Case KJC Doc 3367 Filed 03/25/15 Page 1 of 11 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE.

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1 Case KJC Doc 3367 Filed 03/25/15 Page 1 of 11 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re EXIDE TECHNOLOGIES, Debtor x x Chapter 11 Case No (KJC) Re D.I. 3092, 3095, 3096, 3249, 3250, 3281, 3350 and 3361 UNOFFICIAL NOTEHOLDER COMMITTEE S REPLY TO CERTAIN OBJECTIONS TO PLAN OF REORGANIZATION OF EXIDE TECHNOLOGIES AND JOINDER IN DEBTOR S REPLY RELATED THERETO Certain holders of the 8 5 /8% Senior Secured Notes due 2018 ( Senior Notes ) 2 issued by Exide Technologies ( Exide or the Debtor ) in the initial aggregate principal amount of $675,000,000 under that certain Indenture, dated as of January 25, 2011 (such holders collectively, the Unofficial Noteholder Committee ) 3 hereby reply (this Reply ) to the The last four digits of the Debtor s taxpayer identification number are The Debtor s corporate headquarters is located at Deerfield Parkway, Building 200, Milton, Georgia Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Second Amended Plan of Reorganization of Exide Technologies [D.I. 3096] (the Plan ). The Unofficial Noteholder Committee comprises the following institutions Alliance Bernstein High Income Fund, AB Global High Income Fund, ACM Global High Yield- Offshore and certain other affiliates; AQR Capital Management, LLC, as investment manager on behalf of the funds and accounts it manages; Contrarian Capital Management, L.L.C.; D. E. Shaw Galvanic Portfolios, L.L.C. and other affiliated funds; DW Investment Management, LP, as investment manager on behalf of the funds and accounts it manages; Hudson Bay Capital Management LP; MacKay Shields LLC, as investment manager on behalf of the funds and accounts it manages; Neuberger Berman Fixed Income LLC, as investment manager on behalf of various funds it manages; entities managed by Nomura Corporate Research and Asset Management Inc.; The Northwestern Mutual Life Insurance Company; Simplon Partners, L.P.; and Stonehill Capital Management LLC, as investment manager on behalf of various funds and accounts it manages

2 Case KJC Doc 3367 Filed 03/25/15 Page 2 of 11 (a) Objections to Confirmation of Plan of Reorganization by Retail Holders of Senior Notes [D.I. 3249] (the Retail Holder Objection ) and (b) Joinder of Gables Capital Management Inc. to Objections to Confirmation of Plan of Reorganization by Retail Noteholders [D.I. 3250] (together, with the Retail Holder Objection, the Objections ) and join in The Reorganizing Debtor s Memorandum of Law (I) In Support of Confirmation of the Second Amended Plan of Reorganization of Exide Technologies and (II) In Response to Objections Thereto [D.I. 3361] (the Debtor s Reply ). In support hereof, the Unofficial Noteholder Committee respectfully states as follows REPLY 1. The Debtor seeks confirmation of the Plan, a Plan that substantially all of the Debtor s stakeholders support, including the Unofficial Noteholder Committee whose members hold the largest secured and unsecured claims in this case. 4 Notwithstanding near unanimous support, two non-institutional holders of Senior Notes the so-called Retail Holders continue to object to confirmation based on their alleged unfair treatment under the Plan. The Retail Holders primary complaint is that they should be classified together with institutional holders of Senior Notes Claims (i.e., the Eligible Holders) and receive the same consideration as institutional investors, to wit, that they should receive New Exide Common Stock on account of their Senior Notes Claims and have the opportunity to participate in the Rights Offering. 4 As of the time of the filing of this Reply, the Debtor has not yet filed the Third Amended Plan of Reorganization of Exide Technologies. The Unofficial Noteholder Committee, the Backstop Parties and the Plan Support Parties have been negotiating with the Debtor regarding section 9.3 of the Plan. These negotiations remain ongoing and will hopefully be resolved in the Third Amended Plan of Reorganization of Exide Technologies. In the event that the parties fail to reach agreement, all rights are reserved

3 Case KJC Doc 3367 Filed 03/25/15 Page 3 of In response, the Debtor has revised the Plan to classify all Holders of Senior Notes in a single Class A. Moreover, the Plan now provides that the Retail Holders and other Holders of Senior Notes Claims that are not Eligible Holders can elect to receive their pro rata share of 10% of New Exide Common Stock on account of their Senior Notes Claims on a fully diluted basis after giving effect to the conversion of the New Second Lien Convertible Notes, and such parties may also participate in the Rights Offering post-confirmation. 3. These Plan changes fully address the Retail Holders concerns. Moreover, the Debtor s Reply sets forth that that Holders of Class A Claims have voted to accept the Plan by overwhelming margins, with 71.3% in number and 89.2% 5 in amount voting to accept. 6 The Plan accordingly satisfies all of the requirements of section 1129 of the Bankruptcy Code and should be confirmed. A. No Unequal Treatment Exists Because All Holders of Senior Notes Claims Can Receive New Exide Common Stock on Account of Their Senior Notes Claims and Participate in the Rights Offering 4. The Retail Holders argue that the Plan treats Retail Holders unequally because the Retail Holders, unlike Eligible Holders, do not receive New Exide Common Stock on account of their Senior Notes Claims. 7 This objection is now moot the revised Plan provides that all Holders of Senior Notes Claims can receive their pro rata share of 10% of New Exide Common Stock, on a fully diluted basis and after conversion of all of the New Second Lien Debtor s Reply, at 8. Approximately 94% in number of Holders of Class A-1 Claims, comprising approximately 99% in amount of Class A-1 Claims, voted to accept the Plan. If Class A-2 were to be counted separately from Class A-1, Class A-2 still would have voted to accept the Plan in number, but reject the Plan in amount 51.2% in number and 9.9% in amount voting to accept against 48.8% in number and 90.1% in amount voting to reject. See Retail Holders Obj. at

4 Case KJC Doc 3367 Filed 03/25/15 Page 4 of 11 Convertible Notes. See Plan 1.196, (defining Senior Notes Alternative Election Deadline and Senior Notes Stock Election ); 4.1(b)(ii)(1)(C) (providing for distribution of Senior Notes Alternative Distribution Deferred Payments in the absence of making stock election); and 4.1(b)(ii)(1)(D) (providing for Senior Notes Stock Election). 5. The Plan previously made no distributions of New Exide Common Stock to non-institutional holders of Senior Notes Claims not because of some nefarious conspiracy, but rather, because investors required the Reorganized Debtor to be private on emergence. This was necessary to attract the best executive team for the Reorganized Debtor, as well as to otherwise satisfy the investment parameters under the Backstop Commitment Agreement. Until the number of potential record holders of New Exide Common Stock could be reasonably known which was not possible until the Voting Deadline passed the Debtor could not offer New Exide Common Stock to all holders of Senior Notes Claims while simultaneously satisfying the conditions precedent to funding under the Backstop Commitment Agreement. 6. The Plan further provides that the Retail Holders and other Holders of Senior Notes Claims who are not Eligible Holders can participate in the Rights Offering postconfirmation. As a result, the Retail Holders now receive, on account of their Senior Notes Claims (a) their Pro Rata share of $500,000 in cash or post-confirmation participation in the Rights Offering; (b) either their pro rata share of 10% of the New Exide Common Stock, if they make the Senior Notes Stock Election, or their pro rata share of Senior Notes Alternative Distribution Deferred Payments, adjusted for the Senior Notes Stock Election; and (c) on account of their Deficiency Claim, their Pro Rata Share of the net proceeds of the GUC Trust Assets, subject to the allocation and distribution formulas included in the GUC Trust Settlement Agreement. See Plan 4.1(a)(ii) (1)-(2), and 4.1(b)(ii)(1)-(2)

5 Case KJC Doc 3367 Filed 03/25/15 Page 5 of Finally, the Plan incorporates a settlement with the Indenture Trustee for the Senior Notes which addresses the Retail Holders objection to the treatment of the Senior Notes Deficiency Claims. The revised GUC Trust Settlement Agreement, pursuant to which the Indenture Trustee now agrees to support the Plan, provides that Holders of Senior Notes Deficiency Claims who are not Eligible Holders will receive the same pro rata distributions on account of such claims as they would have received in the absence of the GUC Trust Settlement Agreement through a reallocation of Class A-1 distributions from the GUC Trust. See Plan 4.1(b)(ii) (2). As a result, no unequal treatment exists In sum, all Holders of Senior Notes Claims receive the same 5.4% distributive value and all Holders enjoy the same opportunities for recovery under the Plan, i.e., an ability to share in any upside potential of the Reorganized Debtor through the ownership of New Exide Common Stock and an ability to participate in the Rights Offering. 8 Neither the Bankruptcy Code nor its legislative history precisely define the standards of equal treatment under section 1123(a)(4) of the Bankruptcy Code. Courts agree, however, that section 1123(a)(4) does not require precise equality, only approximate equality in treatment of claims within a class. In re W.R. Grace & Co., 729 F.3d 311, 327 (3d Cir. 2013) (quoting In re Quigley Co., Inc., 377 B.R. 110, 116 (Bankr. S.D.N.Y. 2007)). Thus, the same treatment requirement affords all claimants in a class the equal opportunity for recovery, but does not mandate recovery of the same amount on account of any claim. In re AOV Indus., Inc., 792 F.2d 1140, 1152 (D.C. Cir. 1986); see also In re Joint E. & S. Dist. Asbestos Litig., 982 F.2d 721, 749 (2d Cir. 1992), opinion modified on rehearing, 993 F.2d 7 (2d Cir. 1993) ( Without question, the same treatment standard of section 1123(a)(4) does not require that all claimants within a class receive the same amount of money. ); In re Multiut Corp., 449 B.R. 323, 334 (Bankr. N.D. Ill. 2011) (finding that similarity is not a precise relationship ); In re Dana Corp., 412 B.R. 53, 62 (S.D.N.Y. 2008) (the key inquiry under 1123(a)(4) is not whether all of the claimants in a class obtain the same thing, but whether they have the same opportunity ); In re Cent. Med. Ctr., Inc., 122, B.R. 568, 574 (Bankr. E.D. Mo. 1990) (finding that affording all bondholders the opportunity to participate in the same random lottery system satisfied section 1123(a)(4) of the Bankruptcy Code)

6 Case KJC Doc 3367 Filed 03/25/15 Page 6 of 11 B. The Plan Was Proposed in Good Faith 9. The Retail Holders argue that the Plan lacks good faith because (a) it undervalues the Debtor in an effort to improperly distribute potential future return to the Unofficial Noteholder Committee and DIP Lenders; 9 (b) the Debtor failed to negotiate with anyone other than the Unofficial Noteholder Committee and DIP Lenders; 10 (c) the Debtor gerrymandered Class A-2 in an effort to create one class of accepting impaired creditors; 11 and (d) the Debtor sought to disadvantage Retail Holders for no other reason than their status as natural persons. 12 The Retail Holders objections miss the mark and should be overruled. 10. A plan is proposed in good faith if it will fairly achieve a result consistent with the objectives and purposes of the Bankruptcy Code. Thus, a plan satisfies the good faith requirement if it preserves the debtor s going concern and maximizes the property available to satisfy creditors. 13 Here, the Plan ensures that Exide will emerge as a viable going concern and employer of almost 10,000 people, while at the same time providing recoveries for Holders of Senior Note Claims, General Unsecured Claims, and the Holders of Vernon Tort Claims, among others. If the Debtor were to be liquidated in a chapter 7, recoveries will not repay the DIP Facility in full, and all of these other stakeholders including the Retail Holders will receive nothing. Clearly, the Plan maximizes creditor recoveries and satisfies the Bankruptcy Code s good faith standard Retail Holders Obj. at 6, 7-9. Id. at 6. Id. at 12. Id. at 6-7. In re Am. Capital Equip., LLC, 688 F.3d 145, (3d Cir. 2012)

7 Case KJC Doc 3367 Filed 03/25/15 Page 7 of 11 a) Class A-2 Does Not Result in Bad Faith 11. Separate classification and treatment of a creditor does not, by itself, violate the good faith standard. In order to constitute bad faith, the different treatment of creditors would need to have a serious disparate effect on the parties. 14 As discussed above, this argument is mooted by the Plan amendment. In any event, the Plan never unfairly discriminated against the Class A-2 claimants nor does it have a disparate effect on such claimants as their recoveries are substantially the same as those provided to Class A-1 claimants. b) The Debtor is Not Required for Purposes of Good Faith to Negotiate With Every Creditor Prior to Proposing Its Plan 12. The Retail Holders complain that they were shut out of plan negotiations, but they misremember the facts, as there have been good faith negotiations among the parties even though consensual resolution became impossible. Notwithstanding these failed efforts, the Debtor, with other stakeholder support, revised the Plan to address the Retail Holders primary concerns. 13. But the Plan should be confirmed even if no negotiations with the Retail Holders had taken place. Contrary to the Retail Holders assertions otherwise, the Bankruptcy Code does not require that all creditors participate in plan negotiations. 15 As courts have acknowledged, a debtor s plan may satisfy good faith even if it may not be one which the creditors would themselves design and indeed may not be confirmable In re W.R. Grace & Co., 475 B.R 34, 90 (3d Cir. 2012). Id. Id. at 93 (quoting In re Frascella Enter. Inc., 360 B.R. 435 (Bankr. E.D. Pa. 2007))

8 Case KJC Doc 3367 Filed 03/25/15 Page 8 of 11 c) The Plan Does Not Undervalue the Debtor s Assets 14. As previously disclosed, and as discussed in the Debtor s Reply, the implied total enterprise value of the Debtor is approximately $643.4 million. The Retail Holders have presented no credible evidence to the contrary. In fact, DIP Facility Claims which sit at the top of the capital structure and are entitled to repayment in full in cash as of the Effective Date are not being paid in full in cash under the Plan. The Retail Holders allegation that DIP Facility Claims are receiving more value than they are entitled to because of some conspiracy to undervalue the Debtor, when in fact, the DIP Facility Claims are not being paid in full in cash (which is their entitlement), flies in the face of commercial reality. C. Section 1129(b) of the Bankruptcy Code Permits the Waiver of the Senior Secured Noteholders Rights to Subordination of the Subordinated Notes 15. The Retail Holders also object to confirmation because the Plan allegedly improperly waives the Senior Notes Claims subordination rights vis-à-vis the Subordinated Notes Claims and thus violates the absolute priority rule with respect to Class A-2 claimants unsecured claims. They are incorrect. 16. At the outset, the waiver of subordination rights is not enforced against the Retail Holders or other Holders of Senior Notes Claims who are not Eligible Holders that did not vote for the plan. See Plan 4.1(b)(ii)(3). 17. But even without that provision, section 1129(b)(1) of the Bankruptcy Code expressly permits a class to waive subordination rights based on a majority vote [n]otwithstanding section 510(a) [of the Bankruptcy Code], if all of the applicable requirements of subsection (a) of this section are met other than paragraph (8) are met with respect to the plan, the court, on request of the proponent of the plan, shall confirm the plan notwithstanding such paragraph if the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests under, and has not accepted, the plan

9 Case KJC Doc 3367 Filed 03/25/15 Page 9 of U.S.C. 1129(b)(1) (emphasis supplied). 17 The legislative history of section 510(a) of the Bankruptcy Code articulates that a subordination agreement will not be reinforced in a reorganization case in which the class that is the beneficiary of the agreement has accepted, a plan that waives their rights under the agreement. Otherwise, the subordination agreement would prevent what chapter 11 contemplates that senior creditors may give up rights to junior creditors in the interest of confirmation of a plan and rehabilitation of the debtor. See House Report No , 95 th Cong., 1 st Sess. 539 (1977); Senate Report No , 9 th Cong., 2d Sess. 74 (1978). D. No Basis Exists to Disqualify or Otherwise Designate Any Vote of a Member of the Unofficial Noteholder Committee 18. This Court has previously denied the Retail Holders attempt to designate the votes of the members of the Unofficial Noteholder Committee. 18 Yet the Retail Holders persist, raising the same arguments about alleged conflicts of interest and other sweeping statements of misconduct for which no evidence what-so-ever exists See In re TCI 2 Holdings, LLC, 428 B.R. 117, 141 (Bankr. D. N.J. 2010) ( the only logical reading of the term notwithstanding in section 1129(b)(1) [of the Bankruptcy Code] seems to be Even though section 510(a) requires the enforceability of a subordination agreement in a bankruptcy case to be the same extent that the agreement is enforceable under nonbankruptcy law, if a non-consensual plan meets all of the 1129 (a) and (b) requirements, the court shall confirm the plan ); see also In re Tribune Co., 472 B.R. 223, 241 (Bankr. D. Del. 2012) (same). See Order (A) Approving the Adequacy of the Debtor s Disclosure Statement with Respect to the Plan of Reorganization of Exide Technologies; (B) Approving Solicitation and Notice Procedures with Respect to Confirmation of the Debtor s Proposed Plan of Reorganization; (C) Approving the Form of Various Ballots and Notices in Connection Therewith; and (D) Scheduling Certain Dates with Respect Thereto [D.I. 3092], at Disqualification of a creditor s entitlement to vote is the exception, not the rule, as courts recognize that the right of creditors to vote on a plan is a critical feature of Chapter 11. Courts therefore impose a heavy burden on the party seeking to disallow a vote to establish lack of good faith. See In re Indianapolis Downs, LLC, 486 B.R. 286, 296 (Bankr. D. Del. 2013) ( the right of creditors to vote on a plan is a critical feature of Chapter 11, and the 9

10 Case KJC Doc 3367 Filed 03/25/15 Page 10 of In fact, the Unofficial Noteholder Committee has cooperated with Exide through a lengthy and tumultuous chapter 11 case, providing a commitment for $160 million in new capital without which this Debtor cannot emerge from bankruptcy. Members of the Unofficial Noteholder Committee who are DIP Lenders also funded the Debtor; first, with $275 million in post-petition financing, and subsequently, at the Debtor s request in order to keep operating, with an additional $60 million. Despite the fact that the DIP Lenders are not getting paid in full in cash, the Unofficial Noteholder Committee continues to support the Debtor s confirmation. Notably, the Unofficial Noteholder Committee has supported the Debtor throughout its negotiations with the environmental regulators over the Vernon Facility, providing capital during the ultimately unproductive efforts to keep the Vernon Facility running. 20. In sum, the Unofficial Noteholder Committee has acted in good faith, fairly and equitably, throughout this chapter 11 case. The Retail Holders objection and request based on improper voting should once again be overruled. party seeking to disallow a vote bears a heavy burden ). The decision to designate or disqualify a vote requires a finding of bad faith or misconduct based on a factual inquiry on a case-to-case basis. Id. at 295. The conduct at issue must be more than simply establishing that a creditor acted in its own self-interest to maximize its recovery. Good faith does not demand selfless disinterest. In re Holly Knoll Partnership, 167 B.R. 381, 385 (Bankr. E.D. Pa. 1994); In re Allegheny Int l Inc., 118 B.R. 282, (Bankr. W.D. Pa. 1990) (court designated a creditor s vote after concluding the creditor overpaid for claims in order to purchase a blocking position to control the plan of reorganization process). The conduct at issue must be more than simply establishing that a creditor acted in its own self-interest to maximize its recovery. Instead, a request for disqualification of a vote requires a showing that the creditor acted in aid of an interest other than an interest as a creditor or that a creditor has cast his vote with an ulterior reason aimed at gaining some advantage to which he would not otherwise be entitled in his position. In re Holly Knoll Partnership, 167 B.R. at 385 (quoting In re Allegheny Int l Inc., 118 B.R. at 289 and 5 Collier on Bankruptcy, [1] at (15 th ed. 1993))

11 Case KJC Doc 3367 Filed 03/25/15 Page 11 of 11 WHEREFORE, for the reasons set forth above and in the Debtor s Reply, the Unofficial Noteholder Committee respectfully requests that the Court overrule the Objections, and grant such other relief as this Court may deem just and proper. Dated Wilmington, Delaware March 25, 2015 YOUNG CONAWAY STARGATT & TAYLOR, LLP /s/ Pauline K. Morgan Pauline K. Morgan (No. 3650) Rodney Square 1000 North King Street Wilmington, DE Telephone (302) Facsimile (302) and - PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP Alan W. Kornberg Alice Belisle Eaton Claudia R. Tobler 1285 Avenue of the Americas New York, New York Telephone (212) Facsimile (212) Counsel to the Unofficial Noteholder Committee