EXIDE TECHNOLOGIES
As filed with the Securities and Exchange Commission on
August 24, 2006
No. 333-135564
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Amendment No. 4
To
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EXIDE TECHNOLOGIES
(Exact name of registrant as
specified in its charter)
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Delaware
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23-0552730
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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13000 Deerfield Parkway
Building 200
Alpharetta, GA 30004
(678) 566-9000
(Address, including zip code,
and telephone number,
including area code, of
registrants principal executive offices)
Barbara A. Hatcher
Executive Vice President and General Counsel
Exide Technologies
13000 Deerfield Parkway
Building 200
Alpharetta, GA 30004
(678) 566-9000
(Name, address, including zip
code, and telephone number,
including area code, of agent for service)
Copies of all communications, including communications
sent to agent for service, should be sent to:
Carter W. Emerson, P.C.
Kirkland & Ellis LLP
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-2000
Approximate date of commencement of proposed sale to the
public: From time to time on or after the
effective date of this Registration Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following
box. o
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, other than
securities offered only in connection with dividend or interest
reinvestment plans, check the following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box. o
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
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SUBJECT TO COMPLETION, DATED
AUGUST 24, 2006
PROSPECTUS
Common Stock
Rights to Purchase up to
21,428,571 Shares
of Common Stock at
$3.50 per Share
We are distributing at no charge to holders of our common stock
non-transferable subscription rights to purchase shares of our
common stock. You will receive 0.85753 of a subscription right
for each share of common stock owned at the close of business on
August 23, 2006, subject to adjustments to eliminate
fractional rights. We are distributing subscription rights
exercisable for up to 21,428,571 shares of our common
stock. The 21,428,571 shares referred to here and elsewhere in
this prospectus include 2,893,883 shares which are being offered
in a separate private placement at the same price as that
offered in the rights offering to two of our shareholders who
are acting as standby purchasers in the rights offering and will
be receiving registration rights pursuant to a registration
rights agreement we will enter into with these shareholders, as
further described in The Rights Offering
Standby Commitments and Plan of Distribution.
Each full subscription right will entitle you to purchase
one share of our common stock at a subscription price of
$3.50 per share. The per share price is equal to a 20%
discount to the average closing price of our common stock for
the 30 trading day period ended July 6, 2006. The
subscription rights will expire if they are not exercised by
5:00 p.m., Eastern Daylight Time, on September 14,
2006, unless we extend this offering period, such extension not
to exceed 15 business days. You should carefully consider
whether to exercise your subscription rights before the
expiration of the rights offering. Unless we give you a right of
cancellation as a result of a fundamental (as determined by us)
change to the terms of the rights offering, all exercises of
subscription rights are irrevocable. Our board of directors is
making no recommendation regarding your exercise of the
subscription rights. The subscription rights may not be sold or
transferred.
If any rights remain unsubscribed after the closing of the
rights offering, two of our shareholders and one other investor
have agreed, subject to certain conditions, to purchase a number
of shares of our common stock equal to the number of shares not
subscribed for in the rights offering at a price per share equal
to the rights offering subscription price pursuant to a standby
purchase agreement. Two of such investors have also agreed to
purchase 14,285,714 additional shares of our common stock for
$3.50 per share subject to certain conditions.
We may cancel or terminate the rights offering at any time prior
to its expiration. If we terminate or cancel this offering, we
will return your subscription price, but without any payment of
interest.
The shares are being offered directly by us without the services
of an underwriter or selling agent.
Shares of our common stock are traded on the Nasdaq Global
Market under the symbol XIDE. On August 22,
2006, the closing sales price for our common stock was
$4.01 per share. The shares of common stock issued in the
rights offering will also be listed on the Nasdaq Global Market
under the same symbol.
The exercise of your subscription rights for shares of our
common stock involves risks. You should carefully consider the
risk factors beginning on page 4 of this prospectus before
exercising your subscription rights.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus
is ,
2006
TABLE OF
CONTENTS
You should rely only on the information contained or
incorporated by reference in this prospectus. We have not
authorized anyone to provide you with additional or different
information from that contained or incorporated by reference in
this prospectus. The information contained in this prospectus is
accurate only as of the date on the front cover of this
prospectus and any information we have incorporated by reference
is accurate only as of the date of the document incorporated by
reference, regardless of the time of delivery of this prospectus
or any exercise of the rights.
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QUESTIONS
AND ANSWERS RELATING TO THE RIGHTS OFFERING
What is a
rights offering?
We are distributing to holders of our common stock as of
5:00 p.m. Eastern Daylight Time on August 23, 2006,
the record date, at no charge, non-transferable
subscription rights to purchase shares of our common stock. You
will receive 0.85753 of a subscription right for each share of
common stock you owned at the close of business on the record
date, subject to adjustments to eliminate fractional rights. The
subscription rights will be evidenced by rights certificates.
What is a
right?
Each full right gives our shareholders the opportunity to
purchase one share of our common stock for $3.50 per share.
We have granted to you, as a shareholder of record on the record
date, 0.85753 of a right for each share of our common stock you
owned at that time. We determined the ratio of rights you will
receive per share by dividing the total number of shares we will
issue upon exercise of the rights (21,428,571) by our total
number of shares outstanding (24,988,768). For example, if
you owned 100 shares of our common stock on the record
date, you have the right to purchase 86 shares of common stock
for $3.50 per share. You may exercise any number of your
subscription rights, or you may choose not to exercise any
subscription rights.
If you hold your shares in the name of a broker, dealer or other
nominee who uses the services of the Depository Trust Company,
or DTC, DTC will issue 0.85753 of a right to the
nominee for each share of our common stock you own at the record
date, subject to adjustments to eliminate fractional rights.
Each full right can then be used to purchase one share of common
stock for $3.50 per share. As in the example above, if you owned
100 shares of our common stock on the record date, you have
the right to purchase 86 shares of common stock for
$3.50 per share.
We will not issue fractional subscription rights or cash in lieu
of fractional rights. Fractional subscription rights will be
rounded to the nearest whole number, with such adjustments as
may be necessary to ensure that we offer 21,428,571 shares
of common stock in the rights offering. In the unlikely event
that, due to the rounding of fractional subscription rights, the
rights offering would have been subscribed in an amount in
excess of 21,428,571 shares of common stock, all
holders subscription rights will be reduced in an
equitable manner. Any excess subscription funds will be promptly
returned without interest.
Why are
we conducting the rights offering?
We are making the rights offering and we are selling additional
shares of common stock to Tontine Capital Partners, L.P., or
Tontine, and Legg Mason Investment Trust, Inc., or
Legg Mason and together with Tontine, the
Standby Purchasers, in order to raise capital that
we intend to use to provide additional liquidity for working
capital, capital expenditures and general corporate purposes.
The Standby Purchasers may elect to assign some or all of their
rights to purchase shares of common stock to their designated
affiliates. We believe that the rights offering and sale of
additional shares of common stock to the Standby Purchasers will
strengthen our financial condition through generating additional
cash and increasing our stockholders equity. If we are
unable to raise capital in this manner, we may be required to
seek alternative sources of liquidity to satisfy our ongoing
operations, restructuring plans and capital expenditures and we
may not be able to obtain such alternative sources of liquidity
on commercially reasonable terms, if at all. If we are unable to
generate such additional liquidity, our financial condition
would be adversely affected.
How was
the $3.50 per share subscription price
determined?
Our Board of Directors determined the subscription price after
negotiations with the Standby Purchasers, considering the likely
cost of capital from other sources, the price at which our
principal shareholders might be willing to participate in the
rights offering, historical and current trading prices for our
common stock, our need for liquidity and capital and the need to
provide an incentive to our shareholders to participate in the
rights offering on a pro-rata basis. The subscription price for
a subscription right is $3.50 per share. The per share
price is equal to a 20% discount to the average closing price of
our common stock for the 30 trading day period ended
July 6, 2006. The
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subscription price is not necessarily related to our book value,
net worth or any other established criteria of value and may or
may not be considered the fair value of the common stock to be
offered in the rights offering.
Am I
required to exercise all of the rights I receive in the rights
offering?
No. You may exercise any number of your rights, or you may
choose not to exercise any rights. However, if you choose not to
fully exercise your rights, the relative percentage of our
common stock that you own will decrease and your voting and
other rights will be diluted.
Am I
required to exercise my rights if I vote to approve the rights
offering at the annual meeting?
No. How you vote at the annual meeting has no impact on your
decision as to whether to exercise your rights.
How soon
must I act to exercise my rights?
The rights may be exercised beginning on the date of this
prospectus through the expiration date, which is
September 14, 2006, at 5:00 p.m., Eastern Daylight
Time. If you elect to exercise any rights, the subscription
agent must actually receive all required documents and payments
from you at or before the expiration date. Although we have the
option of extending the expiration date of the subscription
period, we currently do not intend to do so.
May I
transfer my rights?
No. You may not sell or transfer your rights to anyone.
Are we
requiring a minimum subscription to complete the rights
offering?
No.
Can the
Board of Directors cancel, amend or extend the rights
offering?
Yes. Our Board of Directors may decide to cancel the rights
offering at any time prior to the expiration of the rights
offering and for any reason. If our Board of Directors cancels
the rights offering, we will issue a press release notifying
shareholders of the cancellation and any money received from
subscribing shareholders will be returned, without interest or
deduction, as soon as practicable.
We may amend or extend the subscription period of the rights
offering. We reserve the right to withdraw the rights offering
at any time prior to the expiration date and for any reason, in
which event all funds received in the rights offering will be
returned without interest or deduction to those persons who
subscribed for shares in the rights offering.
Has our
Board of Directors made a recommendation to our shareholders
regarding the rights offering?
Our Board of Directors will not make any recommendation to
shareholders regarding the exercise of rights under the rights
offering. Shareholders who exercise rights risk investment loss
on new money invested. We cannot assure you that the market
price for our common stock will remain above the subscription
price or that anyone purchasing shares at the subscription price
will be able to sell those shares in the future at the same
price or a higher price. For more information on the risks of
participating in the rights offering, see Risk
Factors.
What will
happen if I choose not to exercise my rights?
If you do not exercise any rights, the number of shares of our
common stock you own will not change; however, due to the fact
that shares will be purchased by other shareholders in the
rights offering, including the shares purchased by the Standby
Purchasers and the Additional Standby Purchaser pursuant to
their agreement to purchase any shares not subscribed for in the
rights offering, and the Standby Purchasers will be purchasing
additional shares of our common stock, your percentage ownership
after the exercise of the rights will be diluted.
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How do I
exercise my rights? What forms and payment are required to
purchase the shares of common stock?
If you wish to participate in the rights offering, you must take
the following steps:
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deliver payment to the subscription agent using the methods
outlined in this prospectus; and
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deliver a properly completed rights certificate to the
subscription agent before 5:00 p.m., Eastern Daylight Time,
on September 14, 2006.
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You may also use an alternate procedure called Notice of
Guaranteed Delivery, which gives you an extra three days
to deliver the rights certificate if the subscription agent
receives full payment before the expiration date of the
subscription period and a securities broker or qualified
financial institution signs the Notice of Guaranteed
Delivery form to guarantee that your properly completed
rights certificate will be timely delivered.
If you send a payment that is insufficient to purchase the
number of shares you requested, or if the number of shares you
requested is not specified in the forms, the payment received
will be applied to exercise the subscription privilege to the
extent of the payment. If the payment exceeds the subscription
price for the full exercise of the subscription privilege, the
excess will be returned to you as soon as practicable. You will
not receive interest on any payments refunded to you under the
rights offering.
When will
I receive my new shares?
If you purchase shares of common stock through the rights
offering, you will receive your new shares as soon as
practicable after the closing of the rights offering. Subject to
state securities laws and regulations, we have the discretion to
delay allocation and distribution of any shares you may elect to
purchase by exercise of your privilege in order to comply with
state securities laws.
After I
send in my payment and rights certificate, may I change or
cancel my exercise of rights?
No. Unless we give you a right of cancellation as a result of a
fundamental (as determined by us) change to the terms of the
rights offering, all exercises of rights are irrevocable, even
if you later learn information that you consider to be
unfavorable to the exercise of your rights. You should not
exercise your rights unless you are certain that you wish to
purchase additional shares of our common stock at a price of
$3.50 per share.
What should I do if I want to participate in the rights
offering, but my shares are held in the name of my broker,
dealer or other nominee?
If you hold your shares of our common stock in the name of a
broker, dealer or other nominee, then your broker, dealer or
other nominee is the record holder of the shares you own. The
record holder must exercise the rights on your behalf for the
shares of common stock you wish to purchase.
If you wish to participate in the rights offering and purchase
shares of common stock, please promptly contact the record
holder of your shares. We will ask your broker, dealer or other
nominee to notify you of the rights offering. You should
complete and return to your record holder the form entitled
Beneficial Owner Election Form. You should receive
this form from your record holder with the other rights offering
materials.
How much
money will the Company receive from the rights
offering?
If we sell all the shares being offered, we will receive
proceeds of $70.2 million after deducting estimated
offering expenses. While we are offering shares in the rights
offering with no minimum purchase requirement, the Standby
Purchasers and the Additional Standby Purchaser have agreed,
subject to certain conditions, to purchase a number of shares of
our common stock equal to the number of shares not subscribed
for in the rights offering at a price per share equal to the
rights offering subscription price. Accordingly, even if the
Standby Purchasers and the Additional Standby Purchaser are the
only participants in the rights offering, we expect to receive
proceeds from the rights offering of $70.2 million after
deducting estimated offering expenses. See Use of
Proceeds and The Rights Offering Standby
Commitments.
Are there
risks in exercising my subscription rights?
Yes. The exercise of your subscription rights involves risks.
Exercising your subscription rights means buying additional
shares of our common stock and should be considered as carefully
as you would consider any other
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equity investment. Among other things, you should carefully
consider the risks described under the heading Risk
Factors.
Is there
an over-subscription privilege?
No.
What is
the role of the Standby Purchasers and the Additional Standby
Purchaser in this offering?
In connection with the rights offering, we have entered into a
standby purchase agreement with the Standby Purchasers and the
Additional Standby Purchaser (the Standby
Agreement). The Standby Agreement obligates us to sell,
and requires the Standby Purchasers and the Additional Standby
Purchaser to purchase from us, any and all shares of our common
stock issuable upon the exercise of any rights that remain
unsubscribed at the close of the rights offering subscription
period. The price per share paid by the Standby Purchasers and
the Additional Standby Purchaser for such common stock will be
equal to the subscription price offered in the rights offering.
For a more complete description of the role of the Standby
Purchasers and the Additional Standby Purchaser in the rights
offering, see The Rights Offering Standby
Commitments and Plan of Distribution.
Are the
Standby Purchasers receiving any compensation for the standby
commitments?
Yes. As compensation to the Standby Purchasers for the standby
commitments, we agreed to sell, concurrently with the rights
offering, 14,285,714 additional shares of our common stock to
Standby Purchasers at the same subscription price applied to the
rights for gross proceeds of $50.0 million, and the Standby
Purchasers agreed to purchase such shares. In addition, if,
under certain circumstances provided for in the Standby
Agreement, the rights offering is not consummated or the Standby
Agreement is terminated, the Standby Purchasers have the option
to purchase up to 14,285,714 additional shares of common stock
from us at the same subscription price applied to the rights
offering if our shareholders approve the rights offering or, if
our shareholders do not approve the rights offering.
How many
shares will the Standby Purchasers and the Additional Standby
Purchaser own after the offering?
If no shareholders other than the Standby Purchasers and the
Additional Standby Purchaser exercise their subscription rights,
the Standby Purchasers and the Additional Standby Purchaser will
purchase up to 21,428,571 shares of our common stock in the
offering pursuant to their respective subscription rights
received as shareholders and their standby commitments. In that
case and taking into account the 14,285,714 shares the
Standby Purchasers will purchase from us separately and the
shares the Standby Purchasers and the Additional Standby
Purchaser currently own, the aggregate ownership interest of the
Standby Purchasers and the Additional Standby Purchaser in our
common stock could be approximately 64%, and the ownership
interest of the remaining shareholders could decrease to
approximately 36%. If the rights offering has not closed on
or prior to September 30, 2006, under certain
circumstances, the Standby Purchasers may purchase up to
$50.0 million of our common stock at $3.50 per share. If
the Standby Purchasers exercise this option in full, their
aggregate ownership in us would increase to approximately 43%.
See The Rights Offering Standby
Commitments.
How many
shares of common stock will be outstanding after the rights
offering and sale of additional shares of common stock to the
Standby Purchasers?
As of August 21, 2006, we had 24,988,768 shares of
common stock issued and outstanding. We expect to issue
21,428,571 shares in the rights offering and 14,285,714
additional shares in the separate sale to the Standby
Purchasers. After the rights offering and the sale of additional
shares to the Standby Purchasers we anticipate that we will have
60,703,053 shares of common stock outstanding.
Are there
any conditions to the standby commitments?
Yes. The obligation of the Standby Purchasers and the Additional
Standby Purchaser to fulfill the standby commitments will be
subject to a number of conditions. For a more detailed
description of the conditions to the Standby Purchasers
and the Additional Standby Purchasers standby commitments,
see The Rights Offering Standby
Commitments.
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Can Our
Board of Directors withdraw the rights offering?
Yes. Our Board of Directors may decide to withdraw the rights
offering at any time on or before the expiration of the rights
offering for any reason. If we withdraw the rights offering, any
money received from subscribing stockholders will be refunded
promptly, without interest. See The Rights
Offering Cancellation Rights.
If the
rights offering is not completed, will my subscription payment
be refunded to me?
Yes. The subscription agent will hold all funds it receives in a
segregated bank account until completion of the rights offering.
If the rights offering is not completed, we will immediately
instruct the subscription agent to return your payment in full.
If you own shares in street name, it may take longer
for you to receive payment because the subscription agent will
send payments through the record holder of your shares. You will
not be credited interest on your payment.
Will the
rights be listed on a stock exchange or national
market?
The rights will not be listed on the Nasdaq Global Market or any
other stock exchange or national market.
Our common stock and warrants will continue to trade on the
Nasdaq Global Market under the symbols XIDE and
XIDEW, respectively.
How do I
exercise my rights if I live outside the United
States?
The subscription agent will hold rights certificates for
shareholders having addresses outside the United States. In
order to exercise rights, holders with addresses outside the
United States must notify the subscription agent and timely
follow other procedures described in Rights
Offering Foreign Shareholders.
What fees
or charges apply if I purchase shares of common stock?
We are not charging any fee or sales commission to issue rights
to you or to issue shares to you if you exercise your rights. If
you exercise your rights through the record holder of your
shares, you are responsible for paying any fees your record
holder may charge you.
What are
the U.S. federal income tax consequences of exercising
rights?
For U.S. federal income tax purposes, you will not
recognize taxable income as a result of the distribution or
exercise of your rights unless the rights offering is part of a
disproportionate distribution within the meaning of
applicable tax rules (in which case you may recognize taxable
income upon receipt of the rights). We intend to take the
position that the rights offering will not be part of a
disproportionate distribution, but certain aspects of that
determination are unclear. For further information, see
U.S. Federal Income Tax Considerations. You
should, and are urged to, seek specific advice from your
personal tax advisor concerning the tax consequences of the
rights offering under your own tax situation.
To whom
should I send my forms and payment?
If your shares are held in the name of a broker, dealer or other
nominee, then you should send your subscription documents,
rights certificate and payment to that record holder. If you are
the record holder, then you should send your subscription
documents, rights certificate and payment by hand delivery,
first class mail or courier service to:
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By Mail or Overnight
Courier:
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By Hand:
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American Stock Transfer &
Trust Company
Operations Center
Attn: Reorganization Department
6201 15th Avenue
Brooklyn, NY 11219
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American Stock Transfer &
Trust Company
Attn: Reorganization Department
59 Maiden Lane
New York, NY 10038
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You are solely responsible for completing delivery to the
subscription agent of your subscription documents, rights
certificate and payment. We urge you to allow sufficient time
for delivery of your subscription materials to the subscription
agent.
Who
should I contact if I have other questions?
If you have other questions or need assistance, please contact
the information agent, Georgeson Shareholder Communications Inc.
at
(888) 206-5896.
vi
SUMMARY
This summary highlights information contained elsewhere in this
document. This summary is not complete and may not contain all
of the information that you should consider before deciding
whether or not you should exercise your rights. You should read
the entire document carefully. References in this prospectus to:
Exide, the Company, we,
us and our refer to Exide Technologies
and its consolidated subsidiaries.
Our
Business
We are a global producer and recycler of lead acid batteries. We
provide a comprehensive range of stored electrical energy
products and services for transportation and industrial
applications. Transportation markets include original-equipment
and aftermarket automotive, heavy-duty truck, agricultural and
marine applications. Industrial markets include batteries for
telecommunications systems, fuel-cell load leveling, electric
utilities, railroads, uninterruptible power supply, lift trucks,
mining and other commercial vehicles. Our many brands include
Exide®,
Absolyte®,
Centratm,
Classic®,
DETA®,
Fulmen®,
GNBtm,
Liberatortm,
Marathon®,
Sonnenschein®
and
Tudor®.
We are a Delaware corporation organized in 1966 to succeed to
the business of a New Jersey corporation founded in 1888. Our
principal executive offices are located at 13000 Deerfield
Parkway, Building 200, Alpharetta, Georgia 30004. Our phone
number is
(678) 566-9000.
More comprehensive information about us and our products is
available through our Internet website at www.exide.com. The
information contained on our website, or other sites linked to
it, is not incorporated by reference into this prospectus.
The
Rights Offering
Further details concerning this part of the summary are set
forth under Rights Offering. Only
holders of record of our common stock on the record date may
exercise rights.
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Securities offered |
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We are distributing to you, at no charge, 0.85753 of a
non-transferable subscription right for every one share of our
common stock that you owned on the record date, either as a
holder of record or, in the case of shares held of record by
brokers, banks or other nominees, on your behalf, as a
beneficial owner of such shares, subject to adjustments to
eliminate fractional rights. We expect the gross proceeds from
the rights offering to be $75.0 million. In addition, we are
selling to the Standby Purchasers additional shares of common
stock at the rights offering subscription price for gross
proceeds of $50.0 million. |
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Subscription privilege |
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Each full right gives you the opportunity to purchase
one share of our common stock for $3.50 per share. |
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Record date |
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5:00 p.m. Eastern Daylight Time on August 23, 2006. |
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Expiration date |
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5:00 p.m. Eastern Daylight Time on September 14, 2006. |
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Subscription price |
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$3.50 per share, payable in cash, which is a 20% discount to the
average closing price of our common stock for the
30 trading day period ending July 6, 2006. All
payments must be cleared on or before the expiration date. |
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Use of proceeds |
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We intend to use the proceeds of the rights offering to provide
additional liquidity for working capital, capital expenditures
and general corporate purposes. |
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Non-transferability of rights |
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The subscription rights may not be sold, transferred or
assigned, and will not be listed for trading on the Nasdaq
Global Market or on any stock exchange or market or on the OTC
Bulletin Board. |
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No board recommendation |
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Our Board of Directors makes no recommendation to you about
whether you should exercise any rights. You are urged to make
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decision based on your own assessment of our business and the
rights offering. Please see Risk Factors for a
discussion of some of the risks involved in investing in our
common stock. |
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Standby commitment |
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Subject to certain conditions, the Standby Agreement requires
the Standby Purchasers and the Additional Standby Purchaser to
purchase a number of shares of our common stock equal to the
number of shares not subscribed for in the rights offering at a
price per share equal to the rights offering subscription price.
In addition, the Standby Purchasers have agreed, pursuant to the
Standby Agreement to purchase additional shares of our common
stock at a price per share equal to the rights offering
subscription price. |
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No revocation |
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If you exercise any of your rights, you are not allowed to
revoke or change the exercise or request a refund of monies paid. |
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U.S. federal income tax considerations |
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For U.S. federal income tax purposes, you will not
recognize taxable income as a result of the distribution or
exercise of your rights unless the rights offering is part of a
disproportionate distribution within the meaning of
applicable tax rules (in which case you may recognize taxable
income upon receipt of the rights). We intend to take the
position that the rights offering will not be part of a
disproportionate distribution, but certain aspects of that
determination are unclear. For further information, see
U.S. Federal Income Tax Considerations. You
should, and are urged to, seek specific advice from your
personal tax advisor concerning the tax consequences of the
rights offering under your own tax situation. |
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Extension, withdrawal, cancellation and amendment |
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We have the option, with the approval of the Standby Purchasers,
to extend the rights offering and the period for exercising your
subscription rights, for a period not to exceed 15 business
days, although we do not presently intend to do so. Our Board of
Directors may cancel the rights offering in its sole discretion
at any time prior to or on the expiration of the rights offering
for any reason (including, without limitation, a change in the
market price of our common stock). We also reserve the right to
withdraw or terminate the rights offering at any time for any
reason. In the event that the rights offering is cancelled,
withdrawn or terminated, all funds received from subscriptions
by shareholders will be returned. Interest will not be payable
on any returned funds. We also reserve the right to amend the
terms of the rights offering. |
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Procedure for exercising rights |
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To exercise rights, you must complete the rights certificate and
deliver it to the subscription agent, American Stock Transfer
& Trust Company, together with full payment for all the
subscription rights you elect to exercise. The subscription
agent must receive the proper forms and payments on or before
the expiration of the rights offering. You may deliver the
documents and payments by mail or commercial currier. If regular
mail is used for this purpose, we recommend using registered
mail, properly insured, with return receipt requested. |
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Subscription agent |
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American Stock Transfer & Trust Company. |
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Information agent |
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Georgeson Shareholder Communications Inc. |
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Questions |
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Questions regarding the rights offering should be directed to
the information agent, Georgeson Shareholder Communications Inc.
at (888) 206-5896. |
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Shares outstanding before the rights offering and sale of
additional shares of common stock to the Standby Purchasers |
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24,988,768 shares as of August 21, 2006. |
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Shares outstanding after completion of the rights offering and
sale of additional shares of common stock to the Standby
Purchasers |
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60,703,053 shares of our common stock will be outstanding
immediately after completion of the rights offering and sale of
additional shares of common stock to the Standby Purchasers. |
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Risk factors |
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Shareholders considering making an investment in the rights
offering should consider the risk factors described in
Risk Factors. |
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Fees and expenses |
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We will bear the fees and expenses relating to the rights
offering. |
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Nasdaq Global Market trading symbol |
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Shares of our common stock are currently listed for quotation on
the Nasdaq Global Market under the symbol XIDE. |
Risk
Factors
Before you invest in the rights offering, you should be aware
that there are various risks associated with your investment,
including the risks described in the section entitled Risk
Factors beginning on page 4 and the risks that we
have highlighted in other sections of this prospectus. You
should carefully read and consider these risk factors together
with all of the other information included in this prospectus
before you decide to exercise your rights to purchase shares of
our common stock.
3
RISK
FACTORS
An investment in our common stock involves a high degree of
risk. You should carefully consider the risks described below,
together with the other information contained in this
prospectus, before making a decision to invest in our common
stock. The risks described below are not the only risks we face.
Additional risks and uncertainties not currently known to us or
that we currently deem to be immaterial may also materially and
adversely affect our business operations. If any of the
following risks actually occurs, our business, results of
operations and financial condition could suffer. In that case,
the trading price of our common stock could decline, and you may
lose all or part of your investment.
Risks
Related to Our Business
We have experienced significant increases in raw material
prices, particularly lead, and further changes in the prices of
raw materials or in energy costs could have a material adverse
impact on our business and financial condition.
Lead is the primary material by weight used in the manufacture
of batteries, representing approximately one-third of our cost
of goods sold. Average lead prices quoted on the London Metal
Exchange (the LME) have risen dramatically,
increasing from $920.00 per metric tonne for fiscal 2005 to
$1,041.00 per metric tonne for fiscal 2006. As of
August 4, 2006, lead prices quoted on the LME were
$1,135.00 per metric tonne. If we are unable to increase
the prices of our products proportionate to the increase in raw
material costs, our gross margins will decline. We cannot
provide assurance that we will be able to hedge our lead
requirements at reasonable costs or that we will be able to pass
on these costs to our customers. Increases in our prices could
also cause customer demand for our products to be reduced and
net sales to decline. The rising cost of lead requires us to
make significant investments in inventory and accounts
receivable, which reduces amounts of cash available for other
purposes, including making payments on our notes and other
indebtedness. We also consume significant amounts of steel and
other materials in our manufacturing process and incur energy
costs in connection with manufacturing and shipping of our
products. The market prices of these materials are also subject
to fluctuation, which could further reduce our available cash.
Our liquidity position remains constrained. If we fail to
meet our operations objectives and the shortfall is not replaced
through other means, including the rights offering and sale of
additional shares, the lack of liquidity would have a material
adverse impact on our business and financial condition.
Our current liquidity position remains constrained. We have an
operational plan that would provide adequate liquidity to fund
our operations through the remainder of this fiscal year. We
have reduced our planned capital expenditures and planned
restructuring activities in order to provide additional
liquidity.
If we fail to meet our operations objectives, including working
capital reductions, and if such shortfall is not replaced
through proceeds from the rights offering and sale of additional
shares or other means, the lack of liquidity would have a
material adverse impact on our ability to fund our operations
and financial obligations and cause us to evaluate a
restructuring of our obligations.
The going concern modification received from our
independent registered public accounting firm for the fiscal
year ended March 31, 2006 could cause adverse reactions
from our creditors, vendors, customers and others.
Our financial statements for our fiscal year ended
March 31, 2006 contain an audit report from our independent
accounting firm PricewaterhouseCoopers LLP that contains a
going concern modification, stating that the
uncertainty with respect to our ability to maintain compliance
with our financial covenants through fiscal 2007 raises
substantial doubt about our ability to continue as a going
concern. This going concern modification was based on our
suffering recurring losses and negative cash flows from
operations and our inability to comply with one or more of the
covenants of our senior secured credit facility during fiscal
2005 and fiscal 2006. There is no assurance that we will be able
to meet our fiscal 2007 business plan and be in compliance with
our senior secured credit facility through the period as of
March 31, 2007. This going concern modification could
create concerns on the part of our creditors, vendors, customers
and others about whether we will be able to fulfill our
contractual obligations and otherwise continue to operate our
business, which could result in a tightening of our liquidity.
The going concern modification could also be perceived
negatively by the capital markets, which could adversely affect
the prices of our common stock as well as our ability to raise
capital.
4
We are subject to a preliminary SEC inquiry.
The Enforcement Division of the U.S. Securities and Exchange
Commission (the SEC) has told us that it has
commenced a preliminary inquiry into statements we made during
fiscal 2006 about our ability to comply with fiscal 2005 loan
covenants and the going concern modification in the audit report
in our annual report on
Form 10-K
for fiscal 2005, which we filed with the SEC in June 2005. If
the preliminary inquiry results in a formal investigation, it
could have a material adverse effect on our financial position,
results of operations and cash flows.
We are subject to fluctuations in exchange rates and other
risks associated with our
non-U.S. operations
which could adversely affect our results of operations.
We have significant manufacturing operations in, and export to,
several countries outside the United States. Approximately 58%
of our net sales for fiscal 2006 were generated in Europe, Asia
and Australia, with the vast majority generated in Europe in
Euros and British Pounds. Because such a significant portion of
our operations is based overseas, we are exposed to foreign
currency risk, resulting in uncertainty as to future assets and
liability values, and results of operations that are denominated
in foreign currencies. We invoice foreign sales and service
transactions in local currencies, using actual exchange rates
during the period, and translate these revenues and expenses
into U.S. dollars at average monthly exchange rates.
Because a significant portion of our net sales and expenses are
denominated in foreign currencies, the depreciation of these
foreign currencies in relation to the U.S. dollar could
adversely affect our reported net sales and operating margins.
We translate our
non-U.S. assets
and liabilities into U.S. dollars using current rates as of
the balance sheet date. Therefore, foreign currency depreciation
against the U.S. dollar would result in a decrease of our
net investment in foreign subsidiaries.
In addition, foreign currency depreciation, particularly
depreciation of the Euro, would make it more expensive for our
non-U.S. subsidiaries
to purchase certain of our raw material commodities that are
priced globally in U.S. dollars, such as lead, which is
quoted on the LME in U.S. dollars. We do not engage in
significant hedging of our foreign currency exposure and cannot
assure that we will be able to hedge our foreign currency
exposures at a reasonable cost.
There are other risks inherent in our
non-U.S. operations,
including:
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changes in local economic conditions, including disruption of
markets;
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changes in laws and regulations, including changes in import,
export, labor and environmental laws;
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exposure to possible expropriation or other government
actions; and
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unsettled political conditions and possible terrorist attacks
against American interests.
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These and other factors may have a material adverse effect on
our
non-U.S. operations
or on our results of operations and financial condition.
Our liquidity is affected by the seasonality of our
business. Warm winters and cool summers adversely affect
us.
We sell a disproportionate share of our automotive aftermarket
batteries during the fall and early winter. Resellers buy
automotive batteries during these periods so they will have
sufficient inventory for cold weather periods. In addition, many
of our industrial battery customers in Europe do not place their
battery orders until the end of the calendar year. This
seasonality increases our working capital requirements and makes
us more sensitive to fluctuations in the availability of
liquidity. Unusually cold winters or hot summers may accelerate
battery failure and increase demand for automotive replacement
batteries. Mild winters and cool summers may have the opposite
effect. As a result, if our sales are reduced by an unusually
warm winter or cool summer, it is not possible for us to recover
these sales in later periods. Further, if our sales are
adversely affected by the weather, we cannot make offsetting
cost reductions to protect our liquidity and gross margins in
the short-term because a large portion of our manufacturing and
distribution costs are fixed.
Decreased demand in the industries in which we operate may
adversely affect our business.
Our financial performance depends, in part, on conditions in the
automotive, material handling and telecommunications industries,
which, in turn, are generally dependent on the U.S. and global
economies. As a result, economic and other factors adversely
affecting production by original equipment manufacturers
(OEMs) and
5
their customers spending could adversely impact our
business. Relatively modest declines in customer purchases from
us could have a significant adverse impact on our profitability
because we have substantial fixed production costs. If our OEM
and large aftermarket customers reduce their inventory levels,
and reduce their orders, our performance would be significantly
adversely impacted. In this environment, we cannot predict
future production rates or inventory levels or the underlying
economic factors. Continued uncertainty and unexpected
fluctuations may have a significant negative impact on our
business.
The remaining portion of our battery sales are of aftermarket
batteries. The factors influencing demand for automotive
replacement batteries include: (1) the number of vehicles
in use; (2) average battery life; (3) the average age
of vehicles and their operating environment; (4) weather
conditions; and (5) population growth and overall economic
conditions. Any significant adverse change in any one of these
factors may have a significant negative impact on our business.
The loss of our sole supplier of polyethylene battery
separators would have a material adverse effect on our
business.
We rely exclusively on a single supplier to fulfill our needs
for polyethylene battery separators a critical
component to many of our products. There is no second source
that could readily provide the volume of polyethylene separators
used by us. As a result, any major disruption in supply from
this supplier would have a material adverse impact on us. If we
are not able to maintain a good relationship with this supplier,
or if for reasons beyond our control the suppliers service
were disrupted, our business may experience a significant
negative impact.
Many of the industries in which we operate are
cyclical.
Our operating results are affected by the general cyclical
pattern of the industries in which our major customer groups
operate. Any decline in the demand for new automobiles, light
trucks, and sport utility vehicles could have a material adverse
impact on the financial condition and results of operations of
our transportation battery divisions. A weak capital expenditure
environment in the telecommunications, uninterruptible power
systems and electric industrial forklift truck markets could
have a material adverse impact on the financial condition and
results of operations of our industrial energy divisions.
We are subject to pricing pressure from our larger
customers.
We face significant pricing pressures in all of our business
segments from our larger customers. Because of our
customers purchasing size, our larger customers can
influence market participants to compete on price and other
terms. Such customers also use their buying power to negotiate
lower prices. If we are not able to offset pricing reductions
resulting from these pressures by improved operating
efficiencies and reduced expenditures, those price reductions
may have an adverse impact on our business.
We face increasing competition and pricing pressure from
other companies in our industries, and if we are unable to
compete effectively with these competitors, our sales and
profitability could be adversely affected.
We compete with a number of major domestic and international
manufacturers and distributors of lead acid batteries, as well
as a large number of smaller, regional competitors. Due to
excess capacity in some sectors of our industry and
consolidation among industrial purchasers, we have been
subjected to continual and significant pricing pressures. The
North American, European and Asian lead acid battery markets are
highly competitive. The manufacturers in these markets compete
on price, quality, technical innovation, service and warranty.
In addition, we are experiencing heightened competitive pricing
pressure as Asian producers, able to employ labor at
significantly lower costs than producers in the U.S. and Western
Europe, expand their export capacity and increase their
marketing presence in our major markets.
If we are not able to develop new products or improve upon
our existing products on a timely basis, our business and
financial condition could be adversely affected.
We believe that our future success depends, in part, on the
ability to develop, on a timely basis, new technologically
advanced products or improve on our existing products in
innovative ways that meet or exceed our competitors
product offerings. Maintaining our market position will require
continued investment in research and development and sales and
marketing. Industry standards, customer expectations, or other
products may emerge
6
that could render one or more of our products less desirable or
obsolete. We may be unsuccessful in making the technological
advances necessary to develop new products or improve our
existing products to maintain our market position. If any of
these events occur, it could cause decreases in sales and have
an adverse effect on our business and financial condition.
We may be adversely affected by the instability and
uncertainty in the world financial markets and the global
economy, including the effects of turmoil in the Middle
East.
Instability in the world financial markets and the global
economy, including (and as a result of) the turmoil in the
Middle East, may create uncertainty in the industries in which
we operate, and may adversely affect our business. In addition,
terrorist activities may cause unpredictable or unfavorable
economic conditions and could have a material adverse impact on
our operating results and financial condition.
We may be unable to successfully implement our business
strategy, which could adversely affect our results of operations
and financial condition.
Our ability to achieve our business and financial objectives is
subject to a variety of factors, many of which are beyond our
control. For example, we may not be successful in increasing our
manufacturing and distribution efficiency through productivity,
process improvements and cost reduction initiatives. Further, we
may not be able to realize the benefits of these improvements
and initiatives within the time frames we currently expect. In
addition, we may not be successful in increasing our percentage
of captive arrangements and spent battery collections or in
hedging our lead requirements, leaving us exposed to
fluctuations in the price of lead. Additionally, our
implementation of these strategies could be delayed due to our
limited liquidity. Any failure to successfully implement our
business strategy could adversely affect results of operations
and financial condition, and could further impair our ability to
make certain strategic capital expenditures and meet our
restructuring objectives.
We are subject to costly regulation in relation to
environmental, health and safety matters, which could adversely
affect our business and results of operations.
In the manufacture of our products throughout the world, we
manufacture, distribute, recycle and otherwise use large amounts
of potentially hazardous materials, especially lead and acid. As
a result, we are subject to a substantial number of costly
regulations, including limits on employee blood lead levels. In
particular, we are required to comply with increasingly
stringent requirements of federal, state and local environmental
and occupational safety and health laws and regulations in the
United States and other countries, including those governing
emissions to air, discharges to water, noise and odor emissions;
the generation, handling, storage, transportation, treatment and
disposal of waste materials; and the cleanup of contaminated
properties and human health and safety. Compliance with these
laws and regulations results in ongoing costs. We could also
incur substantial costs, including cleanup costs, fines and
civil or criminal sanctions, third party property damage or
personal injury claims, or costs to upgrade or replace existing
equipment, as a result of violations of or liabilities under
environmental laws or non-compliance with environmental permits
required at our facilities. In addition, many of our current and
former facilities are located on properties with histories of
industrial or commercial operations. Because some environmental
laws can impose liability for the entire cost of cleanup upon
any of the current or former owners or operators, regardless of
fault, we could become liable for the cost of investigating or
remediating contamination at these properties if contamination
requiring such activities is discovered in the future. We may
become obligated to pay material remediation-related costs at
our Tampa, Florida facility in the amount of approximately
$12.5 million to $20.5 million, at the Columbus,
Georgia facility in the amount of approximately
$6.0 million to $9.0 million and at the Sonalur,
Portugal facility in the amount of $3.5 million to
$7.0 million.
We cannot be certain that we have been, or will at all times be,
in complete compliance with all environmental requirements, or
that we will not incur additional material costs or liabilities
in connection with these requirements in excess of amounts we
have reserved. Private parties, including current or former
employees, could bring personal injury or other claims against
us due to the presence of, or exposure to, hazardous substances
used, stored or disposed of by us, or contained in our products,
especially lead. Environmental requirements are complex and have
tended to become more stringent over time. These requirements or
their enforcement may change in the future in a manner that
could have a material adverse effect on our business, results of
operations and financial condition. We have made and will
continue to make expenditures to comply with environmental
requirements. These
7
requirements, responsibilities and associated expenses and
expenditures, if they continue to increase, could have a
material adverse effect on our business and results of
operations. While our costs to defend and settle claims arising
under environmental laws in the past have not been material, we
cannot provide assurance that this will remain so in the future.
The EPA or state environmental agencies could take the
position that we have liability under environmental laws that
were not discharged in bankruptcy. To the extent these
authorities are successful in disputing the pre-petition nature
of these claims, we could be required to perform remedial work
that has not yet been performed for alleged pre-petition
contamination, which would have a material adverse effect on our
financial condition, cash flows or results of operations.
The EPA or state environmental agencies could take the position
that we have liability under environmental laws that were not
discharged in bankruptcy. To the extent these authorities are
successful in disputing the pre-petition nature of these claims,
we could be required to perform remedial work that has not yet
been performed for alleged pre-petition contamination, which
would have a material adverse effect on our financial condition,
cash flows or results of operations. We have previously been
advised by the EPA or state agencies that we are a
Potentially Responsible Party under the
Comprehensive Environmental Response, Compensation and Liability
Act or similar state laws at 97 federally defined Superfund or
state equivalent sites. At 45 of these sites, we have paid our
share of liability and believe that it is probable that our
liability for most of the remaining sites will be treated as
disputed unsecured claims under our Joint Plan of Reorganization
(the Plan). However, there can be no assurance that
these matters will be discharged. In addition, the EPA, in the
course of negotiating this pre-petition claim, had notified us
of the possibility of additional
clean-up
costs associated with Hamburg, Pennsylvania properties of
approximately $35.0 million. To date, the EPA has not made
a formal claim for this amount or provided any support for this
estimate. To the extent the EPA or other environmental
authorities disputed the pre-petition nature of these claims, we
would intend to resist any such effort to evade the bankruptcy
laws intended result, and believe there are substantial
legal defenses to be asserted in that case. However, there can
be no assurance that we would be successful in challenging any
such actions.
We may be adversely affected by legal proceedings to which
we are, or may become, a party.
We are subject to a number of litigation and regulatory
proceedings, the results of which could have a material adverse
effect on our business, financial condition or results of
operations. No assurances can be given that we will be able to
successfully defend any such litigation and regulatory
proceedings, and adverse results in one or more of such
litigation and regulatory proceedings could have a material
adverse effect on our business or operations.
The
cost of resolving our pre-petition disputed claims, including
legal and other professional fees involved in settling or
litigating these matters, could have a material adverse effect
on our financial condition, cash flows and results of
operations.
At March 31, 2006, there were approximately 1,400
pre-petition disputed unsecured claims on file in the bankruptcy
case that remain to be resolved through our 2004 plan of
reorganizations claims reconciliation and allowance
procedures. We established a reserve of common stock and
warrants to purchase common stock for issuance to holders of
these disputed unsecured claims as the claims are allowed by the
bankruptcy court. Although these claims are generally resolved
through the issuance of common stock and warrants from the
reserve rather than the payment of money, the process of
resolving these claims through settlement or litigation requires
considerable resources, including expenditures for legal and
professional fees and the attention of our personnel. These
costs could have a material adverse effect on our financial
condition, cash flows and results of operations. We are unable
to predict how the recent declines in our stock price will
impact this process given that our common stock is the currency
in which these claims are resolved. On the one hand, lower stock
prices may make some plaintiffs less willing to litigate but, on
the other hand, may make some plaintiffs less willing to settle
for less than the full amount of their claims depending on a
variety of factors, including the strength of the
plaintiffs claims and the size of the plaintiffs
anticipated ultimate award.
8
Holders
of our common stock are subject to the risk of dilution of their
investment as the result of the issuance of additional shares of
common stock and warrants to purchase common stock to holders of
pre-petition claims to the extent the reserve of common stock
and warrants established to satisfy such claims is
insufficient.
Pursuant to our 2004 plan of reorganization, we have established
a reserve of common stock and warrants to purchase common stock
for issuance to holders of general unsecured pre-petition
disputed claims. To the extent this reserve is insufficient to
satisfy these disputed claims, we would be required to issue
additional shares of common stock and warrants, which would
result in dilution to holders of our common stock.
We agreed pursuant to our 2004 plan of reorganization to issue
25,000,000 shares of common stock and warrants initially
exercisable for 6,250,000 shares of common stock,
distributed as follows:
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holders of pre-petition secured claims were allocated
collectively 22,500,000 shares of common stock; and
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holders of general unsecured claims were allocated collectively
2,500,000 shares of common stock and warrants to purchase
6,250,000 shares of common stock at $32.11 per share,
and approximately 13.4% of such new common stock and warrants
were initially reserved for distribution for disputed general
unsecured claims under our 2004 plan of reorganizations
claims reconciliation and allowance procedures.
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Under the claims reconciliation and allowance process set forth
in our 2004 plan of reorganization, the Official Committee of
Unsecured Creditors, in consultation with us, established a
reserve to provide for a pro rata distribution of common stock
and warrants to holders of disputed general unsecured claims as
they become allowed. As claims are evaluated and processed, we
will object to some claims or portions thereof, and upward
adjustments (to the extent stock and warrants not previously
distributed remain) or downward adjustments to the reserve will
be made pending or following adjudication or other resolution of
these objections. Predictions regarding the allowance and
classification of claims are inherently difficult to make. With
respect to environmental claims in particular, there is inherent
difficulty in assessing our potential liability due to the large
number of other potentially responsible parties. For example, a
demand for the total cleanup costs of a landfill used by many
entities may be asserted by the government using joint and
several liability theories. Although we believe that there is a
reasonable basis in law to believe that we will ultimately be
responsible for only our share of these remediation costs, there
can be no assurance that we will prevail on these claims. In
addition, the scope of remedial costs, or other environmental
injuries, are highly variable and estimating these costs
involves complex legal, scientific and technical judgments. Many
of the claimants who have filed disputed claims, particularly
environmental and personal injury claims, produce little or no
proof of fault on which we can assess our potential liability
and either specify no determinate amount of damages or provide
little or no basis for the alleged damages. In some cases we are
still seeking additional information needed for claims
assessment. Information that is unknown to us at the current
time may significantly affect our assessment regarding the
adequacy of the reserve amounts in the future.
As general unsecured claims have been allowed in the bankruptcy
court, we have distributed common stock at a rate of
approximately one share per $383.00 in allowed claim amount and
approximately one warrant per $153.00 in allowed claim amount.
These rates were established based upon the assumption that the
stock and warrants allocated to non-noteholder general unsecured
claims on the effective date of our 2004 plan of reorganization,
including the reserve established for disputed general unsecured
claims, would be fully distributed so that the recovery rates
for all allowed unsecured claims would comply with our 2004 plan
of reorganization without the need for any redistribution or
supplemental issuance of securities. If the amount of
non-noteholder general unsecured claims that is eventually
allowed exceeds the amount of claims anticipated in the setting
of the reserve, additional common stock and warrants will be
issued for the excess claim amounts at the same rates as used
for the other non-noteholder general unsecured claims. If this
were to occur, additional common stock would also be issued to
the holders of prepetition secured claims to maintain the ratio
of their distribution in common stock at nine times the amount
of common stock distributed for all unsecured claims. Based on
information currently available, as of July 31, 2006,
approximately 7% of new stock and warrants reserved for
distribution for disputed general unsecured claims has been
distributed. The Company also continues to resolve certain
non-objected claims.
9
Work
stoppages or other labor issues at our facilities or our
customers or suppliers facilities could adversely
affect our operations.
At March 31, 2006, approximately 20% of our North American
and many of our
non-U.S. employees
were unionized. It is likely that a significant portion of our
workforce will remain unionized for the foreseeable future. It
is also possible that the portion of our workforce that is
unionized may increase in the future. Contracts covering
approximately 591 of our domestic employees will expire in 2007,
and the remainder thereafter. In addition, contracts covering
most of our union employees in Europe and the rest of the world
expire on various dates through fiscal 2007. Although we believe
that our relations with employees are generally good, if
conflicts develop between us and our employees unions in
connection with the renegotiation of these contracts or
otherwise, work stoppages or other labor disputes could result.
A work stoppage at one or more of our plants, or a material
increase in our costs due to unionization activities, may have a
material adverse effect on our business. Work stoppages at the
facilities of our customers or suppliers may also negatively
affect our business. If any of our customers experience a
material work stoppage, that customer may halt or limit the
purchase of our products. This could require us to shut down or
significantly reduce production at facilities relating to those
products. Moreover, if any of our suppliers experience a work
stoppage, our operations could be adversely affected if an
alternative source of supply is not readily available.
Our
ability to operate our business effectively could be impaired if
we fail to attract and retain experienced key
personnel.
Our success depends, in part, on the continued contributions and
experience of our senior officers and other key personnel.
Certain of our senior officers are relatively new. The fact that
certain of our key senior officers are recent additions to our
staff and may not possess knowledge of our historical operations
could adversely affect the operation of our business. Moreover,
if in the future we lose or suffer an extended interruption in
the service of one or more of our other senior officers or key
employees, our financial condition and operating results may be
adversely affected.
Our
internal control over financial reporting was not effective as
of March 31, 2006.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002,
and the rules and regulations promulgated thereunder, our
management was required to furnish a report on, and our
independent registered public accounting firm attested to, our
internal controls over financial reporting in our Annual Report
on
Form 10-K
for the year ended March 31, 2006. In connection with the
preparation of this report, our management assessed the
effectiveness of our internal control over financial reporting
as of March 31, 2006, and this assessment identified
several material weaknesses relating to ineffective controls
over accounting for inventories and investments in affiliates,
lack of sufficient resources in accounting and finance, lack of
segregation of duties and ineffective controls over period-end
accounting for income taxes. Because of these material
weaknesses, our management concluded that our internal controls
over financial reporting were not effective as of March 31,
2006 based on the criteria in the Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In an effort to
remediate the material weaknesses and other deficiencies, we are
currently implementing a number of changes to our internal
controls including hiring additional personnel to focus on
ongoing remediation initiatives. However, there can be no
assurance that such remediation steps will be successful, that
we will not have significant deficiencies or other material
weaknesses in the future or that, when next evaluated, our
management will conclude, and our auditors will determine, that
our internal control over financial reporting is effective. Any
failure to implement effective internal controls could harm our
operating results or cause us to fail to meet our reporting
obligations. Inadequate internal controls could also cause
investors to lose confidence in our reported financial
information, which could have a negative effect on the trading
price of our common stock, and may require us to incur
additional costs to improve our internal control system.
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Our
substantial indebtedness could adversely affect our financial
condition.
We have a significant amount of indebtedness. As of
June 30, 2006, we had total indebtedness, including capital
leases, of approximately $718.8 million. Our level of
indebtedness could have significant consequences. For example,
it could:
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limit our ability to borrow money or sell stock to fund our
working capital, capital expenditures, acquisitions and debt
service requirements;
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substantially increase our vulnerability to changes in interest
rates, because a substantial portion of our indebtedness bears
interest at floating rates;
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limit our flexibility in planning for, or reacting to, changes
in our business and future business opportunities;
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make us more vulnerable to a downturn in our business or in the
economy;
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place us at a disadvantage to some of our competitors, who may
be less highly leveraged than us; and
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require a substantial portion of our cash flow from operations
to be used for debt payments, thereby reducing the availability
of our cash flow to fund working capital, capital expenditures,
acquisitions and other general corporate purposes.
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One or a combination of these factors could adversely affect our
financial condition. Subject to restrictions in the indenture
governing our convertible notes and our senior secured credit
facility, we may incur additional indebtedness, which could
increase the risks associated with our already substantial
indebtedness.
Restrictive
covenants restrict our ability to operate our business and to
pursue our business strategies, and our failure to comply with
these covenants could result in an acceleration of our
indebtedness.
Our senior credit facility and the indenture governing our
senior secured notes contain covenants that restrict our ability
to finance future operations or capital needs, to respond to
changing business and economic conditions or to engage in other
transactions or business activities that may be important to our
growth strategy or otherwise important to us. The credit
agreement and the indenture governing our senior secured notes
restrict, among other things, our ability and the ability of our
subsidiaries to:
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incur additional indebtedness or enter into sale and leaseback
transactions;
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pay dividends or make distributions on our capital stock or
certain other restricted payments or investments;
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purchase or redeem stock;
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issue stock of our subsidiaries;
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make investments and extend credit;
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engage in transactions with affiliates;
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transfer and sell assets;
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effect a consolidation or merger or sell, transfer, lease or
otherwise dispose of all or substantially all of our
assets; and
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create liens on our assets to secure debt.
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In addition, our senior credit facility requires us to maintain
minimum consolidated earnings before interest, taxes,
depreciation, amortization and restructuring costs
(Adjusted EBITDA) and requires us to repay
outstanding borrowings with portions of the proceeds we receive
from certain sales of property or assets and specified future
debt offerings. Our ability to comply with the covenants in our
senior credit facility may be affected by events beyond our
control, and we may not be able to meet the financial ratios.
Any breach of the covenants in our senior secured credit
agreement or the indenture governing our senior secured notes
could cause a default under our senior secured credit agreement
and other debt (including our notes), which would restrict our
ability to borrow under our credit facility, thereby
significantly impacting our liquidity. If
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there were an event of default under any of our debt instruments
that was not cured or waived, the holders of the defaulted debt
could cause all amounts outstanding with respect to the debt
instrument to be due and payable immediately. Our assets and
cash flow may not be sufficient to fully repay borrowings under
our outstanding debt instruments if accelerated upon an event of
default. If, as or when required, we are unable to repay,
refinance or restructure our indebtedness under, or amend the
covenants contained in, our senior credit facility, the lenders
under our senior credit facility could institute foreclosure
proceedings against the assets securing borrowings under the
senior credit facility.
In fiscal 2005 and 2006, we were unable to comply with certain
financial and other covenants in our senior credit facility at
various times. In order to avoid an event of default, we were
required to obtain waivers and amendments of such covenants from
the lenders. This resulted in the payment of amendment fees as
well as legal fees and other costs associated with the
amendments, adversely affected our ability to maintain trade
credit terms and contributed to our independent auditors
including a going concern modification in their reports on our
fiscal 2005 and 2006 financial statements.
We
have entered into a plea agreement with the U.S. Attorney
for the Southern District of Illinois under which we are
required to pay a fine of $27.5 million over five years. If
we are unable to post adequate security for this fine by
February 2007 and the U.S. District Court is unwilling to
modify the plea agreement, we could be unable to remain in
compliance with the provisions of our senior credit facility and
the indenture governing our senior secured notes, which could
have a material adverse effect on our business and financial
condition.
In 2001, we reached a plea agreement with the U.S. Attorney
for the Southern District of Illinois (the
U.S. Attorney) resolving an investigation into
a scheme by former officers and certain corporate entities
involving fraudulent representations and promises in connection
with the distribution, sale and marketing of automotive
batteries between 1994 and 1997. We agreed to pay a fine of
$27.5 million over five years, to five-years probation and
to cooperate with the U.S. Attorney in its prosecution of
the former officers. We filed for bankruptcy in April 2002 and
did not pay any installments of the criminal fine before or
during our bankruptcy proceedings, nor did we pay any
installments of the criminal fine after we emerged from
bankruptcy in May 2004. In 2002, the U.S. Attorney filed a
claim against us as a general unsecured creditor and on
May 31, 2006, the District Court approved a Joint Agreement
and Proposed Joint Resolution of Issues Raised in the
Governments Motion Filed on November 18, 2005
Regarding the Payment of Criminal Fine and modified our schedule
to pay the $27.5 million fine through quarterly payments
over the next five years, ending in 2011. Under the order, we
must provide security in a form acceptable to the court and to
the government by February 26, 2007 for its guarantee of
any remaining unpaid portion of the fine, but may petition the
court if we believe our financial viability would be jeopardized
by providing such security. If we are not able to provide
security in a form acceptable to the court and to the government
by February 26, 2007 and the district court is unwilling to
modify the plea agreement, then the resulting obligation to
provide such security could result in our inability to maintain
compliance with our senior credit facility and the indenture
governing our senior secured notes, which could have a material
adverse effect on our business and financial condition.
We
have large pension contributions required over the next several
years.
Cash contributions to our pension plans are generally made in
accordance with minimum regulatory requirements. Our U.S.
pension plans are currently significantly under-funded. Based on
current assumptions and regulatory requirements, our minimum
future cash contribution requirements for our U.S. pension plans
are expected to remain relatively high for the next few fiscal
years. On November 17, 2004, we received written
notification of a tentative determination from the IRS granting
a temporary waiver of our minimum funding requirements for our
U.S. pension plans for calendar years 2003 and 2004, amounting
to approximately $50.0 million, net, under Section 412(d)
of the Internal Revenue Code, subject to providing a lien
satisfactory to the Pension Benefit Guaranty Corporation. Based
upon the temporary waiver and sensitivity to varying economic
scenarios, we expect our cumulative minimum future cash
contributions to our U.S. pension plans will total approximately
$115 million to $165 million from fiscal 2007 to
fiscal 2011, including $46.7 million in fiscal 2007. These
projections also assume that the provisions of the Pension
Funding Equity Act of 2004 are extended for the
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2006 plan year and funding reform legislation similar to the
bills currently before Congress is passed and takes effect for
the 2007 plan year. We expect that cumulative contributions to
its non U.S. pension plans will total approximately $84 million
from fiscal 2007 to fiscal 2011, including $16.1 million in
fiscal 2007. In addition, we expect that cumulative
contributions to our other post-retirement benefit plans will
total approximately $13 million from fiscal 2007 to fiscal 2011,
including $2.8 million in fiscal 2007.
Risks
Related to the Rights Offering
The
price of our common stock is volatile and may decline before or
after the subscription rights expire.
The market price of our common stock could be subject to wide
fluctuations in response to numerous factors, some of which are
beyond our control. These factors include, among other things,
actual or anticipated variations in our operating results and
cash flow, the nature and content of our earnings releases and
our competitors earnings releases, announcements of
technological innovations that impact our services, customers,
competitors or markets, changes in financial estimates by
securities analysts, business conditions in our markets and the
general state of the securities markets and the market for
similar stocks, changes in capital markets that affect the
perceived availability of capital to companies in our
industries, governmental legislation or regulation, currency and
exchange rate fluctuations, as well as general economic and
market conditions, such as recessions.
We cannot assure you that the public trading market price of our
common stock will not decline after you elect to exercise your
rights. If that occurs, you may have committed to buy shares of
common stock in the rights offering at a price greater than the
prevailing market price, and could have an immediate unrealized
loss. Moreover, we cannot assure you that following the exercise
of your rights you will be able to sell your common stock at a
price equal to or greater than the subscription price. Until
shares are delivered upon expiration of the rights offering, you
will not be able to sell the shares of our common stock that you
purchase in the rights offering. Certificates representing
shares of our common stock purchased will be delivered as soon
as practicable after expiration of the rights offering. We will
not pay you interest on funds delivered to the subscription
agent pursuant to the exercise of rights.
If the
rights offering, the sale of shares to the Standby Purchasers
and the Additional Standby Purchaser pursuant to their standby
commitments under the Standby Agreement and the sale of
additional shares of common stock to the Standby Purchasers are
consummated, your relative ownership interest will experience
significant dilution.
The Standby Purchasers and the Additional Standby Purchaser are
entering into a Standby Agreement with us which provides that,
subject to certain conditions, they will purchase any shares
that remain unsold in this offering at the same subscription
price per share. To the extent that you do not exercise your
rights and shares are purchased by other shareholders in the
rights offering, your proportionate voting interest will be
reduced, and the percentage that your original shares represent
of our expanded equity after exercise of the rights will be
diluted. We will also sell additional shares of our common stock
to the Standby Purchasers. This sale will have the effect of
diluting your proportionate interest in our common stock,
regardless of whether you choose to exercise your subscription
rights. The percentage of our common stock owned by shareholders
other than the Standby Purchasers and the Additional Standby
Purchaser will decline as a result of the sales to such
investors from 86% to 36% if no other shareholders exercise
their subscription rights, or to 66% even if all other
shareholders exercise such rights.
After
the consummation of the rights offering and the sale of
additional shares of common stock to the Standby Purchasers, a
significant amount of our common stock will be concentrated in
the hands of a few of our stockholders, and their interests may
not coincide with yours.
Upon the completion of the rights offering and the sale of
additional shares of common stock to the Standby Purchasers, if
only the Standby Purchasers and the Additional Standby Purchaser
exercise their subscription rights, the Standby Purchasers and
the Additional Standby Purchaser would collectively own, on a
fully diluted basis, approximately 55% of our common stock. As a
result, if the Standby Purchasers and the Additional Standby
Purchaser and their respective affiliates were to elect to act
together, they would have the ability to exercise control over
matters generally requiring shareholder approval. These matters
include the election of directors and the
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approval of significant corporate transactions, including
potential mergers, consolidations or sales of all or
substantially all of our assets. Your interests as a holder of
the common stock may differ from the interests of the Standby
Purchasers and the Additional Standby Purchaser and their
affiliates.
After
the consummation of the rights offering and the sale of
additional shares of common stock to the Standby Purchasers, the
Standby Purchasers and the Additional Standby Purchaser will
have significantly increased their ownership of our common stock
and further acquisitions of our common stock by any of them
could constitute a change of control or a
change in control under the documents which govern
our debt obligations.
As of August 21, 2006 Tontine beneficially owned
2,425,387 shares, or approximately 9.7%, and the Additional
Standby Purchaser beneficially owned 1,588,892 shares, or
approximately 6.2%, of our common stock (including the
Additional Standby Purchasers warrants exercisable into
common stock), respectively. After the completion of the rights
offering and the sale of additional shares of common stock to
the Standby Purchasers, the Standby Purchasers and the
Additional Standby Purchaser will have significantly increased
their proportionate ownership of our common stock. Under the
credit agreement governing our senior credit facility, a
change of control is deemed to have occurred if any
person or group acquires 30% or more of the issued and
outstanding shares of our common stock on a fully diluted basis
and under the indentures governing our senior notes and
convertible notes a change in control is deemed to
have occurred if any person or group acquires greater than 50%
of the issued and outstanding shares of our common stock. If a
change of control under our credit agreement or a
change in control under our senior notes and
convertible notes indentures is deemed to occur, the credit
agreement lenders may require immediate payment of our
outstanding borrowings and the noteholders can require us to
purchase the notes, and such actions would have a material
adverse effect on our business and financial condition. Although
the number of shares they can purchase under the Standby
Agreement is limited so that they cannot exceed such thresholds,
there can be no assurance that they will not purchase additional
shares in the future which would cause a change in
control or a change of control to occur.
The
subscription rights are not transferable and there is no market
for the subscription rights.
You may not sell, give away or otherwise transfer your
subscription rights. The subscription rights are only
transferable by operation of law. Because the subscription
rights are non-transferable, there is no market or other means
for you to directly realize any value associated with the
subscription rights. You must exercise the subscription rights
and acquire additional shares of our common stock to realize any
value.
The
subscription price determined for the rights offering is not an
indication of the fair value of our common stock.
The subscription price of $3.50 per share in the rights offering
was set by our Board of Directors. In determining the
subscription price, our Board of Directors considered a number
of factors, including: negotiations with the Standby Purchasers;
our need for liquidity and capital; the likely cost of capital
from other sources; our business prospects; the need to offer
shares at a price that would be attractive to our investors
relative to the current trading price of our common stock; the
historical and current market price of our common stock; general
conditions in the securities market; the need to provide an
incentive to our shareholders to participate in the rights
offering on a pro-rata basis; our operating history; and the
liquidity of our common stock. In conjunction with its review of
these factors, our Board of Directors also reviewed analyses of
prior rights offerings by other public companies, including the
range of discounts to market value represented by the
subscription prices in those rights offerings. The subscription
price does not necessarily bear any relationship to the book
value of our assets, net worth, past operations, cash flows,
losses, financial condition or any other established criteria
for fair value. You should not consider the subscription price
as an indication of the fair value of our common stock. After
the date of this prospectus, our common stock may trade at
prices above or below the subscription price.
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Unless
we give you a right of cancellation as a result of a fundamental
(as determined by us) change to the terms of the rights
offering, you may not revoke your subscription exercise and
could be committed to buying shares above the prevailing market
price.
Once you exercise your subscription rights, you may not revoke
the exercise unless we give you a right of cancellation as a
result of a fundamental (as determined by us) change to the
terms of the rights offering. The public trading market price of
our common stock may decline before the subscription rights
expire. If you exercise your subscription rights and,
afterwards, the public trading market price of our common stock
decreases below the subscription price, you will have committed
to buying shares of our common stock at a price above the
prevailing market price. Our common stock is traded on the
Nasdaq Global Market under the symbol XIDE, and the
last reported sales price of our common stock on the Nasdaq
Global Market on August 22, 2006 was $4.01 per share.
Moreover, you may be unable to sell your shares of common stock
at a price equal to or greater than the subscription price you
paid for such shares.
If we determine there has been a fundamental change to the terms
of the rights offering, we may give you the right to cancel your
subscription exercise. Our determination of whether a change to
the terms of the rights offering is fundamental will
be made on a case-by-case basis and we cannot assure you that we
will deem fundamental a change that you would
otherwise believe to be fundamental. If we elect to
withdraw or terminate the rights offering, neither we nor the
subscription agent will have any obligation with respect to the
subscription rights except to return, without interest, any
subscription payments the subscription agent received from you.
If you
do not act promptly and follow the subscription instructions,
your exercise of subscription rights may be
rejected.
Shareholders who desire to purchase shares in the rights
offering must act promptly to ensure that all required forms and
payments are actually received by the subscription agent prior
to September 14, 2006, the expiration date of the rights
offering. If you are a beneficial owner of shares, you must act
promptly to ensure that your broker, custodian bank or other
nominee acts for you and that all required forms and payments
are actually received by the subscription agent prior to the
expiration date of the rights offering. We shall not be
responsible if your broker, custodian or nominee fails to ensure
that all required forms and payments are actually received by
the subscription agent prior to the expiration date of the
rights offering. If you fail to complete and sign the required
subscription forms, send an incorrect payment amount or
otherwise fail to follow the subscription procedures that apply
to your exercise in the rights offering, the subscription agent
may, depending on the circumstances, reject your subscription or
accept it only to the extent of the payment received. Neither we
nor our subscription agent undertakes to contact you concerning
an incomplete or incorrect subscription form or payment, nor are
we under any obligation to correct such forms or payment. We
have the sole discretion to determine whether a subscription
exercise properly follows the subscription procedures.
The
tax treatment of the rights offering is somewhat uncertain and
it may be treated as a taxable event to our
shareholders.
If the rights offering is deemed to be part of a
disproportionate distribution under section 305
of the Internal Revenue Code, our shareholders may recognize
taxable income for United States federal income tax purposes in
connection with the receipt of rights in the rights offering
depending on our current and accumulated earnings and profits
and our shareholders basis in our common stock. A
disproportionate distribution is a distribution or a
series of distributions, including deemed distributions, that
has the effect of the receipt of cash or other property by some
stockholders or holders of debt instruments convertible into
stock and an increase in the proportionate interest of other
stockholders in a companys assets or earnings and profits.
Because we have outstanding notes convertible into our common
stock and on which we have paid interest, applicable Treasury
regulations provide that the receipt of the rights will be part
of a disproportionate distribution unless a full
adjustment is made in the conversion price of the notes to
reflect the rights offering. It is unclear whether the
adjustment to the conversion price of the notes qualifies as a
full adjustment. See U.S. Federal Income Tax
Considerations for further information on the treatment of
the rights offering.
In addition, your tax basis in the rights, in your current
shares of our common stock and in the shares of our common stock
that you acquire through exercise of the rights may be
uncertain. Your tax basis in the shares of
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common stock acquired through exercise of the rights will equal
the sum of the subscription price for the shares and your tax
basis, if any, in the rights. Your tax basis in the rights will
depend on whether the rights offering is deemed to be part of a
disproportionate distribution, the fair market value
of the rights and, if applicable, whether you elect to allocate
part of the tax basis of your common stock to the rights. See
U.S. Federal Income Tax Considerations for
further information on these issues.
Risks
Related to our Common Stock
Sales,
or the availability for sale, of substantial amounts of our
common stock could adversely affect the value of our common
stock.
No prediction can be made as to the effect, if any, that future
sales of our common stock, or the availability of common stock
for future sales, will have on the market price of our common
stock. Sales of substantial amounts of our common stock in the
public market, and the availability of shares for future sale,
including 1,237,080 shares of our common stock issuable
upon exercise of outstanding options to acquire shares of our
common stock, 3,454,231 shares of our common stock that may
be issued upon conversion of our convertible notes and
6,250,000 shares covered by warrants issued and issuable
under our 2004 plan of reorganization (such share totals not
adjusted for antidilution adjustments that may be triggered by
the rights offering and sale of additional shares of common
stock), could adversely affect the prevailing market price of
our common stock. This in turn would adversely affect the fair
value of the common stock and could impair our future ability to
raise capital through an offering of our equity securities.
Our
common stock price may be volatile, and consequently investors
may not be able to resell their common stock at or above the
subscription price.
The price at which our common stock will trade after this
offering may be volatile and may fluctuate due to factors such
as:
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our historical and anticipated quarterly and annual operating
results;
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variations between our actual results and analyst and investor
expectations or changes in financial estimates and
recommendations by securities analysts;
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investor perceptions of our company and comparable public
companies;
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our ability to comply with financial covenants in our senior
credit facility; and
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conditions and trends in general market conditions.
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Fluctuations may be unrelated to or disproportionate to company
performance. These fluctuations may result in a material decline
in the trading price of our common stock.
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DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These
statements may be found throughout this prospectus, particularly
under the headings Summary and Risk
Factors, among others. Forward-looking statements
typically are identified by the use of terms such as
may, will, should,
expect, anticipate, believe,
estimate, intend and similar words,
although some forward-looking statements are expressed
differently. You should consider statements that contain these
words carefully because they describe our expectations, plans,
strategies and goals and our beliefs concerning future business
conditions, our results of operations, financial position, and
our business outlook or state other forward-looking
information based on currently available information. The
factors listed above under the heading Risk Factors
and in other sections of this prospectus provide examples of
risks, uncertainties and events that could cause our actual
results to differ materially from the expectations expressed in
our forward-looking statements. These statements include, among
other things, the following:
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projections of revenues, cost of raw materials, income or loss,
earnings or loss per share, capital expenditures, growth
prospects, dividends, the effect of currency translations,
capital structure and other financial items;
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statements regarding our plans and objectives, including the
introduction of new products or estimates or predictions of
actions by customers, suppliers, competitors or regulating
authorities;
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statements of future economic performance;
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statements of assumptions, such as the prevailing weather
conditions in our market areas, underlying other statements and
statements about our business; and
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statements regarding our ability to obtain amendments under our
debt agreements.
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Factors that could cause actual results to differ materially
from these forward-looking statements include, but are not
limited to the following general factors:
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adverse reactions by creditors, vendors, customers and others to
the going concern modification in the independent registered
public accounting firms audit report for the fiscal year
ended March 31, 2006;
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our ability to implement and fund our business strategies and
restructuring plans based on current liquidity;
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lead, which experiences significant fluctuations in market price
and which, as a hazardous material, may give rise to costly
environmental and safety claims, can affect our results because
it is a major constituent in most of our products;
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unseasonable weather (warm winters and cool summers), which
adversely affects demand for automotive and some industrial
energy batteries;
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our reliance on a single supplier for our polyethylene battery
separators;
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a pending preliminary SEC inquiry;
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our substantial debt and debt service requirements which
restrict our operating and financial flexibility, and impose
significant interest and financing costs and our ability to
comply with the covenants in our debt agreements or obtain
waivers of noncompliance;
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we are subject to a number of litigation and regulatory
proceedings, the results of which could have a material adverse
effect on our business, financial condition or results of
operations;
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the realization of the tax benefits of our net operating loss
carry forwards, which are dependent upon future taxable income;
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the battery markets in North America and Europe are very
competitive and, as a result, it is often difficult to maintain
margins;
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foreign operations involve risk such as disruption of markets,
changes in import and export laws, currency restrictions,
currency exchange rate fluctuations and possible terrorist
attacks against U.S. interests;
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we are exposed to fluctuations in interest rates on our variable
debt which can affect our results;
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our ability to maintain and generate liquidity to meet our
operating needs;
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general economic conditions;
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Asian batteries sold in North America and Europe at lower prices;
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our ability to acquire goods and services
and/or
fulfill labor needs at budgeted costs;
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our ability to attract and retain key personnel;
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our ability to pass along increased material costs to our
customers;
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the loss of one or more of our major customers;
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our ability to consummate the rights offering and sale of
additional shares of common stock to the Standby Purchasers;
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our significant pension obligations over the next several years;
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the substantial management time and financial and other
resources needed for our consolidation and rationalization of
acquired entities; and
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our ability to comply with the provisions of Section 404 of
the Sarbanes-Oxley Act of 2002.
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Although we believe that the expectations reflected in such
forward-looking statements are reasonable, we can give no
assurance that such expectations will prove to have been
correct. Important factors that could cause actual results to
differ materially from our expectations are disclosed under
Risk Factors and elsewhere in this prospectus. The
forward-looking statements made in this prospectus relate only
to events as of the date on which the statements are made. We
undertake no obligation to update beyond that required by law
any forward-looking statement to reflect events or circumstances
after the date on which the statement is made or to reflect the
occurrence of unanticipated events.
18
USE OF
PROCEEDS
The maximum net proceeds to us from the sale of our common stock
offered in the rights offering and the sale of additional shares
of common stock to the Standby Purchasers is estimated to be
approximately $117.7 million after deducting estimated
offering expenses. We intend to use the proceeds of the rights
offering, together with the proceeds of the sale of such
additional shares of our common stock to the Standby Purchasers,
to provide additional liquidity for capital expenditures
(approximately 40%, or $46.0 million), restructuring costs
(approximately 25%, or $30.5 million), general corporate
purposes (approximately 25%, or $28.7 million) and working
capital (approximately 10%, or $12.4 million). Such
restructuring costs are principally severance and other expenses
related to staff reductions in selling, marketing and general
and administrative functions, primarily in Europe, and
consolidation of our operations and the elimination of other
redundancies in plants and equipment throughout our business.
19
CAPITALIZATION
The following table describes our cash and cash equivalents and
capitalization as of June 30, 2006 on an actual basis and
on a pro forma, as adjusted basis to give effect to the sale of
21,428,571 shares in the rights offering and sale of
14,285,714 additional shares of common stock to the Standby
Purchasers (including application of net proceeds as described
above) at a price of $3.50 per share.
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2006
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
(in thousands except
|
|
|
|
share data)
|
|
|
Cash and cash equivalents
|
|
$
|
37,029
|
|
|
$
|
154,729
|
|
|
|
|
|
|
|
|
|
|
Debt (including current portion):
|
|
|
|
|
|
|
|
|
Senior secured credit facility
|
|
$
|
333,603
|
|
|
$
|
333,603
|
|
Other, including capital lease
obligations and other loans with interest rates generally
ranging up to 11% due in installments through 2015
|
|
|
23,433
|
|
|
|
23,433
|
|
Senior secured notes
|
|
|
290,000
|
|
|
|
290,000
|
|
Short-term borrowings
|
|
|
11,794
|
|
|
|
11,794
|
|
|
|
|
|
|
|
|
|
|
Total senior debt (including
current portion)
|
|
|
658,830
|
|
|
|
658,830
|
|
Convertible senior subordinated
notes
|
|
|
60,000
|
|
|
|
60,000
|
|
Minority interest
|
|
|
13,413
|
|
|
|
13,413
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par
value, 61,500,000 shares authorized; 24,545,631 shares
outstanding; 60,259,916 shares outstanding as adjusted
|
|
|
245
|
|
|
|
603
|
|
Preferred stock, $0.01 par
value, 1,000,000 shares authorized; no shares outstanding
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
889,048
|
|
|
|
1,013,690
|
|
Accumulated deficit
|
|
|
(677,551
|
)
|
|
|
(677,551
|
)
|
Accumulated other comprehensive
income (loss)
|
|
|
(2,730
|
)
|
|
|
(2,730
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
209,012
|
|
|
|
334,012
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
941,255
|
|
|
$
|
1,066,255
|
|
20
THE
RIGHTS OFFERING
The
Rights
We are distributing to the record holders of our common stock as
of the record date non-transferable subscription rights to
subscribe for and purchase shares of our common stock. The per
share price of $3.50 is equal to a 20% discount to the average
closing price of our common stock for the 30 trading day
period ended July 6, 2006. The subscription rights will
entitle the holders of common stock to purchase shares of common
stock for an aggregate purchase price of $75.0 million. See
below for additional information regarding subscription by DTC
participants.
Each holder of record of our common stock will receive 0.85753
of a subscription right for each share of our common stock held
by such holder, subject to adjustment to eliminate fractional
rights. Each subscription right will entitle the holder thereof
to purchase at the subscription price, on or prior to the
expiration time of the rights offering, the holders pro
rata portion of the shares of our common stock being offered in
the rights offering, based upon the holders holdings of
our common stock as of the record date.
We intend to keep the rights offering open until
September 14, 2006 unless our Board of Directors extends
such time with the approval of the Standby Purchasers.
Effects
on Ownership of Certain Beneficial Owners and
Management
The following table sets forth information on the beneficial
ownership of our common stock as of August 10, 2006 by
persons known to beneficially own more than 5% of our common
stock, our directors and our executive officers, and the
potential effects of the rights offering and sale of additional
shares. Note that beneficial ownership information includes
shares which may be acquired by a specified person on the
exercise of warrants, whereas the number of shares which may be
purchased in the rights offering by such person is based only on
the number of shares actually owned by such person.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class if
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
Only Standby
|
|
|
|
Number of
|
|
|
|
|
|
Additional
|
|
|
Additional
|
|
|
of Class if
|
|
|
Purchasers
|
|
|
|
Shares
|
|
|
|
|
|
Rights
|
|
|
Shares to
|
|
|
All Holders
|
|
|
and Additional
|
|
|
|
Beneficially
|
|
|
Percent of
|
|
|
Offering
|
|
|
Standby
|
|
|
Exercise
|
|
|
Standby Purchaser
|
|
Name of Beneficial Owner
|
|
Owned
|
|
|
Class
|
|
|
Shares
|
|
|
Purchasers(1)
|
|
|
Rights
|
|
|
Exercise Rights
|
|
|
5% Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sterling Capital Management LLC(2)
|
|
|
3,459,939
|
|
|
|
13.8
|
%
|
|
|
2,966,995
|
|
|
|
|
|
|
|
10.6
|
%
|
|
|
5.7
|
%
|
4064 Colony Road,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite 300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charlotte, NC 28211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wells Fargo & Company(3)
|
|
|
2,571,500
|
|
|
|
10.3
|
%
|
|
|
2,205,134
|
|
|
|
|
|
|
|
7.9
|
%
|
|
|
4.2
|
%
|
420 Montgomery Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco, CA 94104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey L. Gendell(4)
|
|
|
2,425,387
|
|
|
|
9.7
|
%
|
|
|
2,079,838
|
|
|
|
8,571,429
|
|
|
|
21.5
|
%
|
|
|
35.1
|
%
|
C/o Tontine Capital Management,
L.L.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55 Railroad Avenue, 3rd Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greenwich, CT 06830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald Smith & Co., Inc.(5)
|
|
|
2,365,597
|
|
|
|
9.5
|
%
|
|
|
2,028,566
|
|
|
|
|
|
|
|
7.2
|
%
|
|
|
3.9
|
%
|
152 West 57th Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanfield Capital Partners LLC(6)
|
|
|
1,926,062
|
|
|
|
7.7
|
%
|
|
|
1,651,652
|
|
|
|
|
|
|
|
5.9
|
%
|
|
|
3.2
|
%
|
430 Park Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. Greene and Company, LLC(7)
|
|
|
1,816,760
|
|
|
|
7.3
|
%
|
|
|
1,557,923
|
|
|
|
|
|
|
|
5.6
|
%
|
|
|
3.0
|
%
|
599 Lexington Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class if
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
Only Standby
|
|
|
|
Number of
|
|
|
|
|
|
Additional
|
|
|
Additional
|
|
|
of Class if
|
|
|
Purchasers
|
|
|
|
Shares
|
|
|
|
|
|
Rights
|
|
|
Shares to
|
|
|
All Holders
|
|
|
and Additional
|
|
|
|
Beneficially
|
|
|
Percent of
|
|
|
Offering
|
|
|
Standby
|
|
|
Exercise
|
|
|
Standby Purchaser
|
|
Name of Beneficial Owner
|
|
Owned
|
|
|
Class
|
|
|
Shares
|
|
|
Purchasers(1)
|
|
|
Rights
|
|
|
Exercise Rights
|
|
|
Arklow Capital, LLC(8)
|
|
|
1,588,892
|
|
|
|
6.2
|
%
|
|
|
814,045
|
|
|
|
|
|
|
|
4.1
|
%
|
|
|
7.0
|
%
|
237 Park Avenue, Suite 900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legg Mason Investment Trust, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,714,286
|
|
|
|
9.4
|
%
|
|
|
23.0
|
%
|
Directors and Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael R. DAppolonia
|
|
|
7,412
|
|
|
|
*
|
|
|
|
4,545
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
Mark C. Demetree
|
|
|
7,626
|
|
|
|
*
|
|
|
|
5,000
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
David S. Ferguson
|
|
|
4,036
|
|
|
|
*
|
|
|
|
3,461
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
Phillip M. Martineau
|
|
|
12,412
|
|
|
|
*
|
|
|
|
8,833
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
John P. Reilly
|
|
|
7,412
|
|
|
|
*
|
|
|
|
4,545
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
Michael P. Ressner
|
|
|
7,412
|
|
|
|
*
|
|
|
|
4,545
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
Gordon A. Ulsh
|
|
|
331,132
|
|
|
|
1.3
|
%
|
|
|
218,211
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
Carroll R. Wetzel
|
|
|
4,036
|
|
|
|
*
|
|
|
|
3,461
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
Mitchell Bregman
|
|
|
21,775
|
|
|
|
*
|
|
|
|
12,956
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
Neil Bright
|
|
|
21,852
|
|
|
|
*
|
|
|
|
15,165
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
E.J. OLeary
|
|
|
35,514
|
|
|
|
*
|
|
|
|
21,879
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
Phillip A. Damaska
|
|
|
13,432
|
|
|
|
*
|
|
|
|
8,088
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
All Directors and executive
officers as a group (15 persons)
|
|
|
507,253
|
|
|
|
2.0
|
%
|
|
|
323,982
|
|
|
|
|
|
|
|
1.4
|
%
|
|
|
*
|
|
|
|
|
* |
|
Represents less than 1% of the outstanding common stock. |
|
(1) |
|
Assumes 100% participation in the rights offering. |
|
(2) |
|
The information reflects the Schedule 13G filed by Sterling
Capital Management LLC on February 14, 2006. As of
February 14, 2006, 3,459,939 shares of our common
stock were beneficially owned by Sterling Capital Management LLC. |
|
(3) |
|
The information reflects the Schedule 13G filed jointly by
Wells Fargo & Company and Wells Capital Management
Incorporated on April 24, 2006. As of April 24, 2006,
2,571,500 shares of our common stock were reported
beneficially owned by Wells Fargo & Company and
2,524,700 shares of our common stock were reported
beneficially owned by Wells Capital Management Incorporated. |
|
(4) |
|
The information reflects the Schedule 13D filed jointly by
Tontine Capital Management, L.L.C., Tontine Partners, L.P.,
Tontine Capital Partners, L.P., Tontine Management, L.L.C.,
Tontine Overseas Associates, L.L.C., and Jeffrey L. Gendell on
June 29, 2006. Jeffrey L. Gendell (Mr. Gendell)
is the managing member of Tontine Capital Management, L.L.C.
(TCM), a Delaware limited liability company, the
general partner of Tontine Capital Partners, L.P., a Delaware
limited partnership (TCP). Mr. Gendell is the
managing member of Tontine Management, L.L.C. (TM),
a Delaware limited liability company, the general partner of
Tontine Partners, L.P., a Delaware limited partnership
(TP). Mr. Gendell is also the managing member of
Tontine Overseas Associates, L.L.C., a Delaware limited
liability company (TOA), the investment adviser to
Tontine Overseas Fund, Ltd., a Cayman Islands corporation
(TOF) and certain separately managed accounts.
Mr. Gendell indirectly owns 2,425,387 shares of Common
Stock of which is made up of the following: TCP directly owns
632,200 shares of Common Stock; TP directly owns
564,576 shares of Common Stock; TOF beneficially owns
1,178,611 shares of Common Stock; and certain separately managed
accounts own 50,000. |
|
(5) |
|
The information reflects the Schedule 13G filed by Donald
Smith & Co., Inc. on February 14, 2006. As of
February 14, 2006, 2,365,597 shares of our common
stock were beneficially owned by Donald
Smith & Co., Inc. |
22
|
|
|
(6) |
|
The information reflects the Schedule 13G/A filed by
Stanfield Capital Partners LLC on February 14, 2006. As of
February 14, 2006, 1,926,062 shares of our common
stock were beneficially owned by Stanfield Capital Partners LLC. |
|
(7) |
|
The information reflects the Schedule 13G filed by David J.
Greene and Company, LLC on February 10, 2006. As of
February 10, 2006, 1,816,760 shares of our common
stock were beneficially owned by David J. Greene and
Company, LLC. |
|
(8) |
|
The information reflects the Schedule 13G/A filed by Arklow
Capital, LLC on July 7, 2006. As of July 7, 2006,
1,588,892 shares of our common stock were beneficially
owned by Arklow Capital, LLC. including warrants exercisable
into 639,600 shares of common stock held by Arklow Capital,
LLC. |
Reasons
for the Rights Offering and Sale of Additional Shares of Common
Stock to the Standby Purchasers
In approving the rights offering, our Board of Directors
carefully evaluated our need for liquidity, financial
flexibility and additional capital. Our Board of Directors also
considered several alternative capital raising methods prior to
concluding that the rights offering was the appropriate
alternative. In conducting its analysis, our Board of Directors
also considered the dilution of the ownership percentage of the
current holders of our common stock caused by the rights
offering and the sale of additional shares of common stock to
the Standby Purchasers, and the resulting anti-dilution
adjustment to the conversion price for our convertible notes and
the exercise price of our warrants. For more information
regarding the anti-dilution adjustments to the conversion price
for our convertible notes and the exercise price for our
warrants, see Description of Capital Stock
Warrants and Description of Capital
Stock Convertible Notes. In addition, our
Board of Directors considered that the rights offering would
only occur if the holders of a majority of the voting power
represented by the shares of common stock present in person or
by proxy at our stockholder meeting and entitled to vote, voting
together as a single class, approved the transaction.
After weighing the factors discussed above and the effect of the
rights offering and sale of additional shares of common stock to
the Standby Purchasers of generating $125.0 million, before
expenses, in additional capital for us, we believe that the
rights offering is the best alternative for capital raising and
is in the best interests of our company and our stockholders. As
described in Use of Proceeds, the proceeds of the
rights offering are intended to be used to provide additional
liquidity for working capital, capital expenditures and general
corporate purposes.
Although we believe that the rights offering will strengthen our
financial condition, our Board of Directors is not making any
recommendation as to whether you should exercise your
subscription rights.
Standby
Commitments
We will be offering in a private placement 2,079,838 shares
of common stock to Tontine and 814,045 shares of common
stock to the Additional Standby Purchaser on terms identical to
those in this rights offering. Tontine and the Additional
Standby Purchaser will not be participating in the registered
rights offering, however the shares which we are offering to
them in the private placement represent the number of shares to
which they would be entitled had they participated in the rights
offering.
On June 28, 2006, we entered into the Standby Agreement
with the Standby Purchasers and the Additional Standby
Purchaser. The following description of the Standby Agreement
summarizes the material terms of the Standby Agreement. A copy
of the Standby Agreement has been filed as an exhibit to our
Form 8-K
filed on June 29, 2006. We urge you to carefully read that
entire document.
The Standby Agreement obligates us to sell, and requires the
Standby Purchasers and the Additional Standby Purchaser to
purchase from us, any and all shares of our common stock
issuable upon the exercise of any rights remaining unsubscribed
at the close of the rights offering subscription period. The
price per share paid by the Standby Purchasers and the
Additional Standby Purchaser for such common stock will be equal
to the subscription price offered in the rights offering. We
will also sell to the Standby Purchasers
14,285,714 additional shares of our common stock at a price
equal to the subscription price for the rights offering for
gross proceeds of $50.0 million.
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The obligation of the Standby Purchasers and the Additional
Standby Purchaser to fulfill the standby commitments under the
Standby Agreement is subject to the following conditions:
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our representations and warranties under the Standby Agreement
are true and correct in all material respects as of the date of
the Standby Agreement and the date of the closing of the
transactions contemplated thereunder;
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our execution and delivery of a registration rights agreement;
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there having been no material adverse effect on our financial
condition or earnings, financial position, operations, assets,
results of operations, business or prospects and there having
occurred no event or circumstance which would reasonably likely
result in such a material adverse effect;
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there having occurred none of the following events: (i) a
suspension of trading of our Common Stock or a suspension of
trading or the establishment of limited or minimum prices on
securities generally on the New York Stock Exchange or
Nasdaq Global Market; (ii) a banking moratorium having been
declared either by U.S. federal or New York State
authorities; or (iii) there having occurred any material
outbreak or material escalation of hostilities, declaration by
the United States of a national emergency or war or other
calamity or crisis which has a material adverse effect on the
U.S. financial markets (a Market Event).
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The obligation of Tontine to fulfill the standby commitments
under the Standby Agreement is subject to the condition that on
or prior to the closing date of the transactions contemplated by
the Standby Agreement, two nominees of Tontine (who are
reasonably acceptable to our Board of Directors) are elected to
our Board of Directors, which will result in our Board of
Directors consisting of not more than nine directors, provided
that this action does not limit our Board of Directors
ability to change the number of our directors after such closing
date. Tontine has submitted to us the names of individuals to be
evaluated for election by our Board of Directors. The candidates
are executives with companies in which Tontine has an
investment. Our Board of Directors is considering these
candidates.
Each of the Standby Purchasers and the Additional Standby
Purchaser have agreed that they will not purchase shares in the
rights offering which would result in either of them
individually or any group (within the meaning of
Section 13(d)(3) of the Exchange Act) of which they are a
member owning (i) 30% or more of the issued and outstanding
shares of our common stock on a fully diluted basis without the
requisite prior written consent of our lenders under our senior
secured credit facility or (ii) greater than 50% of the
issued and outstanding shares of our common stock. If either
Standby Purchaser would otherwise exceed such maximum number of
shares, such excess shall be purchased by the other Standby
Purchaser.
We have agreed, subject to the fiduciary duties of our Board of
Directors after receipt of advice from our outside legal
counsel, that we will not, other than with respect to the
disposition of non-core assets as permitted by the credit
agreement under our senior secured credit facility for a price
not to exceed $30.0 million in the aggregate and certain
other transactions permitted by the Standby Agreement, discuss,
knowingly encourage, negotiate, undertake, initiate, authorize,
recommend, propose or enter into any transaction involving a
merger, consolidation, business combination, purchase or
disposition of any material amount of the assets or any capital
stock other than the rights offering and sale of additional
shares to the Standby Purchasers or facilitate, knowingly
encourage, solicit or initiate discussions, negotiations or
submissions of proposals or offers in respect of any such
alternative transaction. We have also agreed not to furnish or
cause to be furnished any information concerning our business,
operations, properties or assets in connection with, or to
otherwise cooperate with or facilitate any such alternative
transaction. In addition, we have agreed to cease discussions or
negotiations regarding the sale of our Industrial Energy Europe
and Rest of World business segment. These restrictions terminate
upon the completion of the rights offering.
If the rights offering has not closed on or prior to
September 30, 2006, for any reason other than a material
breach of the Standby Agreement by the Standby Purchasers or a
termination of the Standby Agreement by the Standby Purchasers
in connection with a Market Event or if we terminate the Standby
Agreement prior to the closing of the rights offering other than
as a result of a material breach of the Standby Agreement by the
Standby Purchasers or if the Standby Purchasers terminate the
Standby Agreement in accordance with its terms, other than in
connection with a Market Event, the Standby Purchasers have the
option to purchase additional shares of our
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common stock at a price equal to the rights offering
subscription price for gross proceeds of $50.0 million,
provided that the Standby Purchasers must exercise this option
within 10 business days of the occurrence of an event that
triggers it.
As of August 21, 2006, Tontine and the Additional Standby
Purchaser beneficially owned 2,425,387 and 1,588,892 shares
of our common stock, consisting of approximately 9.7% and 6.2%
of our issued and outstanding common stock, respectively
(including, in the case of the Additional Standby Purchaser,
warrants held by it). Legg Mason does not hold any shares of our
common stock.
Each of the Standby Purchasers and the Additional Standby
Purchaser has represented to us that they are not
affiliates within the meaning of Rule 405 of
the Securities Act of 1933, as amended and are not acting in
concert with each other and are not members of a
group (within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934) that includes
another Standby Purchaser or the Additional Standby Purchaser as
a member of such a group and have no current intention to act in
the future in a manner that would make them members of such a
group.
In connection with the Standby Agreement, we have agreed that
upon the closing of the transactions contemplated by the Standby
Agreement, we will enter into a registration rights agreement in
the form attached to the Standby Agreement filed as an exhibit
to our
Form 8-K
filed on June 29, 2006, with the Standby Purchasers and the
Additional Standby Purchaser. Pursuant to such registration
rights agreement, we will register the resale of the shares of
the Companys common stock that each Standby Purchaser and
the Additional Standby Purchaser holds, including those they
acquire in the rights offering and under the Standby Agreement.
As a result, once the registration statement with respect to
such shares is declared effective by the SEC, such shares would
be eligible for resale in the public market without restriction
to the extent not already eligible for resale.
Pursuant to the registration rights agreement, we are required
to:
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use our reasonable best efforts to cause a registration
statement to be filed and declared effective by the SEC within
90 days following the closing under the Standby
Agreement; and
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use our reasonable best efforts to keep the registration
statement continuously effective for so long as any of the
Standby Purchasers and the Additional Standby Purchaser or their
permitted assigns hold our securities.
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Subject to certain restrictions, we may delay without penalty
the foregoing obligations to file any registration statement or
keep any registration statement usable for resales during one or
more periods aggregating not more than 90 days in any
twelve-month period in the event that we would be required to
disclose in the registration statement information not otherwise
then required by law to be publicly disclosed and in the
judgment of our Board of Directors, there is a reasonable
likelihood that such disclosure or any other action to be taken
in connection with the registration statement would materially
and adversely affect any existing or prospective material
business situation, transaction or negotiation or otherwise
materially and adversely affect our company.
Under the registration rights agreement, at any time the
registration statement is not effective and after written
request of the Standby Purchasers or their permitted assigns, we
will be required to effect the registration of securities
addressed in such request. In addition, if we propose to file on
our behalf or on behalf of selling securityholders a
registration statement, the Standby Purchasers or their
permitted assigns may request that their securities be
registered on such registration statement.
Method of
Exercising Rights
Unless we give you a right of cancellation as a result of a
fundamental (as determined by us) change to the terms of the
rights offering, the exercise of rights is irrevocable and may
not be cancelled or modified.
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You may exercise your rights as follows:
Subscription
by Registered Holders
You may exercise your subscription privilege by properly
completing and executing the rights certificate together with
any required signature guarantees and forwarding it, together
with payment in full of the subscription price for each share of
the common stock you subscribe for, to the subscription agent at
the address set forth under the subsection entitled
Subscription Agent and Escrow Agent, on or prior to
the expiration date.
Subscription
by DTC Participants
Banks, trust companies, securities dealers and brokers that hold
shares of our common stock as nominee for more than one
beneficial owner may, upon proper showing to the subscription
agent, exercise their subscription privilege on the same basis
as if the beneficial owners were record holders on the record
date through DTC. DTC will issue 0.85753 of a right to you for
each share of our common stock you own at the record date,
subject to adjustment to eliminate fractional rights. Each full
right can then be used to purchase one share of common
stock for $3.50 per share. You may exercise these rights through
DTCs PSOP Function on the agents subscription over
PTS procedure and instructing DTC to charge your
applicable DTC account for the subscription payment for the new
shares and deliver such amount to the subscription agent. DTC
must receive the subscription instructions and payment for the
new shares by the rights expiration date. Except as described
under the subsection titled Notice of Guaranteed
Delivery, subscriptions accepted by the subscription agent
via a Notice of Guaranteed Delivery must be delivered to the
subscription agent with payment before the expiration of the
subscription period.
Subscription
by Beneficial Owners
If you are a beneficial owner of shares of our common stock
whose shares are registered in the name of a broker, custodian
bank or other nominee, or if you hold common stock certificates
and would prefer to have an institution conduct the transaction
relating to the rights on your behalf, you should instruct your
broker, custodian bank or other nominee or institution to
exercise your rights and deliver all documents and payment on
your behalf prior to 5:00 p.m. Eastern Daylight Time, on
the expiration date. Your subscription rights will not be
considered exercised unless the subscription agent receives from
you, your broker, custodian, nominee or institution, as the case
may be, all of the required documents and your full subscription
price payment prior to 5:00 p.m. Eastern Daylight Time, on
the expiration date.
Payment
Method
Payments must be made in full in U.S. currency by:
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check or bank draft payable to American Stock Transfer &
Trust Company drawn upon a U.S. bank;
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postal, telegraphic or express money order payable to American
Stock Transfer & Trust Company, the subscription agent; or
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wire transfer of immediately available funds to accounts
maintained by the subscription agent.
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Any personal check used to pay for shares of common stock must
clear the appropriate financial institutions prior to the
expiration date. The clearing house may require five or more
business days. Accordingly, holders who wish to pay the
subscription price by means of a uncertified personal check are
urged to make payment sufficiently in advance of the expiration
date to ensure such payment is received and clears by such date.
Rights certificates received after that time will not be
honored, and we will return your payment to you, without
interest.
The subscription agent will be deemed to receive payment upon:
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clearance of any uncertified check deposited by the subscription
agent;
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receipt by the subscription agent of any certified check bank
draft drawn upon a U.S. bank;
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receipt by the subscription agent of any postal, telegraphic or
express money order; or
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receipt of collected funds in the subscription agents
account.
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In other words, if you send an uncertificated check, payment
will not be deemed to have been received by the subscription
agent until the check has cleared, but if you send a certified
check bank draft drawn upon a U.S. bank, a postal,
telegraphic or express money order or wire or transfer funds
directly to the subscription agents account, payment will
be deemed to have been received by the subscription agent
immediately upon receipt of such instruments and wire or
transfer.
You should read the instruction letter accompanying the rights
certificate carefully and strictly follow it. DO NOT SEND RIGHTS
CERTIFICATES OR PAYMENTS TO US. Except as described below under
Notice of Guaranteed Delivery, we will
not consider your subscription received until the subscription
agent has received delivery of a properly completed and duly
executed rights certificate and payment of the full subscription
amount. The risk of delivery of all documents and payments is on
you or your nominee, not us or the subscription agent.
The method of delivery of rights certificates and payment of the
subscription amount to the subscription agent will be at the
risk of the holders of rights, but, if sent by mail, we
recommend that you send those certificates and payments by
overnight courier or by registered mail, properly insured, with
return receipt requested, and that a sufficient number of days
be allowed to ensure delivery to the subscription agent and
clearance of payment before the expiration of the subscription
period. Because uncertified personal checks may take at least
five or more business days to clear, we strongly urge you to pay
or arrange for payment by means of certified or cashiers
check or money order to avoid missing the opportunity to
exercise your subscription rights should you decide to exercise
your subscription rights.
Unless a rights certificate provides that the shares of common
stock are to be delivered to the record holder of such rights or
such certificate is submitted for the account of a bank or a
broker, signatures on such rights certificate must be guaranteed
by an Eligible Guarantor Institution, as such term
is defined in
Rule 17Ad-15
of the Securities Exchange Act of 1934, as amended, subject to
any standards and procedures adopted by the subscription agent.
Missing
or Incomplete Subscription Information
If you do not indicate the number of subscription rights being
exercised, or do not forward full payment of the total
subscription price payment for the number of subscription rights
that you indicate are being exercised, then you will be deemed
to have exercised your basic subscription privilege with respect
to the maximum number of subscription rights that may be
exercised with the aggregate subscription price payment you
delivered to the subscription agent. If we do not apply your
full subscription price payment to your purchase of shares of
our common stock, we or the subscription agent will return the
excess amount to you by mail, without interest, as soon as
practicable after the expiration date of the rights offering.
Expiration
Date and Amendments
The subscription period, during which you may exercise your
subscription privilege, expires at 5:00 p.m., Eastern
Daylight Time, on the expiration date. If you do not exercise
your rights prior to that time, your rights will expire and will
no longer be exercisable. We will not be required to issue
shares of common stock to you if the subscription agent receives
your rights certificate or your payment after that time,
regardless of when you sent the rights certificate and payment,
unless you send the documents in compliance with the guaranteed
delivery procedures described below. We may, in our sole
discretion, extend the time for exercising the subscription
rights. If we should make any fundamental changes to the terms
set forth in this prospectus, we will file a post-effective
amendment to the registration statement, offer potential
purchasers who have subscribed for rights the opportunity to
cancel such subscriptions and issue a refund of any money
advanced by such shareholder and circulate an updated prospectus
after the post-effective amendment is declared effective with
the SEC. In addition, upon such event, we will extend the
expiration date of the rights offering to allow holders of
rights ample time to make new investment decisions and for us to
recirculate updated documentation. Promptly following any such
occurrence, we will issue a press release announcing any changes
with respect to this offering and the new expiration date.
We will extend the duration of the rights offering as required
by applicable law and may choose to extend it if we decide that
changes in the market price of our common stock warrant an
extension or if we decide to give investors more time to
exercise their subscription rights in the rights offering. We
may extend the expiration date of the rights offering by giving
oral or written notice to the subscription agent on or before
the scheduled expiration
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date. If we elect to extend the expiration of the rights
offering, we will issue a press release announcing such
extension no later than 9:00 a.m., Eastern Daylight Time,
on the next business day after the most recently announced
expiration date.
We reserve the right, in our sole discretion, to amend or modify
the terms of the rights offering.
Subscription
Price
Our Board of Directors determined the subscription price after
negotiations with the Standby Purchasers, considering the likely
cost of capital from other sources, the price at which our
principal shareholders might be willing to participate in the
rights offering, historical and current trading prices for our
common stock, our need for liquidity and capital and the need to
provide an incentive to our shareholders to participate in the
rights offering on a pro-rata basis. The subscription price for
a full subscription right is $3.50 per share. The per share
price is equal to a 20% discount to the average closing price of
our common stock for the 30 trading day period ended
July 6, 2006. The subscription price is not necessarily
related to our book value, net worth or any other established
criteria of value and may or may not be considered the fair
value of the common stock to be offered in the rights offering.
We cannot assure you that the market price of the common stock
will not decline during or after the rights offering. We also
cannot assure you that you will be able to sell shares of common
stock purchased during the rights offering at a price equal to
or greater than the subscription price. We urge you to obtain a
current quote for our common stock before exercising your rights.
Conditions,
Withdrawal and Termination
We reserve the right to withdraw the rights offering on or prior
to the expiration date for any reason. We may terminate the
rights offering, in whole or in part, if at any time before
completion of the rights offering there is any judgment, order,
decree, injunction, statute, law or regulation entered, enacted,
amended or held to be applicable to the rights offering that in
the sole judgment of our Board of Directors would or might make
the rights offering or its completion, whether in whole or in
part, illegal or otherwise restrict or prohibit completion of
the rights offering. We may waive any of these conditions and
choose to proceed with the rights offering even if one or more
of these events occur. If we terminate the rights offering, in
whole or in part, all affected subscription rights will expire
without value, and all subscription payments received by the
subscription agent will be returned without interest as soon as
practicable.
Cancellation
Rights
Our Board of Directors may cancel the rights offering in its
sole discretion at any time prior to the time the rights
offering expires for any reason. If we cancel the rights
offering, we will issue a press release notifying shareholders
of the cancellation and any funds you paid to the subscription
agent will be returned without interest or deduction as soon as
practicable.
Subscription
Agent
The subscription agent for this offering is American Stock
Transfer & Trust Company. The address to which
subscription documents, rights certificates, notices of
guaranteed delivery and payments other than wire transfers
should be mailed or delivered is:
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By Mail or Overnight
Courier:
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By Hand:
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American Stock Transfer &
Trust Company
Operations Center
Attn: Reorganization Department
6201 15th Avenue
Brooklyn, NY 11219
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American Stock Transfer &
Trust Company
Attn: Reorganization Department
59 Maiden Lane
New York, NY 10038
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If you deliver subscription documents, rights certificates or
notices of guaranteed delivery in a manner different than that
described in this prospectus, then we may not honor the exercise
of your subscription privileges.
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You should direct any questions or requests for assistance
concerning the method of subscribing for the shares of common
stock or for additional copies of this prospectus to the
information agent, Georgeson Shareholder Communications Inc.,
(888) 206-5896.
Fees and
Expenses
We will pay all fees charged by the subscription agent and the
information agent. You are responsible for paying any other
commissions, fees, taxes or other expenses incurred in
connection with the exercise of the rights. Neither we nor the
subscription agent will pay such expenses.
No
Fractional Rights
We will not issue fractional subscription rights or cash in lieu
of fractional rights. Fractional subscription rights will be
rounded to the nearest whole number, with such adjustments as
may be necessary to ensure that we offer 21,428,571 shares
of common stock in the rights offering. In the unlikely event
that, due to the rounding of fractional subscription rights, the
rights offering would have been subscribed in an amount in
excess of 21,428,571 shares of common stock, all
holders subscription rights will be reduced in an
equitable manner. Any excess subscription funds will be promptly
returned without interest.
Medallion
Guarantee May Be Required
Your signature on each subscription rights certificate must be
guaranteed by an eligible institution, such as a member firm of
a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or
correspondent in the United States, subject to standards and
procedures adopted by the subscription agent, unless:
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your subscription rights certificate provides that shares are to
be delivered to you as record holder of those subscription
rights; or
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you are an eligible institution.
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Notice To
Brokers and Nominees
If you are a broker, a trustee or a depositary for securities
who holds shares of our common stock for the account of others
on the rights offering record date, you should notify the
respective beneficial owners of such shares of the rights
offering as soon as possible to find out their intentions with
respect to exercising their subscription rights. You should
obtain instructions from the beneficial owner with respect to
their subscription rights, as set forth in the instructions we
have provided to you for your distribution to beneficial owners.
If the beneficial owner so instructs, you should complete the
appropriate subscription rights certificates and submit them to
the subscription agent with the proper payment. If you hold
shares of our common stock for the account(s) of more than one
beneficial owner, you may exercise the number of subscription
rights to which all such beneficial owners in the aggregate
otherwise would have been entitled had they been direct record
holders of our common stock on the rights offering record date,
provided that you, as a nominee record holder, make a proper
showing to the subscription agent by submitting the form
entitled Nominee Holder Certification that we will
provide to you with your rights offering materials. If you did
not receive this form, you should contact the subscription agent
to request a copy.
Beneficial
Owners
If you are a beneficial owner of shares of our common stock or
will receive your subscription rights through a broker,
custodian bank or other nominee, we will ask your broker,
custodian bank or other nominee to notify you of the rights
offering. If you wish to exercise your subscription rights, you
will need to have your broker, custodian bank or other nominee
act for you. If you hold certificates of our common stock
directly and would prefer to have your broker, custodian bank or
other nominee act for you, you should contact your nominee and
request it to effect the transactions for you. To indicate your
decision with respect to your subscription rights, you should
complete and return to your broker, custodian bank or other
nominee the form entitled Beneficial Owners Election
Form. You
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should receive this form from your broker, custodian bank or
other nominee with the other rights offering materials. If you
wish to obtain a separate subscription rights certificate, you
should contact the nominee as soon as possible and request that
a separate subscription rights certificate be issued to you. You
should contact your broker, custodian bank or other nominee if
you do not receive this form, but you believe you are entitled
to participate in the rights offering. We are not responsible if
you do not receive the form from your broker, custodian bank or
nominee or if you receive it without sufficient time to respond.
Notice of
Guaranteed Delivery
The subscription agent will grant you three business days after
the expiration date to deliver the rights certificate if you
follow the following instructions for providing the subscription
agent notice of guaranteed delivery. On or prior to the
expiration date, the subscription agent must receive payment in
full for all shares of common stock subscribed for through the
exercise of the subscription privilege, together with a properly
completed and duly executed notice of guaranteed delivery
substantially in the form accompanying this prospectus either by
hand, mail, telegram or facsimile transmission, that specifies
the name of the holder of the rights and the number of shares of
common stock subscribed for. If applicable, it must state
separately the number of shares of common stock subscribed for
through the exercise of the subscription privilege and a member
firm of a registered national securities exchange, a member of
the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or
correspondent in the United States must guarantee that the
properly completed and executed rights certificate for all
shares of common stock subscribed for will be delivered to the
subscription agent within three business days after the
expiration date. The subscription agent will then conditionally
accept the exercise of the privileges and will withhold the
certificates for shares of common stock until it receives the
properly completed and duly executed rights certificate within
that time period.
In the case of holders of rights that are held of record through
DTC, those rights may be exercised by instructing DTC to
transfer rights from that holders DTC account to the
subscription agents DTC account, together with payment of
the full subscription price. The notice of guaranteed delivery
must be guaranteed by a commercial bank, trust company or credit
union having an office, branch or agency in the United States or
by a member of a Stock Transfer Association approved medallion
program such as STAMP, SEMP or MSP. Notices of guaranteed
delivery and payments should be mailed or delivered to the
appropriate addresses set forth under
Subscription Agent and Escrow Agent.
Transferability
of Rights
The rights granted to you are non-transferable and, therefore,
may not be assigned, gifted, purchased or sold to anyone else.
The rights offered hereunder are non-transferable.
Validity
of Subscriptions
We will resolve all questions regarding the validity and form of
the exercise of your subscription privilege, including time of
receipt and eligibility to participate in the rights offering.
Our determination will be final and binding. Once made, unless
we give you a right of cancellation as a result of a fundamental
(as determined by us) change to the terms of the rights
offering, subscriptions and directions are irrevocable, and we
will not accept any alternative, conditional or contingent
subscriptions or directions. We reserve the absolute right to
reject any subscriptions or directions not properly submitted or
the acceptance of which would be unlawful. You must resolve any
irregularities in connection with your subscriptions before the
subscription period expires, unless waived by us in our sole
discretion. Neither we nor the subscription agent shall be under
any duty to notify you or your representative of defects in your
subscriptions. A subscription will be considered accepted,
subject to our right to withdraw or terminate the rights
offering, only when a properly completed and duly executed
rights certificate and any other required documents and payment
of the full subscription amount have been received by the
subscription agent. Our interpretations of the terms and
conditions of the rights offering will be final and binding.
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Escrow
Arrangements; Return of Funds
The subscription agent will hold funds received in payment for
shares of the common stock in a segregated account pending
completion of the rights offering. The subscription agent will
hold this money in escrow until the rights offering is completed
or is withdrawn and canceled. If the rights offering is canceled
for any reason, we will promptly return this money to
subscribers without interest.
Rights of
Subscribers
You will have no rights as a shareholder until certificates
representing shares of common stock are issued to you. You will
have no right to revoke your subscriptions after you deliver
your completed rights certificate, payment and any other
required documents to the subscription agent.
Foreign
Shareholders
We will not mail rights certificates to shareholders whose
addresses are outside the United States or who have an army post
office or foreign post office address. The subscription agent
will hold these rights certificates for their account. To
exercise rights, our foreign shareholders must notify the
subscription agent prior to 11:00 a.m., Eastern Daylight
Time, at least three business days prior to the expiration date
by completing an international holder subscription form which
will be delivered to those holders in lieu of a rights
certificate and sending it by mail or telecopy to the
subscription agent at the address and telecopy number set forth
under Subscription Agent and Escrow
Agent.
No
Revocation or Change
Once you submit the form of rights certificate to exercise any
rights, you are not allowed to revoke or change the exercise or
request a refund of monies paid. Unless we give you a right of
cancellation as a result of a fundamental (as determined by us)
change to terms of the rights offering, all exercises of rights
are irrevocable, even if you learn information about us that you
consider to be unfavorable. You should not exercise your rights
unless you are certain that you wish to purchase additional
shares of our common stock at the subscription price.
Regulatory
Limitation
We will not be required to issue to you shares of our common
stock pursuant to the rights offering if, in our opinion, you
are required to obtain prior clearance or approval from any
state or federal regulatory authorities to own or control such
shares and if, at the time the rights offering expires, you have
not obtained such clearance or approval.
U.S. Federal
Income Tax Treatment of Rights Distribution
Kirkland & Ellis LLP has acted as our tax counsel in
connection with the rights offering. Based upon discussions with
Kirkland & Ellis LLP, we believe that our distribution or
any shareholders exercise of these rights to purchase
shares of common stock will not be taxable to our shareholders
for the reasons described below in U.S. Federal
Income Tax Considerations. For a discussion of the tax
consequences to shareholders who receive or exercise the rights
if the Internal Revenue Service determines that these rights
have value, see U.S. Federal Income Tax
Considerations Receipt, Exercise and Explanation of
the Rights; Tax Basis and Holding Period of Shares Received upon
Exercise of the Rights.
No
Recommendation to Rights Holders
Our Board of Directors is not making any recommendations to you
as to whether or not you should exercise your rights. You should
make your decision based on your own assessment of your best
interests after reading this prospectus.
31
Listing
The rights will not be listed on the Nasdaq Global Market or any
other stock exchange or national market. The shares of common
stock issuable upon exercise of the rights will be listed on the
Nasdaq Global Market under the symbol XIDE.
Shares of
Common Stock Outstanding After the Rights Offering and Sale of
Additional Shares of Common Stock to the Standby
Purchasers
Based on the 24,988,768 shares of our common stock issued
and outstanding as of August 21, 2006,
60,703,053 shares of our common stock will be issued and
outstanding after the rights offering and sale of additional
shares of common stock to the Standby Purchasers is completed,
an increase in the number of outstanding shares of our common
stock of approximately 143%.
32
U.S.
FEDERAL INCOME TAX CONSIDERATIONS
The discussion that follows is the opinion of Kirkland &
Ellis LLP, special tax counsel to the Company, concerning
all material U.S. federal income tax considerations to U.S.
Holders (as defined below) of our common stock of the receipt of
rights in the rights offering and the ownership, exercise and
disposition of the rights except that Kirkland &
Ellis LLP expresses no opinion with respect to
(i) whether adjustments to the conversion price of the
convertible notes qualify as a full adjustment,
(ii) the amount of the Companys accumulated or
current earnings and profits for any taxable year,
(iii) actions and positions the Company states it intends
to take or (iv) statements of fact by the Company. In the
following discussion, we, us and similar
words refer to the Company and not to Kirkland &
Ellis LLP. This discussion is a summary and does not
consider all aspects of U.S. federal income taxation that
may be relevant to particular U.S. Holders in light of
their individual investment circumstances or to certain types of
U.S. Holders that are subject to special tax rules,
including partnerships, banks, financial institutions or other
financial services entities, broker-dealers,
insurance companies, tax-exempt organizations, regulated
investment companies, real estate investment trusts, retirement
plans, individual retirement accounts or other tax-deferred
accounts, persons who use or are required to use
mark-to-market
accounting, persons that received our common stock in
satisfaction of our prior indebtedness to such persons, persons
that hold rights or our common stock as part of a
straddle, a hedge or a conversion
transaction, persons that have a functional currency other
than the U.S. dollar, investors in pass-through entities,
certain former citizens or permanent residents of the United
States and persons subject to the alternative minimum tax. This
discussion also does not address any federal non-income, state,
local or foreign tax considerations to U.S. Holders, nor
does it address any tax considerations to persons other than
U.S. Holders. This summary assumes that U.S. Holders
have held our common stock exclusively as a capital
asset within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the
Code). This summary is based on the Code and
applicable Treasury Regulations, rulings, administrative
pronouncements and decisions as of the date hereof, all of which
are subject to change or differing interpretations at any time
with possible retroactive effect.
For purposes of this discussion, a U.S. Holder
is a beneficial owner of our common stock that is (1) a
citizen or an individual resident of the United States;
(2) a corporation (or entity treated as a corporation for
U.S. federal income tax purposes) created or organized, or
treated as created or organized, in or under the laws of the
United States or any political subdivision of the United States;
(3) an estate the income of which is subject to
U.S. federal income taxation regardless of its source; or
(4) a trust (i) if a court within the United States is
able to exercise primary supervision over its administration and
one or more U.S. persons have authority to control all
substantial decisions of the trust or (ii) that has a valid
election in effect under applicable Treasury Regulations to be
treated as a U.S. person.
If a partnership (or entity or arrangement treated as a
partnership for U.S. federal income tax purposes) holds our
common stock, the tax treatment of a partner in the partnership
will depend upon the status of the partner and the activities of
the partnership. In this event, the partner and partnership
should consult their tax advisors concerning the tax treatment
of the receipt of rights in the rights offering and the
ownership, exercise and disposition of the rights.
EACH HOLDER OF OUR COMMON STOCK IS URGED TO CONSULT ITS TAX
ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN
INCOME AND OTHER TAX CONSIDERATIONS OF THE RECEIPT OF RIGHTS IN
THE RIGHTS OFFERING AND THE OWNERSHIP, EXERCISE AND DISPOSITION
OF THE RIGHTS.
Receipt,
Exercise and Expiration of the Rights; Tax Basis and Holding
Period of Shares Received upon Exercise of the
Rights
Provided that the rights offering is not part of a
disproportionate distribution within the meaning of
section 305 of the Code, you will not recognize taxable
income for United States federal income tax purposes in
connection with the receipt of rights in the rights offering. A
disproportionate distribution is a distribution or a series of
distributions, including deemed distributions, that has the
effect of the receipt of cash or other property by some
stockholders or holders of debt instruments convertible into
stock and an increase in the proportionate interest of other
stockholders in a companys assets or earnings and profits.
Although we have made no distributions on our
33
common stock within the last 36 months (other than
distributions that qualify as redemptions under the tax law),
because we have outstanding notes convertible into our common
stock and on which we have paid interest, applicable Treasury
regulations provide that the receipt of the rights will be part
of a disproportionate distribution unless a full
adjustment is made in the conversion price of the notes to
reflect the rights offering. The indenture pursuant to which the
convertible notes were issued requires an adjustment to the
conversion price as a result of the rights offering, and we
intend to make this adjustment. The Treasury regulations do not
directly address the adjustment mechanism contained in the
indenture pursuant to which the convertible notes were issued.
Thus, it is uncertain whether the adjustment to the conversion
price required by the indenture qualifies as a full
adjustment, and accordingly it is uncertain whether the
receipt of the rights in the rights offering is taxable. We
intend to take the position that the adjustment to the
conversion price required by the indenture qualifies as a
full adjustment and that the receipt of the rights
in the rights offering is not taxable, but the Internal Revenue
Service or the courts may disagree with our position. If the
adjustment to the conversion price of the convertible notes is
finally determined by the Internal Revenue Service or a court
not to qualify as a full adjustment, our
shareholders may be treated as receiving a distribution upon the
receipt of rights in the rights offering in an amount equal to
the fair market value of the rights distributed.
Consequences
if the adjustment to the conversion price required by the
indenture qualifies as a full
adjustment
In this case, the distribution of rights would be taxable to
you as a dividend to the extent that the fair market value of
the rights you receive is allocable to our current and
accumulated earnings and profits for the taxable year in which
the rights are distributed. We believe that we do not have any
accumulated earnings and profits, and, although it is not
possible to determine our current earnings and profits for the
taxable year that includes the date of the rights distribution,
we expect that we will not have current earnings and profits for
that taxable year. Dividends received by corporate holders of
our stock are taxable at ordinary corporate tax rates subject to
any applicable dividends-received deduction. Dividends received
by noncorporate holders of our stock in taxable years beginning
before January 1, 2011 are taxed under current law at the
holders capital gain tax rate (a maximum rate of
15 percent) provided that the holder meets applicable
holding period and other requirements. Any distributions in
excess of our current and accumulated earnings and profits will
be treated as a tax-free return of basis, and any further
distributions in excess of your basis in our common stock will
be treated as gain from the sale or exchange of our common stock
(unless, as discussed in more detail below, you received the
common stock with respect to which the rights were distributed
in satisfaction of our prior indebtedness to you). Regardless of
whether the distribution of rights is treated as a dividend, as
a tax-free return of basis or as gain from the sale or exchange
of our common stock, your basis in the rights you receive will
be the rights fair market value.
If you allow rights received in the rights offering to expire,
you will not recognize any gain or loss upon the expiration of
the rights. You also will not recognize any gain or loss upon
the exercise of rights received in the rights offering, and the
tax basis of the shares of common stock acquired through
exercise of the rights will equal the sum of the subscription
price for the shares and your tax basis, if any, in the rights.
If you exercise the rights, your tax basis in the rights will be
zero unless either (i) the fair market value of the rights
on the date such rights are distributed is equal to at least
15 percent of the fair market value on such date of the
common stock with respect to which they are received or
(ii) you elect, in your United States federal income tax
return for the taxable year in which the rights are received, to
allocate part of the tax basis of such common stock to the
rights. In either such case, a portion of your basis in the
common stock with respect to which the rights are received will
be allocated to such rights in proportion to the respective fair
market values of the common stock and the rights on the date the
rights are distributed. The fair market value of the rights on
the date the rights are distributed is uncertain, and we have
not obtained, and do not intend to obtain, an appraisal of the
fair market value of the rights on that date. In determining the
fair market value of the rights, you should consider all
relevant facts and circumstances, including any difference
between the $3.50 per share subscription price of the rights and
the trading price of our stock on the date that the rights are
distributed, the length of the period during which the rights
may be exercised and the fact that the rights are
non-transferable. If you have tax basis in the rights and you
allow the rights to expire, the tax basis of the common stock
owned by you with respect to which such rights were distributed
will be restored to the tax basis of such common stock
immediately before the receipt of the rights in the rights
offering. The holding period for the shares of common stock
acquired through exercise of the rights will begin on the date
the rights are exercised.
34
If you exercise the rights received in the rights offering after
disposing of the shares of common stock with respect to which
the rights are received, then certain aspects of the tax
treatment of the exercise of the rights are unclear, including
(i) the allocation of tax basis between the common stock
previously sold and the rights, (ii) the impact of such
allocation on the amount and timing of gain or loss recognized
with respect to the common stock previously sold, and
(iii) the impact of such allocation on the tax basis of the
common stock acquired through exercise of the rights. If you
exercise the rights received in the rights offering after
disposing of the shares of common stock with respect to which
the rights are received, you should consult your tax advisor.
Consequences
if the adjustment to the conversion price required by the
indenture does not qualify as a full
adjustment
If you allow rights received in the rights offering to expire,
you will recognize a short-term capital loss equal to your basis
in the expired rights unless the Internal Revenue Service, based
on wording in a Supreme Court opinion on a related issue,
successfully challenges your recognition of this short-term
capital loss and requires you to reallocate your basis in the
expired rights to your shares of our common stock and to
recognize no loss. Your ability to use any capital loss is
subject to certain limitations. You will not recognize any gain
or loss upon the exercise of the rights, and the tax basis of
the shares of common stock acquired through exercise of the
rights will equal the sum of the subscription price for the
shares and your tax basis in the rights. The holding period for
the shares of common stock acquired through exercise of the
rights will begin on the date the rights are exercised.
Sale of
Shares of Common Stock and Receipt of Distributions on Shares of
Common Stock
You will recognize capital gain or loss upon the sale of common
stock acquired through the exercise of rights in an amount equal
to the difference between the amount realized and your tax basis
in the common stock (unless, as discussed in more detail below,
you received the common stock with respect to which the rights
were distributed in satisfaction of our prior indebtedness to
you). The capital gain or loss will be long-term if your holding
period in the shares is more than one year. Long-term capital
gains recognized by individuals are taxable under current law at
a maximum rate of 15 percent. Under current law, long-term
capital gains recognized by individuals will be taxable at a
maximum rate of 20 percent for taxable years beginning
after December 31, 2010. Long-term capital gains recognized
by corporations are taxable at ordinary corporate tax rates. If
you have held your shares of common stock for one year or less,
your capital gain or loss will be short-term. Short-term capital
gains are taxed at a maximum rate equal to the maximum rate
applicable to ordinary income. Your ability to use any capital
loss is subject to certain limitations.
Distributions, if any, on shares of common stock acquired
through the exercise of rights will be taxable to you as a
dividend to the extent that the cash and fair market value of
property is allocable to our current and accumulated earnings
and profits for the taxable year in which the distribution is
made. Dividends received by corporate holders are taxable at
ordinary corporate tax rates subject to any applicable
dividends-received deduction. Dividends received by noncorporate
holders of stock in taxable years beginning before
January 1, 2011 are taxed under current law at the
holders capital gain tax rate (a maximum rate of
15 percent) provided that the holder meets applicable
holding period and other requirements. Under current law,
dividends received by noncorporate holders in subsequent taxable
years will be taxed as ordinary income at a maximum rate of
35 percent. Any distributions in excess of our current and
accumulated earnings and profits will be treated as a tax-free
return of basis, and any further distributions in excess of your
basis in the common stock will be treated as gain from the sale
or exchange of such common stock (unless, as discussed in more
detail below, you received the common stock with respect to
which the rights were distributed in satisfaction of our prior
indebtedness to you). Your basis in any property you receive as
a distribution on shares of our common stock will be the
propertys fair market value (regardless of whether the
distribution is treated as a dividend, as a tax-free return of
basis or as gain from the sale or exchange of our common stock).
Finally, note that if you received the common stock with respect
to which the rights were distributed in satisfaction of our
prior indebtedness to you, then you may be required to treat a
portion of your gain from the sale or exchange of the common
stock you acquire through the exercise of the rights as ordinary
income to the extent that you previously recognized an ordinary
loss on your receipt of our common stock in exchange for the
prior indebtedness or to the extent you previously recognized
deductions due to the full or partial worthlessness of that
35
prior indebtedness. In addition, you may be subject to special
rules if you engage in a transaction with respect to the common
stock you acquire through the exercise of the rights that
generally would be tax-free or permit deferral of gain or income
recognition. If you received the common stock with respect to
which the rights were distributed in satisfaction of our prior
indebtedness to you, you are urged to consult your own tax
advisor concerning these issues.
Information
Reporting and Backup Withholding
You may be subject to information reporting
and/or
backup withholding with respect to dividend payments on or the
gross proceeds from the disposition of common stock acquired
through the exercise of rights. Backup withholding may apply
under certain circumstances if you (i) fail to furnish your
social security or other taxpayer identification number
(TIN), (ii) furnish an incorrect TIN,
(iii) fail to report interest or dividends properly, or
(iv) fail to provide a certified statement, signed under
penalty of perjury, that the TIN provided is correct and that
you are not subject to backup withholding. Any amount withheld
from a payment under the backup withholding rules is allowable
as a credit against (and may entitle you to a refund with
respect to) your federal income tax liability, provided that the
required information is furnished to the IRS. Certain persons
are exempt from backup withholding, including corporations and
financial institutions. You should consult your tax advisors as
to your qualification for exemption from withholding and the
procedure for obtaining such exemption.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
RECEIPT OF RIGHTS IN THE RIGHTS OFFERING AND THE OWNERSHIP,
EXERCISE AND DISPOSITION OF THE RIGHTS.
36
PRICE
RANGE OF COMMON STOCK AND DIVIDEND POLICY
Trading
Prices
Since May 6, 2004, our common stock has traded on the
Nasdaq Global Market under the symbol XIDE. The high
and low closing bid prices for our common stock is set forth
below.
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High
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Low
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Fiscal 2005:
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First Quarter
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$
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21.50
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$
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18.43
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Second Quarter
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$
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21.25
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$
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14.80
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Third Quarter
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$
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16.10
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$
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10.30
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Fourth Quarter
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$
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16.12
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$
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12.81
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Fiscal 2006:
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First Quarter
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$
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13.34
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$
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4.32
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Second Quarter
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$
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5.53
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$
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4.24
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Third Quarter
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$
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5.11
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$
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3.45
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Fourth Quarter
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$
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4.20
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$
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2.35
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Fiscal 2007:
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First Quarter
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$
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4.80
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$
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2.75
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Second Quarter (through
August 22, 2006)
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$
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4.60
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$
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3.55
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Prior to May 6, 2004, our old common stock was traded on
the
over-the-counter
market and quoted on the OTC Bulletin Board under the
symbol EXDTQ. The old common stock was cancelled,
effective May 5, 2004, pursuant to our 2004 plan of
reorganization.
As of August 21, 2006, we had 24,988,768 shares of our
common stock outstanding, with approximately 3,700 holders
of record.
Dividend
Policy
We have not declared or paid dividends on our common stock since
our emergence from Chapter 11 in 2004. Covenants in our
senior credit agreement restrict our ability to pay cash
dividends on capital stock and we presently do not intend to pay
dividends on our common stock.
37
DESCRIPTION
OF CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 shares
of common stock, $0.01 par value per share and
1,000,000 shares of preferred stock, $0.01 par value per
share. No shares of preferred stock are issued or outstanding.
The following description of our capital stock, warrants and
convertible notes and certain provisions of our certificate of
incorporation and bylaws is a summary of the material terms
thereof and is qualified in its entirety by the provisions of
the certificate of incorporation and bylaws and the warrant
agreement and convertible notes indenture, copies of which have
been filed with the SEC and are available for inspection. See
Available Information.
Common
Stock
Holders of our common stock are entitled to one vote for each
share held on all matters submitted to a vote of shareholders,
including the election of directors. Accordingly, holders of a
majority of the shares of common stock entitled to vote in any
election of directors may elect all of the directors standing
for election if they choose to do so. Our certificate of
incorporation does not provide for cumulative voting for the
election of directors. Holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared from
time to time by our board of directors out of funds legally
available therefor, and are entitled to receive, pro rata, all
of our assets available for distribution to such holders upon
liquidation. Holders of common stock have no preemptive or
redemption rights. All outstanding shares of our common stock
are fully paid and nonassessable.
At August 21, 2006, 24,988,768 shares of our common
stock were outstanding, and there were:
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1,237,080 shares issuable upon exercise of options
outstanding, with 240,148 having an exercise price of
$15.82, 1,795 having an exercise price of $14.95; 9,000 having
an exercise price of $13.78; 12,000 having an exercise price of
$13.41; 250,000 having an exercise price of $13.22; 8,600 having
an exercise price of $5.00; 34,000 having an exercise price of
$4.97; 30,000 having an exercise price of $4.88; 8,315 having an
exercise price of $4.45; 7,500 having an exercise price of
$4.87; 39,711 having an exercise price of $4.96; 6,100 having an
exercise price of $4.81; 61,013 having an exercise price of
$3.98; 513,898 having an exercise price of $4.46; and 15,000
having an exercise price of $4.35.
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5,539,738 shares available for future awards under our 2004
Stock Incentive Plan;
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6,250,000 shares issuable upon the exercise of warrants to
purchase our common stock at an exercise price of
$32.11 per share that have been issued and may be issued in
the future to holders of unsecured pre-petition claims pursuant
to our 2004 plan of reorganization;
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additional shares issuable to holders of disputed claims under
our 2004 plan of reorganization; and
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3,454,231 shares of common stock issuable upon conversion
of our convertible notes at their initial conversion price of
$17.37 per share.
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Pursuant to our 2004 plan of reorganization, we have established
a reserve of common stock and warrants to purchase common stock
for issuance to holders of general unsecured pre-petition
disputed claims. To the extent this reserve is insufficient to
satisfy these disputed claims, we would be required to issue
additional shares of common stock and warrants, which would
result in dilution to holders of common stock. We agreed
pursuant to our 2004 plan of reorganization to issue
25,000,000 shares of common stock and warrants initially
exercisable for 6,250,000 shares of common stock,
distributed as follows:
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holders of pre-petition secured claims were allocated
collectively 22,500,000 shares of common stock; and
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holders of general unsecured claims were allocated collectively
2,500,000 shares of common stock and warrants to purchase
6,250,000 shares of common stock at $32.11 per share,
and approximately 13.4% of such new common stock and warrants
were initially reserved for distribution for disputed general
unsecured claims under our 2004 plan of reorganizations
claims reconciliation and allowance procedures.
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Under the claims reconciliation and allowance process set forth
in our 2004 plan of reorganization, the Official Committee of
Unsecured Creditors, in consultation with us, established a
reserve to provide for a pro rata distribution of common stock
and warrants to holders of disputed general unsecured claims as
they become allowed.
38
As claims are evaluated and processed, we will object to some
claims or portions thereof, and upward adjustments (to the
extent stock and warrants not previously distributed remain) or
downward adjustments to the reserve will be made pending or
following adjudication or other resolution of these objections.
Predictions regarding the allowance and classification of claims
are inherently difficult to make. If the amount of general
unsecured claims that is eventually allowed exceeds the amount
of claims anticipated in the setting of the reserve, additional
common stock and warrants will be issued for the excess claim
amounts at the same rates as used for the other general
unsecured claims. If this were to occur, additional common stock
would also be issued to the holders of pre-petition secured
claims to maintain the ratio of their distribution in common
stock at nine times the amount of common stock distributed for
all unsecured claims.
Preferred
Stock
Pursuant to our certificate of incorporation, we are authorized
to issue blank check preferred stock, which may be
issued from time to time in one or more series upon
authorization by our Board of Directors. Our Board of Directors,
without further approval of the shareholders, is authorized to
fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences,
and any other rights, preferences, privileges and restrictions
applicable to each series of the preferred stock. The issuance
of preferred stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes could,
among other things, adversely affect the voting power of the
holders of common stock and, under certain circumstances, make
it more difficult for a third party to gain control of us,
discourage bids for our common stock at a premium or otherwise
adversely affect the market price of our common stock.
Warrants
Term. The warrants will expire on May 5,
2011.
Exercise Price and Anti-dilution. The initial
exercise price of the warrants was $32.11 per share and
upon the commencement of the rights offering, the exercise price
was reduced to $30.69 and the number of warrants issued and
issuable increased to approximately 6,539,180. The exercise
price is subject to further adjustment pursuant to the
anti-dilution provisions summarized below, including upon
consummation of the sale of additional shares of our common
stock to the Standby Purchasers.
If, at any time before the expiration date of the warrants, we
(i) pay a dividend or make a distribution on our common
stock in shares of common stock, (ii) subdivide or combine
our outstanding shares of common stock or (iii) reclassify
our common stock into other securities, the number of shares
issuable on exercise of each warrant and each warrants
exercise price will be adjusted so that the holders of warrants
are entitled to receive the number and kind of shares of common
stock or other securities that they would have received if their
warrants had been exercised immediately before the event (or, if
applicable, the events record date).
In addition, if we issue or sell or are deemed to issue or sell
any common stock (other than Excluded Stock defined
in the warrant agreement) without consideration or for
consideration per share less than the Market Price
(as defined in the warrant agreement) of the common stock as of
the day of such issuance or sale, the exercise price in effect
immediately prior to each such issuance will be reduced and the
number of shares issuable on exercise of each warrant will be
increased as determined in accordance with a weighted average
formula in the warrant agreement.
Finally, if we at any time or from time to time distribute to
all holders of common stock (including in connection with a
consolidation or merger in which we are the continuing
corporation) evidences of our indebtedness, cash or assets
(other than distributions and dividends payable in shares of
common stock or cash dividends or distributions paid out of
retained earnings or surplus legally available for such
dividends or distributions), the warrants exercise price
will be decreased to reflect the value of the distribution in
accordance with the warrant agreement.
No adjustment in the number of shares purchasable under the
warrants is required unless such adjustment would require an
increase or decrease of at least 1.0% in the number of shares
purchasable.
39
Event Protection. Until May 5, 2007 and
subject to certain other conditions, in the event of a sale,
lease, transfer or other disposition of all or substantially all
of our assets or a consolidation, merger or other business
combination in which we are not the surviving entity (each such
event, an Organic Change) in which the consideration
to be paid to the holders of the common stock is
$957.3 million or less, the buyer or surviving entity shall
pay holders of the warrants (in exchange for such warrants) the
cash equivalent to a Black-Scholes valuation using a 40%
volatility and the remaining life of the warrants, such
valuation subject to a 50% reduction beginning May 5, 2006
(the Black-Scholes Amount). In certain
circumstances, the buyer or surviving entity may elect, in lieu
of paying the Black-Scholes Amount, to give the holders of
warrants rights to acquire and receive upon exercise of such
warrants such shares of stock, securities or other property
issuable or payable as part of the Organic Change as they would
have been entitled to receive upon exercise of such warrants had
such warrants been exercised immediately before such Organic
Change, provided that if a portion of the consideration paid by
such buyer or surviving entity in connection with the Organic
Change is cash, the amount of cash which the holders of the
warrants will be entitled to receive upon exercise shall be a
portion of the Black-Scholes Amount.
Convertible
Notes
General
A holder may at any time prior to the close of business on the
maturity date convert any outstanding convertible notes into
shares of our common stock. The initial conversion price was
$17.37 per share. Upon the commencement of this rights
offering, the conversion price decreased to $16.42 per
share. The conversion price is subject to further adjustment as
described below. A holder may convert convertible notes only in
denominations of $1,000 and multiples of $1,000.
Adjustment
to Conversion Price Upon a Change in Control
If holders elect to convert their notes in connection with
clauses (1), (2) or (3) of the definition of
change in control as set forth below and 10% or more of the fair
market value of the consideration for the shares of our common
stock in the transaction consists of (i) cash (excluding
cash paid for fractional shares), (ii) other property or
(iii) securities that are not traded or scheduled to be
traded immediately following such transaction on a
U.S. national securities exchange or the Nasdaq Global
Market, we will decrease the conversion price for the notes
surrendered for conversion, which will increase the number of
shares issuable upon conversion (the additional
shares) as described below.
Change in control is defined in the convertible
notes indenture to mean the occurrence of one or more of the
following events:
(1) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of our assets to any person or group of
related persons for purposes of Section 13(d) of the
Exchange Act (a Group), together with any affiliates
thereof (whether or not otherwise in compliance with the
provisions of the indenture);
(2) the approval by the holders of our capital stock of any
plan or proposal for the liquidation or dissolution of our
company (whether or not otherwise in compliance with the
provisions of the indenture);
(3) any person or Group shall become the owner, directly or
indirectly, beneficially or of record, of shares representing
more than 50% of the aggregate ordinary voting power represented
by our issued and outstanding capital stock; or
(4) the replacement of a majority of our Board of Directors
over a two-year period from the directors who constituted our
Board of Directors at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a
majority of our Board of Directors then still in office who
either were members of such Board of Directors at the beginning
of such period or whose election as a member of such Board of
Directors was previously so approved.
The number of additional shares are determined by reference to a
table included in the indenture, based on the date on which the
change in control becomes effective (the effective
date) and the share price (the share price)
40
paid per share of common stock in the change in control. If
holders of our common stock receive only cash in the change in
control, the share price is the cash amount paid per share.
Otherwise, the share price is the average of the closing sale
prices of our common stock on the five trading days prior to but
not including the effective date of the corporate transaction.
The maximum amount of additional shares is 12.6542 per
$1,000 principal amount of convertible notes, but in no event
will the total number of shares of common stock issuable upon
conversion exceed approximately 70.2247 per $1,000
principal amount of notes, subject to adjustments in the same
manner as the conversion price as set forth under
Conversion Price Adjustments.
Conversion
after a Public Acquirer Change in Control
In the case of a public acquirer change in control (as defined
below), we may, in lieu of increasing the conversion rate by
additional shares as described under
Adjustment to Conversion Price Upon a Change
in Control above, elect to adjust the conversion rate and
the related conversion obligation such that, from and after the
effective date of such public acquirer change in control,
holders of the notes will be entitled to convert their notes
into a number of shares of public acquirer common stock (as
defined below) that have been registered, or the resale of which
will be registered, under the Securities Act, by multiplying the
conversion rate in effect immediately before the public acquirer
change in control by a fraction:
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the numerator of which will be (i) in the case of a
consolidation, merger or binding share exchange, pursuant to
which our common stock is converted into or exchanged for the
right to receive cash, securities or other property, the average
value of all cash and any other consideration (as determined by
our board of directors) paid or payable per share of common
stock or (ii) in the case of any other public acquirer
change in control, the average of the last closing price of our
common stock for the five consecutive trading days prior to but
excluding the effective date of such public acquirer change in
control, and
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the denominator of which will be the average of the last closing
prices of the public acquirer common stock for the five
consecutive trading days commencing on the trading day next
succeeding the effective date of such public acquirer change in
control.
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A public acquirer change in control means a change
in control that would otherwise obligate us to increase the
conversion rate as described under Adjustment
to Conversion Price Upon a Change in Control and the
acquirer (or any entity that is a directly or indirectly
wholly-owned subsidiary of the acquirer) has a class of common
stock traded on a national securities exchange or quoted on the
Nasdaq Global Market or which will be so traded or quoted when
issued or exchanged in connection with such change in control
(the public acquirer common stock). Upon a public
acquirer change in control, holders may convert their notes at
the adjusted conversion rate described in the preceding
paragraph but will not be entitled to the increased conversion
rate as described under Adjustment to
Conversion Price Upon a Change in Control. The registered
shares of public acquirer Common Stock, or the shares of public
acquirer common stock registered for resale, as the case may be,
shall be listed, or approved for listing subject only to
official notice of issuance, on a national securities exchange
or the Nasdaq Global Market.
Conversion
Price Adjustments
The conversion price will be adjusted if (without duplication):
(1) we issue to all holders of shares of our common stock
other capital stock as a dividend or distribution on our common
stock;
(2) we subdivide or combine our common stock;
41
(3) we issue (other than pursuant to a shareholders rights
plan) to all holders of our common stock or our preferred stock,
rights (including the rights offering described herein, as
provided above), warrants or options entitling them to subscribe
for or purchase shares of our common stock at less than the then
current market price;
(4) we distribute to all holders of our common stock
evidences of our indebtedness, shares of capital stock (other
than common stock), securities, cash, property, rights, warrants
or options, excluding:
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those rights, warrants or options referred to in clause (3)
above;
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any dividend or distribution paid exclusively in cash not
referred to below; and
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any dividend or distribution referred to in clause (1)
above;
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(5) we declare a cash dividend or distribution to all or
substantially all of the holders of our common stock. If we
declare such a cash dividend or distribution, the conversion
price shall be decreased to equal the number determined by
multiplying the conversion price in effect immediately prior to
the record date for such dividend or distribution by the
following fraction:
(Pre-Dividend Sale Price Dividend Adjustment Amount)
/ Pre-Dividend Sale Price
provided that, no adjustment to the conversion price or the
ability of a holder of a note to convert will be made if we
provide that holders of notes will participate in the cash
dividend or distribution without conversion; provided further
that if the numerator of the foregoing fraction is less than
$1.00 (including a negative amount) then in lieu of any
adjustment under this clause (5), we will make adequate
provision so that each holder of notes will have the right to
receive upon conversion the amount of cash such holder would
have received had such holder converted such notes on the record
date for such cash dividend or distribution. Pre-Dividend
Sale Price means the average common stock price for the
three consecutive trading days ending on the trading day
immediately preceding the ex-dividend date for such dividend or
distribution. Dividend Adjustment Amount means the
full amount of the dividend or distribution to the extent
payable in cash applicable to one share of common stock;
(6) we or one of our subsidiaries makes a payment in
respect of a tender offer or exchange offer for our common stock
to the extent that the cash and value of any other consideration
included in the payment per share of common stock exceeds the
current market price per share of common stock on the trading
day next succeeding the last date on which tenders or exchanges
may be made pursuant to such tender or exchange offer; or
(7) someone other than us or one of our subsidiaries makes
a payment in respect of a tender offer or exchange offer in
which, as of the closing date of the offer, our board of
directors is not recommending rejection of the offer. The
adjustment referred to in this clause will only be made if:
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the tender offer or exchange offer is for an amount that
increases the offerors ownership of common stock to more
than 25% of the total shares of our common stock
outstanding; and
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the cash and value of any other consideration included in the
payment per share of common stock exceeds the current market
price per share of common stock on the business day next
succeeding the last date on which tenders or exchanges may be
made pursuant to the tender or exchange offer.
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However, the adjustment referred to in this clause (7) will
not be made if as of the closing of the offer, the offering
documents disclose a plan or an intention to cause us to engage
in a consolidation or merger of or a sale of all or
substantially all of our assets.
Anti-Takeover
Effects of Our Certificate of Incorporation and Bylaws
Some provisions of our certificate of incorporation and bylaws
may be deemed to have an anti-takeover effect and may delay or
prevent a tender offer or takeover attempt that a shareholder
might consider to be in its best interest, including those
attempts that might result in a premium over the market price
for the shares held by shareholders.
42
These provisions include, but are not limited to:
No
Removal of Directors Without Cause
Directors may be removed by the shareholders only for cause.
Board
Vacancies
Our certificate of incorporation authorizes the Board of
Directors to fill vacant directorships or to increase the size
of the Board of Directors, which may deter a shareholder from
removing incumbent directors and simultaneously gaining control
of the Board of Directors by filling the vacancies created by
this removal with its own nominees.
Cumulative
Voting
Our certificate of incorporation does not authorize our
shareholders the right to cumulative voting in the election of
directors. As a result, shareholders may not aggregate their
votes for a single director.
Shareholder
Action Without a Meeting
Our bylaws prevent our shareholders from taking action without a
meeting called in accordance with the bylaws. As a result, our
shareholders cannot act by written consent.
Advance
Notice of Director Nominees and Other Matters to Come Before
Shareholder Meetings
Our bylaws require shareholders to notify us prior to the date
which is 90 days before the anniversary of the last annual
meeting of shareholders of any nominations they will propose for
directors or other matters they wish to propose at the annual
meeting.
Authorized
but Unissued Shares
Our authorized but unissued shares of common stock and preferred
stock are available for future issuance without shareholder
approval. These additional shares may be utilized for a variety
of corporate purposes, including future public offerings to
raise additional capital, corporate acquisitions and employee
benefit plans. The existence of authorized but unissued shares
of common stock and preferred stock could render more difficult
or discourage an attempt to obtain control of a majority of our
common stock by means of a proxy contest, tender offer, merger
or otherwise.
Section 203
of Delaware General Corporation Law
We are subject to the business combination statute
of the Delaware General Corporation Law. In general, such
statute prohibits a publicly held Delaware corporation from
engaging in various business combination
transactions with any interested shareholder for a
period of three years after the date of the transaction in which
the person became an interested shareholder, unless:
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the transaction is approved by the Board of Directors prior to
the date the interested shareholder obtained such status;
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upon consummation of the transaction which resulted in the
shareholder becoming an interested shareholder, the
interested shareholder owned at least 85% of the
voting stock of the corporation outstanding at the time the
transaction commended, excluding specified shares; or
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on or subsequent to such date the business
combination is approved by the board of directors and
authorized at an annual or special meeting of the shareholders
by the affirmative vote of at least
662/3%
of the outstanding voting stock which is not owned by the
interested shareholder.
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A business combination includes mergers, asset sales
and other transactions resulting in financial benefit to a
shareholder. An interested shareholder is a person
who, together with affiliates and associates, owns (or within
three years, did own) 15% or more of a corporations voting
stock. The statute could prohibit or delay mergers or other
takeover or change in control attempts with respect to us and,
accordingly, may discourage attempts to acquire us.
Transfer
Agent
American Stock Transfer & Trust Company is the transfer
agent for our common stock.
44
PLAN OF
DISTRIBUTION
On or about August 28, 2006, we will distribute the rights,
rights certificates and copies of this prospectus to individuals
who owned shares of common stock on August 23, 2006 except
Tontine and the Additional Standby Purchaser. If you wish to
exercise your rights and purchase shares of common stock, you
should complete the rights certificate and return it with
payment for the shares, to the subscription agent, American
Stock Transfer & Trust Company, at the following address:
By Mail:
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By Mail or Overnight
Courier:
American Stock
Transfer & Trust Company
Operations Center
Attn: Reorganization Department
6201 15th Avenue
Brooklyn, NY 11219
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By Hand:
American Stock Transfer
& Trust Company
Attn: Reorganization Department
59 Maiden Lane
New York, NY 10038
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See The Rights Offering Method of Exercising
Rights. If you have any questions, you should contact the
information agent, Georgeson Shareholder Communications Inc.,
(888) 206-5896.
Other than as described herein, we do not know of any existing
agreements between any shareholder, broker, dealer, underwriter
or agent relating to the sale or distribution of the underlying
common stock.
45
LEGAL
MATTERS
The validity of the subscription rights and the common stock
issuable upon subscription of the rights will be passed upon for
us by Kirkland & Ellis LLP, Chicago, Illinois (a
limited liability partnership that includes professional
corporations).
EXPERTS
The financial statements and managements assessment of the
effectiveness of internal control over financial reporting
(which is included in Managements Report on Internal
Control Over Financial Reporting) incorporated in this
prospectus by reference to the Annual Report on
Form 10-K
for the year ended March 31, 2006 have been so incorporated
in reliance on the report (which contains an explanatory
paragraph relating to our ability to continue as a going concern
as described in Note 1 to our financial statements and an
adverse opinion on the effectiveness of internal control over
financial reporting) of PricewaterhouseCoopers LLP, an
independent registered public accounting firm, given on the
authority of said firm as experts in auditing and accounting.
INCORPORATION
BY REFERENCE
We disclose important information to you by referring you to
documents that we have previously filed with the SEC or
documents that we will file with the SEC in the future. The
information incorporated by reference is considered to be part
of this prospectus, and information in documents that we file
later with the SEC will automatically update and supersede
information in this prospectus. We incorporate by reference the
documents listed below into this prospectus, and any future
filings made by us with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act until we close this offering,
including all filings made after the date of the initial
registration statement and prior to the effectiveness of the
registration statement. We hereby incorporate by reference the
following documents:
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our Annual Report on
Form 10-K
for the fiscal year ended March 31, 2006, filed with the
SEC on June 29, 2006 and the portions of the Proxy
Statement dated July 28, 2006 that are incorporated by
reference into the
Form 10-K;
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our Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2006, filed with the SEC on August 8, 2006;
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our Current Report on
Form 8-K,
filed with the SEC on June 29, 2006;
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our Current Report on
Form 8-K,
filed with the SEC on July 6, 2006;
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our Current Report on Form 8-K, filed with the SEC on
August 4, 2006;
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our Current Report on Form 8-K, filed with the SEC on
August 23, 2006; and
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our Current Report on Form 8-K, filed with the SEC on
August 24, 2006.
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Any statement contained in a document incorporated or deemed to
be incorporated by reference in this prospectus is modified or
superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded does not,
except as so modified or superseded, constitute a part of this
prospectus.
You may request a copy of these filings, at no cost, by written
or oral request made to us at the following address or telephone
number:
Exide Technologies
13000 Deerfield Parkway
Building 200
Alpharetta, GA 30004
(678) 566-9000
Attention: Corporate Secretary
46
AVAILABLE
INFORMATION
We file annual, quarterly and current reports, prospectus and
other information with the SEC. You may read and copy any
materials that we file with the SEC at the SECs public
reference room at 100 F Street, N.E.,
Washington, D.C. Please call the SEC at
1-800-SEC-0330
for more information about the operation of the public reference
rooms. The SEC also maintains an internet website, at
http://www.sec.gov, that contains our filed reports, proxy and
information statements and other information that we file
electronically with the SEC. Additionally, we make these filings
available, free of charge, on our website at www.exide.com as
soon as reasonably practicable after we electronically file such
materials with, or furnish them to, the SEC. The information on
our website, other than these filings, is not, and should not
be, considered part of this prospectus and is not incorporated
by reference into this document.
47
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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Item 14.
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Other
Expenses of Issuance and Distribution
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The following table sets forth all costs and expenses payable by
us in connection with the sale of the securities being
registered hereunder. All of the amounts shown are estimates
except for the SEC registration fee.
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SEC registration fee
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$
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6,941
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Investment banking fees and
expenses
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3,750,000
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(1)
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Subscription agent fees and
expenses
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55,000
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Information agent fees and expenses
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9,000
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Legal fees and expenses
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800,000
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Accounting fees and expenses
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75,000
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Printing costs
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65,000
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Miscellaneous expenses
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47,500
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Total
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$
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4,809,525
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(1) |
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Represents the pro rata portion related to the rights offering
of total investment banking fees and expenses in connection with
the rights offering and sale of additional shares to the Standby
Purchasers and other related matters. |
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Item 15.
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Indemnification
of Directors and Officers
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We are incorporated under the laws of the State of Delaware.
Section 145 of the Delaware General Corporation Law
provides that a corporation may indemnify directors and
officers, as well as other employees and individuals, against
expenses (including attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
such persons in connection with any threatened, pending or
completed actions, suits or proceedings in which such persons
are made a party by reason of being or having been a director,
officer, employee or agent to the corporation. The Delaware
General Corporation Law provides that Section 145 is not
excluding other rights to which those seeking indemnification
may be entitled under any certificate of incorporation, bylaws,
agreement, vote of stockholders or disinterested directors or
otherwise. Our bylaws provide for indemnification by us of our
directors, officers and employees to the fullest extent
permitted by the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law
permits a corporation to provide in its certificate of
incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the
directors duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (iii) for unlawful payments of dividends or
unlawful stock repurchases, redemptions or other distributions
or (iv) for any transactions from which the director
derived an improper personal benefit. Our certificate of
incorporation provides for such limitations of liability to the
fullest extent permitted by Delaware General Corporation Law.
We have entered into indemnification agreements with certain of
our officers and all members of our board of directors. The
indemnification agreements provide that we will indemnify our
officers and directors party thereto against any losses,
expenses and taxes arising from any action taken against the
officers and directors by reason of or relating to their status
or actions taken in their capacity as our officers or directors.
We are not responsible for indemnifying officers and directors
for any action initiated or brought voluntarily by any officer
or director against us or any of our employees.
We maintain standard policies of insurance under which coverage
is provided (i) to our directors and officers against loss
arising from claims made by reason of breach of duty or other
wrongful act and (ii) to us with respect to payments which
may be made by us to such directors and officers pursuant to the
above indemnification provision or otherwise as a matter of law.
II-1
The list of exhibits in the Exhibit Index to this report is
incorporated herein by reference.
(a) Exide Technologies hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. To
reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration
statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) of this section do not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or
furnished to the SEC by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under
the Securities Act to any purchaser, if the registrant is
subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to
an offering, other than registration statements relying on
rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in
the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such date of first use.
(5) That, for the purpose of determining liability of the
registrant under the Securities Act to any purchaser in the
initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering
of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method
used to sell the securities to the
II-2
purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and
will be considered to offer or sell such securities to such
purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
(b) Exide Technologies hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of Exide Technologies annual report pursuant
to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plans annual report pursuant to
Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on
Form S-3
and has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the city of
Alpharetta, State of Georgia, on the 24th day of August,
2006.
EXIDE TECHNOLOGIES
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By:
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/s/ Gordon
A. Ulsh
Name: Gordon
A. Ulsh
Title: President, Chief Executive Officer and
Director
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* * * *
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment No. 4 to the registration
statement on
Form S-3
has been signed by the following persons in the capacities and
on the dates indicated:
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Signatures
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Capacity
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Dates
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/s/ Gordon
A. Ulsh
Gordon
A. Ulsh
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President, Chief Executive Officer
and Director
(Principal Executive Officer)
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August 24, 2006
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*
Francis
M. Corby Jr.
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Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
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August 24, 2006
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*
Phillip
A. Damaska
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Senior Vice President and
Corporate Controller
(Principal Accounting Officer)
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August 24, 2006
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*
John
P. Reilly
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Chairman of the Board of Directors
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August 24, 2006
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*
Michael
R. DAppolonia
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Director
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August 24, 2006
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*
David
S. Ferguson
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Director
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August 24, 2006
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*
Michael
P. Ressner
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Director
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August 24, 2006
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II-4
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Signatures
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Capacity
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Dates
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*
Carroll
R. Wetzel
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Director
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August 24, 2006
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* /s/ Barbara
A. Hatcher
Barbara
A. Hatcher
Attorney-in-Fact
Pursuant to Power of Attorney
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II-5
EXHIBIT INDEX
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Exhibit
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Number
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Description
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2
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.1
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Standby Purchase Agreement among
Exide Technologies and Tontine Capital Partners, L.P., Legg
Mason Investment Trust, Inc. and Arklow Capital, LLC, dated
June 28, 2006 (incorporated by reference to
Exhibit 10.1 to our
Form 8-K
filed with the SEC on June 29, 2006).
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2
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.2
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Form of Registration Rights
Agreement to be entered into among Exide Technologies and
Tontine Capital Partners, L.P., Legg Mason Investment Trust,
Inc. and Arklow Capital, LLC, (incorporated by reference to
Exhibit 10.1 to our
Form 8-K
filed with the SEC on June 29, 2006).
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2
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.3
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Amendment to Standby Purchase
Agreement among Exide Technologies and Tontine Capital Partners,
Legg Mason Investment Trust, Inc. and Arklow Capital, LLC, dated
August 1, 2006.**
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3
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.1
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Amended and Restated Certificate
of Incorporation.**
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3
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.2
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Certificate of Amendment to
Amended and Restated Certificate of Incorporation (incorporated
by reference to Exhibit 3.1 to our Form 8-K filed with
the SEC on August 24, 2006).
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3
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.3
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Amended and Restated Bylaws
(incorporated by reference to Exhibit 3.2 to our Annual
Report on
Form 10-K
filed with the SEC on June 29, 2006).
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4
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.1
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Form of Subscription Rights
Certificate.**
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4
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.2
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Subscription Agent Agreement among
Exide Technologies and American Stock Transit & Trust
Company dated August 23, 2006.*
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5
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.1
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Opinion of Kirkland &
Ellis LLP.**
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8
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.1
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Tax Opinion of Kirkland &
Ellis LLP.*
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23
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.1
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Consent of PricewaterhouseCoopers
LLP.*
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23
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.2
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Consent of Kirkland &
Ellis LLP (included in Exhibit 5.1).**
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24
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.1
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Power of Attorney (included in
signature page).
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99
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.1
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Form of Instructions For Use
of Exide Subscription Rights.**
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99
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.2
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Form of Notice of Guaranteed
Delivery for Subscription Rights.**
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99
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.3
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Form of Letter to Shareholders who
are Record Holders.**
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99
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.4
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Form of Letter to Shareholders who
are Beneficial Holders.**
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99
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.5
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Form of Letter to Clients of
Shareholders who are Beneficial Holders.**
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99
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.6
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Form of Nominee Holder
Certification Form.**
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99
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.7
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Form of Beneficial Owner Election
Form.**
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|
99
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.8
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Substitute
Form W-9
for Use with Rights Offering.**
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* Filed herewith.
** Filed previously.