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The following is an excerpt from a 10-K SEC Filing, filed by EXIDE CORP on 8/19/2002.
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EXIDE TECHNOLOGIES - 10-K - 20020819 - BUSINESS

Item 1. Business

(1) Overview

Unless otherwise indicated references to any "fiscal year" means the year ended March 31 of that year (e.g., "fiscal 2002" refers to the period beginning April 1, 2001 and ending March 31, 2002, "fiscal 2001" refers to the period beginning April 1, 2000 and ending March 31, 2001 and "fiscal 2000" refers to the period beginning April 1, 1999 and ending March 31, 2000).

Bankruptcy Considerations

On April 15, 2002 ("Petition Date") Exide Technologies (together with its subsidiaries unless the context requires otherwise, "Exide" or the "Company") and three of its wholly-owned, U.S. subsidiaries (RBD Liquidation, LLC, Exide Delaware, LLC and Exide Illinois, Inc.; together with Exide collectively, the "Debtors") filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws ("Bankruptcy Code" or "Chapter 11") in the United States Bankruptcy Court for the District of Delaware ("Bankruptcy Court") under case numbers 02-11125 through 02-11128 (jointly administered for procedural purposes before the Bankruptcy Court under case number 02-11125JCA).

The Debtors are currently operating their business as debtors-in-possession pursuant to the Bankruptcy Code.

The Company decided to file for reorganization for itself and certain of its subsidiaries under Chapter 11 as it offered the most efficient alternative to restructure its balance sheet and access new working capital while continuing to operate in the ordinary course of business. The Company has a heavy debt burden, caused largely by a debt-financed acquisition strategy and the significant costs of integrating those acquisitions. Other factors leading to the reorganization included the impact of current adverse economic conditions on the Company's markets, particularly the telecommunications industry, ongoing competitive pressures, and recent capital market volatility. These factors contributed to a loss of revenues and resulted in significant operating losses and negative cash flows, severely impacting the Company's financial condition and its ability to maintain compliance with debt covenants.

As debtors in possession under Chapter 11, the Debtors are authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the approval of the Bankruptcy Court. The Company's operations outside of the U.S. are not included in the Chapter 11 proceedings. However, in connection with the Chapter 11 filing, the Company entered into a "Standstill and Subordination Agreement" with its Pre-Petition Senior Secured Credit Facility Lenders, whereby the lenders have agreed to forbear collection of principal payments on foreign borrowings under the pre-petition facility from non-debtor subsidiaries until December 2003, subject to earlier termination upon the occurrence of certain events. A description of the pre-petition credit agreement and certain of its conditions appears in this Report at Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.

On May 10, 2002 the Company received final Bankruptcy Court approval to access its entire $250 million debtor-in-possession ("DIP") financing facility ("DIP Credit Facility"). The DIP Credit Facility will be used to supplement cash flows from operations during the reorganization process including the payment of post-petition ordinary course trade and other payables, the payment of certain permitted pre-petition claims, working capital needs, letter of credit requirements and for other general corporate purposes. A more detailed description of the DIP Credit Facility appears in this Report at Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.

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Under Section 362 of the Bankruptcy Code, actions to collect pre-petition indebtedness, as well as most other pending litigation, are stayed. Absent an order of the Bankruptcy Court, substantially all pre-petition liabilities are subject to settlement under a plan of reorganization to be approved by the Bankruptcy Court. Although the Debtors expect to file a reorganization plan that provides for emergence from bankruptcy as a going concern, there can be no assurance that a reorganization plan will be proposed by the Debtors or confirmed by the Bankruptcy Court, or that any such plan will be successfully implemented.

Under the Bankruptcy Code, the Debtors may also assume or reject executory contracts, including lease obligations, subject to the approval of the Bankruptcy Court and certain other conditions. Parties affected by these rejections may file claims with the Bankruptcy Court in accordance with the reorganization process. Due to the timing of the Chapter 11 proceedings, the Company cannot currently estimate or anticipate what impact the rejection and subsequent claims of executory contracts may have on the reorganization process.

On June 14, 2002, the Company filed with the Bankruptcy Court schedules and statements of financial affairs setting forth, among other things, the assets and liabilities of the Debtors as shown by our books and records on the Petition Date, subject to the assumptions contained in certain notes filed in connection therewith. All of the schedules are subject to further amendment or modification. The Bankruptcy Code provides for a claims reconciliation and resolution process, although a bar date for filing claims has not yet been established. As the ultimate number and amount of allowed claims is not presently known, and because any settlement terms of such allowed claims are subject to a confirmed plan of reorganization, the ultimate distribution with respect to allowed claims is not presently ascertainable.

The United States Trustee has appointed an unsecured creditors committee. The official committee and its legal representatives have a right to be heard on all matters that come before the Bankruptcy Court.

At this time, it is not possible to predict the effect of the Chapter 11 reorganization process on our business, various creditors and security holders, or when it may be possible to emerge from Chapter 11. Our future results are dependent upon our confirming and implementing, on a timely basis, a plan of reorganization. The Company believes, however, that under any reorganization plan, the Company's common stock would likely be substantially if not completely diluted or cancelled as a result of the conversion of debt to equity or with respect to any other compromise of interests. Further, it is also likely that the Company's senior notes and convertible subordinated notes will suffer substantial impairment.

The ultimate recovery, if any, by creditors, security holders and/or common shareholders will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what value will be ascribed in the bankruptcy proceedings to each of these constituencies. Accordingly, Exide urges that appropriate caution be exercised with respect to existing and future investments in any of these securities.

The consolidated financial statements contained herein have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business. The ability of the Company to continue as a going concern is predicated, among other things, on the confirmation of a reorganization plan, compliance with the provisions of the DIP Credit Facility, the ability of the Company to generate the required cash flows from operations and, where necessary, obtaining financing sources sufficient to satisfy future obligations. As a result of the Chapter 11 filing, and consideration of various strategic alternatives, including possible assets sales, the Company expects that any reorganization plan will likely result in material changes to the carrying amount of assets and liabilities in the consolidated financial statements.

General Discussion of Business

Exide Technologies is 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 210 Carnegie Center, Suite 500, Princeton, NJ 08540.

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The Company is one of the largest volume producers of lead acid batteries in the world, with fiscal 2002 net sales of approximately $2.4 billion. Our European, North American and Pacific Rim operations represented approximately 48%, 47% and 5%, respectively, of our fiscal 2002 net sales. We manufacture and supply industrial and transportation batteries in North America, Europe, the Middle East, India, Australia and New Zealand. Our industrial batteries consist of motive power batteries, such as those for use in material handling applications and other electric vehicles, and network power batteries used for telecommunication, industrial and military applications.

Acquisition of GNB

On September 29, 2000, the Company acquired GNB Technologies, Inc. ("GNB"), a U.S. and Pacific Rim manufacturer of both industrial and transportation batteries, from Pacific Dunlop Limited. The acquired GNB operations are located in the U.S., Australia, New Zealand, Canada, Europe, Japan, South Asia, China, India and the Middle East. The former GNB businesses manufacture industrial batteries in North America, including those used in both motive and network power applications under various brands such as Absolyte(R), Marathon(R), Sprinter(R), Champion(R) and Pacific Chloride(R). The former GNB operations also manufacture transportation batteries under the Champion(R), Stowaway(R) and National(R) brands, among others, including private label brands, and is a supplier to automotive original equipment manufacturers in North America and the Pacific Rim.

(2) Financial Information about Segments

For fiscal 2002, we were primarily engaged in the manufacture, distribution and sale of lead acid batteries in three global business segments: Motive Power, Network Power and Transportation. See Note 21 to the Company's Consolidated Financial Statements appearing elsewhere herein.

(3) Narrative Description of Business

Our strategic focus is customer energy storage and application needs on a global basis. We have three primary business segments: Motive Power, Network Power and Transportation.

Motive Power Segment

Sales of Motive Power batteries represented approximately 20% of our net sales for fiscal 2002. We believe we have a leading market position in the motive power segment of the worldwide industrial battery market, based on our estimate of current market share.

Product performance and customer service are very important in the Motive Power markets. We work closely with our customers as they develop new products, designing batteries to meet their needs. While we established our current market position primarily by acquiring existing manufacturers with established brand names, we plan to market our products under global brands and establish a reputation for quality, product technology and service.

Our Motive Power batteries are composed of two-volt cells assembled in numerous configurations and sizes to provide capacities ranging from 30 Ah to 1500 Ah. We also manufacture and market a range of 6 and 12 volt monobloc batteries used on smaller material handling vehicles, access equipment and electrically-powered wheelchairs. Exide offers conventional vented lead acid technology utilizing tubular positive-plate and flat plate cell design. Exide also offers a range of lead acid battery technologies to meet a wide spectrum of customer application requirements. For example, Exide provides monobloc batteries incorporating gelled electrolyte and copper-stretched metal technology (CSM) for high performance applications. In addition, we provide maintenance-free sealed batteries incorporating absorbed glass mat (AGM) technology under the Champion(R) brand name.

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The materials handling industry is the largest market for Motive Power batteries, including forklifts, electric counter balance trucks, pedestrian pallet trucks, low level order pickers, turret trucks, tow tractors, reach trucks and very narrow aisle (VNA) trucks.

Other market segments requiring Motive Power products include:
scrubber/dryer and sweeper machines in the floor cleaning market, scissor lifts, access platforms and telescopic zooms in the access market, buggies and carts in the golf market, mobility equipment in the wheelchair market, mining locomotives, electric road vehicles, electric boats and non-military submersible vehicles.

In addition to our Motive Power battery products, Exide offers a range of battery chargers, watering and maintenance equipment and battery transfer equipment.

The motive power battery market in Europe is divided into the original equipment manufacturer ("OEM") market, comprised of the manufacturers of the electric vehicles described above, and the replacement market, which includes large users of such electric vehicles as well as original equipment dealer networks. The majority of our sales are to OEMs. Our major original equipment motive power customers in Europe include the materials handling operations of the Linde Group (Germany), Junghreinrich Group (Germany), Atlet (Sweden) and BT Rolatruc (Sweden). We also sell our Motive Power products to a wide range of customers in the aftermarket, ranging from large industrial concerns and retail distributors to small warehouse and manufacturing operations.

In Europe, we provide Motive Power products and services through company-owned sales and service organizations in each country and utilize distributors and agents for export of products from Europe to the rest of the world. In addition, we distribute Motive Power batteries through OEM dealers, independent distributors and directly to large fleet users.

The European motive power market has developed due to a trend toward electric (rather than internal combustion) material handling vehicles and from the growth of warehousing and logistics service providers. This market is served primarily through OEMs rather than end users. Additionally, with the advent of the Euro and the attendant greater price transparency, the OEM truck manufacturers have been able to exert additional competitive pressure by standardizing prices throughout Europe.

In North America, the Motive Power business is served primarily through independent lift truck dealers or sold directly to large national accounts or end users. Our customers include Nacco, Crown, Wal-Mart, Kroger and Ford Motor Company.

The North American product range includes the conventional vented lead acid technology utilizing the flat plate cell design, the tubular positive-plate design from our European Motive Power business, and Champion sealed maintenance-free batteries and chargers.

Motive Power products and services are provided in North America through company-owned sales and service locations which are augmented by a network of independent manufacturers' representatives who provide local service on their own behalf.

The European and North American motive power markets are heavily influenced by the demand for materials handling equipment. Customer demand for materials handling equipment has a strong historical correlation to general economic conditions.

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Network Power Segment

Sales of Network Power batteries represented approximately 17% of our net sales for fiscal 2002.

Network Power (also known as standby or stationary) batteries are used for back-up power applications to ensure continuous power supply in case of main (primary) power failure or outage. Today's examples of where network power batteries are used to provide backup power include telecommunications, computers, hospitals, process control, air traffic control, security systems, utility, railway and military applications.

One of the largest network power markets is telecommunications. Customers for network power batteries for telecom applications include manufacturers of switches and other equipment and the system operators. Battery demand for telecommunications has until recently been fueled by the growth in internet broadband connections and worldwide deployment of multiple cellular and wireless mobile communication systems where each repeater system and base transceiver station may require a set of standby batteries. Other telecommunications applications include central and local switching systems (PABX), satellite stations, optical fiber repeating boxes, cable TV transmission boxes and radio transmission stations. In these applications, the batteries are usually packaged with a 48V DC power system.

The telecommunications industry and network power battery demand has experienced a significant downturn during the last year, which the Company does not expect will reverse in the near term. As a result, during the third quarter of fiscal 2002 the Company recorded goodwill impairment charges based upon its assessment of the fair value of the Network Power reporting unit against book carrying value. Further deterioration in industry performance, particularly in Europe, could result in additional impairment charges in future periods. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.

Network power batteries also serve as uninterruptible power supplies (UPS) used in computer installations for banks, airlines and back up servers for the internet. UPS battery customers consist of system manufacturers and end users. Performance in this market is impacted by the demand for computer systems.

Our major network power battery customers include:

. telecommunications companies, such as AT&T, China Unicom, Cingular, Nippon Telegraph and Telephone (NTT), Qwest, Singapore Telecom, Telecom Italia, Telefonica of Spain and Verizon;

. manufacturers of telecommunications equipment, such as Alcatel, Ericsson, Marconi, Motorola and Nokia;

. manufacturers and end users of UPS, primarily for mainframe computer systems, such as MGE and Siemens;

. electrical generating companies; and

. government and military users.

We sell our products directly to these customers and promote our products by holding seminars, participating in trade shows and distributing technical literature.

Given the importance of service and technical assistance, we generally ship network power batteries directly to system suppliers and UPS manufacturers who include the batteries in their original equipment and distribute products to end users. Batteries are also shipped directly to end users for both systems and the replacement of aged batteries.

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Today we offer a global product line which is being marketed under the following five brands associated with product type and technology:

. Absolyte(R):      Large 2-volt sealed cells, incorporating AGM technology, for long duration (e.g.
                    telecom) and short duration applications.
. Marathon(R):      Multi-cell AGM monobloc batteries for long duration applications.
. Sprinter(R):      Multi-cell AGM monobloc batteries for short duration applications.
. Sonnenschein(R):  Multi-cell monoblocs and 2-volt cells, incorporating Gel technology, primarily
                    for long duration applications.
. Classic(TM):      Multi-cell monoblocs and 2-volt cells, using traditional flooded construction,
                    primarily for large installation and long duration applications.

There are two primary Network Power lead acid battery technologies:
valve-regulated (VRLA, or sealed) and vented (flooded). There are also two types of VRLA technologies--GEL and AGM.

These technologies are described as follows:

Product   Description
VRLA: GEL This technology utilizes a gel electrolyte. Sealed batteries have replaced other types of
          network power batteries because they enhance safety, reduce maintenance and can be
          used in both vertical and horizontal positions. The Sonnenschein gel technology offers the
          advantages of high reliability and long life. The gel product range offers a wide range of
          capabilities such as heat resistance, deep discharge resistance, long shelf life and high
          cyclic performance.

VRLA: AGM This technology utilizes an electrolyte immobilized in an absorbent glass mat separator.
          This technology is particularly well adapted to shorter back-up time and can offer up to a
          20-year design life.

Vented    This technology is used in applications requiring high reliability but with the ability to
(Flooded) allow for regular maintenance. The basic construction involves positive flat or tubular
          positive plates. Transparent containers and easily accessible internal construction are
          features of these batteries that allow end users to check the battery's physical condition.

Exide is also one of the leading suppliers of submarine batteries. Our customers include the navies of Denmark, France, Germany, Italy, Norway, Singapore, Spain, Sweden, Turkey, and we are the sole supplier to the U.S. Navy for submarine batteries.

Transportation Segment

Transportation batteries include starting, lighting and ignition (SLI) batteries for cars, trucks, off-road vehicles, agricultural and construction vehicles, motorcycles, recreational vehicles, boats, and other applications. Transportation batteries represented approximately 63% of our net sales for fiscal 2002.

In North America, we are the second largest manufacturer of transportation batteries. In Europe, we are one of the largest manufacturers of transportation batteries. The market is divided between sales to OEMs and aftermarket customers. We market our products under various trademarks including Exide(R), Champion(R), Stowaway(R), SubZero(R), Trailblazer(R), Willard(R), Tudor(R), DETA(R), Centra(R), Fulmen(R) and Prestolite(R) and many private label brands for customers. We also produce and market the Exide Select(R), including the Exide Select Orbital(R) battery.

Transportation: Original Equipment Manufacturer (OEM) Market

The OEM market consists of the sale of batteries to manufacturers of automobiles and trucks, buses and off-road agricultural and construction vehicles. The factors affecting the OEM market are consumer demand for

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passenger cars, light trucks and sport utility vehicles; significant consolidation in the automotive industry; globalization of OEM procurement activities and competition.

Our major OEM customers in North America include DaimlerChrysler, Ford Motor Company, Toyota, Kenworth, Peterbilt, John Deere International, Volvo Cars of North America and Case/New Holland.

Our major OEM customers in Europe are Fiat, Volkswagen Group, the PSA group (Peugeot S.A./Citroen), Renault/Nissan, BMW and Ford.

Transportation: Aftermarket

We sell aftermarket batteries in North America through automotive parts retailers and mass merchandisers, car and truck dealers, and wholesale distributors who supply service stations, repair shops, automotive and farm-equipment dealers, and small retailers. We also provide transportation batteries for commercial applications, such as trucks, farm equipment, tractors and off-road vehicles, as well as batteries for marine, lawn and garden and motorcycle applications.

Demand for conventional automotive replacement batteries is influenced by the following principal factors: (1) the number of vehicles in use, (2) average battery life, (3) the average age of vehicles and their condition, (4) seasonal weather conditions and (5) general population growth and economic conditions. The ratio of battery usage to vehicles in use has increased slightly in recent years, reflecting higher average miles of vehicle usage and an increasing number of vehicles used in warm climates. Aftermarket demand is more stable than the original equipment market since it is not affected by the cyclical nature of new vehicle demand. The replacement market is also larger in general than the original equipment segment, since automotive batteries tend to require replacement every three to five years.

We market our aftermarket batteries in North America to a broad range of retailers and distributors. We are a leading supplier to NAPA, Wal-Mart, Sam's Club, Kmart, and CSK Inc. We are also a supplier of authorized replacement batteries for DaimlerChrysler, Mopar, Freightliner and John Deere International.

Our North American aftermarket operations include a company-owned branch network. This branch network throughout the United States and Canada which sells and distributes batteries and other products to local auto parts retailers, service stations, repair shops, fleet operators, battery specialists and installers. The branches may also deliver batteries to our national account customers' retail stores and collect used and spent batteries for recycling.

Our primary North American transportation battery products include the following:

Product                  Description
Exide(R) Champion(R) and These batteries include a comprehensive range of vented, maintenance-free lead acid
private label            batteries, from a basic battery to a premium battery with enhanced power cold
                         cranking amps and a 72 month warranty. These batteries are sold under the
                         Champion(R) and Exide(R) brand name as well as various private labels.

Exide NASCAR Select(R)   Our Exide NASCAR Select(R) batteries are officially licensed by NASCAR. Our
and Champion             Champion Trailblazer(R) batteries are targeted at light trucks and SUV vehicles. Both
Trailblazer(R)           the Champion Trailblazer(R) and the Exide NASCAR Select(R) batteries include a
                         number of features differentiating them from conventional batteries, including
                         increased durability, resistance to vibration and battery performance and life.

Exide Select Orbital(R)  Through its patented spiral wound technology and state-of-the-art recombinant
                         design, this battery can be recharged in a fraction of the time needed for conventional
                         batteries, and has high power output and superior vibration resistance compared with
                         a conventional lead acid battery.

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Batteries used for marine and recreational vehicles include the Stowaway(R) and Nautilus(R) brands, which employ technology to satisfy the power requirements of large engines, sophisticated electronics and on-board accessories. For the marine market, we produce the Exide Select Orbital(R) Marine, which brings all the advantages of Exide's patented spiral wound technology to the marine market. The Exide Select Orbital(R) Marine maintains nearly a full charge during the off-season, and can be quickly recharged. This battery is also sealed, making it ideal for closed environments (such as inside a boat hull). The Exide Select Orbital(R) Marine battery is complemented by the Stowaway(R) Powercycler(R), which was the first sealed, AGM battery introduced in the marine battery market. The Stowaway(R) Powercycler(R) is a completely sealed, VRLA battery with AGM technology and prismatic plates that offers features and benefits similar to the Exide Select Orbital(R). We also produce the Nautilus(R) Gold Dual Purpose and the Stowaway(R) Dual Purpose, a combination battery, replacing separate starting and deep cycle batteries in two-battery marine and recreational vehicle systems, and the Nautilus(R) Mega Cycle and Stowaway(R) Deep Cycle, a high performance, dual terminal battery.

We sell aftermarket batteries in Europe primarily through battery wholesalers, OEM dealer networks, hypermarkets, European purchasing centers and oil companies. Wholesalers and OEM dealers have traditionally represented the majority of this market, but supermarket chains, replacement-parts stores (represented by purchasing associations) and hypermarkets have become increasingly important. Battery wholesalers now sell and distribute batteries to a network of automotive parts retailers, service stations, independent retailers, and supermarkets throughout Europe.

Demand for conventional automotive replacement batteries in the European aftermarket is affected by the same major factors influencing the aftermarket in North America. In Europe, mass merchandisers have gained market share in recent years. Buying groups representing smaller battery resellers have grown and begun to expand. The European aftermarket is less concentrated than in North America at the present time and we believe Exide is well-positioned to supply mass merchandisers, buying groups and individual resellers.

We have a leading position in the automotive aftermarket in most European countries and our customers include ADI, KWIK FIT and many other leading aftermarket battery distributors. We sell our aftermarket batteries in Europe under a variety of well-known brand names, including Exide, Fulmen, DETA, Tudor, SONNAK, and Centra.

In Europe, our product offerings vary by market. We generally offer a basic model, an upgrade model, a premium model and various niche products in each market. Exide has five major Company-owned brands in Europe. Exide(R) and Tudor(R) are promoted as pan-European brands, whereas Deta(R), Centra(TM) and Fulmen(TM) have strong local awareness levels.

The following describes our product offerings in the United Kingdom and is representative of our product offerings elsewhere in Europe:

Product     Description

Basic(TM)   This is our basic model. It uses traditional lead acid technology, has average power
            and cold-cranking capabilities, carries a 12-month warranty and is adequate for
            most conventional automotive uses. The same or similar battery is marketed under
            private label brand names in France, Germany and Spain, under the Basic name in
            Italy and under various other names in other markets.

Classic(TM) This is our upgrade model. It still uses traditional lead acid technology, and has
            increased power and cold-cranking capabilities. This battery carries a 24-month
            warranty. The same or similar batteries are marketed under the Equipe name in
            France, the Classic name in Germany, the Leader name in Italy, the Tudor name in
            Spain and under various other names in other markets.

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Product     Description

Ultra(TM)   This is our premium model. It has a number of added features including higher
            power and a 36-month warranty. The same or similar batteries are marketed under
            the Formula name in France, the Top Start Plus name in Germany, the Ultra name
            in Italy, the Millennium 3 name in Spain and under various other names in other
            markets.

STR/STE(TM) Our STR/STE batteries use recombination technology to allow a lead acid battery to
            be installed in the passenger compartment of an automobile with little or no fluid
            loss or acid fumes under normal operating conditions. Our STE technology was
            approved for use by BMW and was included in some models beginning with the
            2000 model year.

Maxxima(TM) This is the equivalent of the Exide Select Orbital(R) described above. We market this
            battery under the Maxxima brand name throughout Europe.

Quality

We recognize that product performance and quality are critical to our success and we have undertaken a company-wide quality improvement effort. In April 2001, the Company launched its EXCELL (Exide's Customer-focused Excellence Lean Leadership) program to systematically eliminate waste and implement the concepts of continuous flow and customer pull throughout the entire Exide supply chain. The EXCELL initiative is intended to implement lean production and other quality improvements. The system, now being implemented at 62 Exide facilities worldwide, also incorporates best practices to improve product quality, workplace safety and regulatory compliance. The best processes include Kaizen (continuous improvement); mistake proofing; quality control process charting; total productive maintenance; business process re-engineering; one piece flow; standard work; six sigma (measure of variance); quick changover; 5S (everything has a place and everything in its place); and visual factory.

Our quality effort begins in the design phase with an in depth understanding of customer and application requirements. Our batteries are designed to the required performance, industry and customer quality standards, using design processes, tools and materials to achieve reliability and durability. Our commitment to quality continues through our manufacturing process. We have quality audit processes and standards in each of our production facilities. We have established an employee Lead Quality Continuous Improvement Team, and many of our plants have established quality-related incentive plans for hourly employees. Our quality program extends past the point of sale. We offer warranties on our products, inservice product evaluations, and we conduct customer satisfaction surveys.

Most of our major production facilities are approved under ISO 9000, QS 9000 or equivalent quality standards. Also, we have obtained ISO 14001 certification at eight of our manufacturing plants, including TS16949 certification at three of these facilities. We have received quality certification from Renault, PSA Group, BMW, VW/Audi and Fiat and Q1 approval from Ford. In addition, several of our plants are AQAP approved by the military organizations of different countries. We have received quality certifications from many Network Power customers such as NTT and Motorola.

Research and Development

We are committed to developing new and technologically advanced products, services and systems that provide superior performance and value to our customers. To support this commitment, we focus significant attention on developing opportunities across our global businesses.

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We have focused our global research and development activities into a central facility in Europe. Scientists and engineers at this facility are currently focused on projects to enhance the lead acid battery technology for the benefit of the entire Company.

In addition, we also operate a number of product and process-development centers around the world. These centers work cooperatively to define and improve our product design and production processes.Examples of projects currently underway include continuous grid making processes, battery assembly automation and productivity and product improvement programs. By leveraging this network, we have been able to transfer technologies, product and process knowledge among our various operating facilities, thereby adapting best practices from around the world for use throughout the Company.

In addition to our in-house efforts, we are forming alliances and collaborative partnerships to pursue knowledge developments. One example of this strategy is the collaborative agreement with Siemens VDO Automotive AG announced on September 24, 2001 to develop energy-management systems for 14- and 42-volt automotive electrical and electronic architectures for the global OEM market. Through this partnership, the companies intend to co-develop and market products and systems designed to optimize electrical-energy management in vehicles, such as advanced software and state-of-charge/state-of-health sensors. Other new vehicle technologies creating demand for 42-volt power include electric power steering, electromechanical brakes and advanced electrically-controlled heating and air conditioning systems.

The Company has established similar arrangements with Lear Corporation and Valeo in the Transportation area.

Patents, Trademarks and Licenses

We own or have a license to use various trademarks that are valuable to our business. At present we own more than 800 trademarks and license the right to use fewer than 50 trademarks worldwide. While we believe these trademarks and trade names enhance the brand recognition of our products and are therefore important to our business, we do not believe any of these individually are material to our business. An unaffiliated company has rights to use the Exide(R) mark in approximately 37 foreign countries and Exide Electronics Group, Inc., an unaffiliated company, is licensed to use the Exide(R) name on certain devices. These licenses are not, however, material to the conduct of our business or results of operations.

We have generated a large number of patents in the operation of our business and currently own all or a partial interest in more than 800 patents worldwide. We also have more than 1,000 applications for patents pending. Although we believe our patents and patent applications collectively are important to our business and that technological innovation is important to our market competitiveness, currently no patent individually is material to operation of the business or its financial condition.

At the present time, the Company is not engaged to any significant extent in commercialization of its technology or brand names.

Manufacturing, Raw Materials and Suppliers

Lead is the primary material by weight used in the manufacture of lead acid batteries, representing approximately one-fourth of the cost of goods produced. We obtain substantially all of our North American lead requirements through the operation of our six secondary lead recycling plants, which reclaim lead by recycling spent lead acid batteries. In North America, batteries are obtained for recycling from our customers and through our Company-owned branch networks.

The Company is party to three supply agreements with Daramic, Inc. ("Daramic") expiring in December 2009 for the purchase of separators, a critical component of battery manufacturing. The agreements restrict the

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Company's ability to source separators from other suppliers and provide for substantial minimum annual purchase commitments. The Company purchases substantially all of its separator requirements from Daramic and the Company does not believe there exists a readily available alternative source or sources of supply for the volume of separators Daramic provides. As a result, any substantial disruption in supply from Daramic would likely have a material adverse impact on the Company. In May 2002, Daramic filed a motion in the Bankruptcy Court to compel the Company to accept or reject the supply agreements. Following negotiation with Daramic, the Company agreed to pay approximately $10 million due with respect to the period prior to the Company's Chapter 11 filing and, subject to Bankruptcy Court approval, to accept the contracts with certain agreed upon amendments.

Other key raw materials and components in the production of batteries include lead oxide, acid, plastics and chemicals, which are generally available from multiple sources. We have not experienced any material stoppage or disruption in production as a result of the unavailability, or delays in the availability, of raw materials.

Competition

Motive Power Segment

Exide has the largest market share for motive power products on a global basis. The Hawker Battery Group acquired in 2001 by EnerSys is number two in Europe. Other competitors in Europe include Fiamm, Hoppecke, BAE and MIDAC. Exide ranks second to Enersys in market share in North America. In North America, the other major competitors are C&D Technologies and East Penn. In Asia, JSB, Panasonic, Yuasa and Hitachi are the major competitors with Yuasa being the market leader. In countries such as Brazil, China and India, local manufacturing is required and Exide is currently serving these markets on a limited basis through export sales.

Quality, reliability, delivery and price are important differentiators in the motive power market along with technical innovation and responsive service. Well-known brands are also important and Exide's Chloride Motive Power, Deta, GNB, Tudor and Sonnenschein are among the leading brands in the world.

Network Power Segment

EnerSys, following the acquisition of Hawker Battery Group in 2001, has the largest market share on a global basis with Exide ranking second in the world.

Exide ranks second to C&D Technologies in North America and maintains the leading share in Europe. In Asia, Yuasa has a market leadership position. Competition in this segment has intensified given the recent slowdown and decline in the industry demand for batteries.

Quality, reliability, delivery and price are important differentiators in the network power market, along with technical innovation and responsive service. Well-known brands are also important and Exide's Absolyte(R), Sonnenschein(R), Marathon, Sprinter and Classic are among the leading brands in the world.

The Company is implementing a plant rationalization and overhead reduction program, as well as lean manufacturing and strategic sourcing initiatives, to better enable it to respond to the changing market conditions.

Transportation Segment

The North American and European transportation markets are highly competitive. The manufacturers in these markets compete primarily on price, quality, technical innovation, service and warranty. Well-recognized brand names are also important for aftermarket customers who do not purchase private label batteries. Most sales are made without long-term contracts.

In the North American Transportation aftermarket, we believe Johnson Controls has the largest market position, followed by Exide. Other principal competitors in this market are Delphi Automotive Systems and East

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Penn. Price competition in this market has been severe in recent years. Competition is strongest in the mass merchandiser channel where large customers use their buying power to command lower prices.

Our largest competitors in the North American OEM market are Delphi Automotive Systems and Johnson Controls. OEMs change battery suppliers less frequently than aftermarket customers but, because of their size, can influence market participants to compete on price and other terms.

Exide has the largest market position in Europe in automotive batteries, both aftermarket and original equipment. Our next largest single competitor in the automotive markets is Varta, followed by Fiamm and Hoppecke.

The European battery markets, particularly in the automotive OEM and industrial areas, have undergone severe price competition.

We expect competition to remain intense. We seek to maintain and grow our market positions and customer base through strong brands, improved product performance, quality, customer service and cost reduction.

Environmental, Health and Safety Matters

The Company, particularly as a result of its manufacturing, distribution and recycling operations, is subject to numerous environmental laws and regulations and is exposed to liabilities and compliance costs arising from its past and current handling, releasing, storing and disposing of hazardous substances and hazardous wastes. The Company's operations are also subject to occupational safety and health laws and regulations, particularly relating to monitoring of employee health. The Company devotes resources to attaining and maintaining compliance with environmental and occupational health and safety laws and regulations and does not currently believe environmental, health or safety compliance issues will have a material adverse effect on the Company's business, financial condition or results of operations. The Company believes that it is in substantial compliance with all material environmental, health and safety requirements.

Because environmental liabilities are not accrued until a liability is determined to be probable and reasonably estimable, not all potential future environmental liabilities have been included in the Company's environmental reserves and, therefore, additional earnings charges are possible. Also, future findings or changes in estimates could have a material effect on the recorded reserves and cash flows.

North America

The Company has been advised by the U.S. Environmental Protection Agency or state agencies that it is a "Potentially Responsible Party" ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act or similar state laws at 90 federally defined Superfund or state equivalent sites (including 16 former GNB sites). At 61 of these sites, the Company has either paid or is in the process of paying its share of liability. In most instances, the Company's obligations are not expected to be significant because its portion of any potential liability appears to be minor or insignificant in relation to the total liability of all PRPs that have been identified and are financially viable. The Company's share of the anticipated remediation costs associated with all of the Superfund sites where it has been named a PRP, based on the Company's estimated volumetric contribution of waste to each site, is included in the environmental remediation reserves discussed below.

Because the Company's liability under such statutes may be imposed on a joint and several basis, the Company's liability may not necessarily be based on volumetric allocations and could be greater than the Company's estimates. Management believes, however, that its PRP status at these Superfund sites will not have a material adverse effect on the Company's business or financial condition because, based on the Company's experience, it is reasonable to expect that the liability will be roughly proportionate to its volumetric contribution of waste to the sites.

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The Company currently has greater than 50% liability at three Superfund sites. Other than these sites, the Company's allocation exceeds 5% at seven sites for which the Company's share of liability has not been paid as of March 31, 2002. The current allocation at these seven sites averages approximately 22%.

The Company is also involved in the assessment and remediation of various other properties, including certain Company owned or operated facilities. Such assessment and remedial work is being conducted pursuant to a number of state and federal environmental laws and with varying degrees of involvement by state and federal authorities. Where probable and reasonably estimable, the costs of such projects have been accrued by the Company, as discussed below. In addition, certain environmental matters concerning the Company are pending in federal and state courts or with certain environmental regulatory agencies.

International

The Company is subject to numerous environmental, health and safety requirements and is exposed to differing degrees of liabilities, compliance costs, and cleanup requirements arising from its past and current activities in various international locations including Europe. The laws and regulations applicable to such activities differ from country to country and also substantially differ from U.S. laws and regulations. The Company believes that it is in substantial compliance with all material environmental, health and safety requirements in each country.

The Company expects that its international operations will continue to incur capital and operating expenses in order to maintain compliance with evolving environmental, health and safety requirements or more stringent enforcement of existing requirements in each country.

Consolidated

While the ultimate outcome of the foregoing environmental matters is uncertain, after consultation with legal counsel, management does not believe the resolution of these matters, individually or in the aggregate, will have a material adverse effect on the Company's long-term business, financial condition or results of operations.

The Company has established reserves for on-site and off-site environmental remediation costs and believes that such reserves are adequate. As of March 31, 2002 the amount of such reserves on the Company's consolidated balance sheet were $70.5 million. Of this amount, $56.3 million was included in other non-current liabilities.

In the United States, the Company has advised each state and federal authority with whom we have negotiated plans for environmental investigations or remediation of the Company's Chapter 11 filing as required by those agreements or applicable rules. In some cases these authorities may require the Company to undertake certain agreed remedial activities under a modified schedule, or may seek to negotiate or require modified remedial activities. Such requests have been received at several sites and are the subjects of ongoing discussions. At this time no requests or directives have been received which, individually or in the aggregate, would alter the Company's reserves or have a material adverse effect on the Company's business, financial condition or results of operation.

Employees

Total worldwide employment was approximately 17,300 at March 31, 2002, compared to 20,000 at March, 2001, reflecting the impact of the Company's ongoing restructuring actions and cost reduction efforts.

North America. As of March 31, 2002, we employed approximately 1,700 salaried employees and approximately 4,700 hourly employees in North America. Approximately 40% of such salaried employees are engaged in sales, service, marketing and administration and approximately 60% in manufacturing and

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engineering. Approximately 23% of our hourly employees are represented by unions. Relations with the unions are generally good. Contracts covering approximately 700 of our union employees expire in fiscal 2003, and the remainder thereafter.

Europe. As of March 31, 2002, we employed approximately 3,900 salaried employees and approximately 6,400 hourly employees in Europe. Approximately 75% of such salaried employees are engaged in sales, service, marketing and administration and approximately 25% in manufacturing and engineering. Our hourly employees are generally represented by unions. Relations with the unions are generally good. Contracts covering most of our European union employees expire on various dates through calendar year 2002.

Backlog

Our Network Power and Motive Power order backlog at March 31, 2002 was approximately $72 million and $12 million, respectively. We expect to fill virtually all of the March 31, 2002 backlog during fiscal 2003. Our transportation backlog at March 31, 2002 was not significant.

Financial Information About Foreign and Domestic Operations and Export Sales

See Note 21 to the Company's consolidated financial statements appearing elsewhere herein.

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