human Relations Act, the Pennsylvania Wage Payment & Collection Law, the Pennsylvania Minimum Wage Act of 1968, the Pennsylvania Equal Pay Law, and any and all other claims arising under federal, state or local law, rule, regulation, constitution, ordinance or public policy whether known or unknown, arising up to and including the date of execution of this Release; provided, however that the parties do not release each other from any claim of breach of the terms of this Release. This release of rights does not extend to claims that may arise after the date of this Release. Employee agrees that Employee will not initiate any charge or complaint or institute any claim or lawsuit against Releasees or any of them based on any fact or circumstance occurring up to and including the date of the execution by Employee of this Release. 4 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. 5 Employee affirms that the only consideration for the signing of this Release are the terms stated herein and in the Employment Agreement 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. 6 Employee and Employer affirm that the Employment Agreement 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. 7 Employee acknowledges that Employee has been given a period of at least 21 days within which to consider this Release. 8 Following the execution of this Release, the Employee has a period of 7 days from the date of execution to revoke this Release, and this Release shall not become effective or enforceable until the revocation period has expired. A-2 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 Section 2 above. IN WITNESS WHEREOF, Employee and the authorized representative of Employer have executed this Release on the dates indicated below: C&D TECHNOLOGIES, INC. Dated:_____________________ By:______________________________ Title:___________________________ Dated:_____________________ _________________________________ A-3 EX-15 6 exb15.txt EXHIBIT 15 September 12, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 Commissioners: We are aware that our report dated August 21, 2002 on our review of interim financial information of C&D Technologies, Inc. and Subsidiaries (the "Company") as of and for the period ended July 31, 2002 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 EX-99 7 exb99-1.txt Exhibit 99.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of C&D Technologies, Inc. ("C&D"), that, to his knowledge, the Quarterly Report of C&D on Form 10-Q for the period ended July 31, 2002, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of C&D. Date: September 13, 2002 /S/ Wade H. Roberts, Jr. ------------------ ----------------------------------- Wade H. Roberts, Jr. President and Chief Executive Officer (Principal Executive Officer) EX-99 8 exb99-2.txt Exhibit 99.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of C&D Technologies, Inc. ("C&D"), that, to his knowledge, the Quarterly Report of C&D on Form 10-Q for the period ended July 31, 2002, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of C&D. Date: September 13, 2002 /s/ Stephen E. Markert, Jr. ------------------ ----------------------------------- Stephen E. Markert, Jr. Vice President Finance (Principal Financial and Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----