<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL , 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ISSUER OF SENIOR NOTES REGISTERED HEREBY
PRESTOLITE ELECTRIC INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3621 94-3142032
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
GUARANTOR OF SENIOR NOTES REGISTERED HEREBY
PEI HOLDING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3621 94-3142033
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
2100 COMMONWEALTH BOULEVARD
ANN ARBOR, MI 48105
(734) 913-6600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
----------------
P. KIM PACKARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PRESTOLITE ELECTRIC INCORPORATED
2100 COMMONWEALTH BOULEVARD
ANN ARBOR, MI 48105
(734) 913-6600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPY TO:
MICHAEL J. KENNEDY
MICHAEL S. DORF
ANDREW M. KANTER
BROBECK, PHLEGER & HARRISON LLP
ONE MARKET, SPEAR STREET TOWER
SAN FRANCISCO, CA 94105
(415) 442-0900
----------------
Approximate date of commencement of the proposed sale of the securities to
the public: As soon as practicable after the effective date of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box [_] .
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF OFFERING MAXIMUM
SECURITIES TO BE AMOUNT TO BE PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
9 5/8% Senior Notes due
2008.................. $125,000,000 100%(1) $125,000,000(1) $36,875
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Guarantees of the 9 5/8%
Senior Notes due 2008.. $125,000,000 None(2) None(2) None(2)
</TABLE>
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(1) Pursuant to Rule 457(f)(2) of the Securities Act of 1933, as amended, the
registration fee has been estimated based on the book value of the
securities to be received in exchange for the securities to be issued
hereunder in the Exchange Offer described herein.
(2) Pursuant to Rule 459(n) no separate registration fee is payable in respect
of the guarantees.
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
PRESTOLITE ELECTRIC INCORPORATED
OFFER TO EXCHANGE ITS
OUTSTANDING
9 5/8% SENIOR NOTES DUE 2008
FOR ANY AND ALL OF ITS
9 5/8% SENIOR NOTES DUE 2008
LOGO
FULLY AND UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS BY
PEI HOLDING, INC.
-----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED.
INTEREST PAYABLE FEBRUARY 1 AND AUGUST 1 DUE FEBRUARY 1, 2008
-----------
Prestolite Electric Incorporated, a Delaware corporation (the "Issuer"),
hereby offers upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange an aggregate principal amount of
up to $125,000,000 of 9 5/8% Senior Notes Due 2008 (the "Exchange Notes"),
which are fully and unconditionally guaranteed by PEI Holding Inc., a Delaware
corporation and parent of the Issuer ("PEI") and have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to the
registration statement of which this Prospectus constitutes a part (including
any amendments and supplements thereto, the "Registration Statement") for a
like principal amount of its 9 5/8% Senior Notes Due 2008 (the "Outstanding
Notes" and, together with the Exchange Notes, the "Notes") of the Issuer with
the holders thereof, which are fully and unconditionally guaranteed by PEI but
have not been so registered.
The Exchange Notes will be freely transferable. The terms of the Exchange
Notes are identical in all material respects to the Outstanding Notes except
for certain transfer restrictions and registration rights relating to the
Outstanding Notes and except that, if the Exchange Offer is not consummated by
July 21, 1998, the interest rate on the Outstanding Notes will increase by 0.5%
until the Exchange Offer is consummated. The Exchange Notes are offered
hereunder in order to satisfy certain obligations of the Issuer under the
Purchase Agreement dated as of January 16, 1998 among the Issuer, PEI and
Credit Suisse First Boston Corporation and BT Alex.Brown Incorporated, the
initial purchasers of the Outstanding Notes (the "Initial Purchasers"), and the
Registration Rights Agreement dated as of January 22, 1998 (the "Registration
Rights Agreement") among the Issuer, PEI and the Initial Purchasers. The
Exchange Notes evidence the same debt as the Outstanding Notes and are issued
under, and are entitled to the same benefits under, the Indenture (as defined
herein) as the Outstanding Notes. In addition, the Exchange Notes and the
Outstanding Notes are treated as one series of securities under the Indenture.
The Exchange Notes will mature on February 1, 2008, unless previously redeemed.
Interest on the Exchange Notes is payable semi-annually on February 1 and
August 1 of each year commencing on August 1, 1998.
The Exchange Notes will be redeemable at the option of the Issuer, in whole
or in part, at any time on or after February 1, 2003 at the redemption prices
set forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, up to 35.0% of the original aggregate principal amount
of the Exchange Notes may be redeemed from time to time prior to February 1,
2001 at the redemption price set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption, with the net cash proceeds of one
or more Public Equity Offerings (as defined) provided that at least $81.25
million principal amount of the Exchange Notes originally issued remains
outstanding immediately after each such redemption. See "Description of the
Exchange Notes."
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Outstanding Notes as of , 1998.
The Issuer will not receive any proceeds from the Exchange Offer. The Issuer
has agreed to bear the expenses of the Exchange Offer. No underwriter is being
used in connection with the Exchange Offer.
The Exchange Notes will be unsecured, senior obligations of the Issuer and
will rank pari passu in right of payment with all other existing and future
senior indebtedness of the Issuer and senior in right of payment to any
existing and future subordinated indebtedness of the Issuer. The Exchange Notes
will be effectively subordinated to all existing and future secured
indebtedness of
----------- (continued on following page)
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF
OUTSTANDING NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE 17.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1998
<PAGE>
the Issuer, including indebtedness under the New U.S. Credit Facility (as
defined), to the extent of the value of the assets securing such indebtedness.
The Exchange Notes will be structurally subordinated to all existing and
future indebtedness of any subsidiary of the Issuer, including indebtedness
under the New U.K. Credit Facility (as defined). The Exchange Notes will be
fully and unconditionally guaranteed on an unsecured, senior basis by PEI.
None of the Issuer's subsidiaries will guarantee the Exchange Notes. As of
December 31, 1997, on a pro forma basis after giving effect to the
Transactions (as defined) as if the Transactions had occurred on such date,
the Issuer would have had approximately $129.5 million of consolidated
indebtedness outstanding, of which approximately $4.5 million would have
represented secured indebtedness, and the indebtedness of the Issuer's
subsidiaries would have been approximately $3.2 million (excluding trade
payables of approximately $18.4 million). The Indenture relating to the
Exchange Notes permits the Issuer and its subsidiaries to incur additional
indebtedness, including senior indebtedness, subject to certain limitations.
See "Description of the Exchange Notes."
Prior to the Exchange Offer, there has been no public market for either the
Outstanding Notes or the Exchange Notes. If a market for the Exchange Notes
should develop, the Exchange Notes could trade at a discount from their face
amount. The Issuer does not intend to list the Exchange Notes on any national
securities exchange. It is not anticipated that an active public market for
the Exchange Notes will develop. Although the Initial Purchasers have informed
the Issuer that they currently intend to make a market in the Exchange Notes,
they are not obligated to do so, and any such market-making may be
discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes. See "Risk Factors--Lack of Public Market for Securities."
Based upon no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Issuer believes
that Exchange Notes issued pursuant to the Exchange Offer in exchange for
Outstanding Notes may be offered for resale, resold and otherwise transferred
by a holder thereof other than (i) a broker-dealer who purchased such
Outstanding Notes directly from the Issuer to resell pursuant to Rule 144A
under the Securities Act or any other available exemption under the Securities
Act or (ii) a person that is an "affiliate" (as defined in Rule 405 under the
Securities Act) of the Issuer or PEI without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of such
Exchange Notes. See "The Exchange Offer--Purpose and Effects."
Each broker-dealer (other than an "affiliate" of the Issuer) that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Outstanding Notes where such Outstanding Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Issuer has agreed that, for a period of 180 days after the
Expiration Date (as defined), it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." Any broker-dealer who is an affiliate of the Issuer may not
rely on such no-action letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transactions. See "The Exchange Offer."
Any Outstanding Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the rights and preferences and
will be subject to the limitations applicable thereto under the Indenture.
Following consummation of the Exchange Offer, the holders of Outstanding Notes
will continue to be subject to the existing restrictions on transfer thereof
and the Issuer will have no further obligation to such holders to provide for
the registration under the Securities Act of the Outstanding Notes held by
them. To the extent that Outstanding Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Outstanding Notes could
be adversely affected. It is not expected that an active market for the
Outstanding Notes will develop while they are subject to restrictions on
transfer. See "Risk Factors--Consequences of Failure to Exchange."
The Issuer will accept for exchange any and all Outstanding Notes that are
validly tendered and not withdrawn on or prior to 5:00 p.m., New York City
time, on the date the Exchange Offer expires, which will be , 1998, (the
"Expiration Date"), unless the Exchange Offer is extended by the Issuer (but
in no event to a date later than , 1998), in its sole discretion, in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended. Tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date, unless previously accepted for payment by the Company. The
Exchange Offer is not conditioned upon any minimum principal amount of
Outstanding Notes being tendered for exchange. However, the Exchange Offer is
subject to certain conditions which may be waived by the Issuer and to the
terms and provisions of the Registration Rights Agreement. The Exchange Notes
bear interest from the last interest payment date of the Outstanding Notes to
occur prior to the issue date of the Exchange Notes or, if no such interest
has been paid, from January 22, 1998. Holders of the Outstanding Notes whose
Outstanding Notes are accepted for exchange will not receive interest on such
Outstanding Notes for any period subsequent to the last interest payment date
to occur prior to the issue date of the Exchange Notes, if any, and will be
deemed to have waived the right to receive any interest payment on the
Outstanding Notes accrued from and after such interest payment date or, if no
such interest has been paid, from January 22, 1998. See "The Exchange Offer."
Outstanding Notes may be tendered only in integral multiples of $1,000.
2
<PAGE>
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUER ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OUTSTANDING NOTES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
----------------
"Prestolite Electric" is a registered trade name of AlliedSignal
Corporation. "Leece-Neville" is a registered trademark of the Issuer. "Hobart"
is a registered trademark of Hobart Brothers Company, a subsidiary of Illinois
Tool Works. "Lucas" is a registered trademark of Lucas Industries plc. Certain
other trademarks of the Issuer and other companies are used in this
Prospectus.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the related notes, appearing elsewhere in this Prospectus. As used in
this Prospectus, unless the context otherwise requires, (i) the "Issuer" refers
to Prestolite Electric Incorporated, (ii) "PEI" refers to PEI Holding, Inc.,
the sole stockholder of the Issuer, (iii) "Prestolite" refers to PEI, the
Issuer and all of their respective subsidiaries prior to the closing of the
Lucas Acquisition (as defined), (iv) the "Company" refers to Prestolite after
giving effect to the Lucas Acquisition and (v) the "Lucas Businesses" refers
collectively to the Heavy Duty Products ("Lucas HDP") division of a subsidiary
of Lucas Industries plc, an English corporation ("Lucas Industries"), Lucas
Holdings South Africa (Proprietary) Limited, a South African corporation
(renamed Prestolite Electric Holdings South Africa (Proprietary) Limited)
("Lucas South Africa"), and the controlling interest in Lucas Indiel Argentina
S.A., an Argentine corporation ("Lucas Argentina") acquired by Prestolite in
the Lucas Acquisition. The statement of operations and other sales-related
information presented herein on a pro forma basis gives effect to the
Transactions (as defined) as if the Transactions had occurred at January 1,
1997. For purposes of the financial and other information set forth in this
Prospectus, references to a fiscal year relate to a December 31 fiscal year end
for Prestolite and the Company and to a January 31 fiscal year end for the
Lucas Businesses. All share data for PEI reflect a 20-for-1 stock split
effective March 26, 1998.
THE COMPANY
The Company is a leading global manufacturer and distributor of electro-
mechanical power conversion products and systems for niche markets, including
heavy duty vehicles, material handling, defense and industrial applications.
The Company's products are primarily used for diesel engines and electric
vehicles and include alternators, starter motors, direct current electric
motors, relays and controls and battery chargers. In 1997, approximately 45% of
Prestolite's net sales were derived from aftermarket sales, with the remainder
derived from original equipment manufacturers ("OEMs"). Approximately 40% of
Prestolite's aftermarket net sales in 1997 were derived from the service arms
of OEM customers ("OES"), with the balance derived from independent warehouse
distributors and the U.S. Department of Defense. The Company's largest OEM and
OES customers include Ford Motor Company, Freightliner, Clark Material
Handling, Caterpillar, the U.S. Department of Defense and Thermo King in North
America and BT Lifters, Cummins Engine, ERF Trucks, Leyland Trucks, Perkins
Engine and Mitsubishi Caterpillar Forklift in Europe. None of the Company's
United States employees is represented by a labor union.
On January 22, 1998, Prestolite completed the acquisition of the Lucas
Businesses from Lucas Industries (the "Lucas Acquisition"). The Lucas
Businesses manufacture primarily alternators and starter motors for the truck,
bus and automotive markets in the United Kingdom, continental Europe, South
America and South Africa. The Lucas Acquisition (i) strengthens the Company's
position as a leading global manufacturer and distributor of alternators and
starter motors, (ii) complements the Company's historic product portfolio and
(iii) augments the Company's core technology in its principal product lines. In
addition, the Company has the opportunity to sell certain truck, bus and
automotive products through Lucas Industries' worldwide distribution network of
over 4,000 outlets. The Lucas Acquisition significantly enhances the Company's
access to an international customer base, and provides an entrance to the
international automotive market. In the year ended December 31, 1997,
approximately 43% of the Lucas Businesses' net sales were derived from
aftermarket sales, with the remainder derived from OEMs. The Lucas Businesses'
largest OEM and OES customers include Ford Motor Company, Mercedes-Benz,
Nissan, Perkins Engine, Volkswagen and Volvo.
As a result of the Lucas Acquisition, the Company will consolidate its global
leadership position in its primary markets, expand its global reach and improve
its aftermarket distribution capabilities. The Company believes that it is the
largest supplier in North America of (i) newly manufactured heavy duty
alternators for the
4
<PAGE>
aftermarket, (ii) high amperage alternators for school buses and emergency
vehicles, (iii) electric motors for pump and winch applications and (iv)
solenoid switches for heavy duty starter circuits. The Company also believes
that it is one of the two largest suppliers of heavy duty alternators and heavy
duty starter motors for the European market and one of the three largest
worldwide producers of heavy duty alternators, heavy duty starter motors,
material handling motors and industrial battery chargers, as well as solenoid
switches for heavy duty starter circuits. After giving pro forma effect to the
Lucas Acquisition, the Company's net sales in 1997 to customers outside North
America would have increased to approximately 55% of its pro forma net sales as
compared with approximately 21% of Prestolite's net sales in 1997 on a stand-
alone basis, while its aftermarket sales would have remained relatively
constant at approximately 45% of net sales and pro forma net sales. On a
combined basis, the Company's pro forma net sales and EBITDA (as defined) for
the twelve months ended December 31, 1997 would have been approximately $298.6
million and $24.0 million, respectively.
BUSINESS STRENGTHS
The Company believes that its leading global market position in its primary
markets can be attributed to the following factors:
Product Quality and Brand Recognition. The Company believes that its products
are generally recognized by its customers as superior based on their advanced
technology, innovation, reliability, durability and quality. The Company
believes that its primary brand names, Leece-Neville in the heavy duty vehicle
market (Butec Leece-Neville in Europe and the Middle East), Prestolite in the
material handling and industrial markets and Hobart for battery chargers in the
material handling market, are generally recognized as being of the highest
quality in their respective markets. Prestolite has received numerous
manufacturing and product quality awards from its customers, including Q1
status from Ford Motor Company and preferred supplier status from Cummins
Engine.
Attractive Aftermarket/Original Equipment Balance. Approximately 44% of the
Company's 1997 pro forma net sales would have been to aftermarket customers.
The aftermarket is generally a more stable source of sales and generates higher
margins than the Company's sales to its OEM customers, which include a number
of major OEMs in North America and Europe. The Company believes that its
aftermarket and original equipment businesses are complementary and provide the
Company with a competitive advantage in meeting customer needs and in
maintaining the high levels of expertise necessary to compete successfully in
both markets. The strong engineering and manufacturing capabilities necessary
to meet the stringent requirements for original equipment technology and
quality are transferable to the Company's aftermarket operations, and OEM
position, in turn, is a major factor in generating aftermarket demand. Further,
the understanding of replacement activity gained through the aftermarket
enhances the Company's understanding of the demanding needs of OEMs.
Applied Technological and Engineering Capabilities. The Company has built an
engineering team with in-depth design and application experience, which has
allowed it to introduce innovative new products and applications. Processes and
systems common to a number of product lines are designed by engineers at the
Company's research and development facility in Ann Arbor, Michigan. Company
engineers work closely with partners at a number of major universities,
including the University of Michigan, in the areas of electronics, magnetics,
alternative materials and product testing. Product design, development and
application are performed by dedicated engineering teams located at the
Company's manufacturing facilities, which work closely with customers to design
products and systems that meet each customer's specifications. Successful new
product introductions include a self-diagnostic alternator, a motor which
management estimates provides approximately 20% more operating "on-time" than
competitive motors and a system which allows a lift truck fleet manager to
monitor individual battery chargers and obtain performance feedback on each
charger, battery and electric lift truck within a facility.
Manufacturing Excellence. The Company's present management team, which joined
Prestolite following Genstar Capital Corporation's ("Genstar") acquisition of
Prestolite in 1991, has instituted continuous
5
<PAGE>
improvement programs at all of Prestolite's manufacturing facilities, including
synchronous manufacturing techniques, cellular manufacturing arrangements and
kanban-based just-in-time inventory control. Changes in manufacturing methods
have made floor space available for expansion at most of Prestolite's
facilities. From 1992 to 1997, Prestolite increased its sales per employee by
approximately 65% and increased its sales per square foot of manufacturing and
warehouse space by approximately 160%. Ongoing training programs for
Prestolite's experienced workforce are an integral part of such continuous
improvement efforts.
International Presence. As the Company's original equipment (OEM and OES)
customers expand their manufacturing operations in foreign countries, the
Company expects that these customers will increasingly turn to suppliers who
can support their locally-manufactured OEM products and aftermarket presence.
The Company believes that its global manufacturing and distribution network,
further enhanced by the Lucas Acquisition, provides an advantage over its
competitors in servicing its North American and European customers' foreign
manufacturing operations. The Lucas Acquisition will also significantly enhance
the Company's access to an international customer base in rapidly growing
emerging markets. In addition, the Company has acquired the Lucas Businesses'
strong automotive parts distribution networks in Argentina and South Africa and
has the opportunity to sell certain truck, bus and automotive products through
Lucas Industries' worldwide distribution network of over 4,000 outlets.
GROWTH STRATEGY
The Company's goal is to continue to increase revenues and profitability. Key
elements of the Company's growth strategy include:
Provide Systems Solutions to Customers. OEMs are increasingly demanding
systems solutions, particularly in the markets for heavy duty truck and non-
automotive electric vehicles, as customers consolidate their supplier base and
lower the overall cost of their products by incorporating systems consisting of
components designed to work together. The Company anticipates that its
engineering strengths, combined with its market knowledge and the broad range
of products offered within each product category, will enable the Company to
assist its customers with the design and manufacture of integrated system
solutions, such as the entire charging and starting system of a heavy duty
truck or the motive power system of a forklift.
Develop New Applications and Products. The Company intends to continue to
leverage its strong technological capabilities into its new product development
process, allowing it to better serve its customers through continued product
introductions and improvements. For example, one of the Company's Leece-Neville
alternators, initially developed for the aftermarket, is now standard equipment
on Freightliner FLD series trucks. In addition to having its aftermarket
products adopted by OEMs, the Company works with its OEM customers to design
the Company's products and systems into the OEMs' finished products. For
example, in 1996 more than twenty-five motor designs were custom engineered to
fit specific lift trucks being developed by Prestolite's OEM customers.
Continue Cost Reduction Emphasis. A primary focus of the Company's management
has been to significantly reduce manufacturing costs through continuous
improvement programs at Prestolite's manufacturing facilities. Further cost
reductions have been achieved through ongoing value engineering efforts, such
as a product redesign that enabled Prestolite to reduce the cost of one of its
European starter motors by over 30%. In addition, cost reductions have been
achieved through plant closings and corporate staff reductions. In connection
with the Lucas Acquisition, the Company has specifically identified estimated
cost reductions of $1.7 million in 1998, $5.1 million in 1999 and $6.2 million
in 2000 based on expected productivity improvements, manufacturing realignments
and overhead cost reductions. Such estimates are based on management's
preliminary assumptions. There can be no assurance, however, as to the amount
of cost savings, if any, that will actually be realized.
6
<PAGE>
Pursue Global Expansion. The Company is expanding its international presence
in order to benefit from the trend toward international standardization and to
participate in rapidly growing emerging markets. The Lucas Acquisition is a
significant further step toward increasing the Company's international
presence, and the Company intends to expand its international presence through
strategic acquisitions as well as internal growth. The Company presently owns
an interest in a producer of alternators and starter motors for the automotive
and heavy duty markets in India. The Company intends to pursue joint ventures
in those countries or regions where a local partner is critical to success.
Such global expansion is expected to provide access to new customers and
technologies, as well as protection from regional economic cycles.
Strategically Acquire Complementary Businesses. Management intends to
continue to selectively pursue acquisitions of businesses producing products
which complement the Company's existing product portfolio. For example, the
Hobart acquisition added battery chargers to the Company's existing electric
vehicle product line, and the Lucas Acquisition complements Prestolite's
existing product portfolio with a variety of truck, bus and automotive
products.
THE TRANSACTIONS
On January 22, 1998, Prestolite completed the acquisition of Lucas HDP, Lucas
South Africa and a controlling interest in Lucas Argentina from Lucas
Industries. The total consideration paid at closing in the Lucas Acquisition
was approximately $41.3 million plus, in connection with Lucas Argentina, (i)
approximately $1.2 million payable upon exercise of an option to purchase
substantially all the remaining shares of Lucas Argentina, (ii) approximately
$7.1 million of outstanding indebtedness which was assumed or repaid (excluding
approximately $2.6 million outstanding under drawn letters of credit that was
also assumed) and (iii) a maximum aggregate of $19.0 million of post-closing
contingent payments. [The purchase price paid at the closing of the Lucas
Acquisition is subject to certain post-closing adjustments based on the
financial statements of the Lucas Businesses as of the closing date. There can
be no assurance that the actual price paid for the Lucas Businesses after
giving effect to any such adjustment will not differ from the foregoing
amounts.] In addition, Prestolite Electric Limited, the Issuer's U.K.
subsidiary ("Prestolite U.K."), purchased from Lucas Aftermarket Operations,
the aftermarket division of a subsidiary of Lucas Industries ("LAO"), certain
inventory and transition assistance for an aggregate price of approximately
$2.0 million, payable in installments in the first and fourth quarters of 1998.
On January 22, 1998, Prestolite also completed the offering of the
Outstanding Notes (the "Offering"). In connection with the Offering, the
Company effected a series of transactions that resulted in a recapitalization
of the Company (such transactions are collectively referred to herein as the
"Recapitalization"). The Recapitalization consisted of (i) the Offering, (ii)
the repayment of approximately $42.0 million of outstanding indebtedness
(including approximately $3.4 million of indebtedness of Lucas Argentina),
(iii) the payment of a dividend to PEI to enable PEI and an affiliate to
purchase securities of PEI from PEI's securityholders for an aggregate purchase
price of approximately $29.7 million, (iv) the entry by the Issuer into a
credit facility (the "New U.S. Credit Facility") providing for up to $23.0
million of revolving credit loans and (v) the entry by Prestolite U.K. into a
temporary line of credit (the "Temporary U.K. Credit Facility") providing for
short-term borrowings of up to (Pounds)3.0 million. On April , 1998,
Prestolite U.K. replaced the Temporary U.K. Credit Facility with a long-term
credit facility (the "New U.K. Credit Facility") providing for borrowings of up
to (Pounds)7.0 million (approximately $11.8 million based on exchange rates as
of March 31, 1998). See "The Transactions--The Recapitalization," "Certain
Transactions" and "Description of Certain Indebtedness."
The Lucas Acquisition and the Recapitalization are collectively referred to
herein as the "Transactions."
7
<PAGE>
OWNERSHIP AND MANAGEMENT
On October 29, 1991, Genstar and certain members of the Company's management
completed the acquisition out of bankruptcy of the assets comprising
Prestolite. In the two years following the acquisition, Prestolite, under the
direction of its present management team, rationalized its production
facilities, decentralized and streamlined its organizational structure and
reorganized its operations. Several facilities were closed, certain non-core
business lines were sold and corporate staff was reduced by 65%. Since the
acquisition, management has instituted continuous improvement programs at all
of Prestolite's manufacturing facilities, including synchronous manufacturing
techniques, cellular manufacturing arrangements and kanban-based just-in-time
inventory control. Genstar and management presently own approximately 85% and
15%, respectively, of the common stock, par value $0.01 per share ("Common
Stock"), of PEI (in each case on a fully-diluted basis). The purchase of PEI
securities from Genstar and its shareholders and from management pursuant to
the Recapitalization represented the first realization on their investment in
the Company.
Genstar is an Alberta, Canada corporation (with shares listed on the Alberta
Stock Exchange) specializing in the acquisition of basic manufacturing and
service businesses. Since its founding in 1988, Genstar has consummated a
number of acquisitions including, in addition to Prestolite, the acquisition of
the following companies: Wolverine Tube, Inc., a leading North American copper
tube manufacturer and distributor; Gentek Building Products, Inc. and Gentek
Building Products Ltd., leading manufacturers of aluminum, vinyl and steel
siding; and Seaspan International Ltd., Canada's largest tug and barge company.
----------------
The Company's headquarters are located at 2100 Commonwealth Boulevard, Ann
Arbor, Michigan 48105, and its telephone number at that address is (734) 913-
6600.
RISK FACTORS
Prospective participants in the Exchange Offer should carefully consider the
specific matters set forth under "Risk Factors" as well as the other
information and data included in this Prospectus prior to making any
determination as to their participation.
8
<PAGE>
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
<TABLE>
<CAPTION>
The Exchange Offer................ The Issuer is offering to exchange $1,000
principal amount of Exchange Notes for each
$1,000 principal amount of Outstanding
Notes that are properly tendered and
accepted. The terms of the Exchange Notes
are identical in all material respects to
the Outstanding Notes except for certain
transfer restrictions and registration
rights relating to the Outstanding Notes
and that, if the Exchange Offer is not
consummated by July 21, 1998, the interest
rate on the Outstanding Notes shall
increase by 0.5% until the Exchange Offer
is consummated. The issuance of Exchange
Notes is intended to satisfy certain
obligations of the Issuer contained in the
Registration Rights Agreement. The Exchange
Notes represent the same debt as the
Outstanding Notes, and will be issued, and
holders thereof are entitled to the same
benefits as holders of Outstanding Notes,
under the Indenture.
<C> <S>
Expiration Date.................. 5:00 P.M., New York City time, on ,
1998, unless the Exchange Offer is extended
by the Issuer (but in no event to a date
later than , 1998). See "The Exchange
Offer--Period for Tendering Outstanding
Notes."
Accrued Interest on the Exchange Each Exchange Note will bear interest from
Notes and the Outstanding the last interest payment date on which
Notes........................... interest was paid on the Outstanding Notes,
or, if interest has not yet been paid on
the Outstanding Notes, from January 22,
1998, the date of issuance (the "Issue
Date") of the Outstanding Notes. Such
interest will be paid with the first
interest payment on the Exchange Notes.
Accordingly, interest, which has accrued
since the last interest payment date or
January 22, 1998, as the case may be, on
the Outstanding Notes accepted for exchange
will cease to be payable upon issuance of
the Exchange Notes. Untendered Outstanding
Notes that are not exchanged for Exchange
Notes pursuant to the Exchange Offer will
bear interest at a rate of 9 5/8% per annum
after the Expiration Date.
Conditions of the Exchange The Exchange Offer is subject to certain
Offer........................... customary conditions, any or all of which
may be waived by the Issuer. See "The
Exchange Offer--Certain Conditions to the
Exchange Offer."
Procedures for Tendering Each holder of Outstanding Notes wishing to
Outstanding Notes............... accept the Exchange Offer must complete and
sign the Letter of Transmittal, in
accordance with the instructions contained
herein and therein, and forward or hand-
deliver such Letter of Transmittal to the
Exchange Agent identified below at the
address set forth herein and therein. Each
exchanging holder will be required to
represent in the Letter of Transmittal that
such holder is acquiring the Exchange Notes
in the ordinary course of business, is not
engaged in, and does not intend to engage
in, a distribution of Exchange Notes and is
not an affiliate of the Issuer or PEI. Any
holder of Outstanding Notes whose
Outstanding Notes are registered in the
name
</TABLE>
9
<PAGE>
<TABLE>
<C> <S>
of brokers, dealers, commercial banks,
trust companies or nominees is urged to
contact such registered holders promptly if
such holder wishes to accept the Exchange
Offer. See "The Exchange Offer--Procedures
for Tendering Outstanding Notes."
Guaranteed Delivery Procedures... Holders of Outstanding Notes who wish to
tender their Outstanding Notes and whose
Outstanding Notes are not immediately
available, or who cannot deliver their
Outstanding Notes, the Letter of
Transmittal or any other documents required
by the Letter of Transmittal to the
Exchange Agent prior to the Expiration
Date, or who cannot complete the procedure
for book-entry transfer on a timely basis
must tender their Outstanding Notes
according to the guaranteed delivery
procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal of Tenders............ Tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 P.M.,
New York City time, on the Expiration Date.
See "The Exchange Offer--Withdrawal
Rights."
Acceptance of Outstanding Notes The Company will accept for exchange any
and Delivery of Exchange Notes.. and all Outstanding Notes which are
properly tendered in the Exchange Offer
prior to 5:00 P.M., New York City time, on
the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will
be delivered promptly following the
Expiration Date. See "The Exchange Offer--
Acceptance of Outstanding Notes for
Exchange; Delivery of Exchange Notes."
Certain Federal Income Tax For a discussion of certain federal income
Considerations.................. tax considerations relating to the exchange
of the Outstanding Notes for the Exchange
Notes, see "Certain Federal Income Tax
Considerations."
Rights of Dissenting Holders of Outstanding Notes do not have
Noteholders..................... any appraisal or dissenters' rights under
the Delaware General Corporation Law in
connection with the Exchange Offer.
Use of Proceeds.................. There will be no cash proceeds payable to
the Issuer from the issuance of the
Exchange Notes pursuant to the Exchange
Offer.
Exchange Agent................... The Trustee is also the Exchange Agent. The
mailing address of the Exchange Agent is
U.S. Bank Trust National Association, P.O.
Box 64485, St. Paul, MN, 55164-9549
Attention: Specialized Finance (SPFT0414).
The address for deliveries by overnight
courier and by registered/certified mail
is: 180 East Fifth Street, St. Paul, MN
55101, Attention: Specialized Finance
(SPFT0414). Hand deliveries should be made
before 5:00 p.m. (New York Time) to 100
Wall Street, 20th Floor, New York, NY
10005. For information with respect to the
Exchange Offer, the telephone number for
the Exchange Agent is (612) 244-8161 and
the facsimile number for the Exchange Agent
is (612) 244-1537, Attention: Melina Black.
</TABLE>
10
<PAGE>
SUMMARY OF THE TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to an aggregate principal amount of $125,000,000
of the Outstanding Notes. The form and terms of the Exchange Notes will be the
same as the form and terms of the Outstanding Notes except that the Exchange
Notes will not bear legends restricting the transfer thereof. The Exchange
Notes will be obligations of the Issuer entitled to the benefits of the
Indenture. See "Description of the Exchange Notes."
Exchange Notes Offered...... $125,000,000 aggregate principal amount of 9 5/8%
Senior Notes due 2008 of Prestolite Electric
Incorporated (the "Issuer"), fully and
unconditionally guaranteed by PEI.
Comparison With Outstanding
Notes; Transferability.....
The Exchange Notes will be freely transferable
under the Securities Act by holders of
Outstanding Notes who are not affiliates of the
Issuer. The holders of Outstanding Notes
currently are entitled to certain registration
rights pursuant to the Registration Rights
Agreement. However, upon consummation of the
Exchange Offer, holders of Outstanding Notes who
do not exchange their Outstanding Notes for
Exchange Notes will no longer be entitled to any
registration rights and will not be able to
reoffer, resell or otherwise dispose of their
Outstanding Notes, unless they are subsequently
registered under the Securities Act, which the
Issuer will have no obligation to do, or unless
an exemption from the registration requirements
of the Securities Act is available. The Exchange
Notes otherwise will be identical in all material
respects to the Outstanding Notes except for
certain transfer restrictions and registration
rights relating to the Outstanding Notes and
except that, if the Exchange Offer is not
consummated by July 21, 1998, the interest rate
on the Outstanding Notes will increase by 0.5%
until the Exchange Offer is consummated. See "The
Exchange Offer."
Maturity Date............... February 1, 2008
Interest Payment Dates...... February 1 and August 1 of each year, commencing
August 1, 1998.
Optional Redemption......... The Exchange Notes will be redeemable at the
option of the Issuer, in whole or in part, at any
time on or after February 1, 2003 at the
redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of
redemption. In addition, up to 35.0% of the
original aggregate principal amount of the
Exchange Notes may be redeemed from time to time
prior to February 1, 2001 at the redemption price
set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption, with
the net cash proceeds of one or more Public
Equity Offerings (as defined) provided that at
least $81.25 million principal amount of the
Exchange Notes originally issued remains
outstanding immediately after each such
redemption. See "Description of the Exchange
Notes--Optional Redemption."
Change of Control........... Upon a Change of Control (as defined) each holder
of Exchange Notes may require the Issuer to
repurchase such holder's outstanding Exchange
Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the
date of repurchase. The Company
11
<PAGE>
may not be able to fund the repurchase of all of
the Exchange Notes in the event of a Change of
Control. See "Risk Factors--Limitations on
Repurchases of Exchange Notes upon Change of
Control" and "Description of the Exchange Notes--
Change of Control."
Guarantee................... Payment of the principal of and interest on the
Exchange Notes will be fully and unconditionally
guaranteed on an unsecured, senior basis by PEI
(the "Guarantee"). None of the Issuer's
subsidiaries will guarantee the Exchange Notes.
Ranking..................... The Exchange Notes will be unsecured, senior
obligations of the Issuer and will rank pari
passu in right of payment with all other existing
and future senior indebtedness of the Issuer and
senior in right of payment to any existing and
future subordinated indebtedness of the Issuer.
The Exchange Notes will be effectively
subordinated to all existing and future secured
indebtedness of the Issuer, including
indebtedness under the New U.S. Credit Facility,
to the extent of the value of the assets securing
such indebtedness. The Exchange Notes will be
structurally subordinated to all existing and
future indebtedness of any subsidiary of the
Issuer, including indebtedness under the New U.K.
Credit Facility. As of December 31, 1997, on a
pro forma basis after giving effect to the
Transactions as if the Transactions had occurred
on such date, the Issuer would have had
approximately $129.5 million of consolidated
indebtedness outstanding, of which approximately
$4.5 million would have represented secured
indebtedness, and the indebtedness of the
Issuer's subsidiaries would have been
approximately $3.2 million (excluding trade
payables of approximately $18.4 million). The
Indenture relating to the Exchange Notes permits
the Issuer and its subsidiaries to incur
additional indebtedness, including senior
indebtedness, subject to certain limitations. See
"Description of the Exchange Notes."
The Guarantee will be an unsecured, senior
obligation of PEI and will rank pari passu in
right of payment with all other senior, unsecured
indebtedness of PEI. As of December 31, 1997, on
a pro forma basis after giving effect to the
Transactions, PEI would have had no indebtedness
outstanding, other than the Guarantee.
Restrictive Covenants....... The indenture under which the Exchange Notes will
be issued (the "Indenture") contains certain
covenants that, among other things, limit (i) the
issuance of additional indebtedness by the
Issuer, (ii) the issuance of indebtedness and
preferred stock by the Issuer's subsidiaries,
(iii) the payment of dividends on the capital
stock of the Issuer and its subsidiaries and the
purchase, redemption or retirement of capital
stock and certain indebtedness, (iv) investments,
(v) certain transactions with affiliates, (vi)
sales of assets including capital stock of
subsidiaries and (viii) certain consolidations,
mergers and transfers of assets. The Indenture
also prohibits certain restrictions on
distributions from subsidiaries and limits the
business activities, borrowings and investments
of PEI. However, all of these limitations are
subject to a number of important qualifications.
See "Description of the Exchange Notes--Certain
Covenants."
12
<PAGE>
SUMMARY FINANCIAL INFORMATION
Set forth below is summary pro forma information for the Company and summary
historical financial information for PEI and the Lucas Businesses. The
information in the following tables is qualified by reference to, and should be
read in conjunction with, "Selected Consolidated Historical Financial Data,"
"Unaudited Pro Forma Combined Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the respective
financial statements of PEI, Lucas HDP, Lucas Argentina and Lucas South Africa
and the related notes thereto, included elsewhere in this Prospectus.
THE COMPANY--PRO FORMA
The unaudited pro forma financial information for the Company set forth below
has been derived from the unaudited pro forma financial information included
elsewhere in this Prospectus and gives effect to the Transactions, including
the issuance of the Notes, borrowings under the New U.S. Credit Facility, the
Lucas Acquisition and the other matters described under "Unaudited Pro Forma
Combined Financial Data." The pro forma statements of operations data give
effect to the Transactions as if they had occurred on January 1, 1997 and the
pro forma balance sheet data give effect to the Transactions as if they had
occurred on December 31, 1997. The unaudited pro forma financial information
does not purport to represent what the Company's financial position and results
of operations would have been if the Transactions had actually been completed
as of the dates indicated and is not intended to project the Company's
financial position or results of operations for any future period.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
(IN THOUSANDS,
EXCEPT RATIOS)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $298,630
Cost of goods sold.......................................... 245,330
Selling, general and administrative expenses................ 40,247
Redundancy charges.......................................... 1,656
--------
Operating income............................................ 11,397
Other income(a)............................................. (720)
Interest expense............................................ 12,525
--------
Loss from continuing operations before minority interest and
income taxes............................................... (408)
Provision for income taxes.................................. 1,907
--------
Loss from continuing operations before minority interest.... $ (2,315)
========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (excluding current debt).................... $ 52,044
Total assets................................................ 184,359
Total debt.................................................. 129,517
Stockholders' equity (deficit).............................. (13,607)
OTHER DATA:
EBITDA(b)................................................... $ 23,966
Depreciation and amortization............................... 11,849
Capital expenditures........................................ 9,930
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
SELECTED RATIOS:
Ratio of EBITDA to interest expense....................................... 1.9 x
Ratio of total debt to EBITDA(c).......................................... 5.4 x
Ratio of earnings to fixed charges(d)..................................... --
</TABLE>
- - - - - - - - - - - --------
(a) Other income consists primarily of interest income.
(b) EBITDA is calculated as the sum of the loss from continuing operations
before minority interest plus the following to the extent deducted in
calculating such loss: (i) interest expense, (ii) income tax expense, (iii)
depreciation expense and (iv) amortization expense. EBITDA is a widely
accepted financial indicator of a company's ability to service debt, but is
not calculated the same by all companies. EBITDA should not be considered
by an investor as an alternative to net income, as an indicator of the
Company's operating performance or as an alternative to cash flow as a
measure of liquidity.
(c) The pro forma ratio of total debt to EBITDA represents total pro forma debt
at December 31, 1997, divided by pro forma EBITDA for the twelve months
ended December 31, 1997.
(d) For purposes of calculating the ratio of earnings to fixed charges,
earnings include loss from continuing operations before minority interest
and income taxes plus fixed charges. Fixed charges consist of interest
expense and 33% of rental expense (deemed by management to be
representative of the interest factor of rental payments). Pro forma
earnings were insufficient to cover fixed charges by approximately $0.4
million.
14
<PAGE>
PEI--HISTORICAL
The following table sets forth certain consolidated historical financial
information of PEI. The financial information as of and for the fiscal years
ended December 31, 1995, 1996 and 1997 has been derived from PEI's audited
financial statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS, EXCEPT RATIOS
STATEMENTS OF OPERATIONS DATA: AND SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales.................................... $ 131,503 $ 148,765 $ 171,700
Cost of goods sold........................... 106,541 120,585 137,792
Selling, general and administrative
expenses.................................... 18,955 20,986 23,188
Restructuring charges........................ 3,100 56 --
--------- --------- ---------
Operating income............................. 2,907 7,138 10,720
Other expense(a)............................. 203 108 210
Interest expense............................. 4,282 5,313 5,384
--------- --------- ---------
Income (loss) from continuing operations
before income taxes......................... (1,578) 1,717 5,126
Provision for income taxes................... 630 (2,314) 2,303
--------- --------- ---------
Income (loss) from continuing operations..... (2,208) 4,031 2,823
========= ========= =========
Earnings per common share from continuing
operations(b):
Basic...................................... (0.64) 1.17 0.82
Diluted.................................... (0.64) 1.13 0.78
Shares used in computing earning per
share(b):
Basic...................................... 3,466,740 3,454,740 3,446,740
Diluted.................................... 3,466,740 3,553,800 3,628,020
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (excluding current debt)..... $ 25,486 $ 29,567 $ 31,588
Total assets................................. 72,473 93,604 88,685
Total debt................................... 40,451 46,514 42,930
Stockholders' equity......................... 13,273 18,018 18,943
OTHER DATA:
EBITDA(c).................................... $ 7,254 $ 12,276 $ 16,011
Cash flow from operating activities.......... 1,447 2,560 7,749
Cash flow from investing activities.......... (5,035) (10,336) 1,483
Cash flow from financing activities.......... 3,789 8,032 (9,582)
Depreciation and amortization................ 4,550 5,246 5,501
Capital expenditures......................... 4,864 6,794 5,638
Ratio of earnings to fixed charges(d)........ -- 1.3x 1.8x
</TABLE>
- - - - - - - - - - - --------
(a) Other expense consists primarily of operating costs of idle facilities.
(b) Earnings per common share and shares used in the computation reflect the
20-for-1 stock split.
(c) EBITDA for any period is calculated as the sum of income (loss) from
continuing operations plus the following to the extent deducted in
calculating such net income: (i) minority interest, (ii) interest expense,
(iii) income tax expense, (iv) depreciation expense and (v) amortization
expense, in each case for such period. EBITDA is a widely accepted
financial indicator of a company's ability to service debt, but is not
calculated the same by all companies. EBITDA should not be considered by an
investor as an alternative to net income, as an indicator of the Company's
operating performance or as an alternative to cash flow as a measure of
liquidity.
(d) For purposes of computing the ratio of earnings to fixed charges, earnings
include income (loss) from continuing operations before income taxes plus
fixed charges. Fixed charges consist of interest expense and 33% of rental
expense (deemed by management to be representative of the interest factor
of rental payments). Earnings were insufficient to cover fixed charges in
1995 by approximately $1.6 million.
15
<PAGE>
THE LUCAS BUSINESSES--COMBINED HISTORICAL (UNAUDITED)
The following table sets forth certain combined historical financial
information of the Lucas Businesses. Each of the Lucas Businesses changed its
fiscal year-end from July 31 to January 31 during 1996, and from January 31 to
December 31 following the Lucas Acquisition. Accordingly, the January 31, 1997
and December 31, 1997 statement of operations data are for the six months and
eleven months then ended, respectively. The Lucas Businesses' combined
financial data as of January 31, 1997 and December 31, 1997, for the years
ended July 31, 1995 and 1996, the six-month period ended January 31, 1997 and
the eleven-month period ended December 31, 1997 were derived from the audited
financial statements of Lucas HDP, Lucas Argentina and Lucas South Africa
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
JULY 31, JULY 31, JANUARY 31, DECEMBER 31,
1995 1996 1997 1997
---------- ---------- ----------- -------------
(IN THOUSANDS)
STATEMENTS OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Net sales...................... $130,138 $129,757 $ 62,076 $121,734
Cost of goods sold............. 104,183 102,945 50,159 100,571
Selling, general and
administrative expenses....... 27,228 24,857 10,702 20,280
Non recurring charges (a)...... -- 1,455 -- 763
Redundancy charges............. 284 528 200 1,656
-------- -------- -------- --------
Operating income (loss)........ (1,557) (28) 1,015 (1,536)
Other expense (income)......... 155 401 (102) (393)
Interest expense............... 1,352 1,320 734 1,427
-------- -------- -------- --------
Income (loss) before income
taxes, minority interest and
extraordinary items........... (3,064) (1,749) 383 (2,570)
Provision for income taxes..... 992 1,657 1,009 1,815
-------- -------- -------- --------
Income (loss) before minority
interest...................... $ (4,056) $ (3,406) $ (626) $ (4,385)
======== ======== ======== ========
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital (excluding debt)..................... $ 41,742 $ 48,421
Total assets......................................... 101,469 108,785
Total debt........................................... 16,000 11,620
Stockholders' equity and parent company equity....... 64,218 72,725
OTHER DATA:
EBITDA (b)..................... $ 3,551 $ 6,745 $ 4,089 $ 5,158
Cash flow from operating
activities.................... (1,854) 3,238 3,188 5,101
Cash flow from investing
activities.................... (5,446) (3,927) (3,870) (4,077)
Cash flow from financing
activities.................... 5,090 6,711 2,971 6,070
Depreciation and amortization
(c)........................... 5,263 7,174 2,972 6,301
Capital expenditures........... 5,579 4,013 3,880 4,146
</TABLE>
- - - - - - - - - - - --------
(a) Represents in 1996 a writedown of $1,455 of Lucas Argentina goodwill and in
1997 nonrecurring Lucas Argentina expense related to purchase adjustments
agreed to by Lucas Industries and Prestolite for remanufactured inventory
($300) and for pension liability ($455).
(b) EBITDA for any period is calculated as the sum of income (loss) before
minority interest plus the following to the extent deducted in calculating
such net income: (i) interest expense, (ii) income tax expense, (iii)
depreciation expense and (iv) amortization expense, in each case for such
period. EBITDA is a widely accepted financial indicator of a company's
ability to service debt, but is not calculated the same by all companies.
EBITDA should not be considered by an investor as an alternative to net
income, as an indicator of the Company's operating performance or as an
alternative to cash flow as a measure of liquidity.
(c) Depreciation and amortization for the twelve months ended July 31, 1996,
includes a write down of $1,455 of goodwill of Lucas Argentina discussed in
Note (a).
16
<PAGE>
RISK FACTORS
Prospective participants in the Exchange Offer should carefully consider the
following risk factors, as well as the other information and data included
elsewhere in this Prospectus, prior to making any determination as to their
participation.
SUBSTANTIAL LEVERAGE; INABILITY TO SERVICE DEBT
In connection with the Transactions, the Issuer has incurred a significant
amount of indebtedness. As a result, the Issuer is highly leveraged and has
substantial repayment obligations, as well as significantly increased interest
expense. In addition, subject to the restrictions contained in the New U.S.
Credit Facility and the Indenture, the Issuer and its subsidiaries may incur
additional indebtedness from time to time to finance acquisitions or capital
expenditures or for other purposes. As of December 31, 1997, on a pro forma
basis after giving effect to the Transactions as if the Transactions had
occurred on such date, the Issuer would have had approximately $129.5 million
of consolidated indebtedness outstanding and the Issuer's stockholders'
deficit would have been approximately $13.6 million. On a pro forma basis
after giving effect to the Transactions as if the Transactions had occurred on
January 1, 1997, earnings would have been insufficient to cover fixed charges
for the year ended December 31, 1997 by approximately $0.4 million.
The Issuer's ability to make scheduled payments of principal or interest on,
or to refinance, its indebtedness will depend on future operating performance
and cash flow, which are subject to prevailing economic conditions, prevailing
interest rate levels and financial, competitive, business and other factors
beyond its control. The degree to which the Issuer is leveraged could have
important consequences to holders of the Exchange Notes, including the
following: (i) the Issuer's ability to obtain additional financing for working
capital, capital expenditures, acquisitions or general corporate purposes may
be impaired; (ii) a substantial portion of the Issuer's cash flow from
operations must be dedicated to the payment of interest on the Notes and
interest on its other existing indebtedness, thereby reducing the funds
available to the Issuer for other purposes; (iii) the agreements governing the
Issuer's long-term indebtedness, including the New U.S. Credit Facility and
the Indenture, contain certain restrictive financial and operating covenants;
(iv) the indebtedness under the New U.S. Credit Facility is at variable rates
of interest, which causes the Issuer to be vulnerable to increases in interest
rates; (v) the indebtedness outstanding under the New U.S. Credit Facility is
secured by all inventory, accounts receivable and general intangibles of the
Issuer and will become due prior to the time the principal on the Exchange
Notes will become due; (vi) the indebtedness outstanding under the New U.K.
Credit Facility is structurally senior to the Exchange Notes and is secured by
all the accounts receivable of Prestolite U.K., but is not guaranteed by the
Issuer or PEI, and may become due prior to the time the principal on the
Exchange Notes will become due; (vii) the Issuer is substantially more
leveraged than certain of its competitors, which might place the Issuer at a
competitive disadvantage; (viii) the Issuer may be hindered in its ability to
adjust rapidly to changing market conditions; (ix) the Issuer's substantial
degree of leverage may negatively affect certain suppliers' willingness to
give the Issuer favorable payment terms; and (x) the Issuer's substantial
degree of leverage could make it more vulnerable in the event of a downturn in
general economic conditions or in its business. See "Description of Certain
Indebtedness."
The Issuer believes that, based upon its current and anticipated levels of
operations, it will have sufficient capital to carry on its business and will
be able to meet its debt service obligations, including interest payments on
the Notes, when due. There can be no assurance, however, that the future cash
flow of the Issuer will be sufficient to meet the Issuer's obligations and
commitments. If the Issuer cannot generate sufficient cash flow from
operations to service its indebtedness and to meet its other obligations and
commitments, the Issuer might be required to refinance its debt or to dispose
of assets to obtain funds for such purpose. There is no assurance that
refinancings or asset dispositions could be effected on a timely basis or on
satisfactory terms, if at all, or would be permitted by the terms of the New
U.S. Credit Facility or the Indenture. In the event that the Issuer is unable
to refinance the New U.S. Credit Facility or raise funds through asset sales,
sales of equity or otherwise, its ability to pay principal of, and interest
on, the Notes would be adversely affected.
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GUARANTEE; RANKING
PEI will fully and unconditionally guarantee the Exchange Notes on an
unsecured, senior basis. PEI is a holding company that derives substantially
all of its operating income and cash flow from the Issuer and whose only
material assets are the outstanding shares of common stock of the Issuer.
Accordingly, PEI will be dependent upon the earnings and cash flow of, and
dividends and distributions from, the Issuer to perform on its guarantees of
the Exchange Notes. None of the Issuer's subsidiaries will guarantee the
Exchange Notes.
The Outstanding Notes currently are, and the Exchange Notes will be,
unsecured, senior obligations of the Issuer ranking pari passu in right of
payment with all other existing and future senior indebtedness of the Issuer
and senior in right of payment to any existing and future subordinated
indebtedness of the Issuer. The Exchange Notes will be effectively
subordinated to all existing and future secured indebtedness of the Issuer,
including indebtedness under the New U.S. Credit Facility, which is secured by
a lien on all inventory and accounts receivable of the Issuer. See
"Description of Certain Indebtedness--New U.S. Credit Facility." Holders of
existing or future secured indebtedness of the Issuer permitted under the
Indenture, including holders of indebtedness under the New U.S. Credit
Facility, will have claims with respect to the assets constituting collateral
that are prior to the claims of holders of the Notes. The Exchange Notes will
also be structurally subordinated to all existing and future indebtedness of
any subsidiary of the Issuer, including indebtedness under the New U.K. Credit
Facility, if any. As of December 31, 1997, on a pro forma basis after giving
effect to the Transactions as if the Transactions had occurred on such date,
the Issuer would have had approximately $129.5 million of consolidated
indebtedness outstanding, of which approximately $4.5 would have represented
secured indebtedness, and the indebtedness of the Issuer's subsidiaries would
have been approximately $3.2 million (excluding trade payables of
approximately $18.1 million). See "Description of the Exchange Notes--
Ranking." The Indenture will permit the Issuer and its subsidiaries to incur
additional indebtedness, including senior indebtedness, subject to certain
limitations.
RESTRICTIVE LOAN COVENANTS
The New U.S. Credit Facility includes certain negative covenants and
restrictions on actions by the Issuer including, without limitation,
restrictions on (i) the making of investments, loans and advances and the
paying of dividends and other restricted payments; (ii) the incurrence of
additional indebtedness; (iii) the granting of liens, other than liens created
pursuant to the New U.S. Credit Facility and certain permitted liens; (iv)
mergers, consolidations and sales of all or a substantial part of the
Company's business or property; (v) the acquisition of all of the assets or a
division of another corporation or capital expenditures greater than $15.0
million in a calendar year; (vi) the sale of receivables or the repayment of
other debt; and (vii) the guarantee of certain obligations. The New U.S.
Credit Facility also requires the Company to meet certain financial covenants,
including maintaining capitalization levels, capitalization ratios, minimum
fixed charge coverage ratios and funded debt ratios. All of these restrictive
covenants may restrict the Company's ability to expand or to pursue its
business strategies. The ability of the Company to comply with these and other
provisions of the New U.S. Credit Facility may be affected by changes in
economic or business conditions, results of operations or other events beyond
the Company's control. The breach of any of these covenants could result in a
default under the New U.S. Credit Facility, in which case, depending on the
actions taken by the lender thereunder or its successors or assignees, such
lender could elect to declare all indebtedness under the New U.S. Credit
Facility to be due and payable. If the Company were unable to repay such
borrowings, such lender could proceed against the collateral granted to them
to secure that indebtedness, which indebtedness is secured by liens on all
inventory, accounts receivable and general intangibles of the Issuer. In
addition, the New U.S. Credit Facility contains certain events of default
which are substantially similar to the events of default under the Indenture
except as follows: (i) the Issuer's failure to pay other indebtedness or
judgments entered against the Issuer will trigger a default under the New U.S.
Credit Facility at lower dollar amounts than in the Indenture; (ii) the
failure of any security interest in collateral securing the New U.S. Credit
Facility will trigger a default under the New U.S. Credit Facility; (iii) a
Change of Control that triggers the Company's repurchase obligations under the
Indenture will trigger a default under the New U.S. Credit Facility; (iv) the
New U.S. Credit Facility prohibits the optional redemption of the Notes in
certain circumstances; and (v) the New U.S. Credit Facility generally has
shorter
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grace periods and lower default thresholds than the Indenture. If the
indebtedness under the New U.S. Credit Facility were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to
repay in full such indebtedness and the other indebtedness of the Company,
including the Notes. See "Description of Certain Indebtedness--New U.S. Credit
Facility."
The New U.K. Credit Facility includes certain covenants of Prestolite U.K.
that, among other things, restrict (i) the incurrence of senior indebtedness
by Prestolite U.K., (ii) the creation or subsistence of security interests in
Prestolite U.K. (other than certain permitted liens or encumbrances) and (iii)
the payment of dividends and interest and/or repayment of capital on
intercompany indebtedness to the Issuer when Prestolite U.K. is in default
under the New U.K. Credit Facility. The New U.K. Credit Facility also requires
Prestolite U.K. to comply with certain financial covenants, including
restrictions regarding total debt, total debt service and tangible net worth.
The breach of any of these covenants could result in a default under the New
U.K. Credit Facility. Further, in certain circumstances intercompany
indebtedness of Prestolite U.K. to the Issuer is subordinated to indebtedness
outstanding under the New U.K. Credit Facility. See "Description of Certain
Indebtedness--New U.K. Credit Facility."
LIMITATIONS ON REPURCHASES OF NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined in the Indenture),
each holder of the Notes will be entitled to require the Company to purchase
such holder's Notes at a purchase price equal to 101% of the principal amount
of such Notes, plus accrued and unpaid interest, if any, to the date of
repurchase. However, the New U.S. Credit Facility will prohibit the purchase
of Notes by the Company in the event of a Change of Control, unless and until
such time as the indebtedness under the New U.S. Credit Facility is repaid in
full. The Company's failure to purchase Notes would result in a default under
the Indenture and the New U.S. Credit Facility which would permit the trustee
under the Indenture, the holders of at least 25% in principal amount of the
outstanding Notes or the lender under the New U.S. Credit Facility to declare
the principal and accrued but unpaid interest to be due and payable. The
inability to repay the indebtedness under the New U.S. Credit Facility, if
accelerated, would also constitute an event of default under the Indenture,
which could cause an acceleration of the indebtedness under the Indenture. In
the event of a Change of Control, there can be no assurance that the Company
would have either (i) the ability to refinance the New U.S. Credit Facility or
(ii) sufficient assets to satisfy all of its obligations under the New U.S.
Credit Facility and the Notes. See "Description of Certain Indebtedness--New
U.S. Credit Facility" and "Description of the Exchange Notes--Change of
Control."
DEPENDENCE ON ORIGINAL EQUIPMENT MANUFACTURERS; CYCLICAL BUSINESS
The Company's sales to OEMs would have accounted for approximately 56% of
its pro forma net sales for the year ended December 31, 1997. As a result, the
sale of a significant portion of the Company's products is related to the
overall level of domestic and foreign new diesel and electric production.
Industry sales and production are cyclical and can be affected by the strength
of the economy generally or in specific regions, by prevailing interest rates
and other factors which may have an effect on the Company's sales. In
addition, strikes, lock-outs, work stoppages or other production interruptions
in the heavy duty vehicle or material handling industries may adversely affect
the demand for the Company's products. Although the balance of the Company's
aftermarket and OEM sales, as well as the diversity of the OEM markets served
(both in terms of end-use and geography), help stabilize the Company's
revenues, a decline in the demand for or production of new diesel or electric
vehicles, particularly in North America, could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DIFFICULTY OF INTEGRATING ACQUIRED OPERATIONS
In order to expand its markets and to complement its product portfolio, the
Company's growth strategy includes growth through acquisitions. The Company is
continually investigating opportunities for domestic and foreign acquisitions.
There can be no assurance, however, that future acquisitions can be
consummated on
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acceptable terms or that any acquired companies can be successfully integrated
into the Company's operations. The Company's ability to make future
acquisitions may also be constrained by its ability to obtain financing. See
"--Substantial Leverage; Ability to Service Debt," "--Restrictive Loan
Covenants" and "Business--Growth Strategy."
Acquisitions may also involve a number of special risks, including: (i)
initial reductions in the Company's operating results; (ii) diversion of
management's attention; (iii) unanticipated problems or legal liabilities; and
(iv) a possible reduction in earnings due to amortization of acquired
intangible assets in the event that such acquisitions are made at levels that
exceed the fair market value of net tangible assets. Some or all of these
items could have a material adverse effect on the Company. There can be no
assurance that businesses acquired in the future will achieve sales and
profitability that justify the investment therein. In addition, to the extent
that consolidation becomes more prevalent in the industry, the prices for
attractive acquisition candidates may increase to unacceptable levels.
The full benefits of the Lucas Acquisition will require the integration of
Prestolite's and the Lucas Businesses' respective administrative, finance,
manufacturing, engineering and sales and marketing organizations, the
coordination of sales efforts and the implementation of appropriate
operations, financial and management systems and controls. While the Company
believes that it has sufficient financial and management resources to
accomplish the integration of the Lucas Businesses, there can be no assurance
that such will be the case or that the Company will not experience
difficulties with customers, personnel or other factors. The Company has
initiated a rationalization of its production operations following the Lucas
Acquisition, which includes the closing of certain facilities. These
transition and integration activities will require substantial attention from
the Company's management team. The diversion of management attention, as well
as any other difficulties which may be encountered in the transition and
integration process, could have an adverse impact on the revenues and
operating results of the Company. There can be no assurance that the Company
will be able to successfully integrate the operations of the Lucas Businesses
or that any expected cost reductions will be achieved.
In addition, most of the 1,541 employees who were employed by the Lucas
Businesses at the time of the Lucas Acquisition are represented by labor
unions, including all of the hourly employees and some of the salaried
employees. The agreement covering the employees of Lucas HDP expires in
January 1999. There can be no assurance that a strike or work stoppage will
not occur upon expiration of the agreement governing Lucas HDP if such
agreement is not renewed. There can be no assurance that any actions taken by
the Company following the Lucas Acquisition, including any actions taken in
connection with manufacturing realignments and overhead cost reductions, will
not adversely affect the Company's relations with the Lucas Businesses'
unionized employees. See "The Transactions--The Lucas Acquisition" and
"Business--Growth Strategy--Continue Cost Reduction Emphasis."
RISK OF EXPANSION OF FOREIGN OPERATIONS; FOREIGN EXCHANGE RISK
The Company currently conducts business outside of the United States, the
United Kingdom, South Africa and Argentina. After giving pro forma effect to
the Lucas Acquisition, the Company's net sales in 1997 to customers outside
North America would have increased to approximately 55% of its pro forma net
sales from approximately 21% of Prestolite's net sales in 1997 on a stand-
alone basis. The Company intends to expand its international presence through
strategic acquisitions as well as internal growth. The Company intends to
pursue joint ventures in those countries or regions in which a local partner
is critical to success. However, as the Company's international operations
grow to account for a larger percentage of the Company's total net sales,
adverse results from the Company's operations in one or more foreign countries
could adversely affect the Company's financial condition and results of
operations. The success of the Company's operations in an expansion into
international markets will depend on numerous factors, many of which are
beyond its control. Such factors include, but are not limited to, economic and
political conditions in the foreign countries in which the Company operates.
In particular, Argentina and South Africa have historically been less
economically and politically stable than the United States and the United
Kingdom. In addition, international operations and
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expansion may increase the Company's exposure to certain risks inherent in
doing business outside the United States, including slower payment cycles,
unexpected changes in regulatory requirements, potentially adverse tax
consequences, restrictions on the repatriation of profits and assets,
compliance with foreign laws and standards and political risks. See
"Business--Growth--Strategy--Pursue Global Expansion."
As a result of the Lucas Acquisition, the Company is likely to experience
increased foreign currency exchange gains and losses in the ordinary course of
its business due to the increase in its operations outside the United States.
As a result, fluctuations between the U.S. dollar and the currencies of other
countries in which the Company conducts its business may have a material
adverse impact on the Company's financial condition or results of operations.
In addition, exchange rate fluctuations may impact, perhaps materially, the
amount of any cost reductions that the Company anticipates following the Lucas
Acquisition. While the Company may engage in foreign currency hedging
transactions which may moderate the overall effect of such currency exchange
rate fluctuations, the Company expects that it will be affected by such
fluctuations, and there can be no assurance that the Company will be
successful in its hedging activities, if any, or that such exchange rate
fluctuations will not otherwise have a material adverse impact on the
Company's financial condition or results of operations, or cause significant
fluctuations in quarterly results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
COMPETITION
The markets in which the Company operates are highly competitive. While no
single competitor competes with the Company in all of its product lines, the
Company faces significant competition in each of its product lines. There can
be no assurance that the Company's products will continue to compete
successfully with the products of other companies, many of whom are
significantly larger and have substantially greater financial and other
resources than the Company. In addition, the Company is under increasing
pressure from its major OEM customers to reduce product costs. Management
believes that the Company's experience in engineering and implementing cost
reduction programs and its ability to develop new and improved products and to
control manufacturing and development costs should allow the Company's
products and prices to remain competitive. However, there can be no assurance
that the Company will be able to improve or maintain profit margins. See
"Business--Competition."
WARRANTY EXPOSURE
The Company warrants to its OEM customers that its products are defect-free
and meet certain OEM specifications. The Company also provides warranties to
its aftermarket customers. These OEM and aftermarket customers in turn offer
product warranties to their customers. As a result, the Company receives
claims and requests for payment from its customers to remedy complaints made
by the ultimate consumers. Beginning in the fourth quarter of 1995, Prestolite
began to experience increased warranty claims resulting from a combination of
increased sales, plant relocation activities and unexpected failure rates on
certain alternator models. The unexpected failure rates were partly attributed
to manufacturing difficulties associated with the relocation of certain
alternator production operations from Prestolite's Cleveland, Ohio facility to
its facility in Arcade, New York, and to the use of such alternators in
certain newer engine applications where heat and vibration conditions were
severe. Since the third quarter of 1996, Prestolite has designed and released
numerous product improvements intended to reduce these failure rates, and
management believes that the major factors contributing to such warranty
claims have been addressed. Despite this increase in warranty expense,
management believes that the Company has not lost any significant sales and
believes that its alternator performance is similar to that of its
competitors' alternators. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
ENVIRONMENTAL RISKS
The Company's operations and properties are subject to federal, state, local
and foreign laws, regulations and ordinances relating to the use, storage,
handling, generation, transportation, treatment, emission, release, discharge
and disposal of certain materials, substances and wastes. The nature of the
Company's operations
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exposes it to the risk of liabilities or claims with respect to environmental
matters, including off-site disposal matters, and there can be no assurance
that material costs will not be incurred in connection with such liabilities
or claims or that the indemnities provided by the sellers of the various
businesses acquired will be applicable or available.
The Company believes that it complies with all relevant environmental
regulations and that its reserves are sufficient to cover any known
environmental claims related to its properties. Based upon the Company's
experience to date, the Company believes that the future cost of compliance
with existing environmental laws, regulations and ordinances (or liability for
known environmental claims) will not have a material adverse effect on the
Company's business, financial condition or results of operations. However,
future events, such as changes in existing laws and regulations or their
interpretation, may give rise to additional compliance costs or liabilities
that could have a material adverse effect on the Company's business, financial
condition or results of operations. Compliance with more stringent laws or
regulations, as well as more vigorous enforcement policies of regulatory
agencies or stricter or different interpretations of existing laws, may
require additional expenditures by the Company that may be material.
CONTROL BY PRINCIPAL STOCKHOLDER
As of March 31, 1998, Genstar presently owned approximately 85% (on a fully-
diluted basis), of the Common Stock of PEI. PEI owns all of the outstanding
common stock of the Issuer. Consequently, Genstar has the ability to control
the business and affairs of the Issuer by virtue of its ability to elect a
majority of PEI's and the Issuer's respective Boards of Directors and its
voting power with respect to actions requiring stockholder approval. See
"Principal Stockholders" and "Certain Transactions."
FRAUDULENT CONVEYANCE RISKS; INSOLVENCY
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid obligations
under the Notes in favor of other existing or future creditors of the Company.
Proceeds from the Offering were used, in part, to fund a purchase of Common
Stock and options and warrants to purchase Common Stock from PEI's
securityholders. If a court in a lawsuit on behalf of any unpaid creditor of
the Company or a representative of the Company's creditors, such as a trustee
in bankruptcy or the Company as a debtor in possession, were to find that, at
the time the Company issued the Outstanding Notes, the Company (x) intended to
hinder, delay or defraud any existing or future creditor or contemplated
insolvency with a design to prefer one or more creditors to the exclusion in
whole or in part of others or (y) did not receive fair consideration in good
faith or reasonably equivalent value for issuing the Outstanding Notes and the
Company (i) was insolvent, (ii) was rendered insolvent by reason of such
distribution, (iii) was engaged or about to engage in business or transactions
for which its remaining assets constituted unreasonably small capital to carry
on its business, or (iv) intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they matured, such court could
avoid obligations under the Notes and avoid such transactions. Alternatively,
in such event, claims of the holders of Notes could be subordinated to claims
of other creditors of the Company. The Company may be viewed as insolvent at
the time of or as a result of the Recapitalization if the fair market value of
its assets does not exceed its probable liabilities at the time of, or
following, the Recapitalization.
Based upon financial and other information currently available to it,
management of the Company believes that the Outstanding Notes were incurred
for proper purposes and in good faith. Certain courts have held, however, that
a company's purchase of its own equity securities does not constitute
reasonably equivalent value or fair consideration for incurring indebtedness.
Moreover, in this case the Issuer upstreamed a portion of the proceeds of the
Outstanding Notes to PEI to fund the purchase of PEI's equity securities by
PEI or an affiliate without the Issuer receiving any direct benefit from the
transaction. Thus, even if a court were to view the purchase of PEI's equity
securities as conferring reasonably equivalent value on PEI, it may still view
the transfer
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of the proceeds from the Issuer to PEI as without conferring reasonably
equivalent value. Thus, the Recapitalization may be viewed as not constituting
reasonably equivalent value or fair consideration to PEI, the Issuer or both.
The Company believes that it (i) is solvent and will continue to be solvent
after issuing the Exchange Notes, because the Company believes the fair value
of the Company's assets exceeds and will exceed its probable liabilities, (ii)
will have sufficient capital for carrying on the business it intends to
conduct after such issuance and (iii) will be able to pay its debts as they
mature. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." There can be no
assurance, however, that a court would concur with such beliefs and positions.
In rendering its opinion on the validity of the Outstanding Notes, counsel for
each of the Company and the Initial Purchasers expressed no opinion as to
federal or state laws relating to fraudulent transfers.
LACK OF PUBLIC MARKET FOR SECURITIES
There is no existing trading market for the Exchange Notes, and there can be
no assurance regarding the future development of a market for the Exchange
Notes, or the ability of holders to sell their Exchange Notes or the price at
which such holders may be able to sell their Exchange Notes. If such a market
were to develop, the Exchange Notes could trade at prices that may be higher
or lower than the initial offering price of Outstanding Notes depending on
many factors, including prevailing interest rates, the market for similar
securities, general economic conditions and the financial conditions and
performance of, and prospects for, the Company. The Initial Purchasers have
advised the Issuer that they currently intend to make a market in the Exchange
Notes. The Initial Purchasers are not obligated to do so, however, and any
market making with respect to the Exchange Notes may be discontinued at any
time without notice. Therefore, there can be no assurance as to the liquidity
of any trading market for the Exchange Notes, or that an active market for the
Exchange Notes will develop. The Outstanding Notes are designated for trading
in the PORTALSM Market, a subsidiary of the NASDAQ Stock Market, Inc. The
Issuer does not intend to apply for listing or quotation of the Exchange Notes
on any securities exchange or stock market. Historically, the market for non-
investment grade debt has been subject to disruptions that have caused
substantial volatility in the prices of such securities. There can be no
assurance that the market for the Exchange Notes, will not be subject to
similar disruptions. Any such disruptions could have an adverse effect on
holders of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Outstanding Notes who do not exchange their Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Outstanding Notes as set forth in the
legend thereon as a consequence of the issuance of the Outstanding Notes
pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, the Outstanding Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Issuer does not currently anticipate that it will
register the Outstanding Notes under the Securities Act. In addition, upon the
consummation of the Exchange Offer holders of Outstanding Notes which remain
outstanding will not be entitled to any rights to have such Outstanding Notes
registered under the Securities Act or to any similar rights under the
Registration Rights Agreement. See "Description of the Exchange Notes--
Registration Rights." To the extent that Outstanding Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, or
tendered but unaccepted, Outstanding Notes could be adversely affected. The
tender of Outstanding Notes pursuant to the Exchange Offer may have an adverse
effect upon, and increase the volatility of, the market prices of the
Outstanding Notes due to a reduction in liquidity.
YEAR 2000 RISK
Currently, many automated systems and software products are coded to accept
only two digit entries in the date code field. These date code fields will
need to accept four digit entries or otherwise modified to distinguish 21st
century dates from 20th century dates. As a result, many companies' systems
and software may need to be
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upgraded or replaced in order to function correctly after December 31, 1999.
The Company expects that the material aspects of the automated systems at its
United States and United Kingdom manufacturing facilities will be fully
upgraded or replaced prior to December 31, 1999. While the financial impact of
the Company's Year 2000 remediation efforts at its United States and United
Kingdom facilities is not anticipated to be material to the Company's result
of operations, financial position or cash flows, there can be no assurance of
no such material adverse impact. The Company is also conducting a review of
the automated systems used by Lucas Argentina and Lucas South Africa, as well
as an additional review of selected suppliers, to assess their Year 2000
compliance efforts. At this time, the Company is unable to determine the cost
of compliance efforts for its Argentine and South African facilities, or the
impact of the Company's Argentine and South African and third party compliance
efforts, if any, on the Company's results of operations, financial position or
cash flow. However, significant delays in product delivery by the Company's
suppliers, or significant cost-cutting efforts by the Company's customers to
compensate for Year 2000 costs, could have a material impact on the Company's
results of operations, financial position or cash flow.
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THE TRANSACTIONS
THE LUCAS ACQUISITION
On January 22, 1998, Prestolite completed the acquisition of Lucas HDP,
Lucas South Africa, and a controlling interest in Lucas Argentina from Lucas
Industries. The Lucas Businesses manufacture primarily alternators and starter
motors for the truck, bus and automotive markets in the United Kingdom,
continental Europe, South America and South Africa. The Lucas Acquisition (i)
strengthens the Company's position as a leading global manufacturer and
distributor of alternators and starter motors, (ii) complements Prestolite's
historic product portfolio and (iii) augments the Company's core technology in
its principal product lines. In addition, the Company has the opportunity to
sell certain truck, bus and automotive products through Lucas Industries'
worldwide distribution network of over 4,000 outlets. The Lucas Acquisition
significantly enhanced the Company's access to an international customer base,
and provided an entrance to the international automotive market.
The total consideration paid at closing in the Lucas Acquisition was
approximately $41.3 million plus, in connection with Lucas Argentina, (i)
approximately $1.2 million payable upon exercise of an option to purchase
substantially all of the remaining shares of Lucas Argentina, (ii)
approximately $7.1 million of outstanding indebtedness which was assumed or
repaid (excluding approximately $2.6 million outstanding under drawn letters
of credit that was also assumed) and (iii) a maximum aggregate of $19.0
million of post-closing contingent payments. In connection with the Lucas
Acquisition: (i) Prestolite U.K. acquired the assets comprising Lucas HDP for
a purchase price of approximately $30.3 million, (ii) Prestolite acquired all
of the outstanding shares of Lucas South Africa for a purchase price of
approximately $7.1 million, and (iii) Prestolite (A) acquired approximately
56% of the shares of Lucas Argentina for a purchase price of approximately
$0.3 million and (B) purchased from Lucas Industries intercompany indebtedness
of Lucas Argentina for approximately $3.6 million, for an aggregate purchase
price of approximately $3.9 million. In addition, a subsidiary of the Issuer
will be required to make certain post-closing payments to Lucas Industries of
up to a maximum of $9.0 million contingent upon the collection of certain
receivables and up to a maximum of $10.0 million contingent upon Lucas
Argentina having achieved certain earnings targets in 1998, 1999 and 2000. Any
such post-closing contingent payments are expected to be paid from the
collection of such receivables or from such earnings. PEI guaranteed the
obligation of its subsidiary to make these post-closing payments in the event
that such contingencies occur. In addition, Prestolite has the option to
purchase, and Lucas Industries has the option to require Prestolite to
purchase, substantially all the remaining outstanding shares of Lucas
Argentina at any time during August 1998 for approximately $1.2 million. [The
purchase price paid upon the closing of the Lucas Acquisition is subject to
certain post-closing adjustments based on the financial statements of the
Lucas Businesses as of the closing date. There can be no assurance that the
actual price paid for the Lucas Businesses after giving effect to any such
adjustment will not differ from the foregoing amounts.]
In conjunction with the Lucas Acquisition, the Company entered into a number
of ancillary agreements providing for, among other things, distribution
arrangements, supply of products and intellectual property licensing. In
particular, for five years Lucas South Africa will (i) supply to LAO certain
products for distribution through LAO's worldwide distribution network, (ii)
act as importer and primary distributor of certain Lucas-branded products for
LAO in the aftermarkets of South Africa, Lesotho, Namibia, Botswana and
Swaziland (the "Southern African Territories") and for a transition period
will have rights to certain trademarks of Lucas Industries. For five years
Lucas Argentina will act as exclusive supplier of Lucas Argentina's
manufactured products to Lucas Diesel Do Brasil Ltda. ("Lucas Brasil") for
aftermarket sale and distribution by Lucas Brasil in South America (except
Argentina), and in Argentina will (i) act as importer from and distributor for
LAO, (ii) distribute in the aftermarket Lucas-branded products and for a
transition period will be permitted to brand products manufactured and sold by
it with certain trademarks of Lucas Industries. Prestolite U.K. has a
continuing license for intellectual property relating to in-line diesel pumps
for manufacture and sale to the original equipment market and for sale to LAO
for supply and distribution by LAO in the aftermarket. Prestolite U.K. is
additionally permitted to brand electrical products with certain trademarks of
Lucas Industries through
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1998 for sale to the original equipment market and through 1999 for sale to
the aftermarket. In addition, subject to certain conditions, for five years
Prestolite U.K will act as exclusive supplier to LAO for LAO's requirements of
in-line diesel pumps branded with trademarks of Lucas Industries for
aftermarket sales. During 1998, Prestolite U.K. will assume control for the
distribution to the aftermarket and OES market of certain products produced by
Lucas HDP. In connection with such transition, Prestolite U.K. will purchase
from LAO certain inventory and transition assistance for an aggregate price of
approximately $2.0 million payable in installments in the first and fourth
quarters of 1998. During such transition period, LAO will sell certain
products produced by Lucas HDP as agent for Prestolite, and will be entitled
to receive commissions with respect to such sales. The acquisition agreements
provide that, with certain exceptions, Lucas Industries will not, for a period
of four years following consummation of the Lucas Acquisition, design or
manufacture anywhere in the world products sold by Lucas HDP, nor sell in the
Southern African Territories or Argentina products manufactured by Lucas South
Africa or Lucas Argentina prior to the Lucas Acquisition.
Each of the acquisition agreements contained certain warranties and
covenants. With certain exceptions, the warranties of the selling party under
each acquisition agreement expire between one and seven years after the date
of the closing. In general, each of the acquisition agreements provides for
the recovery of damages by the Company in the event of any inaccuracy in or
breach of the warranties and covenants made by the selling party in the
acquisition agreements and indemnification of the Company by Lucas Industries
for losses relating to taxes or environmental claims.
THE RECAPITALIZATION
On January 22, 1998, Prestolite also completed the Offering of the
Outstanding Notes. In connection with the Offering, the Company effected a
series of transactions that resulted in the Recapitalization of the Company.
The Recapitalization consisted of (i) the Offering (ii) the repayment of
approximately $42.0 million of outstanding indebtedness (including
approximately $3.4 million of indebtedness of Lucas Argentina), (iii) the
payment of a dividend to PEI to enable PEI and an affiliate to purchase
securities of PEI from PEI's securityholders for an aggregate purchase price
of approximately $29.7 million, (iv) the entry by the Issuer into the New U.S.
Credit Facility providing for up to $23.0 million of revolving credit loans
and (v) the entry by Prestolite U.K. into the Temporary U.K. Credit Facility
providing for short-term borrowings of up to (Pounds)3.0 million. On April ,
1998, Prestolite U.K. replaced the Temporary U.K. Credit Facility with the New
U.K. Credit Facility providing for borrowings of up to (Pounds)7.0 million
(approximately $11.6 million based on exchange rates as of March 31, 1998).
See "Certain Transactions" and "Description of Certain Indebtedness."
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USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. The Outstanding Notes surrendered in exchange
for the Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, the issuance of the Exchange Notes will not result in any
increase in the indebtedness of the Company.
The $125.0 million of proceeds from the sale of the Outstanding Notes were
used to (i) pay the purchase price of approximately $41.3 million in
connection with the closing of the Lucas Acquisition, (ii) repay approximately
$42.0 million of outstanding indebtedness pursuant to the Recapitalization
(including approximately $3.4 million of debt of Lucas Argentina), (iii) fund
the purchase of approximately $29.7 million of securities of PEI from its
securityholders pursuant to the Recapitalization and (iv) pay fees and
expenses of approximately $5.6 million in connection with the Lucas
Acquisition and the Recapitalization, including prepayment fees. The remaining
amount of approximately $6.4 million was used for general corporate purposes,
including working capital. See "The Transactions."
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THE EXCHANGE OFFER
PURPOSE AND EFFECTS
The Exchange Offer is designed to provide to holders of Outstanding Notes an
opportunity to acquire Exchange Notes which, unlike the Outstanding Notes,
will be freely transferable at all times (provided that the holder is not an
affiliate of the Issuer).
The Outstanding Notes were originally issued and sold on January 22, 1998,
in the principal amount of $125 million in a transaction exempt from the
registration requirements of the Securities Act. The Outstanding Notes may not
be reoffered, resold or transferred unless done so pursuant to a registration
statement filed pursuant to the Securities Act or unless an exemption from the
registration requirements of the Securities Act is available.
The Issuer is making the Exchange Offer in reliance on the position of the
staff of the Securities and Exchange Commission (the "Commission") as set
forth in certain no-action letters addressed to other parties in other
transactions. However, the Issuer has not sought its own no-action letter and
there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer as in such other
circumstances. Based upon these interpretations by the staff of the
Commission, the Issuer believes that Exchange Notes issued pursuant to this
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold and otherwise transferred by a holder thereof other than (i) a broker-
dealer who purchased such Outstanding Notes directly from the Issuer to resell
pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act or (ii) a person that is an "affiliate" (as
defined in Rule 405 under the Securities Act) of the Issuer or PEI without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and that such holder is not participating,
and has no arrangement or understanding with any person to participate, in the
distribution of such Exchange Notes. Holders of Outstanding Notes accepting
the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may not rely on the position of the staff of the Commission as
set forth in these no-action letters and would have to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. A secondary resale
transaction in the United States by a holder who is using the Exchange Offer
to participate in the distribution of Exchange Notes must be covered by a
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K under the Securities Act.
The Exchange Notes will be freely transferable by the Holders thereof,
subject to the limitations described in the immediately preceding paragraphs.
The Exchange Notes will be identical in all material respects to the
Outstanding Notes for which they may be exchanged pursuant to this Exchange
Offer except for certain transfer restrictions and registration rights
relating to the Outstanding Notes and except that, if the Exchange Offer is
not consummated by July 21, 1998, the interest rate on the Outstanding Notes
will increase by 0.5% until the Exchange Offer is consummated. HOLDERS WHO DO
NOT EXCHANGE THEIR OUTSTANDING NOTES PURSUANT TO THIS EXCHANGE OFFER WILL
CONTINUE TO HOLD OUTSTANDING NOTES WHICH ARE SUBJECT TO RESTRICTIONS ON
TRANSFER.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Promptly after the Registration Statement of which this Prospectus
constitutes a part has been declared effective, the Issuer will offer the
Exchange Notes in exchange for surrender of the Outstanding Notes. The Issuer
will keep the Exchange Offer open for not less than 30 business days (or
longer if required by applicable law) after the date on which notice of the
Exchange Offer is mailed to the holders of the Outstanding Notes. For each
$1,000 principal amount of Outstanding Notes validly tendered to the Issuer
pursuant to the Exchange Offer and not withdrawn by the holder thereof, the
holder of such Outstanding Notes will receive $1,000 principal amount
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<PAGE>
of Exchange Notes. Interest on each Exchange Note will accrue from the last
interest payment date on which interest was paid on the Outstanding Note
surrendered in exchange therefor or, if no interest has been paid on such
Outstanding Note, from the date of the original issue of the Outstanding
Notes. The Exchange Notes evidence the same debt as the Outstanding Notes and
are issued under and entitled to the same benefits under the Indenture as the
Outstanding Notes. In addition, the Exchange Notes and the Outstanding Notes
are treated as one series of securities under the Indenture.
If (i) by April 22, 1998, neither the Registration Statement nor the Shelf
Registration Statement (as defined in the Registration Rights Agreement) has
been filed with the Commission; (ii) by July 21, 1998, neither the Exchange
Offer is consummated nor the Shelf Registration Statement is declared
effective; or (iii) after either the Registration Statement or the Shelf
Registration Statement is declared effective, such Registration Statement
thereafter ceases to be effective or usable (subject to certain exceptions) in
connection with resales of Outstanding Notes or Exchange Notes in accordance
with and during the periods specified in the Registration Rights Agreement
(each such event referred to in clause (i) through (iii) being herein called a
"Registration Default"), additional cash interest will accrue on the Notes at
the rate of 0.50% per annum from and including the date on which any such
Registration Default shall occur to but excluding the date on which all
Registration Default have been cured, calculated on the principal amount of
the Notes as of the date on which such interest is payable. Such interest is
payable in addition to any other interest payable from time to time with
respect to the Notes.
As of March 31, 1998, $125,000,000 aggregate principal amount of Outstanding
Notes were outstanding. This Prospectus and the Letter of Transmittal are
being sent to all registered holders of Outstanding Notes.
Tendering holders of Outstanding Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Outstanding Notes
pursuant to the Exchange Offer. The Issuer will pay all charges and expenses,
other than certain transfer taxes which may be imposed, in connection with the
Exchange offer. See "--Transfer Taxes" below.
Holders of Outstanding Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law in connection with the Exchange
Offer.
PERIOD FOR TENDERING OUTSTANDING NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Issuer will accept for exchange Outstanding Notes which
are properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1998, unless the Exchange Offer is extended by
the Issuer (but in no event to a date later than , 1998); provided,
however, that the Issuer's obligation to accept Outstanding Notes for exchange
pursuant to the Exchange Offer is subject to certain conditions set forth
under "--Certain Conditions to the Exchange Offer" below.
The Issuer expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance of exchange of any Outstanding Notes, by giving oral
or written notice of such extension to the holders thereof as described below.
During any such extension, all Outstanding Notes previously tendered will
remain subject to the Exchange Offer and may be accepted for exchange by the
Issuer. Any Outstanding Notes not accepted for exchange for any reason will be
returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
The Issuer expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Outstanding Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified below under "--Certain Conditions to the Exchange
Offer." The Issuer will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the Outstanding
Notes as promptly as practicable, such notice in the case of any extension to
be issued by means of a press release or other public announcement no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
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PROCEDURES FOR TENDERING OUTSTANDING NOTES
Except as set forth below, a holder of Outstanding Notes who wishes to
tender Outstanding Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal, to U.S.
Bank Trust National Association (the "Exchange Agent") at the address set
forth below under "--Exchange Agent" on or prior to the Expiration Date. In
addition, either (i) certificates for such Outstanding Notes must be received
by the Exchange Agent, or (ii) a timely confirmation of a book-entry transfer
(a "Book-Entry Confirmation") of such Outstanding Notes into the Exchange
Agent's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedure for book-entry transfer described below,
must be received by the Exchange Agent on or prior to the Expiration Date, or
(iii) the holder of Outstanding Notes must comply with the guaranteed delivery
procedures described below.
Each exchanging holder of Outstanding Notes will be required to represent in
the Letter of Transmittal that such holder is acquiring the Exchange Notes in
the ordinary course of business, is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes and is not an affiliate of the
Issuer or PEI.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER OF
OUTSTANDING NOTES. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN
ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE ISSUER OR
PEI.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Outstanding Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Outstanding Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution (as defined below). In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantees must be made
by a firm which is a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the
United States (collectively, "Eligible Institutions"). If Outstanding Notes
are registered in the name of a person other than a signer of the Letter of
Transmittal, the Outstanding Notes surrendered for exchange must be endorsed
by, or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by the Issuer in its sole
discretion, duly executed by the registered holder of Outstanding Notes with
the signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Outstanding Notes tendered for exchange will be
determined by the Issuer in its sole discretion, which determination shall be
final and binding. The Issuer reserves the absolute right to reject any and
all tenders of any particular Outstanding Notes not properly tendered or to
not accept any particular Outstanding Notes which acceptance might, in the
judgment of the Issuer or its counsel, be unlawful. The Issuer also reserves
the absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Outstanding Notes either before or after
the Expiration Date. The interpretation of the terms and conditions of the
Exchange Offer as to any particular Outstanding Notes either before or after
the Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Issuer shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of
Outstanding Notes for exchange must be cured within such reasonable period of
time as the Issuer shall determine. Neither the Issuer, the Exchange Agent nor
any other person shall
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<PAGE>
be under any duty to give notification of any defect or irregularity with
respect to any tender of Outstanding Notes for exchange, nor shall any of them
incur any liability for failure to give such notification. Tenders of
Outstanding Notes received by the Exchange Agent that are not properly
tendered and as to which the irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering holder, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Outstanding Notes, such Outstanding Notes must
be endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered holder or holders that
appear on the Outstanding Notes.
If the Letter of Transmittal or any Outstanding Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Issuer of
their authority to so act must be submitted.
In all cases, issuance of Exchange Notes for Outstanding Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Outstanding
Notes or a timely Book-Entry Confirmation of such Outstanding Notes in the
Exchange Agent's account at the Book-Entry Transfer Facility, a properly
completed and duly executed Letter of Transmittal and all other required
documents. If any tendered Outstanding Notes are not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or Outstanding
Notes are submitted for a greater principal amount than the holder thereof
desires to exchange, such unaccepted or non-exchanged Outstanding Notes will
be returned without expense to the tendering holder thereof (or, in the case
of Outstanding Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, such non-exchanged Outstanding Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Outstanding Notes by
causing the Book-Entry Transfer Facility to transfer such Outstanding Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Outstanding Notes may be effected through book-
entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal
(or a copy thereof), with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at the address set forth below under "--Exchange Agent" on or
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Tenders of Outstanding Notes will be accepted only in principal amounts of
$1,000 and integral multiples thereof.
Upon the terms and subject to the conditions of the Exchange Offer, the
Issuer will accept all Outstanding Notes validly tendered and not withdrawn
promptly prior to 5:00 p.m. on the Expiration Date. The Issuer will deliver
Exchange Notes in exchange for Outstanding Notes promptly following acceptance
of the Outstanding Notes.
For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Outstanding Notes when, as and if the Issuer has
given oral or written notice thereof to the Exchange Agent.
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The Exchange Agent will act as agent for the tendering holders of Outstanding
Notes for the purposes of receiving the Exchange Notes. Under no circumstances
will interest be paid by the Issuer or the Exchange Agent by reason of any
delay in making such payment or delivery.
The Issuer's acceptance for exchange of Outstanding Notes tendered pursuant
to the Exchange Offer will constitute a binding agreement between the
tendering holder and the Issuer upon the terms and subject to the conditions
of the Exchange Offer.
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Outstanding Notes will be returned, at the
Issuer's expense, to the tendering holder thereof as promptly as practicable
after the expiration or termination of the Exchange Offer.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Outstanding Notes desires to tender such
Outstanding Notes and the Outstanding Notes are not immediately available, or
time will not permit such holder's Outstanding Notes or other required
documents to reach the Exchange Agent before the Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed Notice
of Guaranteed Delivery, substantially in the form provided by the Issuer
(mail, courier or hand delivery or by facsimile transmission), setting forth
the name and address of the holder of Outstanding Notes, the certificate
number(s) of such Outstanding Notes (except in the case of book-entry tenders)
and the principal amount of Outstanding Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three New York
Stock Exchange ("NYSE") trading days after the Expiration Date, the Letter of
Transmittal (or a copy thereof) together with the certificates for all
physically tendered Outstanding Notes, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and any other documents required by
the Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent, and (iii) such properly completed and executed Letter of
Transmittal (or a copy thereof) together with the certificates for all
physically tendered Outstanding Notes, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and all other documents required by
the Letter of Transmittal, are received by the Exchange Agent within three
NYSE trading days after the Expiration Date.
WITHDRAWAL RIGHTS
Tenders of Outstanding Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth below under "--
Exchange Agent." Any such notice of withdrawal must (i) specify the name of
the person having tendered the Outstanding Notes to be withdrawn, (ii)
identify the Outstanding Notes to be withdrawn (including the certificate
numbers and principal amount of such Outstanding Notes (except in the case of
book-entry tenders)), (iii) be signed by the holder of Outstanding Notes in
the same manner as the original signature on the Letter of Transmittal by
which such Outstanding Notes are tendered or be accompanied by sufficient
documents of transfer and (iv) specify the name in which such Outstanding
Notes are registered, if different from that of the withdrawing holder. If
certificates for Outstanding Notes have been delivered or otherwise identified
to the Exchange Agent, then, prior to the release of such certificates, the
withdrawing holder must also submit the certificate numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution unless such holder of Outstanding Notes
is an Eligible Institution. If Outstanding Notes have been tendered for book-
entry transfer as described above, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Outstanding Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
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the Issuer, whose determination shall be final and binding on all parties. Any
Outstanding Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Outstanding
Notes which have been tendered for exchange but which are not exchanged for
any reason will be returned to the holder thereof without cost to such holder
(or, in the case of Outstanding Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Outstanding Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for
the Outstanding Notes) as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer. Properly withdrawn Outstanding
Notes may be retendered by following one of the procedures described under "--
Procedures for Tendering Outstanding Notes" above at any time on or prior to
the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Issuer shall
not be required to accept for exchange, or to issue Exchange Notes in exchange
for, any Outstanding Notes and may terminate or amend the Exchange Offer, if
at any time before the acceptance of such Outstanding Notes for exchange or
the exchange of the Exchange Notes for such Outstanding Notes, any of the
following events shall occur:
(a) such acceptance or issuance would violate applicable law or any
applicable interpretation of the staff of the Commission;
(b) there shall be instituted or pending any action or proceeding by or
before any court or governmental agency with respect to the Exchange
Offer which, in the Company's sole judgment might impair the ability of
the Company to proceed with the Exchange Offer; or
(c) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which, in the sole judgment of the Company, might
materially impair the ability of the Company to proceed with the
Exchange Offer.
The foregoing conditions are for the sole benefit of the Issuer and may be
asserted by the Issuer regardless of the circumstances giving rise to any such
condition or may be waived by the Issuer in whole or in part at any time and
from time to time in its sole discretion. The failure by the Issuer at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
In addition, the Issuer will not accept for exchange any Outstanding Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Outstanding Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939.
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EXCHANGE AGENT
U.S. Bank Trust National Association has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at the address set forth below. Questions and
requests for assistance, requests for additional copies of the Prospectus or
of the Letter of Transmittal and requests for Notices of Guaranteed Delivery
should be directed to the Exchange Agent, addressed as follows:
BY FACSIMILE: BY MAIL:
U.S. Bank Trust National Association U.S. Bank Trust National
(612) 244-1537 Association
Attention: Specialized Finance P.O. Box 64485
(SPFT0414) St. Paul, Minnesota 55164-9549
Confirm by Telephone to: (612) 244- Attention: Specialized Finance
8161 (SPFT0414)
BY HAND BEFORE 5:00 p.m. (New York BY OVERNIGHT COURIER AND BY
Time): REGISTERED/CERTIFIED MAIL:
U.S. Bank Trust National Association U.S. Bank Trust National Association
100 Wall Street 180 East Fifth Street
20th Floor St. Paul, Minnesota 55101
New York, NY 10005 Attention: Specialized Finance
(SPFT0414)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FAX TRANSMISSION OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The Issuer will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The Issuer will pay certain other expenses to be incurred in connection with
the Exchange Offer, including the fees and expenses of the Exchange Agent,
accounting and certain legal fees.
TRANSFER TAXES
Holders who tender their Outstanding Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith. If however,
Exchange Notes and/or substitute Outstanding Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Outstanding Notes, or if tendered
Outstanding Notes are registered in the name of any person other than the
person signing a Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the transfer of Outstanding Notes to the Issuer or its
order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted together with a Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Outstanding Notes who do not exchange their Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Outstanding Notes as set forth in the
legend thereon as a consequence of the issuance of the Outstanding Notes
pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, the Outstanding Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws.
34
<PAGE>
The Issuer does not currently anticipate that it will register Outstanding
Notes under the Securities Act. To the extent that Outstanding Notes are
tendered in connection with the Exchange Offer, any trading market for
Outstanding Notes not tendered in connection with the Exchange Offer could be
adversely affected. The tender of Outstanding Notes pursuant to the Exchange
Offer may have an adverse effect upon, and increase the volatility of, the
market prices of the Outstanding Notes due to a reduction in liquidity. See
"Risk Factors--Consequences of Failure to Exchange."
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes, as reflected in the Issuer's accounting records on the date
of the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer will be amortized over the term
of the Exchange Notes.
35
<PAGE>
CAPITALIZATION
The following table sets forth (i) the historical capitalization of PEI as
of December 31, 1997 and (ii) the pro forma capitalization of PEI as of
December 31, 1997 after giving pro forma effect to the Transactions. See "The
Transactions." This presentation should be read in conjunction with the
"Unaudited Pro Forma Combined Financial Data" and PEI's Consolidated Financial
Statements and the related notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
---------------------------------------------
PRO FORMA HISTORICAL
---------------------- ----------------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents ....... $ 6,349 $ 455
======== =======
Total debt (including current
portion):
Existing Credit Facilities(a).. $ -- $32,373
New U.S. Credit Facility(b).... -- --
9 5/8% Senior Notes due 2008... 125,000 --
12% Senior Subordinated Note
due 2004(c) .................. -- 9,267
Other debt(d).................. 4,517 1,290
-------- -------
Total debt................... 129,517 42,930
Stockholders' equity (deficit):
Common Stock, par value $0.01
per share; 5,000,000 shares
authorized; 3,303,000 shares
issued and outstanding actual;
2,017,000 shares issued and
outstanding pro forma(e)...... 2 2
Warrants(f).................... -- 3,239
Additional paid-in capital..... 16,623 16,623
Retained earnings (accumulated
deficit)...................... (5,491) (634)
Treasury shares and other...... (24,741) (287)
-------- -------
Total stockholders' equity
(deficit)................... (13,607) 18,943
-------- -------
Total capitalization......... $115,910 $61,873
======== =======
</TABLE>
- - - - - - - - - - - --------
(a) Represents $28,588 of indebtedness under a Credit Agreement, dated as of
October 25, 1994, of the Issuer and $3,785 of indebtedness under an Advice
of Borrowing, dated as of September 15, 1997, of Prestolite U.K.
(together, the "Exisiting Credit Facilities").
(b) Total availability under the New U.S. Credit Facility is $23.0 million,
subject to borrowing base restrictions. See "Description of Certain
Indebtedness--New U.S. Credit Facility."
(c) Represents the total senior subordinated indebtedness of $10.0 million net
of the unamortized discount of $0.7 million.
(d) Includes $1.3 million of capitalized leases and $3.2 million ($6.6 million
assumed less repayment of $3.4 million) of indebtedness of Lucas Argentina
as of December 31, 1997 which was assumed in the Lucas Acquisition. See
"Description of Certain Indebtedness--Other Indebtedness."
(e) All shares reflect the 20-for-1 stock split. Pro forma data reflect the
purchase of 1,286,000 shares of Common Stock pursuant to the
Recapitalization. See "The Transactions--The Recapitalization."
(f) Pro forma data reflect the purchase for $3.4 million of warrants to
purchase Common Stock pursuant to the Recapitalization. See "The
Transactions--The Recapitalization."
36
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
PEI
The following table sets forth selected consolidated historical financial
data of PEI as of and for the periods indicated. The statements of operations
data for each of the fiscal years in the three-year period ended December 31,
1997 and the balance sheet data as of December 31, 1996 and 1997 have been
derived from audited financial statements of PEI included elsewhere in this
Prospectus. The statements of operations data for each of the fiscal years in
the two year period ended December 31, 1994 and the balance sheet data as of
December 31, 1993, 1994 and 1995 have been derived from the audited financial
statements of PEI not included in this Prospectus. The information in the
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated
Financial Statements of PEI, including the notes thereto, included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT RATIOS AND SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net sales............... $ 116,040 $ 129,011 $ 131,503 $ 148,765 $ 171,700
Cost of goods sold...... 94,986 102,858 106,541 120,585 137,792
Selling, general and
administrative
expenses............... 17,454 18,583 18,955 20,986 23,188
Restructuring and idle
facility costs......... 1,000 -- 3,100 56 --
--------- --------- --------- --------- ---------
Operating income........ 2,600 7,570 2,907 7,138 10,720
Other expense(a)........ 51 544 203 108 210
Interest expense........ 3,066 3,360 4,282 5,313 5,384
--------- --------- --------- --------- ---------
Income (less) from
continuing operations
before income taxes and
extraordinary items.... (517) 3,666 (1,578) 1,717 5,126
Provision for income
taxes.................. 123 480 630 (2,314) 2,303
--------- --------- --------- --------- ---------
Income (loss) from
continuing operations
before extraordinary
items.................. (640) 3,186 (2,208) 4,031 2,823
========= ========= ========= ========= =========
Earnings per common
share from continuing
operations before
extraordinary items(b):
Basic................. (0.20) 0.96 (0.64) 1.17 0.82
Diluted............... (0.20) 0.94 (0.64) 1.13 0.78
Shares used in computing
earnings per share(b):
Basic................. 3,215,000 3,301,940 3,466,740 3,454,740 3,446,740
Diluted............... 3,215,000 3,401,400 3,466,740 3,553,800 3,628,020
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital
(excluding debt)....... $ 18,960 $ 24,920 $ 25,486 $ 29,567 $ 31,588
Total assets............ 65,131 72,366 72,473 93,604 88,685
Total debt.............. 33,854 36,548 40,451 46,514 42,930
Stockholders' equity.... 11,715 15,605 13,273 18,018 18,943
OTHER DATA:
EBITDA(c)............... $ 6,263 $ 11,041 $ 7,254 $ 12,276 $ 16,011
Cash flow from operating
activities............. 3,280 1,100 1,447 2,560 7,749
Cash flow from investing
activities............. (1,195) (2,667) (5,035) (10,336) 1,483
Cash flow from financing
activities............. (2,257) 1,786 3,789 8,032 (9,582)
Depreciation and
amortization........... 3,714 4,015 4,550 5,246 5,501
Capital expenditures.... 1,452 2,688 4,864 6,794 5,638
Ratio of earnings to
fixed charges(d)....... -- 1.9x -- 1.3x 1.8x
</TABLE>
- - - - - - - - - - - --------
(a) Other expense consists primarily of operating costs of idle facilities.
(b) Earnings per common share and shares used in the computation reflect the
20-for-1 stock split.
(c) EBITDA for any period is calculated as the sum of income (loss) from
continuing operations plus the following to the extent deducted in
calculating such net income: (i) minority interest, (ii) interest expense,
(iii) income tax expense, (iv) depreciation expense and (v) amortization
expense, in each case for such period. EBITDA is a widely accepted
financial indicator of a company's ability to service debt, but is not
calculated the same by all companies. EBITDA should not be considered by
an investor as an alternative to net income, as an indicator of the
Company's operating performance or as an alternative to cash flow as a
measure of liquidity.
(d) For purposes of computing the ratio of earnings to fixed charges, earnings
include income before income taxes, discontinued operations and
extraordinary items plus fixed charges. Fixed charges consist of interest
expense and 33% of rental expense (deemed by management to be
representative of the interest factor of rental payments). Earnings were
insufficient to cover fixed charges in 1993 and 1995 by approximately $0.5
million and $1.6 million, respectively.
37
<PAGE>
THE LUCAS BUSINESSES--COMBINED HISTORICAL (UNAUDITED)
The following table sets forth selected combined historical financial data
of the Lucas Businesses as of and for the periods indicated. Each of the Lucas
Businesses changed its fiscal year from July 31 to January 31 during 1996, and
from January 31 to December 31 following the Lucas Acquisition. Accordingly,
the January 31, 1997 and December 31, 1997 statement of operations data are
for the six months and eleven months then ended, respectively. The Lucas
Businesses' selected combined historical financial data as of January 31, 1997
and December 31, 1997, and for the years ended July 31, 1995 and 1996, the
six-month period ended January 31, 1997 and eleven-month period ended December
31, 1997 were derived from the audited financial statements of Lucas HDP,
Lucas Argentina and Lucas South Africa included elsewhere in this Prospectus.
The information in the table should be read in conjunction with the Financial
Statements of each of Lucas HDP, Lucas Argentina and Lucas South Africa,
including the related notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX ELEVEN
YEAR ENDED MONTHS MONTHS
------------------ ENDED ENDED
JULY 31, JULY 31, JANUARY 31, DECEMBER 31,
1995 1996 1997 1997
-------- -------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales........................ $130,138 $129,757 $ 62,076 $121,734
Cost of goods sold............... 104,183 102,945 50,159 100,571
Selling, general and
administrative expenses......... 27,228 24,857 10,702 20,280
Non recurring charges(a)......... -- 1,455 -- 763
Redundancy charges............... 284 528 200 1,656
-------- -------- -------- --------
Operating income................. (1,557) (28) 1,015 (1,536)
Other expense (income)........... 155 401 (102) (393)
Interest expense................. 1,352 1,320 734 1,427
-------- -------- -------- --------
Income (loss) before income taxes
and minority interest........... (3,064) (1,749) 383 (2,570)
Provision for income taxes....... 992 1,657 1,009 1,815
-------- -------- -------- --------
Income (loss) before minority
interest........................ $ (4,056) $ (3,406) $ (626) $ (4,385)
======== ======== ======== ========
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital (excluding debt)................... $ 41,742 $ 48,421
Total assets....................................... 101,469 108,785
Total debt......................................... 16,000 11,620
Stockholders' equity and parent company equity..... 64,218 72,725
OTHER DATA:
EBITDA(b)........................ $ 3,551 $ 6,745 $ 4,089 $ 5,158
Cash flow from operating
activities...................... (1,854) 3,238 3,188 5,101
Cash flow from investing
activities...................... (5,446) (3,927) (3,870) (4,077)
Cash flow from financing
activities...................... 5,090 6,711 2,971 6,070
Depreciation and
amortization(c)................. 5,263 7,174 2,972 6,301
Capital expenditures............. 5,579 4,013 3,880 4,146
</TABLE>
- - - - - - - - - - - --------
(a) Represents in 1996 a writedown of $1,455 of Lucas Argentina goodwill and
in 1997 non recurring Lucas Argentina expenses related to purchase
adjustments agreed to by Lucas Argentina as provisions for remanufactured
inventory ($300) and for pension liability ($455).
(b) EBITDA for any period is calculated as the sum of income (loss) before
minority interest plus the following to the extent deducted in calculating
such net income: (i) interest expense, (ii) income tax expense, (iii)
depreciation expense and (iv) amortization expense, in each case for such
period. EBITDA is a widely accepted financial indicator of a company's
ability to service debt. EBITDA should not be considered by an investor as
an alternative to net income, as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity.
(c) Depreciation and amortization for the twelve months ended July 31, 1996,
includes a write down of $1,455 of goodwill of Lucas Argentina discussed
in note (a).
38
<PAGE>
LUCAS HDP
The following table sets forth selected historical financial data of Lucas
HDP as of and for the periods indicated. Lucas HDP changed its fiscal year from
July 31 to January 31 during 1996, and from January 31 to December 31 following
the Lucas Acquisition. Accordingly, the January 31, 1997 and December 31, 1997
statement of operations data are for the six months and eleven months then
ended, respectively. Lucas HDP's selected historical financial data as of
January 31, 1997 and December 31, 1997, and for the years ended July 31, 1995
and 1996, the six-month period ended January 31, 1997 and eleven-month period
ended December 31, 1997 were derived from Lucas HDP's audited financial
statements included elsewhere in this Prospectus. The information in the table
should be read in conjunction with the Financial Statements of Lucas HDP,
including the notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SIX ELEVEN
---------------- MONTHS MONTHS
JULY JULY ENDED ENDED
31, 31, JANUARY 31, DECEMBER 31,
1995 1996 1997 1997
------- ------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.......................... $37,544 $44,794 $22,562 $41,528
Cost of goods sold................. 27,631 32,432 16,050 29,300
Selling, general and administrative
expenses.......................... 8,085 7,749 4,209 7,708
Redundancy charges................. -- 162 57 92
------- ------- ------- -------
Operating income................... 1,828 4,451 2,246 4,428
Interest expense................... n/a n/a n/a n/a
------- ------- ------- -------
Income before income taxes......... 1,828 4,451 2,246 4,428
Provision for income taxes......... 603 1,469 741 1,461
------- ------- ------- -------
Net income......................... $ 1,225 $ 2,982 $ 1,505 $ 2,967
======= ======= ======= =======
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital (excluding debt)................... $21,228 $27,408
Total assets....................................... 34,430 42,677
Total debt......................................... n/a n/a
Parent company equity.............................. 29,867 36,095
OTHER DATA:
EBITDA(a).......................... $ 3,071 $ 5,731 $ 2,976 $ 5,987
Cash flow from operating
activities........................ 2,261 5,614 3,750 7,745
Cash flow from investing
activities........................ (1,688) (1,278) (1,191) (1,435)
Cash flow from financing
activities........................ -- -- -- --
Depreciation and amortization...... 1,243 1,280 730 1,559
Capital expenditures............... 1,779 1,278 1,194 1,453
</TABLE>
- - - - - - - - - - - --------
(a) EBITDA for any period is calculated as the sum of net income plus the
following to the extent deducted in calculating such net income: (i)
interest expense, (ii) income tax expense, (iii) depreciation expense, and
(iv) amortization expense, in each case for such period. EBITDA is a widely
accepted financial indicator of a company's ability to service debt, but is
not calculated the same by all companies. EBITDA should not be considered
by an investor as an alternative to net income, as an indicator of the
Company's operating performance or as an alternative to cash flow as a
measure of liquidity.
39
<PAGE>
LUCAS ARGENTINA
The following table sets forth selected historical financial data of Lucas
Argentina as of and for the periods indicated. Lucas Argentina changed its
fiscal year from July 31 to January 31 during 1996, and from January 31 to
December 31 following the Lucas Acquisition. Accordingly, the January 31, 1997
and December 31, 1997 statement of operations data are for the six months and
eleven months then ended, respectively. Lucas Argentina's selected historical
financial data as of January 31, 1997 and December 31, 1997 and for the years
ended July 31, 1995 and 1996, the twelve-month period ended July 31, 1996 and
for the six-month period ended January 31, 1997 were derived from Lucas
Argentina's audited financial statements included elsewhere in this
Prospectus. The information in the table should be read in conjunction with
the Financial Statements of Lucas Argentina, including the notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX
YEAR ENDED MONTHS ELEVEN
------------------ ENDED MONTHS ENDED
JULY 31, JULY 31, JANUARY 31, DECEMBER 31,
1995 1996 1997 1997
-------- -------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales........................ $74,124 $68,436 $32,125 $66,119
Cost of goods sold............... 61,838 57,607 28,618 60,731
Selling, general and
administrative expenses......... 16,169 14,070 5,107 9,881
Non recurring charges(a)......... -- 1,455 -- 763
Redundancy charges............... 284 366 143 1,564
------- ------- ------- -------
Operating income (loss)(a)....... (4,167) (5,062) (1,743) (6,820)
Other expense (income)........... 155 401 (83) (230)
Interest expense................. 1,310 1,162 734 1,427
------- ------- ------- -------
Income (loss) before income taxes
and minority interest........... (5,632) (6,625) (2,394) (8,017)
Provision for income taxes....... -- 2 -- --
------- ------- ------- -------
Income (loss) before minority
interest........................ $(5,632) $(6,627) $(2,394) $(8,017)
======= ======= ======= =======
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital (excluding debt)................... $17,796 $18,072
Total assets....................................... 59,738 58,683
Total debt......................................... 16,000 11,620
Stockholders' equity............................... 29,821 32,304
OTHER DATA:
EBITDA(b)........................ $ (709) $ (64) $ 357 $(2,252)
Cash flow from operating
activities...................... (5,065) (2,939) (1,374) (4,044)
Cash flow from investing
activities...................... (2,521) (2,123) (2,490) (2,264)
Cash flow from financing
activities...................... 5,195 6,750 3,200 6,120
Depreciation and
amortization(c)................. 3,613 5,399 2,017 4,338
Capital expenditures............. 2,521 2,123 2,490 2,264
</TABLE>
- - - - - - - - - - - --------
(a) Represents in 1996 a goodwill writedown of $1,455 and in 1997 non
recurring expenses related to purchase adjustments agreed by Lucas
Industries and Prostolite for manufactured inventory ($300) and for
pension liability ($455).
(b) EBITDA for any period is calculated as the sum of income (loss) before
minority interest plus the following to the extent deducted in calculating
such net income: (i) interest expense, (ii) income tax expense, (iii)
depreciation expense and (iv) amortization expense, in each case for such
period. EBITDA is a widely accepted financial indicator of a company's
ability to service debt, but is not calculated the same by all companies.
EBITDA should not be considered by an investor as an alternative to net
income, as an indicator of the Company's operating performance or as an
alternative to cash flow as a measure of liquidity.
(c) Depreciation and amortization for the twelve months ended July 31, 1996,
includes a write down of $1,455 of goodwill of Lucas Argentina as
discussed in note (a).
40
<PAGE>
LUCAS SOUTH AFRICA
The following table sets forth selected historical financial and operating
data of Lucas South Africa as of and for the periods indicated. Lucas South
Africa changed its fiscal year from July 31 to January 31 during 1996, and
from January 31 to December 31 following the Lucas Acquisition. Accordingly,
the January 31, 1997 and December 31, 1997 statement of operations data are
for the six months and eleven months then ended, respectively. Lucas South
Africa's selected historical financial data as of January 31, 1997 and
December 31, 1997, and the years ended July 31, 1995 and 1996, for the six-
month period ended January 31, 1997 and for the eleven-month period ended
December 31, 1997 were derived from Lucas South Africa's audited financial
statements included elsewhere in this Prospectus. The information in the table
should be read in conjunction with the Financial Statements of Lucas South
Africa, including the notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SIX ELEVEN
----------------- MONTHS MONTHS
JULY ENDED ENDED
JULY 31, 31, JANUARY 31, DECEMBER 31,
1995 1996 1997 1997
-------- ------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales......................... $19,093 $17,330 $7,601 $14,497
Cost of goods sold................ 15,337 13,709 5,703 10,950
Selling, general and
administrative expenses.......... 2,974 3,038 1,386 2,691
Redundancy charges................ -- -- -- --
------- ------- ------ -------
Operating income.................. 782 583 512 856
Other expense (income) (interest
income).......................... -- -- (19) (163)
Interest expense.................. 42 158 -- --
------- ------- ------ -------
Income before income taxes........ 740 425 531 1,019
Provision for income taxes........ 389 186 268 354
------- ------- ------ -------
Net income........................ $ 351 $ 239 $ 263 $ 665
======= ======= ====== =======
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital (excluding debt)................... $2,718 $ 2,941
Total assets....................................... 7,420 7,505
Total debt......................................... -- --
Stockholders' equity............................... 4,530 4,326
OTHER DATA:
EBITDA(a)......................... $ 1,189 $ 1,078 $ 756 $ 1,423
Cash flow from operating
activities....................... 950 563 812 1,400
Cash flow from investing
activities....................... (1,237) (526) (189) (378)
Cash flow from financing
activities....................... (105) (39) (229) (50)
Depreciation and amortization..... 407 495 225 404
Capital expenditures.............. 1,279 612 196 429
</TABLE>
- - - - - - - - - - - --------
(a) EBITDA for any period is calculated as the sum of net income plus the
following to the extent deducted in calculating such net income: (i)
interest expense, (ii) income tax expense, (iii) depreciation expense and
(iv) amortization expense, in each case for such period. EBITDA is a
widely accepted financial indicator of a company's ability to service
debt, but is not calculated the same by all companies. EBITDA should not
be considered by an investor as an alternative to net income, as an
indicator of the Company's operating performance or as an alternative to
cash flow as a measure of liquidity.
41
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data present the pro
forma combined balance sheet of the Company as of December 31, 1997 as if the
Transactions had occurred on December 31, 1997, and present the pro forma
combined statement of operations data of the Company as if the Transactions
had occurred on January 1, 1997.
The unaudited pro forma combined financial data are based on the historical
consolidated financial statements of PEI and the historical financial
statements of each of the Lucas Businesses, and on the assumptions and
adjustments described in the notes to such unaudited pro forma combined
financial data. The statements of operations data for the Lucas Businesses are
based on the audited statements of operations for the eleven months ended
December 31, 1997 included elsewhere in this Prospectus and the unaudited
statements of operations for the month ended January 31, 1998 (the Lucas
Businesses fiscal year end is January 31). The unaudited pro forma combined
financial data do not reflect certain cost reductions which the Company
believes could be realized in connection with the Lucas Acquisition as a
result of productivity improvements, manufacturing realignments and overhead
cost reductions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Business Strengths--
Continue Cost Reduction Emphasis." Such estimated cost reductions are based on
management's preliminary assumptions. There can be no assurance, however, as
to the amount of cost savings, if any, that will actually be realized.
The unaudited pro forma combined financial data do not purport to represent
what the Company's financial position and results of operations would have
been if the Transactions had actually been completed as of the dates indicated
and are not intended to project the Company's financial position or results of
operations for any future period.
The unaudited pro forma combined financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the respective historical financial statements
of PEI, Lucas HDP, Lucas Argentina and Lucas South Africa and the related
notes thereto included elsewhere in this Prospectus.
42
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------
PRO
LUCAS LUCAS LUCAS TRANSACTION FORMA
PRESTOLITE HDP ARGENTINA SOUTH AFRICA ADJUSTMENTS COMBINED
---------- ------- --------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and marketable
securities............. $ 455 $19,508 $ 1,516 $1,342 $ (16,472)(a) $ 6,349
Accounts receivable..... 26,326 8,164 9,200 2,523 (80)(b) 46,133
Inventory............... 24,687 5,833 18,096 1,655 1,980 (c) 52,251
Prepaid expenses and
other assets........... 4,191 74 1,513 -- -- 5,778
------- ------- -------- ------ --------- --------
Total current
assets............. 55,659 33,579 30,325 5,520 (14,572) 110,511
------- ------- -------- ------ --------- --------
Property, plant and
equipment, net of
accumulated
depreciation........... 26,179 8,768 16,369 1,985 (823)(d) 52,478
Intangible assets....... 2,834 -- 1,601 -- 5,800 (e) 10,235
Discontinued
operations............. 1,416 -- -- -- -- 1,416
Other................... 2,597 330 10,388 -- (3,596)(f) 9,719
------- ------- -------- ------ --------- --------
Total assets........ $88,685 $42,677 $ 58,683 $7,505 $ (13,191) $184,359
======= ======= ======== ====== ========= ========
LIABILITIES
Accounts payable........ $12,042 $ 5,162 $ 9,539 $2,579 $ 1,900 (c) $ 31,222
Accrued expenses........ 12,029 1,420 2,714 -- 11,082 (h) 27,245
Current debt............ 4,196 -- -- -- (4,003)(i) 193
------- ------- -------- ------ --------- --------
Total current
liabilities........ 28,267 6,582 12,253 2,579 8,979 58,660
Existing credit
facilities............. 32,373 -- 11,620 -- (43,993)(j) --
New credit facilities... -- -- -- -- -- --
Senior notes............ -- -- -- -- 125,000 (k) 125,000
Subordinated debt....... 9,267 -- -- -- (9,267)(l) --
Other debt.............. 1,290 -- -- -- 3,227 (m) 4,517
Less current debt....... (4,196) -- -- -- 4,003 (i) (193)
------- ------- -------- ------ --------- --------
38,734 -- 11,620 -- 78,970 129,324
Other long-term
liabilities............ 2,741 -- 2,503 600 4,100 (n) 9,944
------- ------- -------- ------ --------- --------
Total liabilities... 69,742 $ 6,582 $ 26,376 $3,179 $ 92,049 197,928
------- ------- -------- ------ --------- --------
MINORITY INTEREST....... -- -- 3 -- 35 (o) 38
SHAREHOLDERS' EQUITY
Common stock, paid in
capital, warrants and
parent company
equity............... $19,864 $36,095 $ 45,463 $1,880 $ (86,677)(p) $ 16,625
Retained earnings
(deficit)............ (634) -- (13,159) 2,446 5,856 (p) (5,491)
Treasury shares and
other................ (287) -- -- -- (24,454)(p) (24,741)
------- ------- -------- ------ --------- --------
Total shareholders'
equity............. 18,943 36,095 32,304 4,326 (105,275) (13,607)
------- ------- -------- ------ --------- --------
Total liabilities
and equity......... $88,685 $42,677 $ 58,683 $7,505 $ (13,191) $184,359
======= ======= ======== ====== ========= ========
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
financial statements.
43
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS)
The unaudited pro forma balance sheet at December 31, 1997, has been
prepared as if the Transactions had taken place as of December 31, 1997. The
following adjustments were recorded:
(a) Represents the elimination of cash at Lucas HDP of $19,508 less cash of
$3,036 for general corporate purposes as a result of the Offering.
(b) Represents the elimination of intercompany balances from the Lucas
Businesses.
(c) Represents deferred inventory purchases at Prestolite from Lucas
Industries.
(d) Represents the allocation of negative goodwill of $823 to property, plant
and equipment.
(e) Represents capitalized financing costs related to the issuance of the
Notes and costs related to the Lucas Acquisition, net of capitalized costs
of $350 related to the refinanced Existing Credit Facilities.
(f) Represents the adjustment of other long-term receivables of $4,896 at
Lucas Argentina pursuant to the acquisition agreement dated January 22,
1998, less a pension asset of $1,300 at Lucas South Africa.
(g) Represents the liability for the deferred inventory purchase ($1,980) less
elimination of intercompany balances ($80).
(h) Represents the accrual of $10,170 of restructuring costs, of which $1,000
is associated with Prestolite, $1,230 for an exercise of an option to
purchase substantially all of the remaining shares of Lucas Argentina, and
less $318 to adjust the Lucas HDP warranty accrual for liabilities not
assumed by Prestolite.
(i) Represents adjustments to eliminate current maturities of the refinanced
debt referred to in note (i).
(j) Represents adjustments to eliminate indebtedness under the Existing Credit
Facilities and eliminate existing indebtedness of the Lucas Businesses
that was repaid, assumed (see note (m) below) or eliminated as a result of
the Transactions.
(k) Represents the issuance of the Notes.
(l) Represents the repayment of the 12% Senior Subordinated Note due 2004.
(m) Represents the assumption of Lucas Argentina debt of $6,620 less repayment
at closing of $3,393.
(n) Represents $4,100 of contingent liabilities in connection with the
acquisition of Lucas Argentina. In connection with the acquisition of
Lucas Argentina, Prestolite agreed to pay a maximum of $10,000 contingent
upon Lucas Argentina's achieving certain earnings targets through the year
2000, for which no liability has been recorded on the pro forma balance
sheet. Prestolite has also agreed to pay $9,000 contingent upon collection
through 2002 of certain long-term receivables of Lucas Argentina. These
receivables were written down to the expected net collectible amount (see
Note (f) above) and a contingent liability of $4,100 was established
representing the expected payment to Lucas Industries.
(o) Represents an approximate 0.3% minority interest in Lucas Argentina,
existing after the exercise of the option referred in Note (g) above.
(p) Represents the following equity adjustments:
<TABLE>
<CAPTION>
TREASURY
COMMON STOCK RETAINED SHARES
AND PAID IN EARNINGS AND
CAPITAL (DEFICIT) OTHER
------------ --------- --------
<S> <C> <C> <C>
Elimination of Lucas deficit (equity)..... $(83,438) $10,713 $ --
Purchase of PEI securities................ (3,239) (2,047) (24,454)
Prestolite restructuring charge........... -- (1,000) --
Loss on debt restructuring................ -- (1,810) --
-------- ------- --------
$(86,677) $ 5,856 $(24,454)
======== ======= ========
</TABLE>
44
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT RATIOS AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------------------
LUCAS LUCAS LUCAS TRANSACTION PRO FORMA
PRESTOLITE HDP ARGENTINA SOUTH AFRICA ADJUSTMENTS COMBINED
---------- ------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $171,700 $45,597 $70,142 $15,404 $(4,213)(a) $298,630
Cost of goods sold...... 137,792 32,531 64,235 11,646 (874)(b) 245,330
-------- ------- ------- ------- ------- --------
Gross profit.......... 33,908 13,066 5,907 3,758 (3,339) 53,300
Selling, general and
administrative
expenses............... 23,188 8,140 10,518 2,873 (4,472)(c) 40,247
Non recurring charges... -- -- 763 -- (763)(d) --
Redundancy charges...... -- 92 1 ,564 -- -- 1,656
-------- ------- ------- ------- ------- --------
Operating income...... 10,720 4,834 (6,938) 885 1,896 11,397
Other expense (income)
(primarily interest
income)................ 210 -- (387) (167) (376)(e) (720)
Interest expense........ 5,384 -- 1,564 -- 5,577 (f) 12,525
-------- ------- ------- ------- ------- --------
Income (loss) from
continuing operations
before minority
interest and income
taxes.................. 5,126 4,834 (8,115) 1,052 (3,305) (408)
Provision for income
taxes.................. 2,303 1,587 -- 354 (2,337)(g) 1,907
-------- ------- ------- ------- ------- --------
Income (loss) from
continuing operations
before minority
interest............... $ 2,823 3,247 $(8,115) $698 $(968) $(2,315)
Minority interest....... -- -- -- -- (16)(h) (16)
-------- ------- ------- ------- ------- --------
Income (loss) from
continuing operations
....................... $ 2,823 $ 3,247 $(8,115) $ 698 $ (952) $(2,299)
======== ======= ======= ======= ======= ========
Earnings per common
share from continuing
operations(i):
Basic................. $ 0.82 $ (1.16)
Fully diluted......... 0.78 (1.16)
OTHER DATA:
EBITDA(j)............... 23,966
Depreciation and
amortization........... 5,501 1,675 4,534 435 (296) 11,849
Capital expenditures.... 5,638 1,463 2,359 470 -- 9,930
SELECTED RATIOS:
Ratio of EBITDA to interest expense........................................... 1.9
Ratio of total debt to EBITDA(k).............................................. 5.4
Ratio of earnings to fixed charges(l)......................................... --
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
financial statements.
45
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PERCENTAGES)
The unaudited pro forma statement of operations for the year ended December
31, 1997 has been prepared as if the Transactions had occurred on January 1,
1997. The following adjustments were recorded:
(a) Represents elimination of intercompany sales ($447) plus reclassification
of the Lucas Argentina VAT credit ($3,766) to selling, general and
administrative expenses.
(b) Represents the following:
<TABLE>
<S> <C>
Elimination of intercompany sales...................................... $447
Adjust Lucas Businesses warranty expense:
Lucas HDP............................................................ 152
Lucas Argentina...................................................... 275
----
$874
====
</TABLE>
The Lucas Businesses warranty expense was charged to operations in 1997 and
the adjustments relate either to liabilities not assumed by Prestolite or
for liabilities for which Lucas Industries has indemnified Prestolite.
(c) Represents the following:
<TABLE>
<S> <C>
Reclassification of Lucas Argentina VAT credit....................... $3,766
Depreciation of negative goodwill (15 years) net of additional
amortization (10 years) related to deferred financing and
acquisition costs................................................... 296
Lucas South Africa royalty payments related to an agreement not
assumed by Prestolite............................................... 210
Lost Lucas Argentina VAT benefit for which Lucas Industries has
indemnified Prestolite.............................................. 200
------
$4,472
======
</TABLE>
(d) Represents the elimination of non recurring Lucas Argentina expenses
related to purchase adjustments agreed to by Lucas Industries and
Prestolite for remanufactured inventory ($308) and for the pension
liability ($455).
(e) Represents additional interest income on average cash balances computed at
7%.
(f) Represents increased interest expense to reflect indebtedness incurred in
connection with the Transaction assuming an 8 3/8% interest rate on the
New U.S. Credit Facility and a 9 5/8% interest rate on the Notes.
(g) Represents the tax effect of the adjustments at an effective rate of
approximately 40% excluding adjustments related to Lucas Argentina which
is in a tax loss position for which no tax benefit is recorded.
(h) Represents the approximate 0.3% Lucas Argentina minority interest.
(i) The shares used in computing earnings per common share have been adjusted
to reflect the recapitalization as if it occurred on January 1, 1997 as
well as to reflect the 20-for-1 stock split effective March 26, 1998. The
following is a reconciliation of shares used.
<TABLE>
<CAPTION>
BASIC DILUTED
---------- ----------
<S> <C> <C>
Shares per audited financial statement............... 3,446,740 3,628,020
Shares repurchased................................... (1,286,000) (1,286,000)
Warrants repurchased................................. (171,740) (171,740)
Effect of antidilutive options....................... -- (181,280)
---------- ----------
Used in pro forma EPS................................ 1,989,000 1,989,000
========== ==========
</TABLE>
(j) EBITDA is calculated as the sum of income (loss) from continuing
operations before minority interest plus the following to the extent
deducted in calculating such income: (i) interest expense, (ii) income tax
expense, (iii) depreciation expense and (iv) amortization expense. EBITDA
is a widely accepted financial
46
<PAGE>
indicator of a company's ability to service debt, but is not calculated the
same by all companies. EBITDA should not be considered by an investor as an
alternative to net income as an indicator of the Company's operating
performance, as an indicator of the Company's operating performance or as
an alternative to cash flow as a measure of liquidity.
(k) The pro forma ratio of total debt to EBITDA represents total pro forma
debt at December 31, 1997, divided by pro forma EBITDA for the twelve
months ended December 31, 1997.
(l) For purposes of calculating the ratio of earnings to fixed charges,
earnings include income (loss) from continuing operations before minority
interest and income taxes plus fixed charges. Fixed charges consist of
interest expense and 33% of rental expense (deemed by management to be
representative of the interest factor of rental payments). Pro forma
earnings were insufficient to cover fixed charges by approximately $0.4
million.
47
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Most of the Company's products are component parts used on diesel engines,
electric vehicles and automobiles sold to both aftermarket and original
equipment customers. The Company sells its products to a variety of markets,
both in terms of end-use and geography. The Company believes that the balance
of its aftermarket and OEM sales, as well as the diversity of markets served,
helps stabilize the Company's sales and earnings.
The Company's net sales to aftermarket customers in 1997 would have
represented approximately 44% of its pro forma net sales, with the remainder
derived from OEM customers. Demand in the Company's OEM markets tends to
follow capital goods business cycles. The aftermarket, while highly fragmented
and competitive, is generally a more stable source of sales and generates
higher margins than the Company's sales to its OEM customers. The Company's
aftermarket distribution channels consist of (i) OES customers, (ii)
independent warehouse distributors who supply repair shops, dealers and
retailers and (iii) government agencies that purchase aftermarket products
directly from the Company. Net sales through such channels would have
accounted for approximately 26%, 65% and 9%, respectively, of the Company's
pro forma aftermarket net sales in 1997.
After giving pro forma effect to the Lucas Acquisition, the Company's net
sales in 1997 to customers outside North America would have increased to
approximately 55% of its pro forma net sales, as compared with approximately
21% of Prestolite's net sales in 1997 on a stand-alone basis. Of the Company's
1997 pro forma net sales, approximately 26%, 22% and 5% would have been
derived from sales of the Company's operations in the United Kingdom,
Argentina and South Africa, respectively. Because of these foreign sales, the
Company's business is subject to the risks of doing business abroad, including
currency exchange rate fluctuations, withholding taxes, limits on repatriation
of funds, compliance with foreign laws and other economic and political
uncertainties. See "Risk Factors--Risk of Expansion of Foreign Operations;
Foreign Exchange Risk."
The Company completed the Recapitalization and the Lucas Acquisition during
the first quarter of 1998. In connection with the Recapitalization, the
Company expects to record a non-recurring charge of approximately $3.9 million
for the write off of unamortized financing expenses and discounts, to pay
prepayment penalties and for compensation expense in connection with the
purchase of management stock options. These charges are expected to be
incurred in the first quarter of 1998. The Company also expects to record a
restructuring charge to operations of approximately $1.0 million related to
costs that are expected to be incurred at certain Prestolite facilities as a
result of the Lucas Acquisition.
In February 1996, Prestolite completed the acquisition of the battery
charger business and certain welding product lines of Hobart Brothers Company
("Hobart"), now a subsidiary of Illinois Tool Works. The cost of the acquired
business, excluding working capital requirements and certain subsequent
capital expenditures, was $11.8 million, which was partially financed by the
seller. The battery charger business was acquired because it complements
Prestolite's material handling product lines. In September 1997, Prestolite
sold the assets of the welding division acquired from Hobart for $7.5 million,
plus contingent future payments totaling approximately $1.9 million.
Prestolite retained accounts receivable, accounts payable and certain other
liabilities. Results for the 1997 and 1996 fiscal years treat the welding
equipment business as a discontinued operation. In conjunction with this sale,
Prestolite recorded a $1.5 million after-tax loss on disposition.
At the end of 1995, Prestolite announced the closing of a manufacturing
facility in Cleveland, Ohio, and moved the production of alternators from the
Cleveland facility to Prestolite's Arcade, New York facility. Primarily as the
result of this decision, a restructuring charge of $2.4 million was recorded
in 1995. A significant factor leading to the decision to close the Cleveland
facility was the increased application of cellular manufacturing arrangements
at the Arcade facility in 1994 and 1995 and the consequent reduction in floor
space requirements.
48
<PAGE>
Beginning in the fourth quarter of 1995, Prestolite began to experience
increased warranty claims resulting from a combination of increased sales,
plant relocation activities and unexpected failure rates on certain alternator
models. The unexpected failure rates were partly attributed to manufacturing
difficulties associated with the relocation of certain alternator production
operations from the Cleveland facility to the Arcade facility, and to the use
of such alternators in certain newer engine applications where heat and
vibration conditions were severe. The table below summarizes Prestolite's
warranty expenses for the periods shown. These warranty expenses include
credits issued to customers and such adjustments as management believes
necessary to record an end-of-period warranty reserve for units sold prior to
the end-of-period which management expects to be returned for credit in
subsequent periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1995 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales ............................... $129,011 $131,503 $148,765 $171,700
Warranty Expense .................... 2,274 2,255 4,268 8,461
Percent of Sales .................... 1.76% 1.71% 2.87% 4.93 %
</TABLE>
Units returned for warranty credit are analyzed for, among other things,
date manufactured and type of failure. Based on that analysis, management
believes that $0.5 million of the warranty expense recorded in the fourth
quarter of 1996 and $2.4 million of the warranty expense recorded in 1997
resulted from actions taken during and because of the closing of the Cleveland
facility and the transfer of production operations from Cleveland to Arcade.
Because warranty coverage is generally extended for 18 months, management
believes the exposure period for production during the Cleveland-to-Arcade
move has ended and warranty expenses will drop to lower levels. In addition,
over the past 18 months Prestolite has designed and released numerous product
improvements intended to reduce these failure rates, and management believes
that the major factors contributing to such warranty claims have been
addressed. Despite this increase in warranty expense, management believes that
the Company has not lost any significant sales and believes that its
alternator performance is similar to that of its competitors' alternators.
However, there can be no assurance that the Company will not incur substantial
warranty expense in the future. Increased warranty claims and the related
expenses could have a material adverse effect on the Company's financial
condition and results of operations. See "Risk Factors--Warranty Exposure."
RESULTS OF OPERATIONS--PEI HISTORICAL
The following discussion relates to the results of operations of PEI on a
stand-alone basis, does not include a discussion of the Lucas Businesses and
does not give pro forma effect to the Lucas Acquisition. The results of
operations of the Issuer are substantially identical to those of PEI. Results
of operations have been restated to treat the Beech Electric business as part
of continuing operations and the welding equipment business as a discontinued
operation.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales were $171.7 million for 1997, an increase of $22.9 million, or
15.4%, from $148.8 million in 1996. The Company experienced increased net
sales in each of its major distribution channels in 1997. The increase in net
sales was also positively affected by the inclusion of twelve months of
battery charger sales in 1997 compared with ten months of battery charger
sales in 1996.
Gross profit was $33.9 million in 1997, an increase of $5.7 million, or
20.3%, from $28.2 million in 1996. As a percentage of net sales, gross profit
was 19.7% and 18.9%, respectively. Gross profit increased primarily due to
productivity improvements and increased sales volume. Gross profit was
adversely affected by warranty expense of $8.4 million in 1997 compared with
$4.2 million in 1996. Prestolite believes that approximately $2.4 million of
the warranty expenses recorded during 1997 were non-recurring in nature,
stemming from actions that occurred during and because of production
relocation, and that warranty costs will decline after the fourth quarter of
1997. See "Risk Factors--Warranty Exposure."
49
<PAGE>
Selling, general and administrative expenses were $23.2 million in 1997, an
increase of $2.2 million, or 10.5%, from $21.0 million in 1996. As a
percentage of net sales, these expenses decreased to 13.5% in 1997 from 14.1%
in 1996. In addition to modest increases resulting from inflation and the
increased level of sales, selling, general and administrative expenses in 1997
included increases from 1996 of $0.6 million for bonus expense; $0.4 million
for consulting, legal and audit expenses; and $0.5 million related to twelve
months of ownership of the battery charger business in 1997 compared with ten
months in 1996.
Operating income was $10.7 million in 1997, an increase of $3.6 million, or
50.2%, from $7.1 million for 1996 due to the factors discussed above.
Operating income as a percentage of net sales was 6.2% in 1997, compared to
4.8% in 1996.
Net interest expense was $5.4 million in 1997, an increase of $0.1 million,
or 1.3%, from $5.3 million in 1996. Interest expense increased because of
increases in borrowings associated with the Hobart acquisition and to fund
increased working capital requirements associated with increased net sales.
Income taxes were $2.3 million of expense in 1997, an increase of $4.6
million from $2.3 million of income in 1996. Prestolite's effective tax rate
was 45% for the period,
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales were $148.8 million for 1996, an increase of $17.3 million, or
13.1%, from $131.5 million in 1995. The increase in net sales was due
primarily to the February 1996 acquisition of the Hobart battery charger
business. In addition, alternator sales to the heavy duty OES market increased
37% from 1995 as Prestolite continued selling newly manufactured alternators
into a market that had previously been serviced primarily with remanufactured
products. These sales increases were partly offset by reduced sales in the
United Kingdom.
Gross profit was $28.2 million in 1996, an increase of $3.2 million, or
12.9%, from $25.0 million in 1995. As a percentage of net sales, gross profit
was 18.9% and 19.0%, respectively. Productivity improvements in many areas
were offset in part by the costs associated with the relocation of alternator
production from the Cleveland facility to the Arcade facility. In addition,
Prestolite began to experience increased alternator warranty expenses in the
fourth quarter of 1995, which continued throughout 1996. See "Risk Factors--
Warranty Exposure."
Selling, general and administrative expenses were $21.0 million for 1996, an
increase of $2.0 million, or 10.7%, from $19.0 million in 1995. This increase
was largely due to Prestolite's acquisition of the battery charger business in
February 1996. As a percentage of net sales, these expenses decreased to 14.1%
in 1996 from 14.4% in 1995.
Operating income was $7.1 million for 1996, an increase of $4.2 million, or
145.5%, from $2.9 million for 1995 due to the factors discussed above and the
recording of a $3.1 million restructuring charge in 1995, primarily related to
the decision to close the Cleveland facility. Operating income as a percentage
of net sales was 4.8% in 1996, compared to 2.2% in 1995.
Net interest expense was $5.3 million in 1996, an increase of $1.0 million,
or 24.1%, from $4.3 million in 1995. Net interest expense increased due to the
increase in borrowings incurred in connection with the Hobart acquisition.
The provision for income taxes was a $2.3 million benefit in 1996 compared
to a $0.6 million expense in 1995. This benefit was generated by recording
during 1996 the benefit of prior year net operating loss carry forwards. The
improved financial performance of Prestolite in 1996 made it likely that the
tax benefits of these losses would be realized in future periods, enabling the
Company to record a tax benefit in 1996.
50
<PAGE>
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net sales were $131.5 million for 1995, an increase of $2.5 million, or
1.9%, from $129.0 million in 1994. The marginal increase in net sales was
primarily due to an increase in non-defense sales of 9.3%. Such gains were
offset by a decrease in defense-related sales of 31.0% due to reduced
purchases by the U.S. Department of Defense.
Gross profit was $25.0 million in 1995, a decrease of $1.2 million, or 4.6%,
from $26.2 million in 1994. Gross profit in 1995 was unfavorably impacted due
to market mix, rising commodity prices (especially copper) and costs
indirectly related to the closing of Prestolite's Cleveland facility.
Selling, general and administrative expenses were $19.0 million for 1995, an
increase of $0.4 million, or 2.7%, from $18.6 million in 1994. These expenses
were 14.4% of net sales in 1995 and 1994.
Operating income was $2.9 million for 1995, a decrease of $4.7 million, or
61.6%, from $7.6 million for 1994 due to the factors discussed above and the
$3.1 million restructuring charge related to the closure of the Cleveland
facility ($2.4 million) and the write-down of assets at the Beech Electric
operation ($0.7 million). Operating income as a percentage of net sales was
2.2% in 1995, compared to 5.9% in 1994.
Net interest expense was $4.3 million in 1995, an increase of $0.9 million,
or 27.4%, from $3.4 million in 1994. Net interest expense increased as the
result of increased capital spending in 1995 plus the effect of a general
increase in interest rates.
Prestolite had an income tax expense of $0.6 million in 1995 as compared to
income tax expense of $0.5 million in 1994. This expense related primarily to
certain state income taxes which were levied despite the net operating loss
position of the Company for tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
PEI
Prestolite's principal sources of cash in the 1997, 1996 and 1995 fiscal
years were from operations and borrowings under the Existing Credit
Facilities. Cash generated from operating activities during such periods was
$7.7 million, $2.6 million and $1.4 million, respectively. During each of such
periods, Prestolite used such cash primarily to fund operations and capital
expenditures.
Capital expenditures for 1997 amounted to $5.6 million. Capital expenditures
for 1996 amounted to $6.8 million (including $0.4 million of capital leases
and $1.7 million recorded as part of the welding business which was
subsequently sold). Capital spending in both 1997 and 1996 was primarily for
additional equipment and tooling to reduce costs through automation, replace
existing equipment and enable Prestolite to manufacture new products. $7
million of the 1996 capital expenditures related to the Hobart acquisition;
approximately half of those expenditures were associated with the
establishment of production in a new facility. Capital expenditures for 1995
amounted to $4.9 million, primarily for the replacement of existing equipment
and cost reduction programs.
During fiscal 1995, Prestolite announced the closing of its Cleveland
facility. In 1996, Prestolite sold its Cleveland facility as well as idle
facilities in Gainesville, Georgia, and Cardiff, Wales. In addition,
Prestolite sold its Florence, Kentucky warehouse and leased back 60% of the
space. These asset sales generated an aggregate of $4.3 million of cash in
1996.
The Company
The Company's liquidity needs are expected to consist primarily of working
capital needs and scheduled payments of principal and interest on its
indebtedness. As a result of the Recapitalization, the Company has
significantly increased cash requirements for debt service relating to amounts
outstanding under the New U.S.
51
<PAGE>
Credit Facility, the New U.K. Credit Facility and the Notes. See "Risk
Factors--Substantial Leverage; Ability to Service Debt."
The Company's capital expenditures are expected to be approximately $13.2
million in 1998. Planned capital expenditures consist primarily of
expenditures to reduce costs through automation, replace existing equipment
and enable the Company to manufacture new products, and expenditures related
to improving the Company's manufacturing infrastructure in connection with the
realignment of certain manufacturing operations of the Lucas Businesses.
In connection with the integration of the Lucas Businesses, the Company
expects to incur aggregate costs of approximately $10.2 million through the
end of fiscal 2000. These costs are expected to include approximately $1.0
million related to existing Prestolite facilities and approximately $9.2
million related to the implementation of productivity improvements,
manufacturing realignments and overhead cost reductions at the facilities
acquired in the Lucas Acquisition.
In connection with the acquisition of Lucas Argentina, the Company assumed
approximately $7.1 million of outstanding indebtedness, of which $3.7 million
remained outstanding following the Recapitalization. An additional
approximately $2.6 million outstanding under drawn letters of credit was also
assumed by the Company. In addition, a subsidiary of the Issuer will be
required to make certain post-closing payments to Lucas Industries of up to a
maximum of $9.0 million contingent upon the collection of certain receivables
and up to a maximum of $10.0 million contingent upon Lucas Argentina having
achieved certain earnings targets in 1998, 1999 and 2000. Any such post-
closing contingent payments are expected to be paid from the collection of
such receivables or from such earnings. PEI guaranteed the obligation of its
subsidiary to make these post-closing payments in the event that such
contingencies occur. In connection with the acquisition from LAO of certain
inventory and transition assistance, Prestolite U.K. is required to make
estimated payments of approximately $2.0 million to LAO, payable in
installments in the first and fourth quarters of 1998. Prestolite also
presently expects to exercise an option to purchase substantially all of the
remaining shares of Lucas Argentina in August 1998 for a purchase price of
approximately $1.2 million payable upon such exercise.
The Company's short-term liquidity needs, including a portion of the one-
time costs associated with the Lucas Acquisition, are expected to be provided
by: (i) existing cash balances; (ii) operating cash flows; and (iii)
borrowings under the New U.S. Credit Facility and the New U.K Credit Facility.
The Company expects to fund its long-term liquidity needs from its operating
cash flows, the issuance of debt and/or equity securities and bank borrowings.
Concurrently with the Offering, the Issuer entered into the New U.S. Credit
Facility. See "Description of Certain Indebtedness--New U.S. Credit Facility."
Pursuant to the New U.S. Credit Facility, Comerica Bank has agreed to lend to
the Issuer up to $23.0 million in the form of a senior secured revolving
credit facility, including a $2.0 million letter of credit subfacility.
Indebtedness under the New U.S. Credit Facility is guaranteed on a senior
basis by PEI and is secured by a first priority lien on all inventory,
accounts receivable and general intangibles of the Issuer. The Issuer's
ability to borrow under the New U.S. Credit Facility is restricted by a
borrowing base consisting of a percentage of eligible inventory and accounts
receivable. Also in connection with the Offering, Prestolite U.K. entered into
the Temporary U.K. Credit Facility. On April , 1998, Prestolite U.K.
replaced the Temporary U.K. Credit Facility with the New U.K. Credit Facility
providing for borrowings of up to (Pounds)7.0 million. Indebtedness under the
New U.K. Credit Facility is secured by the accounts receivable of Prestolite
U.K. Prestolite U.K.'s ability to borrow under the New U.K. Credit Facility is
restricted by a borrowing base consisting of a percentage of Prestolite U.K.'s
eligible receivables. See "Description of Certain Indebtedness--New U.K.
Credit Facility."
The Company believes that funds provided by operations, together with the
proceeds from the Offering and borrowings under the New U.S. Credit Facility
and the New U.K. Credit Facility, will be adequate to meet the Company's
anticipated requirements for working capital, interest payments, planned
capital expenditures and principal payments on debt. Estimates as to working
capital needs and other expenditures may be materially
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affected if the foregoing sources are not available or do not otherwise
provide sufficient funds to meet the Company's obligations.
NET OPERATING LOSSES
At December 31, 1997 Prestolite had net operating loss ("NOL") carryforwards
for tax reporting purposes of approximately $6.2 million related to U.S. tax
reporting. The NOLs in the U.S. expire beginning in 2006.
INFLATION
The Company believes that the relatively moderate inflation over the last
few years has not had a significant impact on the Company's revenues or
profitability and that it has been able to offset the effects of inflation by
increasing prices or by realizing improvements in operating efficiency.
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BUSINESS
The Company is a leading global manufacturer and distributor of electro-
mechanical power conversion products and systems for niche markets, including
heavy duty vehicles, material handling, defense and industrial applications.
The Company's products are primarily used for diesel engines and electric
vehicles and include alternators, starter motors, direct current electric
motors, relays and controls and battery chargers. In 1997, approximately 45%
of Prestolite's net sales were derived from aftermarket sales, with the
remainder derived from OEMs. Approximately 40% of Prestolite's aftermarket net
sales in 1997 were derived from OES customers, with the balance derived from
independent warehouse distributors and the U.S. Department of Defense. The
Company's largest OEM and OES customers include Ford Motor Company,
Freightliner, Clark Material Handling, Caterpillar, the U.S. Department of
Defense and Thermo King in North America and BT Lifters, Cummins Engine, ERF
Trucks, Leyland Trucks, Perkins Engine and Mitsubishi Caterpillar Forklift in
Europe. None of the Company's United States employees is represented by a
labor union.
On January 22, 1998, Prestolite completed the acquisition of the Lucas
Businesses from Lucas Industries. The Lucas Businesses manufacture primarily
alternators and starter motors for the truck, bus and automotive markets in
the United Kingdom, continental Europe, South America and South Africa. The
Lucas Acquisition (i) strengthens the Company's position as a leading global
manufacturer and distributor of alternators and starter motors, (ii)
complements Prestolite's historic product portfolio and (iii) augments the
Company's core technology in its principal product lines. In addition, the
Company has the opportunity to sell certain truck, bus and automotive products
through Lucas Industries' worldwide distribution network of over 4,000
outlets. The Lucas Acquisition significantly enhanced the Company's access to
an international customer base, and provides an entrance to the international
automotive market. In the year ended December 31, 1997, approximately 43% of
the Lucas Businesses' net sales were derived from aftermarket sales, with the
remainder derived from OEMs. The Lucas Businesses' largest OEM and OES
customers include Ford Motor Company, Mercedes-Benz, Nissan, Perkins Engine,
Volkswagen and Volvo.
As a result of the Lucas Acquisition, the Company will consolidate its
global leadership position in its primary markets, expand its global reach and
improve its aftermarket distribution capabilities. The Company believes that
it is the largest supplier in North America of (i) newly manufactured heavy
duty alternators for the aftermarket, (ii) high amperage alternators for
school buses and emergency vehicles, (iii) electric motors for pump and winch
applications and (iv) solenoid switches for heavy duty starter circuits. The
Company also believes that it is one of the two largest suppliers of heavy
duty alternators and heavy duty starter motors for the European market and one
of the three largest worldwide producers of heavy duty alternators, heavy duty
starter motors, material handling motors and industrial battery chargers, as
well as solenoid switches for heavy duty starter circuits. After giving pro
forma effect to the Lucas Acquisition, the Company's net sales in 1997 to
customers outside North America would have increased to approximately 55% of
pro forma net sales as compared with approximately 21% of Prestolite's net
sales in 1997 on a stand-alone basis, while its aftermarket sales would have
remained relatively constant at approximately 45% of net sales and pro forma
net sales. On a combined basis, the Company's pro forma net sales and EBITDA
for the twelve months ended December 31, 1997 would have been approximately
$298.6 million and $24.0 million, respectively.
BUSINESS STRENGTHS
The Company believes that its leading global market position in its primary
markets can be attributed to the following factors:
Product Quality and Brand Recognition. The Company believes that its
products are generally recognized by its customers as superior based on their
advanced technology, innovation, reliability, durability and quality. The
Company believes that its primary brand names, Leece-Neville in the heavy duty
vehicle market (Butec Leece-Neville in Europe and the Middle East), Prestolite
in the material handling and industrial markets and Hobart for battery
chargers in the material handling market, are generally recognized as being of
the highest quality in their respective markets. Prestolite has received
numerous manufacturing and product quality awards
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from its customers, including Q1 status from Ford Motor Company and preferred
supplier status from Cummins Engine.
Attractive Aftermarket/Original Equipment Balance. Approximately 44% of the
Company's 1997 pro forma net sales would have been to aftermarket customers.
The aftermarket is generally a more stable source of sales and generates
higher margins than the Company's sales to its OEM customers, which include a
number of major OEMs in North America and Europe. The Company believes that
its aftermarket and original equipment businesses are complementary and
provide the Company with a competitive advantage in meeting customer needs and
in maintaining the high levels of expertise necessary to compete successfully
in both markets. The strong engineering and manufacturing capabilities
necessary to meet the stringent requirements for original equipment technology
and quality are transferable to the Company's aftermarket operations, and OEM
position, in turn, is a major factor in generating aftermarket demand.
Further, the understanding of replacement activity gained through the
aftermarket enhances the Company's understanding of the demanding needs of
OEMs.
Applied Technological and Engineering Capabilities. The Company has built an
engineering team with in-depth design and application experience, which has
allowed it to introduce innovative new products and applications. Processes
and systems common to a number of product lines are designed by engineers at
the Company's research and development facility in Ann Arbor, Michigan.
Company engineers work closely with partners at a number of major
universities, including the University of Michigan, in the areas of
electronics, magnetics, alternative materials and product testing. Product
design, development and application are performed by dedicated engineering
teams located at the Company's manufacturing facilities, which work closely
with customers to design products and systems that meet each customer's
specifications. Successful new product introductions include:
. A self-diagnostic alternator, which utilizes an LED indicator to signal
whether the alternator is functioning properly. This self-diagnostic
feature, the first of its kind, was designed to help prevent the
unnecessary replacement of a properly functioning alternator when
another component, such as the battery, wiring or starter motor, is
actually responsible for electrical system failure. A U.S. patent
application has been filed for this technology.
. The XOT (extended on-time) motor, which management estimates provides
approximately 20% more operating "on-time" than competitive motors for
pump, winch, lift and similar applications at lower cost than the
Company's previous design.
. The CDAC (computer data acquisition and control) system, which allows a
lift truck fleet manager to monitor individual battery chargers and
obtain performance feedback on each charger, battery and electric lift
truck within a facility. The resultant computer data on truck and
battery activity allow the fleet manager to maximize battery life and
optimize fleet operating cost.
Manufacturing Excellence. The Company's present management team, which
joined Prestolite following Genstar's acquisition of Prestolite in 1991, has
instituted continuous improvement programs at all of Prestolite's
manufacturing facilities, including synchronous manufacturing techniques,
cellular manufacturing arrangements and kanban-based just-in-time inventory
control. Changes in manufacturing methods have made floor space available for
expansion at most of Prestolite's facilities. From 1992 to 1997, Prestolite
increased its sales per employee by approximately 65% and increased its sales
per square foot of manufacturing and warehouse space by approximately 160%.
Ongoing training programs for Prestolite's experienced workforce are an
integral part of such continuous improvement efforts.
International Presence. As the Company's original equipment (OEM and OES)
customers expand their manufacturing operations in foreign countries, the
Company expects that these customers will increasingly turn to suppliers who
can support their locally-manufactured OEM products and aftermarket presence.
The Company believes that its global manufacturing and distribution network,
further enhanced by the Lucas Acquisition, provides an advantage over its
competitors in servicing its North American and European customers' foreign
manufacturing operations. The Lucas Acquisition also significantly enhanced
the Company's access to an
55
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international customer base in rapidly growing emerging markets. In addition,
the Company acquired the Lucas Businesses' strong automotive parts
distribution networks in Argentina and South Africa and has the opportunity to
sell certain truck, bus and automotive products through Lucas Industries'
worldwide distribution network of over 4,000 outlets.
GROWTH STRATEGY
The Company's goal is to continue to increase revenues and profitability.
Key elements of the Company's growth strategy include:
Provide Systems Solutions to Customers. OEMs are increasingly demanding
systems solutions, particularly in the markets for heavy duty truck and non-
automotive electric vehicles, as customers consolidate their supplier base and
lower the overall cost of their products by incorporating systems consisting
of components designed to work together. The Company anticipates that its
engineering strengths, combined with its market knowledge and the broad range
of products offered within each product category, will enable the Company to
assist its customers with the design and manufacture of integrated system
solutions, such as the entire charging and starting system of a heavy duty
truck or the motive power system of a forklift.
Develop New Applications and Products. The Company intends to continue to
leverage its strong technological capabilities into its new product
development process, allowing it to better serve its customers through
continued product introductions and improvements. For example, one of the
Company's Leece-Neville alternators, initially developed for the aftermarket,
is now standard equipment on Freightliner FLD series trucks. In addition to
having its aftermarket products adopted by OEMs, the Company works with its
OEM customers to design the Company's products and systems into the OEMs'
finished products. For example, in 1996 more than twenty-five motor designs
were custom engineered to fit specific lift trucks being developed by
Prestolite's OEM customers.
Continue Cost Reduction Emphasis. A primary focus of the Company's
management has been to significantly reduce manufacturing costs through
continuous improvement programs at Prestolite's manufacturing facilities.
Further cost reductions have been achieved through ongoing value engineering
efforts, such as a product redesign that enabled Prestolite to reduce the cost
of one of its European starter motors by over 30%. In addition, cost
reductions have been achieved through plant closings and corporate staff
reductions. In connection with the Lucas Acquisition, the Company has
specifically identified estimated cost reductions of $1.7 million in 1998,
$5.1 million in 1999 and $6.2 million in 2000 based on expected productivity
improvements, manufacturing realignments and overhead cost reductions. Such
estimates are based on management's preliminary estimates. There can be no
assurance, however, as to the amount of cost savings, if any, that will
actually be realized.
Pursue Global Expansion. The Company is expanding its international presence
in order to benefit from the trend toward international standardization and to
participate in rapidly growing emerging markets. The Lucas Acquisition is a
significant further step toward increasing the Company's international
presence, and the Company intends to expand its international presence through
strategic acquisitions as well as internal growth. The Company presently owns
an interest in a producer of alternators and starter motors for the automotive
and heavy duty markets in India. The Company intends to pursue joint ventures
in those countries or regions where a local partner is critical to success.
Such global expansion is expected to provide access to new customers and
technologies, as well as protection from regional economic cycles.
Strategically Acquire Complementary Businesses. Management intends to
continue to selectively pursue acquisitions of businesses producing products
which complement the Company's existing product portfolio. For example, the
Hobart acquisition added battery chargers to the Company's existing electric
vehicle product line, and the Lucas Acquisition complements Prestolite's
existing product portfolio with a variety of truck, bus and automotive
products.
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LUCAS BUSINESSES
The Lucas Businesses manufacture primarily alternators and starter motors
for the truck, bus and automotive markets in the United Kingdom, continental
Europe, South America and South Africa. The Lucas Acquisition (i) strengthens
the Company's position as a leading global manufacturer and distributor of
alternators and starter motors, (ii) complements Prestolite's historic product
portfolio and (iii) augments the Company's core technology for its principal
product lines. In addition, the Company has the opportunity to sell certain
truck, bus and automotive products through Lucas Industries' worldwide
distribution network of over 4,000 outlets. The Lucas Acquisition
significantly enhanced the Company's access to an international customer base,
and provided an entrance to the international automotive market.
United Kingdom. The heavy duty products offered by Lucas HDP in the United
Kingdom and continental Europe complement Prestolite's historic heavy duty
product portfolio. Lucas HDP manufactures a wide range of heavy duty products,
including brushless alternators and coaxial starter motors, two significant
product lines not previously produced by Prestolite. Lucas HDP has a strong
position in the high amperage 24-volt bus alternator market, which Prestolite
has only had limited success in penetrating. Lucas HDP also add major new
European customers, including Mercedes-Benz and Volvo.
Argentina. Lucas Argentina produces automotive starter motors, alternators
and steering columns and distributes a wide range of automotive products to
OEMs and the aftermarket. Approximately 75% of Lucas Argentina's net sales
represent sales of products manufactured by Lucas Argentina, with the
remainder representing sales of products purchased from third parties. The
Lucas Acquisition gives the Company a foothold in the emerging Mercosur
market. In addition, the Company believes that there is an opportunity for
Lucas Argentina to supply the Company with certain alternator and starter
motor components manufactured by Lucas Argentina which the Company currently
purchases from third parties.
South Africa. Lucas South Africa produces automotive starter motors and
alternators and distributes a wide range of automotive products to OEMs and
the aftermarket. Approximately 73% of Lucas South Africa's net sales represent
sales of products manufactured by Lucas South Africa, with the remainder
representing sales of products purchased from third parties. In addition,
Lucas South Africa produces a low material-cost starter motor which the
Company believes is well-suited for production in emerging markets with low
labor costs.
Distribution. In conjunction with the Lucas Acquisition, the Company entered
into a number of ancillary agreements providing for, among other things,
distribution arrangements, supply of products and intellectual property
licensing. In particular, for five years Lucas South Africa will (i) supply to
LAO certain products for LAO's distribution through LAO's worldwide
distribution network, (ii) act as importer and primary distributor of certain
Lucas-branded products for LAO in the aftermarkets of the Southern African
Territories and for a transition period has rights to certain trademarks of
Lucas Industries. For five years Lucas Argentina will act as exclusive
supplier of Lucas Argentina's manufactured products to Lucas Brasil for
aftermarket sale and distribution by Lucas Brasil in South America (except
Argentina), and in Argentina (i) act as importer from and distributor for LAO,
(ii) distribute in the aftermarket Lucas-branded products and for a transition
period will be permitted to brand products manufactured and sold by it with
certain trademarks of Lucas Industries. Prestolite U.K. has a continuing
license for intellectual property relating to in-line diesel pumps for
manufacture and sale to the original equipment market and for sale to LAO for
supply and distribution by LAO in the aftermarket. Prestolite U.K. is
additionally permitted to brand electrical products with certain trademarks of
Lucas Industries through 1998 for sale to the original equipment market and
through 1999 for sale to the aftermarket. In addition, subject to certain
conditions, for five years Prestolite U.K will act as exclusive supplier to
LAO for LAO's requirements of in-line diesel pumps branded with trademarks of
Lucas Industries for aftermarket sales. During 1998, Prestolite U.K. will
assume control for the distribution to the aftermarket and OES market of
certain products produced by Lucas HDP. See "The Transactions--The Lucas
Acquisition."
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PRODUCTS
The Company manufactures and distributes electro-mechanical power conversion
products and systems for heavy duty vehicles and material handling, defense,
industrial and automotive applications. Prestolite historically manufactured
alternators, starter motors, direct current electric motors and relays and
controls. The Hobart acquisition added battery chargers, and the Lucas
Acquisition added additional truck, bus and automotive product offerings that
complement the Prestolite's historic product portfolio. Although the Company's
products are primarily used for diesel engines and electric vehicles, most
products are also used in a broad range of industrial applications. The
Company generally focuses on applications which are high value-added in terms
of engineering or which require special customer support. The following table
summarizes the products offered by the Company:
<TABLE>
<CAPTION>
% OF PRO
FORMA 1997
PRODUCTS NET SALES BRAND NAMES MARKETS SERVED/(PRIMARY END USE)
- - - - - - - - - - - -------------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Alternators/Regulators 33% Leece-Neville Heavy Duty (trucks, school and shuttle buses,
Butec Leece-Neville emergency vehicles, off road and
Lucas* special purpose vehicles, transport
refrigeration and generator sets)
Defense (military vehicles)
Automotive (automobiles and light trucks)
Material Handling (internal combustion engine
lift trucks)
Industrial (marine and other industrial
applications)
- - - - - - - - - - - -------------------------------------------------------------------------------------------------------
Starter Motors 17% Prestolite Defense (military vehicles)
Butec Leece-Neville
Lucas*
Heavy Duty (trucks, school and shuttle buses,
emergency vehicles, off road and
special purpose vehicles, transport
refrigeration and generator sets)
Automotive (automobiles and light trucks)
Industrial (marine and other industrial
applications)
- - - - - - - - - - - -------------------------------------------------------------------------------------------------------
Direct Current 10% Prestolite Material Handling (electric lift trucks and
Electric Motors Lucas* other commercial electric
vehicles)
Industrial (hydraulic pumps)
- - - - - - - - - - - -------------------------------------------------------------------------------------------------------
Relays and Controls 16% Prestolite Heavy Duty (trucks, school and shuttle buses,
(Solenoids, Contactors Lucas* emergency vehicles, off road and
and Control Boxes) special purpose vehicles and
generator sets)
Automotive (light trucks)
Material Handling (electric lift trucks and
other commercial electric
vehicles)
Defense (military vehicles)
Industrial (marine, telecommunications and
other industrial applications)
- - - - - - - - - - - -------------------------------------------------------------------------------------------------------
Battery Chargers 6% Hobart Material Handling (electric lift truck and
other commercial electric
vehicles)
- - - - - - - - - - - -------------------------------------------------------------------------------------------------------
Other Products** 18% Prestolite Heavy Duty (trucks, school and shuttle buses,
TrekStar emergency vehicles, off road and
Lucas* special purpose vehicles, transport
Thermostart refrigeration and generator sets)
Automotive (automobiles and light trucks)
Industrial (marine and other industrial
applications)
</TABLE>
* Manufactured by the Lucas Businesses for distribution by the Company under
the Company's brand names (and for a transition period under the "Lucas"
brand name) and for sale to Lucas Industries for distribution under brand
names of Lucas Industries. See "The Transactions--The Lucas Acquisition"
and "Patents, Trademarks and Licenses."
** Includes ignition distributors, speedometers and odometers, in-line diesel
pumps, steering columns and diesel engine pre-heaters.
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Alternators. The Company manufactures alternators and regulators primarily
for heavy duty applications, generally under the Leece-Neville name (Butec
Leece-Neville in Europe and the Middle East), and for automotive applications.
Alternators are electric generators that produce rectified direct current.
Regulators are electronic devices that control alternator output. Alternator
output is directly related to alternator frame size, or diameter. The Company
manufactures alternators in sizes ranging from 5-inch alternators for use in
off road and sport utility vehicles, transport refrigeration, trucks and
generator sets, to 8 9/16-inch alternators for use in military vehicles, buses
and special purpose vehicles. The Lucas Businesses also produce smaller
internal and external fan alternators for a wide variety of cars, light to
medium trucks and agricultural vehicles.
The Company recently introduced a self-diagnostic alternator, which utilizes
an LED indicator to signal whether the alternator is functioning properly.
Approximately 25% of the alternators returned to the Company for warranty
credit are found to be operating properly, indicating that mechanics
frequently misdiagnose the cause of electrical system failure. This self-
diagnostic feature, the first of its kind, was designed to help prevent the
unnecessary replacement of a properly functioning alternator when another
component, such as the battery, wiring or starter motor, is actually
responsible for electrical system failure. A U.S. patent application has been
filed for this technology.
The Company believes that, based on its increased sales, it has
significantly increased its share of the North American commercial truck and
transport refrigeration OEM alternator markets since 1992. Management believes
that this increase is due to the advanced technology, innovation, reliability
and quality of the Company's products. The Company believes that its standard
heavy duty alternators meet the increased demand for electric power on modern
trucks better than competitors' products. The size of the Leece-Neville
alternators, which generally have larger diameters than competing products,
gives them superior magnetic and electrical properties resulting in higher
output at low speeds. This is a significant factor as truck electrical
requirements increase with greater use of electronics in vehicle systems and
the addition of "creature comforts" such as air conditioning and other
auxiliary devices in sleeper-cab equipped long-haul trucks, and is also
significant for applications involving frequent idling, start-and-stop and
low-speed driving, such as local pick-up and delivery trucks and school buses.
Motors. The Company manufactures three main types of motors: starter motors,
material handling motors and pump and winch motors.
Starter motors are the largest individual motor category sold by the
Company. Historically, Prestolite's product offerings were limited to the
upper end of the North American heavy duty market (consisting primarily of
military and special purpose vehicles and larger heavy duty trucks), which
limited Prestolite's ability to successfully penetrate the commercial starter
motor market. Over 65% of the starter motors manufactured by Prestolite from
1992 to 1996 were sold to the U.S. Department of Defense or OEM defense
contractors for military applications. Over the past two years, Prestolite has
developed a full line of starter motors which includes products designed for
the lower-end and mid-size segments of the market. In the United Kingdom, the
Company manufactures a range of heavy duty starter motors which are sold
primarily for use in trucks and generator sets. In addition, the Lucas
Businesses' starter motor product range includes both direct drive and gear-
reduced types for automobiles and light commercial vehicles. By offering a
full product line, management believes the Company will be able to increase
its commercial starter motor sales. In addition, the Company expects that a
full line of starter motors will help the Company maintain and augment its
position in the alternator market as customers turn to suppliers offering
integrated systems rather than individual products.
Material handling motors, which are 5 to 13 inches in diameter, provide the
motive power, operate the forks and provide power steering for lift trucks and
other commercial electric vehicles. A material handling motor is generally
designed for a specific forklift truck model.
Pump and winch motors, which are 4.5 inches in diameter, are generally used
in hydraulic pump operations and other applications such as the lift
mechanisms in tow trucks. The Company believes that its share of the pump and
winch motor market has increased since 1994, largely due to sales of the XOT
(extended on-time)
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motor introduced in late 1995. This motor produces approximately 20% more
operating "on-time" than competitive motors for pump, winch, lift and similar
appliances at lower cost than the Company's previous design. In 1996, two of
the largest United States producers of hydraulic pumps, Monarch Hydraulics and
MTE Hydraulics, completed their testing and began purchasing the XOT motor.
The Company also manufactures a 3.3-inch diameter motor used for back-up
braking systems on school buses and certain other applications.
Relays and Controls. Relays and controls include solenoids, contactors and
control boxes. A solenoid is an electromagnet used to move a plunger in and
out to operate contacts that make and break electric circuits. The Company's
solenoid switches are typically used to control a vehicle starter motor or a
hydraulic pump motor. Contactors are similar to solenoids, but are built for
heavier duty applications and are more expensive. The Company's contactors are
primarily designed for material handling, defense, industrial and
telecommunications applications. The Company is currently redesigning most of
its contactor product line to an "A-frame" design, which uses fewer components
and is expected to be manufactured at a lower unit cost than the Company's
previous designs. A control box (called "switchgear" in the United Kingdom),
which includes solenoids and electronic circuits in an enclosed case, assists
the starting circuit of a diesel-powered vehicle to provide a pre-heating
cycle for the engine. The Company's control boxes are sold primarily for
military applications.
Battery Chargers. The Company acquired its battery charger business from
Hobart in February 1996 to enhance the Company's position in the material
handling market. The Company sells industrial battery chargers under the
Hobart brand name, which has been recognized in the battery charger
marketplace since 1917. The Hobart product range covers all batteries
customarily used in the material handling market. The Company's high-end
product line provides battery sensing and multi-functional output control of
the charging cycle, which makes it well suited for sealed batteries or for
difficult applications such as use inside cold storage freezers.
The Company's advanced CDAC (Computer Data Acquisition and Control) system
technology allows a lift truck fleet manager to monitor individual battery
chargers and obtain performance feedback on each charger, battery and electric
lift truck within a facility. A truck identification device attached to the
truck communicates to the battery and a battery identification device then
communicates through the charger to the computer during the charging cycle.
The resultant computer data on truck and battery activity allow the fleet
manager to maximize battery life and optimize fleet operating cost.
Other Products. Other products manufactured by the Company include ignition
distributors primarily for marine applications and the TrekStar line of
speedometers and odometers. The Lucas Businesses also manufacture in-line
diesel pumps, steering columns and Thermostart brand pre-heaters for diesel
engines, and redistribute in Argentina and South Africa a wide range of
automotive products manufactured by third parties. The Company's welding
equipment business, which was acquired from Hobart in February 1996, was
divested in the third quarter of 1997.
MARKETS
Market Dynamics
Most of the Company's products are component parts used on diesel engines,
electric vehicles and automobiles. Vehicle components often do not last for
the entire life of the vehicle. As a result, sales are made to both
aftermarket and original equipment customers. For example, the Company
believes that aftermarket sales represent approximately 75% of total sales in
the heavy duty truck alternator market because such trucks generally have
useful lives of 1.2 to 1.5 million miles while alternators last approximately
200,000 to 500,000 miles. The Company's sales to aftermarket customers would
have represented approximately 44% of its 1997 pro forma net sales, with its
remaining net sales derived from OEM customers.
Aftermarket. The aftermarket consists of the production and sale of both new
and remanufactured parts used in the maintenance and repair of vehicles. The
Company's aftermarket distribution channels consist of (i)
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OES customers, (ii) independent warehouse distributors who supply repair
shops, dealers and retailers and (iii) government agencies that purchase
aftermarket products directly from the Company. Although OEM position is a
major factor in generating aftermarket demand, the Company has been successful
in securing replacement sales in North America of heavy duty alternators
originally produced by other manufacturers. The Company is also working to
achieve similar results in the replacement markets for heavy duty and
automotive starter motors, direct current motors and contactors.
The Company's newly manufactured aftermarket products compete with
remanufactured products, which consist of used components that are reassembled
into finished products. The Company believes that until 1993, the North
American heavy duty truck alternator aftermarket was approximately 80% served
by remanufactured units. In that year, the Company began to actively promote a
new (not rebuilt) alternator that provided 130 amperes of power compared to
the 100 to 115 amperes provided by most remanufactured units. The Company
believes that since 1992, it has significantly increased its share of the
heavy duty truck alternator aftermarket.
The North American heavy duty truck aftermarket is a significant market for
the Company. In the 1990s, the OES arms of truck manufacturers have more
aggressively pursued aftermarket business, upgrading maintenance capabilities,
instituting 24-hour service and welcoming the opportunity to repair trucks of
other manufacturers. The Company believes that the OES share of the North
American heavy duty truck aftermarket has increased significantly from 1991
through 1996. The Company has seen similar trends emerging in the European
heavy duty truck aftermarket and in the material handling market.
Distribution through independent warehouse distributors is an additional
important element of the aftermarket. Unlike OES suppliers, these distributors
are typically privately owned. These distributors often focus on a specific
market (heavy duty, automotive, material handling, etc.). In addition to
supplying the aftermarket, independent warehouse distributors often provide
products to smaller OEMs. Although the distributors' share of the North
American and European aftermarket has declined in recent years, warehouse
distribution remains an important distribution channel for the Company. The
Company believes that warehouse distributors will continue to represent the
principal aftermarket distribution channel in emerging markets.
Original Equipment. The original equipment market consists of the production
and sale of new component parts for use in the manufacture of new vehicles or
equipment. Original equipment sales are generally made to the vehicle OEM
although some sales may be to another component manufacturer which in turn
supplies the OEM. While OEMs tend to be large and relatively well-known firms
with considerable negotiating strength, the Company believes that they are
normally reluctant to change suppliers. Products sold to an OEM often must be
designed or modified to fit the OEM customer's unique specifications. Whether
or not the product is specific to the vehicle application, most OEMs have
rigorous testing procedures, performed by the vendor or the OEM, that require
supervision and review by the OEM's engineering function. In addition,
component changes may require changes in product design and aftermarket
cataloging by the OEM.
In response to pressure to improve product quality, shorten design cycles
and reduce capital spending, production and inventory costs, OEMs are
increasingly outsourcing design and production of non-strategic components.
Led by the automotive industry, OEMs are turning to suppliers who can provide
the design, engineering, manufacturing and project management support for
complete systems of integrated products. By purchasing complete systems, OEMs
are able to shift design, engineering and product management to fewer and more
capable suppliers. Integrated systems suppliers are generally able to design,
manufacture and deliver components at a lower cost than OEMs due to (i) their
lower labor costs and other manufacturing efficiencies, (ii) their ability to
spread research and development and engineering costs over products provided
to multiple OEMs and (iii) other economies of scale inherent in manufacturing
products for multiple OEMs, such as the ability to automate and leverage
global purchasing capabilities.
The original equipment market has been impacted by recent fundamental
changes in OEM sourcing strategies. OEMs are consolidating their supplier base
and are seeking suppliers which can (i) meet their shorter product design
cycles and bring products to market on an expedited basis, (ii) provide
technologically advanced
61
<PAGE>
product lines and integrated systems solutions, (iii) reliably produce and
ship products on a just-in-time basis, (iv) lower product and system costs and
pass those cost savings on to the OEM customer and (v) assist the OEM in
serving the aftermarket needs of its customers through its OES network. As a
result, the Company believes that OEMs generally prefer to purchase components
from a small group of preferred suppliers.
OEMs are becoming increasingly global, both through acquisition (for
example, Renault (France) acquired Mack Trucks, Inc. (U.S.) in 1990, BT
Lifters (Sweden) acquired The Raymond Corporation (U.S.) in 1997, and PACCAR
Inc. (U.S.) acquired DAF Trucks N.V. (Holland) in 1996 and Foden Trucks (U.K.)
in 1981) and expansion into foreign markets directly and through joint
ventures (for example, Cummins Engine, J.I. Case and Freightliner have each
entered into joint ventures in China, and Toyota (Japan) and Halla (Korea)
have announced plans to produce lift trucks in Europe). They are in turn
requiring their preferred suppliers to establish global production
capabilities to meet their original equipment needs as they expand their
manufacturing operations internationally, and establish global distribution
networks to support their aftermarket presence.
Markets Served.
The Company sells its products to a variety of markets. The Company believes
that the diversity of markets served, both in terms of end-use and geography,
helps stabilize the Company's sales and earnings.
Heavy Duty. The heavy duty market, which represented approximately 28% of
the Company's pro forma net sales in 1997, includes heavy duty trucks, school
and shuttle buses, emergency vehicles, off road and special purpose vehicles,
transport refrigeration and generator sets. The heavy duty products sold by
the Company are designed primarily for use with diesel engines, generally 2.5
liters or larger. The products sold into this market (alternators, starter
motors, starter solenoids, in-line diesel pumps and the Thermostart brand pre-
heater) usually fit multiple applications with limited or no modification for
a specific application.
Automotive. The automotive and light truck market represented approximately
18% of the Company's pro forma net sales in 1997. Products sold to automobile
OEMs include starter solenoids for light truck application in the United
States, starter motors and alternators in Argentina and South Africa and
steering columns in Argentina.
Material Handling. The material handling market, which represented
approximately 15% of the Company's pro forma net sales in 1997, includes
direct current electric motors and contactors for electric lift trucks and
alternators for internal combustion engine lift trucks. This market category
also includes products manufactured for other electrically-powered commercial
vehicles, such as golf cars. The direct current electric motors sold to the
material handling market are generally designed for specific forklift truck
models. The Company works closely with its OEM customers to design motors that
meet the OEM's specifications, often while the vehicles are at the prototype
stage or earlier in the development cycle. Once an OEM selects a motor for a
forklift, the vendor is normally the original equipment and the primary
aftermarket supplier for that model for its entire product life.
Defense. The products sold by the Company to the defense market include
alternators, starter motors and control boxes for use in military vehicles
including tanks, trucks, personnel carriers and the HMMWV, and are generally
designed for use with a specific diesel engine. The Company's position as an
original equipment supplier to the U.S. Department of Defense and to a number
of defense contractors is of major importance in capturing aftermarket demand.
Although the defense market has declined in recent years, it was still
responsible for approximately 9% of the Company's pro forma net sales in 1997.
Industrial, Marine and Other Applications. Approximately 4% of the Company's
1997 pro forma net sales were to a wide range of other markets. These include
starter motors, alternators and ignition distributors for marine and other
applications, contactors sold to the telecommunications market for use with
backup battery systems and direct current motors sold for a variety of
industrial applications.
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<PAGE>
Warehouse Distribution. A portion of the sales of each product line sold by
the Company represents sales to independent warehouse distributors. Almost all
of the Company's battery chargers are sold to distributors, which normally
purchase lift trucks, batteries and battery chargers from separate suppliers.
The Company has a network of automotive parts distributors in Argentina and
South Africa, many operating with a "Lucas" franchise that includes
distinctive signage and branded product. About half of the Company's sales
through these automotive distribution networks represents products
manufactured by third parties and purchased by the Company for resale. Sales
to independent warehouse distributors represented approximately 26% of the
Company's pro forma net sales in 1997.
MARKETING AND CUSTOMERS
A principal component of the Company's marketing strategy is for the
Company's engineering teams to work closely with customers to design products
and systems that meet each customer's specifications. An integral part of the
Company's recent success at penetrating new markets has been its multi-tiered
approach to selling. For example, in the truck market, the Company's sales
representatives call on truck manufacturers, engine manufacturers, dealers and
fleet buyers. Such multi-level selling enables the Company to generate both
"pull-through" and "push-down" demand. Technical support is provided to the
customer before, during and after the sale. On time delivery and aftermarket
support are also important factors influencing the customer's buying decision.
Alternators. The Company's alternators and regulators are sold to a variety
of aftermarket and original equipment customers. In North America, Prestolite
historically emphasized the aftermarket. Over time, market demand led to
increased OEM sales, and Leece-Neville alternators are now standard equipment
on trucks manufactured by Freightliner, the leading producer of heavy duty
trucks in North America. Leece-Neville alternators are also standard equipment
on Ford heavy duty trucks, and optional equipment on Kenworth Truck, Peterbilt
Motors, Navistar, Mack Trucks, Western Star and Volvo heavy duty trucks. The
Company believes it is the market share leader in the OES businesses of four
of the five largest heavy duty truck manufacturers in North America, and the
Company's growth in this channel has helped increase original equipment
placement and market share among these key customers. This represents a
significant improvement from 1992, when the Company's alternators and
regulators were not standard equipment with any OEM. The Company also believes
it is the primary supplier to Carrier and Thermo King, the leading producers
of transportation refrigeration units in North America.
In the market for commercial high-amperage alternators, the Company has been
a leader since the 1940s. Applications include ambulances, fire trucks,
limousines, shuttle buses, school buses and recreational vehicles. Recent
efforts by the Company have produced significant growth in this segment. Key
customers for these applications include Bluebird, Thomas Built Buses and
Spartan Motors. Automotive alternators are produced in South Africa and
Argentina. Most sales are to OEMs. Major customers include Ford, Volkswagen,
Toyota, Samcor and Nissan.
Motors. The Company's starter motors sold for installation on new diesel
engines are sold to military vehicle OEMs such as AM General, Stewart &
Stevenson Services, Oshkosh Truck and General Dynamics. Aftermarket sales of
starter motors for defense applications are primarily sold directly to the
U.S. Department of Defense. Heavy duty starter motors are also sold to
commercial truck OEMs when one of the Company motors is specified by their
customer, but annual quantities are relatively small. In the United Kingdom,
the Company manufactures a range of heavy duty starter motors which are sold
primarily for use in trucks and generator sets. Aftermarket sales of
commercial heavy duty starter motors are sold through the Company's network of
independent warehouse distributors, and also through OES suppliers.
Automotive starter motors are produced in South Africa and Argentina and
sold primarily to OEMs. Major customers include Ford and Toyota.
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<PAGE>
The Company's material handling motors are typically custom designed for
OEMs. In 1997 approximately 83% of Prestolite's material handling motors were
sold directly to original equipment customers for OEM production or for resale
into their OES dealer network, and the remaining 17% were sold through a
network of approximately 120 independent warehouse distributors for sale into
the aftermarket. The major customers for the Company's material handling
motors are electric forklift truck OEMs such as Clark Material Handling, BT
Lifters/Prime Mover and Mitsubishi Caterpillar Forklift Europe, all of which
have well-developed dealer networks and active OES programs which sell the
Company's products into the aftermarket. The Company also sells replacement
motors for many older model lift trucks primarily through the Company's
network of independent warehouse distributors.
The Company's pump motors are typically sold to a limited number of OEMs,
such as Monarch Hydraulics, MTE Hydraulics and Fenner Fluid Power, whose
products are then sold to a wide variety of mobile equipment manufacturers,
such as Waltco (tailgate lifts), JLG Industries (aerial work platforms) and
Fleetwood Enterprises (RV leveling systems). Motors for winch applications are
typically sold directly to the winch manufacturer.
Relays and Controls. The principal customers for the Company's solenoid
sales are Ford in the light truck and sport utility vehicle market; Navistar,
Freightliner and Ford in the heavy duty truck market; John Deere, J.I. Case
and New Holland in the agricultural equipment market; AM General, Stewart &
Stevenson Services and Oshkosh Truck in the military vehicle market; Barnes,
MTE Hydraulics, Monarch Hydraulics and Warn Industries in the hydraulic pump
and winch motor market; Fermont, Libby and the U.S. Department of Defense in
the military generator set market; and Club Car, EZ-GO Textron and Raymond in
the electric vehicle market. Nearly all solenoid sales to OEM customers are
direct, and many of these OEMs have extensive dealer networks that allow the
Company to capture additional aftermarket sales through their OES channels.
Most of the Company's contactors are sold directly to original equipment
customers. The contactor business has been repositioned over the past five
years with telecommunications emerging as the Company's largest application in
the North American market, including original equipment customers such as
Lucent Technologies, Nortel and Ericsson. Sales to the material handling
market, upon which the Company's contactor business was originally founded,
have declined because of the widening use of electronic speed controllers in
newer forklift models. Major original equipment lift truck customers include
BT Lifters/Prime Mover and Mitsubishi Caterpillar Forklift Europe. The Company
has a large installed base of contactors in older model forklifts and is
revamping its distributor support programs to capture more of the aftermarket
business. A significant amount of the Company's annual contactor sales are to
OEM defense contractors, including Fermont, Essex Electro and GEC Marconi.
Aftermarket sales of contactors and control boxes for military applications
are usually made directly to the U.S. Department of Defense and AM General in
the United States and the U.K. Ministry of Defense and Vickers in the United
Kingdom.
Battery Chargers. The principal customers for the Company's battery chargers
include distributors and lift truck dealers, which typically work with the
final buyer of the truck to provide a package, including a battery and a
charger unit. The Company is seeking to increase its share of the North
American industrial battery charger market through private branding for other
companies in the industry and by expanding beyond the material handling
market.
APPLIED ENGINEERING AND MANUFACTURING
The Company has built an engineering team with in-depth design and
application experience, which has allowed it to introduce innovative new
products and applications. Processes and systems common to a number of product
lines are directed by engineers at the Company's research and development
facility in Ann Arbor, Michigan. Company engineers work closely with partners
at a number of major universities, including the University of Michigan, in
the areas of electronics, magnetics, alternative materials and product
testing. Product design, development and application are performed by
dedicated engineering teams located at the Company's manufacturing facilities
which work closely with customers to design products and systems that meet
each customer's specifications.
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<PAGE>
The Company generally focuses on applications which are high value-added in
terms of engineering or require special customer support as these markets
provide higher margins than many high-volume applications. The Company prefers
to work with customers to achieve "designed-in" status. For example, in the
material handling market more than twenty-five motors were custom designed in
1996 to fit specific lift trucks being developed by the Company's OEM
customers. The Company's engineering strengths, combined with its market
knowledge and the broad range of products offered within each product
category, enable the Company to assist its customers with the design and
manufacture of integrated system solutions to meet its customers' needs, such
as the entire charging and starting system of a heavy duty truck or the motive
power system of a forklift. The Company expects that such system selling will
become more prevalent as the Company's OEM customers seek to reduce the number
of suppliers and lower the overall cost of their products by using components
designed to work together.
The Company's present management team, which joined Prestolite following
Genstar's acquisition of Prestolite in 1991, has instituted continuous
improvement programs at all of Prestolite's manufacturing facilities,
including synchronous manufacturing techniques, cellular manufacturing
arrangements and kanban-based just-in-time inventory control. Changes in
manufacturing methods have made floor space available for expansion at most of
Prestolite's facilities. From 1992 to 1997, Prestolite increased its sales per
employee by approximately 65% and increased its sales per square foot of
manufacturing and warehouse space by approximately 160%. Ongoing training
programs for Prestolite's experienced workforce are an integral part of such
continuous improvement efforts.
COMPETITION
The markets in which the Company operates are highly competitive. While no
single competitor competes with the Company in all of its product lines, the
Company faces significant competition in each of its product lines. In
addition, the Company is under constant pressure from its major OEM customers
to reduce product costs. Management believes that the Company's experience in
engineering and implementing cost reduction programs and its ability to
develop new and improved products and to control manufacturing and development
costs should allow the Company's products and prices to remain competitive.
See "Risk Factors--Competition."
Alternators. Delco Remy America ("Delco") is the Company's principal
competitor in the North American market for truck alternators in both the OEM
and aftermarket segments. Some national and many local remanufacturers also
compete in the aftermarket. The Company's principal competitor in the North
American transportation refrigeration and off-road portions of the market for
heavy duty alternators is Bosch. Bosch is also the Company's principal
competitor in the European market for truck alternators. The Company's
principal competitors in the South African and Argentine OEM market include
Bosch and other international corporations that import into such markets. C.E.
Niehoff is the Company's major competitor in the market for military
alternators. The Company's principal competitors in the market for high-
amperage (165 to 300 ampere) commercial alternators are Lestek and Powerline.
At the lower end of the heavy duty alternator market, automotive-based designs
and foreign competitors are a significant factor.
Motors. The Company's principal competitors in the North American and
European starter motor market are Delco and Bosch, respectively. Principal
North American competitors in the material handling motor market are General
Electric and Advanced DC. The Company's principal competitors in the South
African and Argentine OEM market include Bosch and other international
corporations that import into such markets.
Relays and Controls. The Company's principal competitors in the solenoid
market are Electromation and Automotive Controls (Echlin) in the light truck
sector; Stancor Electric (Emerson) in the heavy duty market; Stancor Electric
and Clum in the material handling market; and Stancor Electric in industrial
markets. The Company's principal competitors in the contactor market are
Albright Engineers (primarily in Europe), Contact Industries and, in the
forklift aftermarket, Intrupa Manufacturing.
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<PAGE>
Battery Chargers. The Company's principal competitors in the battery charger
market include Hertner and Ferro Magnetic.
PATENTS, TRADEMARKS AND LICENSES
The Company holds various patents and trademarks related to its products. No
single patent or trademark is currently of material importance to the
Company's operations. The Company has applied for a U.S. patent for its self-
diagnostic alternator.
The Company has the exclusive right to use the "Prestolite Electric" trade
name for use with motor and ignition parts through a perpetual, royalty-free
license from AlliedSignal Corporation. "Prestolite Wire" and "Prestolite
Batteries" are sold by unrelated companies. In connection with the Hobart
acquisition, the Company acquired the use of the "Hobart" brand name for
battery chargers for five years from the February 28, 1996 acquisition date.
Lucas Industries retained all rights to the "Lucas" trade name and logo and
certain other trademarks of Lucas Industries following the Lucas Acquisition.
As part of the Lucas Acquisition, Lucas Argentina, Lucas South Africa and
Prestolite U.K. are each permitted for a transition period to brand products
manufactured and sold by them with certain Lucas Industries trademarks.
In connection with the Lucas Acquisition the Company expects to enter into
an agreement with Hitachi, Ltd., a Japanese corporation, for a seven-year non-
exclusive, non-transferrable license to manufacture and sell certain starter
motors and alternators utilizing Hitachi's proprietary technology in exchange
for a one-time fee of (Yen)30.0 million (approximately $0.2 million based on
exchange rates as of March 31, 1998) and royalty payments based on the net
sales of such products.
PROPERTIES
The Company's corporate headquarters are located at 2100 Commonwealth
Boulevard, Ann Arbor, Michigan 48105. The Company leases its headquarters. The
following table sets forth certain information regarding the facilities
operated by the Company as of the date of this Prospectus:
<TABLE>
<CAPTION>
APPROX. OWNED/
LOCATION USE SQUARE FEET LEASED
-------- ----------------- ----------- ------
<S> <C> <C> <C>
Ann Arbor, MI........................... Headquarters 11,000 Leased
Ann Arbor, MI........................... Technology Center 4,500 Leased
Arcade, NY.............................. Manufacturing 342,800 Owned
Decatur, AL............................. Manufacturing 258,000 Owned
Wagoner, OK............................. Manufacturing 50,000 Leased
Troy, OH................................ Manufacturing 160,000 Leased
Dearborn Heights, MI.................... Remanufacturing 22,000 Leased
Florence, KY............................ Warehouse 108,800 Leased
Leyland, U.K............................ Manufacturing 250,000 Owned
Cardiff, U.K............................ Manufacturing 15,000 Owned
Acton, U.K.............................. Manufacturing 368,900 Owned
Johannesburg, South Africa.............. Manufacturing 118,400 Owned
Buenos Aires, Argentina................. Manufacturing 159,000 Owned
San Lorenzo, Argentina.................. Manufacturing 76,676 Owned
San Luis, Argentina..................... Manufacturing 30,800 Owned
</TABLE>
The lease for the Company's Ann Arbor headquarters expires in October 1998;
the Ann Arbor technology center in December 1998; the Wagoner facility in
April 1999; the Troy facility in October 2006; the Dearborn Heights facility
in November 1998; and the Florence facility in June 2000.
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<PAGE>
The Company believes that it complies with all relevant environmental
regulations and that its reserves are sufficient to cover any known
environmental claims related to its properties. See Note 7 of the Notes to
PEI's Consolidated Financial Statements.
EMPLOYEES
The Company had 2,824 employees as of February 28, 1998. There are no
collective bargaining agreements in effect with respect to any of the
Company's employees, with the exception of (i) employees at the Company's
Leyland, England facility and (ii) all of the hourly and some of the salaried
employees at the five facilities acquired in the Lucas Acquisition. The
agreement covering the employees of Lucas HDP expires in January 1999. There
can be no assurance that a strike or work stoppage will not occur upon
expiration of the agreement governing Lucas HDP if such agreement is not
renewed. See "Risk Factors--Difficulty of Integrating Acquired Operations."
The Company believes that relations with its employees are excellent.
LEGAL PROCEEDINGS
From time to time the Company is involved in various litigation matters
arising in the ordinary course of its business. Management believes that none
of the matters in which the Company is currently involved, either individually
or in the aggregate, is material to the financial position, results of
operations, or cash flows of the Company.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of March 31, 1998,
with respect to the executive officers and Directors of the Issuer and PEI:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
P. Kim Packard............. 58 President, Chief Executive Officer and
Director of the Issuer and PEI
Kenneth C. Cornelius....... 53 Senior Vice President, Chief Financial Officer
and Secretary of the Issuer and PEI
Thomas C. Dolson........... 64 Vice President and Division President,
Prestolite Products Division of the Issuer
I. Conrad Schwab........... 56 Vice President and Division President,
Prestolite Power Division of the Issuer
Thomas E. Hunt............. 45 Vice President and Division President, Leece-
Neville Heavy Duty Division of the Issuer
Michael Lea................ 53 Vice President and Managing Director,
Prestolite U.K.
Dennis P. Chelminski....... 45 Controller of the Issuer, Assistant Secretary
of the Issuer and PEI
Richard D. Paterson(a)(b).. 55 Chairman of the Board and Director of the
Issuer and PEI
Ross J. Turner(b).......... 67 Director of the Issuer and PEI
John A. West(a)(b)......... 69 Director of the Issuer and PEI
</TABLE>
- - - - - - - - - - - --------
(a)Member of Audit Committee of PEI and the Issuer
(b)Member of Compensation Committee of PEI and the Issuer
P. Kim Packard joined the Issuer and PEI in December 1991 as President,
Chief Executive Officer and a Director. Prior to joining the Company, Mr.
Packard was President and Chief Operating Officer of Hobart Brothers Company
of Troy, Ohio for six years. Previously, Mr. Packard served as President of
Warner & Swasey and an officer or executive of various divisions of
Allied/Bendix. He also served in various marketing, sales, and executive
capacities with GTE Sylvania. Mr. Packard holds a B.S. in electrical
engineering from Pennsylvania State University and an M.S. from the
Massachusetts Institute of Technology, where he was a Sloan Fellow. He is also
a director of Kurz-Kasch Corporation, Dayton, Ohio.
Kenneth C. Cornelius became Senior Vice President and Chief Financial
Officer of the Issuer and PEI in August 1992 and has been Secretary of the
Issuer and PEI since 1993. Previously, he was Chief Financial Officer with M-C
Industries for three years, after spending 17 years with Maremont Corporation
in various financial positions, including eight years as Chief Financial
Officer. Mr. Cornelius holds a B.A. from Carleton College and an M.B.A. from
the University of Michigan.
Thomas C. Dolson joined the Issuer in November 1994 as President of the
Prestolite Products Division. He previously served as Chief Executive Officer
of Nitram Energy and Chief Operating Officer of M-C Industries. Mr. Dolson
also served more than twenty years in the U.S. Marine Corps, with his final
rank being Lieutenant Colonel. He holds a B.S. in Business from the University
of Idaho and M.S. in Personnel Administration from George Washington
University.
I. Conrad Schwab became an officer of the Issuer in conjunction with the
Issuer's acquisition of two product lines from Hobart in February 1996. He
joined Hobart in 1988 as General Manager of the Ground Power Division. He was
formerly General Manager, Personal Aircraft, at Piper Aircraft; Director of
Business Development for Fiat-Allis, and served in various positions for
Firestone in Europe. He received a B.A. in Biological Science from Johns
Hopkins University, did graduate studies at the University of Tubingen in
Germany and received a Master of Foreign Trade from the American Graduate
School of International Management in Phoenix.
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<PAGE>
Thomas E. Hunt joined the Issuer in July 1996 as the Leece-Neville Director
of Product Engineering. He was promoted to his current position in January
1997. Previously, he was Director of Heavy Duty Engineering with the Delco-
Remy division of General Motors, which became Delco Remy America in 1994. Mr.
Hunt joined Delco in 1974 and held various positions there before becoming the
head of heavy duty engineering in 1988. Mr. Hunt received a B.S. in Electrical
Engineering from Rose-Hulman Institute of Technology and an M.B.A. from
Anderson University.
Michael Lea became Managing Director of Prestolite U.K. in December 1993. He
had previously been Sales and Marketing Director of Polypenco Ltd. From 1977
to 1990 he served in various positions with GKN, leading to Managing Director
of GKN Composites Ltd. Mr. Lea is a Chartered Engineer holding Bachelor of
Technology in Metallurgy and Doctor of Philosophy in Engineering degrees from
Brunel University.
Dennis P. Chelminski has been Controller of the Issuer and Treasurer and
Assistant Secretary of the Issuer and PEI since February 1992. Mr. Chelminski
is also Treasurer and Assistant Secretary of PEI. He held the position of
Chief Accounting Officer from October 1991 to February 1992 and was previously
Manager of Financial Analysis. Prior to 1986, he held various financial
positions with Eltra Corporation and AlliedSignal Corporation. Mr. Chelminski
holds a B.S. in accounting from the University of Toledo, and is a C.P.A.
Richard D. Paterson has been a Director and Chairman of the Board of
Directors of the Issuer and PEI since 1991. Mr. Paterson has been Executive
Vice President and a director of Genstar Investment Corporation, an affiliate
of Genstar ("GIC"), since 1987 and was a director of Genstar from 1988 through
August 1995. In addition, he is currently a director of a number of privately
held corporations.
Ross J. Turner has been a Director of the Issuer and PEI since 1991. Mr.
Turner has been Chairman of the Board of Directors of GIC since 1987 and was a
director of Genstar from 1988 through August 1995. Mr. Turner is the Deputy
Chairman and a director of Rio Algom Limited in Canada and of Guy F. Atkinson
Company and Blue Shield of California in the United States. In addition, he is
currently a director of a number of privately held corporations.
John A. West has been a Director of the Issuer and PEI since 1991. Mr. West
has been Executive Vice President of GIC since 1992 and a director of GIC
since 1987 and was a director of Genstar from 1988 through August 1995. In
addition, he is currently a director of a number of privately held
corporations.
Directors of PEI are elected annually to serve until the next annual meeting
of shareholders of PEI or until their successors have been elected and
qualified. Executive officers of PEI are appointed by, and serve at the
discretion of, the Board of Directors of PEI. None of the executive officers
or Directors of PEI is related by blood, marriage or adoption to any other
executive officer or Director of PEI.
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes all compensation paid for the year ended
December 31, 1997 to the Company's Chief Executive Officer and the four other
highest compensated executive officers who were serving as executive officers
at December 31, 1997 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------- LONG-TERM
OTHER ANNUAL COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($)(A) COMPENSATION($)(B) AWARDS(C) COMPENSATION($)(D)
- - - - - - - - - - - --------------------------- --------- ----------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C>
P. Kim Packard.......... 305,000 249,900 -- -- 10,220
President and Chief
Executive Officer
Kenneth C. Cornelius.... 156,769 95,800 -- -- 6,034
Senior Vice President
and Chief Financial
Officer
Thomas C. Dolson........ 135,292 71,100 -- -- 6,109
Vice President and
Division President,
Prestolite Products
I. Conrad Schwab........ 134,385 94,000 -- -- 5,183
Vice President and
Division President,
Prestolite Power
Thomas E. Hunt.......... 117,308 98,700 -- -- 435
Vice President and
Division President,
Leece-Neville Heavy
Duty Division
</TABLE>
- - - - - - - - - - - --------
(a)Amounts reflect bonuses earned during 1997 but paid during 1998.
(b) Other annual compensation in the form of perquisites and other personal
benefits has been omitted where the aggregate amount of such perquisites
and other personal benefits constituted the lesser of $50,000 or 10% of
the total annual salary and bonus for the Named Executive Officer for the
year.
(c) The Company did not make any long-term incentive awards to any of the
Named Executive Officers in 1997.
(d) Amounts reflect premiums paid for life insurance coverage in excess of
$50,000 and contributions, if any, by Prestolite pursuant to its 401(k)
plan. Also includes for Messrs. Packard and Cornelius above-market
interest on deferred compensation payable pursuant to a Deferred
Compensation Agreement between each of Messrs. Packard and Cornelius and
PEI.
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OPTIONS GRANTED IN LAST FISCAL YEAR
The Company did not grant any options to purchase shares of Common Stock to
any of the Named Executive Officers during 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table summarizes the number and value of all unexercised
options held by the Named Executive Officers as of December 31, 1997. No
options were exercised by any of the Named Executive Officers during 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)(A)
------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
P. Kim Packard.............. 156,600 22,400 $2,097,224 $243,342
Kenneth C. Cornelius........ 20,900 8,600 262,322 93,276
Thomas C. Dolson............ 9,900 8,100 111,474 87,569
I. Conrad Schwab............ 3,200 4,800 33,963 50,945
Thomas E. Hunt.............. -- -- -- --
</TABLE>
- - - - - - - - - - - --------
(a) Value is based upon the fair market value of the stock as of December 31,
1997, as determined by the PEI Board of Directors, minus the exercise
price. Fair market value was determined in good faith by the Board of
Directors of PEI and was based upon the historical and projected financial
performance of the Company.
COMPENSATION OF DIRECTORS
The Directors of PEI and the Issuer do not receive any compensation for
their services as Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committees of PEI and the Issuer are
Messrs. Richard A. Paterson, chairman, and John A. West. Each is an executive
officer and currently a director of GIC and was a director of Genstar at
various times from 1988 through August 1995.
EMPLOYMENT AGREEMENTS
PEI has entered into agreements with each of Messrs. Packard, Cornelius,
Dolson, Schwab, Hunt and Lea. The agreements with Messrs. Packard, Cornelius,
Dolson, Schwab and Lea provide in each case that if the employee's employment
with PEI is terminated at any time for any reason, other than by the employee
voluntarily except in the event of a substantial diminution in
responsibilities, for cause (as defined in the respective employment
agreements) or as a result of death or disability, the terminated individual
shall receive from PEI for a period of one year following the date of
termination the then current salary and benefits that the employee would
otherwise have been entitled to receive (except for Mr. Packard who would
receive two years salary and benefits).
Each of the agreements provides that in the event that the employee's
employment is terminated at any time within twelve months following a change
of control (as defined in the respective employment agreements) for any reason
other than for cause, the agreements provide that the respective individual
would be entitled to receive from PEI an additional one year period of such
salary and benefits following the expiration of the salary and benefits such
employee is entitled to receive in the event of termination for any other
reason.
Any benefits payable under the agreements, absent mutual agreement of the
parties, shall be payable at such time and in such manner as if the employee
remained employed by PEI, and such benefits, if any, shall continue
notwithstanding re-employment and/or death of the employee following
termination of employment.
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<PAGE>
1991 OPTION PLAN
In 1991, PEI adopted the PEI Holding, Inc. Management Stock Option Plan (as
amended, the "1991 Option Plan"), designed to provide an incentive to those
designated employees of PEI to continue in their employment and to increase
their efforts for the success of PEI. The designated employees are selected in
the sole discretion of the Compensation Committee of the Board of Directors of
PEI (the "Plan Administrator"). As of April , 1998, an aggregate of 350,280
shares of Common Stock were reserved for issuance under the 1991 Option Plan.
The 1991 Option Plan provides for granting to designated employees stock
options to purchase shares of Common Stock. The Plan Administrator has sole
authority to select those individuals to whom options may be granted and to
determine the number of shares of Common Stock to be subject to the options
granted to such individual. The purchase price of each share of Common Stock
subject to the options is the fair market price of the Common Stock on the
date of the grant as determined by the Board of Directors of PEI. All options
granted are subject to the terms of the Stock Option Agreement ("Option
Agreement") entered into by the recipient of the options.
Each Option Agreement entered into by the recipient of options requires the
recipient to be bound by the terms of any stockholders agreement entered into
between certain stockholders and PEI. Options vest beginning on January 1 of
the first full calendar year following granting of the option (or on the first
anniversary of the date of grant if granted in connection with hiring) and
vest at a rate of 20% per year on each subsequent January 1. Options are not
transferable by the recipient other than by will or by the laws of descent and
distribution and are exercisable during the recipient's lifetime only by the
recipient. All options terminate on the tenth anniversary of the date of
grant. Options are exercisable within 90 days after a registration statement
pertaining to Common Stock has been filed with the Commission under the
Securities Act and declared effective, upon receipt by PEI of an acceptable
opinion of counsel stating that such options are exempt from such registration
or until PEI otherwise determines in its sole discretion.
If the recipient is terminated by PEI without cause (as defined in the
Option Agreement) or for permanent disability or death then all unvested
options are terminated and canceled on the date of termination; within 30 days
of termination PEI may make a cash payment to the recipient in the amount of
the excess of the fair market value of the Common Stock subject to such
options over the exercise price for such shares, or make such other decisions
with respect to such options as in the sole discretion of PEI. If the
recipient is terminated for cause then all options, including vested and
unvested options, are canceled on the last day of such recipient's employment.
In the event of a merger or consolidation of PEI (subsequent to which the
present stockholders of PEI own less than 50% of the voting stock of the
surviving entity), a sale of all or substantially all of the assets of PEI to
an entity not affiliated with Genstar or a dissolution or liquidation of PEI,
then the Plan Administrator may provide for the vesting of up to all options
outstanding within 30 days of such event or authorize a cash payment to each
option holder equal to the excess of the fair market value of the shares of
Common Stock subject to such holder's option over the applicable exercise
price. The options are subject to anti-dilution provisions in the event of a
change in the capital structure of PEI.
As of April , 1998, options to purchase an aggregate of 268,840 shares of
Common Stock at prices from $5.00 to $18.86 were outstanding under the 1991
Option Plan.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth certain information regarding beneficial
ownership of the Common Stock of PEI as of April, 1998 by (i) each person or
entity known by PEI to own beneficially 5% or more of the Common Stock; (ii)
each Director and Named Executive Officer; and (iii) all executive officers
and Directors as a group. PEI owns 100% of the Common Stock of the Issuer. As
of April , 1998, there were 1,993,000 shares of Common Stock outstanding:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------
NAME NUMBER(A) PERCENT(A)
---- --------------- -------------
<S> <C> <C>
Genstar Capital Corporation (b)........... 1,920,000 96.3%
Scotia Plaza, Suite 4900
40 King Street West
Toronto, Ontario M54 4AA
Canada
P. Kim Packard (c)........................ 102,000 5.1
c/o Prestolite Electric Incorporated
2100 Commonwealth Blvd.
Ann Arbor, Michigan 48105
Kenneth C. Cornelius (d).................. 17,100 *
Thomas C. Dolson (e)...................... 11,500 *
I. Conrad Schwab (f)...................... 8,000 *
Thomas E. Hunt (g)........................ 8,000 *
Richard D. Paterson (h)................... 89,280 4.5
Ross J. Turner (h)........................ 89,280 4.5
John A. West (h).......................... 89,280 4.5
All executive officers and Directors as a
group (10 persons) (i)................... 264,380 13.3
</TABLE>
- - - - - - - - - - - --------
* Less than 1%
(a) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of Common Stock subject to options or warrants
currently exercisable or convertible, or exercisable or convertible within
60 days of April , 1998, are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated in the footnotes to this table and pursuant to applicable
community property laws, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock
beneficially owned.
(b) Genstar's shares are held of record by The Royal Trust Company, a licensed
trust company in Canada, that holds the shares for the benefit of Genstar,
its preferred shareholders and GIC.
(c) Consists of 17,000 shares of Common Stock and 85,000 shares issuable upon
exercise of options that are currently exercisable or exercisable within
60 days of April , 1998. Does not include 53,900 shares issuable upon
exercise of options which vest more than 60 days after April , 1998.
(d) Consists of 8,000 shares of Common Stock and 9,100 shares issuable upon
exercise of options that are currently exercisable or exercisable within
60 days of April , 1998. Does not include 19,000 shares issuable upon
exercise of options which vest more than 60 days after April , 1998.
(e) Consists of 8,000 shares of Common Stock and 3,500 shares issuable upon
exercise of options that are currently exercisable or exercisable within
60 days of April , 1998. Does not include 15,100 shares issuable upon
exercise of options which vest more than 60 days after April , 1998.
(f) Consists of 8,000 shares of Common Stock. Does not include 6,900 shares
issuable upon exercise of options which vest more than 60 days after April
, 1998.
(g) Consists of 8,000 shares of Common Stock. Does not include 6,900 shares
issuable upon exercise of options which vest more than 60 days after April
, 1998.
(h) Consists of 89,280 shares of Common Stock indirectly owned by GIC by
virtue of GIC's ownership in Genstar, as to which Messrs. Paterson, Turner
and West may be deemed to be beneficial owners. Excludes the remaining
shares of Common Stock owned by Genstar as to which Messrs. Paterson,
Turner and West disclaim beneficial ownership. See "Certain Transactions--
GIC Management Agreement." Genstar owns approximately 84.9% of the Common
Stock of PEI on a fully-diluted basis.
(i) Amount shown includes an aggregate of 110,100 shares of Common Stock
issuable upon the exercise of options exercisable within 60 days of April
, 1998. Does not include an aggregate of 128,900 shares issuable upon
exercise of options which vest more than 60 days after April , 1998.
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<PAGE>
CERTAIN TRANSACTIONS
THE RECAPITALIZATION
In connection with the Offering, the Company effected a series of
transactions that resulted in the Recapitalization of the Company. The
Recapitalization consisted of (i) the Offering (ii) the repayment of
approximately $42.0 million of outstanding indebtedness (including
approximately $3.2 million of debt of Lucas Argentina), (iii) the payment of a
dividend to PEI to enable PEI and an affiliate to purchase securities of PEI
from PEI's securityholders for an aggregate purchase price of approximately
$29.7 million, (iv) the entry by the Issuer into the New U.S. Credit Facility
providing for up to $23.0 million in revolving credit loans and (v) the entry
by Prestolite U.K. into the Temporary U.K. Credit Facility providing for
short-term borrowings of up to (Pounds)3.0 million. On April 1, 1998,
Prestolite U.K. replaced the Temporary U.K. Credit Facility with the New U.K.
Credit Facility providing for borrowings of up to (Pounds)7.0 million
(approximately $11.8 million based on exchange rates as of March 31, 1998).
See "The Transactions--The Recapitalization" and "Description of Certain
Indebtedness."
The following table summarizes all purchases of Common Stock and options and
warrants to purchase Common Stock pursuant to the Recapitalization. All shares
of Common Stock were purchased by a limited liability company affiliated with
PEI, and all options and warrants to purchase Common Stock were purchased by
PEI.
<TABLE>
<CAPTION>
NAME TOTAL SECURITIES PURCHASED PURCHASE PRICE(A)
---- -------------------------- -----------------
<S> <C> <C>
Genstar Capital Corporation
and/or the preferred
shareholders thereof........ 1,280,000(b) $24,145,408
Entities affiliated with
Cigna Mezzanine Partners
III, L.P.................... 171,740(c) 3,434,700
P. Kim Packard............... 77,600(d) 1,325,188
Kenneth C. Cornelius......... 11,800(e) 196,996
Thomas C. Dolson............. 7,200(f) 103,074
I. Conrad Schwab............. 3,200(g) 41,470
Dennis P. Chelminski......... 6,600(h) 111,722
Michael Lea.................. 9,000(i) 139,831
Other employees as a group (4
persons).................... 14,560(j) 242,192
--------- -----------
Total........................ 1,581,700 $29,740,581
========= ===========
</TABLE>
- - - - - - - - - - - --------
(a) Equal to (i) $18.86 per share of Common Stock, (ii) a price per warrant
equal to $20.00 per share of Common Stock issuable upon exercise of such
warrant and (iii) a price per option equal to $18.86 per share of Common
Stock issuable upon exercise of such option minus the applicable exercise
price. Amounts paid to management included payments to compensate for less
favorable tax treatment with respect to purchased options and were net of
any indebtedness owed to PEI pursuant to applicable stock purchase
agreements.
(b) Genstar's shares were held of record by The Royal Trust Company, a
licensed trust company in Canada, that held the shares for the benefit of
Genstar, its preferred shareholders and GIC.
(c) Consists of warrants to purchase 171,740 shares of Common Stock at an
exercise price of $0.01 per share. The warrants repurchased in the
Recapitalization constituted 100% of the equity interest in the Company of
the entities affiliated with Cigna Mezzanine Partners III, L.P.
(d) Consists of 6,000 shares of Common Stock and vested options to purchase
71,600 shares of Common Stock at an exercise price of $5.00 per share.
(e) Consists of vested options to purchase 11,800 shares of Common Stock at a
weighted average exercise price of $5.19 per share.
(f) Consists of vested and unvested options to purchase 7,200 shares of Common
Stock at a weighted average exercise price of $7.14 per share.
(g) Consists of vested options to purchase 3,200 shares of Common Stock at an
exercise price of $8.25 per share.
(h) Consists of vested options to purchase 6,600 shares of Common Stock at an
exercise price of $5.00 per share.
(i) Consists of vested and unvested options to purchase 9,000 shares of Common
Stock at a weighted average exercise price of $6.14 per share.
(j) Consists of vested options held by four other employees of the Company to
purchase an aggregate of 14,560 shares of Common Stock at a weighted
average exercise price of $5.02 per share.
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<PAGE>
Management also received payments with respect to purchased options that
provided management, on an after-tax basis (taking into account taxes on such
additional payments), with a net amount equal to the after-tax amount that
management would have realized had the shares issued upon exercise of such
options been held sufficiently long to qualify for the capital gains tax rate
applicable to a capital asset held for more than 18 months (assuming that
ordinary income or short-term capital gains were taxable to management at the
highest marginal tax rate applicable to such income at the time of the
purchase).
Messrs. Paterson, Turner and West, all directors of PEI, are executive
officers of GIC. Messrs. Paterson, Turner and West are also shareholders of
GIC. GIC holds approximately 4.65% of the outstanding preferred shares of
Genstar and, as a result, was entitled to approximately 4.65% of the proceeds
distributed to Genstar and/or its preferred shareholders in connection with
the Recapitalization. See "The Recapitalization" and "Principal Stockholders."
GIC acts as the advisor to Genstar, and is entitled to certain fees and
reimbursement of expenses from Genstar for services rendered to Genstar. To
the extent that GIC collects fees and expenses directly from portfolio
companies of Genstar, such as the Company, Genstar's obligation to pay these
fees and expenses to GIC is offset.
GIC MANAGEMENT AGREEMENT
The Company has entered into a management agreement (the "Management
Agreement") with GIC terminating on December 31, 2002, under which GIC has
agreed to provide the Company with ongoing management and financial advisory
services. The Company has agreed to pay GIC a fee of $200,000 per quarter as
compensation for services rendered by GIC under the Management Agreement, plus
all out-of-pocket costs and expenses incurred in connection therewith. On
January 1, 1998, this fee increased to the greater of $900,000 or 0.3% of the
Company's annual net sales. During the years ended December 31, 1995, 1996 and
1997, the Company paid management and advisory fees of $800,000, respectively,
plus out-of-pocket expenses to GIC.
SEVERANCE
In August 1997 the Company paid approximately $495,000 to a former executive
officer in connection with termination of his employment, including amounts
paid in exchange for all stock option rights, shares of Common Stock and
certain other rights held by such officer.
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<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Outstanding Notes were issued under an Indenture, dated as of January
22, 1998 (the "Indenture"), between the Issuer, PEI and U.S. Bank Trust
National Association, as Trustee (the "Trustee"). The Exchange Notes also will
be issued under the Indenture. The Outstanding Notes and the Exchange Notes
will be treated as a single class of securities under the Indenture.
The following is a summary of certain provisions of the Indenture and the
Notes. A copy of the Indenture, including the form of the Notes, has been
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. Capitalized terms used but not otherwise defined herein have the
respective meanings ascribed to them in the Indenture. For purposes of this
summary, the term "Issuer" refers only to Prestolite Electric Incorporated and
not to PEI or any Subsidiary of PEI or the Issuer.
The following summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part thereof by the TIA. Certain terms used herein and in the Indenture
are defined below under "--Certain Definitions." As used herein, the term
"Notes" means the Exchange Notes and the Outstanding Notes, treated as a
single class. Except as otherwise indicated below, the following summary
applies to both the Outstanding Notes and the Exchange Notes offered hereby.
The terms of the Exchange Notes will be identical in all respects to those of
the Outstanding Notes, except for the freely tradeable character of the
Exchange Notes (provided the Holder thereof is not an affiliate of the
Company) and the absence of certain registration rights granted to holders of
the Outstanding Notes. See "The Exchange Offer--Purpose and Effects." The
Exchange Notes will be issued solely in exchange for an equal principal amount
of Outstanding Notes pursuant to the Exchange Offer made hereby.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Issuer in the Borough of Manhattan, The City of New York (which initially
shall be the corporate trust office of the Trustee, at 100 Wall Street, Suite
1600, New York, New York 10005), except that, at the option of the Issuer,
payment of interest may be made by check mailed to the registered holders of
the Exchange Notes at their registered addresses.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Issuer may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
For each Outstanding Note accepted for exchange, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note.
TERMS OF THE NOTES
The Notes are unsecured, senior obligations of the Issuer, limited to $125.0
million aggregate principal amount, and will mature on February 1, 2008
Each Exchange Note will bear interest at a rate per annum shown on the front
cover of this Prospectus from the date of issuance thereof ( , 1998
unless the Exchange Offer is extended) or from the most recent date to which
interest on the Outstanding Notes has been paid or provided for, payable
semiannually to Holders of record at the close of business on the January 15
or July 15 immediately preceding the interest payment date on February 1 and
August 1 of each year, commencing August 1, 1998. Accordingly, registered
holders of Exchange Notes on the relevant record date for the first interest
payment date following the consummation of the Exchange Offer will receive
interest from the most recent interest payment date to which interest has been
paid on the Outstanding Notes or, if no interest has been paid, from January
22, 1998.
76
<PAGE>
Outstanding Notes accepted for exchange will cease to accrue interest from and
after the date of the consummation of the Exchange Offer. Holders whose
Outstanding Notes are accepted for exchange will not receive any payment in
respect of interest on such Outstanding Notes for any period subsequent to the
last interest payment date, if any, of the Outstanding Notes to occur prior to
the issue date of the Exchange Notes and will be deemed to have waived the
right to receive any payment in respect of interest on the Outstanding Notes
accrued from and after such interest payment date, if any. The Issuer will pay
interest on overdue principal at 1% per annum in excess of such rate, and it
will pay interest on overdue installments of interest at such higher rate to
the extent lawful. Interest on the Notes will be computed on the basis of a
360-day year of twelve 30-day months.
The interest rates on the Notes is subject to increase in certain
circumstances if the Registration Statement ceases to be effective as further
described under "--Registration Rights."
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Issuer prior to February 1, 2003. Thereafter,
the Notes will be redeemable, at the Issuer's option, in whole or in part, at
any time or from time to time, upon not less than 30 nor more than 60 days'
prior notice mailed by first-class mail to each Holder's registered address,
at the following redemption prices (expressed as a percentage of principal
amount), plus accrued interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the 12-month period
commencing on February 1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2003........................................................... 104.8125%
2004........................................................... 103.2083%
2005........................................................... 101.6042%
2006 and thereafter............................................ 100.0000%
</TABLE>
In addition, at any time and from time to time prior to February 1, 2001,
the Issuer may redeem in the aggregate up to 35% of the original aggregate
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings to the extent that, in the case of a Public Equity Offering of PEI,
the net cash proceeds thereof are contributed to the equity capital of the
Issuer, at a redemption price (expressed as a percentage of principal amount
thereof) of 109.625% plus accrued interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided,
however, that at least $81.25 million principal amount of the Notes must
remain outstanding after each such redemption.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note.
PEI GUARANTEE
PEI, as primary obligor and not merely as surety, irrevocably and
unconditionally guaranteed, on a senior basis, the performance and punctual
payment when due, whether at Stated Maturity, by acceleration or otherwise, of
all obligations of the Issuer under the Indenture and the Notes, whether for
principal of or interest on the Notes, expenses, indemnification or otherwise
(all such obligations guaranteed by PEI being herein called the "Guaranteed
Obligations"). PEI has agreed to pay, in addition to the amounts stated above,
any and all expenses
77
<PAGE>
(including reasonable counsel fees and expenses) incurred by the Trustee or
the Holders in enforcing any rights under the PEI Guarantee. PEI has no
material assets other than the common stock of the Issuer and the Existing
Non-Issuer PEI Subsidiaries.
The PEI Guarantee is a continuing guarantee and (a) will remain in full
force and effect until payment in full of all the Guaranteed Obligations, (b)
is binding upon PEI and (c) inures to the benefit of and is enforceable by the
Trustee, the Holders and their successors, transferees and assigns.
The PEI Guarantee is an unsecured senior obligation of PEI and ranks pari
passu with other senior unsecured indebtedness of PEI, including its Guarantee
of the Outstanding Notes. Under the Indenture, PEI agreed not to engage in any
activities other than holding the outstanding securities of the Issuer and the
Existing Non-Issuer PEI Subsidiaries and not to incur any liabilities other
than those relating to its guarantees of the Notes, guarantees of certain
other obligations of the Issuer, including guarantees of the performance of
the Issuer's obligations in connection with the Lucas Acquisition and
liabilities for overhead expenses, taxes, and legal, accounting and other
professional fees and expenses. See "--Certain Covenants--Restrictive Covenant
of PEI."
PEI is a holding company which derives all of its operating income from its
Subsidiaries, including the Issuer. The holders of the Notes will have no
direct claim against such Subsidiaries (other than the Issuer). The rights of
holders of the Notes to participate in any distribution of assets of any such
Subsidiary upon its liquidation, bankruptcy, reorganization or otherwise will,
as is the case with other unsecured creditors of PEI, be subject to prior
claims of creditors of that Subsidiary. PEI must rely upon dividends and other
payments from such Subsidiaries, including the Issuer, to generate the funds
to meet its obligations, including the payment of principal of, premium, if
any, and interest under its Guarantee. The ability of PEI's Subsidiaries
(other than the Issuer) to make such payments may be restricted by, among
other things, applicable state and foreign corporate laws and other laws and
regulations or by the terms of agreements to which they may become party.
RANKING
The indebtedness evidenced by the Outstanding Notes is, and the indebtedness
evidenced by the Exchange Notes will be, unsecured Senior Indebtedness of the
Issuer, ranking pari passu in right of payment with all existing and future
Senior Indebtedness of the Issuer and senior in right of payment to all
existing and future Subordinated Obligations of the Issuer. The Outstanding
Notes are, and the Exchange Notes will also be, effectively subordinated to
all existing and future Secured Indebtedness of the Issuer, including
indebtedness under the New U.S. Credit Facility, to the extent of the value of
the assets securing such Indebtedness. The Outstanding Notes are, and the
Exchange Notes will be, structurally subordinated to all existing and future
Indebtedness of any Subsidiary of the Issuer, including indebtedness under the
New U.K. Credit Facility.
As of December 31, 1997, on a pro forma basis after giving effect to the
Transactions as if the Transactions had occurred on such date, the Issuer
would have had approximately $129.5 million of consolidated indebtedness
outstanding, of which approximately $4.5 million would have represented
Secured Indebtedness, and the indebtedness of the Issuer's Subsidiaries would
have been approximately $3.2 million (excluding trade payables of
approximately $18.4 million). Although the Indenture contains limitations on
the amount of additional Indebtedness which the Issuer may Incur, under
certain circumstances the amount of such Indebtedness could be substantial
and, in any case, such Indebtedness may be Senior Indebtedness or Secured
Indebtedness. See "--Certain Covenants--Limitation on Indebtedness."
A substantial portion of the operations of the Issuer will be conducted
through its Subsidiaries. Claims of creditors of such Subsidiaries, including
trade creditors, secured creditors and creditors holding indebtedness and
guarantees issued by such Subsidiaries, and claims of holders of Preferred
Stock (if any) of such Subsidiaries generally will have priority with respect
to the assets and earnings of such Subsidiaries over the claims of creditors
of the Issuer, including holders of the Notes. The Notes, therefore, will be
effectively subordinated to creditors (including trade creditors) and holders
of Preferred Stock (if any) of Subsidiaries of the Issuer. Although
78
<PAGE>
the Indenture limits the Incurrence of Indebtedness and Preferred Stock of
certain of the Issuer's Subsidiaries, such limitation is subject to a number
of significant qualifications. Moreover, the Indenture does not impose any
limitation on the Incurrence by such Subsidiaries of liabilities that are not
considered Indebtedness or Preferred Stock under the Indenture. See "--Certain
Covenants--Limitation on Indebtedness and Preferred Stock of Subsidiaries."
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Issuer to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase (subject to the right of Holders of record on
the relevant record date to receive interest due on the related interest
payment date):
(i)prior to the first public offering of common stock of PEI or the
Issuer, the Permitted Holders cease to be the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of a majority in the aggregate of the total voting power of the
Voting Stock of the Issuer, whether as a result of issuance of securities
of PEI or the Issuer, any merger, consolidation, liquidation or dissolution
of PEI or the Issuer, any direct or indirect transfer of securities by PEI
or the Issuer or otherwise (for purposes of this clause (i) and clause (ii)
below, the Permitted Holders shall be deemed to beneficially own any Voting
Stock of a corporation (the "specified corporation") held by any other
corporation (the "parent corporation") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, in the aggregate
a majority of the voting power of the Voting Stock of the parent
corporation);
(ii)subsequent to the first public offering of common stock of PEI or the
Issuer, (A) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in clause (i) above) directly or
indirectly, of more than 35% of the total voting power of the Voting Stock
of the Issuer and (B) the Permitted Holders "beneficially own" (as defined
in clause (i) above), directly or indirectly, in the aggregate a lesser
percentage of the total voting power of the Voting Stock of the Issuer than
such other person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors of the Issuer (for the purposes of this clause (ii),
such other person shall be deemed to beneficially own any Voting Stock of a
specified corporation held by a parent corporation, if such other person is
the beneficial owner (as defined in clause (i) above), directly or
indirectly, of more than 35% of the voting power of the Voting Stock of
such parent corporation and the Permitted Holders "beneficially own" (as
defined in clause (i) above), directly or indirectly, in the aggregate a
lesser percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of such parent corporation); provided, however, that a Person
shall not be deemed the "beneficial owner" of shares tendered pursuant to a
tender or exchange offer made by such Person or any Affiliate of such
Person until the tendered shares are accepted for purchase or exchange;
(iii)during any period of two consecutive years (or, in the case this
event occurs within the first two years after the Issue Date, such shorter
period as shall have begun on the Issue Date), individuals who at the
beginning of such period constituted the Board of Directors of PEI or the
Issuer (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of PEI or
the Issuer was approved by a vote of 662/3% of the directors of PEI or the
Issuer then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of PEI or the Issuer then in office;
(iv)the merger or consolidation of PEI or the Issuer with or into another
Person or the merger of another Person with or into PEI or the Issuer, or
the sale of all or substantially all the assets of PEI or the Issuer to
another Person (other than a Person that is controlled by the Permitted
Holders), and, in the case
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of any such merger or consolidation, the securities of PEI or the Issuer
that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of PEI or
the Issuer are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving corporation.
Within 30 days following any Change of Control, the Issuer shall mail a
notice to each Holder at its registered address with a copy to the Trustee
stating: (1) that a Change of Control has occurred and that such Holder has
the right to require the Issuer to purchase such Holder's Notes at a purchase
price in cash equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest on the
relevant interest payment date); (2) the circumstances and relevant facts
regarding such Change of Control (including information with respect to pro
forma historical income, cash flow and capitalization after giving effect to
such Change of Control); (3) the repurchase date (which shall be no earlier
than 30 days nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Issuer, consistent with this covenant,
that a Holder must follow in order to have its Notes purchased.
The phrase "all or substantially all," as used with respect to a sale of
assets in the definition in the Indenture of "Change of Control," varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (the law governing the
Indenture) and is subject to judicial interpretation. Accordingly, in certain
circumstances, there may be a degree of uncertainty in ascertaining whether a
particular transaction would involve a disposition of "all or substantially
all" of the assets of a Person and therefore it may be unclear whether a
Change of Control has occurred.
The Issuer will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Issuer will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this paragraph by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
PEI, the Issuer and the Initial Purchasers. The Board of Directors of PEI has
no present intention to engage in a transaction involving a Change of Control,
although it is possible that PEI would decide to do so in the future. Subject
to the limitations discussed below, PEI or the Issuer could, in the future,
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect the Issuer's capital structure or credit rating.
Restrictions on the ability of the Issuer to incur additional Indebtedness are
contained in the covenants described under "--Certain Covenants--Limitation on
Indebtedness" and "--Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries." Such restrictions can only be waived with the
consent of the holders of a majority in principal amount of the Notes then
outstanding. Except for the limitations contained in such covenants, however,
the Indenture will not contain any covenants or provisions that may afford
holders of the Notes protection in the event of a highly leveraged
transaction.
The New U.S. Credit Facility generally prohibits the Issuer from purchasing
any Notes and will also provide that the occurrence of certain change of
control events (as defined therein) with respect to PEI or the Issuer would
constitute a default thereunder. In the event a Change of Control occurs at a
time when the Issuer is prohibited from purchasing Notes, the Issuer could
seek the consent of its lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Issuer does not
obtain such a consent or repay such borrowings, the Issuer will remain
prohibited from purchasing Notes. In such case, the Issuer's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture which would, in turn, constitute a default under the New U.S. Credit
Facility.
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Future Indebtedness of the Issuer may contain prohibitions on the occurrence
of certain events which would constitute a Change of Control or require such
Indebtedness to be repurchased upon a change of control (as defined in the
instruments governing such Indebtedness). Moreover, the exercise by the
Holders of their right to require the Issuer to repurchase the Notes could
cause a default under such indebtedness, even if the Change of Control itself
does not, due to the financial effect of such repurchase on the Issuer.
Finally, the Issuer's ability to pay cash to the Holders following the
occurrence of a Change of Control may be limited by the Issuer's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. The provisions
under the Indenture relative to the Issuer's obligation to make an offer to
repurchase the Notes as a result of a Change of Control may be waived or
modified with the written consent of the holders of a majority in principal
amount of the Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Issuer will not Incur, directly or
indirectly, any Indebtedness unless, on the date of such Incurrence and after
giving effect to such Incurrence and the application of the net proceeds
therefrom, the Consolidated Coverage Ratio would exceed 2.00:1 if such
Incurrence shall occur prior to February 1, 2000 or would exceed 2.25:1 if
such Incurrence shall occur thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Issuer may Incur any or
all of the following Indebtedness: (i) Indebtedness of the Issuer Incurred
under the New U.S. Credit Facility in an aggregate principal amount
outstanding at any time not to exceed the greater of (A) $23.0 million and (B)
the sum of (x) 50% of the book value of the inventory of the Issuer and its
Restricted Subsidiaries and (y) 85% of the book value of the accounts
receivable of the Issuer and its Restricted Subsidiaries, provided that the
amount in clause (A) shall be reduced by the aggregate amount of all proceeds
from all Asset Dispositions that have been applied since the Issue Date to
permanently reduce the outstanding amount of such Indebtedness pursuant to "--
Certain Covenants--Limitation on Sale of Assets and Subsidiary Stock" and less
the aggregate amount of all mandatory prepayments of principal of term loans
thereunder that have been made since the Issue Date; (ii) Indebtedness of the
Issuer owing to and held by any Wholly Owned Subsidiary; provided, however,
that any subsequent issuance or transfer of any Capital Stock or any other
event which results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of any such Indebtedness (except
to another Wholly Owned Subsidiary) will be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the Issuer unless such
Indebtedness is assumed by the buyer of such Wholly Owned Subsidiary or
otherwise discharged in connection with such transaction and such Wholly Owned
Subsidiary is fully released in connection therewith; (iii) Indebtedness
represented by the Notes; (iv) Indebtedness of the Issuer (other than the
Indebtedness described in clauses (i), (ii) or (iii) above) outstanding on the
Issue Date; (v) Indebtedness (including Capitalized Lease Obligations) of the
Issuer Incurred to finance the acquisition, construction or improvement of
fixed or capital assets in an aggregate principal amount at any one time
outstanding not to exceed $10.0 million, provided that such Indebtedness is
Incurred within 180 days after the date of such acquisition, construction or
improvement and does not exceed the fair market value of such acquired,
constructed or improved assets, as determined in good faith by the Board of
Directors of the Issuer; (vi) Refinancing Indebtedness Incurred in respect of
any Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause
(iii), (iv) or this clause (vi); (vii) Indebtedness (A) in respect of
performance bonds, bankers' acceptances, letters of credit and surety or
appeal bonds provided by the Issuer in the ordinary course of its business and
which do not secure Indebtedness other than the Indebtedness and the
obligations with respect to which such instruments were issued and (B) under
Currency Agreements and Interest Rate Agreements Incurred which, at the time
of Incurrence, is in the ordinary course of business; provided, however, that,
in the case of Currency Agreements which relate to Indebtedness and Interest
Rate Agreements, such Currency Agreements and Interest Rate Agreements are
directly related to Indebtedness permitted to be Incurred by the Issuer
pursuant to the Indenture; (viii) Indebtedness represented by Guarantees by
the Issuer of Indebtedness otherwise permitted to be Incurred pursuant to this
covenant or "--Certain Covenants--Limitation on Indebtedness and Preferred
Stock of Restricted Subsidiaries"; and (ix) other Indebtedness in an aggregate
principal amount outstanding at any time not to exceed $10.0 million.
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(c) Notwithstanding the foregoing, the Issuer shall not Incur any
Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof
are used, directly or indirectly, to Refinance any Subordinated Obligations
unless such new Indebtedness shall be subordinated to the Notes to at least
the same extent as such Subordinated Obligations being Refinanced.
(d) For purposes of determining compliance with the foregoing covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than one
of the types of Indebtedness described above, the Issuer, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses
and (ii) an item of Indebtedness may be divided and classified in more than
one of the types of Indebtedness described above.
Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries. The Issuer shall not permit any Restricted Subsidiary to Incur,
directly or indirectly, any Indebtedness or Preferred Stock except: (a)
Indebtedness (1) Incurred under the U.K. Credit Facility (including Guarantees
thereof by Wholly-Owned Subsidiaries of Prestolite U.K.) in an aggregate
principal amount outstanding at any time not to exceed the greater of (A)
(Pounds)9.0 million and (B) the sum (such sum, the "Borrowing Base") of (x)
50% of the book value of the inventory of Prestolite Electric Limited (or any
successor entity) and its Restricted Subsidiaries and (y) 80% of the book
value of the accounts receivable of such entities, (2) Incurred under the
Argentina Credit Facility in an aggregate principal amount outstanding at any
time not to exceed the greater of (A) $8.0 million and (B) the Borrowing Base
of Lucas Argentina or any other Non-U.S./U.K. Subsidiary having more than 66-
2/3% of its tangible assets located in Argentina or Brazil, and its Restricted
Subsidiaries and (3) Incurred under the South Africa Credit Facility in an
aggregate principal amount outstanding at any time not to exceed the greater
of (A) $3.0 million and (B) the Borrowing Base of Lucas Holdings South Africa
(Proprietary) Ltd. (or any successor entity) and its Restricted Subsidiaries,
provided that each of the amounts in clauses (1)(A), (2)(A) and (3)(A) shall
be reduced by the aggregate amount of all proceeds from all Asset Dispositions
that have been applied since the Issue Date to permanently reduce the
outstanding amount of such Indebtedness pursuant to the covenant "Limitation
on Sale of Assets and Subsidiary Stock" and less the aggregate amount of all
mandatory prepayments of principal of term loans thereunder that have been
made since the Issue Date; (b) Indebtedness or Preferred Stock of a Restricted
Subsidiary issued to and held by the Issuer or a Wholly Owned Subsidiary;
provided, however, that any subsequent issuance or transfer of any Capital
Stock which results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of such Indebtedness or Preferred
Stock (other than to the Issuer or a Wholly Owned Subsidiary) shall be deemed,
in each case, to constitute the issuance of such Indebtedness or Preferred
Stock by the issuer thereof unless such Indebtedness is assumed by the buyer
of such Wholly Owned Subsidiary or otherwise discharged in connection with
such transaction and such Wholly Owned Subsidiary is fully released in
connection therewith; (c) Indebtedness or Preferred Stock of a Restricted
Subsidiary Incurred and outstanding on or prior to the date on which such
Restricted Subsidiary was acquired by the Issuer (other than Indebtedness or
Preferred Stock Incurred in connection with, or to provide all or any portion
of the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the Issuer); provided,
however, that on the date of such acquisition and after giving effect thereto,
the Issuer would have been able to Incur at least $1.00 of additional
Indebtedness pursuant to clause (a) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness"; (d) Indebtedness or Preferred Stock
outstanding on the Issue Date, including (i) any such Indebtedness acquired or
assumed in connection with the Lucas Acquisition and (ii) promissory notes
issued by Lucas Argentina in connection with any contingent obligations of
Lucas Argentina pursuant to the terms of the Lucas Acquisition (in each case
other than Indebtedness described in clauses (a) and (b) of this paragraph);
(e) Refinancing Indebtedness Incurred in respect of Indebtedness or Preferred
Stock referred to in clauses (c) or (d)(i) of this paragraph or this clause
(e); provided, however, that to the extent such Refinancing Indebtedness
directly or indirectly Refinances Indebtedness or Preferred Stock of a
Subsidiary described in clause (c), such Refinancing Indebtedness shall be
Incurred only by such Subsidiary; and (f) Indebtedness (A) in respect of
performance bonds, bankers' acceptances, letters of credit and surety or
appeal bonds provided by a Restricted Subsidiary in the ordinary course of its
business and which do not secure Indebtedness other than the Indebtedness and
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obligations with respect to which they were issued and (B) under Currency
Agreements which relate to other Indebtedness and Interest Rate Agreements
Incurred which, at the time of Incurrence, is in the ordinary course of
business; provided, however, that, in the case of Currency Agreements and
Interest Rate Agreements, such Currency Agreements and Interest Rate
Agreements are directly related to Indebtedness permitted to be Incurred by a
Restricted Subsidiary pursuant to the Indenture.
The Issuer will not permit any Unrestricted Subsidiary to Incur any
Indebtedness other than Non-Recourse Debt, provided, however, if any such
Indebtedness ceases to be Non-Recourse Debt, such event shall be deemed to
constitute an Incurrence of Indebtedness by the Issuer or a Restricted
Subsidiary.
Limitation on Restricted Payments. (a) The Issuer will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to make any
Restricted Payment if at the time of such Restricted Payment: (1) a Default or
Event of Default will have occurred and be continuing (or would result
therefrom); (2) the Issuer could not Incur at least $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness;" or (3) the aggregate amount of such
Restricted Payment and all other Restricted Payments (the amount so expended,
if other than in cash, to be determined in good faith by the Board of
Directors of the Issuer, whose determination will be evidenced by a resolution
of such Board of Directors certified in an Officers' Certificate to the
Trustee) declared or made subsequent to the Issue Date would exceed the sum
of: (A) 50% of the Consolidated Net Income accrued during the period (treated
as one accounting period) from the beginning of the fiscal quarter immediately
following the fiscal quarter during which the Issue Date occurs to the end of
the most recent fiscal quarter ending prior to the date of such Restricted
Payment for which financial statements are available (or, in case such
Consolidated Net Income will be a deficit, minus 100% of such deficit); (B)
the aggregate Net Cash Proceeds received by the Issuer from the issue or sale
of Capital Stock (other than Disqualified Stock) or other cash contributions
from PEI to its capital subsequent to the Issue Date (other than an issuance
or sale to a Subsidiary of the Issuer and other than an issuance or sale to a
trust established by the Issuer, or any of its Restricted Subsidiaries); (C)
the amount by which Indebtedness of the Issuer is reduced on the Issuer's
balance sheet upon the conversion or exchange (other than by a Restricted
Subsidiary) subsequent to the Issue Date of any Indebtedness of the Issuer
convertible or exchangeable for Capital Stock (other than Disqualified Stock)
of the Issuer (less the amount of any cash, or the fair value of any other
property, distributed by the Issuer upon such conversion or exchange); and (D)
an amount equal to the sum of (i) the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, repayments of loans or
advances or other transfers of assets to the Issuer or any Restricted
Subsidiary from Unrestricted Subsidiaries and (ii) the portion (proportionate
to the Issuer's equity interest in such Subsidiary) of the fair market value
of the net assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided, that the foregoing
sum shall not exceed, in the case of any Unrestricted Subsidiary, the amount
of Investments previously made by the Issuer or any Restricted Subsidiary in
such Unrestricted Subsidiary, which amount was included in the calculation of
the amount of Restricted Payments.
(b) The provisions of the foregoing paragraph (a) will not prohibit: (i) any
purchase, redemption, defeasance or other acquisition of Capital Stock of the
Issuer or Subordinated Obligations made by exchange for, or out of the net
proceeds of the substantially concurrent sale of, Capital Stock of the Issuer
(other than Disqualified Stock and other than Capital Stock issued or sold to
a Subsidiary of the Issuer or to a trust established by the Issuer or any of
its Subsidiaries); provided, however, that (A) such purchase, redemption,
defeasance or other acquisition will be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such sale
will be excluded from clause (3)(B) of paragraph (a) above; (ii) any purchase,
redemption, defeasance or other acquisition of Subordinated Obligations made
by exchange for, or out of the net proceeds of the substantially concurrent
sale of, Subordinated Obligations of the Issuer; provided, however, that (A)
the principal amount of such new Indebtedness does not exceed the principal
amount of the Subordinated Obligations being so redeemed, repurchased,
acquired or retired for value (plus the amount of any premium required to be
paid under the terms of the instrument governing the Subordinated Obligations
being so redeemed, repurchased, acquired or retired), (B) such new
Indebtedness is subordinated to the Notes at least to the same extent as such
Subordinated Obligations so purchased, exchanged, redeemed, repurchased,
acquired or
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retired for value, (C) such new Indebtedness has a final scheduled maturity
date later than the earlier of the final scheduled maturity date of the
Subordinated Obligations being so redeemed and the final scheduled maturity
date of the Notes and (D) such new Indebtedness has an Average Life equal to
or greater than the Average Life of the Notes; provided further, however, that
such purchase, redemption, defeasance or other acquisition will be excluded in
the calculation of the amount of Restricted Payments; (iii) the purchase by
the Issuer or a Wholly Owned Subsidiary of shares of Lucas Argentina pursuant
to the Lucas Argentina Option; provided that the amount of any such purchase
shall be excluded from the calculation of the amount of Restricted Payments;
(iv) the purchase by the Issuer or a Wholly Owned Subsidiary of any of the
approximately 1% of the outstanding shares of Lucas Argentina not owned by the
Issuer, directly or indirectly, on the Issue Date and not subject to the Lucas
Argentina Option for an aggregate purchase price not to exceed $300,000;
provided that the amount of any such purchase shall be excluded from the
calculation of the amount of Restricted Payments; (v) any dividend,
distribution, purchase or payment made to PEI on or after the Issue Date in
connection with the Recapitalization in an aggregate amount not to exceed
$30.1 million; provided that the amount of any such dividend shall be excluded
from the calculation of the amount of Restricted Payments; (vi) any dividend
paid to PEI the proceeds of which are used for repurchases by PEI of Common
Stock of PEI from employees, officers and directors of PEI, the Issuer or any
of their respective Subsidiaries or their authorized representatives upon the
death, disability or termination of employment of such employees, in an
aggregate amount not to exceed the sum of (A) $1.0 million in any calendar
year plus (B) to the extent previously received by the Issuer, the aggregate
net cash proceeds from any reissuance during such calendar year of Common
Stock of PEI to employees, officers or directors of PEI, the Issuer and their
respective Subsidiaries plus (C) to the extent previously received by the
Issuer, the aggregate net cash proceeds from any payments on life insurance
policies with respect to any employees, officers or directors of PEI, the
Issuer and their respective Subsidiaries which proceeds are used to purchase
the Common Stock of PEI held by any such employees, officers or directors;
provided that the amount of any such dividend shall be included in the
calculation of the amount of Restricted Payments; (vii) any dividend paid to
PEI in respect of overhead expenses, tax liabilities and legal, accounting and
other professional fees and expenses that are directly attributable to the
operations of the Company and its Restricted Subsidiaries, provided that the
amount of any such dividends will be excluded from the calculation of the
amount of Restricted Payments; and (viii) dividends paid within 60 days after
the date of declaration thereof if at such date of declaration such dividend
would have complied with this covenant; provided, however, that the amount of
such dividend will be included in the calculation of the amount of Restricted
Payments; and provided further that, at the time of, and after giving effect
to, any Restricted Payment permitted by clauses (i), (ii), (iv) and (vi) no
Default or Event of Default shall have occurred and be continuing.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Issuer will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock to the Issuer or a Restricted Subsidiary or pay any
Indebtedness or other obligation owed to the Issuer, (ii) make any loans or
advances to the Issuer or (iii) transfer any of its property or assets to the
Issuer or any Restricted Subsidiary, except: (1) any encumbrance or
restriction pursuant to an agreement in effect at or entered into on the Issue
Date; (2) any encumbrance or restriction with respect to the Argentina Credit
Facility, the South Africa Credit Facility or the U.K. Credit Facility;
provided, however, that, except during a period when a default or an event of
default under such facilities shall have occurred and be continuing, no such
encumbrance or restriction shall limit the ability of the applicable borrower
under any such facility to dividend, loan, advance or otherwise transfer funds
to the Issuer required to pay interest, including additional interest,
principal and premium, if any, on the Notes, (3) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary on or
prior to the date on which such Restricted Subsidiary was acquired by the
Issuer or a Restricted Subsidiary (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Subsidiary
or was acquired by the Issuer or a Restricted Subsidiary) and outstanding on
such date; (4) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (1), (2) or (3) of this
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covenant or contained in any amendment to an agreement referred to in clause
(1), (2) or (3) of this covenant; provided, however, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are no less favorable to the Noteholders
than the encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such predecessor agreements, as determined in good
faith by the Issuer and evidenced by an Officers' Certificate; (5) in the case
of clause (iii), any encumbrance or restriction that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is
subject to a lease, license or similar contract; (6) in the case of clause
(iii), contained in security agreements or mortgages securing Indebtedness of
a Restricted Subsidiary to the extent such encumbrance or restrictions
restrict the transfer of the property subject to such security agreements or
mortgages; (7) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and (8) any such encumbrance
or restriction imposed by applicable law.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Issuer will not,
and will not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) the Issuer or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at
least equal to the fair market value of the shares and assets subject to such
Asset Disposition (including as to the value of all non cash consideration),
as determined in good faith by the Board of Directors of the Issuer, (ii) at
least 75% of the consideration thereof received by the Issuer or such
Restricted Subsidiary is in the form of cash or cash equivalents and (iii) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Issuer or such Restricted Subsidiary, as the case may be, (A)
first, to the extent the Issuer or any Restricted Subsidiary, as the case may
be, elects (or is required by the terms of any Senior Indebtedness), to
prepay, repay, redeem or purchase Senior Indebtedness of the Issuer or
Indebtedness (other than Disqualified Stock) of a Restricted Subsidiary (in
each case other than Indebtedness owed to the Issuer or an Affiliate of the
Issuer) within 180 days from the later of the date of such Asset Disposition
or the receipt of such Net Available Cash; provided, however, that any
temporary prepayment or temporary repayment of amounts outstanding under the
New U.S. Credit Facility pending application pursuant to clause (B) shall not
constitute a prepayment or repayment of Senior Indebtedness pursuant to this
clause (A); (B) second, to the extent of the balance of Net Available Cash
after application in accordance with clause (A), to the extent the Issuer or
such Restricted Subsidiary, as the case may be, elects, to the investment by
the Issuer or any Wholly Owned Subsidiary in Additional Assets within 360 days
from the later of the date of such Asset Disposition or the receipt of such
Net Available Cash; (C) third, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A) and (B), to
make an Offer (as defined below) to Holders of the Notes to purchase Notes
pursuant to and subject to the conditions set forth in paragraph (b) of this
covenant; and (D) fourth, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A), (B) and (C), to (x) the
acquisition by the Issuer or any Wholly Owned Subsidiary of Additional Assets
or (y) the prepayment, repayment or purchase of Indebtedness of the Issuer
(other than Indebtedness owed to an Affiliate of the Issuer and other than
Disqualified Stock of the Issuer) or Indebtedness of any Restricted Subsidiary
(other than Indebtedness owed to the Issuer or an Affiliate of the Issuer), in
each case within 360 days from the later of the receipt of such Net Available
Cash and the date the Offer is consummated; provided, however that in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A) or (C) above, the Issuer or such Restricted Subsidiary will
permanently retire such Indebtedness and will cause any related loan
commitment or availability (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions, the Issuer and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash in
accordance herewith except to the extent that the aggregate Net Available Cash
from all Asset Dispositions which are not applied in accordance with this
covenant exceeds $5.0 million. Pending application of Net Available Cash
pursuant to this covenant, such Net Available Cash shall be invested in
Permitted Investments or to reduce outstanding loans under any working capital
facility.
For the purposes of this covenant but not for purposes of the definition of
"Net Available Cash", the following are deemed to be cash: (x) the assumption
by the transferee of Indebtedness of the Issuer (other than Disqualified Stock
of the Issuer and other than Indebtedness that is subordinated to the Notes)
or Indebtedness
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of any Restricted Subsidiary and the release of the Issuer or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such
Asset Disposition and (y) securities received by the Issuer or any Restricted
Subsidiary from the transferee that are promptly converted by the Issuer or
such Restricted Subsidiary into cash.
Notwithstanding the requirement in clause (ii) above that at least 75% of
the consideration received in connection with an Asset Disposition consist of
cash or cash equivalents, the Issuer or its Restricted Subsidiaries may sell
or cause to be sold (A) assets of Lucas Argentina or its Subsidiaries or (B)
shares of Capital Stock of Lucas Argentina or its Subsidiaries representing
less than 50% of the total voting power of the Capital Stock thereof in
exchange for Additional Assets, equity interests in joint ventures or other
Persons engaged in a Related Business; provided that (1) in the event such
exchange transaction or series of related exchange transactions (each an
"Exchange Transaction") involves an aggregate value in excess of $1.0 million,
the terms of such Exchange Transaction shall have been approved by a majority
of the members of the Board of Directors of the Issuer having no personal
stake in such Exchange Transaction, (2) in the event such Exchange Transaction
involves an aggregate value in excess of $5.0 million, the Issuer shall have
received a written opinion from a nationally recognized independent investment
banking firm that the Issuer has received consideration equal to the fair
market value of the assets or Capital Stock being disposed of and (3) the fair
market value (as determined in good faith by the Board of Directors of the
Issuer as of the date of each such Exchange Transaction) of all such Exchange
Transactions made since the Issue Date is no more than $10.0 million in the
aggregate.
(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (a)(iii)(C) of this covenant, the Issuer will be required
to purchase Notes tendered pursuant to an offer by the Issuer for the Notes
(the "Offer") at a purchase price of 100% of their principal amount (without
premium) plus accrued interest to the date of purchase in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
the Indenture. If the aggregate purchase price of Notes tendered pursuant to
the Offer is less than the Net Available Cash allotted to the purchase of the
Notes, the Issuer will apply the remaining Net Available Cash in accordance
with clause (a)(iii)(D) above. The Issuer shall not be required to make an
Offer for Notes pursuant to this covenant if the Net Available Cash available
therefor (after application of the proceeds as provided in clauses (A) and
(B)) are less than $10.0 million for all Asset Dispositions (which lesser
amounts shall be carried forward for purposes of determining whether an Offer
is required with respect to the Net Available Cash from any subsequent Asset
Disposition).
(c) The Issuer will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Issuer will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
Limitation on Transactions with Affiliates. (a) The Issuer will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter
into or conduct any transaction or series of transactions (including the
purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with any Affiliate of the Issuer
(an "Affiliate Transaction") unless (i) the terms of such transaction are no
less favorable to the Issuer or such Restricted Subsidiary, as the case may
be, than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate; (ii) in the
event such Affiliate Transaction involves an aggregate amount in excess of
$1.0 million, the terms of such transaction are set forth in writing and shall
have been approved by a majority of the members of the Board of Directors
having no personal stake in such Affiliate Transaction (and such majority
determines that such Affiliate Transaction satisfies the criteria in clause
(i) above) and (iii) in the event such Affiliate Transaction involves an
aggregate amount in excess of $5.0 million, the Issuer has received a written
opinion from a nationally recognized independent investment banking firm that
such Affiliate Transaction is fair to the Issuer and its Restricted
Subsidiaries from a financial point of view.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any
Restricted Payment permitted to be made pursuant to "--Certain Covenants--
Limitation on Restricted Payments," (ii) any issuance of
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securities, or other payments, awards or grants in cash, securities or
otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii)
the grant of stock options or similar rights to employees and directors of the
Issuer pursuant to plans approved by the Board of Directors, (iv) loans or
advances to employees in the ordinary course of business in accordance with
the past practices of the Issuer or its Restricted Subsidiaries, but in any
event not to exceed $1.5 million in the aggregate outstanding at any one time,
(v) the payment of reasonable fees and indemnities to directors of the Issuer
and its Restricted Subsidiaries who are not employees of the Issuer or its
Restricted Subsidiaries, (vi) any transaction between the Issuer and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries, (vii) the issuance or
sale of any Capital Stock (other than Disqualified Stock) of the Issuer and
(viii) the payment to Genstar Investment Corporation or an affiliate of an
annual management fee not to exceed an amount per annum equal to the greater
of $900,000 and 0.3% of the Issuer's consolidated net sales, plus, in each
case, the reimbursement of reasonable out-of-pocket expenses.
Limitation on Liens. The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or permit to exist any Lien on
any of its property or assets (including Capital Stock), whether owned on the
Issue Date or thereafter acquired, securing any obligation, other than
Permitted Liens, unless contemporaneously therewith effective provision is
made to secure the Notes equally and ratably with (or on a senior basis to, in
the case of Subordinated Obligations) such obligation for so long as such
obligation is so secured.
Limitation on Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Issuer (i) will not, and will not permit any Restricted
Subsidiary of the Issuer to, transfer, convey, sell, lease or otherwise
dispose of any Capital Stock of any Restricted Subsidiary to any Person (other
than to the Issuer or a Wholly Owned Subsidiary), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of
such Restricted Subsidiary (or, (x) in the case of a non-Wholly Owned
Subsidiary, all of the Capital Stock of such Subsidiary owned by the Issuer
and (y) in the case of Lucas Argentina and its Subsidiaries, shares of Capital
Stock in Exchange Transactions in accordance with the covenant "--Limitation
on Sales of Assets and Subsidiary Stock" so long as after any such sale Lucas
Argentina continues to constitute a Restricted Subsidiary) and (b) the net
cash proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with the covenant described above under "Limitation
on Sales of Assets and Subsidiary Stock" and (ii) will not permit any
Restricted Subsidiary to issue any of its Capital Stock (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares or similar shares and, in the case of a Non-U.S./U.K. Subsidiary,
shares required to be owned by citizens of such Subsidiary's jurisdiction of
organization) to any Person other than to the Issuer or a Wholly Owned
Subsidiary or to officers or employees of such Restricted Subsidiary in
connection with stock options or stock ownership or other benefit plans
approved by the Board of Directors of the Issuer.
Limitation on Sale/Leaseback Transactions. The Issuer will not, and will not
permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction
with respect to any property unless (i) the Issuer or such Restricted
Subsidiary would be entitled to (A) Incur Indebtedness in an amount equal to
the Attributable Indebtedness with respect to such Sale/Leaseback Transaction
pursuant to the covenant described under "--Certain Covenants--Limitation on
Indebtedness" and (B) create a Lien on such property securing such
Attributable Indebtedness without equally and ratably securing the Notes
pursuant to the covenant described under "--Certain Covenants--Limitation on
Liens," (ii) the net cash proceeds received by the Issuer or any Restricted
Subsidiary in connection with such Sale/Leaseback Transaction are at least
equal to the fair value (as determined in good faith by the Board of Directors
of the Issuer and certified in an Officers' Certificate to the Trustee) of
such property and (iii) the transfer of such property is permitted by, and the
Issuer or such Restricted Subsidiary applies the proceeds of such transaction
in compliance with, the covenant described under "--Certain Covenants
Limitation on Sales of Assets and Subsidiary Stock."
SEC Reports. Notwithstanding that PEI and the Issuer may not be subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, PEI and
the Issuer will file with the SEC (unless the SEC will not accept such a
filing) and provide within 15 days to the Trustee and Noteholders such annual
reports and such
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information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections. In lieu of filing and providing separate reports as set forth above,
PEI and the Issuer may, so long as PEI owns 100% of the Capital Stock of the
Issuer and if permitted by the SEC, include in the reports filed and provided
by PEI as set forth above such financial information and narrative disclosure
regarding the Issuer and the PEI Guarantee as required by the SEC in lieu of
filing such separate reports. PEI and the Issuer also will comply with the
other provisions of TIA 314(a).
Restrictive Covenant of PEI. PEI shall not (i) engage in any activities or
hold any assets other than the Capital Stock of the Issuer and of the Existing
Non-Issuer PEI Subsidiaries or (ii) Incur any liabilities other than (A)
liabilities under the PEI Guarantee, (B) liabilities under Guarantees by PEI
of amounts under the New U.S. Credit Facility, (C) liabilities under
Guarantees by PEI of the performance of the Issuer's obligations in connection
with the Lucas Acquisition and (D) liabilities for overhead expenses, taxes
and legal, accounting and other professional fees and expenses. PEI shall not
make any Investment other than in (i) the Voting Stock of the Issuer and of
the Existing Non-Issuer PEI Subsidiaries, (ii) Guarantees permitted by this
covenant, (iii) Temporary Cash Investments and (iv) connection with the
Recapitalization; provided, however, that if PEI merges into the Issuer, this
covenant shall no longer be applicable.
Restrictive Covenant of Existing Non-Issuer PEI Subsidiaries. PEI shall
cause each Existing Non-Issuer PEI Subsidiary not to (i) engage in any
activities other than activities conducted by such Existing Non-Issuer PEI
Subsidiary as of the Issue Date or (ii) Incur any liabilities; provided,
however, that if any Existing Non-Issuer PEI Subsidiary shall merge into the
Issuer or any Wholly Owned Subsidiary, this covenant shall no longer be
applicable with respect to such Existing Non-Issuer PEI Subsidiary. As of the
Issue Date, no Existing Non-Issuer PEI Subsidiary engages in any activities
other than the holding of trademarks, trade names and other intellectual
property rights, and the shares of common stock of PEI purchased in the
Recapitalization, with the exception of Prestolite Electric of Michigan
Incorporated, which employs the Company's field sales force and Michigan-based
employees. All of the Capital Stock of each Existing Non-Issuer PEI Subsidiary
is owned by PEI.
MERGER AND CONSOLIDATION
The Issuer will not consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, all or
substantially all its assets to, any Person, unless: (i) the resulting,
surviving or transferee Person (the "Successor Issuer") will be a Person
organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor Issuer (if not the
Issuer) will expressly assume, by supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Issuer under the Notes and the Indenture; (ii) immediately
after giving effect to such transaction (and treating any Indebtedness which
becomes an obligation of the Successor Issuer or any Restricted Subsidiary as
a result of such transaction as having been Incurred by the Successor Issuer
or such Restricted Subsidiary at the time of such transaction), no Default or
Event of Default will have occurred and be continuing; (iii) immediately after
giving effect to such transaction, the Successor Issuer would be able to Incur
an additional $1.00 of Indebtedness under paragraph (a) of the covenant
described under "--Certain Covenants--Limitation on Indebtedness;" (iv)
immediately after giving effect to such transaction, the Successor Issuer will
have a Consolidated Net Worth in an amount which is not less than the
Consolidated Net Worth of the Issuer immediately prior to such transaction;
and (v) the Issuer will have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture (if any) comply with the Indenture,
as set forth in the Indenture.
The Successor Issuer will succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under the Indenture, but the
predecessor Issuer in the case of a conveyance, transfer or lease of all or
substantially all its assets will not be released from the obligation to pay
the principal of and interest on the Notes.
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DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a
default in the payment of principal of any Note when due at its Stated
Maturity, upon optional redemption, upon required repurchase, upon declaration
or otherwise, (iii) the failure by the Issuer to comply with its obligations
under "--Merger and Consolidation," (iv) the failure by PEI or the Issuer to
comply for 30 days after notice with any of its obligations under the
covenants described under "--Change of Control" or "--Certain Covenants" (in
each case, other than a failure to purchase Notes), (v) the failure by PEI or
the Issuer to comply for 60 days after notice with its other agreements
contained in the Indenture, (vi) the failure by PEI or the Issuer or any
Significant Subsidiary of the Issuer to pay any Indebtedness within any
applicable grace period after final maturity or the acceleration of any such
Indebtedness by the holders thereof because of a default if the total amount
of such Indebtedness unpaid or accelerated exceeds $10.0 million or its
foreign currency equivalent (the "cross acceleration provision"), (vii)
certain events of bankruptcy, insolvency or reorganization of PEI, the Issuer
or any Significant Subsidiary of the Issuer (the "bankruptcy provisions") or
(viii) any judgment or decree for the payment of money in excess of $10.0
million is rendered against PEI, the Issuer or any Significant Subsidiary of
the Issuer and either (A) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree and is not discharged, waived or stayed
within 10 days after notice and is not covered by insurance or (B) such
judgment or decree remains outstanding for a period of 60 days following such
judgment and is not discharged, waived or stayed within 10 days after notice
(the "judgment default provision") and is not covered by insurance.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
However, a default under clauses (iv), (v), (vi) and (viii) will not
constitute an Event of Default until the Trustee or the Holders of 25% in
aggregate principal amount of the outstanding Notes notify the Issuer as
provided in the Indenture of the default and the Issuer does not cure such
default within the time specified in clauses (iv) and (v) hereof after receipt
of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the outstanding Notes by
notice to the Issuer may declare the principal of and accrued but unpaid
interest on all the Notes to be due and payable. Upon such a declaration, such
principal and interest will be due and payable immediately. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Issuer occurs and is continuing, the principal of and accrued interest
on all the Notes will ipso facto become immediately due and payable without
any declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in aggregate principal amount
of the outstanding Notes may rescind any such acceleration with respect to the
Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee
will be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such
Holders shall have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no Holder may
pursue any remedy with respect to the Indenture or the Notes unless (i) such
Holder shall have previously given the Trustee notice that an Event of Default
is continuing, (ii) Holders of at least 25% in aggregate principal amount of
the outstanding Notes shall have requested the Trustee to pursue the remedy,
(iii) such Holders shall have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the Trustee shall not
have complied with such request within 60 days after the receipt of the
request and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Notes shall not have given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Notes are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
of exercising any trust or power
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conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other Holder or that
would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the
Default within the earlier of 90 days after it occurs or 30 days after it is
known to a Trust Officer or written notice of it is received by the Trustee.
Except in the case of a Default in the payment of principal of, premium (if
any) or interest on any Note, the Trustee may withhold notice if and so long
as a committee of its Trust Officers in good faith determines that withholding
notice is not opposed to the interests of the Noteholders. In addition, the
Issuer is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous year. The Issuer also is
required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Issuer is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Notes) and any past default or compliance with any provisions may be
waived with the consent of the Holders of a majority in principal amount of
the Notes then outstanding. However, without the consent of each Holder of an
outstanding Note affected, no amendment may, among other things, (i) reduce
the amount of Notes whose Holders must consent to an amendment, (ii) reduce
the rate of or extend the time for payment of interest on any Note, (iii)
reduce the principal of or extend the Stated Maturity of any Note, (iv) reduce
the premium payable upon the redemption of any Note or change the time at
which any Note may be redeemed as described under "--Optional Redemption," (v)
make any Note payable in money other than that stated in the Note, (vi) impair
the right of any Holder to receive payment of principal of and interest on
such Holder's Notes on or after the due dates therefor or to institute suit
for the enforcement of any payment on or with respect to such Holder's Notes
or (vii) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions.
Without the consent of any Holder, the Issuer and the Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations the Issuer
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are as described in Section 163(f)(2)(B) of
the Code), to add Guarantees with respect to the Notes, to secure the Notes,
to add to the covenants of the Issuer for the benefit of the Noteholders or to
surrender any right or power conferred upon the Issuer, to make any change
that does not adversely affect the rights of any Holder and to comply with any
requirement of the SEC in connection with the qualification of the Indenture
under the TIA.
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Issuer is
required to mail to Noteholders a notice briefly describing such amendment.
However, the failure to give such notice to all Noteholders, or any defect
therein, will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and transfer documents and the Issuer may require a Noteholder to pay any
taxes required by law
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or permitted by the Indenture, including any transfer tax or other similar
governmental charge payable in connection therewith. The Issuer is not
required to transfer or exchange any Note selected for redemption or to
transfer or exchange any Note for a period of 15 days prior to a selection of
Notes to be redeemed. The Notes will be issued in registered form and the
registered holder of a Note will be treated as the owner of such Note for all
purposes.
DEFEASANCE
The Issuer at any time may terminate all its obligations under the Notes and
the Indenture ("legal defeasance"), except for certain obligations, including
those respecting the defeasance trust and obligations to register the transfer
or exchange of the Outstanding Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Issuer at any time may terminate its obligations under the
covenants described under "Certain Covenants (other than the covenant
described under "--Merger and Consolidation")," the operation of the cross
acceleration provision, the bankruptcy provisions with respect to Significant
Subsidiaries and the judgment default provision described under "Defaults" and
the limitations contained in clauses (iii) and (iv) under "Merger and
Consolidation" ("covenant defeasance").
The Issuer may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Issuer exercises its
legal defeasance option, payment of the Notes may not be accelerated because
of an Event of Default with respect thereto. If the Issuer exercises its
covenant defeasance option, payment of the Notes may not be accelerated
because of an Event of Default specified in clause (iv), (v), (vi), (vii)
(with respect only to Significant Subsidiaries) or (viii) under "--Defaults"
above or because of the failure of the Issuer to comply with clause (iii) or
(iv) under "--Merger and Consolidation."
In order to exercise either defeasance option, the Issuer must irrevocably
deposit or cause to be deposited in trust (the "defeasance trust") with the
Trustee money or U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide cash at such times and in such amounts as will be
sufficient to pay principal and interest when due on all the Notes (except
lost, stolen or destroyed Notes which have been replaced or repaid) to
maturity or redemption, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and
will be subject to federal income tax on the same amounts and in the same
manner and at the same times as would have been the case if such deposit and
defeasance had not occurred (and, in the case of legal defeasance only, such
Opinion of Counsel must be based on a ruling of the Internal Revenue Service
or other change in applicable federal income tax law).
CONCERNING THE TRUSTEE
U.S. Bank Trust National Association (formerly known as First Trust National
Association) is the Trustee under the Indenture and has been appointed by the
Issuer as Registrar and Paying Agent with regard to the Outstanding Notes and
the Exchange Notes.
The Holders of a majority in principal amount of the issued and outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that if an Event of Default occurs
(and is not cured), the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any Holder of Notes, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense and then only to the extent required by the terms of the Indenture.
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GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock
of a Person that becomes a Wholly Owned Restricted Subsidiary as a result of
the acquisition of such Capital Stock by the Issuer or another Wholly Owned
Restricted Subsidiary; (iii) shares of Capital Stock of a Person that becomes
a Non-U.S./U.K. Subsidiary as a result of the acquisition of such Capital
Stock by the Issuer or a Wholly Owned Restricted Subsidiary; or (iv) Capital
Stock constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; provided, however, that, in the case of clauses (ii),
(iii) and (iv), such Restricted Subsidiary is primarily engaged in a Related
Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the covenants in the Indenture, "Affiliate" shall
also mean any beneficial owner of Capital Stock representing 10% or more of
the total voting power of the Voting Stock (on a fully diluted basis) of the
Issuer or of rights or warrants to purchase such Voting Stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Argentina Credit Facility" means one or more credit facilities to be
entered into on or after the Issue Date among one or more of Lucas Argentina
or any other Non-U.S./U.K. Subsidiary having more than 66-2/3% of its tangible
assets located in Argentina or Brazil and the lenders from time to time party
thereto, including any collateral documents, instruments and agreements
executed in connection therewith, and the term Argentina Credit Facility shall
also include any amendments, supplements, modifications, extensions, renewals,
restatements or refundings thereof and any credit facilities that replace,
refund or refinance any part of the loans, other credit facilities or
commitments thereunder, including any such replacement, refunding or
refinancing facility that increases the amount borrowable thereunder or alters
the maturity thereof.
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by the Issuer or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of
this definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or similar
shares or shares required by applicable law to be held by a Person other than
the Issuer or a Restricted Subsidiary or issuances of shares permitted under
"--Certain Covenants--Limitation on Sale or Issuance of Capital Stock of
Restricted Subsidiaries."), (ii) all or substantially all the assets of any
division or line of business of the Issuer or any Restricted Subsidiary or
(iii) any other assets of the Issuer or any Restricted Subsidiary outside of
the ordinary course of business of the Issuer or such Restricted Subsidiary
(other than, in the case of (i), (ii) and (iii) above, (v) a pledge, sale or
transfer of title of receivables in connection with a Permitted Lien described
in clause (l) of the definition thereof, (w) a disposition of obsolete or
worn-out assets, (x) a disposition by a Restricted Subsidiary to the Issuer or
by the Issuer or a Restricted Subsidiary to a Wholly Owned Subsidiary, (y) for
purposes of the covenant described under "--Certain Covenants--Limitation on
Sales of Assets and Subsidiary Stock" only, a disposition that constitutes a
Restricted Payment permitted by the covenant described under "--Certain
Covenants--Limitation on Restricted Payments" and (z) disposition of assets
with a fair market value of less than $500,000).
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"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the product of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee thereof duly authorized to act on
behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other day on
which banking institutions in New York City are authorized or required by law
to close.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented
by such obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP; and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such
determination for which financial statements are available to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided,
however, that (1) if the Issuer or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or if
the transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period, (2) if the Issuer or any Restricted
Subsidiary has repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of such period or if any Indebtedness is to
be repaid, repurchased, defeased or otherwise discharged (in each case other
than Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
date of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall
be calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if the Issuer or such Restricted Subsidiary
has not earned the interest income actually earned during such period in
respect of cash or Temporary Cash Investments used to repay, repurchase,
defease or otherwise discharge such Indebtedness, (3) if since the beginning
of such period the Issuer or any Restricted Subsidiary shall have made any
Asset Disposition or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Issuer or any Restricted Subsidiary repaid, repurchased,
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defeased or otherwise discharged with respect to the Issuer and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Issuer and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (4) if since the beginning of such period the Issuer or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment
in any Restricted Subsidiary (or any Person which becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of assets
occurring in connection with a transaction requiring a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit of
a business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first
day of such period and (5) if since the beginning of such period any Person
(that subsequently became a Restricted Subsidiary or was merged with or into
the Issuer or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition, any Investment or acquisition of assets
that would have required an adjustment pursuant to clause (3) or (4) above if
made by the Issuer or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or
acquisition of assets occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Issuer. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if
the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Issuer and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
Incurred by the Issuer or its Restricted Subsidiaries, without duplication,
(i) interest expense attributable to Capitalized Lease Obligations and to
leases constituting part of a Sale/Leaseback Transaction, (ii) amortization of
debt discount and debt issuance cost, (iii) capitalized interest, (iv) non-
cash interest expense, (v) commissions and discounts owed with respect to
letters of credit and bankers' acceptance financing, (vi) net costs associated
with Hedging Obligations (including amortization of fees), (vii) Preferred
Stock dividends in respect of all Preferred Stock of the Issuer and its
Subsidiaries held by Persons other than the Issuer or a Wholly Owned
Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any
other Person to the extent such Indebtedness is Guaranteed by (or secured by
the assets of) the Issuer or any Restricted Subsidiary and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Issuer) in connection with Indebtedness
Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Issuer and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income:
(i)any net income (loss) of any Person (other than the Issuer) if such
Person is not a Restricted Subsidiary, except that (A) subject to the
exclusion contained in (iv) below, the Issuer's equity in the net income of
any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Issuer or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained
in clause (iii) below) and (B) the Issuer's equity in a net loss of any
such Person for such period shall be included in determining such
Consolidated Net Income,
(ii)any net income (loss) of any Person acquired by the Issuer or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition,
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(iii)any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Issuer, except that (A) subject
to the exclusion contained in (iv) below the Issuer's equity in the net
income of any such Restricted Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Restricted Subsidiary during such period to the Issuer
or another Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to another
Restricted Subsidiary, to the limitation contained in this clause) and (B)
the Issuer's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income,
(iv)any gain or loss realized upon the sale or other disposition of any
assets of the Issuer, its consolidated Subsidiaries or any other Person
(including pursuant to any Sale/Leaseback Transaction) which is not sold or
otherwise disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any Capital Stock of
any Person,
(v)any extraordinary gain or loss, and
(vi)the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described
under "--Certain Covenants--Limitation on Restricted Payments" only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Issuer or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under such covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Issuer and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Issuer ending prior to the taking of any action for the
purpose of which the determination is being made for which financial
statements are available, as (i) the par or stated value of all outstanding
Capital Stock of the Issuer plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to
protect such Person against fluctuations in currency values as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness
or Disqualified Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes; provided, however, that any
Capital Stock that would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require such Person to repurchase
or redeem such Capital Stock upon the occurrence of an "asset sale" or "change
of control" occurring prior to the first anniversary of the Stated Maturity of
the Notes shall not constitute Disqualified Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock than the provisions described
under "--Change of Control" and "--Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock."
"EBITDA" for any period means the sum of Consolidated Net Income, plus the
following to the extent deducted in calculating such Consolidated Net Income:
(a) Consolidated Interest Expense, (b) all income tax
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expense of the Issuer and its consolidated Restricted Subsidiaries, (c)
depreciation expense of the Issuer and its consolidated Restricted
Subsidiaries, (d) amortization expense of the Issuer and its consolidated
Restricted Subsidiaries (excluding amortization expense attributable to a
prepaid cash item that was paid in a prior period) and (e) all other non-cash
charges of the Issuer and its consolidated Restricted Subsidiaries (excluding
any such non-cash charge to the extent that it represents an accrual of or
reserve for cash expenditures in any future period), in each case for such
period. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization and non-cash
charges of, a Restricted Subsidiary shall be added to Consolidated Net Income
to compute EBITDA only to the extent (and in the same proportion) that the net
income of such Restricted Subsidiary was included in calculating Consolidated
Net Income and only if a corresponding amount would be permitted at the date
of determination to be divided to the Issuer by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Non-Issuer PEI Subsidiaries" means, collectively, PEI 1998 LLC, a
Delaware limited liability company, Prestolite International Sales
Corporation, a Delaware corporation, Prestolite Electric of Michigan,
Incorporated, a Delaware corporation, Megatron Industries Incorporated, a
Delaware corporation, Leece-Neville Corporation, a Delaware corporation, and
Beech Electric Corporation, a Delaware corporation.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such Person (whether arising by
virtue of partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole
or in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by
such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence"
when used as a noun shall have a correlative meaning. The accretion of
principal of a non-interest bearing or other discount security shall be deemed
the Incurrence of Indebtedness.
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"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i)the principal in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii)all Capitalized Lease Obligations of such Person and all Attributable
Indebtedness in respect of Sale/Leaseback Transactions entered into by such
Person;
(iii)all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding Trade Payables arising in the ordinary course of business);
(iv)all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (i) through (iii)
above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following receipt by such Person of a demand for reimbursement
following a payment on the letter of credit);
(v)the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(vi)all obligations of the type referred to in clauses (i) through (v) of
other Persons and all dividends of other Persons for the payment of which,
in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(vii)all obligations of the type referred to in clauses (i) through (vi)
of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii)to the extent not otherwise included in this definition, net
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; provided,
however, that the amount outstanding at any time of any Indebtedness Incurred
with original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar
agreement or arrangement designed to protect such Person against fluctuations
in interest rates as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person. For purposes of the
definitions of "Unrestricted Subsidiary" and "Restricted Payment" and "--
Certain Covenants--Limitation on Restricted Payments", (i) "Investment" shall
include the portion (proportionate to the Issuer's equity interest in such
Subsidiary) of the fair market value of the net assets
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of any Subsidiary of the Issuer at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation of
such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to
continue to have a permanent "Investment" in an Unrestricted Subsidiary equal
to an amount (if positive) equal to (x) the Issuer's "Investment" in such
Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Issuer's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time that such
Subsidiary is so re-designated a Restricted Subsidiary; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors and evidenced by a resolution of such Board of
Directors certified in an Officers' Certificate to the Trustee.
"Issue Date" means the date on which the Outstanding Notes are originally
issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Lucas Argentina" means, collectively, Lucas Indiel Argentina S.A., an
Argentine corporation, Prestolite Newco, Inc., a Delaware corporation, and
Lucas Argentine Holdings Inc., a Delaware corporation, or any successor entity
to either or any of the foregoing.
"Lucas Argentina Option" means the right of the Issuer to acquire, directly
or indirectly, all of the shares of Capital Stock of Lucas Argentina not
owned, directly or indirectly, by the Issuer as of the Issue Date, other than
approximately 1% of the outstanding shares of Capital Stock of Lucas
Argentina, for an aggregate purchase price not to exceed 1.23 million
Argentine Pesos.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise and proceeds from
the sale or other disposition of any securities received as consideration, but
only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other non
cash form) therefrom, in each case net of (i) all legal, title and recording
tax expenses, commissions and other fees and expenses incurred, and all
Federal, state, provincial, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien
upon or other security arrangement of any kind with respect to such assets, or
which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law, be repaid out of the proceeds from
such Asset Disposition, (iii) all distributions and other payments required to
be made to minority interest holders in Restricted Subsidiaries or joint
ventures as a result of such Asset Disposition and (iv) the deduction of
appropriate amounts to be provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the assets disposed of in
such Asset Disposition and retained by the Issuer or any Restricted Subsidiary
after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"New U.S. Credit Facility" means that certain credit facility, dated as of
January 22, 1998, entered into among the Issuer and the lenders from time to
time party thereto, including any collateral documents, instruments and
agreements executed in connection therewith, and the term New U.S. Credit
Facility shall also include any amendments, supplements, modifications,
extensions, renewals, restatements or refundings thereof and any credit
facilities that replace, refund or refinance any part of the loans, other
credit facilities or commitments thereunder, including any such replacement,
refunding or refinancing facility that increases the amount borrowable
thereunder or alters the maturity thereof.
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"Non-Recourse Debt" means Indebtedness (i) as to which neither the Issuer
nor any Restricted Subsidiary (a) provides any Guarantee or credit support of
any kind (including any undertaking, Guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise) and (ii) no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Issuer or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior
to its stated maturity.
"Non-U.S./U.K. Subsidiary" means any Restricted Subsidiary of the Issuer
having more than 66 2/3% of its tangible assets located in one or more
jurisdictions outside of the United States or the United Kingdom.
"PEI" means PEI Holding, Inc., the Issuer's parent corporation.
"PEI Guarantee" means the Guarantee of the Notes by PEI.
"Permitted Holders" means Genstar Capital Corporation, its Affiliates and
its stockholders and the Issuer's executive officers as of the Issue Date.
"Permitted Investment" means an Investment by the Issuer or any Restricted
Subsidiary in (i) the Issuer, a Restricted Subsidiary or a Person which will,
upon the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Issuer or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Issuer or any
Restricted Subsidiary, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms; provided, however, that such trade terms may include such concessionary
trade terms as the Issuer or any such Restricted Subsidiary deems reasonable
under the circumstances; (v) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (vi) loans or advances to employees made in the ordinary
course of business consistent with past practice of the Issuer or such
Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to
the Issuer or any Restricted Subsidiary or in satisfaction of judgments;
(viii) any Person (including a joint venture) to the extent such investment
represents the non-cash portion of the consideration received for an Asset
Disposition as permitted pursuant to the covenant described under "Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock"; (ix) Lucas
Argentina in connection with the exercise by the Issuer of the Lucas Argentina
Option; (x) joint ventures in Related Businesses made in exchange for or
conversion of Investments existing on the Issue Date in other joint ventures
in Related Businesses; and (xi) joint ventures in an aggregate amount at any
one time outstanding not to exceed $10.0 million, provided that such joint
ventures are engaged in a Related Business.
"Permitted Liens" means, with respect to any Person, (a) pledges or deposits
by such Person under workmen's compensation laws, unemployment insurance laws
or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits or cash or United States government
bonds to secure surety or appeal bonds to which such Person is a party, or
deposits as security for contested taxes or import duties or for the payment
of rent, in each case incurred in the ordinary course of business; (b) Liens
imposed by law, such as carriers', warehousemen's and mechanics' Liens, in
each case for sums not yet due or being contested in good faith by appropriate
proceeding or other Liens arising out of judgments or awards against such
Person with respect to which such Person shall then be proceeding with an
appeal or other proceedings for review; (c) Liens for property taxes not yet
subject to penalties for non-payment, which are being contested in good faith
by appropriate proceedings or with respect to which adequate reserves have
been recorded in accordance with GAAP; (d) Liens in favor of issuers of surety
bonds or letters of credit issued pursuant to the request of and for the
account of such Person in the ordinary course of its business;
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(e) survey exceptions, encumbrances, easements or reservations of, or rights
of others for, licenses, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions as
to the use of real properties or liens incidental to the conduct of the
business of such Person or to the ownership of its properties; (f) Liens
securing Hedging Obligations so long as the related Indebtedness is, and is
permitted to be under the Indenture, secured by a Lien on the same property
securing such Hedging Obligations; (g) leases and subleases of real property
which do not interfere with the ordinary conduct of the business of the Issuer
or any of its Restricted Subsidiaries, and which are made on customary and
usual terms applicable to similar properties; (h) Liens existing as of the
Issue Date and Liens created by the Indenture; (i) Liens created solely for
the purpose of securing the payment of all or a part of the purchase price of
assets or property acquired or constructed in the ordinary course of business
after the date on which the Notes are originally issued; provided, however,
that (A) the aggregate principal amount of Indebtedness secured by such Liens
shall not exceed the lesser of cost or fair market value of the assets or
property so acquired or constructed, (B) the Indebtedness secured by such
Liens shall have otherwise been permitted to be issued under the Indenture and
(C) such Liens shall not encumber any other assets or property of the Issuer
or any of its Restricted Subsidiaries and shall attach to such assets or
property within 180 days of the construction or acquisition of such assets or
property; (j) Liens on the assets or property of a Restricted Subsidiary of
the Issuer existing at the time such Restricted Subsidiary became a Subsidiary
of the Issuer and not incurred as a result of (or in connection with or in
anticipation of) such Restricted Subsidiary becoming a Subsidiary of the
Issuer; provided, however, that (A) any such Lien does not by its terms cover
any property or assets after the time such Restricted Subsidiary becomes a
Subsidiary which were not covered immediately prior to such transaction, (B)
the incurrence of the Indebtedness secured by such Lien shall have otherwise
been permitted to be issued under the Indenture, and (C) such Liens do not
extend to or cover any other property or assets of the Issuer or any of its
Restricted Subsidiaries; (k) Liens to secure Capitalized Lease Obligations
permitted to be Incurred under the Indenture; (l) Liens on accounts
receivable, inventory and general intangibles securing Indebtedness
outstanding or committed under the New U.S. Credit Facility and the South
Africa Credit Facility and Liens securing Indebtedness outstanding or
committed under the Argentina Credit Facility and the U.K. Credit Facility;
(m) Liens extending, renewing or replacing in whole or in part a Lien
permitted by the Indenture; provided, however, that (A) such Liens do not
extend beyond the property subject to the existing Lien and improvements and
construction on such property and (B) the Indebtedness secured by the Lien may
not exceed the Indebtedness secured at the time by the existing Lien;
(n) Liens on inventory deemed to arise by reason of the consignment of
inventory in the ordinary course of business of the Issuer and its Restricted
Subsidiaries; and (o) Liens on the assets or property of a Restricted
Subsidiary of the Issuer to secure Indebtedness of such Restricted Subsidiary
owing to and held by the Issuer.
"Person" means any individual, corporation, partnership joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"Principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time; provided, however, that for purposes of calculating any such
premium, the term "principal" shall not include the premium with respect to
which such calculation is being made.
"Public Equity Offering" means an underwritten primary public offering of
common stock of PEI or the Issuer pursuant to an effective registration
statement under the Securities Act.
"Recapitalization" means any one or more of the following transactions, any
one or more of which may occur on or following the Issue Date: (i) the payment
of a dividend by the Issuer to PEI; (ii) the making by PEI of an Investment in
a Wholly Owned Subsidiary for the purpose of effecting a repurchase of the
Capital Stock of
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PEI, (iii) the purchase by PEI or such Wholly Owned Subsidiary of shares of
Capital Stock of PEI from the holders thereof, (iv) the purchase by PEI of
options or warrants to purchase shares of Capital Stock of PEI from the
holders thereof, and/or (v) the payment by PEI of certain additional amounts
to the holders of options to purchase shares of Capital Stock of PEI;
provided, however, that the total of the payments referred to in clauses (i)
through (v), net of any amounts received from the holders of such shares,
options or warrants in connection with such transactions, shall not exceed
$30.1 million in the aggregate.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness, and shall
include the Refinancing of multiple facilities with a single facility and the
Refinancing of a single facility with multiple facilities. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Issuer or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture (including Indebtedness of
the Issuer that Refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that Refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that Refinances
Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being Refinanced, (ii) the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is Incurred that is
equal to or greater than the Average Life of the Indebtedness being Refinanced
and (iii) such Refinancing Indebtedness is Incurred in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue price)
that is equal to or less than the sum of the aggregate principal amount (or if
issued with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Issuer or (y) Indebtedness of
the Issuer or a Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Related Business" means any business related, ancillary or complementary to
the businesses of the Issuer and the Restricted Subsidiaries on the date of
the Indenture.
"Restricted Payment" with respect to any Person means (i) the declaration or
payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Issuer or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Issuer held by any Person
or of any Capital Stock of a Restricted Subsidiary held by any Person (other
than a Restricted Subsidiary), including the exercise of any option to
exchange any Capital Stock (other than into Capital Stock of the Issuer that
is not Disqualified Stock), (iii) the purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) the
making of any Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Issuer other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Issuer or a Restricted Subsidiary
transfers such property to a Person and the Issuer or a Restricted Subsidiary
leases such property from such Person.
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"SEC" means the U.S. Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Issuer secured by a
Lien.
"Senior Indebtedness" means (i) Indebtedness of the Issuer, whether
outstanding on the Issue Date or thereafter Incurred, and (ii) accrued and
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Issuer to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of the Issuer for money borrowed and (B) indebtedness evidenced
by notes, debentures, bonds or other similar instruments for the payment of
which the Issuer is responsible or liable unless, in the case of (i) and (ii),
in the instrument creating or evidencing the same or pursuant to which the
same is outstanding, it is provided that such obligations are subordinate in
right of payment to the Notes; provided, however, that Senior Indebtedness
shall not include (1) any obligation of the Issuer to any Subsidiary, (2) any
liability for Federal, state, local or other taxes owed or owing by the
Issuer, (3) any Trade Payables arising in the ordinary course of business, (4)
any Indebtedness of the Issuer (and any accrued and unpaid interest respect
thereof) which is subordinate or junior in any respect to any other
Indebtedness or other obligation of the Issuer, (5) that portion of any
Indebtedness which at the time of Incurrence is Incurred in violation of the
Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Issuer within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"South Africa Credit Facility" means one or more credit facilities to be
entered into on or after the Issue Date among Lucas Holdings South Africa
(Proprietary) Limited, or any successor entity, and the lenders from time to
time party thereto, including any collateral documents, instruments and
agreements executed in connection therewith, and the term South Africa Credit
Facility shall also include any amendments, supplements, modifications,
extensions, renewals, restatements or refundings thereof and any credit
facilities that replace, refund or refinance any part of the loans, other
credit facilities or commitments thereunder, including any such replacement,
refunding or refinancing facility that increases the amount borrowable
thereunder or alters the maturity thereof.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Issuer (whether
outstanding on the Issue Date or thereafter Incurred) which is expressly
subordinate or junior in right of payment to the Notes pursuant to a written
agreement.
"Subsidiary" of any Person means any corporation, association, partnership,
limited liability company or other business entity of which more than 50% of
the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i)
such Person, (ii) such Person and one or more Subsidiaries of such Person or
(iii) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized
by the United States of America having capital, surplus and undivided profits
aggregating in excess of $50.0 million (or the
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foreign currency equivalent thereof) and whose long-term debt is rated "A" (or
such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money market fund sponsored by a registered broker
dealer or mutual fund distributor including those offered by the Trustee or an
affiliate of the Trustee, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than 90
days after the date of acquisition, issued by a corporation (other than an
Affiliate of an Issuer) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or
"A-1" (or higher) according to Standard & Poor's Ratings Group, (v)
investments in securities with maturities of six months or less from the date
of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings
Group or "A" by Moody's Investors Service, Inc.; and (vi) investments in
mutual funds, whose investment guidelines restrict such funds' investments to
investments which are substantially similar to those described in clauses (i)-
(v).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb)
as in effect on the date of the Indenture.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"U.K. Credit Facility" means one or more credit facilities to be entered
into or on or after the Issue Date among Prestolite Electric Limited, or any
successor entity, or any of its Wholly Owned Subsidiaries and the lenders from
time to time party thereto, including any collateral documents, instruments
and agreements executed in connection therewith, and the term U.K. Credit
Facility shall also include any amendments, supplements, modifications,
extensions, renewals, restatements or refundings thereof and any credit
facilities that replace, refund or refinance any part of the loans, other
credit facilities or commitments thereunder, including any such replacement,
refunding or refinancing facility that increases the amount borrowable
thereunder or alters the maturity thereof.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Issuer that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Issuer (including any newly acquired or newly formed Subsidiary of the
Issuer) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Issuer or any other Subsidiary of the Issuer that
is not a Subsidiary of the Subsidiary to be so designated; provided, however,
that either (A) the Subsidiary to be so designated has total consolidated
assets of $1,000 or less or (B) if such Subsidiary has consolidated assets
greater than $1,000, then such designation would be permitted under "Certain
Covenants--Limitation on Restricted Payments." The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) the
Issuer could Incur $1.00 of additional Indebtedness under clause (a) of
"Certain Covenants--Limitation on Indebtedness" and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy
of the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States
of America (including any agency or instrumentality thereof) for the payment
of which the full faith and credit of the United States of America is pledged
and which are not callable or redeemable at the issuer's option.
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"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding
and normally entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers, or trustee thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Issuer all
the Capital Stock of which (other than directors' qualifying shares or similar
shares and, in the case of a Non-U.S./U.K. Subsidiary, shares required to be
owned by citizens of such Subsidiary's jurisdiction of organization) is owned
by the Issuer or one or more other Wholly Owned Subsidiaries; provided that,
notwithstanding the foregoing, the term "Wholly Owned Subsidiary" shall be
deemed to include Lucas Argentina, unless the Issuer shall not have exercised
the Lucas Argentina Option prior to August 31, 1998.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will be issued in definitive, fully registered form
without interest coupons. The Exchange Notes will be represented by one or
more permanent global Notes (the "Global Exchange Note") and will be deposited
with the Trustee as custodian for DTC and registered in the name of a nominee
of DTC. Except as set forth below, the Global Exchange Note may be
transferred, in whole and not in part, only to DTC or nominee of DTC.
Investors may hold their beneficial interests in the Global Exchange Note
directly through DTC if they are participants in such system, or indirectly
through organizations which are participants in such system.
Notes that are issued as described below under "Certificated Notes" will be
issued in definitive form. Upon the transfer of a Note in definitive form,
such Note will, unless the Global Exchange Note has previously been exchanged
for Notes in definitive form, be exchanged for an interest in the Global
Exchange Note representing the principal amount of Notes being transferred.
Upon the issuance of the Global Exchange Note, DTC will credit, on its
internal system, the respective principal amount of the individual beneficial
interests represented by such Global Exchange Note to the accounts of persons
who have accounts with such depositary. Ownership of beneficial interests in a
Global Exchange Note will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in the Global Exchange Note will be shown on, and the
transfer of that ownership will be effected only through, records maintained
by DTC or its nominee (with respect to interests of participants) and the
records of participants (with respect to interests of persons other than
participants). The laws of some jurisdictions may require that certain
purchasers of securities takes physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Exchange Note.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Exchange Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Exchange Notes represented by such
Global Exchange Note for all purposes under the Indenture and the Notes.
Except as set forth below, owners of beneficial interests in the Global
Exchange Note will not be entitled to have the Exchange Notes represented by
the Global Exchange Note registered in their names, will not receive or be
entitled to receive physical delivery of certificated Exchange Notes in
definitive form and will not be considered to be the owners or holders of any
Exchange Notes under the Global Exchange Note.
Payments of the principal of, and interest on, the Global Exchange Note will
be made to DTC or its nominee, as the case may be, as the registered owner
thereof. Neither the Issuer, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global
Exchange Note or for maintaining, supervising or reviewing any records
relating to such beneficiary ownership interests.
The Issuer expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Exchange Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global
Exchange Note as shown on the records of
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DTC or its nominee. The Issuer also expects that payments by participants to
owners of beneficial interests in such Global Exchange Note held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
DTC has advised the Issuer that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the Global Exchange Note is
credited and only in respect of such portion of the aggregate principal amount
of Exchange Notes as to which such participant or participants has or have
given such direction.
DTC has advised the Issuer as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of l934. DTC was
created to hold securities for its participants and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Exchange Note among participants of DTC,
it is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Issuer nor
the Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under
the rules and procedures governing their respective operations.
CERTIFICATED NOTES
The Exchange Notes represented by the Global Exchange Note are exchangeable
for certificated Exchange Notes in definitive form of like tenor as such
Exchange Notes in denominations of U.S. $1,000 and integral multiples thereof
if (i) DTC notifies the Issuer that it is unwilling or unable to continue as
depository for the Global Exchange Note or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act and a successor depository
is not appointed by the Issuer within 90 days, (ii) the Issuer in its
discretion at any time determines not to have all of the Exchange Notes
represented by the Global Exchange Note or (iii) an Event of Default has
occurred and is continuing. Any Exchange Note that is exchangeable pursuant to
the preceding sentence is exchangeable for certificated Exchange Notes
issuable in authorized denominations and registered in such names as DTC shall
direct. Subject to the foregoing, the Global Exchange Note is not
exchangeable, except for a Global Exchange Note of the same aggregate
denomination to be registered in the name of DTC or its nominee.
REGISTRATION RIGHTS
The holders of Exchange Notes will not be entitled to any registration
rights with respect to the Exchange Notes. Pursuant to the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, the Issuer is required by no
later than July 21, 1998 to have consummated the Exchange Offer or have
declared effective by the Commission a "shelf" registration statement for an
offering on a continuous basis of Outstanding Notes. In the event (i) the
Exchange Offer made hereby is not consummated (or a shelf registration
statement is not declared effective) as
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aforementioned, or (ii) after either the Registration Statement of which this
Prospectus constitutes a part or such shelf registration statement is declared
effective, such registration statement thereafter ceases to be effective or
usable (subject to certain exceptions) in connection with resales of
Outstanding Notes or Exchange Notes in accordance with and during the periods
specified in the Registration Rights Agreement (each such event referred to in
clause (i) and (ii) being herein called a "Registration Default"), additional
cash interest will accrue on the Outstanding Notes and the Exchange Notes at
the rate of 0.50% per annum from and including the date on which any such
Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured, calculated on the principal amount of
the Notes as of the date on which such interest is payable. Such interest is
payable in addition to any other interest payable from time to time with
respect to the Notes.
Assuming consummation of the Exchange Offer made hereby, all of the Issuer's
registration obligations with respect to the Outstanding Notes under the
Registration Rights Agreement will have been fulfilled.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an Exhibit to the Registration
Statement of which this Prospectus forms a part.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW U.S. CREDIT FACILITY
In connection with the Offering, the Issuer entered into the New U.S. Credit
Facility with Comerica Bank. The following is a summary of the material terms
and conditions of the New U.S. Credit Facility and is subject to the detailed
provisions of the New U.S. Credit Facility and various related documents
entered into in connection with the New U.S. Credit Facility.
The New U.S. Credit Facility consists of a revolving credit facility in an
aggregate principal amount of $23.0 million, including a $2.0 million letter
of credit subfacility, and will mature on January 31, 2000. Indebtedness under
the New U.S. Credit Facility is guaranteed on a senior basis by PEI and is
secured by a first priority lien on all of the Issuer's accounts receivable,
inventory and general intangibles. The Issuer is entitled to draw amounts
under the New U.S. Credit Facility, subject to availability pursuant to a
borrowing base formula based upon eligible accounts receivable and inventory
levels, in order to meet the Issuer's working capital requirements and for
general corporate purposes.
Interest accrues on amounts outstanding under the New U.S. Credit Facility
at a rate equal to the per annum interest rate established by Comerica Bank as
its prime rate for its borrowers, as such rate may vary from time to time,
plus up to 0.125% depending upon the applicable borrowing base. Such prime
rate is not necessarily the lowest rate on loans made by Comerica Bank at any
such time. The New U.S. Credit Facility does not contain any mandatory
prepayment provisions as long as the aggregate amounts outstanding under the
New U.S. Credit Facility do not exceed the applicable borrowing base. The
Issuer is permitted to prepay amounts outstanding under the New U.S. Credit
Facility in whole or in part without penalty.
The New U.S. Credit Facility also includes certain negative covenants and
restrictions on actions by the Issuer including, without limitation,
restrictions on (i) the making of investments, loans and advances and the
paying of dividends and other restricted payments; (ii) the incurrence of
additional indebtedness; (iii) the granting of liens, other than liens created
pursuant to the New U.S. Credit Facility and certain permitted liens; (iv)
mergers, consolidations and sales of all or a substantial part of the
Company's business or property; (v) the acquisition of all of the assets or a
division of another corporation or capital expenditures greater than $15.0
million in a calendar year; (vi) the sale of receivables or the repayment of
other debt; and (vii) the guarantee of certain obligations. The New U.S.
Credit Facility also requires the Company to meet certain financial covenants,
including maintaining capitalization levels, capitalization ratios, minimum
fixed charge coverage ratios and funded debt ratios. The New U.S. Credit
Facility specifies certain customary events of default including, without
limitation, non-payment of principal, interest or fees, violation of
covenants, inaccuracy of representations and warranties in any material
respect, cross default to certain other indebtedness and agreements,
bankruptcy and insolvency events, material judgments and liabilities, and
unenforceability of certain documents under the New U.S. Credit Facility. The
events of default under the New U.S. Credit Facility are substantially similar
to the events of default under the Indenture except as follows: (i) the
Issuer's failure to pay other indebtedness or judgments entered against the
Issuer will trigger a default under the New U.S. Credit Facility at lower
dollar amounts than in the Indenture; (ii) the failure of any security
interest in collateral securing the New U.S. Credit Facility will trigger a
default under the New U.S. Credit Facility; (iii) a Change of Control that
triggers the Company's repurchase obligations under the Indenture will trigger
a default under the New U.S. Credit Facility; (iv) the New U.S. Credit
Facility will prohibit the optional redemption of the Notes in certain
circumstances; and (v) the New U.S. Credit Facility will generally have
shorter grace periods and lower default thresholds than the Indenture. If the
indebtedness under the New U.S. Credit Facility were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to
repay in full such indebtedness and the other indebtedness of the Company,
including the Notes. See "Risk Factors--Restrictive Loan Covenants."
The foregoing summary of certain provisions of the New U.S. Credit Facility
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the New U.S. Credit Facility,
a copy of which has been filed as an Exhibit to the Registration Statement of
which this Prospectus forms a part.
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NEW U.K. CREDIT FACILITY
On April , 1998, Prestolite U.K. replaced the Temporary U.K. Credit
Facility (which was entered into in connection with the Recapitalization) with
the New U.K. Credit Facility providing for borrowings of up to (Pounds)7.0
million (approximately $11.8 million based on exchange rates as of March 31,
1998). Indebtedness incurred under the New U.K. Credit Facility is secured by
the accounts receivable of Prestolite U.K. Prestolite U.K. is entitled to draw
amounts under the New U.K. Credit Facility, subject to availability pursuant
to a borrowing base formula based upon eligible receivable levels, in order to
meet working capital requirements, for restructuring costs in connection with
the Lucas Acquisition and to refinance the Temporary U.K. Credit Facility. The
New U.K. Credit Facility includes certain covenants of Prestolite U.K. that,
among other things, will restrict (i) the incurrence of senior indebtedness by
Prestolite U.K., (ii) the creation or subsistence of security interests by
Prestolite U.K. (other than certain permitted loans or encumbrances) and (iii)
the payment of dividends and interest and/or repayment of capital on
intercompany indebtedness to the Issuer when Prestolite U.K. is in default
under the New U.K. Credit Facility. The New U.K. Credit Facility also requires
Prestolite U.K. to comply with certain financial covenants, including
restrictions regarding total debt, total debt service, bearing and tangible
net worth. The breach of any of these covenants could result in a default
under the New U.K. Credit Facility. Interest accrues on amounts outstanding
under the New U.K. Credit Facility at a rate equal to the lender's base rate
plus 1.75% per annum. The New U.K. Credit Facility has a term of three years.
In certain circumstances intercompany indebtedness of Prestolite U.K. to the
Issuer is subordinated to indebtedness outstanding under the New U.K. Credit
Facility, and dividend payments or other distributions by Prestolite U.K. to
the Issuer are restricted, pursuant to a Subordination Agreement between the
Issuer, Prestolite U.K. and the tender under the New U.K. Credit Facility (the
"Subordination Agreement"). Pursuant to the terms of the Subordination
Agreement, Prestolite U.K. is generally prohibited from making such payments
upon the occurrence of an event of default, or in the event that such payment
would result in an event of default, under the New U.K. Credit Agreement.
The foregoing summary of certain provisions of the New U.K. Credit Facility
and the Subordination Agreement does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the provisions of
the New U.K. Credit Facility and the Subordination Agreement, copies of which
have been filed as Exhibits to the Registration Statement of which this
Prospectus forms a part.
OTHER INDEBTEDNESS
At March 31, 1998, the Company had, on a consolidated basis, approximately
$6.0 million of other indebtedness outstanding. In connection with the Lucas
Acquisition the Company assumed approximately $7.1 million of outstanding
indebtedness of Lucas Argentina, of which approximately $3.7 million remained
outstanding following the closing of the Transactions. Such indebtedness is
comprised of short-term revolving lines of credit with a number of banks,
which lines of credit are generally unsecured and bear interest at variable
rates. In addition, approximately $2.8 million was outstanding under drawn
letters of credit.
In addition, the Company had approximately $1.0 million in capital lease
obligations as of March 31, 1998. Imputed interest rates on such capital lease
obligations range from approximately 9% to 10.5%. These capital lease
obligations are secured by the assets of various facilities and leased
equipment.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain material United States federal
income tax consequences of the acquisition, ownership and disposition of the
Exchange Notes. Unless otherwise stated, this discussion is limited to the tax
consequences to those persons who are original beneficial owners of the
Exchange Notes and who hold such Exchange Notes as capital assets ("Holders").
This discussion does not address specific tax consequences that may be
relevant to particular persons (including, for example, financial
institutions, broker-dealers, insurance companies, tax-exempt organizations,
and persons in special situations, such as those who hold Exchange Notes as
part of a straddle, hedge, short-sale, conversion transaction, or other
integrated investment). This discussion also does not address the tax
consequences to Non-U.S. Holders (as defined below) that are subject to U.S.
federal income tax on a net basis or income realized with respect to an
Exchange Note because such income is effectively connected with the conduct of
a U.S. trade or business. This discussion does not address the tax
consequences to persons that have a functional currency other than the U.S.
dollar. In addition, this discussion does not address U.S. federal alternative
minimum tax consequences or any aspect of state, local or foreign taxation.
This discussion is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as of the date hereof
and all of which are subject to change, possibly on a retroactive basis.
PROSPECTIVE PURCHASERS OF THE EXCHANGE NOTES ARE URGED TO CONSULT THEIR TAX
ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THEM
OF ACQUIRING, OWNING AND DISPOSING OF THE EXCHANGE NOTES, AS WELL AS THE
APPLICATION OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
U.S. FEDERAL INCOME TAXATION OF U.S. HOLDERS
Exchange Offer
The exchange of Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer will not be treated as a taxable "exchange" for U.S. federal
income tax purposes because the Exchange Notes will not be considered to
differ materially in kind or extent from the Outstanding Notes. As a result, a
Holder should not recognize taxable gain or loss upon the receipt of an
Exchange Note. A Holder's holding period for an Exchange Note should include
the Holder's holding period for the Outstanding Note exchanged therefor and
the Holder's adjusted tax basis in an Exchange Note should be the same as the
Holder's adjusted tax basis in such Outstanding Note.
Payments of Interest
In general, interest on an Exchange Note will be taxable to a beneficial
owner who or which is: (i) a citizen or resident of the United States; (ii) a
corporation created or organized under the laws of the United States or any
State thereof (including the District of Columbia); or (iii) a person
otherwise subject to U.S. federal income taxation on its worldwide income (a
"U.S. Holder") as ordinary income from domestic sources at the time it is
(actually or constructively) received or accrued, depending on the beneficial
owner's method of accounting for U.S. federal income tax purposes.
Bond Premium on the Exchange Notes
If a U.S. Holder of an Exchange Note purchased an Outstanding Note for an
amount in excess of the amount payable at the maturity date (or a call date,
if appropriate) of the Outstanding Note, the U.S. Holder may deduct such
excess as amortizable bond premium over the aggregate terms of the Outstanding
Notes and the Exchange Notes (taking into account earlier call dates, as
appropriate) under a yield-to-maturity formula. The deduction is available
only if an election is made by the U.S. Holder or is in effect. This election
is revocable only with the consent of the Internal Revenue Service ("IRS").
The election applies to all obligations owned or subsequently
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acquired by the U.S. Holder. The U.S. Holder's adjusted tax basis in the
Outstanding Notes and the Exchange Notes will be reduced to the extent of the
deduction of amortizable bond premium. Except as may otherwise be provided in
future regulations, under the Code amortizable bond premium is treated as an
offset to interest income on the Outstanding Notes and the Exchange Notes
rather than as a separate deduction item.
Market Discount on the Exchange Notes
The tax consequences of a disposition of the Exchange Notes may be affected
by the market discount provisions of the Code. These rules generally provide
that if a U.S. Holder acquired the Outstanding Notes or the Exchange Notes at
a market discount which equals or exceeds 1/4 of 1% of the stated redemption
price of the Exchange Notes at maturity multiplied by the number of remaining
complete years to maturity and thereafter recognizes gain upon a disposition
(or makes a gift) of the Exchange Notes, the lesser of (i) such gain (or
appreciation, in the case of a gift) or (ii) the portion of the market
discount which accrued while the Outstanding Notes or Exchange Notes were held
by such U.S. Holder will be treated as ordinary income at the time of the
disposition (or gift). For these purposes, market discount with respect to an
Exchange Note received for an Outstanding Note means the excess (if any) of
the stated redemption price at maturity over the basis of such Outstanding
Note immediately after their acquisition by the U.S. Holder. A U.S. Holder of
the Exchange Notes may elect to include any market discount (whether accrued
under the Outstanding Notes or the Exchange Notes) in income currently rather
than upon disposition of the Exchange Notes. This election once made applies
to all market discount obligations acquired on or after the first taxable year
to which the election applies, and may not be revoked without the consent of
the IRS.
A U.S. Holder of any Exchange Note who acquired an Outstanding Note or an
Exchange Note at a market discount generally will be required to defer the
deduction of a portion of the interest on any indebtedness incurred or
maintained to purchase or carry such Outstanding Note or Exchange Note until
the market discount is recognized upon a subsequent disposition of the
Exchange Note. Such a deferral is not required, however, if the U.S. Holder
elects to include accrued market discount in income currently.
Disposition of Exchange Notes
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of an Exchange Note, a U.S. Holder generally will recognize
taxable gain or loss equal to the difference between: (i) the sum of cash plus
the fair market value of all other property received on such disposition
(except to the extent such cash or property is attributable to accrued but
unpaid interest, which will be taxable as ordinary income); and (ii) such
beneficial owner's adjusted tax basis in the Exchange Note. Such gain or loss
recognized on the disposition of an Exchange Note generally will be capital
gain or loss (except to the extent of any accrued market discount). Under
recently enacted legislation, capital gains of individuals derived in respect
of capital assets held for more than one year are eligible for reduced rates
of taxation which may vary depending upon the holding period of such capital
assets. The deductibility of capital losses is subject to limitations.
U.S. FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
Under present U.S. federal income tax law and subject to the discussion of
backup withholding below:
(i)payments of principal and interest on the Exchange Notes by the Issuer
or any agent of the Issuer to any beneficial owner of an Exchange Note that
is not a U.S. Holder (a "Non-U.S. Holder") will not be subject to U.S.
federal withholding tax, provided that in the case of interest (a) (1) the
beneficial owner does not actually or constructively own 10 percent or more
of the total combined voting power of all classes of stock of the Issuer
entitled to vote within the meaning of Section 871(h)(3) of the Code and
the Treasury regulations thereunder, (2) the beneficial owner is not a
controlled foreign corporation that is related to the Issuer through stock
ownership, (3) the beneficial owner is not a bank described in Section
881(c)(3)(A) of the Code, and (4) either (A) the beneficial owner of the
Exchange Notes certifies to the Issuer or its agent on Internal Revenue
Service ("IRS") Form W-8 (or a suitable substitute form), under penalties
of perjury,
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that it is not a "U.S. person" (as defined in the Code) and provides its
name and address, or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary
course of its trade or business (a "financial institution") and holds the
Exchange Notes on behalf of the beneficial owner certifies to the Issuer or
its agent under penalties of perjury that such statement has been received
from the beneficial owner by it or by a financial institution between it
and the beneficial owner and furnishes the payor with a copy thereof or (b)
the Non-U.S. Holder is entitled to the benefits of an income tax treaty
under which interest on the Exchange Notes is exempt from U.S. federal
withholding tax and provides a properly executed IRS Form 1001 claiming the
exemption;
(i)a Non-U.S. Holder will not be subject to U.S. federal tax on gain
realized on the sale, exchange or other disposition of an Exchange Note
unless (a) the Non-U.S. Holder is an individual who is present in the
United States for a period or periods aggregating 183 or more days in the
taxable year of the disposition and certain other conditions are met or (b)
the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S.
tax law applicable to certain U.S. expatriates; and
(iii)the exchange of Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer will not be treated as a taxable "exchange" for U.S. federal
income tax purposes because the Exchange Notes will not be considered to
differ materially in kind or extent from the Outstanding Notes.
Under recently finalized Treasury regulations (the "Final Regulations"), the
certification requirement referred to in (a)(4)(A) of paragraph (i) above may
also be satisfied with other documentary evidence for interest paid after
December 31, 1998 with respect to an offshore account or through certain
intermediaries. In addition, under the Final Regulations, Non-U.S. Holders
will generally be required to provide IRS Form W-8 in lieu of IRS Form 1001 in
order to be entitled to the benefits of an income tax treaty as referred to in
(b) of paragraph (i) above. However, alternative documentation may be
applicable in certain situations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Exchange Notes are outstanding, the
Issuer is required to provide the IRS with certain information, including the
beneficial owner's name, address and taxpayer identification number, the
aggregate amount of payments to that beneficial owner during the calendar year
and the amount of tax withheld, if any. This obligation, however, does not
apply with respect to certain payments to U.S. Holders, including
corporations, tax-exempt organizations, qualified pension and profit sharing
trusts and individual retirement accounts, provided that they establish
entitlement to an exemption.
In the event that a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number in
the manner required by applicable law or underreports its tax liability, the
Issuer, its agents or paying agents or a broker may be required to "backup"
withhold a tax equal to 31% of each payment of interest and principal on the
Exchange Notes. This backup withholding is not an additional tax and may be
credited against the U.S. Holder's U.S. federal income tax liability, provided
that the required information is furnished to the IRS.
Under current Treasury regulations, backup withholding and information
reporting will not apply to payments made by the Issuer or any agent thereof
(in its capacity as such) to a Non-U.S. Holder of an Exchange Note if such
Non-U.S. Holder has provided the required certification that it is not a U.S.
person as set forth in clause (a)(4)(A) in paragraph (i) under "--U.S. Federal
Income Taxation of Non-U.S. Holders," or has otherwise established an
exemption (provided that neither the Issuer nor its agent has actual knowledge
that the holder is a U.S. person or that the conditions of any exemption are
not in fact satisfied).
Payment of the proceeds from the sale of an Exchange Note to or through a
foreign office of a broker will not be subject to information reporting or
backup withholding, except that if the broker is a U.S. person, a controlled
foreign corporation for U.S. federal income tax purposes, a foreign person 50
percent or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding
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the payment was effectively connected with a U.S. trade or business or, with
respect to payments made after December 31, 1999, a foreign partnership that
is owned 50 percent or more by U.S. persons or is engaged in a U.S. trade or
business, information reporting may apply to such payments. Payment of the
proceeds from a sale of an Exchange Note to or through the U.S. office of a
broker will be subject to information reporting and backup withholding unless
the holder or beneficial owner certifies as to its taxpayer identification
number or otherwise establishes an exemption from information reporting and
backup withholding.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for
Outstanding Notes where such Outstanding Notes were acquired as a result of
market-making activities or other trading activities. The Issuer has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 1998, all
dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.
The Issuer will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
accounts pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market or, in negotiated
transactions or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account pursuant to the Exchange
Offer and any broker or dealer that participates in a distribution of such new
Notes may be deemed to be an "Underwriter" within the meaning of the
Securities Act and any profit on any such resale or Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Issuer will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the
Letter of Transmittal. The Issuer has agreed to pay all expenses incident to
the Exchange Offer (including the expenses of one counsel for the holders of
the Notes) other than commissions or concessions of any brokers or dealers and
will indemnify the holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
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NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Exchange Notes in Canada is being made only on a
private placement basis exempt from the requirement that the Issuer prepare
and file a prospectus with the securities regulatory activities in each
province where trades of the Exchange Notes are effected. Accordingly, any
resale of the Exchange Notes in Canada must be made in accordance with
applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Exchange Notes.
REPRESENTATION OF PURCHASERS
Each purchaser of Exchange Notes in Canada who receives a purchase
confirmation will be deemed to represent to the Issuer and the dealer from
whom such purchase confirmation is received that (i) such purchaser is
entitled under applicable provincial securities laws to purchase such Exchange
Notes without the benefit of a prospectus qualified under such securities
laws, (ii) where required by law, such purchaser is purchasing as principal
and not as agent and (iii) such purchaser has reviewed the text above under
"--Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws. Following a decision of the U.S. Supreme Court, it is possible that
Ontario purchasers will not be able to rely upon the remedies set out in
Section 12(2) of the United States Securities Act of 1933 where securities are
being offered under a U.S. private placement memorandum.
ENFORCEMENT OF LEGAL RIGHTS
All of the Issuer's directors and officers, as well as the experts named
herein, may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the Issuer or such persons. All or a substantial portion of the assets of
the Issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the Issuer or such
persons in Canada or to enforce a judgment obtained in Canadian courts against
such Issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Exchange Notes to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Exchange Notes acquired by such purchaser pursuant to this Offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from the Issuer.
Only one such report must be filed in respect of Exchange Notes acquired on
the same date and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Exchange Notes should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Exchange
Notes in their particular circumstances and with respect to the eligibility of
the Exchange Notes for investment by the purchaser under relevant Canadian
legislation.
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LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Brobeck, Phleger & Harrison LLP, San Francisco, California.
EXPERTS
The consolidated financial statements of PEI as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997,
included in this Prospectus, have been included in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The financial statements of Lucas HDP as of December 31, 1997 and January
31, 1997 and for the eleven-month period ending December 31, 1997, the six-
month period ended January 31, 1997, and the years ended July 31, 1996 and
1995, appearing in this Prospectus, have been included in reliance on the
report of Ernst & Young, chartered accountants, independent accountants, given
on the authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Lucas Argentina as of January 31,
1997, and January 2, 1998 and for the years ended July 31, 1995 and 1996, the
six-month period ended January 31, 1997, and the eleven month period ended
January 2, 1998, appearing in this Prospectus, have been included in reliance
on the report of Deloitte & Co., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Lucas South Africa as of December
31, 1997, and January 31, 1997 and for the eleven-month period ending December
31, 1997, the six-month period ended January 31, 1997, and the years ended
July 31, 1996 and 1995, appearing in this Prospectus, have been included in
reliance on the report of Arthur Andersen & Co., Chartered Accountants (S.A.),
given on the authority of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Issuer and PEI have filed jointly with the Commission a Registration
Statement on Form S-4 under the Securities Act, with respect to the Exchange
Notes offered by this Prospectus. For the purposes hereof, the term
"Registration Statement" means the original Registration Statement and any and
all amendments thereto. This Prospectus does not contain all of the
information set forth in the Registration Statement and the schedules and
exhibits thereto, to which reference hereby is made. Each statement made in
this Prospectus concerning a document filed as an exhibit to the Registration
Statement is qualified in its entirety by reference to such exhibit for a
complete statement of its provisions. Any interested party may inspect the
Registration Statement and its exhibits, without charge, at the public
reference facilities of the Commission at its principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its
regional office at 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, 13th Floor, New York, New York 10007. Any interested
party may obtain copies of all or any portion of the Registration Statement
and its exhibits at prescribed rates from the Public Reference Section of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington DC 20549.
Following the effective date of the Registration Statement, the Issuer will
be subject to the periodic reporting and other information requirements of the
Exchange Act pursuant to Section 15(d) thereof. The Issuer and PEI have agreed
that, whether or not they are subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, they will file with the Commission (unless
the Commission will not accept such a filing), and
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furnish to the holders of the Notes with the annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act. All reports filed with the Commission will be
available on the Commission's web site at http:www.sec.gov. In addition, for
so long as any of the Notes remain outstanding, the Issuer has agreed to make
available to any prospective purchaser of the Notes or beneficial owner of the
Notes, in connection with any sale thereof, the information required by Rule
144A(d)(4) under the Securities Act.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PEI HOLDING, INC. AND SUBSIDIARIES
Report of Independent Accountants..................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996.......... F-3
Consolidated Statements of Operations for the Years Ended December 31,
1997, 1996 and 1995.................................................. F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1997, 1996 and 1995..................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995.................................................. F-6
Notes to Consolidated Financial Statements............................ F-7
Financial Statement Schedule: Schedule II--Valuation and Qualifying
Accounts and Reserves................................................ F-21
HEAVY DUTY PRODUCTS DIVISION OF LUCAS INDUSTRIES PLC
Report of Independent Auditors........................................ F-22
Balance Sheets as of December 31, 1997 and January 31, 1997........... F-23
Statements of Income for the Eleven-Month Period Ended December 31,
1997, the Six-Month Period Ended January 31, 1997 and the Years Ended
July 31, 1996 and July 31, 1995...................................... F-24
Statements of Changes in Parent Company Equity for the Eleven-Month
Period Ended December 31, 1997, the Six-Month Period Ended January
31, 1997 and the Years Ended July 31, 1996 and July 31, 1995......... F-25
Statements of Cash Flows for the Eleven-Month Period Ended December
31, 1997, the Six-Month Period Ended January 31, 1997 and the Years
Ended July 31, 1996 and July 31, 1995................................ F-26
Notes to Financial Statements......................................... F-27
LUCAS INDIEL ARGENTINA S.A.
Report of Independent Auditors........................................ F-31
Consolidated Balance Sheets as of January 2, 1998 and January 31,
1997................................................................. F-32
Consolidated Statements of Operations for the Years Ended July 31,
1995 and July 31, 1996, the Six-Month Period Ended January 31, 1997
and the Eleven-Month Period Ended January 2, 1998 ................... F-33
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended July 31, 1995 and July 31, 1996, the Six-Month Period
Ended January 31, 1997 and the Eleven-Month Period Ended January 2,
1998 ................................................................ F-34
Consolidated Statements of Cash Flows for the Years Ended July 31,
1995 and July 31, 1996, the Six-Month Period Ended January 31, 1997
and the Eleven-Month Period Ended January 2, 1998 ................... F-35
Notes to Consolidated Financial Statements............................ F-36
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED
Report of Independent Auditors........................................ F-44
Consolidated Balance Sheets as of December 31, 1997 and January 31,
1997................................................................. F-45
Consolidated Statements of Income for the Eleven-Month Period Ended
December 31, 1997 and the Six-Month Period Ended January 31, 1997.... F-46
Consolidated Statements of Cash Flows for the Eleven-Month Period
Ended December 31, 1997 the Six-Month Period Ended January 31, 1997.. F-47
Notes to Consolidated Financial Statements............................ F-48
Report of Independent Auditors........................................ F-56
Consolidated Balance Sheets as of July 31, 1996 and July 31, 1995..... F-57
Consolidated Statements of Income for the Years ended July 31, 1996
and July 31, 1995.................................................... F-58
Consolidated Statements of Cash Flows for Years Ended July 31, 1996
and July 31, 1995.................................................... F-59
Notes to Consolidated Financial Statements............................ F-60
Convenience Translation............................................... F-68
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of PEI Holding, Inc.:
We have audited the accompanying consolidated balance sheet of PEI Holding,
Inc. and Subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows
and the financial statement schedule listed on the index to financial
statements for the years ended December 31, 1997, 1996 and 1995. These
financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of PEI Holding,
Inc. and Subsidiaries as of December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for the years ended December
31, 1997, 1996 and 1995, in conformity with generally accepted accounting
principles. In addition, in our opinion the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole presents fairly, in all material respects, the
financial information required to be included therein.
Coopers & Lybrand L.L.P.
Detroit, Michigan
January 30, 1998, except for
Note 21(b) for which the
date is March 26, 1998
F-2
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 455 $ 795
Accounts receivable, net of allowance for doubtful
accounts of $1,812 and $1,662 at December 31, 1997 and
1996, respectively...................................... 26,326 23,899
Inventories, net......................................... 24,687 24,958
Deferred tax asset, net.................................. 3,226 2,595
Prepaid and other current assets......................... 965 687
-------- --------
Total current assets................................... 55,659 52,934
-------- --------
Property, plant and equipment:
Land..................................................... 771 771
Building and improvements................................ 12,840 10,693
Equipment and tooling.................................... 31,461 25,895
Construction in progress................................. 1,276 3,840
-------- --------
46,348 41,199
Less accumulated depreciation.......................... (20,169) (15,382)
-------- --------
26,179 25,817
Net assets of discontinued operations...................... 1,416 10,437
Property, plant and equipment held for disposal............ -- 1,326
Investments................................................ 2,597 650
Intangible assets.......................................... 2,834 2,440
-------- --------
$ 88,685 $ 93,604
======== ========
LIABILITIES
Current liabilities:
Revolving credit......................................... $ 3,052 $ 515
Current portion of long-term debt........................ 1,144 4,235
Accounts payable......................................... 12,042 12,904
Accrued liabilities...................................... 12,029 10,463
-------- --------
Total current liabilities.............................. 28,267 28,117
Long-term debt............................................. 29,467 32,605
Subordinated debt, net..................................... 9,267 9,159
Accrued pension liability, net of current.................. 451 678
Deferred gain and other long-term liabilities (includes
$3,308 in 1996 related to the Hobart acquisition)......... 583 4,122
Deferred tax liabilities, net.............................. 1,707 905
-------- --------
Total liabilities...................................... 69,742 75,586
STOCKHOLDERS' EQUITY (NOTE 21(B))
Common stock, par value $.01; 5,000,000 shares authorized,
3,303,000 shares issued and outstanding in 1997 and 1996,
respectively.............................................. 2 2
Paid-in capital............................................ 16,623 16,623
Stock warrants, for 171,740 shares, at estimated current
value..................................................... 3,239 1,073
Retained earnings (accumulated deficit).................... (634) 382
Notes receivable, employees' stock purchase, 7.74%, due
2002...................................................... (346) (396)
Foreign currency translation adjustment.................... 379 550
Treasury stock, 32,000 and 24,000 shares in 1997 and 1996,
respectively, at cost..................................... (320) (216)
-------- --------
Total stockholders' equity............................. 18,943 18,018
-------- --------
$ 88,685 $ 93,604
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $171,700 $148,765 $131,503
Cost of goods sold............................... 137,792 120,585 106,541
-------- -------- --------
Gross profit................................. 33,908 28,180 24,962
Selling, general and administrative expenses..... 23,188 20,986 18,955
Restructuring charge............................. -- 56 3,100
-------- -------- --------
Operating income............................. 10,720 7,138 2,907
Interest expense................................. 5,384 5,313 4,282
Other............................................ 210 108 203
-------- -------- --------
Income (loss) from continuing operations,
before income taxes......................... 5,126 1,717 (1,578)
Provision (benefit) for income taxes............. 2,303 (2,314) 630
-------- -------- --------
Income (loss) from continuing operations..... 2,823 4,031 (2,208)
Income (loss) from discontinued operation
(including asset write-down of $2,500 in 1997),
net of taxes of $1,116 and $175 in 1997 and
1996, respectively.............................. (1,673) 312 --
-------- -------- --------
Net income (loss)............................ $ 1,150 $ 4,343 $ (2,208)
======== ======== ========
Basic earnings per common share: (Note 21(b))
Income from continuing operations.............. $ 0.82 $ 1.17 $ (0.64)
Discontinued operations........................ (0.49) 0.09 --
-------- -------- --------
Net income (loss)............................ $ 0.33 $ 1.26 $ (0.64)
======== ======== ========
Diluted earnings per common share: (Notes 21(b))
Income from continuing operations.............. $ 0.78 $ 1.13 $ (0.64)
Discontinued operations........................ (0.46) 0.09 --
-------- -------- --------
Net income (loss)............................ $ 0.32 $ 1.22 $ (0.64)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK RETAINED NOTES FOREIGN
------------------- EARNINGS RECEIVABLE CURRENCY
SHARES PAID-IN STOCK (ACCUMULATED EMPLOYEE TRANSLATION TREASURY
(NOTE 21(B)) AMOUNT CAPITAL WARRANT DEFICIT) STOCK ADJUSTMENT STOCK TOTAL
------------ ------ ------- ------- ------------ ---------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1995................... 3,303,000 $ 2 $16,623 $1,073 $(1,753) $(545) $205 $15,605
Net loss................ (2,208) (2,208)
Translation adjustment.. (79) (79)
Common stock, purchased
from employees and
other.................. 99 $(144) (45)
--------- --- ------- ------ ------- ----- ---- ----- -------
Balance, December 31,
1995................... 3,303,000 2 16,623 1,073 (3,961) (446) 126 (144) 13,273
Net income.............. 4,343 4,343
Translation adjustment.. 424 424
Common stock, purchased
from employees and
other.................. 50 (72) (22)
--------- --- ------- ------ ------- ----- ---- ----- -------
Balance, December 31,
1996................... 3,303,000 2 16,623 1,073 382 (396) 550 (216) 18,018
Net income.............. 1,150 1,150
Translation adjustment.. (171) (171)
Transfer to stock
warrants............... 2,166 (2,166) --
Common stock, purchased
from employees and
other.................. 50 (104) (54)
--------- --- ------- ------ ------- ----- ---- ----- -------
Balance, December 31,
1997................... 3,303,000 $ 2 $16,623 $3,239 $ (634) $(346) $379 $(320) $18,943
========= === ======= ====== ======= ===== ==== ===== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $1,150 $ 4,343 $(2,208)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Loss on sale of discontinued operations.......... 2,500 -- --
Cash (used in) discontinued operations........... (979) (2,663) --
Write-down and loss on property, plant and
equipment held for disposal..................... 277 167 2,200
Deferred gain on sale and leaseback.............. (233) (117) --
Depreciation and amortization.................... 5,501 5,246 4,550
Loss (gain) on sale of property, plant and
equipment....................................... 148 (462) (18)
Deferred taxes................................... 171 (1,700) --
Changes in assets and liabilities:
Accounts receivable............................ (2,651) (3,861) 1,677
Inventories.................................... 103 (635) (1,940)
Prepaid and other current assets............... (233) 635 (469)
Accounts payable............................... (751) 3,944 (775)
Accrued liabilities............................ 2,746 (2,337) (1,570)
------ ------- -------
Net cash provided by operating activities..... 7,749 2,560 1,447
------ ------- -------
Cash flows from investing activities:
Capital expenditures............................... (5,638) (6,794) (4,864)
Additions to organization and other costs.......... (1,019) (122) (56)
Proceeds from sale of property, plant and
equipment......................................... 1,140 2,787 285
Proceeds from sale of discontinued operations and
assets held for disposal.......................... 7,500 1,543 --
Purchase of certain product lines from Hobart,
including net assets of discontinued
operations of $5,053.............................. -- (7,500) --
Investment in affiliates........................... (500) (250) (400)
------ ------- -------
Net cash used in investing activities......... 1,483 (10,336) (5,035)
------ ------- -------
Cash flows from financing activities:
Net increase in revolving credit loan.............. 3,691 6,119 5,514
Payments on long-term debt......................... (6,799) (7,102) (2,575)
Proceeds from borrowings........................... -- 6,000 793
Purchase of treasury stock......................... (54) (22) (45)
Borrowings (payments) on capital leases, net....... (194) 41 (64)
Installment purchase of inventory from Hobart...... -- 2,465 --
Payments on acquisition payable to Hobart.......... (6,150) (633) --
Deferred gain on sale leaseback.................... -- 1,164 --
Other financing costs, net......................... (76) -- 166
------ ------- -------
Net cash provided by financing activities..... (9,582) 8,032 3,789
------ ------- -------
Effect of foreign currency exchange rate on cash.... 10 (43) (29)
------ ------- -------
Net (decrease) increase in cash..................... (340) 213 172
Cash, beginning of year............................. 795 582 410
------ ------- -------
Cash, end of year................................... $ 455 $ 795 $ 582
====== ======= =======
Supplemental cash flow information:
Interest paid...................................... $5,017 $ 4,930 $ 4,013
====== ======= =======
Taxes paid......................................... $ 619 $ 213 $ 247
====== ======= =======
Noncash financing transaction, deferred payment on
Hobart acquisition................................ -- $ 4,318 --
====== ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS ORGANIZATION
PEI Holding, Inc. ("PEI" or the "Company"), a subsidiary of Genstar Capital
Corporation ("Genstar" or the "Parent"), was formed in 1991 to acquire
substantially all of the assets and assume certain liabilities of Prestolite
Electric Incorporated and its wholly owned subsidiaries ("Prestolite"). PEI
includes the wholly owned subsidiaries Prestolite Electric Incorporated and
Prestolite Electric of Michigan, Inc. Prestolite Electric Incorporated's
wholly owned subsidiaries include Prestolite Electric Limited, a U. K.
corporation, and Prestolite Power Corporation, a company formed in 1996 to
acquire certain products lines of Hobart Brothers Company. Operations are
generally conducted as Prestolite Electric Incorporated. There are no material
differences between the financial statements of PEI and Prestolite Electric
Incorporated.
The Company manufactures and distributes heavy duty alternators and starter
motors, direct current electric motors and other electrical components for
aftermarket and original equipment application in the heavy duty vehicle,
defense, material handling, marine and other industries. Sales related to U.S.
Department of Defense contracts were 11.8 percent, 10.5 percent and 12.0
percent of consolidated sales for 1997, 1996 and 1995, respectively, with
about half of those sales directly to the U.S. government. Five manufacturing
facilities and one distribution warehouse are located in the United States and
two manufacturing facilities are located in the United Kingdom.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of PEI and its direct and indirect wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
b. FOREIGN CURRENCY TRANSLATION: The assets and liabilities of foreign
subsidiaries have been translated into U.S. dollars at the rates of exchange
existing as of the balance sheet date. Revenues and expenses have been
translated at the average monthly exchange rates. Translation adjustments are
recorded as a separate component of stockholders' equity.
c. INVENTORIES: Inventories are stated at the lower of cost or market with
cost being established by the last-in, first-out ("LIFO") method for
substantially all inventory owned by domestic companies and by the first-in,
first-out ("FIFO") method for all inventories owned by foreign subsidiaries
and divisions. Approximately $6,492,000 and $6,502,000 of net inventories at
December 31, 1997 and 1996, respectively, have been valued based on FIFO cost.
d. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated
at cost. Costs of maintenance and repairs are charged to operations when
incurred; costs of renewals, betterments and additions are capitalized. The
cost and accumulated depreciation applicable to assets retired or sold are
removed from the accounts, and the gain or loss on disposition is recognized
as income. Depreciation is computed on a straight-line basis over the
estimated useful lives of the buildings and improvements (11 to 31 years) and
the machinery and equipment (3 to 10 years).
e. INTANGIBLE ASSETS: Intangible assets are comprised of organization and
financing costs and goodwill. At each balance sheet date management assesses
whether there has been an impairment in the carrying value of intangible
assets. This assessment is based on comparing amortization to anticipated cash
flows and operating income.
f. PRODUCT WARRANTY COSTS AND SERVICE RETURNS: Anticipated costs related to
product warranty and service returns are provided for based upon management's
estimate of such costs, after consideration of historical trends and sales of
the products to which such costs relate.
F-7
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
g. ENGINEERING EXPENSES: Engineering costs are expensed as incurred and are
included in selling, general and administrative expenses. Total engineering
expenses for the years ended December 31, 1997, 1996 and 1995 were $5,988,336,
$5,967,517, and $4,351,794, respectively. Included in these engineering
expenses are research and development costs (as defined by Statement of
Financial Accounting Standards No. 2) for the years ended December 31, 1997,
1996 and 1995 of $4,947,685, $4,935,087 and $3,607,566, respectively.
h. EARNINGS PER SHARE: Basic earnings per share is calculated by dividing
income available to common stockholders by the weighted average number of
common shares outstanding. Diluted earnings per share is calculated by
dividing income available to common stockholders by the weighted average
number of common shares outstanding and potentially issuable common shares.
i. ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
j. FINANCIAL INSTRUMENTS: The carrying amount of the Company's financial
instruments, which includes cash, accounts receivable, accounts payable, and
long-term debt approximates their fair value at December 31, 1997 and 1996.
Fair values have been determined based on management estimates and information
from market sources.
k. RECLASSIFICATIONS: Certain prior year amounts have been reclassified to
conform to current year presentation.
3. EARNINGS PER SHARE ("EPS")
In computing income available to common stockholders no adjustments were
required to the amounts reported in the statement of operations. Shares used
in the computation have been restated to reflect the 20-for-1 stock split
effective subsequent to year end (see Note 21(b)). Shares of common stock
available and potentially issuable used in the computation are comprised of
the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Average number of shares of common stock
used in computing basic EPS................ 3,275,000 3,283,000 3,295,000
Warrants, issuable for a nominal exercise
price...................................... 171,740 171,740 171,740
--------- --------- ---------
Shares used in computing basic EPS........ 3,446,740 3,454,740 3,466,740
Dilutive effect of stock options............ 181,280 99,060 --
--------- --------- ---------
Shares used in computing dilutive EPS..... 3,628,020 3,553,800 3,466,740
========= ========= =========
</TABLE>
Options were excluded from 1995 dilutive EPS since the inclusion of these
would have been antidilutive.
F-8
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INVENTORIES
Inventories consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
FIFO cost:
Raw materials............................................ $10,303 $12,073
Work in process.......................................... 6,939 6,760
Finished goods........................................... 8,710 7,533
------- -------
Total FIFO cost........................................ 25,952 26,366
Adjustment to LIFO cost.................................... 1,552 1,768
Reserves for excess and obsolescence....................... (2,817) (3,176)
------- -------
$24,687 $24,958
======= =======
</TABLE>
As a result of a decrease in inventory, there was a LIFO liquidation which
resulted in a $216,000 decrease in income from continuing operations, before
income taxes, as compared to that which would have been reported had there
been no liquidation.
5. INVESTMENTS
Investments at December 31, 1997 are carried at cost. They include $597,000
representing a 5 percent interest in an Indian company and a $2 million
interest in a U.S. company. The U.S. investment includes $1.5 million that
will be paid in 1998 (which amount is included in accrued liabilities) at
which time the Company's ownership will increase to 35 percent from 9 percent
at December 31, 1997. In conjunction with the increase in ownership, the
Company expects to change to the equity method of accounting for the U.S.
company.
6. INTANGIBLES ASSETS
Intangibles assets consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Organizational costs (5 year amortization).................... $3,761 $3,761
Goodwill (5 to 10 year amortization).......................... 1,165 1,165
Financing costs (3 to 10 year amortization)................... 1,149 1,149
Lucas acquisition and refinancing costs (Note 21(a)).......... 1,018 --
------ ------
7,093 6,075
Accumulated amortization...................................... 4,259 3,635
------ ------
$2,834 $2,440
====== ======
</TABLE>
The financing costs will be written off in 1998 as a result of the
refinancing discussed in Note 21(a). The Lucas acquisition and refinancing
costs will be considered in allocating the purchase price of the Lucas
acquisition. Any goodwill resulting will be amortized over 20 years. The
refinancing costs will be amortized over the 10-year term of the new senior
debt.
F-9
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accrued compensation........................................ $ 3,139 $ 2,556
Accrued warranty............................................ 3,232 2,195
Payable to Hobart Brothers Company.......................... -- 2,842
Accrued environmental liability............................. 529 791
Amount due related to 1997 investment (Note 5).............. 1,500 --
Other accrued liabilities................................... 3,629 2,079
------- -------
$12,029 $10,463
======= =======
</TABLE>
8. DEBT
Debt consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
North America:
Revolving credit, interest at prime rate plus .75
percent, collateralized by all North American assets.. $18,383 $15,006
Term loan, interest at prime rate plus .75 to 1.25
percent, collateralized by all North American assets.. 10,205 15,494
Subordinated debt, interest at 12 percent.............. 10,000 10,000
------- -------
Total................................................ 38,588 40,500
------- -------
United Kingdom, interest at the bank's base rate plus 2
percent, collateralized by all U.K. assets:
Revolving credit....................................... 431 119
Term loan.............................................. 3,354 5,054
------- -------
Total................................................ 3,785 5,173
------- -------
Total term, revolving credit and subordinated debt
(refinanced subsequent to year-end)................. 42,373 45,673
Capital lease obligations................................ 942 1,150
Unamortized discount on subordinated debt................ (733) (841)
Other.................................................... 348 532
------- -------
Consolidated total................................... 42,930 46,514
Less current maturities.................................. 4,196 4,750
------- -------
Long-term debt....................................... $38,734 $41,764
======= =======
</TABLE>
As discussed in Note 21(a), subsequent to year-end the Company refinanced
all of its term, revolving credit and subordinated debt with the proceeds from
the $125 million, 9 5/8 percent (interest payable semiannually) unsecured
senior notes. The notes mature on February 1, 2008, and are redeemable at the
option of the Company, in whole or in part, beginning on February 1, 2003 at
amounts from 104.8125 percent to 100 percent of the principal amount, plus
accrued and unpaid interest to the redemption date with the net proceeds of a
public equity offering. In addition, up to 35 percent of the principal amount
of the notes may be redeemed prior to February 1, 2001 at an amount equal to
109.625 percent of the principal amount redeemed, plus accrued and unpaid
interest to the redemption date.
F-10
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. DEBT--(CONTINUED)
In connection with the refinancing the Company entered into new credit
agreements in the U.S. and the U.K. The U.S. agreements consist of a $23
million revolving credit facility, including a $2 million letter of credit
subfacility, which will be advanced pursuant to a formula based on eligible
U.S. accounts receivable and inventory levels. The borrowings will be
collateralized by all U.S. accounts receivable and inventories, will bear
interest at the bank's prime rates (8.5 percent at December 31, 1997) plus up
to .125 percent and will mature on January 31, 2000. No amounts were drawn on
the facility in connection with the refinancing.
The U.K. agreement consists of a credit facility providing for short-term
borrowings of up to (Pounds)3 million (approximately $4.9 million based on
exchange rates as of December 31, 1997) and is secured by liens on all U.K.
assets. It is expected that a new U.K. agreement will be entered into
consisting of (Pounds)7 million (approximately $11.6 million based on exchange
rates at December 31, 1997) credit facility which will be advanced based upon
eligible U.K. accounts receivable. The borrowings will be collateralized by
all U.K. accounts receivable, will bear interest at the bank's base rate (7.25
percent at December 31, 1997) plus 1.75 percent and will mature in February
2001. No amounts were drawn on the facility in connection with the
refinancing.
The senior notes and credit facilities mentioned above contain various
covenants including limits on a) issuance of additional debt or preferred
stock; b) the payment of dividends and purchases, redemptions or retirements
or common stock; c) investments; d) sale of assets and capital stock of
subsidiaries; and e) certain consolidations, mergers, transfers of assets and
certain other transactions with affiliates.
Maturities of debt obligations at December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1998................................................................. $ 4,196
1999................................................................. 223
2000................................................................. 175
2001................................................................. 216
2002................................................................. 27
Thereafter........................................................... 38,093
-------
Total.............................................................. $42,930
=======
</TABLE>
9. INCOME TAXES
Income (loss) from continuing operations, before income taxes, consists of
the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
<S> <C> <C> <C>
U.S................................................... $2,866 $ 442 $(3,584)
Foreign............................................... 2,260 1,275 2,006
------ ------ -------
$5,126 $1,717 $(1,578)
====== ====== =======
</TABLE>
F-11
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. INCOME TAXES--(CONTINUED)
The components of income tax related to continuing operations are as follows
(in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
U.S.:
Current -- -- --
Deferred........................................ $ 920 $ 81 $(1,300)
Increase (decrease) in valuation reserve........ (196) (1,256) 1,300
Foreign:
Current......................................... 573 -- --
Deferred........................................ 202 370 390
Increase (decrease) in valuation reserve........ 489 (1,815) --
State and local................................... 315 306 240
------ ------- -------
$2,303 $(2,314) $ 630
====== ======= =======
</TABLE>
A reconciliation of the U.S. statutory tax rate to the effective tax rate
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ------ -----
<S> <C> <C> <C>
Statutory rate........................................ 34.0% 34.0% 34.0%
Change in valuation reserve........................... 5.7 (178.9) (82.4)
State and local, net of federal benefit............... 4.1 11.8 (10.0)
Difference in foreign tax rates....................... -- (3.7) 18.5
Other................................................. 1.1 2.0 --
---- ------ -----
Effective tax rate.................................. 44.9% (134.8)% (39.9)%
==== ====== =====
</TABLE>
The major components of deferred taxes (stated on an after tax basis) on the
balance sheet are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accrued tax benefit carryforwards.......................... $ 2,201 $ 3,835
Assets of discontinued operations.......................... 1,015 --
Current liabilities........................................ 2,176 1,766
Deferred gain.............................................. 185 366
Inventories................................................ (1,471) (1,324)
Property, plant and equipment.............................. (3,511) (3,267)
Other...................................................... 924 801
Valuation reserve.......................................... -- (487)
------- -------
$ 1,519 $ 1,690
======= =======
</TABLE>
PEI has net operating loss ("NOL") carryforwards at December 31, 1997 for
U.S. tax reporting purposes of approximately $6.2 million and approximately
$160,000 of alternative minimum tax benefit carryforwards. All U.K. NOLs have
been used as of December 31, 1997. The changes in the valuation reserve are
the result of management's estimate as to the recovery of deferred tax assets,
in particular the recovery of U.S. and U.K. NOLs. The NOLs in the U.S. expire
beginning in 2006.
F-12
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. EMPLOYEE BENEFIT PLANS
The Company has retirement savings plans for substantially all of its United
States employees. These retirement savings plans have cash or deferred salary
arrangements and include an option for matching contributions by the Company
and additional contributions at the discretion of its Board of Directors. The
Company's matching contributions to these plans were $699,000, $663,000 and
$549,000 for 1997, 1996 and 1995, respectively. The Company also has defined
benefit plans that cover certain former employees. Benefits under these
defined benefit plans are based on years of service. The Company's funding
policy is to meet the minimum funding requirements of the Employee Retirement
Income Security Act of 1974, as amended. The Company's subsidiary in the U.K.
provides benefits based on the employees' earnings. The Company's funding
policy is to meet the minimum funding requirements imposed by current statutes
or tax regulations.
The funded status of the United States defined benefit plans at December 31,
1997 and 1996, based upon most recent actuarial valuations (December 31, 1997
and 1996), is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Actuarial present value of accumulated benefit obligations
(all vested)................................................ $2,927 $2,943
====== ======
Projected benefit obligation for service rendered to date.... $2,927 $2,943
Plan assets at fair value (principally short-term cash
equivalents, corporate notes, U.S. bonds and equities)...... 2,429 2,205
------ ------
Projected benefit obligation in excess of plan assets........ 498 738
Unrecognized net loss (gain)................................. (30) 158
------ ------
Net accrued pension cost..................................... $ 528 $ 580
====== ======
</TABLE>
The components of pension expense for the United States plans for the years
ended December 31, 1997, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Service costs for benefits earned during the period... $ 13 $ 50 $ 67
Interest cost......................................... 209 207 206
Actual return on plan assets.......................... (270) (186) (259)
Net amortization and deferral......................... 94 31 139
Curtailment........................................... -- 2 --
----- ----- -----
Net periodic pension cost........................... $ 46 $ 104 $ 153
===== ===== =====
Rates used in the calculation of amounts above are:
Discount rate......................................... 7.5% 7.5% 7.5%
Expected rate of return on assets..................... 8.0 8.0 8.0
</TABLE>
F-13
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. EMPLOYEE BENEFIT PLANS--(CONTINUED)
The funded status of the U.K. plans at December 31, 1997 and 1996, based
upon the most recent actuarial valuation (December 31, 1997 and 1996), is as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Actuarial present value of accumulated benefit obligations
(all vested)............................................. $ 8,815 $ 7,381
Effect of estimated future compensation increases......... 710 1,352
------- -------
Projected benefit obligation for service rendered to
date..................................................... 9,525 8,733
Plan assets at fair value (principally short-term cash
equivalents, corporate notes and U.K. equities).......... 12,262 10,614
------- -------
Plan assets in excess of projected benefit obligation..... 2,737 1,881
Unrecognized net gain..................................... 2,735 1,979
------- -------
Net accrued pension cost.................................. $ (2) $ 98
======= =======
</TABLE>
The components of pension expense for the U.K. plans for the years ended
December 31, 1997, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ----- -------
<S> <C> <C> <C>
Service costs for benefits earned during the
period.......................................... $ 480 $ 438 $ 376
Interest cost.................................... 693 657 589
Actual return on plan assets..................... (2,103) (942) (1,360)
Net amortization and deferral.................... 1,030 (128) 505
------- ----- -------
Net periodic pension cost...................... $ 100 $ 25 $ 110
======= ===== =======
Rates used in the calculation of amounts above are:
Discount rate.................................... 7.0% 8.5% 8.5%
Expected rate of return on assets................ 8.0 9.5 9.5
Anticipated rate of salary increase.............. 5.0 6.5 7.5
</TABLE>
11. ENVIRONMENTAL ISSUES
Certain of the Company's plants (primarily two manufacturing facilities) are
in the process of remedial cleanup and containment for environmental
contamination that occurred prior to PEI's acquisition of Prestolite. PEI has
assumed a portion of the environmental liability related to the acquired
facilities. The prior owners of the two manufacturing facilities have taken
the lead to manage the cleanup and remedial actions. They bill PEI for its
share of the costs. The liability of $529,000 and $791,000 at December 31,
1997 and 1996, respectively, is included in current liabilities is based upon
environmental studies and represents management's best estimate of the
Company's share of the liability for cleanup and containment costs. Management
believes that the majority of its share of the costs will be expended in 1998.
While it is possible that the cleanup and containment costs could exceed the
liability recorded, management does not believe any excess would materially
affect future consolidated financial statements of PEI.
12. LEASES
The Company leases certain office and manufacturing facilities, data
processing equipment and automobiles under long-term operating lease
agreements. In the current year, the Company entered into capital leases for
certain manufacturing and engineering equipment and improvements related to
real property. The leases expire
F-14
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. LEASES--(CONTINUED)
on various dates through 2006. The following are schedules of future minimum
lease payments for operating and capital leases (with terms in excess of one
year) at December 31, 1997 (in thousands):
<TABLE>
<S> <C>
Operating leases (year ended December 31):
1998............................................................... $1,885
1999............................................................... 1,349
2000............................................................... 1,134
2001............................................................... 784
2002............................................................... 973
Thereafter......................................................... 2,109
------
$8,234
======
</TABLE>
Rent expense for operating leases was $3,195,218, $1,622,280 and $1,490,793
for the years ended December 31, 1997, 1996 and 1995, respectively.
<TABLE>
<S> <C>
Capital leases (year ended December 31):
1998............................................................... $ 403
1999............................................................... 278
2000............................................................... 203
2001............................................................... 151
2002............................................................... 29
Thereafter......................................................... 109
------
Total minimum lease payments..................................... 1,173
Less imputed interest............................................ 210
------
Present value of net minimum lease payments...................... $ 963
======
</TABLE>
The book value, as of December 31, 1997, of equipment under capital leases
was $1,169,000, which is net of amortization of $641,000.
13. STOCK OPTIONS
PEI has established a stock option plan for certain designated employees.
All shares and per share amounts reflect the 20-for-1 stock split effective
subsequent to year end (see Note 21(b)). The Company has reserved 350,280
shares for the plan. All options outstanding as of December 31, 1997 have an
exercise price of $5.00 to $8.25 per share, and no options have been
exercised. Options generally vested 20 percent per year over five years but
may not be exercised until 90 days following the effective date of a
registration statement under the Securities Act of 1933 or upon receipt by PEI
of a legal opinion that registration is not required or until PEI determines
otherwise. The exercise date may be accelerated upon a change of control of
the Company.
F-15
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. STOCK OPTIONS--(CONTINUED)
The changes in stock options outstanding for the years ended December 31,
1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
------- --------
<S> <C> <C>
Outstanding at January 1, 1995............................. 297,200 $5.20
Granted.................................................... 59,500 8.25
Forfeited.................................................. (23,800) 7.20
------- -----
Outstanding at December 31, 1995........................... 332,900 $5.60
======= =====
Exercisable at December 31, 1995........................... -- --
======= =====
Outstanding at January 1, 1996............................. 332,900 $5.60
Granted.................................................... 86,000 8.25
Forfeited.................................................. (57,500) 7.20
------- -----
Outstanding at December 31, 1996........................... 361,400 $6.20
======= =====
Exercisable at December 31, 1996........................... -- --
======= =====
Outstanding at January 1, 1997............................. 361,400 $6.20
Forfeited.................................................. (51,500) 5.90
------- -----
Outstanding at December 31, 1997........................... 309,900 $6.25
======= =====
Exercisable at December 31, 1997........................... -- --
======= =====
</TABLE>
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-
Based Compensation" (SFAS 123) became effective for the company in 1996. As
allowed by SFAS 123, the Company has elected to continue to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock issued to Employees"
("APB 25") in accounting for its stock option plans. Under APB 25, the Company
does not recognize compensation expense on the issuance of its stock options
because the option terms are fixed and the exercise price equals the market
price of the underlying stock on the grant date.
As required by SFAS 123, the Company has determined the pro forma
information as if the Company had accounted for stock options granted since
January 1, 1995 under the fair value method of SFAS 123.
Principal assumptions used in calculating the pro forma information were as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Risk free interest rates......................................... 6.31% 7.83%
Expected life, in years.......................................... 7.00 7.00
Expected volatility.............................................. -- --
Expected dividend yield.......................................... -- --
Weighted average fair value of options granted................... 5.31 4.87
</TABLE>
F-16
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. STOCK OPTIONS--(CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The
Company's pro forma information follows (in thousands except for earnings per
share information):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
<S> <C> <C> <C>
Net income (loss), as reported....................... $1,150 $4,343 $(2,208)
Net income (loss), pro forma......................... 1,094 4,265 (2,240)
Earnings per share, as reported...................... 0.33 1.26 (0.64)
Earnings per share, pro forma........................ 0.32 1.23 (0.65)
</TABLE>
The pro forma effect on net income for 1997, 1996 and 1995 is not
representative of the pro forma effect on net income in future years because
it does not take into consideration pro forma compensation expense related to
grants made prior to 1995.
In connection with the issuance of the subordinated debt (Note 8) the
Company issued warrants to purchase 171,740 shares of common stock exercisable
for a nominal amount. The Company assigned these warrants a fair value of
$1,073,375 ($6.25 share) at the date of issuance and revalued them to current
fair value during 1997 through a transfer from paid in capital. All warrants
were repurchased in January 1998 in connection with the refinancing (See Note
21(a)).
14. RELATED PARTY TRANSACTIONS
The Company has a management consulting agreement with Genstar Investment
Corporation ("GIC"), an affiliate of Genstar. Under the agreement, the Company
pays GIC a management consulting fee of $800,000 per year. For each of the
years ended December 31, 1997, 1996 and 1995, $800,000 were charged to
operations under this agreement. At December 31, 1997 and 1996, $200,000 of
consulting fees were accrued and unpaid.
15. PROPERTY, PLANT AND EQUIPMENT HELD FOR DISPOSAL
Property, plant and equipment held for disposal at December 31, 1996
included one facility. During 1997, the Company sold this facility; a loss of
approximately $277,000 was recognized on this transaction.
16. LITIGATION AND CLAIMS
Various legal actions and claims are pending or may be instituted or
asserted in the future against the Company. The outcome of individual matters
is not predictable at this time. Except as related to environmental issues as
discussed in Note 11, the potential aggregate amount of liability at December
31, 1997 and 1996 with respect to these matters cannot be ascertained;
however, management believes that any resulting unrecorded liability would not
materially affect the future consolidated financial statements of the Company.
17. DISCONTINUED OPERATIONS
During the third quarter of 1997, the Company sold its welding equipment
division for $7.5 million plus commitments from the buyer to acquire up to
$1.9 million of inventory not included in the initial sale. Net assets of
discontinued operations at December 31, 1997, include uncollected accounts
receivable and inventory of the welding equipment division which were not
sold. This division was acquired during 1996 as a part of the purchase of
certain product lines from Hobart Brothers Company. This division is treated
as a discontinued operation, and the 1996 financial statements have been
reclassified to exclude the operations of the welding equipment division from
continuing operations. The Company recorded a $1.5 million after tax loss on
the sale ($2.5 million loss, less $1 million tax benefit).
F-17
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. DISCONTINUED OPERATIONS--(CONTINUED)
During 1997, the Company decided to retain its Beech Electric Division
("Beech") as part of the Company's continuing operations. Beech was identified
for disposition in 1995 and had been accounted for as a discontinued operation
since that time. The accompanying consolidated financial statements have been
reclassified to include Beech in continuing operations. As a result of the
decision to dispose of Beech, the Company recorded $700,000 to write-down the
assets to their net realizable value, which amount is included with the
restructuring charge in the 1995 consolidated statement of operations.
The prior year financial statements have been reclassified to reflect the
welding equipment division as a discontinued operation and to include Beech in
continuing operations. The effect of the restatement on prior years follows
(in thousands):
<TABLE>
<CAPTION>
PREVIOUSLY WELDING
REPORTED DIVISION BEECH RESTATED
---------- -------- ------ --------
<S> <C> <C> <C> <C>
1996:
Assets of discontinued operation...... $ 968 $ 10,437 $ (968) $ 10,437
Total assets.......................... 96,969 (3,466) 101 93,604
Total liabilities..................... 78,951 (3,466) 101 75,586
Net sales............................. 166,609 (20,283) 2,439 148,765
Operating income...................... 7,838 (590) (110) 7,138
Discontinued operations............... (115) 312 115 312
1995:
Net sales............................. 128,924 -- 2,579 131,503
Operating income...................... 3,839 -- (932) 2,907
Discontinued operations............... (936) -- 936 --
</TABLE>
18. RESTRUCTURING CHARGE
During 1995, the Company announced restructuring plans which included the
closing of its plant in Cleveland, Ohio and moving operations previously
conducted at the Cleveland plant to the plant located in Arcade, New York. A
provision of $2,400,000 was recognized in 1995 related to the restructurings.
The 1995 restructuring charge consists of the following (in thousands):
<TABLE>
<S> <C>
Employee severance costs............................................. $ 975
Write-down of property, plant and equipment.......................... 1,120
Post-closing facility costs.......................................... 305
------
2,400
Asset write down of previously discontinued operations (Note 17)..... 700
------
$3,100
======
</TABLE>
The Cleveland plant closing was completed during 1996 and no accrual
remained as of the end of 1996. Costs incurred were approximately equal to the
amount provided. Certain costs such as start-up costs and training were not
provided for in the 1995 restructuring provision and were charged to
operations in 1996.
F-18
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. OPERATIONS BY GEOGRAPHIC AREA
The Company operates primarily in one segment which is the manufacture and
distribution of electrical equipment primarily for heavy duty vehicle,
defense, material handling and marine applications. Financial information
summarized by geographic area is as follows (in thousands):
<TABLE>
<CAPTION>
UNITED GREAT
STATES BRITAIN ELIMINATIONS CONSOLIDATED
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
For twelve months ended:
December 31, 1997:
Sales......................... $143,865 $31,312 $(3,477) $171,700
Operating income.............. 8,093 2,532 95 10,720
December 31, 1996:
Sales......................... $124,669 $26,503 $(2,407) $148,765
Operating income.............. 5,191 1,746 201 7,138
December 31, 1995:
Sales......................... $105,539 $27,794 $(1,830) $131,503
Operating income.............. 334 2,609 (36) 2,907
Identifiable assets:
As of December 31, 1997......... $ 75,008 $19,181 $(5,504) $ 88,685
As of December 31, 1996......... 79,381 19,302 (5,079) 93,604
</TABLE>
20. SALE AND LEASEBACK
In 1996, the Company sold its Florence, Kentucky, facility and leased back
approximately 60 percent of the space in that facility. The transaction
resulted in a gain of approximately $1,447,000, of which approximately
$283,000 was recognized upon completion of the transaction. The remainder of
the gain is being amortized through June 2001, offsetting the rental expense.
The lease is classified as an operating lease. The minimum future rental
payments are included in Note 8. The current portion of the gain,
approximately $233,000 at both December 31, 1997 and 1996, is included in
accrued liabilities.
21. SUBSEQUENT EVENTS
(a) On January 22, 1998, Prestolite issued $125 million, 9 5/8 percent
(interest payable semiannually), unsecured senior notes. Proceeds from the
issuance of the notes were used as follows (in thousands):
<TABLE>
<S> <C>
Acquire certain affiliates of Lucas Industries plc................ $ 44,702
Repay existing Prestolite debt (of which $42,373 was outstanding
at December 31, 1997)............................................ 38,653
Purchase of PEI securities........................................ 29,741
Fees and expenses................................................. 6,950
General corporate purposes........................................ 4,954
--------
$125,000
========
</TABLE>
On January 22, 1998, Prestolite acquired the heavy duty products division of
Lucas Industries plc (a U.K. corporation), Lucas Holdings South Africa
(Proprietary) Limited and a controlling interest in Lucas Indiel Argentina
S.A. ("Lucas Argentina") (collectively referred to as the "Lucas Businesses").
The Lucas Businesses
F-19
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21. SUBSEQUENT EVENTS--(CONTINUED)
manufacture primarily alternators and starter motors for the truck, bus and
automotive markets in the U.K., continental Europe, South America and South
Africa. The purchase price was as follows (in thousands):
<TABLE>
<S> <C>
Cash at closing, including repayment of $3,393 of debt.............. $44,702
Assumption of Lucas Argentina debt.................................. 6,300
Future payment for additional equity of Lucas Argentina............. 1,200
-------
$52,202
=======
</TABLE>
The purchase price is subject to adjustments based upon the closing balance
sheets of each of the businesses acquired and additional payments, with a
maximum aggregate amount of $19 million, may be required based on the
operating performance of Lucas Argentina over the next three years and upon
the collection of certain receivables. Prestolite has also agreed to acquire
certain inventory and consulting services from Lucas Industries plc for an
estimated aggregate amount of $2.6 million. Summary unaudited combined
financial information as of September 30, 1997 and for the 12 months then
ended for the Lucas Businesses follows (in thousands):
<TABLE>
<S> <C>
Total assets........................................................ $110,591
Total liabilities................................................... 45,605
Net sales........................................................... 134,548
Operating income.................................................... 2,317
</TABLE>
Prestolite refinanced all of its existing senior bank debt and the senior
subordinated notes. In connection with the refinancing, the Company incurred
prepayment penalties, eliminated the discount related to the senior
subordinated notes and wrote-off unamortized financing costs related to the
existing debt. These amounts, which aggregated approximately $2 million, will
be reflected as an extraordinary loss on refinancing in 1998.
The purchase of the PEI securities consisted of the following (in
thousands):
<TABLE>
<S> <C>
Repurchase of 1,286,000 (after stock split) shares of PEI common
stock............................................................. $24,259
Repurchase of all outstanding warrants associated with the
refinanced senior subordinated debt............................... 3,435
Repurchase of stock options for 123,960 (after stock split) shares
of PEI common stock............................................... 2,047
-------
$29,741
=======
</TABLE>
(b) On March 10, 1998 the Board of Directors approved a 20-for-1 stock split
effective March 26, 1998, and increased the number of authorized shares to
5,000,000. All shares and per share amounts have been restated to reflect the
split.
22. SUMMARY FINANCIAL INFORMATION
Summary financial information of Prestolite Electric Incorporated follows ($
thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C> <C>
Balance sheet:
Current assets.................................... $ 55,676 $ 52,934
Non current assets................................ 33,026 40,670
Current liabilities............................... 28,267 28,143
Non current liabilities........................... 41,475 47,469
Stockholders' equity.............................. 18,960 17,992
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Statement of operations:
Net sales......................................... $171,700 $148,765 $131,503
Gross profit...................................... 33,908 28,180 24,962
Income (loss) from continuing operations.......... 2,812 4,024 (2,212)
Net income (loss)................................. 1,139 4,336 (2,212)
</TABLE>
F-20
<PAGE>
SCHEDULE II
PEI HOLDING INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGE TO BALANCE AT
BEGINNING COSTS AND CHARGED TO END OF
OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS(1) PERIOD
---------- --------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts:
Year ended December 31,
1997.................. $1,662 $608 -- $ 458 $1,812
Year ended December 31,
1996.................. $1,285 $499 -- $ 122 $1,662
Year ended December 31,
1995.................. $1,218 $223 -- $ 156 $1,285
Reserve for Inventory
Obsolescence:
Year ended December 31,
1997.................. $3,176 $908 -- $1,267 $2,817
Year ended December 31,
1996.................. $3,146 $708 -- $ 678 $3,176
Year ended December 31,
1995.................. $2,937 $787 -- $ 578 $3,146
</TABLE>
- - - - - - - - - - - --------
(1) Deductions related to the allowance for doubtful accounts relate to the
writeoff of uncollectable accounts and adjustments for receivables, which
are expected to be satisfied by the return of used parts returned for
credit. Deductions related to inventory obsolescence relate primarily to
the disposal of obsolete inventory.
F-21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS PRESTOLITE ELECTRIC LIMITED:
We have audited the accompanying balance sheets of the Heavy Duty Products
Division of Lucas Industries plc ("Lucas HDP") as of December 31, 1997 and
January 31, 1997, and the related statements of income, cash flows and changes
in parent company equity for the eleven-month period ended December 31, 1997,
the six-month period ended January 31, 1997 and the years ended July 31, 1996
and July 31, 1995. Lucas HDP was acquired by Prestolite Electric Limited, a
wholly-owned subsidiary of Prestolite Electric Incorporated, on January 22,
1998. These financial statements are the responsibility of the management of
Prestolite Electric Limited. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lucas HDP as of December
31, 1997 and January 31, 1997, and the results of its operations and its cash
flows for the eleven-month period ended December 31, 1997, the six-month
period ended January 31, 1997 and the years ended July 31, 1996 and July 31,
1995, in conformity with accounting principles generally accepted in the
United States.
Ernst & Young
Chartered Accountants
London, England
March 30, 1998
F-22
<PAGE>
HEAVY DUTY PRODUCTS DIVISION OF LUCAS INDUSTRIES PLC
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................. $ 19,508 $ 12,765
Trade accounts receivable (Note 7)................... 1,008 1,254
Amounts owed by Lucas Industries group companies..... 7,156 6,278
Inventories (Note 8)................................. 5,833 4,985
Prepayments.......................................... 74 130
-------- --------
Total current assets............................... 33,579 25,412
-------- --------
FIXED ASSETS:
Property, plant and equipment (Note 9)............... 8,768 8,656
Other noncurrent assets--tooling..................... 330 362
-------- --------
Total assets....................................... $ 42,677 $ 34,430
======== ========
LIABILITIES AND PARENT COMPANY EQUITY
CURRENT LIABILITIES:
Trade accounts payable............................... $ 4,848 $ 2,843
Amounts owed to Lucas Industries group companies..... 314 559
Payroll and other taxes.............................. 545 485
Accrued liabilities.................................. 464 297
-------- --------
Total current liabilities.......................... 6,171 4,184
NONCURRENT LIABILITIES:
Warranty provisions.................................. 411 379
-------- --------
Total liabilities.................................. 6,582 4,563
PARENT COMPANY EQUITY.................................. 36,095 29,867
-------- --------
Total liabilities and parent company equity........ $ 42,677 $ 34,430
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
HEAVY DUTY PRODUCTS DIVISION OF LUCAS INDUSTRIES PLC
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
<S> <C> <C> <C> <C>
Sales............................ $41,528 $22,562 $44,794 $37,544
Cost of goods sold............... (29,392) (16,107) (32,594) (27,631)
Selling, general and
administrative expenses......... (7,708) (4,209) (7,749) (8,085)
------- ------- ------- -------
Operating income (Note 3)........ 4,428 2,246 4,451 1,828
Income taxes (Note 6) (1,461) (741) (1,469) (603)
------- ------- ------- -------
Net income................... $ 2,967 $ 1,505 $ 2,982 $ 1,225
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE>
HEAVY DUTY PRODUCTS DIVISION OF LUCAS INDUSTRIES PLC
STATEMENTS OF CHANGES IN PARENT COMPANY EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
<S> <C> <C> <C> <C>
Net income for the financial
period.......................... $ 2,967 $ 1,505 $ 2,982 $ 1,225
Exchange adjustments............. 950 676 (561) 823
Other movements.................. 2,311 257 1,072 964
------- ------- ------- -------
Net increase to parent company
equity.......................... 6,228 2,438 3,493 3,012
Opening parent company equity.... 29,867 27,429 23,936 20,924
------- ------- ------- -------
Closing parent company equity.... $36,095 $29,867 $27,429 $23,936
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
HEAVY DUTY PRODUCTS DIVISION OF LUCAS INDUSTRIES PLC
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income....................... $ 4,428 $ 2,246 $ 4,451 $ 1,828
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation--property, plant
and equipment................. 1,182 582 992 962
Amortization tooling........... 377 148 288 281
Loss on disposals of property,
plant and equipment........... 79 62 2 (11)
Noncash income from Lucas
Industries group companies.... 836 (479) (411) 355
Increase/(decrease) from changes
in:
Receivables.................... (335) 346 (1,709) 40
Inventories.................... (687) 714 2,458 (434)
Accounts payable and accrued
liabilities................... 1,845 178 (779) (757)
Warranty provisions............ 20 (47) 322 (3)
------- ------- ------- -------
7,745 3,750 5,614 2,261
------- ------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property, plant and
equipment....................... (1,118) (1,024) (976) (1,388)
Purchase of tooling.............. (335) (170) (302) (391)
Proceeds on disposals of
property, plant and equipment... 18 3 -- 91
------- ------- ------- -------
(1,435) (1,191) (1,278) (1,688)
------- ------- ------- -------
Foreign currency translation
adjustment........................ 433 210 (90) 985
------- ------- ------- -------
Net increase in cash............... 6,743 2,769 4,246 1,558
Cash at beginning of period........ 12,765 9,996 5,750 4,192
------- ------- ------- -------
Cash at end of period.............. $19,508 $12,765 $ 9,996 $ 5,750
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
HEAVY DUTY PRODUCTS DIVISION OF LUCAS INDUSTRIES PLC
NOTES TO FINANCIAL STATEMENTS
1. HEAVY DUTY PRODUCTS DIVISION OF LUCAS INDUSTRIES PLC
Lucas HDP was formerly the Heavy Duty Products division of a subsidiary of
Lucas Industries plc, a company incorporated in the United Kingdom, until it
was acquired by Prestolite Electric Limited, wholly-owned subsidiary of
Prestolite Electric Incorporated, in January 1998. Lucas HDP manufactures
primarily alternators, starter motors, switch gear and pumps for the
automotive market at its facility in the United Kingdom. For the purposes of
these financial statements Lucas HDP is presented as a separate subsidiary of
Lucas Industries plc.
The financial statements have been prepared on a stand alone basis to
reflect all operating assets and liabilities and all costs of operations. In
particular, adjustments have been made to include property and related
charges, and appropriate charges in respect of pension benefits and income
taxes. Cost of goods sold and selling, general and administrative expenses,
and related assets and liabilities, include recharges to reflect costs
incurred on behalf of Lucas HDP by Lucas Industries plc group companies
consistent with the terms of the purchase of Lucas HDP by Prestolite Electric
Limited.
The functional currency is pounds sterling. The financial statements have
been prepared in United States dollars, and in conformity with accounting
principles generally accepted in the United States, for the purpose of
distribution in the United States in connection with the prospectus to be
prepared in connection with the registration statement of Prestolite Electric
Incorporated and PEI Holding, Inc.
2. ACCOUNTING POLICIES
Exchange rates. Exchange gains and losses arising in the normal course of
trading are presented in the income statement.
Depreciation. Depreciation is based on the estimated useful lives of assets
and is charged at the following rates:
<TABLE>
<S> <C>
Land...................................................... 0%
Buildings................................................. 2% per annum
Plant and equipment....................................... 4% - 33% per annum
</TABLE>
Inventories. Inventories are valued at the lower of cost and net realizable
value, using the first in, first out method, after making due allowance for
obsolete and slow moving items. In the case of work in progress and finished
goods, cost comprises direct materials, direct labor and an appropriate
proportion of production overheads.
Deferred taxation. Provision for deferred taxation is made under the
liability method on all temporary differences between the book and tax bases
of assets and liabilities.
Pensions. Pension costs are determined in accordance with the requirements
of SFAS 87--"Employers' Accounting for Pensions."
Revenue recognition. Sales are recorded when products are dispatched.
Use of estimates. The preparation of financial statements requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
F-27
<PAGE>
HEAVY DUTY PRODUCTS DIVISION OF LUCAS INDUSTRIES PLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. OPERATING INCOME (IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
<S> <C> <C> <C> <C>
Operating income is arrived at
after charging:
Depreciation--property, plant and
equipment....................... $1,182 $582 $992 $962
Amortization--tooling............ 377 148 288 281
Redundancy and reorganization.... 92 57 162 --
====== ==== ==== ====
</TABLE>
4. EXPORT SALES (IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
<S> <C> <C> <C> <C>
Intercompany sales to subsidiaries
of Lucas
Industries plc in the following
areas were:
Continental Europe.............. $ 241 $ 21 $ 23 $ --
Rest of World................... 61 15 52 27
Sales to third parties in the
following areas were:
Continental Europe.............. 13,796 7,045 12,785 8,313
North America................... 34 16 55 48
Rest of World................... 210 80 368 243
------- ------ ------- ------
$14,342 $7,177 $13,283 $8,631
======= ====== ======= ======
</TABLE>
5. INTERCOMPANY PURCHASES (IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
<S> <C> <C> <C> <C>
Intercompany purchases from
subsidiaries of Lucas Industries
plc:
Raw materials and consumables... $ 770 $776 $1,326 $1,765
Services........................ 303 165 500 653
------ ---- ------ ------
$1,073 $941 $1,826 $2,418
====== ==== ====== ======
</TABLE>
6. TAXATION (IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
<S> <C> <C> <C> <C>
The charge based on the profit for
the year comprises:
United Kingdom Corporation tax at
33%.............................. $ 1,461 $ 741 $ 1,469 $ 603
======= ===== ======= =====
</TABLE>
As part of a larger United Kingdom group, the tax liability is settled within
the group's tax affairs and consequently, the liability for income and
corporation taxes is included under parent company equity.
F-28
<PAGE>
HEAVY DUTY PRODUCTS DIVISION OF LUCAS INDUSTRIES PLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. TRADE ACCOUNTS RECEIVABLE (IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
<S> <C> <C>
Trade accounts receivable.............................. $1,122 $1,264
Allowance for doubtful accounts........................ (114) (10)
------ ------
$1,008 $1,254
====== ======
</TABLE>
8. INVENTORIES (IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
<S> <C> <C>
Raw materials and consumables.......................... $ 767 $ 806
Work in progress....................................... 3,868 3,784
Finished goods......................................... 1,198 395
------ ------
$5,833 $4,985
====== ======
</TABLE>
9. PROPERTY, PLANT AND EQUIPMENT (IN THOUSANDS)
<TABLE>
<CAPTION>
FREEHOLD PLANT
LAND AND AND
BUILDINGS EQUIPMENT TOTAL
--------- --------- -------
<S> <C> <C> <C>
At December 31, 1997
Cost.............................................. $3,229 $23,664 $26,893
Depreciation...................................... 1,535 16,590 18,125
------ ------- -------
Net book values................................. $1,694 $ 7,074 $ 8,768
====== ======= =======
At January 31, 1997
Cost.............................................. $3,130 $23,106 $26,236
Depreciation...................................... 1,439 16,141 17,580
------ ------- -------
Net book values................................. $1,691 $ 6,965 $ 8,656
====== ======= =======
</TABLE>
10. PENSIONS AND POSTRETIREMENT HEALTH CARE
Pensions. The majority of employees are members of the Lucas Industries plc
pension plan, the Lucas Pension Plan (the "Plan"). This is a defined benefit
plan. The assets of the Plan are invested primarily in equities and fixed
interest securities. The latest actuarial valuation of the Plan was made as at
March 31, 1994.
The pension cost is calculated on a stand alone basis, assuming a separation
from the Plan effective from July 31, 1994 but on the same terms as for the
acquisition by Prestolite Electric Limited. Otherwise, the actuarial methods
and assumptions applied are consistent with those adopted by Lucas Industries
plc. Company contributions are assumed to remain suspended having regard to
the surplus disclosed for the Plan.
Under the terms of the acquisition, on separation from the Plan, the fair
value of the Plan assets allocated to Lucas HDP will be in excess of the
related accumulated benefit obligations.
F-29
<PAGE>
HEAVY DUTY PRODUCTS DIVISION OF LUCAS INDUSTRIES PLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. PENSIONS AND POSTRETIREMENT HEALTH CARE--(CONTINUED)
The pension cost computed in accordance with the requirements of SFAS 87
comprises (in thousands):
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
<S> <C> <C> <C> <C>
Service Cost.................. $ 1,532 $ 791 $ 1,417 $ 1,383
Interest Cost................. 2,316 1,302 2,168 1,924
Actual return on scheme
assets....................... (3,012) (1,635) (4,960) (2,594)
Net amortization and
deferral..................... -- (41) 2,665 595
------- ------- ------- -------
Net periodic pension cost... $ 836 $ 417 $ 1,290 $ 1,308
======= ======= ======= =======
</TABLE>
The major assumptions in computing the pension expense were:
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
<S> <C> <C> <C> <C>
Investment return................ 8.5% 9.5% 8.5% 8.5%
Discount rate.................... 7.5% 8.5% 8.5% 8.5%
Salary increases................. 5.0% 6.0% 6.0% 6.0%
Pension increases................ 3.0% 4.0% 4.0% 4.0%
</TABLE>
Other postretirement benefits. There are no other postretirement benefit
obligations.
F-30
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE PRESIDENT AND DIRECTORS OF LUCAS INDIEL ARGENTINA S.A.:
We have audited the accompanying consolidated balance sheets of Lucas Indiel
Argentina S.A. (an Argentine Corporation) and its consolidated subsidiaries
(the "Company") as of January 31, 1997 and January 2, 1998, and the related
consolidated statements of operations, changes in stockholders equity and cash
flows for the years ended July 31, 1995 and 1996, the six month period ended
January 31, 1997 and the eleven month period ended January 2, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Argentina which are in substantial agreement with those in the
United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly in all material respects the financial position of the Company
as of January 31, 1997 and January 2, 1998 and the results of its operations
and its cash flows for the years ended July 31, 1995 and 1996, the six month
period ended January 31, 1997 and the eleven month period ended January 2,
1998 in conformity with accounting principles generally accepted in the United
States of America.
Deloitte & Co.
Buenos Aires, Argentina
March 30, 1998
F-31
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, JANUARY 2,
1997 1998
----------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash.................................................. $ 1,704 $ 1,516
Accounts receivable................................... 7,396 9,200
Prepaid and other assets.............................. 1,295 1,513
Inventories........................................... 19,097 18,096
------- --------
Total Current Assets.............................. 29,492 30,325
------- --------
Other assets.......................................... 10,416 10,388
Property, plant and equipment, net.................... 17,966 16,369
Intangible assets, net................................ 1,864 1,601
------- --------
Total assets...................................... $59,738 $ 58,683
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable...................................... $10,158 $ 9,539
Short term debt....................................... 11,000 6,620
Accrued liabilities:
Accrued payroll and payroll taxes................... 777 1,409
Accrued taxes....................................... 220 271
Other accrued expenses and liabilities.............. 541 1,034
------- --------
Total Current Liabilities......................... 22,696 18,873
------- --------
Advances from parent company.......................... 5,000 5,000
Other liabilities..................................... 1,751 1,929
Accrued claims and other litigation expenses.......... 467 574
------- --------
Total Liabilities................................. 29,914 26,376
------- --------
Minority interest..................................... 3 3
------- --------
Sub-total......................................... 29,917 26,379
------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $1 per share; 2,786,176 and
14,786,176 shares authorized, respectively........... 2,786 14,786
Overall adjustment.................................... 24,630 24,630
Additional paid-in capital............................ 6,535 5,035
Legal reserve......................................... 1,012 1,012
Accumulated deficit................................... (5,142) (13,159)
------- --------
Total stockholders equity......................... 29,821 32,304
------- --------
$59,738 $ 58,683
======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-32
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN
SIX MONTHS MONTHS
ENDED ENDED
YEAR ENDED YEAR ENDED JANUARY 31, JANUARY 2,
JULY 31, 1995 JULY 31, 1996 1997 1998
------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues................ $74,124 $68,436 $32,125 $66,119
Cost of sales............... 61,838 57,607 28,618 60,731
------- ------- ------- -------
Gross profit.............. 12,286 10,829 3,507 5,388
Selling, general and
administrative expenses.... 16,169 14,070 5,107 9,881
Non recurring charges....... -- 1,455 -- 763
Redundancy charges.......... 284 366 143 1,564
------- ------- ------- -------
Operating loss............ 4,167 5,062 1,743 6,820
Other (expenses) income,
net........................ (155) (401) 83 230
Interest expense............ 1,310 1,162 734 1,427
------- ------- ------- -------
Loss before provision for
income tax and minority
interest in
subsidiaries............. 5,632 6,625 2,394 8,017
Provision for income tax.... -- 2 -- --
------- ------- ------- -------
Loss before minority
interests in
subsidiaries............. 5,632 6,627 2,394 8,017
Minority interests in
subsidiaries............... 21 15 -- --
------- ------- ------- -------
Net loss.................. $ 5,611 $ 6,612 $ 2,394 $ 8,017
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-33
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JULY 31, 1995 AND 1996 , THE SIX-MONTH PERIOD ENDED
JANUARY 31, 1997, AND THE ELEVEN-MONTH PERIOD ENDED JANUARY 2, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
STOCKHOLDERS' CONTRIBUTIONS RETAINED EARNINGS
------------------------------------- ----------------------
ADDITIONAL UNAPPROPRIATED
OVERALL PAID-IN LEGAL RETAINED
CAPITAL ADJUSTMENT CAPITAL TOTAL RESERVE EARNINGS TOTAL
------- ---------- ---------- ------- ------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at July 31,
1994................... $ 300 $24,630 $ 1,535 $26,465 $ 831 $ 12,172 $39,468
As per resolution of the
Extraordinary Stock-
holders' Meeting held
on November 15, 1994:
Legal reserve......... -- -- -- 181 (181) --
Dividends............. -- -- -- -- (630) (630)
Net loss................ -- -- -- -- (5,611) (5,611)
------- ------- -------- ------- ------ -------- -------
Balances at July 31,
1995................... 300 24,630 1,535 26,465 1,012 5,750 33,227
As per resolution of the
Extraordinary Stock-
holders' Meeting held
on November 6, 1995:
Capitalization of re-
tained earnings...... 1,886 -- 1,886 -- (1,886) --
Capitalization of un-
paid cash
dividends approved in
prior years.......... 600 -- 600 -- -- 600
Irrevocable capital con-
tributions............. -- 5,000 5,000 -- -- 5,000
Net loss................ -- -- -- -- (6,612) (6,612)
------- ------- -------- ------- ------ -------- -------
Balances at July 31,
1996................... 2,786 24,630 6,535 33,951 1,012 (2,748) 32,215
Net loss................ -- -- (2,394) (2,394)
------- ------- -------- ------- ------ -------- -------
Balances at January 31,
1997................... 2,786 24,630 6,535 33,951 1,012 (5,142) 29,821
Irrevocable capital con-
tributions............. -- 7,000 7,000 -- -- 7,000
As per resolution of the
Extraordinary Stock-
holders' Meeting held
on November 28, 1997:
Capitalization of ir-
revocable capital
contributions........ 12,000 (12,000) -- -- --
Irrevocable capital con-
tributions............. -- 3,500 3,500 -- -- 3,500
Net loss................ -- -- -- -- (8,017) (8,017)
------- ------- -------- ------- ------ -------- -------
Balances at January 2,
1998................... $14,786 $24,630 $ 5,035 $44,451 $1,012 $(13,159) $32,304
======= ======= ======== ======= ====== ======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-34
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
JULY 31, 1995 JULY 31, 1996 JANUARY 31, 1997 JANUARY 2, 1998
------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss for the
year/period.......... $(5,611) $(6,612) $(2,394) $(8,017)
Adjustments to
reconcile net loss to
net cash used in
operations:
Depreciation and
amortization....... 3,613 3,944 2,017 4,338
Tax credits
uncollectible...... 340
Goodwill write off.. 1,455
Increase in
allowance for
doubtful accounts.. 47 160
Other............... (25)
Changes in operating
assets and
liabilities:
Accounts
receivable....... 3,985 (3,686) 3,211 (1,964)
Prepaid and other
receivables...... (1,495) (134) (230) (404)
Accounts payable.. (2,424) 1,926 (1,446) (619)
Accrued taxes..... (487) 254 (71) 51
Accrued payroll
and payroll
taxes............ (799) 177 (579) 632
Other
liabilities...... 800 (2,465) (348) 778
Inventories....... (2,647) 1,840 (1,534) 1,001
------- ------- ------- -------
Net cash used in
operations..... (5,065) (2,939) (1,374) (4,044)
------- ------- ------- -------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Increase in property,
plant and equipment.. (2,521) (2,123) (2,490) (2,264)
------- ------- ------- -------
Net cash used in
investing
activities..... (2,521) (2,123) (2,490) (2,264)
------- ------- ------- -------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from short
term and long term
borrowings........... 825 1,150 3,200
Advances from the
parent company....... 5,000
Irrevocable capital
contributions........ 5,600 10,500
Dividends paid........ (630)
Cancellation of short
term debt............ (4,380)
------- ------- ------- -------
Net cash
provided by
financing
activities..... 5,195 6,750 3,200 6,120
------- ------- ------- -------
Increase (decrease) in
cash................... (2,391) 1,688 (664) (188)
Cash at beginning of
year/period............ 3,071 680 2,368 1,704
------- ------- ------- -------
Cash at end of
year/period............ $ 680 $ 2,368 $ 1,704 $ 1,516
======= ======= ======= =======
SUPPLEMENTAL
DISCLOSURES:
Cash paid for
interest............. $ 1,048 $ 1,131 $ 491 $ 1,647
Cash paid for income
tax.................. -- -- 2 3
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-35
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PURPOSE OF THESE FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America ("U.S. GAAP"), for inclusion in the prospectus to be prepared in
connection with the registration statement of Prestolite Electric Incorporated
and PEI Holding, Inc., which acquired a majority of the outstanding common
stock of Lucas Indiel Argentina S.A. (the "Company") on January 22, 1998.
The U.S. GAAP consolidated financial statements were derived from the
statutory consolidated financial statements of the Company which are stated in
Argentine pesos, the currency of the country in which the Company is
incorporated and operates. The Company's statutory consolidated financial
statements are prepared in accordance with accounting principles generally
accepted in Argentina (Argentine GAAP), which differ in certain respects from
U.S. GAAP.
2. NATURE OF BUSINESS--OPERATIONS AND MAJOR CUSTOMERS
As of January 2, 1998, the Company was a subsidiary of LucasVarity plc. On
January 22, 1998, Prestolite Electric Incorporated acquired a majority of the
outstanding shares of the Company and, accordingly, the Company is a
subsidiary of Prestolite Electric Incorporated.
The Company manufactures and distributes motor starters, alternators,
distributors and steering columns. Two of the Company's customers accounted
for greater than 10% of total net sales. The Company is specialized in its
field of activities, working with up-dated machinery as from a technological
point of view.
3. MERGER BETWEEN LUCAS INDIEL S.A. AND F.M.R. SAN LUIS S.A.
On September 24, 1996, the Boards of Directors of the Company and its former
subsidiary, F.M.R. San Luis S.A., approved the Preliminary Merger Agreement of
the two companies by which F.M.R. San Luis S.A. was merged into the Company.
Before the merger, the Company had a 99.82% interest in F.M.R. San Luis S.A.
The approval of the merger was based on special purpose balance sheets
prepared as of July 31, 1996. The Preliminary Merger Agreement was approved by
the Extraordinary Stockholders' Meetings held on October 22, 1996. The
Definitive Merger Agreement was signed on December 13, 1996. The merged
entities agreed that the merger came into effect on July 31, 1996. The merger
was registered before the Companies Inspection Bureau on April 1, 1997.
4. CHANGE OF FISCAL YEAR
Effective January 31, 1997, the Company changed its fiscal year end from
July 31 to January 31. Accordingly, the 1997 fiscal year ended on January 31,
1997 whereas the previous fiscal year ended on July 31.
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation. At July 31, 1995 and 1996 the consolidated
financial statements include the accounts of Lucas Indiel Argentina S.A. and
its subsidiaries FMR San Luis S.A., Equipos Originales S.A. and Jovsa S.A. At
January 31, 1997 and January 2, 1998 the consolidated financial statements
include the accounts of the mentioned companies; FMR San Luis S.A.'s balances
are included in Lucas Indiel Argentina S.A.'s as a consequence of the merger
mentioned in Note 3. All significant intercompany balances and transactions
have been eliminated.
Presentation of financial statements in US dollars. These consolidated
financial statements are presented in U.S. dollars. The translation of all
items of these consolidated financial statements has been made using the
exchange rate of one Argentine peso to one U.S. dollar; this exchange rate
reflects the free market exchange rate
F-36
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
prevailing at July 31, 1995 and 1996, January 31, 1997 and January 2, 1998.
Also this exchange rate results from the so called "convertibility law"
enacted by the Argentine government in April 1991.
Restatement of financial statements in constant monetary units. Consolidated
financial statements reflect the effects of the changes in the purchasing
power of the Argentine peso through August 31, 1995, on the financial position
of the Company. The inclusion of price-level adjustments in the financial
statements is considered appropriate under the prolonged inflationary
conditions affecting the Argentine economy. Effective September 1, 1995, and
following general Resolutions of the Argentine Federation of Councils of
Economic Sciences the restatement has been discontinued, and the Company
started accounting for its transactions at the nominal value. For purposes of
the restatement through August 31, 1995, the Company used coefficients based
on the Argentine Wholesale Price Index.
Use of estimates. The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting period. Actual
results may differ from the estimates and assumptions used in preparing the
financial statements.
Revenue recognition. Operating revenues, are recognized upon shipment of
products, with appropriate provision for uncollectible accounts.
Monetary items. Cash, receivables and liabilities were stated at their
nominal values.
Foreign currency denominated assets and liabilities. Foreign currency
denominated assets and liabilities were translated into Argentine pesos at
current rates in effect at January 31, 1997 and January 2, 1998.
Inventories. The value of inventories reflected in the accompanying
financial statements is substantially the same as its historical cost.
Inventories are stated at the lower of cost or market.
Property, plant and equipment. Property plant and equipment was stated at
cost restated by applying the procedure described in the third paragraph of
this note. Depreciation expenses are generally provided on a straight line
basis. Property, plant and equipment is stated at the lower of cost or net
recoverable values.
Intangible assets--Goodwill. Goodwill is stated at cost, when applicable,
restated in terms of purchasing power of August 31, 1995, as described above.
Goodwill basically represents the excess of the purchase price of the
acquisition of Jovsa S.A. over the fair value of the net assets acquired and
is amortized by the straight-line method over a period of 10 years. Management
has reviewed the realizability of goodwill based on undiscounted future cash
flow and an evaluation of the remaining useful lives, and has determined that
there is no impairment as of January 31, 1997 and January 2, 1998.
Fair value of financial instruments. The Company's financial instruments
include cash, receivables, payables, and short and long-term debt. At January
31, 1997 and January 2, 1998, the carrying values of the Company financial
instruments approximated their fair values based on current market prices and
rates.
Impairment of long-lived assets. Management believes that no events or
changes in circumstances indicate that the Company's property, or intangible
assets may not be recoverable at January 31, 1997 and January 2, 1998 based on
the undiscounted future cash flow.
F-37
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, JANUARY 2,
1997 1998
----------- ----------
<S> <C> <C>
Trade receivables................................... $7,481 $9,365
Notes receivable.................................... 24 96
Debtors in legal proceedings........................ 271 279
------ ------
Sub-total......................................... 7,776 9,740
Less: Allowance for uncollectible accounts
receivable......................................... (380) (540)
------ ------
$7,396 $9,200
====== ======
</TABLE>
7. PREPAID AND OTHER ASSETS
Prepaid and other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, JANUARY 2,
1997 1998
----------- ----------
<S> <C> <C>
Current:
Tax credits........................................ $ 71 $ 776
Other debtors...................................... 93 297
Prepaid expenses................................... 21 46
Advances to suppliers.............................. 364 353
Other.............................................. 746 41
------- -------
$ 1,295 $ 1,513
======= =======
Non-current:
Tax credits arising from the suspension of tax
benefits (See Note 17)............................ $ 4,922 $ 4,922
Other tax credits.................................. 5,104 5,182
Miscellaneous...................................... 390 284
------- -------
$10,416 $10,388
======= =======
</TABLE>
8. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, JANUARY 2,
1997 1998
----------- ----------
<S> <C> <C>
Finished goods........................................ $ 4,467 $ 4,609
Work in process....................................... 6,877 5,368
Raw materials and other supplies...................... 3,558 3,529
Goods in transit...................................... 1,285 860
Resale merchandise.................................... 2,124 3,260
Advances to suppliers................................. 786 470
------- -------
$19,097 $18,096
======= =======
</TABLE>
F-38
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, JANUARY 2,
USEFUL LIVES 1997 1998
------------ ----------- ----------
YEARS
<S> <C> <C> <C>
Land..................................... $ 803 $ 803
Buildings................................ 50 6,117 5,896
Machinery................................ 10 6,406 6,212
Tooling.................................. 3 2,259 1,894
Installations............................ 10 1,172 932
Furniture and fittings................... 10 449 382
Vehicles................................. 5 58 53
------- -------
Subtotal............................... 17,264 16,172
------- -------
Advances to suppliers.................... 702 197
------- -------
$17,966 $16,369
======= =======
</TABLE>
The change in property, plant and equipment balances during the six month
period ended January 31, 1997 and the eleven month period ended January 2,
1998 is as follows:
<TABLE>
<CAPTION>
ELEVEN
SIX MONTHS MONTHS
ENDED ENDED
JANUARY 31, JANUARY 2,
1997 1998
----------- ----------
<S> <C> <C>
Balance at beginning of period....................... $40,783 $43,246
Additions............................................ 2,490 2,264
Withdrawals.......................................... (27) --
------- -------
Balance at end of period............................. 43,246 45,510
------- -------
Accumulated depreciation at beginning of period...... 23,410 25,280
Withdrawals.......................................... (3) --
Depreciation for the period.......................... 1,873 3,861
------- -------
Accumulated depreciation at end of period............ 25,280 29,141
------- -------
17,966 16,369
======= =======
</TABLE>
10. ACCOUNTS PAYABLE
Accounts payable consisted of the following (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, JANUARY 2,
1997 1998
----------- ----------
<S> <C> <C>
Trade................................................. $ 1,715 $6,382
Notes payable......................................... 8,443 3,157
------- ------
$10,158 $9,539
======= ======
</TABLE>
11. SHORT TERM DEBT
Bank loans totalled $11,000 and $6,620 as at January 31, 1997 and January 2,
1998 respectively. The approximate average interest rate was 10% and 11.50%,
respectively.
12. ADVANCES FROM PARENT COMPANY
Advances from LucasVarity plc totalled $5,000 as at January 31, 1997 and
January 2, 1998. These advances bear no interest and have no stated maturity.
F-39
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. NET REVENUES
Net revenues consisted of the following (in thousands):
<TABLE>
<CAPTION>
ELEVEN
YEAR- SIX MONTHS MONTHS
YEAR ENDED ENDED ENDED ENDED
JULY 31, JULY 31, JANUARY 31, JANUARY 2,
1995 1996 1997 1998
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales (net of discounts).... $68,240 $64,408 $29,808 $62,259
Tax benefit (under Laws Nos.
22,021 and 22,702)............. 5,884 3,957 2,278 3,766
Other........................... -- 71 39 94
------- ------- ------- -------
$74,124 $68,436 $32,125 $66,119
======= ======= ======= =======
</TABLE>
14. RELATED PARTIES
Prior to January 22, 1998, the Company was a subsidiary of LucasVarity plc.
At January 31, 1997 and January 2, 1998 the Company had an outstanding
liability of $5,000 with LucasVarity plc.
Outstanding balances with other subsidiaries of LucasVarity plc are as
follows (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, JANUARY 2,
1997 1998
----------- ----------
<S> <C> <C>
Lucas Diesel do Brasil Ltda......................... $ (66) $ 326
Lucas Export Services--Shirley--UK.................. (681) (741)
Aftermarket Operations HQ--Shirley--UK.............. 140 38
Lucas Holdings SA (Pty) Ltd--Johannesburg--South
Africa............................................. (7) 154
Other affilliated companies......................... (30) (130)
</TABLE>
Operations with other susidiaries of LucasVarity plc are as follows (in
thousands):
<TABLE>
<CAPTION>
ELEVEN
SIX MONTHS MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
JULY 31, JULY 31, JANUARY 31, JANUARY 2,
1995 1996 1997 1998
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
a)Purchases
Lucas Diesel do Brasil Ltda..... $ 989 $769 $687 $1,936
Lucas Export Services--Shirley--
UK............................. 1,728 856 871 1,881
Lucas KK (Japan)................ 1,463 -- -- --
Other affilliated companies..... 269 506 309 1,001
b)Sales
Lucas Diesel do Brasil Ltda..... $ -- $775 $400 $1,358
Aftermarket Operations HQ--
Shirley--UK.................... 447 440 325 128
Lucas Holdings SA (Pty) Ltd--
Johannesburg--South Africa..... 604 754 198 410
Other affiliated companies...... -- -- -- 174
</TABLE>
F-40
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. CAPITAL STOCK
As at July 31, 1995 the Company's common stock was $300.
The Stockholders' Meeting held on November 6, 1995 declared stock dividends
on the Company's common stock. The dividend was charged to retained earnings
in the amount of $1,886. This stockholders' meeting also approved the
capitalization of unpaid cash dividends for $600. Such increases of common
stock were registered with the Public Registry of Commerce of the Province of
San Luis on March 13, 1996. Therefore, the total capital as of July 31, 1996
and January 31, 1997 amounted to $2,786.
The Stockholders' Meeting held on November 28, 1997 approved the
capitalization of capital contributions for $12,000. Consequently, as of
January 2, 1998 the total capital amounted to $14,786.
16. TAX BENEFITS
Under Decrees Nos. 299/85, 2,563/85, 476/86, 1,732/86, 1,733/86, 3,111/86,
3,176/86, 3,177/86, 1,477/88 and 5,041/90 of the Province of San Luis, the
Martin Amato San Luis S.A. company was granted the exemptions established by
Law No. 22,021 (amended by Law No. 22,702), which include, among others, the
following benefits:
a) Exemption from payment of Income Tax and Capital/Assets Tax for a
period of fifteen years as from the start-up date of the industrial plant,
ranging from 100% for the first five years up to 12.6% for the last year.
b) Exemption from payment of VAT on domestic market sales for a period of
fifteen years as from the start-up date of the industrial plant, using and
following the same percentage scale as that mentioned in point a) above.
The Economic Emergency Law No. 23,697 suspended 50% of promotional benefits
for a period of six months as from September 25, 1989 which had been obtained
and extended for another six-month period under Decree No. 435 of the National
Executive Power. Also, this Decree repealed the release from VAT billed by raw
material and semi-processed goods suppliers.
Under Decree No. 1,033/91 of the National Executive Power the benefit
repealed by article 45 of Decree No. 435 was reinstated by delivering tax
credit certificates.
As from December 1, 1992, Decree No. 2,054/92 replaced the promotional
benefits. These benefits were credited to a current account with the Tax
Authority (D.G.I.), based on the theoretical tax costs.
17. TAX CREDITS RESULTING FROM THE SUSPENSION OF TAX BENEFITS
The Company accounted for $4,922 an estimate of the Company's rights,
resulting from the suspension of the tax benefits under Law No. 23,697, and
the exemption from customs duties repealed by article 45 of Decree No. 435/90.
On June 28 and November 18, 1994, the Tax Authority issued General
Resolutions Nos. 3,838/94 and 3,905/94 published in the Official Bulletin
dated June 30 and November 25, 1994, respectively, which regulated the
granting of Tax Credit Certificates resulting from the suspension of the
promotional benefits under Law No. 23,697 and the exemption from customs
duties repealed by article 45 of Decree No. 435/90.
In June 1995, the Company submitted all the elements established by these
General Resolutions to the corresponding control authority. Notwithstanding
the foregoing, the corresponding control authority can request additional
information in order to establish whether the granting of the aforementioned
Tax Credit Certificates is applicable.
F-41
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. TAX CREDITS RESULTING FROM THE SUSPENSION OF TAX BENEFITS--(CONTINUED)
Once it is verified whether the granting of tax credits is applicable, the
Company will receive the Debt Consolidation Bonds created by Law No. 23,982 in
connection with the claims predating April 1, 1991, and the rest will be
credited to a computerized current account provided by the Tax Authority.
18. TAX LOSS CARRYFORWARDS UNDER LAW NO. 24,073
In line with the provisions of Law No. 24,073, tax loss carryforwards
originated before March 31, 1991 will be converted, once approved by the Tax
Authority, into tax credits to be repaid by the Federal Government with Debt
Consolidation Bonds under Law No. 23,982.
On April 27, 1993, the Company made the corresponding filing with the Tax
Authority for $728. The Tax Authority rejected the Company's request. The
Company accounted for a valuation allowance to cover the rejected tax credit.
The Company appealed the decision with the Tax Authority.
19. DEFERRED INCOME TAX
The components of the deferred income tax are the following:
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, JANUARY 2,
1997 1998
----------- ----------
<S> <C> <C>
Tax loss carryforwards................................ $17,979 28,708
Capitalized expenses for tax purposes................. 3,634 2,932
Disallowable expenses................................. 1,206 2,222
Other................................................. (586) (600)
------- -------
Subtotal............................................ 22,233 33,262
Current rate.......................................... 33% 33%
------- -------
Subtotal............................................ 7,337 10,976
Valuation allowance................................... (7,337) (10,976)
------- -------
Deferred Income tax position.......................... -- --
</TABLE>
Considering that the Company has been showing a deficit in the last years
and taking into account management's projections for the future years
management has decided to provide for the deferred tax position. No charge to
income has arisen as at January 31, 1997 or January 2, 1998.
The expiration dates of the tax loss carryforwards are as follows:
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, JANUARY 2,
EXPIRATION DATE 1997 1998
--------------- ----------- ----------
<S> <C> <C>
January 1999........................................ 1,655 1,655
January 2000........................................ 11,262 11,262
January 2001........................................ 1,627 1,627
January 2002........................................ 3,435 3,435
January 2003........................................ -- 10,729
------ ------
17,979 28,708
====== ======
</TABLE>
F-42
<PAGE>
LUCAS INDIEL ARGENTINA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20. ACCRUED CLAIMS AND OTHER LITIGATION EXPENSES
The Company is involved in various claims and legal proceedings of a nature
considered normal to its business. At January 31, 1997 and January 2, 1998 the
Company recorded a liability related to these claims of $467 and $574
respectively. The final outcome of such claims and proceedings is uncertain.
21. RESTRICTIONS ON THE DISTRIBUTION OF PROFITS
Under Argentine Corporation Law No. 19,550, Companies must appropriate 5% of
each year's income to a legal reserve, until the reserve is equivalent to 20%
of the carrying value of common stock, determined by applying accounting
principles generally accepted in Argentina.
Dividend distributions must be approved by a vote of the stockholders.
Dividends are allowed only to the extent of retained earnings, based upon
financial statements prepared in accordance with Argentine GAAP.
F-43
<PAGE>
REPORT OF THE INDEPENDENT AUDITORS
TO THE MEMBER OF PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA (PROPRIETARY)
LIMITED:
We have audited the Group financial statements of PRESTOLITE ELECTRIC
HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED (formerly known as Lucas Holdings
South Africa (Proprietary) Limited) and subsidiaries at December 31, 1997, and
for the eleven months then ended, and at January 31, 1997, and for the six
months then ended, set out on pages F-45 to F-55. These financial statements
are the responsibility of the Company's Directors. Our responsibility is to
report on these financial statements.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance that, in all material respects, fair presentation
is achieved in the financial statements. An audit includes an evaluation of
the appropriateness of the accounting policies, an examination, on a test
basis, of evidence supporting the amounts and disclosures included in the
financial statements, an assessment of the reasonableness of significant
estimates and a consideration of the appropriateness of the overall financial
statement presentation. We consider that our audit procedures were appropriate
in the circumstances to express our opinion presented below.
We conducted our audit in accordance with auditing standards applicable in
South Africa. Certain accounting practices of the Group used in preparing the
accompanying financial statements conform with generally accepted accounting
principles in South Africa but do not conform with accounting principles
generally accepted in the United States. A description of these differences
and the adjustments required to conform the financial statements to accounting
principles generally accepted in the United States are set forth in Note 19.
In our opinion, the above-mentioned financial statements fairly present the
financial position of the Group at December 31, 1997 and January 31, 1997, and
the results of its operations and cash flow information for the eleven and six
months, respectively, then ended, in conformity with generally accepted
accounting practice and subject to the fact that no Directors' Report has been
included therein, in the manner required by the Companies Act.
Johannesburg, South Africa Arthur Andersen & Co.
February 27, 1998 Chartered Accountants (S.A.)
F-44
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
CAPITAL EMPLOYED
Share capital (Note 2)................................. 2,051,002 2,051,002
Share premium.......................................... 7,091,145 7,091,145
Non-distributable reserves (Note 3).................... 1,267,064 1,282,785
Retained income........................................ 14,974,063 12,810,786
---------- ----------
Shareholder's equity................................. 25,383,274 23,235,718
Payable to holding company (Note 4).................... -- 243,492
---------- ----------
25,383,274 23,479,210
========== ==========
EMPLOYMENT OF CAPITAL
Fixed assets (Note 5).................................. 11,071,766 11,079,875
---------- ----------
CURRENT ASSETS:
Inventories (Note 6)................................. 8,051,937 9,159,112
Accounts receivable.................................. 8,909,902 10,821,336
Receivable from fellow subsidiaries.................. 3,364,225 1,398,218
Bank and cash balances............................... 6,528,983 1,797,932
---------- ----------
Total current assets............................... 26,855,047 23,176,598
---------- ----------
CURRENT LIABILITIES:
Accounts payable..................................... 10,672,241 8,707,169
Payable to holding and fellow subsidiary companies... 1,245,157 2,070,094
Taxation payable..................................... 626,141 --
---------- ----------
Total current liabilities.......................... 12,543,539 10,777,263
---------- ----------
Net current assets................................. 14,311,508 12,399,335
---------- ----------
25,383,274 23,479,210
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-45
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JANUARY 31,
1997 1997
------------- -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Turnover............................................. 66,730,887 34,949,274
Cost of sales........................................ 50,400,789 26,223,037
---------- ----------
Gross profit......................................... 16,330,098 8,726,237
---------- ----------
Operating income (Note 7)............................ 4,690,389 2,785,289
Net finance income (Note 8).......................... 749,975 85,611
---------- ----------
Income before taxation............................... 5,440,364 2,870,900
Taxation (Note 9).................................... 626,141 --
---------- ----------
Net income........................................... 4,814,223 2,870,900
Transfer from non-distributable reserves (Note 3).... 15,721 15,721
Dividend paid........................................ (2,666,667) --
Retained income, beginning of period................. 12,810,786 9,924,165
---------- ----------
Retained income, end of period....................... 14,974,063 12,810,786
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-46
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JANUARY 31,
1997 1997
------------- -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
CASH GENERATED BY OPERATING ACTIVITIES:
Cash generated by operations (Note 10)............. 6,533,301 3,803,695
Decrease (increase) in working capital (Note 11)... 2,192,737 (186,075)
Net finance income (Note 8)........................ 749,975 85,611
Dividend paid...................................... (2,666,667) --
---------- ----------
6,809,346 3,703,231
CASH GENERATED FROM INVESTING ACTIVITIES:
Additions to fixed assets (Note 5)................. (2,081,300) (891,567)
Proceeds on disposal of fixed assets............... 246,497 33,408
---------- ----------
(1,834,803) (858,159)
---------- ----------
4,974,543 2,845,072
========== ==========
CASH EFFECTS OF FINANCING ACTIVITIES:
Decrease in payable to holding company............. (243,492) (732,000)
(Increase) in bank and cash balances............... (4,731,051) (1,795,732)
(Decrease) in bank overdraft....................... -- (317,340)
---------- ----------
(4,974,543) (2,845,072)
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-47
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The financial statements are prepared on the historical cost basis (adjusted
by the revaluation of land and buildings as more fully detailed below), and
incorporate the following significant accounting policies which, unless
otherwise stated, have been applied on a consistent basis.
Investment in subsidiaries and principles of consolidation: The Group
financial statements include the financial position and results of operations
of the Company and its subsidiaries. Intercompany balances and transactions
have been eliminated on consolidation. Goodwill arising on consolidation,
being the excess of the purchase price over the fair value of net tangible
assets of that company, is stated in the consolidated financial statements as
a deduction from non-distributable reserves.
Fixed assets: Fixed assets are stated at cost or valuation less accumulated
depreciation. Fixed assets stated at valuation are valued periodically on an
open market, existing use basis. Depreciation of fixed assets is provided on
the straight line basis, at rates considered appropriate to write off the cost
over the expected useful lives of the assets. The applicable amount of
depreciation on the revalued portion of fixed assets is transferred to
distributable reserves on an annual basis.
The annual rates of depreciation used are as follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings.............................................................. 2%
Motor vehicles......................................................... 20%
Office and computer equipment.......................................... 20%
Plant and machinery.................................................... 5-33%
</TABLE>
Land is not depreciated.
Inventories: Inventories are valued at the lower of cost (determined on a
first-in, first-out or weighted average basis) and net realisable value. Cost,
where applicable, includes an appropriate portion of labour and production
overheads. Maintenance stocks are written-off against income.
Translation of foreign currency items: Foreign currency items have been
translated into South African Rands at the balance sheet rates of exchange for
items not covered by forward exchange contracts. Foreign currency items
covered by forward exchange contracts are translated at the appropriate
forward cover rate. Gains and losses arising from fluctuations in exchange
rates are reflected in income in the period in which they arise.
Deferred taxation: Deferred taxation is provided on the liability method
using the comprehensive basis for the tax effect of timing differences between
the financial and taxable reporting of income and expenditure. Where the
estimated taxation loss available to be carried forward exceeds the aggregate
timing differences, no provision is raised for the resulting deferred tax
asset.
Retirement benefit costs: Retirement benefit costs are charged against
income in the period in which they are incurred.
Turnover: Turnover comprises the net amount invoiced for goods and services
and excludes Value Added Taxation.
F-48
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SHARE CAPITAL
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Authorised:
1,268,225 ordinary shares of 2 Rand each............. 2,536,450 2,536,450
1 B share of 2 Rand.................................. 2 2
--------- ---------
2,536,452 2,536,452
========= =========
Issued:
1,025,500 ordinary shares of 2 Rand each............. 2,051,000 2,051,000
1 B share of 2 Rand.................................. 2 2
--------- ---------
2,051,002 2,051,002
========= =========
</TABLE>
The unissued shares are under the control of the Directors until the next
annual general meeting.
3. NON-DISTRIBUTABLE RESERVES
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Capital redemption reserve fund...................... 536,450 536,450
Reserve arising on valuation of land and buildings... 1,336,302 1,352,023
Release of depreciation on revalued portion of land
and buildings....................................... (15,721) (15,721)
Goodwill written-off................................. (589,967) (589,967)
--------- ---------
1,267,064 1,282,785
========= =========
</TABLE>
4. PAYABLE TO HOLDING COMPANY
The amount payable to the holding company is unsecured, bears interest at 12%
per annum and is payable in six-monthly instalments of (Pounds)50,000 each.
(Refer Note 16).
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Loan payable........................................... 268,816 975,492
Less current portion included in payable to holding
and fellow subsidiary companies..................... (268,816) (732,000)
-------- --------
-- 243,492
======== ========
</TABLE>
F-49
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. FIXED ASSETS
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, DECEMBER 31,
1997 1997
----------- ----------------------------------
NET BOOK COST OR ACCUMULATED NET BOOK
VALUE VALUATION DEPRECIATION VALUE
----------- ---------- ------------ ----------
(SOUTH AFRICAN RAND)
<S> <C> <C> <C> <C>
Land and buildings, at
valuation..................... 2,345,935 2,752,688 451,663 2,301,025
Motor vehicles................. 1 382,765 1,973,867 1,049,057 924,810
Office and computer equipment.. 400,524 1,583,980 1,203,639 380,341
Plant and machinery............ 6,950,651 18,163,234 10,697,644 7,465,590
---------- ---------- ---------- ----------
11,079,875 24,473,769 13,402,003 11,071,766
========== ========== ========== ==========
<CAPTION>
AS OF AS OF
JULY 31, JANUARY 31,
1996 1997
----------- ----------------------------------
NET BOOK COST OR ACCUMULATED NET BOOK
VALUE VALUATION DEPRECIATION VALUE
----------- ---------- ------------ ----------
(SOUTH AFRICAN RAND)
<S> <C> <C> <C> <C>
Land and buildings............. 2,370,432 2,752,688 406,753 2,345,935
Motor vehicles................. 1,271,128 2,290,107 907,342 1,382,765
Office and computer equipment.. 393,663 1,477,195 1,076,671 400,524
Plant and machinery............ 7,204,899 16,449,438 9,498,787 6,950,651
---------- ---------- ---------- ----------
11,240,122 22,969,428 11,889,553 11,079,875
========== ========== ========== ==========
</TABLE>
MOVEMENT SUMMARY DECEMBER 31, 1997
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 31, DECEMBER 31,
1997 1997
----------- ------------------------------------------
NET BOOK DEPRECIATION NET BOOK
VALUE ADDITIONS DISPOSAL CHARGE VALUE
----------- --------- -------- ------------ ----------
(SOUTH AFRICAN RAND)
<S> <C> <C> <C> <C> <C>
Land and buildings...... 2,345,935 -- -- 44,910 2,301,025
Motor vehicles.......... 1,382,765 98,486 193,536 362,905 924,810
Office and computer
equipment.............. 400,524 120,755 5,626 135,312 380,341
Plant and machinery..... 6,950,651 1,862,059 32,719 1,314,401 7,465,590
---------- --------- ------- --------- ----------
11,079,875 2,081,300 231,881 1,857,528 11,071,766
========== ========= ======= ========= ==========
<CAPTION>
AS OF AS OF
JULY 31, JANUARY 31,
1996 1997
----------- ------------------------------------------
NET BOOK DEPRECIATION NET BOOK
VALUE ADDITIONS DISPOSAL CHARGE VALUE
----------- --------- -------- ------------ ----------
(SOUTH AFRICAN RAND)
<S> <C> <C> <C> <C> <C>
Land and buildings...... 2,370,432 -- -- 24,497 2,345,935
Motor vehicles.......... 1,271,128 327,160 18,045 197,478 1,382,765
Office and computer
equipment.............. 393,663 79,977 -- 73,116 400,524
Plant and machinery..... 7,204,899 484,430 -- 738,678 6,950,651
---------- --------- ------- --------- ----------
11,240,122 891,567 18,045 1,033,769 11,079,875
========== ========= ======= ========= ==========
</TABLE>
F-50
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. FIXED ASSETS--(CONTINUED)
Land and buildings comprise Erf 98 Lea Glen Township, Roodepoort, together
with factory buildings thereon. They were last valued in August 1989.
6. INVENTORIES
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Raw material and consumables........................ 4,276,299 4,912,206
Work-in-progress.................................. 239,212 363,938
Finished goods.................................... 3,536,426 3,882,968
--------- ---------
8,051,937 9,159,112
========= =========
</TABLE>
7. OPERATING INCOME
(a) Operating income has been arrived at after charging (crediting) the
following:
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JANUARY 31,
1997 1997
------------- -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Auditors' remuneration:
Audit fees....................................... 200,000 182,500
Other services................................... 120,834 67,901
Depreciation....................................... 1,857,528 1,033,769
Profit on disposal of fixed assets................. (14,616) (15,363)
Net loss on foreign exchange....................... 77,662 82,499
Operating lease charges-
Equipment and vehicles........................... 326,758 123,231
Buildings........................................ 51,526 90,750
Royalties:
Current portion.................................. 2,308,210 1,210,269
Technical Consulting Fees.......................... 2,544,811 --
========= =========
</TABLE>
(b) Directors' emoluments:
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JANUARY 31,
1997 1997
------------- -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
For services as director paid by company.......... 26,969 13,232
For other services paid by subsidiary companies... 386,465 194,706
------- -------
413,434 207,938
======= =======
</TABLE>
F-51
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. NET FINANCE INCOME
Net finance income (costs) consists of the following:
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JANUARY 31,
1997 1997
------------- -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Interest received:
Other............................................ 779,544 146,121
Interest paid:
Holding company.................................. (29,569) (58,530)
Other............................................ -- (1,980)
------- -------
749,975 85,611
======= =======
</TABLE>
9. TAXATION
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JANUARY 31,
1997 1997
------------- -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
South African normal taxation...................... 292,808 --
Secondary tax on companies......................... 333,333 --
------- -----
626,141 --
======= =====
Reconciliation of rate of tax (%)
South African normal tax rate...................... 35.0 35.0
Adjusted for:
Assessed loss.................................... (29.5) (35.0)
Secondary tax on companies....................... 6.0 --
------- -----
11.5 --
======= =====
</TABLE>
10. CASH (UTILIZED) GENERATED BY OPERATIONS
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JANUARY 31,
1997 1997
------------- -----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Operating income................................... 4,690,389 2,785,289
Adjusted for:
Depreciation..................................... 1,857,528 1,033,769
Profit on disposal of fixed assets............... (14,616) (15,363)
--------- ---------
6,533,301 3,803,695
========= =========
</TABLE>
F-52
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INCREASE (DECREASE) IN WORKING CAPITAL
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JANUARY 31,
1997 1997
------------- ---------------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Decrease in inventories..................... 1,107,175 3,536,156
Decrease in accounts receivable............. 1,911,434 310,320
Decrease (increase) in receivable from
fellow subsidiaries........................ (1,966,007) 803,656
(Decrease) increase in accounts payable..... 1,965,072 (3,868,867)
(Decrease) in payable to holding and fellow
subsidiary companies....................... (824,937) (967,340)
----------- ---------------
2,192,737 (186,075)
=========== ===============
12. UNCOVERED FOREIGN CURRENCY ASSETS (LIABILITIES)
At the applicable balance sheet date the Group has the following uncovered
foreign currency denominated assets (liabilities) relating to trading
activities:
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
1997 1997
------------- ---------------
<S> <C> <C>
Pound Sterling.............................. (Pounds)-- (Pounds) 63,511
Japanese Yen................................ (Yen) -- (Yen)(2,624,237)
</TABLE>
13. RETIREMENT BENEFITS
The Group participates in the Lucas Automotive Pension Fund, a defined
benefit plan, governed by the Pension Funds Act, 1956, which covers
substantially all employees. The latest actuarial valuation of the pension
fund, at July 1, 1995, disclosed no unfunded past service liabilities.
14. LEASE COMMITMENTS
Commitments in respect of minimum annual rentals under operating lease
agreements are as follows:
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31,1997 JANUARY 31,1997
---------------------------- ----------------------------
EQUIPMENT EQUIPMENT
AND MOTOR AND MOTOR
PREMISES VEHICLES TOTAL PREMISES VEHICLES TOTAL
-------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Due within one year.. 189,677 82,269 271,946 162,921 201,524 364,445
Due thereafter....... 390,928 456,896 847,824 487,340 426,410 913,750
------- ------- --------- ------- ------- ---------
580,605 539,165 1,119,770 650,261 627,934 1,278,195
======= ======= ========= ======= ======= =========
</TABLE>
15. CAPITAL COMMITMENTS
Capital commitments, for which funds will be provided from existing Group
bank facilities, comprise:
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
<S> <C> <C>
Authorised and contracted for....................... 1,742,858 1,031,548
========= =========
</TABLE>
F-53
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. EXCHANGE CONTROL RESTRICTIONS
Present exchange control restrictions prevent South African companies from
distributing to non-resident shareholders profits earned prior to January 1,
1984, unless special approval is obtained from the Exchange Control
authorities. Where such approval is given, distributions are normally
restricted to earnings arising from trading profits. Furthermore, profits of a
capital nature earned subsequent to January 1, 1984, may not ordinarily be
distributed to non-residents.
Holding company loans of 268,816 Rand (January 31, 1997--975,492 Rand) are
subject to the South African debt standstill arrangements and may only be
repaid with the prior approval of the Exchange Control Authorities (See Note
4).
The group's local borrowing facilities total 5.0 million Rand.
17. CHANGE IN FINANCIAL YEAR END
The Company has changed its financial year end from January 31 to December
31 with effect from December 31, 1997.
18. COMPARATIVES
Some of the prior year figures have been restated in order to achieve
consistency in the presentation of the financial statements.
19. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)
The following adjustments are required to restated the financial statements
from South African Generally Accepted Accounting Practice to that applicable
in the United States:
(A) DEFERRED TAXATION
Under South African Generally Accepted Accounting Practice deferred tax
asset balances should not be carried forward unless the recoverability
thereof is assured beyond reasonable doubt. The company has therefore not
created a deferred tax asset by utilising the assessed loss. Under United
States Generally Accepted Accounting Principles ("US GAAP") assessed losses
carried forward are recognised if it is more than likely that the deferred
tax asset will be realised. Therefore the financial statements of the group
have been adjusted as set out hereunder to take effect to the deferred tax
asset created by the assessed loss.
(B) DEFINED BENEFIT PENSION FUND
The company is currently enjoying a pension holiday and therefore no
pension cost is provided for in the financial statements. Under US GAAP the
yearly expense should be based on actuarial valuation. Additionally the
surplus generated in the fund should be used to reduce this yearly expense,
spread over the remaining working lives of the members. Currently no
actuarial valuation is available to determine the yearly expense, therefore
the charge to income for US GAAP purposes has been based upon previously
contributions recalculated to take effect of current payroll costs. The
charge to the Income Statement has then been reduced by the surplus of the
pension fund over the estimated working lives of members.
(C) REVALUATION OF LAND AND BUILDINGS
In 1989 the company revalued the land and buildings taking the amount by
which they were revalued to a revaluation non-distributable reserve. The
additional depreciation charged on the amount by which they
F-54
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)--
(CONTINUED)
were revalued has been transferred from distributable retained earnings to
the non-distributable revaluation reserve. Under US GAAP no upward
revaluation is allowed. The revaluation has therefore been reserved and the
revaluation non-distributable reserve has been reduced to a zero balance.
The additional depreciation on the revalued amount has been ignored as this
is considered to be immaterial.
(D) GOODWILL
Goodwill has previously been written off to non distributable reserve as
stated in Note 1 hereto. Under USGAAP this write off should have been taken
to retained income. The goodwill would have been fully amortised by July
31, 1995 in terms of US GAAP. A transfer has therefore been made between
retained income and non distributable reserves.
<TABLE>
<CAPTION>
SIX MONTHS
ELEVEN MONTHS ENDED
ENDED JANUARY
DECEMBER 31, 31,
1997 1997
------------- ----------
(SOUTH AFRICAN RAND,
IN THOUSANDS)
<S> <C> <C>
NET INCOME
Retained income before taxation under South African
GAAP............................................... 4,814 2,871
Pension Fund Adjustment per (b) above............... (749) (433)
Deferred Tax Adjustment per (a) above............... (1,004) (1,234)
------ ------
Retained income as adjusted for U.S GAAP............ 3,061 1,204
====== ======
SHAREHOLDER'S FUNDS
Shareholder's Equity under South African GAAP....... 25,383 23,236
Effect of prior year U.S. GAAP adjustments.......... (2,575) (908)
------ ------
Adjusted Shareholder's Equity..................... 22,808 22,328
Deferred Tax Asset per (a) above.................... (1,004) (1,234)
Pension Fund Adjustment per (b) above............... (749) (433)
------ ------
Shareholder's Equity as Adjusted for U.S GAAP..... 21,055 20,661
====== ======
AMORTISATION OF GOODWILL
Increase in Non-Distributable Reserves.............. 590 590
Reduction in Retained Income........................ (590) (590)
------ ------
Effect on Shareholder's Equity...................... -- --
====== ======
</TABLE>
F-55
<PAGE>
REPORT OF THE INDEPENDENT AUDITORS
TO THE MEMBER OF PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA (PROPRIETARY)
LIMITED:
We have audited the Group annual financial statements of PRESTOLITE ELECTRIC
HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED (formerly known as Lucas Holdings
South Africa (Proprietary) Limited) and Subsidiaries at July 31, 1996 and July
31, 1995, and for the years then ended, set out on pages F-57 To F-67. These
annual financial statements are the responsibility of the Company's Directors.
Our responsibility is to report on these annual financial statements.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance that, in all material respects, fair presentation
is achieved in the annual financial statements. An audit includes an
evaluation of the appropriateness of the accounting policies, an examination,
on a test basis, of evidence supporting the amounts and disclosures included
in the annual financial statements, an assessment of the reasonableness of
significant estimates and a consideration of the appropriateness of the
overall financial statement presentation. We consider that our audit
procedures were appropriate in the circumstances to express our opinion
presented below.
We conducted our audit in accordance with auditing standards applicable in
South Africa. Certain accounting practices of the Group used in preparing the
accompanying financial statements conform with generally accepted accounting
principles in South Africa but do not conform with accounting principles
generally accepted in he United States. A description of these differences and
the adjustments required to conform the financial statements to accounting
principles generally accepted in the United States are set forth in Note 18.
In our opinion, the above-mentioned annual financial statements fairly
present the financial position of the Group at July 31, 1996 and July 31,
1995, and the results of its operations and cash flow information for the
years then ended, in conformity with generally accepted accounting practice
and subject to the fact that no Directors' Report has been included therein,
in the manner required by the Companies Act.
Johannesburg, South Africa Arthur Andersen & Co.
February 27, 1998 Chartered Accountants (S.A.)
F-56
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 1996 AND JULY 31, 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
CAPITAL EMPLOYED
Share capital (Note 2).................................... 2,051,002 2,051,002
Share premium............................................. 7,091,145 7,091,145
Non-distributable reserves (Note 3)....................... 1,298,506 1,298,506
Retained income........................................... 9,924,165 7,370,555
---------- ----------
Shareholder's equity.................................... 20,364,818 17,811,208
Payable to holding company (Note 4)....................... 975,492 1,637,510
---------- ----------
21,340,310 19,448,718
========== ==========
EMPLOYMENT OF CAPITAL
Fixed assets (Note 5)..................................... 11,240,122 10,557,607
---------- ----------
CURRENT ASSETS:
Inventories (Note 6).................................... 12,695,268 14,159,149
Accounts receivable..................................... 11,131,656 10,624,373
Receivable from fellow subsidiaries..................... 2,201,874 884,037
Bank and cash balances.................................. 2,200 9,092
---------- ----------
Total current assets................................... 26,030,998 25,676,651
========== ==========
CURRENT LIABILITIES:
Accounts payable........................................ 12,576,036 13,056,639
Payable to holding and fellow subsidiary companies...... 3,037,434 3,585,916
Bank overdraft.......................................... 317,340 142,985
---------- ----------
Total current liabilities.............................. 15,930,810 16,785,540
---------- ----------
Net current assets...................................... 10,100,188 8,891,111
---------- ----------
21,340,310 19,448,718
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-57
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONSOLIDATED INCOME STATEMENTS
FOR THE YEARS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Turnover................................................ 68,671,817 68,467,362
Cost of sales........................................... 54,323,137 54,987,588
---------- ----------
Gross profit............................................ 14,348,680 13,479,774
---------- ----------
Operating income (Note 7)............................... 3,179,264 3,669,362
Net finance costs (Note 8).............................. (625,654) (150,926)
---------- ----------
Income before taxation.................................. 2,553,610 3,518,436
Taxation (Note 9) -- --
---------- ----------
Net income.............................................. 2,553,610 3,518,436
Transfer from non-distributable reserves................ 31,442 220,094
Retained income, beginning of period.................... 7,339,113 3,632,025
---------- ----------
Retained income, end of period.......................... 9,924,165 7,370,555
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-58
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEARS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
CASH GENERATED BY OPERATING ACTIVITIES:
Cash generated by operations (Note 10)................. 4,862,091 4 997 007
(Increase) in working capital (Note 11)................ (1,700,306) (1,408,508)
Net finance costs (Note 8)............................. (625,654) (150,926)
---------- ----------
2,536,131 3,437,573
CASH GENERATED FROM INVESTING ACTIVITIES:
Additions to fixed assets (Note 5)..................... (2,757,531) (4,531,870)
Proceeds on disposal of fixed assets................... 392,189 54,520
---------- ----------
(2,365,342) (4,477,350)
---------- ----------
170,789 (1,039,777)
========== ==========
CASH EFFECTS OF FINANCING ACTIVITIES:
Decrease in payable to holding company................. (352,036) (523 734)
Decrease in bank and cash balances..................... 6,892 1,420,526
Increase in bank overdraft............................. 174,355 142,985
---------- ----------
(170,789) 1,039,777
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-59
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. ACCOUNTING POLICIES
The financial statements are prepared on the historical cost basis (adjusted
by the revaluation of land and buildings as more fully detailed below), and
incorporate the following significant accounting policies which, unless
otherwise stated, have been applied on a consistent basis.
Investment in subsidiaries and principles of consolidation: The Group
financial statements include the financial position and results of operations
of the Company and its subsidiaries. Intercompany balances and transactions
have been eliminated on consolidation. Goodwill arising on consolidation,
being the excess of the purchase price over the fair value of net tangible
assets of that company, is stated in the consolidated financial statements as
a deduction from non-distributable reserves.
Fixed assets: Fixed assets are stated at cost or valuation less accumulated
depreciation. Fixed assets stated at valuation are valued periodically on an
open market, existing use basis. Depreciation of fixed assets is provided on
the straight line basis, at rates considered appropriate to write off the cost
over the expected useful lives of the assets. The applicable amount of
depreciation on the revalued portion of fixed assets is transferred to
distributable reserves on an annual basis.
The annual rates of depreciation used are as follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings.............................................................. 2%
Motor vehicles......................................................... 20%
Office and computer equipment.......................................... 20%
Plant and machinery.................................................... 5-33%
</TABLE>
Land is not depreciated.
Inventories: Inventories are valued at the lower of cost (determined on a
first-in, first-out or weighted average basis) and net realisable value. Cost,
where applicable, includes an appropriate portion of labour and production
overheads. Maintenance stocks are written-off against income.
Translation of foreign currency items: Foreign currency items have been
translated into South African Rands at the balance sheet rates of exchange for
items not covered by forward exchange contracts. Foreign currency items
covered by forward exchange contracts are translated at the appropriate
forward cover rate. Gains and losses arising from fluctuations in exchange
rates are reflected in income in the period in which they arise.
Deferred taxation: Deferred taxation is provided on the liability method
using the comprehensive basis for the tax effect of timing differences between
the financial and taxable reporting of income and expenditure. Where the
estimated taxation loss available to be carried forward exceeds the aggregate
timing differences, no provision is raised for the resulting deferred tax
asset.
Retirement benefit costs: Retirement benefit costs are charged against
income in the period in which they are incurred.
Turnover: Turnover comprises the net amount invoiced for goods and services
and excludes Value Added Taxation.
F-60
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SHARE CAPITAL (AS OF JULY 31)
<TABLE>
<CAPTION>
1996 1996
--------- ---------
(SOUTH AFRICAN
RAND)
<S> <C> <C>
Authorised:
1,268,225 ordinary shares of 2 Rand each............... 2,536,450 2,536,450
1 B share of 2 Rand.................................... 2 2
--------- ---------
2,536,452 2,536,452
========= =========
Issued:
1,025,500 ordinary shares of 2 Rand each............... 2,051,000 2,051,000
1 B share of 2 Rand.................................... 2 2
--------- ---------
2,051,002 2,051,002
========= =========
</TABLE>
The unissued shares are under the control of the Directors until the next
annual general meeting.
3. NON-DISTRIBUTABLE RESERVES (AS OF JULY 31)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(SOUTH AFRICAN
RAND)
<S> <C> <C>
Capital redemption reserve fund...................... 536,450 536,450
Reserve arising on valuation of land and buildings... 1,383,465 1,131,929
Release of depreciation on revalued portion of land
and buildings....................................... 31,442 220,094
Goodwill written-off................................. (589,967) (589,967)
--------- ---------
1,298,506 1,298,506
========= =========
</TABLE>
4. PAYABLE TO HOLDING COMPANY (AS OF JULY 31)
The amount payable to the holding company is unsecured, bears interest at 12%
per annum and is payable in six-monthly instalments of (Pounds)50,000 each.
(Refer Note 16).
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(SOUTH AFRICAN
RAND)
<S> <C> <C>
Loan payable.......................................... 1,285,474 1,637,510
Less current portion included in payable to holding
and fellow subsidiary companies...................... (309,982) --
--------- ---------
975,492 1,637,510
========= =========
</TABLE>
5. FIXED ASSETS (AS OF JULY 31)
<TABLE>
<CAPTION>
1996 1995
---------------------------------- ----------
COST OR ACCUMULATED NET BOOK NET BOOK
VALUATION DEPRECIATION VALUE VALUE
---------- ------------ ---------- ----------
(SOUTH AFRICAN RAND)
<S> <C> <C> <C> <C>
Land and buildings, at
valuation.................. 2,752,688 382,256 2,370,432 2,419,425
Motor vehicles.............. 2,021,045 749,917 1,271,128 1,059,050
Office and computer
equipment.................. 1,397,218 1,003,555 393,663 414,773
Plant and machinery......... 15,965,202 8,760,303 7,204,899 6,664,359
---------- ---------- ---------- ----------
22,136,153 10,896,031 11,240,122 10,557,607
========== ========== ========== ==========
</TABLE>
F-61
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. FIXED ASSETS--(CONTINUED)
MOVEMENT SUMMARY 1996
<TABLE>
<CAPTION>
1995 1996
---------- --------------------------------------------
NET BOOK DEPRECIATION NET BOOK
VALUE ADDITION DISPOSALS CHARGE VALUE
---------- --------- --------- ------------ ----------
(SOUTH AFRICAN RAND)
<S> <C> <C> <C> <C> <C>
Land and buildings...... 2,419,425 -- -- (48,993) 2,370,432
Motor vehicles.......... 1,059,050 669,550 (116,619) (340,853) 1,271,128
Office and computer
equipment.............. 414,773 120,652 -- (141,762) 393,663
Plant and machinery..... 6,664,359 1,967,329 -- (1,426 789) 7,204,899
---------- --------- -------- ---------- ----------
10,557,607 2,757,531 (116,619) (1,958,397) 11,240,122
========== ========= ======== ========== ==========
MOVEMENT SUMMARY 1995
<CAPTION>
1994 1995
---------- --------------------------------------------
NET BOOK DEPRECIATION NET BOOK
VALUE ADDITION DISPOSALS CHARGE VALUE
---------- --------- --------- ------------ ----------
(SOUTH AFRICAN RAND)
<S> <C> <C> <C> <C> <C>
Land and buildings...... 2,468,418 -- -- (48,993) 2,419,425
Motor vehicles.......... 797,298 539,046 (18,975) (258,319) 1,059,050
Office and computer
equipment.............. 293,408 245,151 -- (123,786) 414,773
Plant and machinery..... 3,848,778 3,747,673 -- (932 092) 6,664,359
---------- --------- -------- ---------- ----------
7,407,902 4,531,870 (18,975) (1,363,190) 10,557,607
========== ========= ======== ========== ==========
</TABLE>
Land and buildings comprise Erf 98 Lea Glen Township, Roodepoort, together
with factory buildings thereon. They were last valued in August 1989.
6. INVENTORIES (AS OF JULY 31)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Raw materials and consumables.......................... 5,754,544 8,280,763
Work-in-progress....................................... 1,032,000 1,407,123
Finished goods......................................... 5,908,724 4,471,263
---------- ----------
12,695,724 14,159,149
========== ==========
</TABLE>
F-62
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. OPERATING INCOME (YEAR ENDED JULY 31)
(a) Operating income has been arrived at after charging (crediting) the
following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(SOUTH AFRICAN
RAND)
<S> <C> <C>
Auditors' remuneration:
Audit fees........................................... 182,500 184,500
Other services....................................... 97,444 --
Depreciation........................................... 1,958,392 1,459,697
Profit on disposal of fixed assets..................... (275,565) (132,052)
Net loss on foreign exchange........................... 295,930 68,693
Operating lease charges
Equipment and vehicles............................... 349,807 284,038
Buildings
Recurring............................................ 371,885 434,239
Non-recurring........................................ -- 490,000
Royalties
Current portion........................................ 2,417,147 2,374,925
Prior years' portion................................. 639,000 1,119,000
(b) Directors' emoluments 1996
<CAPTION>
1996 1995
--------- ---------
(SOUTH AFRICAN
RAND)
<S> <C> <C>
For services as director paid by company............... 34,069 31,712
For other services paid by subsidiary companies........ 366,356 344,084
--------- ---------
400,425 375,796
========= =========
</TABLE>
8. NET FINANCE INCOME
Net finance income (costs) consists of the following (year ended July 31):
<TABLE>
<CAPTION>
1996 1995
-------- --------
(SOUTH AFRICAN
RAND)
<S> <C> <C>
Interest received
Others................................................. -- 231,870
Interest paid
Holding company........................................ (154,257) (249,879)
Other.................................................. (471,397) (132,917)
-------- --------
(614,654) (150,926)
======== ========
</TABLE>
9. TAXATION
There is no current taxation charge due to estimated tax losses in the
Company and subsidiary companies of approximately 2.5 million Rand (1995--2.4
million Rand) and 5.1 million Rand (1995--6.3 million Rand) respectively, to
be set-off against future taxable income.
F-63
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. CASH (UTILIZED) GENERATED BY OPERATIONS (YEAR ENDED JULY 31)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(SOUTH AFRICAN
RAND)
<S> <C> <C>
Operating income....................................... 3,179,264 3,669,362
Adjusted for:
Depreciation......................................... 1,958,392 1,459,697
Profit on disposal of fixed assets................... (275,565) (132,052)
--------- ---------
4,862,091 4,997,007
========= =========
</TABLE>
11. INCREASE (DECREASE) IN WORKING CAPITAL (YEAR ENDED JULY 31)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(SOUTH AFRICAN RAND)
<S> <C> <C>
Decrease in inventories............................ 1,463,881 (3,694,717)
Increase in accounts receivable.................... (507,283) (1,745,543)
(Increase) in receivable from fellow subsidiaries.. (1,317,837) (614 126)
(Decrease) increase in accounts payable............ (408,603) 2,986,475
(Decrease) increase in payable to holding and
fellow subsidiary companies....................... (858,464) 1,659,403
---------- ----------
(1,700,306) (1,408,508)
========== ==========
</TABLE>
12. UNCOVERED FOREIGN CURRENCY ASSETS (LIABILITIES) (AS OF JULY 31)
The Group has the following uncovered foreign currency denominated assets
(liabilities) relating to trading activities:
<TABLE>
<CAPTION>
1996 1995
-------------- ----------------
<S> <C> <C>
Pound Sterling.............................. (Pounds) -- (Pounds) (17,066)
Pound Sterling.............................. (Pounds)16,914 (Pounds) 26,017
Japanese Yen................................ (Yen) 12,385 (Yen)(12,163,991)
United States Dollars....................... $ 104,702 $ 26,146
-------------- ----------------
</TABLE>
13. RETIREMENT BENEFITS
The Group participates in the Lucas Automotive Pension Fund, a defined
benefit plan, governed by the Pension Funds Act, 1956, which covers
substantially all employees. The latest actuarial valuation of the pension
fund, at July 1, 1995, disclosed no unfunded past service liabilities.
F-64
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. LEASE COMMITMENTS (AS OF JULY 31)
Commitments in respect of minimum annual rentals under operating lease
agreements are as follows:
<TABLE>
<CAPTION>
1996
-----------------------------
EQUIPMENT
AND MOTOR
PREMISES VEHICLES TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Due within one year............................ 369,316 92,798 462,114
Due thereafter................................. 721,684 128,318 850,002
--------- ------- ---------
1,091,000 221,116 1,312,116
========= ======= =========
<CAPTION>
1995
-----------------------------
EQUIPMENT
AND MOTOR
PREMISES VEHICLES TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Due within one year............................ 333,722 191,358 525,080
Due thereafter................................. 632,966 193,125 826,091
--------- ------- ---------
966,688 384,483 1,351,171
========= ======= =========
</TABLE>
15. CAPITAL COMMITMENTS (AS OF JULY 31)
Capital commitments, for which funds will be provided from existing bank
facilities, comprise:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(SOUTH AFRICAN
RAND)
<S> <C> <C>
Authorised and contracted for............................ 338,064 672,426
Authorised and not contracted for........................ 684,408 701,514
--------- ---------
1,022,472 1,373,940
========= =========
</TABLE>
16. EXCHANGE CONTROL RESTRICTIONS
Present exchange control restrictions prevent south African companies from
distributing to nonresident shareholders profits earned prior to January 1,
1984, unless special approval is obtained from the Exchange Control
authorities. Where such approval is given, distributions are normally
restricted to earnings arising from trading profits. Furthermore, profits of a
capital nature earned subsequent to january 1, 1984, may not ordinarily be
distributed to nonresidents.
Holding company loans of 1,285,474 Rand (1995--1,637,510 Rand) are subject
to the South African debt standstill arrangement and may only be repaid with
the prior approval of the Exchange Control Authorities (Refer Note 4).
The group's local borrowing facilities total 6.0 million Rand (1995--4.0
million Rand).
17. COMPARATIVES
Some of the July 31, 1995 figures have been restated in order to achieve
consistency in the presentation of the financial statements.
F-65
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)
The following adjustments are required to restate the financial statements
from South African Generally Accepted Accounting Practice to that applicable
in the United States;
(A) DEFERRED TAXATION
Under South African Generally Accepted Accounting Practice deferred tax
asset balances should not be carried forward unless the recoverability
thereof is assured beyond reasonable doubt. The company has therefore not
created a deferred tax asset by utilising the assessed loss. Under United
States Generally Accepted Accounting Principles ("US GAAP") assessed losses
carried forward are recognised if it is more than likely that the deferred
tax asset will be realised. Therefore the financial statements of the group
have been adjusted as set out hereunder to take effect of the deferred tax
asset created by the assessed loss.
(B) DEFINED BENEFIT PENSION FUND
The company is currently enjoying a pension holiday and therefore no
pension cost is provided for in the financial statements. Under US GAAP the
yearly expense should be based on actuarial valuations. Additionally the
surplus generated in the fund should be used to reduce this yearly expense,
spread over the remaining working lives of the members. Currently no
actuarial valuation is available to determine the yearly expense, therefore
the charge to income for US GAAP purposes has been based upon previous
contributions recalculated to take effect of current payroll costs. This
charge to the Income Statement has then been reduced by the surplus of the
pension fund over the estimated working lives of members.
(C) REVALUATION OF THE LAND AND BUILDINGS
In 1989 the company revaluated the land and buildings taking the amount
by which they were revalued to a revaluation non-distributable reserve. The
additional depreciation charged on the amount by which they were revalued
had been transferred from distributable retained earnings to the non
distributable revaluation reserve. Under US GAAP no upward revaluation is
allowed. The revaluation has therefore been reversed and the revaluation
non-distributable reserve has been reduced to a zero balance. The
additional depreciation on the revalued amount has been ignored as this is
considered to be immaterial.
(D) GOODWILL
Goodwill has previously been written off to non distributable reserves as
stated in Note 1 hereto. Under US GAAP this write off should have been
taken to retained income. the goodwill would have been fully amortised by
July 31, 1995 in terms of US GAAP. A transfer has therefore been made
between retained income and non distributable reserves.
F-66
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)--
(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31,
----------------------
1996 1995
---------- ----------
(SOUTH AFRICAN RAND,
IN THOUSANDS)
<S> <C> <C>
NET INCOME
Retained income before taxation under South African
GAAP................................................ 2,554 3,518
Pension Fund Adjustment per (b) above................ (866) (866)
Deferred Tax Adjustment per (a) above................ (737) (1,394)
---------- ----------
Retained income as adjusted for U.S. GAAP............ 951 (1,258)
========== ==========
SHAREHOLDER'S FUNDS
Shareholder's Equity under South African GAAP........ 20,265 17,811
Deferred Tax Asset Created in 1994................... 4,369
Effect of prior year U.S. GAAP adjustments........... 695 --
---------- ----------
Adjusted Shareholder's Equity........................ 21,060 22,180
Deferred Tax Asset per (a) above..................... (737) (1,394)
Revaluation of Land and Buildings per (c) above...... -- (1,414)
Pension Fund Adjustment per (b) above................ (866) (866)
---------- ----------
Shareholder's Equity as Adjusted for U.S. GAAP....... 19,457 18,506
========== ==========
AMORTISATION OF GOODWILL
Increase in Non-distributable Reserves............... 590 590
Reduction in Retained Income......................... (590) (590)
---------- ----------
Effect on Shareholder's Equity....................... -- --
========== ==========
</TABLE>
F-67
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONVENIENCE TRANSLATION
Basis of translation into US Dollars:
The financial information set out on the following four pages translates the
Consolidated Income Statements, Balance Sheets, Cash Flow Statements and the
Reconciliation between South African GAAP and United States GAAP for Lucas
Holdings South Africa (Proprietary) Limited and subsidiaries at and for the
periods ended December 31, 1997, January 31, 1997, July 31, 1996 and July 31,
1995, prepared in South African currency (Rands) under South African Generally
Accepted Accounting Practice into United States Dollars.
The method of translation is as follows:
Balance Sheet items are translated at the exchange rate ruling as at the
balance sheet date.
Income Statement items are translated at the average rate for the period.
The reconciliation is translated at the corresponding balance sheet date.
F-68
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONVENIENCE TRANSLATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF AS OF AS OF AS OF
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------ ----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CAPITAL EMPLOYED
Share capital....................... $ 422 $ 450 $ 455 $ 567
Share premium....................... 1,458 1,555 1,574 1,959
Non-distributable reserves.......... 260 281 288 360
Forex Translation Reserve........... 42 (442) (466) (698)
Retained income..................... 3,775 3,274 2,646 1,994
------ ------ ------ -------
Shareholder's equity.............. 5,217 5,094 4,521 4,922
Payable to holding company.......... -- 53 216 452
------ ------ ------ -------
$5,217 $5,147 $4,737 $ 5,374
====== ====== ====== =======
EMPLOYMENT OF CAPITAL
Fixed assets........................ $2,276 $2,429 $2,495 $ 2,917
------ ------ ------ -------
CURRENT ASSETS:
Inventories....................... 1,655 2,009 2,818 3,913
Accounts receivable............... 1,831 2,372 2,471 2,936
Receivable from fellow
subsidiaries..................... 692 306 489 244
Bank and cash balances............ 1,342 394 -- 2
------ ------ ------ -------
Total current assets............ 5,520 5,081 5,778 7,095
====== ====== ====== =======
CURRENT LIABILITIES:
Accounts payable.................. 2,194 1,909 2,792 3,607
Payable to holding and fellow
subsidiary companies............. 256 454 674 991
Bank overdraft.................... -- -- 70 40
Taxation.......................... 129 -- -- --
------ ------ ------ -------
Total current liabilities....... 2,579 2,363 3,536 4,638
------ ------ ------ -------
Net current assets.............. 2,941 2,718 2,242 2,457
------ ------ ------ -------
$5,217 $5,147 $4,737 $ 5,374
====== ====== ====== =======
</TABLE>
F-69
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONVENIENCE TRANSLATION
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Turnover......................... $14,497 $7,601 $17,330 $19,093
Cost of sales.................... 10,950 5,703 13,709 15,337
------- ------ ------- -------
Gross profit..................... $ 3,547 $1,898 $ 3,621 $ 3,756
======= ====== ======= =======
Operating income................. 1,019 606 802 1,023
Net finance income (costs) ...... 163 19 (158) (42)
------- ------ ------- -------
Income before taxation........... 1,182 625 644 981
Taxation......................... (136) -- -- --
------- ------ ------- -------
Net income, for the period....... 1,046 625 644 981
Transfer from non-distributable
reserves........................ 3 3 8 --
Dividend paid.................... (548) -- -- --
Retained income, beginning of
period.......................... 3,274 2,646 1,994 1,013
------- ------ ------- -------
Retained income, end of period... $ 3,775 $3,274 $ 2,646 $ 1,994
======= ====== ======= =======
</TABLE>
F-70
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONVENIENCE TRANSLATION
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash Generated by Operating
Activities:
Cash generated by operations..... $1,343 $ 834 $1,079 $ 1,381
Decrease (increase) in working
capital......................... 451 (41) (377) (389)
Net finance income (costs)....... 154 19 (139) (42)
Dividend paid.................... (548) -- -- --
------ ----- ------ -------
1,400 812 563 950
Cash Generated from Investing
Activities:
Additions to fixed assets........ (429) (196) (612) (1,279)
Proceeds on disposal of fixed
assets.......................... 51 7 86 42
------ ----- ------ -------
(378) (189) (526) (1,237)
------ ----- ------ -------
1,022 623 37 (287)
====== ===== ====== =======
Cash Effects of Financing
Activities:
Decrease in payable to holding
company......................... (50) (160) (78) (145)
Decrease (increase) in bank and
cash balances................... (972) (394) 2 392
Decrease (increase) in bank
overdraft....................... -- (69) 39 40
------ ----- ------ -------
(1,022) (623) 37 287
====== ===== ====== =======
</TABLE>
F-71
<PAGE>
PRESTOLITE ELECTRIC HOLDINGS SOUTH AFRICA
(PROPRIETARY) LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS LUCAS HOLDINGS SOUTH AFRICA (PROPRIETARY) LIMITED)
CONVENIENCE TRANSLATION
RECONCILIATION OF SOUTH AFRICAN GAAP TO UNITED STATES GAAP
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JANUARY 31, JULY 31, JULY 31,
1997 1997 1996 1995
------------- ----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
NET INCOME
Retained income before taxation
under South African GAAP........ $1,046 $ 625 $ 644 $ 981
Pension Fund Adjustment.......... (163) (94) (219) (241)
Deferred Tax Adjustment.......... (218) (268) (186) (389)
------ ------ ------ ------
Retained income as adjusted for
U.S. GAAP....................... 665 263 239 351
====== ====== ====== ======
SHAREHOLDER'S FUNDS
Shareholder's Equity under South
African GAAP.................... 5,217 5,094 4,521 4,921
Effect of prior year U.S. GAAP
adjustments..................... (530) (199) 154 1,207
------ ------ ------ ------
Adjusted Shareholder's equity.. 4,687 4,895 4,675 6,128
Deferred Tax Adjustment.......... (207) (270) (163) (385)
Revaluation of Land and
Buildings....................... -- -- -- (392)
Pension Fund Adjustment.......... (154) (95) (192) (239)
------ ------ ------ ------
Shareholder's Equity as
Adjusted for U.S. GAAP........ 4,326 4,530 4,320 5,112
====== ====== ====== ======
AMORTIZATION OF GOODWILL
Non-Distributable Reserves....... 181 129 131 164
Retained Income.................. (181) (129) (131) (164)
------ ------ ------ ------
Effect on Shareholder's Equity -- -- -- --
====== ====== ====== ======
</TABLE>
F-72
<PAGE>
- - - - - - - - - - - -------------------------------------------------------------------------------
- - - - - - - - - - - -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER OR PEI. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE ISSUER OR PEI SINCE SUCH DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 4
Risk Factors............................................................. 17
The Transactions......................................................... 25
Use of Proceeds.......................................................... 27
The Exchange Offer....................................................... 28
Capitalization........................................................... 36
Selected Consolidated Historical Financial Data.......................... 37
Unaudited Pro Forma Combined Financial Data.............................. 42
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 48
Business................................................................. 54
Management............................................................... 68
Principal Stockholders................................................... 73
Certain Transactions..................................................... 74
Description of the Exchange Notes........................................ 76
Description of Certain Indebtedness...................................... 107
Certain Federal Income Tax Consequences.................................. 109
Plan of Distribution..................................................... 113
Notice to Canadian Residents............................................. 114
Legal Matters............................................................ 115
Experts.................................................................. 115
Available Information.................................................... 115
Index to Financial Statements............................................ F-1
</TABLE>
------------
UNTIL , 1998 [90 DAYS AFTER THE DATE OF THIS PROSPECTUS] ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- - - - - - - - - - - -------------------------------------------------------------------------------
- - - - - - - - - - - -------------------------------------------------------------------------------
- - - - - - - - - - - -------------------------------------------------------------------------------
- - - - - - - - - - - -------------------------------------------------------------------------------
LOGO
PRESTOLITE ELECTRIC INCORPORATED
OFFER TO EXCHANGE ITS
OUTSTANDING
9 5/8% SENIOR NOTES DUE 2008
FOR ANY AND ALL OF ITS
9 5/8% SENIOR NOTES DUE 2008,
Which are Fully and Unconditionally Guaranteed on a Senior Basis by
PEI HOLDING, INC.
----------------
PROSPECTUS
----------------
, 1998
- - - - - - - - - - - -------------------------------------------------------------------------------
- - - - - - - - - - - -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Prestolite Electric Incorporated (the "Issuer") and PEI Holding, Inc.
("PEI"), the Issuer's parent corporation, are each Delaware corporations.
Section 145 of the General Corporation Law of the state of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
were, are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceedings, whether civil, criminal,
administrative or investigative (other than action by or in the right of such
corporation), by reason of the fact that such person is or was an officer or
director of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation
or enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
provided that such officer or director acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe
his conduct was illegal. A Delaware corporation may indemnify officers and
directors in any action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the
corporation in the performance of his duty. Where an officer or director is
successful on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify him against the expenses which such
officer or director actually and reasonably incurred.
In accordance with Delaware Law, the certificate of incorporation of each of
the Issuer and PEI contains a provision to limit the personal liability of the
directors of the Issuer and PEI for violations of their fiduciary duty. This
provision eliminates each director's liability to the Issuer and PEI or their
respective stockholders for monetary damages except (i) for any breach of the
director's duty of loyalty to the Issuer and PEI or their respective
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware Law providing for liability of directors for unlawful payment
of dividends or unlawful stock purchases or redemptions, or (iv) for any
transaction from which a director derived any improper personal benefit. The
effect of this provision is to eliminate the personal liability of directors
for monetary damages for actions involving a breach of their fiduciary duty of
care, including any such actions involving gross negligence.
The Bylaws of each of the Issuer and PEI provide for indemnification of the
officers and directors of the Issuer and PEI to the fullest extent permitted
by applicable law. The Issuer and PEI have each purchased insurance coverage
under policies which insure each of the Issuer and PEI for amounts which each
company is required or permitted to pay as indemnification of directors and
certain officers of the Issuer and PEI, respectively, and their subsidiaries
and which insure directors and certain officers of the Issuer and PEI,
respectively, and their subsidiaries against certain liabilities which might
be incurred by them in such capacities and for which they are not entitled to
indemnification by the Issuer and PEI, as the case may be.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Umbrella Agreement, dated as of January 22, 1998, relating to the Sale
and Purchase of Lucas' Electrical Products Business in England and
companies in South Africa and Argentina, by and between Lucas
Industries plc and others, Prestolite Electric Limited and others, and
PEI
2.2 Agreement, dated as of January 22, 1998, relating to the Sale and
Purchase of Assets of the Lucas Electrical and Electronic Systems-
Heavy Duty Products Business, by and between Lucas Limited, Prestolite
Electric Limited and Lucas Industries plc.
2.3 Agreement, dated as of January 22, 1998, for the Sale and Purchase of
the Entire Issued Share Capital of Lucas Argentine Holdings, Inc. and
Shares in Lucas Indiel Argentina S.A., by and between Lucas Industries
plc, the Issuer and Prestolite Newco, Inc.
2.4 Agreement for the Sale and Purchase of the Entire Issued Share Capital
of Lucas Holdings South Africa (Proprietary) Limited, by and between
Lucas Industries plc and the Issuer
3.1 Certificate of Incorporation of the Issuer
3.2 Certificate of Amendment of Certificate of Incorporation of the Issuer
3.3 Amended and Restated Certificate of Incorporation of PEI
3.4 Certificate of Amendment to Amended and Restated Certificate of
Incorporation of PEI
3.5 By-Laws of the Issuer
3.6 By-Laws of PEI
4.1 Indenture, dated as of January 22, 1998, among the Issuer, PEI and
U.S. Bank Trust National Association (formerly known as First Trust
National Association) as Trustee, including forms of Senior Notes
4.2 Registration Rights Agreement, dated as of January 22, 1998, between
the Issuer, PEI and Credit Suisse First Boston Corporation and BT
Alex.Brown Incorporated as Initial Purchasers
5.1* Opinion of Brobeck, Phleger & Harrison LLP
10.1 Amended and Restated Credit Agreement, dated as of January 22, 1998,
between Comerica Bank and the Issuer
10.2* Invoice Discounting Agreement, dated as of April , 1998, between
Lombard NatWest Discounting Limited and Prestolite Electric Limited
10.3* Subordination Agreement, dated as of April , 1998, between Lombard
NatWest Discounting Limited, Prestolite Electric Limited and the
Issuer.
10.4 Management Consulting Agreement, dated as of October 31, 1991, between
the Issuer and Genstar Investment Corporation
10.5 Amendment No. 1 to Management Consulting Agreement, dated as of
January 1, 1998, between the Issuer and Genstar Investment Corporation
10.6 Promissory Note, dated as of January 22, 1998, payable to Lucas
Industries plc by Prestolite Newco, Inc. ("A" Loan Note)
10.7 Promissory Note, dated as of January 22, 1998, payable to Lucas
Industries plc by Prestolite Newco, Inc. ("B" Loan Note)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
10.8 Promissory Note, dated as of January 22, 1998, payable to Lucas
Industries plc by Prestolite Newco, Inc. ("C" Loan Note)
<C> <S>
10.9 Option Agreement, dated as of January 22, 1998, between Lucas
Industries plc and the Issuer
10.10 Tax Deed, dated as of January 22, 1998, between Lucas Industries plc,
the Issuer and Lucas Indiel Argentina S.A.
10.11 Distribution Agreement--South Africa, dated as of January 22, 1998, by
and between Lucas Limited and Lucas Automotive (Pty) Ltd.
10.12 Distribution Agreement--Argentina, dated as of January 22, 1998, by and
between Lucas Limited and Lucas Indiel Argentina S.A.
10.13 South African Supply Agreement, dated as of January 22, 1998, by and
between Lucas Limited and Lucas Automotive (Pty) Ltd.
10.14 Supply and Distribution Agreement for South America (excluding
Argentina), dated as of January 22, 1998, by and between Lucas Indiel
Argentina S.A. and Lucas Diesel do Brasil Ltda.
10.15 Acton Trade Mark Licence, dated as of January 22, 1998, by and between
Lucas Industries plc and Prestolite Electric Limited
10.16 Trade Mark Licence--Argentina, dated as of January 22, 1998, by and
between Lucas Industries plc and Lucas Indiel Argentina S.A.
10.17 LAO Sale and Transition Agreement relating to Acton, dated as of
January 22, 1998, by and between Lucas Limited and Prestolite Electric
Limited
10.18 Licence of Intellectual Property Relating to In-Line Diesel Pumps,
dated as of January 22, 1998, by and between Lucas Limited and
Prestolite Electric Limited
10.19* Technical Assistance Agreement on Starter Motors and Alternators, dated
as of April , 1998, between the Issuer and Hitachi, Ltd.
10.20 PEI Holding, Inc. Management Stock Option Plan
10.21 Lease, dated as of September 3, 1993, between Plymouth Square and the
Issuer for the Ann Arbor, Michigan headquarters property
10.22 Lease, dated as of March 8, 1994, between Green Road Associates Limited
Partnership and the Issuer for the Ann Arbor, Michigan research
properties
10.23 Lease, dated as of October 11, 1991, between Lawrence Boes and Raymond
Boes and the Issuer, as amended, for the Dearborne Heights, Michigan
property
10.24 Lease, dated as of March 20, 1996, between Miller-Valentine Partners
Limited and the Issuer (as successor by merger to Prestolite Power
Corporation) for the Troy, Ohio property
10.25 Lease, dated as of November 7, 1997, between Miller-Valentine Partners
Limited and the Issuer (as successor by merger to Prestolite Power
Corporation) for the Troy, Ohio property
10.26 Lease, dated as of January 12, 1994, between The City of Wagoner,
Oklahoma and the Issuer for the Wagoner, Oklahoma property
10.27 Lease Agreement, dated as of June 14, 1996, between Duke Realty Limited
Partnership and the Issuer, as amended, for the sale and leaseback of
the Florence, Kentucky property
10.28 Licence Agreement, dated as of October 29, 1991, among PMI Holding,
Corp., the Issuer, Prestolite Electric of New York, Inc., Prestolite
Electric of Michigan, Inc., and Prestolite Technology Corp. and PEI
1991 Acquisition, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
10.29 Employment Agreement, dated as of January 1, 1997, between PEI and P. Kim Packard
10.30 Employment Agreement, dated as of January 1, 1997, between PEI and Kenneth C. Cornelius
<S> <C>
10.31 Employment Agreement, dated as of January 1, 1997, between PEI and Thomas E. Hunt
10.32 Employment Agreement, dated as of January 1, 1997, between PEI and Michael Lea
10.33 Employment Agreement, dated as of January 1, 1997, between PEI and Thomas C. Dolson
10.34 Employment Agreement, dated as of January 1, 1997, between PEI and I. Conrad Schwab
12 Statement of Computation of Ratio of Earnings to Fixed Charges
21* Subsidiaries of PEI
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young
23.3 Consent of Deloitte & Co.
23.4 Consent of Arthur Andersen & Co.
23.5* Consent of Brobeck, Phleger & Harrison LLP (contained in its opinion filed as Exhibit 5.1)
24.1 Powers of Attorney for the Issuer (contained on page II-6 of this Registration Statement).
24.2 Powers of Attorney for PEI (contained on page II-7 of this Registration Statement)
25 Form T-1 Statement of Eligibility of U.S. Bank Trust National Association
27 Condensed Financial Information on Registrant
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- - - - - - - - - - - --------
* To be filed by Amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is shown in the financial
statements or the notes thereto.
II-4
<PAGE>
ITEM 22. UNDERTAKINGS
(a) (1) The undersigned Registrants hereby undertake as follows: that prior
to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the Issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The Registrants undertake that every prospectus (i) that is filed
pursuant to paragraph (a)(1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the
Securities Act of 1933 (the "Act") and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part
of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of
determining any liability under the Act, 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.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrants
pursuant to the foregoing provisions, or otherwise, the Registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of
expenses incurred or paid by a director, officer or controlling person of the
Registrants 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 Registrants will, unless in the opinion
of their 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 Act and
will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
PRESTOLITE ELECTRIC INCORPORATED
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Ann
Arbor, State of Michigan on the day of April, 1998.
PRESTOLITE ELECTRIC INCORPORATED
By___________________________________
P. Kim Packard
Director, President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints P. Kim Packard and Kenneth C. Cornelius and
each of them his attorneys-in-fact, each with full power of substitution, for
him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto in all documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
that such attorneys-in-fact and agents or any of them, or his, her or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATED
/s/ P. Kim Packard President, Chief April , 1998
- - - - - - - - - - - ------------------------------------- Executive Officer
P. KIM PACKARD (principal
executive officer),
Director
/s/ Richard D. Paterson Chairman of the April , 1998
- - - - - - - - - - - ------------------------------------- Board, Director
RICHARD D. PATERSON
/s/ Kenneth C. Cornelius Vice President, April , 1998
- - - - - - - - - - - ------------------------------------- Chief Financial
KENNETH C. CORNELIUS Officer (principal
accounting and
financial officer)
and Secretary
/s/ Ross J. Turner Director April , 1998
- - - - - - - - - - - -------------------------------------
ROSS J. TURNER
/s/ John A. West Director April , 1998
- - - - - - - - - - - -------------------------------------
JOHN A. WEST
II-6
<PAGE>
PEI HOLDING, INC.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Ann
Arbor, State of Michigan on the day of April, 1998.
PRESTOLITE ELECTRIC INCORPORATED
By___________________________________
P. Kim Packard
Director, President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints P. Kim Packard and Kenneth C. Cornelius and
each of them his attorneys-in-fact, each with full power of substitution, for
him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto in all documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
that such attorneys-in-fact and agents or any of them, or his, her or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATED
/s/ P. Kim Packard President, Chief April , 1998
- - - - - - - - - - - ------------------------------------- Executive Officer
P. KIM PACKARD (principal
executive officer),
Director
/s/ Richard D. Paterson Chairman of the April , 1998
- - - - - - - - - - - ------------------------------------- Board, Director
RICHARD D. PATERSON
/s/ Kenneth C. Cornelius Vice President, April , 1998
- - - - - - - - - - - ------------------------------------- Chief Financial
KENNETH C. CORNELIUS Officer (principal
accounting and
financial officer)
and Secretary
/s/ Ross J. Turner Director April , 1998
- - - - - - - - - - - -------------------------------------
ROSS J. TURNER
/s/ John A. West Director April , 1998
- - - - - - - - - - - -------------------------------------
JOHN A. WEST
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
2.1 Umbrella Agreement, dated as of January 22, 1998,
relating to the Sale and Purchase of Lucas' Electrical
Products Business in England and companies in South
Africa and Argentina, by and between Lucas Industries
plc and others, Prestolite Electric Limited and others,
and PEI
2.2 Agreement, dated as of January 22, 1998, relating to
the Sale and Purchase of Assets of the Lucas Electrical
and Electronic Systems-Heavy Duty Products Business, by
and between Lucas Limited, Prestolite Electric Limited
and Lucas Industries plc.
2.3 Agreement, dated as of January 22, 1998, for the Sale
and Purchase of the Entire Issued Share Capital of
Lucas Argentine Holdings, Inc. and Shares in Lucas
Indiel Argentina S.A., by and between Lucas Industries
plc, the Issuer and Prestolite Newco, Inc.
2.4 Agreement for the Sale and Purchase of the Entire
Issued Share Capital of Lucas Holdings South Africa
(Proprietary) Limited, by and between Lucas Industries
plc and the Issuer
3.1 Certificate of Incorporation of the Issuer
3.2 Certificate of Amendment of Certificate of
Incorporation of the Issuer
3.3 Amended and Restated Certificate of Incorporation of
PEI
3.4 Certificate of Amendment to Amended and Restated
Certificate of Incorporation of PEI
3.5 By-Laws of the Issuer
3.6 By-Laws of PEI
4.1 Indenture, dated as of January 22, 1998, among the
Issuer, PEI and U.S. Bank Trust National Association
(formerly known as First Trust National Association) as
Trustee, including forms of Senior Notes
4.2 Registration Rights Agreement, dated as of January 22,
1998, between the Issuer, PEI and Credit Suisse First
Boston Corporation and BT Alex.Brown Incorporated as
Initial Purchasers
5.1* Opinion of Brobeck, Phleger & Harrison LLP
10.1 Amended and Restated Credit Agreement, dated as of
January 22, 1998, between Comerica Bank and the Issuer
10.2* Invoice Discounting Agreement, dated as of April ,
1998, between Lombard NatWest Discounting Limited and
Prestolite Electric Limited
10.3* Subordination Agreement, dated as of April , 1998,
between Lombard NatWest Discounting Limited, Prestolite
Electric Limited and the Issuer.
10.4 Management Consulting Agreement, dated as of October
31, 1991, between the Issuer and Genstar Investment
Corporation
10.5 Amendment No. 1 to Management Consulting Agreement,
dated as of January 1, 1998, between the Issuer and
Genstar Investment Corporation
10.6 Promissory Note, dated as of January 22, 1998, payable
to Lucas Industries plc by Prestolite Newco, Inc. ("A"
Loan Note)
10.7 Promissory Note, dated as of January 22, 1998, payable
to Lucas Industries plc by Prestolite Newco, Inc. ("B"
Loan Note)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.8 Promissory Note, dated as of January 22, 1998, payable
to Lucas Industries plc by Prestolite Newco, Inc. ("C"
Loan Note)
10.9 Option Agreement, dated as of January 22, 1998, between
Lucas Industries plc and the Issuer
10.10 Tax Deed, dated as of January 22, 1998, between Lucas
Industries plc, the Issuer and Lucas Indiel Argentina
S.A.
10.11 Distribution Agreement--South Africa, dated as of
January 22, 1998, by and between Lucas Limited and
Lucas Automotive (Pty) Ltd.
10.12 Distribution Agreement--Argentina, dated as of January
22, 1998, by and between Lucas Limited and Lucas Indiel
Argentina S.A.
10.13 South African Supply Agreement, dated as of January 22,
1998, by and between Lucas Limited and Lucas Automotive
(Pty) Ltd.
10.14 Supply and Distribution Agreement for South America
(excluding Argentina), dated as of January 22, 1998, by
and between Lucas Indiel Argentina S.A. and Lucas
Diesel do Brasil Ltda.
10.15 Acton Trade Mark Licence, dated as of January 22, 1998,
by and between Lucas Industries plc and Prestolite
Electric Limited
10.16 Trade Mark Licence--Argentina, dated as of January 22,
1998, by and between Lucas Industries plc and Lucas
Indiel Argentina S.A.
10.17 LAO Sale and Transition Agreement relating to Acton,
dated as of January 22, 1998, by and between Lucas
Limited and Prestolite Electric Limited
10.18 Licence of Intellectual Property Relating to In-Line
Diesel Pumps, dated as of January 22, 1998, by and
between Lucas Limited and Prestolite Electric Limited
10.19* Technical Assistance Agreement on Starter Motors and
Alternators, dated as of April , 1998, between the
Issuer and Hitachi, Ltd.
10.20 PEI Holding, Inc. Management Stock Option Plan
10.21 Lease, dated as of September 3, 1993, between Plymouth
Square and the Issuer for the Ann Arbor, Michigan
headquarters property
10.22 Lease, dated as of March 8, 1994, between Green Road
Associates Limited Partnership and the Issuer for the
Ann Arbor, Michigan research properties
10.23 Lease, dated as of October 11, 1991, between Lawrence
Boes and Raymond Boes and the Issuer, as amended, for
the Dearborne Heights, Michigan property
10.24 Lease, dated as of March 20, 1996, between Miller-
Valentine Partners Limited and the Issuer (as successor
by merger to Prestolite Power Corporation) for the
Troy, Ohio property
10.25 Lease, dated as of November 7, 1997, between Miller-
Valentine Partners Limited and the Issuer (as successor
by merger to Prestolite Power Corporation) for the
Troy, Ohio property
10.26 Lease, dated as of January 12, 1994, between The City
of Wagoner, Oklahoma and the Issuer for the Wagoner,
Oklahoma property
10.27 Lease Agreement, dated as of June 14, 1996, between
Duke Realty Limited Partnership and the Issuer, as
amended, for the sale and leaseback of the Florence,
Kentucky property
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
10.28 Licence Agreement, dated as of October 29, 1991, among
PMI Holding, Corp., the Issuer, Prestolite Electric of
New York, Inc., Prestolite Electric of Michigan, Inc.,
and Prestolite Technology Corp. and PEI 1991
Acquisition, Inc.
10.29 Employment Agreement, dated as of January 1, 1997,
between PEI and P. Kim Packard
10.30 Employment Agreement, dated as of January 1, 1997,
between PEI and Kenneth C. Cornelius
<C> <S> <C>
10.31 Employment Agreement, dated as of January 1, 1997,
between PEI and Thomas E. Hunt
10.32 Employment Agreement, dated as of January 1, 1997,
between PEI and Michael Lea
10.33 Employment Agreement, dated as of January 1, 1997,
between PEI and Thomas C. Dolson
10.34 Employment Agreement, dated as of January 1, 1997,
between PEI and I. Conrad Schwab
12 Statement of Computation of Ratio of Earnings to Fixed
Charges
21* Subsidiaries of PEI
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young
23.3 Consent of Deloitte & Co.
23.4 Consent of Arthur Andersen & Co.
23.5* Consent of Brobeck, Phleger & Harrison LLP (contained
in its opinion filed as Exhibit 5.1)
24.1 Powers of Attorney for the Issuer (contained on page
II-6 of this Registration Statement).
24.2 Powers of Attorney for PEI (contained on page II-7 of
this Registration Statement)
25 Form T-1 Statement of Eligibility of U.S. Bank Trust
National Association
27 Condensed Financial Information on Registrant
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- - - - - - - - - - - --------
* To be filed by Amendment.
<PAGE>
EXHIBIT 2.1
DATED: JANUARY 22, 1998
------------------------
(1) LUCAS INDUSTRIES PLC AND OTHERS
(2) PRESTOLITE ELECTRIC LIMITED AND OTHERS
(3) PEI HOLDING INC.
U M B R E L L A A G R E E M E N T
-----------------------------------
relating to the
Sale and Purchase of Lucas'
Electrical Products Business in
England and companies in South Africa and Argentina
Eversheds
10 Newhall Street,
Birmingham B3 3LX
Tel: 0121 233 2001
Fax: 0121 236 1583a
ID:BIRCORP 56175
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CONTENTS
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1. Definitions
2. Sale and Purchase of the Activity, the Shares and the Lucas Loan
3. Completion
4. Good Faith Provision
5. Holding Company Loan
6. Post Completion Covenants
7. Waiver
8. Notices
9. Costs
10. Entire Agreement
11. Survival of Certain Provisions
12. Governing Law
13. Guarantees
14. Announcements
15. Termination
16. Assignment
17. No Third Party Beneficiary
18. Authority
19. Restrictive Trade Practices Act
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SCHEDULE 1 Part 1 Details of the Vendors
Part 2 Details of the Purchasers
SCHEDULE 2 Ancillary Agreements
SCHEDULE 3 The Guarantee by the Purchaser Guarantor
SCHEDULE 4 The Guarantee by the Parent Vendor
SCHEDULE 5 Acton HDP Products Part Numbers
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THIS AGREEMENT is made on January 22, 1998
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BETWEEN
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(1) THE VENDORS Those companies whose names and registered offices are set
out in Schedule 1 part 1
(2) THE PURCHASERS Those companies whose names and registered offices are set
out in Schedule 1 part 2
(3) THE PURCHASER GUARANTOR PEI Holding Inc., a Delaware Corporation whose
principal place of business is at 2100 Commonwealth Boulevard, Ann Arbor,
Michigan 48105, USA
RECITALS
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(A) The Subsidiary Vendor has agreed to sell the Activity and the Parent
Vendor has agreed to sell the Argentinean Shares, the Lucas Loan and the
South African Shares respectively to certain of the Purchasers on the
terms and conditions hereinafter appearing and on the terms of
respectively the English Sale Agreement, the Argentinean Sale Agreement
and the South African Sale Agreement. The Vendors and the Purchasers
have also agreed to enter into the Ancillary Agreements.
(B) The Parent Vendor has entered into the English Sale Agreement for the
purposes set out in the recitals to that Agreement.
(C) In consideration of the Vendors entering into this Agreement, the Sale
Agreements, those which are relevant of the Associated Documents and the
Ancillary Agreements (in order to sell the Activity, the Shares and the
Lucas Loan to the Purchasers and to regulate the relationship that will
exist between them after Completion), the Purchaser Guarantor has agreed
to guarantee performance by the
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Purchasers of their respective obligations hereunder, under each of the
Sale Agreements, each of the Associated Documents and under each of the
Ancillary Agreements in the manner hereinafter appearing.
(D) In consideration of the Purchasers and the Purchaser Guarantor entering
into this Agreement, the Sale Agreements, those which are relevant of the
Associated Documents and the Ancillary Agreements (in order to buy the
Activity, the Shares and the Lucas Loan and to regulate the relationship
that will exist between them after Completion), the Parent Vendor has
agreed to guarantee the obligations of the Vendors hereunder, under each
of the Sale Agreements, each of the Associated Documents and under each
of the Ancillary Agreements in the manner hereinafter appearing.
NOW THIS AGREEMENT WITNESSES as follows:-
1. DEFINITIONS
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In this Agreement (which expression shall include the Recitals of and
Schedules to this Agreement) except where inconsistent with the subject
matter or context:-
1.1 The following words and expressions shall bear the following
meanings respectively:-
<TABLE>
<S> <C>
"the Ancillary Agreements" Those agreements in the Agreed
Terms listed in Schedule 2
"the Argentinean Sale Agreement" An agreement of even date herewith
made between the Parent Vendor (1)
Prestolite (2) and Prestolite
Newco (3) relating to the sale of
the Argentinean Shares and the
Lucas Loan
</TABLE>
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<TABLE>
<S> <C>
"the Argentinean Shares" The entire issued share capital of
Lucas Argentine Holdings, Inc., a
Delaware corporation and 1,393,139
of the issued shares in the
capital of Lucas Indiel Argentina
S.A.
"the Assets" The Assets the subject of the
English Sale Agreement (and as
defined therein)
"the Associated Documents" Each of the documents or
agreements (other than the
Ancillary Agreements) referred to
in the Sale Agreements which are
to be entered into or issued on
Completion of such Sale Agreements
including without limitation the
`A' Loan Notes, the `B' Loan Notes
and the `C' Loan Notes (as defined
in the Argentinean Sale Agreement)
"Completion" Completion of the sale and
purchase hereby agreed and agreed
pursuant to the Sale Agreements in
accordance with clause 3 and "the
Completion Date" shall be
construed accordingly.
"Effective Completion" Completion of all the Sale
Agreements and effective exchange
of the Ancillary
</TABLE>
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<TABLE>
<S> <C>
Agreements in
accordance with clause 3
"English Purchaser" Prestolite Electric Limited,
registered number 1189048
"English Sale Agreement" An Agreement of even date herewith
made between the Subsidiary Vendor
(1) the English Purchaser (2) and
the Parent Vendor (3) relating to
the sale and purchase of the
Activity and the Assets (as
defined in such agreement) in the
Agreed Terms
"the Entire Agreement Clauses" The provisions of each of Clause
10.1 of this Agreement, Clause 9
of the South African Sale
Agreement, Clause 10 of the
Argentinean Sale Agreement and
Clause 16 of the English Sale
Agreement
"the Holding Company Loan" The balance outstanding of the
long-term loan referred to in a
letter dated 16 June 1994 from
Standard Bank of South Africa
addressed to Lucas Industries
South Africa (Pty) Limited
</TABLE>
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<TABLE>
<S> <C>
"the Lucas Group" Lucas Varity and any company which
is for the time being a Subsidiary
or Subsidiary Undertaking of
LucasVarity but excluding all the
companies whose shares (whether in
whole or in part) are to be sold
under the Sale Agreements
"Lucas Loan" The same meaning as is attributed
to that expression in the
Argentinean Sale Agreement
"LucasVarity" LucasVarity plc, registered number
3207774
"the Parent Vendor" Lucas Industries plc, registered
number 54802, one of the Vendors
"Prestolite" Prestolite Electric Incorporated,
a Delaware Corporation
"Purchaser's Group" The same meaning as is attributed
to that expression in each Sale
Agreement
"the Sale Agreements" The English Sale Agreement, the
Argentinean Sale Agreement and the
South African Sale Agreement taken
together
"the Shares" The Argentinean Shares and the
South African Shares taken together
</TABLE>
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<TABLE>
<S> <C>
"the South African Sale Agreement" An agreement of even date herewith
made between the Parent Vendor and
Prestolite (2) relating to the
sale of the South African Shares
"the South African Shares" The entire issued share capital of
Lucas Holdings South Africa (PTY)
Limited
"Subsidiary" A subsidiary company within the
meaning of Section 736 Companies
Act 1985 wheresoever incorporated
"Subsidiary Undertaking" A subsidiary undertaking within
the meaning of in Section 258
Companies Act 1985 wheresoever
situate
"the Subsidiary Vendor" Lucas Limited, registered number
872948, one of the Vendors
</TABLE>
1.2 References in this Agreement to statutes or any statutory provision
shall include any statutory modification, re-enactment or extension
thereof for the time being in force and any orders, regulations,
instruments or other subordinate legislation made thereunder provided
always that this shall not operate to increase the liability of the
parties hereunder.
1.3 In this Agreement:-
1.3.1 the masculine gender shall include the feminine and neuter and
the singular number shall include the plural and vice versa;
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1.3.2 references to persons shall include bodies corporate,
unincorporated associations and partnerships;
1.3.3 the expression "the Vendors" shall be construed as any one or
more of the Vendors or all of them as the context shall permit
and shall include their respective successors in title and
permitted assignees;
1.3.4 the expression "the Purchasers" shall be construed as any one or
more of the Purchasers or all of them as the context shall
permit and shall include their respective successors in title
and permitted assignees;
1.3.5 the headings contained in this document are inserted for
convenience only and shall not affect its construction;
1.4 Whenever a document is referred to as being "in the Agreed Terms" it
shall be in the form agreed and initialled by or on behalf of the
Vendors and the Purchasers.
1.5 Except where the contrary is stated, any reference herein to a clause or
Schedule or party is to a clause of or Schedule or party to this
Agreement and any reference within a clause or Schedule to a sub-clause,
paragraph or other sub-division is a reference to such sub-clause,
paragraph or other sub-division so numbered or lettered in that clause
or Schedule. The Schedules form part of this Agreement and shall have
the same force and effect as if expressly set out in the body of this
Agreement.
1.6 Except where the context shall provide or imply to the contrary and
except in clause 6 where the definitions contained in that clause shall
apply to it alone words and expressions defined in each or any of the
Sale Agreements shall have the same meaning in this Agreement.
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2. SALE AND PURCHASE OF THE ACTIVITY THE SHARES AND THE LUCAS LOAN
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2.1 The relevant provisions of this Agreement and of each of the Sale
Agreements shall apply relating to the sale of in the case of the
English Sale Agreement the Activity and the Assets (as defined in such
Agreement) and in the case of each of the other Sale Agreements those
of the Shares as shall be relevant and in the case of the Argentinean
Sale Agreement the Lucas Loan. Accordingly in construing each of the
Sale Agreements the same shall be read and construed as incorporating
within it those provisions of this Agreement as shall be applicable to
it.
2.2 On the date of this Agreement the Vendors, the Purchasers and the
Purchaser Guarantor shall procure that each of the Sale Agreements is
entered into and exchanged by the parties thereto.
2.3 On the date of this Agreement the parties shall or, as the case may
be, shall procure that the Ancillary Agreements are entered into and
exchanged by the parties thereto.
3. COMPLETION
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3.1 Subject as hereinafter provided (and notwithstanding the provisions of
each of the Sale Agreements relating to Completion) Completion shall
not occur of any of the Sale Agreements unless Completion shall occur
of all of them.
3.2 If all the Sale Agreements and all the Ancillary Agreements are not
entered into and exchanged in accordance with clause 2 the parties
shall not be obliged to complete any of them and the provisions of
clause 15 shall apply.
3.3 Following exchange of each of the Sale Agreements and each of the
Ancillary Agreements the parties shall and shall procure that:-
3.3.1 each of the Sale Agreements is completed in accordance with its
terms and on the basis that all matters and things required
to
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be done on completion of each such agreement are duly
performed;
3.3.2 each of the Ancillary Agreements is formally exchanged as a
binding agreement and, where relevant, completed.
The Sale Agreements, the Ancillary Agreements and all documents and
things delivered pursuant thereto (including monies paid by way of
Provisional Consideration as defined in each of the Sale Agreements
and by way of consideration for the Lucas Loan pursuant to the
Argentinean Sale Agreement) shall in each case be held to the order of
the party or parties delivering the same and in escrow so that their
terms do not come into force and effect until Effective Completion and
all payments made thereunder and hereunder will be held to the order
of the party making the payment until Effective Completion. Completion
shall only become effective in accordance with clause 3.4.
3.4 Effective Completion will take place when all matters and things
required to be done and monies required to be paid on completion of
each of the Sale Agreements and the provisions of clause 3.3.2. have
been done, paid and complied with (subject to the escrow arrangements
referred to in clause 3.3.) whereupon:-
3.4.1 the Sale Agreements and all documents delivered and payments
made pursuant thereto shall be released to the recipient and
the Sale Agreements and such other documents will come into
full force and effect in accordance with their respective
terms; and
3.4.2 the Ancillary Agreements will come into full force and effect
in accordance with their respective terms.
3.5 If any of the Sale Agreements is not completed in accordance with its
terms and in accordance with the provisions of this Agreement or if
any of the
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Ancillary Agreements is not exchanged and where relevant completed as
contemplated by this clause 3 (and notwithstanding that some of such
documents may have been completed and/or exchanged in accordance with
their respective terms) none of the parties to such documents shall be
obliged to complete any of them and the provisions of clause 15 shall
apply.
3.6 If Effective Completion has not occurred by midnight (London time) on
the date on which this Agreement is entered into then all the Sale
Agreements, all the Ancillary Agreements and this Agreement shall
lapse and be of no further force or effect and none of the parties
thereto shall have any claim against any other party.
4. GOOD FAITH PROVISION
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4.1 In light of the provisions of the Loan Notes (as defined in the
Argentinean Sale Agreement) but without prejudice to any of their
respective provisions the Purchasers shall and shall procure that each
Group Member (as so defined) shall treat the Parent Vendor fairly and
shall act in good faith with regard to the interests of the Parent
Vendor.
4.2 Without prejudice to the generality of the foregoing and without
prejudice to the provisions of either the `A' Loan Notes or `B' Loan
Notes (as so defined) (so that their provisions are and will remain
unaffected by the following provisions of this clause 4) the
Purchasers shall not and shall procure that no Group Member (as so
defined) shall participate in the implementation of any scheme,
arrangement or transaction or otherwise take any steps the effect of
which is to diminish EBITDA (as defined in the `C' Loan Note as
defined in the Argentinean Sale Agreement) in any year, reduce the
amount which would otherwise be payable under the Loan Notes or
otherwise frustrate or defeat the provisions of those Notes and the
intent and spirit which lies behind them provided always that the
Vendor accepts that nothing contained in this clause 4.2 shall prevent
the taking of any steps the effect and the only effect of which would
be to diminish EBITDA thereby reducing the amount which would
otherwise be payable under the
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`C' Loan Notes if the Purchasers are able to demonstrate to the
reasonable satisfaction of the Parent Vendor that the overriding and
principal purpose of the act which would otherwise constitute a breach
of this clause 4.2 is in the best commercial interests of the Group
and is reasonably necessary to secure the financial position of the
Group going forward and that an incidental effect of such over-riding
and principal purpose is a deleterious effect on EBITDA.
4.3 Without prejudice to any other provision of this Agreement and the
rights of the Parent Vendor hereunder where the Purchasers participate
or any Group Member participates in the implementation of any scheme,
arrangement or transaction the effect of which is to diminish EBITDA
in any year or reduce the amount which would otherwise be payable
under the `C' Loan Notes or otherwise takes any action which may
interfere with or be detrimental to the ability of the Group to
maximise EBITDA the Parent Vendor and the Purchasers will negotiate in
good faith with a view to agreeing an appropriate adjustment to EBITDA
or another appropriate arrangement so that the Parent Vendor is
compensated for any loss it suffers as a consequence of such
participation or action.
5. HOLDING COMPANY LOAN
- - - - - - - - - - - -- --------------------
Prestolite and the Purchaser Guarantor shall procure that Lucas Holdings
South Africa (Pty) Limited discharges the Holding Company Loan in
accordance with its terms.
6. POST COMPLETION COVENANTS
- - - - - - - - - - - -- -------------------------
6.1 In this clause 6 a "Competing Business" means any of the following:-
6.1.1 a trade or business of being engaged anywhere in the world in
designing and/or manufacturing and/or selling Acton HD
Products;
6.1.2 a trade or business of being engaged anywhere in the world in
designing and/or manufacturing Pty and Indiel Products and/or
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of being engaged in selling them to any customer in, or who
requires delivery in, or who any member of the Lucas Group
has good reason to believe intends to sell them in, the South
African Territory or Argentina and whether such sale is to
the OE Market, Original Equipment Service or the Aftermarket.
6.2 In this clause 6 the following expressions have the following meanings:-
"Activity" has the meaning given in the
English Sale Agreement
"Acton HD Products" means
(a) those starter motors and
alternators and components
thereof listed by type number
in part 1 of schedule 2 to the
English Sale Agreement
(b) those starter motors and
alternators and components
thereof not so listed which
were designed and/or
manufactured and/or assembled
and sold by the Activity
(including by transfer to LAO)
in the 2 years immediately
preceding Completion; and/or
(c) products which in terms of
functional specification and/or
application are interchangeable
with any of the products
referred to in sub-clauses (a)
or (b) above
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"Aftermarket" means the market for (a) spare and
replacement parts for components or
sub-assemblies comprised within the
products of Original Equipment
Manufacturers and (b) automotive
accessories but excludes Original
Equipment Service
"Assets" has the meaning given in the
English Sale Agreement
"Indiel" means Lucas Indiel Argentina S.A.
"Indiel Group" means "the Group" as defined in the
Argentinean Sale Agreement
"Lucas Exchange Programme" means the scheme operated by the
Subsidiary Vendor whereby the
Subsidiary Vendor or other members
of the Lucas Group supply to
customers of Lucas Group Companies
(inter alia) alternators and
starter motors ("Electrical
Exchange Units") remanufactured
from used Electrical Exchange Units
or occasionally supply such
customers new units as
remanufactured units. The
Electrical Exchange Units and their
LR numbers for 1997/8 are included
in the Lucas Catalogue XCB167A a
copy of which is annexed hereto
marked "Appendix A" and has been
initialled for identification
purposes by the parties to this
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Agreement. The range of Electrical
Exchange Units varies from time to
time as the vehicle parc changes
"Lucas Group" LucasVarity and (other than any of
the companies whose shares (whether
in whole or in part) are to be sold
under the Sale Agreements) any
company which is a Subsidiary or
Subsidiary Undertaking of
LucasVarity from time to time and
at the time that the relevant
clause in which such expression
appears has application, which
where a claim is to be made under
the relevant clause shall mean when
the cause of action accrued under
such clause
"Lucas Turkey" means Lucas Elektrik Sanayi Ve
Ticaret AS, a Turkish company
"Lucas TVS" means Lucas TVS Limited, an Indian
company
"OE Market" means Original Equipment
Manufacturers in their capacity as
buyers of products for fitting as
original equipment
"Original Equipment means any manufacturer or assembler
-----
Manufacturer of transport vehicles, engines or
similar equipment including, but
not limited to, a manufacturer or
assembler of motor cars, vans,
buses, coaches, forklifts,
industrial vehicles, trucks,
tractors or marine,
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motive power or stationary engines
or a manufacturer of components or
sub-assemblies to be fitted as
original equipment to such
vehicles, engines or similar
equipment
"Original Equipment Service" means the market for supplies of
spare and replacement parts to any
Original Equipment Manufacturer
other than for fitting as original
equipment or to any dealer of any
Original Equipment Manufacturer in
its capacity as a dealer of such
Original Equipment Manufacturer
"Pty" means Lucas Automotive South Africa
(Pty) Ltd
"Pty and Indiel means:-
Products"
(a) starter motors and alternators
and components thereof
manufactured and/or sold by
Indiel and/or Pty at
Completion or which were
manufactured and/or sold by
Indiel or any member of Indiel
Group and/or by Pty or any
member of the Pty Group at any
time in the 2 years
immediately preceding
Completion; and/or
(b) products which in terms of
functional specification
and/or application are
interchangeable with any of
the products referred
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to in sub-clause (a) above
"Pty Group" means "the Group" as defined in the
South African Sale Agreement
"Person" means any person, firm, company,
business, undertaking, entity,
concern or close corporation
"Purchaser's Group" means PEI Holding Inc., a Delaware
company, and any Company which is a
Subsidiary or Subsidiary
Undertaking of PEI Holding Inc from
time to time and at the time that
the relevant clause in which such
expression appears has application
which where a claim is to be made
under the relevant clause shall
mean when the cause of action
accrued under such clause
"South African Territory" means South Africa, Botswana,
Lesotho, Namibia and Swaziland
"Subsidiary" means a subsidiary company as
defined in section 736 of the
Companies Act 1985
"Subsidiary Undertaking" means a subsidiary undertaking as
defined in section 258 of the
Companies Act 1985
6.3 For the purposes of assuring to (a) the English Purchaser the full
benefit of the Activity and (b) the respective purchasers under the
Argentinean Sale Agreement and the South African Sale Agreement
respectively the full benefit of the respective businesses carried on by
each of Indiel and Pty and
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the goodwill in each of such businesses and in consideration of the
agreement of the English Purchaser to buy the Activity and the Assets
under the English Sale Agreement and in consideration of the
consideration referred to in clause 6.10 of this Agreement, the Vendors
and each of them covenants and undertakes in favour of the Purchaser
Guarantor for itself and as trustee for the Purchasers and each member of
the Purchaser's Group (including for the avoidance of doubt Indiel and
Pty) that they shall not and shall procure that no other member of the
Lucas Group will, either alone or in conjunction with or on behalf of any
other Person:-
6.3.1 subject to clause 6.4 for a period of 4 years from Completion
either on its own account or in conjunction with or on behalf of
any Person be (either directly or indirectly) engaged or (save as
the holder of shares or other securities in any company which are
quoted, listed or otherwise dealt in on a recognised stock
exchange or other securities market which confer not more than 5%
of the votes which could be cast at a general meeting of the
company concerned) concerned with or interested in any Competing
Business;
6.3.2 for a period of two years from Completion either on its own
account or in conjunction with or on behalf of any Person without
the prior written consent of the Purchaser Guarantor, which
consent shall not be unreasonably withheld or delayed, solicit or
endeavour to entice away any person who being an employee
employed by the Activity or any company in the Pty Group or the
Indiel Group at Completion is engaged in a senior or managerial
position where such employee remains employed by any member of
the Purchaser's Group and whether or not such person would commit
a breach of contract by reason of leaving service;
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6.3.3 subject to clause 6.4 for a period of 4 years from Completion
either personally or by any agent directly or indirectly either
on its own account or for any other Person solicit the custom of
any Person (who is not a member of the Lucas Group) in relation
to a Competing Business if such Person was at any time within
twelve months prior to or at the Completion Date a customer of
the Activity or Indiel or Pty whether or not such Person would
commit a breach of contract by reason of transferring business;
6.3.4 save as may be required by law or the regulations of the New York
Stock Exchange or the London Stock Exchange Limited for a period
of five years from Completion reveal to any Person or use or
exploit for its own benefit or for the benefit of any other
Person any of the trade secrets, secret or confidential
operations, processes or dealings or any other confidential
information concerning the Activity or Indiel or Pty including
(without limitation) customer lists and names, sales targets and
statistics, market share statistics, surveys and reports so far
as the same have come to the Vendors' knowledge or to the
knowledge of any other member of Lucas Group before Completion
but so that this restriction shall:-
6.3.4.1 cease to apply to information which otherwise than
through default of any member of the Lucas Group becomes
available to the public generally;
6.3.4.2 not prevent or restrain any member of the Lucas Group
from using, exploiting or disclosing such confidential
information when the information to be used, exploited
or revealed relates not only to the Activity or to
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the business of Pty or Indiel but also to any trade or
business existing at Completion of any member of the
Lucas Group and such use, exploitation or revelation is
to be made exclusively in relation to such business and
without reference to the Activity or Indiel or Pty.
6.4 Nothing in clause 6.3 shall prevent or restrict the Lucas Group or any
==========
member of it, either alone or in conjunction with or on behalf of any
other Person:-
6.4.1 from continuing to hold shares in, to control or to acquire
further shares in Lucas TVS and nothing in this Agreement shall
prevent or restrict Lucas TVS from continuing to carry on any of
its businesses as they exist at Completion, nor from developing
any such businesses or any business of a similar type. The Vendors
and Purchaser Guarantor agree that Lucas TVS may continue to
export products, and to expand and develop its exporting business
(but not into Argentina or the South African Territory in relation
to Pty and Indiel Products) without restriction save only that
before any such expansion or development which the Vendors
reasonably believe is material to any member of the Purchaser's
Group including but not limited to in relation to the Activity
they, or one of them, will notify the Purchaser Guarantor of the
same. The Vendors indicate to the Purchaser Guarantor that so far
as the Vendors are aware Lucas TVS has no current plans to launch
a major expansion of its exporting business and does not currently
intend to do so;
6.4.2 from continuing to hold shares in Lucas Turkey and nothing in this
Agreement shall prevent or restrict Lucas Turkey from
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continuing to carry on or developing any of its businesses as
they exist at Completion nor from developing any such businesses
or any business of a similar type (but not by way of exports into
Argentina or the South African Territory);
6.4.3 in whatever form it takes from continuing to own carry on and
developing any of its businesses anywhere in the world, which are
howsoever and whether directly or indirectly, engaged, concerned
with or interested in selling in the Aftermarket and/or to
Original Equipment Service (but not in the OE Market save as
expressly permitted by any of the other sub-clauses of this clause
6.4) starter motors and alternators or components thereof which
are not Acton HD Products other than the sale of Pty and Indiel
Products to any customer in, or who requires delivery in, or who
any member of the Lucas Group has good reason to believe intends
to sell the same, in Argentina or the South African Territory;
6.4.4 from continuing to carry on its business existing at Completion of
remanufacturing and selling starter motors and alternators for any
application nor from developing the same or any business of a
similar type (but not by way of exports into Argentina or the
South African Territory);
6.4.5 from continuing to carry on the activity existing at Completion of
selling new or remanufactured starter motors and alternators as
part of the Lucas Exchange Programme nor from developing such
business (but not by way of exports into Argentina or the South
African Territory) and in particular but without limiting the
generality of the foregoing from obtaining from any Person new
products which are equivalent to Acton HD Products having the part
numbers listed in Schedule 5 which have hitherto been obtained
from the Activity for sale as
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part of such Lucas Exchange Programme (but only where the same are
not hereafter continued to be acquired from a member of the
Purchaser's Group) but such new products so obtained shall not
exceed 7,000 units in aggregate in any 12 month period or such
greater number of units as the English Purchaser shall consent to,
such consent not to be unreasonably withheld (reasonableness to be
judged in the context of the above mentioned quantity);
6.4.6 from acquiring, holding or operating any business or the
shares or other securities of any company (including,
without limitation, shares which are quoted, listed or
otherwise dealt in on a recognised stock exchange or other
securities market) or group of companies or participating
in any joint venture:-
6.4.6.1 where the portion of the activities of such
business, company, group of companies or joint
venture which comprises a Competing Business is
not substantial to such entity as a whole; and
6.4.6.2 where the principal purpose of such acquisition or
participation is not to acquire or participate in
a Competing Business,
provided that:
(a) the relevant member of the Lucas Group shall, within 12
months after acquiring any such business, company or
group of companies offer to sell at market value to the
Purchaser Guarantor such incidental part which is a
Competing Business; and
21
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(b) the Purchaser Guarantor and such member of the Lucas
Group shall negotiate in good faith with a view to
agreeing to the terms for such sale (but shall not be
obliged to conclude such sale if mutually acceptable
terms cannot be agreed); and
(c) where the Competing Business to be offered to the
Purchaser Guarantor under the foregoing provisions of
this clause has annual sales in excess of 25% of the
aggregate annual sales of the Purchaser's Group the
Vendors and the Purchaser Guarantor shall, if they are
able to agree the market value for the same and other
terms and conditions relating to any proposed sale to
the Purchaser Guarantor, negotiate in good faith with a
view to agreeing deferred terms for payment of some or
all of the price (but the relevant member of the Lucas
Group shall not be obliged to conclude any such sale if
mutually acceptable terms cannot be agreed) it being
agreed that the offer by the Purchaser Guarantor to
issue to the Vendors, or one of them, a 5 year level
amortising in years 2-5 note bearing interest at the
rate per annum which is 2% above Barclays Bank plc's
base lending rate from time to time or 12% per annum
whichever is the higher on the date on which such note
is issued shall (but subject to what follows) be deemed
an acceptable form of deferred payment but such note
shall only be acceptable provided that the Purchaser
Guarantor is able to provide in respect of such note
security which is acceptable (in both form and
substance) to the Vendors, or one of them, and the
Vendors are satisfied with the Purchaser Guarantor's
ability to meet its obligations under the Note.
22
<PAGE>
6.4.7 from carrying on any of the activities in the capacity and
to the extent as contemplated by the Ancillary Agreements
or any of them or from enjoying or exercising any benefits
or rights granted to any member of the Lucas Group pursuant
to such Ancillary Agreements;
6.4.8 from continuing to carry on the business existing at
Completion of the provision of a contract repair service in
respect of starter motors and alternators of all types to
fleet operators and vehicle repairers nor from developing
the same or any business of a similar type (but not in
Argentina or the South African Territory) provided that
this provision shall not grant any rights to do anything
which would infringe the intellectual property rights
acquired by the Purchaser's Group (including any owned at
Completion by Indiel or Pty) from the Vendors pursuant to
the Sale Agreements;
6.4.9 subject to the provisions of the Ancillary Agreements, from
licensing or entering into any agreement or other
arrangement whatsoever relating to its trademarks or other
intellectual property provided that subject as aforesaid
and subject to the other provisions of clause 6.4 of this
Agreement neither the Vendors nor any member of the Lucas
Group shall grant any licence under any of its trade marks
or other intellectual property to use or exploit the same
in circumstances where the licensee is or is to become
(either directly or indirectly) engaged, concerned with or
interested in a Competing Business;
6.4.10 from continuing to carry on the business as it exists at
Completion of the rewinding of stators, rotors and heavy
duty armatures nor from developing such business or any
business
23
<PAGE>
of a similar type (but not by way of exports into Argentina
or the South African Territory);
6.4.11 from continuing to hold shares in, to control or to acquire
further shares in Lucas Aftermarket KK (a Japanese
corporation) or, subject to the provisions of the Ancillary
Agreements, from Lucas Aftermarket KK continuing to carry
on any of its businesses existing at Completion nor from
developing such businesses or any business of a similar
type but not by way of exporting into Argentina or the
South African Territory in relation to Pty and Indiel
Products or into any country in Europe in relation to Acton
HD Products provided that in relation to heavy duty starter
motors and alternators not so exported Lucas Aftermarket KK
shall only sell the same for Japanese applications by which
is meant for vehicles whose country of origin is in Asia or
whose original electrics equipment is of Asian origin;
6.4.12 from appointing a distributor in or for the South African
Territory, from supplying that distributor in the South
African Territory with starter motors and/or alternators
and/or components thereof (not being heavy duty products or
components thereof), to which, or to the packaging of
which, the name or trade mark "Lucas" shall have been
applied ("Lucas Branded Products") and from granting such
distributor the right to sell such Lucas Branded Products
in the South African Territory, if at the time of such
appointment, supply, or grant no member of the Purchaser's
Group is an exclusive distributor appointed by any member
of the Lucas Group in or for the South African Territory in
respect of any starter motors or alternators;
24
<PAGE>
6.4.13 from appointing a distributor in or for Argentina, from
supplying that distributor in Argentina with starter motors
and/or alternators and/or components thereof (not being
heavy duty products or components thereof), to which, or to
the packaging of which, the name or trade mark "Lucas"
shall have been applied ("Lucas Branded Products") and from
granting such distributor the right to sell such Lucas
Branded Products in Argentina, if at the time of such
appointment, supply, or grant no member of the Purchaser's
Group is an exclusive distributor appointed by any member
of the Lucas Group in or for Argentina in respect of any
starter motors or alternators;
6.4.14 from continuing to carry on the business as it exists at
Completion of manufacturing and/or selling to the
Aftermarket and the OE Market rectifiers and regulators
being components for alternators nor from developing such
business but not by way of exports to Argentina or the
South African Territory other than to Indiel or Pty save
that Lucas or any member of the Lucas Group shall be
entitled to make sales of such rectifiers and regulators to
the OE Market which may result in alternators incorporating
such rectifiers or regulators being exported by third
parties to Argentina or the South African Territory.
6.5
6.5.1 The Vendors hereby agree that each of the restrictions
contained in clause 6.3 above is reasonable and necessary
==========
for the protection of the Purchaser Guarantor's and the
Purchasers' proprietary interests in the Activity and its
goodwill and in Pty and Indiel and the goodwill in relation
to their respective businesses but if any such restriction
shall be
25
<PAGE>
found by a competent court to be void or voidable at the
option of the Vendors, or any of them, but would be valid
and enforceable if some part thereof were deleted or the
period or the area of application of the restraint reduced
such restriction shall apply with such modification as may
be necessary to make it valid and enforceable and not
voidable.
6.5.2 Without prejudice to clause 6.5.1 if any restriction or
============
undertaking is found by any court or other competent
authority to be void, voidable or unenforceable the parties
shall negotiate in good faith to replace such void,
voidable or unenforceable restriction or undertaking with a
valid provision which has materially the same or similar
legal and commercial effect as such void, voidable or
unenforceable undertaking or restriction as the case may be
which it replaces.
6.6 Each undertaking contained in clause 6.3 shall be construed to impose a
==========
separate independent and severable undertaking in respect of each year
(or part thereof), each locality within the relevant territory, each
category of customers, each capacity in which the Lucas Group is
prohibited from acting and each activity in respect of which the Lucas
Group is restrained and if any one or more of such undertakings is held
to be against the public policy or unlawful or in any way an unreasonable
restraint of trade, the remaining undertakings shall continue in full
force and effect and shall bind the Vendors.
6.7 For the purposes of this clause 6 only the submission to the jurisdiction
========
of the courts referred to in clause 12 shall neither (and shall not be
=========
construed so as to) limit the right of the parties hereto to bring
proceedings with respect to this clause 6. in any other court of
competent jurisdiction nor shall ========= the institution of proceedings
in any one or more jurisdictions preclude the institution of proceedings
in any other jurisdiction (whether concurrently or not) of and to the
extent permitted by applicable law.
26
<PAGE>
6.8 The parties further agree regarding the interpretation and enforcement of
this clause 6:-
6.8.1 with respect to enforcement on behalf of Indiel and the Indiel
Group and for matters pertaining to Argentina, that any dispute
will be resolved as provided under Section 20.4 of the Argentinean
Sale Agreement (Arbitration Provisions) and the law of Argentina
shall govern such interpretation and enforcement; and
6.8.2 with respect to matters pertaining to Pty, the Pty Group or the
South African Territory, that the High Court of South Africa shall
have non-exclusive jurisdiction with respect to such matters and
the law of the Republic of South Africa shall govern such
interpretation and enforcement; and
6.8.3 with respect to interpretation and enforcement on behalf of the
English Purchaser the provisions of clause 12 of this Agreement
shall apply.
6.9 The parties agree that with respect to the provisions of clause 6.3
above, the Purchaser Guarantor is acting as trustee for each member of
the Purchaser's Group and accepts the benefits conferred in terms of this
clause 6 on behalf of each member of the Purchaser's Group and further
that each such member shall be entitled to enforce the benefits and
exercise the rights conferred on them in terms of this clause 6.
6.10 It is hereby acknowledged and agreed that:-
(a) a portion of the purchase price for the Argentinean Shares, and
(b) a portion of the purchase price for the South African Shares
27
<PAGE>
shall be in consideration for the covenants given by the Vendors
under this Agreement for the benefit of the Indiel Group and the Pty
Group respectively.
7. WAIVER
- - - - - - - - - - - -- ------
No waiver by any party to this Agreement of any of the requirements of
this Agreement or any of its rights hereunder shall have effect unless
given in writing and signed by or on behalf of the party giving the
waiver and no delay by any party in exercising any of its rights
hereunder shall impair the same. No single or partial exercise of any
right or remedy shall preclude any further exercise thereof or the
exercise of any other right.
8. NOTICES
- - - - - - - - - - - -- -------
8.1 The addresses for service of the parties to this Agreement shall
be:-
8.1.1 in the case of the Vendors and each of them the registered
office of the Subsidiary Vendor in the United Kingdom from
time to time and shall be addressed to:-
The Legal Director - Lucas
Electrical and Electronic Systems; and
8.1.2 in the case of each of the Purchaser Guarantor and the
Purchasers -Prestolite Electric Incorporated, 2100
Commonwealth Boulevard, Ann Arbor, MI48105, USA -
attention Kim Packard.
8.2 Any notice will be deemed well served on the party to whom it is
addressed if it be served personally or by courier delivery
addressed to such party at its address for service and service
shall be deemed to be effective upon such personal or courier
delivery taking place.
8.3 Any notices or statements to be served pursuant to this Agreement
may be sent by facsimile process
28
<PAGE>
8.3.1 in the case of notices to the Vendors or any of them to
the Legal Director - Lucas Electrical and Electronic
Systems; fax: 0121 627 4420 or to such other fax number as
may be notified to the Purchaser Guarantor and the
Purchasers for the purposes of this clause 8.3; and
8.3.2 in the case of notices to the Purchaser Guarantor and the
Purchasers or any of them to Kim Packard; fax: (313) 913
6655 or to such other fax number as may be notified to the
Vendors for the purposes of this clause 8.3.2.
8.4 Any notice or statement so sent by facsimile process shall be
deemed to have been served at the expiration of 2 hours after the
time of despatch if despatched before 3.00 pm (local time at the
place of destination) on any Business Day and in any other case at
10.00 am (local time at the place of destination) on the Business
Day following the date of despatch provided that it is followed by
a hard copy of the notice or statement served on the recipient in
accordance with clause 8.2.
9. COSTS
- - - - - - - - - - - -- -----
Save as otherwise provided herein or therein each party hereto shall bear
its own costs and expenses in connection with this Agreement each Sale
Agreement, the Associated Documents and the Ancillary Agreements and the
negotiations leading thereto.
10. ENTIRE AGREEMENT
- - - - - - - - - - - --- ----------------
10.1 This Agreement, each Sale Agreement, the Ancillary Agreements and
the documents referred to in it and them (including without
limitation the Associated Documents but excluding the Memorandum as
defined below) (collectively "the Transaction Documents and
individually "a Transaction Document"), contain the whole agreement
between the parties relating to the transactions contemplated by
such Documents and any other transactions or matters related to them
and supersede all previous
29
<PAGE>
agreements between the parties relating to these transactions. Each
of the parties to this Agreement (including without limitation the
Purchaser Guarantor), each Sale Agreement, each Ancillary Agreement
and the Associated Documents acknowledges that it has not relied on
any pre-contractual representations warranties or other assurances
save for the Warranties (as defined in each Sale Agreement) the
Purchaser Assurances (as contained in each Sale Agreement) and the
Vendor Assurances (as contained in the English Sale Agreement) and
otherwise as expressly set out in any of the Transaction Documents.
Each party hereby agrees that it shall have no remedy against any
other party for any negligent or innocent misrepresentation made by
such other party in relation to such transactions prior to the
Transaction Documents being entered into except to the extent that
the same shall have been incorporated in any of such Transaction
Documents as a warranty representation or indemnity in which case
any claim in relation to the same shall be only on the basis of a
breach of the relevant Transaction Document or under the relevant
indemnity provision. Nothing in this clause 10.1 shall relieve any
party from any liability for representations made fraudulently.
10.2 Each of the Purchasers and the Purchaser Guarantor hereby agrees and
acknowledges for itself and for and on behalf of each member of the
Purchaser's Group that the Purchaser Guarantor and each member of
the Purchaser's Group are solely responsible for the contents of the
debt offering memoranda issued by Prestolite on 2 January 1998 and
16 January 1998 (together "the Memorandum") and that:-
10.2.1 none of them has relied on any representation warranty
assurance or other statement made by or on behalf of any
member of the Lucas Group in preparing and issuing the same;
10.2.2 none of them shall have any remedy or right of action against
any member of the Lucas Group for any negligent or innocent
30
<PAGE>
misrepresentation made by any such member in relation to the
Memorandum;
10.2.3 if any person shall make any claim against any member of the
Lucas Group or any of their respective officers, directors,
employees, agents, successors or assigns (each an
"Indemnified Person") by reason of or resulting from or which
arises out of or otherwise relates or is attributable to the
despatch and/or publication of the Memorandum and/or the
offer and sale of the securities offered and sold pursuant to
the Memorandum and/or such Memorandum not containing all
information which it is required by law or regulation to
contain or any statement (including without limitation any
statement of opinion or belief to whomsoever ascribed or by
whomsoever given) therein being or being alleged to be
untrue, inaccurate, incomplete or misleading or having been
made negligently or otherwise without the required standard
of skill and care the Purchaser Guarantor and each of the
Purchasers shall and each of them shall indemnify the Parent
Vendor for itself and for and on behalf of and as trustee for
each Indemnified Party and hold each of them harmless from
and against any and all liabilities losses damages claims
costs and expenses interest awards judgments and penalties
(including without limitation attorneys consultant and
arbitration fees and expenses) suffered incurred or sustained
by an Indemnified Person or to which an Indemnified Person
becomes subject;
10.2.4 nothing in this clause 10.2 shall relieve any member of the
Lucas Group from any liability for representations made
fraudulently or from any liability it may otherwise have
under any warranty or indemnity given pursuant to or other
obligation under any of the Transaction Documents;
31
<PAGE>
10.2.5 the Memorandum shall not constitute a Transaction Document
for the purposes of each of the Entire Agreement Clauses and
none of such Clauses shall operate so as to prevent the
provisions of this Clause 10.2 applying to the fullest extent
possible.
11. SURVIVAL OF CERTAIN PROVISIONS
- - - - - - - - - - - --- ------------------------------
This Agreement shall remain in force and effect after the Completion Date
in respect of any matters covenants or conditions which shall not have been
done observed or performed prior thereto notwithstanding Completion.
12. GOVERNING LAW
- - - - - - - - - - - --- -------------
This Agreement shall be governed by English Law and the parties hereby
submit to the non-exclusive jurisdiction of the English Courts. The
submission to the jurisdiction of the courts referred to in this clause
shall neither (and shall not be construed so as to) limit the right of the
parties hereto to bring proceedings with respect to this agreement in any
other court of competent jurisdiction nor shall the institution of
proceedings in any one or more jurisdictions preclude the institution of
proceedings in any other jurisdiction (whether concurrently or not) of and
to the extent permitted by applicable law.
13. GUARANTEES
- - - - - - - - - - - --- ----------
13.1 The Purchaser Guarantor guarantees to the Vendors in the terms set
out in Schedule 3.
13.2 The Parent Vendor guarantees to the Purchasers in the terms set out
in Schedule 4.
14. ANNOUNCEMENTS
- - - - - - - - - - - --- -------------
No announcement concerning the transactions contemplated by this or any
Sale Agreement any Ancillary Agreement or any Associated Document or any
matter ancillary to them and no disclosure of the terms of this or any Sale
or other such
32
<PAGE>
Agreement or Associated Documents shall (save as required by
law or the regulations of the London Stock Exchange or the New York Stock
Exchange) be made by any party except with the prior written approval of
the Subsidiary Vendor on behalf of the Vendors and the Purchaser Guarantor
on behalf of the Purchaser.
15. TERMINATION
- - - - - - - - - - - --- -----------
In the event that all of the Sale Agreements and Ancillary Agreements are
not entered into and exchanged in accordance with clause 2 or all of the
Sale Agreements are not completed in accordance with clause 3:-
15.1 the parties thereto shall not be obliged to complete any of the Sale
Agreements or Ancillary Agreements or any of the Associated
Documents and each of such documents shall lapse and become null and
void and all rights and obligations in respect thereof shall cease
to have effect immediately save as may be expressly provided
therein;
15.2 the parties to all such documents shall immediately return any
signed copies of the same held by them and all other documents
delivered to them thereunder to the party delivering the same and
shall immediately repay all payments received by them thereunder to
the party making the same.
16. ASSIGNMENT
- - - - - - - - - - - --- ----------
The benefit of this Agreement may not be assigned by either of the Vendors
without the prior written consent of the Purchaser Guarantor or by the
Purchaser Guarantor or the Purchasers without the prior written consent of
the Subsidiary Vendor save that any party may assign the benefit of this
agreement to any Subsidiary or Holding Company of it or to any other
Subsidiary of its Holding Company if such assignment does not increase the
liability of any party under this agreement. If at any time thereafter
such assignee shall cease to be so connected with such assignor it shall
prior to so ceasing reassign the benefit of this agreement to such
assignor.
33
<PAGE>
17. NO THIRD PARTY BENEFICIARY
- - - - - - - - - - - --- --------------------------
Except as otherwise provided in this Agreement this Agreement is intended
and agreed to be solely for the benefit of the parties hereto and their
permitted assigns and no third party shall accrue any benefit claim or
right of any kind whatsoever pursuant to under by or through this
Agreement.
18. AUTHORITY
- - - - - - - - - - - --- ---------
18.1 Where in this Agreement there is any reference to the Vendors
serving any notice, taking any action, giving any instructions or
direction or reaching any agreement with the Purchasers, the
Purchaser Guarantor or any of them the Vendors irrevocably authorise
the Subsidiary Vendor to act on their behalf.
18.2 Where in this Agreement there is any reference to the Purchasers
serving any notice, taking any action, giving any instructions or
direction or reaching any agreement with the Vendors or any of them
the Purchasers irrevocably authorise Prestolite to act on their
behalf.
19. RESTRICTIVE TRADE PRACTICES ACT
- - - - - - - - - - - --- -------------------------------
No provision of this Agreement, by virtue of which this Agreement is
subject to registration (if such be the case) under the Restrictive Trade
Practices Act 1976 shall take effect until the day after particulars of
this Agreement have been furnished to the Director General of Fair Trading
pursuant to Section 24 of the Restrictive Trade Practices Act. For this
purpose the expression "this Agreement" includes any agreement or
arrangement of which this Agreement forms part and which is registrable or
by virtue of which this Agreement is registrable.
34
<PAGE>
SCHEDULE 1
----------
Part 1
DETAILS OF THE VENDORS
Lucas Limited whose registered office is at Stratford Road, Solihull, West
- - - - - - - - - - - -------------
Midlands
LUCAS INDUSTRIES PLC whose registered office is also at Stratford Road,
- - - - - - - - - - - --------------------
Solihull, West Midlands
LUCAS DIESEL DO BRASIL LTDA of Rodovia Raposo Tavares, KH30, Caixa Postal 14,
- - - - - - - - - - - ---------------------------
06700-000 Cotia, Sao Paolo, Brazil
Part 2
DETAILS OF THE PURCHASERS
PRESTOLITE ELECTRIC INCORPORATED, a Delaware Corporation whose principal place
- - - - - - - - - - - --------------------------------
of business is at 2100 Commonwealth Boulevard, Ann Arbor, Michigan 48105 USA
PRESTOLITE ELECTRIC LIMITED whose registered office is at Cleveland Road,
- - - - - - - - - - - ---------------------------
Leyland, Preston, Lancashire PR5 1XB
LUCAS INDIEL ARGENTINA SA, To33, Fo248, No 25, Registro Publico de Commercio of
- - - - - - - - - - - -------------------------
the Province of San Luis, Argentina
LUCAS AUTOMOTIVE (PTY) LIMITED, registration number 05/32211/07 of 5 Yaron
- - - - - - - - - - - ------------------------------
Avenue, Lea Glen, Florida, Transvaal, South Africa
PRESTOLITE NEWCO INC., a Delaware Corporation whose principal place of business
- - - - - - - - - - - ----------------------
is at 2100 Commonwealth Boulevard, Ann Arbor, Michigan 48105 USA
35
<PAGE>
SCHEDULE 2
----------
THE ANCILLARY AGREEMENTS
------------------------
Distribution Agreement for South Africa between (1) Lucas Limited and (2)
Lucas Automotive (Pty) Limited
Distribution Agreement for Argentina between (1) Lucas Limited and (2)
Lucas Indiel Argentina S.A.
South African Supply Agreement between (1) Lucas Limited and (2) Lucas
Automotive (Pty) Limited
Supply and Distribution Agreement for South America (excluding Argentina)
between (1) Lucas Indiel Argentina S.A. and (2) Lucas Diesel do Brasil Ltda
Acton Trade Mark Licence between (1) Lucas Industries plc and (2)
Prestolite Electric Limited
Argentina Trade Mark Licence between (1) Lucas Industries plc and (2) Lucas
Indiel Argentina S.A.
LAO Sale and Transition Agreement between (1) Lucas Limited and (2)
Prestolite Electric Limited
Marketing Services Agreement between (1) Lucas Limited and (2) Prestolite
Electric Limited
Overarching Agreement between (1) PEI Holding Incorporated (2) Lucas
Industries plc (3) Lucas Limited and (4) Prestolite Electric Limited
Licence of Intellectual Property relating to In-Line Diesel Pumps between
(1) Lucas Limited and (2) Prestolite Electric Limited
36
<PAGE>
In-Line Diesel Pumps Supply Agreement between (1) Lucas Limited and (2)
Prestolite Electric Limited.
Side Letter from Lucas Industries plc to Lucas Automotive (Pty) Ltd
concerning use of Trade Marks under the Supply Agreement
Side Letter from Lucas Industries plc to Lucas Indiel Argentina SA
concerning use of Trade Marks under the Supply Agreement.
Side Letter from Lucas Aftermarket Operations to Prestolite Electric
Limited concerning H.D.E units required for Lucas Exchange Unit Programme.
Side Letter from Lucas Industries plc to Lucas Automotive (Pty) Limited
concerning sales to Lucas Ricambi
Side Letter from Lucas Industries plc to Prestolite Electric Incorporated
relating to calculation of EBITDA in certain circumstances
Side Letter from Lucas Limited to Prestolite Electric Incorporated relating
to Luis Perez
Side Letter from Prestolite Electric Incorporated to Lucas Limited relating
to conversion of US $ to (Pounds)Sterling
37
<PAGE>
SCHEDULE 3
----------
GUARANTEE BY THE PURCHASER GUARANTOR
------------------------------------
1. In consideration of the Vendors entering into this Agreement, each Ancillary
Agreement, each Sale Agreement and each Associated Document the Purchaser
Guarantor irrevocably and unconditionally:-
1.1 guarantees to the Vendors and each of them the due and punctual payment
observance and performance by the Purchasers and each of them of all
its and their respective liabilities and obligations whether present or
future, express or implied, actual or contingent under or arising out
of this Agreement, each Ancillary Agreement, each Sale Agreement and
each Associated Document including any liability or obligation to pay
damages;
1.2 undertakes with the Vendors and each of them that whenever the
Purchasers or any of them fails to pay or perform when due any of the
liabilities or obligations referred to in clause 1.1 it will on demand
by the Vendors from time to time pay, perform or procure the
performance of any and all of the same;
1.3 in addition to the obligations contained in clauses 1.1 and 1.2 and
separate from them agrees to indemnify the Vendors and each of them in
full on demand against any loss or damage or any liability (which
liability will include all losses or costs claims expenses or damages
including legal and other professional fees and expenses) which the
Vendors or any of them may suffer or incur directly or indirectly;
1.3.1 arising out of or as a result of or in connection with any
failure for any reason of the Purchasers or any of them to pay,
observe or perform any of the obligations referred to in this
clause 1 when due; and
38
<PAGE>
1.3.2 in enforcing protecting or preserving or seeking to enforce
protect or preserve any of the Vendors rights under this
Agreement, any Ancillary Agreement, any Sale Agreement or any
Associated Document.
2. None of the Vendors will be obliged before exercising any of the rights
powers or remedies conferred upon it and them in respect of the Purchaser
Guarantor under this guarantee or by law;
2.1 to make demand of the Purchasers or any of them; or
2.2 to enforce or seek to enforce any claim right or remedy against the
Purchasers or any of them or any other person; or
2.3 to make or file any claim in connection with the insolvency of the
Purchasers or any of them or any other person; or
2.4 to take any action or obtain judgement in any court against the
Purchasers or any of them or any other person; or
2.5 to enforce or seek to enforce any other security, indemnity, guarantee
or lien taken in respect of any of the obligations of the Purchaser
Guarantor under this guarantee.
3. Neither the liability of the Purchaser Guarantor under this guarantee nor
the rights powers and remedies conferred on the Vendors under this guarantee
or by law will in any way be released prejudiced diminished or affected by
any of the following:-
3.1 the granting of time or indulgence to or any compromise with or
agreement not to sue the Purchasers or any of them the Purchaser
Guarantor or any other person or the Vendors abstaining from proving or
enforcing payment of any dividend or composition;
3.2 the Vendors not giving the Purchaser Guarantor notice of any default by
the Purchasers or any of them or of any action taken by the Vendors;
39
<PAGE>
3.3 any variation made in any of the terms of this Agreement, any Ancillary
Agreement, any Sale Agreement or any Associated Document whether the
same is made with or without the assent or knowledge of the Purchaser
Guarantor;
3.4 the Vendors obtaining or failing to obtain or perfect any other
guarantee or security (whether contemporaneously with this Agreement,
any Ancillary Agreement, any Sale Agreement or any Associated Document
or not) or the modification, variation, renewal, release, termination
or discharge by the Vendors of any security or guarantee now or
hereafter held from the Purchasers or any of them or any other person
(including any signatory to this Agreement, any Ancillary Agreement,
any Sale Agreement or any Associated Document in respect of the
liabilities and obligations referred to in clause 1.1;
3.5 any defect in or the unenforceability of any security or guarantee
given by or on behalf of the Purchasers or any of them or any other
person in respect of any of the liabilities and obligations referred to
in clause 1.1;
3.6 any invalidity, illegality, unenforcability, irregularity or
frustration in any respect of any of the liabilities or obligations
referred to in clause 1.1; and
3.7 any act omission or circumstances which but for this clause 3 might
operate to prejudice, affect or otherwise diminish the liability of the
Purchaser Guarantor under clause 1 or any of the rights powers or
remedies conferred upon the Vendors or any of them under clause 1 or by
law.
4. This guarantee is a continuing guarantee and will remain in full force and
effect until all the liabilities and obligations referred to in clause 1
have been irrevocably paid and satisfied in full.
5. Without prejudice to the Vendors rights against the Purchasers and each of
them as principal debtor the Purchaser Guarantor agrees as a separate and
independent stipulation that any liabilities or obligations referred to in
clause 1.1 which may not be
40
<PAGE>
recoverable on the footing of a guarantee (whether by reason of any legal
limitation, disability or incapacity on or of the Purchasers or any of them
or any other fact or circumstance) or which are or become illegal, voidable,
unenforceable, discharged by any insolvency or irrecoverable (and whether or
not known to the Vendors or the Purchaser Guarantor or any other person)
will nevertheless be recoverable from and enforceable against the Purchaser
Guarantor as sole or principal debtor in respect thereof and will be paid or
performed by the Purchaser Guarantor on demand.
41
<PAGE>
SCHEDULE 4
----------
GUARANTEE BY THE PARENT VENDOR
------------------------------
1. In consideration of the Purchasers or any of them entering into this
Agreement, each Ancillary Agreement each Sale Agreement and each Associated
Document the Parent Vendor irrevocably and unconditionally:-
1.1 guarantees to the Purchasers and each of them the due and punctual
payment observance and performance by the Vendors and each of them of
all its and their respective liabilities and obligations whether
present or future, express or implied, actual or contingent under or
arising out of this Agreement, each Ancillary Agreement, each Sale
Agreement and each Associated Document including any liability or
obligation to pay damages;
1.2 undertakes with the Purchasers and each of them that whenever the
Vendors or any of them fails to pay or perform when due any of the
liabilities or obligations referred to in clause 1.1 it will on demand
by the Purchasers from time to time pay, perform or procure the
performance of any and all of the same;
1.3 in addition to the obligations contained in clauses 1.1 and 1.2 and
separate from them agrees to indemnify the Purchasers and each of them
in full on demand against any loss or damage or any liability (which
liability will include all losses or costs claims expenses or damages
including legal and other professional fees and expenses) which the
Purchasers or any of them may suffer or incur directly or indirectly;
1.3.1 arising out of or as a result of or in connection with any
failure for any reason of the Vendors or any of them to pay,
observe or perform any of the obligations referred to in this
clause 1 when due; and
1.3.2 in enforcing protecting or preserving or seeking to enforce
protect or preserve any of the Purchasers' rights under this
42
<PAGE>
Agreement, any Ancillary Agreement any Sale Agreement or any
other Associated Document.
2. None of the Purchasers will be obliged before exercising any of the rights
powers or remedies conferred upon it and them in respect of the Parent
Vendor under this guarantee or by law;
2.1 to make demand of the Vendors or any of them; or
2.2 to enforce or seek to enforce any claim right or remedy against the
Vendors or any of them or any other person; or
2.3 to make or file any claim in connection with the insolvency of the
Vendors or any of them or any other person; or
2.4 to take any action or obtain judgement in any court against the Vendors
or any of them or any other person; or
2.5 to enforce or seek to enforce any other security, indemnity, guarantee
or lien taken in respect of any of the obligations of the Parent Vendor
under this guarantee.
3. Neither the liability of the Parent Vendor under this guarantee nor the
rights powers and remedies conferred on the Purchasers under this guarantee
or by law will in any way be released prejudiced diminished or affected by
any of the following:-
3.1 the granting of time or indulgence to or any compromise with or
agreement not to sue Vendors or any of them or any other person or the
Purchasers abstaining from proving or enforcing payment of any dividend
or composition;
3.2 the Purchasers not giving the Parent Vendor notice of any default by
the Vendors or any of them or of any action taken by the Purchasers;
43
<PAGE>
3.3 any variation made in any of the terms of this Agreement, any Ancillary
Agreement, any Sale Agreement or any Associated Document whether the
same is made with or without the assent or knowledge of the Parent
Vendor;
3.4 the Purchasers obtaining or failing to obtain or perfect any other
guarantee or security (whether contemporaneously with this Agreement,
any Ancillary Agreement any Sale Agreement or any Associated Document
or not) or the modification, variation, renewal, release, termination
or discharge by the Purchasers of any security or guarantee now or
hereafter held from the Vendors or any of them or any other person
(including any signatory to this Agreement, any Ancillary Agreement or
any Sale Agreement or any Associated Document) in respect of the
liabilities and obligations referred to in clause 1.1;
3.5 any defect in or the unenforcability of any security or guarantee given
by or on behalf of the Vendors or any of them or any other person in
respect of any of the liabilities and obligations referred to in clause
1.1;
3.6 any invalidity, illegality, unenforcability, irregularity or
frustration in any respect of any of the liabilities or obligations
referred to in clause 1.1; and
3.7 any act omission or circumstances which but for this clause 3 might
operate to prejudice, affect or otherwise diminish the liability of the
Parent Vendor under clause 1 or any of the rights powers or remedies
conferred upon the Purchasers or any of them under clause 1 or by law.
4. This guarantee is a continuing guarantee and will remain in full force and
effect until all the liabilities and obligations referred to in clause 1
have been irrevocably paid and satisfied in full.
5. Without prejudice to the Purchasers rights against the Vendors as principal
debtor the Parent Vendor agrees as a separate and independent stipulation
that any liabilities or obligations referred to in clause 1.1 which may not
be recoverable on the footing of a guarantee (whether by reason of any legal
limitation, disability or incapacity on or of
44
<PAGE>
the Vendors or any of them or any other fact or circumstance) or which are
or become illegal, voidable, unenforceable, discharged by any insolvency or
irrecoverable (and whether or not known to the Purchasers or the Parent
Vendor or any other person) will nevertheless be recoverable from and
enforceable against the Parent Vendor as sole or principal debtor in respect
thereof and will be paid or performed by the Parent Vendor on demand.
45
<PAGE>
SIGNED BY CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
----------------------
as duly authorised attorney )
for and on behalf of )
LUCAS LIMITED )
Chris Long-Leather as attorney for Lucas Limited
SIGNED BY CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
----------------------
as duly authorised attorney )
for and on behalf of )
LUCAS INDUSTRIES PLC )
Chris Long-Leather as attorney for Lucas Industries plc
SIGNED BY CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
----------------------
as duly authorised attorney )
for and on behalf of LUCAS DIESEL DO )
BRASIL LTDA )
Chris Long-Leather as attorney for Lucas Diesel Do
Brasil LTDA
PEI HOLDING INC.
By: /s/ P. Kim Packard
--------------------
Name: P. Kim Packard
Title: President
By: /s/ Kenneth C. Cornelius
-------------------------
Name: Kenneth C. Cornelius
Title: Vice President
PRESTOLITE ELECTRIC INCORPORATED
By: /s/ P. Kim Packard
------------------
Name: P. Kim Packard
Title: President
46
<PAGE>
By: /s/ Kenneth C. Cornelius
------------------------
Name: Kenneth C. Cornelius
Title: Vice-President
SIGNED by P. Kim Packard ) /s/ P. Kim Packard
------------------
duly authorised for and on behalf of )
PRESTOLITE ELECTRIC )
LIMITED )
Director
SIGNED by Kenneth C. Cornelius /s/ Kenneth C. Cornelius
------------------------
As attorney in fact for )
and on behalf of )
LUCAS INDIEL ARGENTINA S.A )
SIGNED by Kenneth C. Cornelius /s/ Kenneth C. Cornelius
------------------------
duly authorised for and on behalf of )
LUCAS AUTOMOTIVE (PTY) )
LIMITED )
PRESTOLITE NEWCO, INC.
By: /s/ P. Kim Packard
------------------
Name: P. Kim Packard
Title: President
By: /s/ Kenneth C. Cornelius
-------------------------
Name: Kenneth C. Cornelius
Title: President
47
<PAGE>
EXHIBIT 2.2
DATED JANUARY 22, 1998
----------------------
(1) LUCAS LIMITED
(2) PRESTOLITE ELECTRIC LIMITED
(3) LUCAS INDUSTRIES PLC
A G R E E M E N T
-----------------
relating to the
Sale and Purchase of Assets of
The Lucas Electrical & Electronic Systems - Heavy Duty Products Business
Eversheds
10 Newhall Street
Birmingham
B3 3LX
Tel: 0121 233 2001
Fax: 0121 236 1583
Ref: 36
1
<PAGE>
CONTENTS
--------
1. Definitions
2. Sale and Purchase of the Activity and the Assets
3. Consideration
4. Completion
5. Consents and the Contracts
6. Debtors
7. The Transferring Employees
8. Warranties
9. Indemnity and Liabilities
10. Product Liability and Product Warranty and Other Specific Issues
11. Risk Property and Title
12. Exclusions
13. Further Assurance and Lucas Group Continuing Supply Obligations
14. Shared IP
15. Inspection of Documents
16. Entire Agreement
17. Assignment prohibited
18. No Merger of Obligations at Completion
19. Trusts
20. Purchaser Assurances
21. Vendor Assurances
22. Interest
23. Waiver
24. Notices
25. Costs
26. Announcements
27. Governing Law
28. Counterparts
29. Stamp Duty
2
<PAGE>
30. General
3
<PAGE>
SCHEDULE 1 Accounting Principles
SCHEDULE 2 The Activity
SCHEDULE 3 [Deleted]
SCHEDULE 4 The Leased Assets
SCHEDULE 5 The Property
SCHEDULE 6 Transferring Employees
SCHEDULE 7 Warranties of Vendor
SCHEDULE 8 Assignment of Debtors
SCHEDULE 9 Pensions
SCHEDULE 10 Forward Exchange Currency Contracts
SCHEDULE 11 Vehicles Subject to Master Lease
SCHEDULE 12
Part 1 Pro Forma Completion Statement
Part 2 Pro Forma Aggregation Statement
SCHEDULE 13 Group Sharing Arrangements
SCHEDULE 14 Trademarks
4
<PAGE>
THIS AGREEMENT is made on January 22, 1998
- - - - - - - - - - - --------------
BETWEEN
- - - - - - - - - - - -------
(1) THE VENDOR Lucas Limited whose registered office is at Stratford Road
Solihull B90 4LA England
(2) THE PURCHASER Prestolite Electric Limited whose registered office is at
Cleveland Road, Leyland, Lancashire PR5 1XB
(3) LUCAS Lucas Industries plc whose registered office is at Stratford Road
Solihull B90 4LA England.
RECITALS
- - - - - - - - - - - --------
(A) The Vendor carries on the Activity at the Property (as each such
expression is defined below)
(B) The Vendor has agreed to sell or procure the sale of the Activity and the
Assets (defined below) to the Purchaser on the terms and conditions
hereinafter appearing.
(C) Lucas has entered into this Agreement for the purposes of Clause 2.1.3
(b), Clause 2.2 and Schedule 5 (Property) and Schedule 9 (Pensions).
==========
NOW THIS AGREEMENT WITNESSES as follows:
1. DEFINITIONS
-----------
In this Agreement (which expression shall include the Recitals of and
Schedules to this Agreement) except where inconsistent with the subject
matter or context:-
1.1 The following words and expressions shall bear the following meanings
respectively:-
the Accounting Date" 31st January 1997
"the Accounting Principles" The accounting policies and
principles set out in Part
1
<PAGE>
1 of Schedule 1
"the Accounts" The unaudited management accounts of
the Vendor comprising solely the
unaudited balance sheet and profit
and loss account of the Activity
made up to the Accounting Date a
true copy of which is annexed to the
Disclosure Letter
"the Accruals" So much of any liability of the
Vendor or, (to the extent reflected
as a liability in the books and
ledgers of the Vendor in relation to
the Activity on the Completion Date)
by any other member of the Lucas
Group relating to the Activity which
falls to be settled after the
Completion Date in the course of
carrying on the Activity in respect
of a period of time which commences
before the Completion Date and ends
after the Completion Date as relates
to the period before the Completion
Date
"the Activity" The business of (1) the development,
design, manufacture, assembly,
marketing, sourcing and sale of
those products listed by type number
in Part 1 of Schedule 2 including
where relevant spare parts,
components and ancillary equipment
therefor (and the maintenance and
support of such products) and the
sale distribution and supply of such
products to Original Equipment
Manufacturers as well as the supply
of such products to Lucas
Aftermarket Operations for onward
distribution and supply by them in
the Aftermarket and (2) in the
exercise of those perpetual royalty
free intellectual property licence
rights contained in the Ancillary
Agreements relating to the
manufacture, assembly, marketing,
sourcing and sale of those products
listed in Schedule
2
<PAGE>
2 Part 2 including where relevant
spare parts, components and
ancillary equipment therefor (and
the maintenance and support of such
products) and the sale distribution
and supply of such products to
Original Equipment Manufacturers as
well as the supply of such products
to Lucas Aftermarket Operations for
onward distribution and supply by
them in the Aftermarket in each case
as now carried on at and from the
Property by the Vendor but
excluding, for the avoidance of
doubt the LAO Activity
"Aftermarket" The market for (a) spare and
replacement parts for components or
sub-assemblies comprised within the
products of Original Equipment
Manufacturers and (b) automotive
accessories but excluding Original
Equipment Service
"the Ancillary Agreements" The agreements bearing that meaning
as defined in the Umbrella Agreement
"the Assets" The assets specified in clause 2.1
==========
and the Property to be sold and
purchased hereunder or otherwise
dealt with in accordance with this
Agreement and the benefits and
advantages acquired by the Purchaser
from the Vendor hereunder
"Associated Company" Any person which is either a holding
company (whether direct or indirect)
or a subsidiary company of the
relevant party or a subsidiary
company of any such holding company
or is otherwise directly or
indirectly controlled by or is under
the same control, direct or
indirect, of the relevant party.
3
<PAGE>
"Associated Documents" The meaning attributed to that
expression in the Umbrella
Agreement.
"the Bearings Claims" Any claim or claims which is or are
being or may hereafter be made
against the Vendor or the Purchaser
in respect of the Activity by
Renault Vehicles Industries, Dennis
in the UK and Malaysia and Volvo
relating to bearing problems in
AC172R and AC207R Alternators and
any claim or claims currently lodged
or which are made hereafter by any
other party arising from the same
bearing problems in AC172R and
AC207R Alternators or other
alternators sold or supplied to such
party by the Vendor prior to or the
Purchaser after Completion
"Business Unit" The various activities of the Vendor
in respect of which separate
management accounts have customarily
been prepared by the Vendor
"the Capped Indemnities" All indemnities given by the Vendor
under this Agreement (other than the
Uncapped Indemnities)
"the Claims" The Bearings Claims, the David Brown
Claim, the Perkins Claim and any
claim which the Vendor may have
against any third party in
connection therewith
"Commercial Confidential All such information contained
Information" within or evidenced by the Records
as is not at the completion Date
generally known ble to the public
and which otherwise is of a type and
quality of which is capable in law
of protection as secret or
confidential ion cost and pricing
and data, sources of supply of
equipment, components, raw materials
ods and services all in so by the
Vendor in
4
<PAGE>
relation to the activity but
excluding any tained by any member
of under the Ancillary agreements
and excluding any Know-How
"Completion" Completion of the sale and purchase
hereby agreed in accordance with
clause 4 and "Completion Date" shall
========
subject to Effective Completion
pursuant to the Umbrella Agreement
occurring on the same day as
Completion be constructed
accordingly
"Completed Contracts Any contract or arrangement for the
supply of goods or services by the
vendor (or by any other member of
the Lucas Group as agent or trustee
for the Vendor) in relation to the
Activity:-
1) pursuant to which the supply of
the relevant goods or services was
completed prior to Completion and in
which any warranty guarantee
maintenance or similar obligation
liability or commitment (a "Product
Warranty") given by the Vendor
remains and has not expired; or
ii) to which the supply of the
relevant goods and services has been
completed and under which the
customer has prior to Completion
made a claim against the Vendor or
other member of the Lucas Group (in
its capacity in relation to the
matter claimed for as agent or
trustee for the Vendor) under any
Product Warranty relating to such
good or services
"the Consideration" The aggregate of the Fixed Price
Element and the Net Current Assets
Value
"consistently applied" With reference to any particular
asset, liability, income or
expenditure, (to the extent not
provided to
5
<PAGE>
the contrary in Part 2 of Schedule 1
for the purpose of preparation of
the Completion Statement) applied on
the bases of practices and methods
consistent with those used in the
preparation of the Accounts
"the Contracts" Current contracts and arrangements
of the Vendor (or entered into by
any other member of the Lucas Group
as agent or trustee for the Vendor)
relating wholly to the Activity or
any of the Assets (or where any
current contracts and arrangements
of the Vendor relate in part only to
the Activity or in part only to the
Assets or any of them and in part to
other assets then such part shall be
deemed to be included within the
definition) entered into before the
close of business on the Completion
Date and which then remain (in whole
or in part) to be performed by the
Vendor or any other member of the
Lucas Group, including, without
limitation the Completed Contracts,
the Supplier Contracts, the
agreements relating to the Leased
Assets and the forward exchange
currency contracts which are listed
in Schedule 10 and those current
contracts where any payment
obligations of the Vendor or any
other member of the Lucas Group have
not been satisfied provided always
that this definition notwithstanding
the above excludes:-
i) contracts or arrangements
relating to those assets which are
excluded from the sale by clause 2.4
==========
of this Agreement;
ii) contracts of employment of any
employees of the Vendor or any
member of the Lucas Group;
iii) any hire, hire purchase or
leasing contract other
6
<PAGE>
than in relation to the Leased
Assets;
iv) any contract or arrangement
relating to any liabilities of the
Vendor or any member of the Lucas
Group to be retained by the Vendor
(or any such member) pursuant to
this Agreement;
v) Group Sharing Arrangements;
vi) any forward exchange currency
contracts not listed in Schedule 10;
vii) any contract or arrangement
(other than any contract, notional
contract or transaction between
Lucas Aftermarket Operations and
the Activity) entered into by Lucas
Aftermarket Operations and another
person
"the Creditors" The book and other debts owing by
the Vendor or, (to the extent
reflected as a liability in the
books and ledgers of the Vendor in
relation to the Activity on the
Completion Date) by any other member
of the Lucas Group on behalf of the
Activity, to or in respect of trade
creditors, trade bills payable and
any other amounts payable to
creditors in connection with the
Activity at the close of business on
the Completion Date (and whether or
not then due and payable) including
without limitation
i) the Accruals and where the
liability accrued for is due to
a member of the Lucas Group in
respect of the Activity or by
the Activity to another
Business Unit (in each case on
current account) to the extent
provided for as a creditor in
the Final Completion Statement;
and
7
<PAGE>
ii) to the extent specifically
provided for as a creditor in
the Final Completion Statement
any amounts owed by the Vendor
to any member of the Lucas
Group in respect of the
Activity or to the same extent
by the Activity to another
Business Unit (in each and any
such case on current account)
but excluding (for the
avoidance of doubt) any Lucas
Internal Funding and any other
indebtedness in the nature of
borrowings (but not, for the
avoidance of doubt, monies
payable in respect of the
agreements relating to Leased
Assets)
iii) any amounts owing to creditors
under the Group Sharing
Arrangements to the extent they
relate to the Activity
"the David Brown Claim" The claim notified by Hammond
Suddards, Solicitors for David Brown
Defence Equipment Limited in a
letter dated 14 March 1997 against
the Vendor in respect of the
Activity relating to the supply by
the Vendor to David Brown Defence
Equipment Limited of Transducers
(type 494/7,) David Brown part
number: 00472VT, manufactured by
Ranco Controls Limited (registered
number: 702171) for use in
Challenger 1 and Challenger 2 tanks
(the "DB Supply"), a copy of which
letter is annexed to the Disclosure
Letter and any other claim which is
being or may after Completion be
made against the Vendor or any
member of Lucas Group or the
Purchaser in respect of the Activity
relating to or arising from or
consequential on the DB Supply
"the Debtors" The book and other debts owing to
the Vendor or (to
8
<PAGE>
the extent reflected as an asset in
the books and ledgers of the Vendor
in relation to the Activity on the
Completion Date) any other member of
the Lucas Group on behalf of the
Activity by or in respect of trade
debtors, trade bills receivable and
any other amounts owing to the
Vendor or any other member of the
Lucas Group by debtors in connection
with the Activity (including,
without limitation, amounts due from
Transferring Employees) at the close
of business on the Completion Date
(and whether or not then due and
payable) and to the extent
specifically included as a Debtor in
the Final Completion Statement any
amounts owed by any member of the
Lucas Group to the Vendor in respect
of the Activity or to the same
extent owed to the Activity by
another Business Unit (in each and
any such case on current account)
but excluding (for the avoidance of
doubt) any Lucas Internal Funding
and any other monies in the nature
of a loan
"the Disclosure Letter" The letter of even date herewith
written by the Vendor to the
Purchaser in the Agreed Terms
"Encumbrance" Any interest, equity or claim of any
person (including, without prejudice
to the generality of the foregoing,
any right to acquire, option or
right of pre-emption) or any
mortgage, charge, pledge, lien,
assignment, hypothecation, security
interest (including any created by
law), title retention (relating to
fixed assets only) or any other
security agreement or arrangement
"Environment" The environment as defined in
section 1(2) of the Environmental
Protection Act 1990 and
9
<PAGE>
"Environmental" shall have
a corresponding meaning
"Environmental Claims" Save as set out in the Environmental
Indemnity Exceptions Letter any
action, demand, demand letter,
claim, notice of non-compliance or
violation, notice of liability,
proceeding, consent order or consent
agreement (including investigation,
corrective and remedial action costs
incurred for works required by any
competent authority or governmental
body of competent jurisdiction) in
respect of an act or omission of any
member of the Lucas Group prior to
Completion relating in any way (1)
to (or as the case may be) breach or
violation of any Environmental Law,
Environmental Licence or Hazardous
Substances or (2) to the generation,
transportation, placement, storage,
handling, transmission, discharge,
treatment, use, manufacture and/or
disposal by the Vendor or any other
member of the Lucas Group and/or by
any other person of any Hazardous
Substances or other materials (3) to
the pollution, conservation or
protection of the Environment or any
matter affecting the Environment, in
each case the cause of which arose
prior to the Completion Date at
and/or in and/or on and/or from, as
the case may be, any site and/or
facility and/or the Property
"the Environmental Indemnity The letter from the Vendor to the
Exceptions Letter" Purchaser having the same date as
this Agreement setting out matters
which are relevant for the purposes
of liability under the Environmental
Indemnity
"Environmental Law" Any Statute, treaty, directive,
regulation, legislative or other
measure or law in effect at the date
of this Agreement as currently
enforced by the relevant
10
<PAGE>
statutory administrative or
regulatory authority following
judicial or administrative
interpretation thereof at the date
of this Agreement, including any
judicial or administrative order,
consent decree or judgment, relating
to pollution, conservation or
protection of the Environment,
health, safety or natural resources
or any matters referred to within
(2) of the definition Environmental
Claims by or to which the Vendor or
Lucas in respect of the Activity or
any of the Assets is currently bound
or subject
"the Environmental Indemnity" The indemnity as to environmental
issues contained in clause 9.3(1)
=============
"Environmental Licence" Any permit, licence, authorisation,
consent or other approval required
at any time by the Vendor or any
member of Lucas Group in relation to
the Activity or any of the Assets
pursuant to any Environmental Law;
"Excluded Liabilities" The liabilities to be retained by
the Vendor or if relevant Lucas
Group as set out in clause 9.1
==========
"Fines" In relation to the Activity, fines
and penalties which the Vendor
becomes liable to pay to any
governmental or regulatory authority
or department as a result of
violation by or other non-compliance
on the part of, the Vendor or any
agent thereof for whose acts or
omissions the Vendor is vicariously
liable (or where the Vendor is
liable to indemnify such agent such
amounts for which the Vendor is
liable to pay in indemnification of
such agent) of or with any law
(including any statutory or
regulatory provisions but excluding
any Environmental Law as to which
the provisions of clause 9.3(1)
shall exclusively apply)
11
<PAGE>
applicable to the Vendor or such
agent and any other payment in th
enature of a fine or penalty which
the Vendor becomes liable to make to
any such atuthority or department as
a result of any such violation or
non-compliance where and to the
extent that in any such event at any
time prior to the Completion Date.
"the Fixed Price Element" The aggregate of the Price for the
Contracts, the Price for the
Goodwill, the Price for the
Intellectual Property, the Price for
the Know How, the Price for the
Trademarks, the Price for the Plant
Machinery and Equipment, the price
for the Commercial Confidential
Information and the Price for the
Property namely (Pounds)12,730,000
"the Goodwill" All the goodwill of the Vendor and,
where relevant, any member of the
Lucas Group in connection with the
Activity
"Group Sharing Arrangements" Any and all contracts or
arrangements including but not
limited to those listed in Schedule
13 relating to the supply of goods
and services to the Vendor in
respect of the Activity and the
supply of the same or similar goods
or services to another member of the
Lucas Group or another Business Unit
from the same supplier
"Hazardous Substance" Any substance whatsoever (whether in
a solid or liquid form or in the
form of a gas or vapour and whether
alone or in combination with any
other substance) or waste (as
defined in the Environmental
Protection Act 1990) which is
capable of causing harm to man or
any other living organism supported
by the Environment or damaging the
Environment or
12
<PAGE>
public health or welfare
"Incremental Cost" In relation to any repair or
replacement product, the cost of
performing such repair or replacing
such product which shall not for the
avoidance of doubt include an
apportionment of any fixed cost or
overhead for which the Purchaser
would have been liable or incurred
had it not been obliged to carry out
such repair or replacement less the
net scrap or core value (as
appropriate) of the replaced product
or as the case may be materials
actually recovered by the Purchaser
after allowing for all costs of
recovery
"the Indemnities" All indemnities given by the Vendor
under this Agreement
"the Independent Accountant" The firm of chartered accountants to
whom any matter is submitted for
final resolution in accordance with
clause 3.8
==========
"Intellectual Property" Except as specifically described in
and licensed to the Purchaser by any
of the Ancillary Agreements all
industrial and intellectual property
rights (whether registered or
unregistered) owned by Lucas Group
used by the Vendor and exclusively
relating to the Activity subsisting
in any part of the world excluding
the Trade Marks, Commercial
Confidential Information, the Know-
How and any Shared IP but including
(i) trade or business names, trade
marks service marks, designs, design
rights, patents and copyright
(whether in computer programs or
not) (and all applications in
respect of any of the foregoing);
(ii) the benefit of contractual
rights to any intellectual
13
<PAGE>
property licensed for use
exclusively or non-exclusively in
the Activity from third parties
(excluding other members of Lucas
Group) or by the Vendor in respect
of the Activity to third parties;
(iii) such right title and interest
which the Vendor or, as the case may
be, other member of the Lucas Group
(if any) has in or to the product
names and part numbers (save to the
extent that they are Shared IP)
relating to the products listed by
type number in Part 1 of Schedule 2;
but excluding all intellectual
property rights whether registered
or unregistered
i) owned by a member of the Lucas
Group other than the Vendor and used
by Lucas TVS and Lucas Turkey;
ii) owned by the Vendor or the Lucas
Group and used in connection with
remanufacturing activities of
another Business Unit;
iii) relating to small electrical
motors of the generic type AM60,
WM60, WLM60 and 17W
iv) for the avoidance of doubt,
relating to the 24 volt external fan
80 amp alternator under development
by Lucas TVS and under review by the
Activity
"Key Personnel" Ian Smith and Bob Pate
"Know-How" (i) All inventions relating to
manufacturing or operating
processes, manufacturing and process
techniques, secret formulae and
other industrial, manufacturing and
operating process proprietary
knowledge and information and in use
or owned by
14
<PAGE>
any member of the Lucas Group and
used exclusively in respect of the
Activity but excluding any
Commercial Confidential Information
and excluding any of the same which
is expressly retained by any member
of the Lucas Group under the
Ancillary Agreements
(ii) such right title and interest
which the Vendor or, as the case may
be, other member of the Lucas Group
has in developments or designs of
the products listed in Part 1 of
Schedule 2 carried out at the
Property or elsewhere by the Vendor
or any other member of Lucas Group
prior to the Completion Date
(iii) such right title and interest
which the Vendor or, as the case may
be, other member of the Lucas Group
has in developments, designs or
prototypes (save to the extent that
they are Shared IP) of other
products of a similar kind to those
listed in Part 1 of Schedule 2
(whether such products are currently
in manufacture or not) carried out
at the Property by the Vendor
"the LAO Activity" The meaning given to that term in
the LAO Sale and Transition
Agreement
"the LAO Sale and Transition The agreement to be entered into on
the Agreement" date hereof between (1) Lucas
Aftermarket Operations and (2) the
Purchaser which is listed in
schedule 2 to the Umbrella Agreement
as being one of the Ancillary
Agreements referred to therein
"the Lease" the lease in the Agreed Terms to be
entered into by (1) the Purchaser
and (2) Lucas Corporate in respect
of Lucas Corporate's continued
occupation of part of the Property
following Completion
15
<PAGE>
"the Leased Assets" Those Assets not owned by the Vendor
which are used in the Activity which
are the subject of hire or other
rental or hire purchase, credit
sale, leasing agreements or other
agreements for payment on deferred
terms other than those forming part
of the Group Sharing Arrangements
brief particulars of which assets
and agreements are listed in
Schedule 4
"Lucas Aftermarket Operations" Lucas Limited trading as "Lucas
Aftermarket Operations"
"Lucas Central Treasury" The LucasVarity Treasury Department
presently based at Larden Road Acton
England
"Lucas Competitor" Bosch, Magneti Marelli and Valeo and
any Associated Company of any such
person
"Lucas Corporate" The LucasVarity Corporate Department
(including for the avoidance of
doubt Lucas Central Treasury)
presently based at Larden Road,
Acton, England
"the Lucas Group" LucasVarity, and any Subsidiary or
Subsidiary Undertaking of
LucasVarity for the time being
"Lucas Internal Funding" All monies due to or from the
Activity from or to the Lucas
Central Treasury which is either
quasi capital or otherwise owed on
capital account or which had the
Lucas Central Treasury been a bank
would have amounted to an overdraft
"Lucas Turkey" Lucas Elektrik Sanayi Ve Ticaret AS
"Lucas TVS" Lucas TVS Limited
"LucasVarity" LucasVarity plc, registered number
3207774
"the Management Accounts" The unaudited management accounts of
the Vendor
16
<PAGE>
comprising solely the unaudited
balance sheet and profit and loss
account of the Activity made up to
30 December 1997 a true copy of
which is annexed to the Disclosure
Letter
"Master Lease" The Master Hiring Agreement (number
51986) dated 26th July 1993 and made
between 1) Lucas and 2) Lex Vehicle
Leasing Limited relating to, inter
alia, the vehicles listed in
Schedule 13
"Net Current Assets Value" The aggregate of the values of the
Debtors and the Prepayments and the
Stock less the aggregate of the
values of the Creditors and Accruals
and the Warranty Provision at close
of business on the Completion Date
calculated in accordance with the
Accounting Principles consistently
applied and agreed or ascertained in
accordance with clause 3
========
"Original Equipment
Manufacturer" Any manufacturer or assembler of
transport vehicles, engines or
similar equipment including, but not
limited to, a manufacturer or
assembler of motor cars, vans,
buses, coaches, forklifts,
industrial vehicles, trucks,
tractors or marine, motive power or
stationary engines or a manufacturer
of components or sub-assemblies to
be fitted as original equipment to
such vehicles, engines or similar
equipment
"Original Equipment Service" The market for supplies of spare and
replacement parts to any Original
Equipment Manufacturers other than
for fitting as original equipment or
to any dealer of any Original
Equipment Manufacturer in its
capacity as a dealer of such
Original Equipment Manufacturer
"the Other Sale Agreements" The Argentinean Sale Agreement and
the South African Sale Agreement, as
each such expression is
17
<PAGE>
defined in the Umbrella Agreement
and the LAO Sale and Transition
Agreement
"the Other Warranties and
Other Capped Indemnities" The Warranties and Capped
Indemnities on the part of the
relevant vendor contained in each of
the Other Sale Agreements
"the Perkins Claim" Any potential claim or any claim
(whomsoever made by) whether before
or after Completion following
VarityPerkins' or Perkins Group
Limited's allegation that it has
been unable to output Challenger
powerpacks to Vickers Defence
Systems as referred to in a letter
from Perkins Group Limited to the
Activity dated 2 December 1997
arising from or from a breach of the
particular contractual relations
between the Vendor (in relation to
the Activity) and Perkins Group
Limited in respect of which such
allegation is made.
"the Plant, Machinery and
Equipment" The fixed and moveable plant and
machinery, tooling and equipment
(including vehicles) owned by the
Vendor or any other member of Lucas
Group which is/are used in the
Activity and which is listed in the
schedule annexed to the Disclosure
Letter and such other machinery
tooling furniture and equipment
owned by the Vendor or any other
member of Lucas Group wherever
located and used solely in or for
the Activity
"the Prepayments" So much of the payments made in
advance by the Vendor or, (to the
extent reflected in the books and
ledgers of the Vendor in relation to
the Activity on the Completion Date)
by any other member of the Lucas
Group prior to the Completion Date
in the course of carrying on the
Activity in respect of a
18
<PAGE>
period of time which commences
before the Completion Date and ends
after the Completion Date as relates
to the period after the Completion
Date but excluding any such payment
made by or on behalf of the Vendor
in respect of the Activity relating
to insurance (the benefit of which
is not to be transferred to the
Purchaser)
"the Price for the Commercial The sum of (Pounds)1
Confidential Information"
"the Price for the Contracts" The sum of (Pounds)1
"the Price for the Goodwill" The sum of (Pounds)1
"the Price for the The sum of (Pounds)1
Intellectual Property"
"the Price for the Know-How" The sum of (Pounds)2,061,000
"the Price for the Plant The sum of (Pounds)5,668,995
Machinery and Equipment"
"the Price for the Property" The sum of (Pounds)5,000,000 being
the aggregate of (Pounds)3,000,000
for land, (Pounds)1,500,000 for
buildings and (Pounds)500,000 for
plant and fixtures forming part of
the buildings
"the Price for the Trademarks" The sum of (Pounds)1
"Product Liability" Liability in respect of death,
personal injury, physical damage to
property (other than to the products
themselves) caused by a defect in
any product manufactured, assembled,
repaired, refurbished,
19
<PAGE>
serviced, sold or supplied (or
caused by a failure to carry out
servicing properly) prior to the
Completion Date by the Vendor in
relation to the Activity
"the Provisional The sum of (Pounds)18,453,000 being
the aggregate of:
(1) the Fixed Price Element;
(2) (Pounds)5,723,000 being the
estimated Net Current Assets Value;
"the Property" The leasehold and freehold property
described in Schedule 5 Part 1
==========
"the Purchaser's Group" PEI Holdings Inc, a Delaware
Company, and any Subsidiary or
Subsidiary Undertaking of that
company for the time being
"the Purchaser's Lawyers Pannone & Partners of 123 Deansgate,
Manchester M3 2BU, England and
Brobeck Phleger & Harrison LLP of
One Market Plaza, Spencer Street
Tower, San Francisco CA 94105, USA
"the Records" All such records, lists of customers
and suppliers and written material
located at the Property recording
the Contracts, accounts and other
documents in each case in whatever
medium held relating exclusively to
the Activity or any of the Assets to
enable the Purchaser effectively to
carry on (or in the case of the
Property occupy) the same in
succession to the Vendor or Lucas
including without limitation the
following:- all promotional
material, sales publications,
catalogues, price lists, advertising
materials, technical documentation
and drawings, surveys, reports and
other technical materials and sales
matter, records comprising or
representing accounts, ledgers,
payroll
20
<PAGE>
records, NIC and PAYE records
relating exclusively to the
Transferring Employees and to the
extent not located at the Property
or to the extent the same relate
partly but not exclusively to the
Activity or the Assets copies of the
same but in any case excluding any
of the same which the Vendor or any
other member of the Lucas Group is
required by law to retain and
excluding insurance policies
"the Regulations" The Transfer of Undertakings
(Protection of Employment)
Regulations 1981 as amended
"Shared IP" Except as specifically described in
and licensed to the Purchaser or any
member of the Purchaser's Group by
any of the Ancillary Agreements, and
excluding the Intellectual
Property,the Trade Marks, Know-How,
Commercial Confidential Information
and trademarks all industrial and
intellectual property rights
(whether registered or unregistered)
owned by the Vendor or any other
member of the Lucas Group and used
by the Vendor in relation to the
Activity or some part thereof and
also used by the Vendor in relation
to a Business Unit other than the
Activity or another member of Lucas
Group in relation to its business,
subsisting in any part of the world
including service marks, designs,
design rights, copyright (whether in
computer programs or not) patents
(and all applications in respect of
any of the foregoing);
"the Stock" All stocks, including raw materials
and components, spare parts,
operating supplies, maintenance and
non product stock, work-in-progress,
finished goods, bought-in-goods,
packaging materials, packages and
products and services in
intermediate stages of
21
<PAGE>
manufacture or completion owned by
the Vendor at the close of business
on the Completion Date for use or
sale in connection with the Activity
(including where the same (i)
incorporates goods or materials
supplied by a supplier subject to
reservation of title or (ii) has
been supplied on a consignment stock
or sale or return basis) but
excluding for the avoidance of doubt
any such items owned by the Vendor
but recorded as an asset in the
books and ledgers of the Vendor
relating to the LAO Activity
"Subsidiary" A subsidiary company as defined in
section 736 of the Companies Act
1985
"Subsidiary Undertaking" A subsidiary undertaking as defined
in Section 258 Companies Act 1985
"the Supplier Contracts" Contracts and arrangements which
were entered into before the close
of business on the Completion Date
by or on behalf of the Vendor with
suppliers for the supply to the
Vendor of goods or services in
connection with the Activity which
then remain to be performed, in
whole or in part but excluding the
Group Sharing Arrangements
"Taxation" Corporation tax, income tax, gross
receipts tax, capital gains tax,
PAYE, value added tax, sales and use
tax, transfer tax, customs and other
import duties, excise duties, stamp
duty, stamp duty reserve tax,
capital duty, property tax,
employment tax, and other foreign
taxation equivalent to those taxes,
duties and charges listed in this
paragraph, together with any payment
whatsoever which may be required to
be made to any person in whatever
country as a result of the operation
of any enactment in force at the
date
22
<PAGE>
hereof relating to taxation and
all penalties, charges, additions to
tax, and interest relating to any
claim for taxation or resulting from
a failure to comply with the
provisions of any such enactment
relating to taxation
"the Taxation Warranties" The warranties contained in
paragraph 2.4(C) of the Warranties
"Third Party Rights" All rights of each of the Vendor and
Lucas or either of them against
third parties (but not, for the
avoidance of doubt, against the
Vendor or Lucas) arising out of or
in connection with any of the Assets
or the conduct of the Activity prior
to the Completion Date (other than
any such rights arising from or in
connection with a liability
(including without limitation the
David Brown Claim the Bearings
Claims and the Perkins Claim) which
is not or will not be assumed by the
Purchaser) including but not limited
to but save as aforesaid (i) all
rights under or in respect of
manufacturer's or supplier's
representations, warranties,
guarantees and other contractual
obligations and assurances (express
or implied), (ii) all warranty or
indemnity claims against any
transferor of the Assets or any of
them, (iii) all rights against any
vendor or contractor in respect of
any defect in the title,
construction or condition of the
Property or in respect of any work
or treatment carried out on the
Property, and (iv) all rights
against sub-contractors but
excluding any claim by or right of
the Vendor in respect of (a)
Taxation or (b) insurance (other
than to the extent that it relates
to any Asset hereby agreed to be
sold or a liability hereby agreed to
be transferred and then only to the
extent that both the insurance claim
and the asset or
23
<PAGE>
liability in question have been
reflected in the Final Completion
Statement consistent with the
principles of insurance
"Trademarks" The registered trademarks listed in
Schedule 14
"the Transferring Employees" Those employees of the Vendor or any
other member of Lucas Group whose
names and details are set out in
Schedule 6 being all the employees
who are employed in connection with
the Activity at close of business on
the Completion Date
"the Umbrella Agreement" An agreement in the Agreed Terms
entered into on the same date as
this Agreement between(1) Lucas and
others (2) the Purchaser and others
and (3) PEI Holdings Inc
"the Uncapped Indemnities" The indemnities given by the Vendor
in clauses 7.3, 8.7.4, 8.8, 8.9, 9.1
and 10.9.2 of this Agreement
"the Vendor's Solicitors" Eversheds of 10 Newhall Street,
Birmingham
"the Warranties" The warranties of the Vendor
contained in clause 8 and Schedule 7
========
"the Warranty Provision" Any provision made in the Final
Completion Statement (as defined
below) calculated in accordance with
the Accounting Principles
consistently applied in respect of
liabilities (whether actual or
contingent) for Warranty Work (as
defined in clause 10) or Product
=========
Liability
1.2 References in this Agreement to statutes or any statutory provision shall
include any statutory modification, re-enactment or extension thereof for
the time being in force and any orders, regulations, instruments or other
subordinate legislation made thereunder provided always that this shall
not operate to increase the liability of the parties hereunder.
24
<PAGE>
1.3 In this Agreement:
1.3.1 the masculine gender shall include the feminine and neuter and
the singular number shall include the plural and vice versa
1.3.2 references to persons shall include bodies corporate,
unincorporated associations and partnerships
1.3.3 the expressions "the Vendor" and "Lucas" shall include
their respective successors in title
1.3.4 the headings (including for the avoidance of doubt, those
headings shown in bold type in Part 1 of Schedule 2) contained
in this document are inserted for convenience only and shall not
affect its construction
1.3.5 references to any agreements, assets, contracts, property,
rights, benefits, obligations or liabilities of the Vendor or
Lucas in relation to the Activity or Property or Assets, or to
products or services sold or supplied by or to the Vendor or
Lucas, shall include the same where they have been entered into,
acquired, incurred, sold or supplied by or to another member of
the Lucas Group as agent for the Vendor or Lucas whether or not
the Vendor or Lucas was a disclosed or undisclosed principal.
1.4 Whenever a document is referred to as being "in the Agreed Terms" it
shall be in the form agreed and initialled by or on behalf of the Vendor
and the Purchaser.
1.5 Except where the contrary is stated, any reference herein to a clause or
Schedule or party is to a clause of or Schedule or party to this
Agreement and any reference within a clause or Schedule to a sub-clause,
paragraph or other sub-division is a reference to such sub-clause,
paragraph or other sub-division so numbered or lettered in that clause or
Schedule. The Schedules form part of this Agreement and shall have the
same force and effect as if expressly set out in the body of this
Agreement.
2. SALE AND PURCHASE OF THE ACTIVITY AND THE ASSETS
------------------------------------------------
2.1 The Vendor shall (and where relevant shall procure that Lucas will) sell
and the Purchaser shall purchase as at and with effect from Completion
the business comprising the Activity and the following on a going concern
basis:-
25
<PAGE>
2.1.1 the benefit of the Contracts (subject to the burden attaching
thereto)
2.1.2 the Goodwill;
2.1.3 (a) the Intellectual Property,
(b) the Trade Marks and
(c) the Know-How;
2.1.4 the Plant, Machinery and Equipment;
2.1.5 the Records;
2.1.6 the Stock;
2.1.7 the Debtors and the benefit of the Prepayments
2.1.8 the Commercial Confidential Information;
2.1.9 the Third Party Rights;
2.1.10 all other physical assets of whatsoever nature owned by
the Vendor or any other member of Lucas Group and exclusively
employed in the Activity at Completion and not otherwise
specified or excepted herein;
free from Encumbrances (except reservation of title claims by
suppliers) but without prejudice thereto with full title guarantee (save
in respect of unregistered Intellectual Property) and the express
assurance as to freedom from Encumbrances and the covenants implied by
Sections 2 and 3 of the Law of Property (Miscellaneous Provisions) Act
1994 shall apply to anything falling within the scope of such assurance
and covenants notwithstanding that the Vendor does not know or could not
reasonably be expected to know about it.
2.2 Lucas will sell and the Purchaser will buy the Property upon the terms
hereof and the conditions of sale set out in Schedule 5 Part 2. In case
of any conflict between the Standard Conditions therein referred to and
this Agreement the provisions of this Agreement shall prevail.
2.3 The Purchaser shall pay the Creditors and the Accruals in accordance with
the Vendor's normal business practice in relation to the Activity. The
Purchaser shall indemnify the Vendor against all expenses costs loss
damage and liability incurred by the Vendor as a result of any failure or
delay
26
<PAGE>
in so paying.
2.4 There shall be expressly excluded and excepted from the sale and purchase
hereunder (and nothing in this Agreement shall operate to transfer) any
of the following:
2.4.1 the benefit to the Vendor of this Agreement;
2.4.2 ownership of the Leased Assets;
2.4.3 other than the Intellectual Property, any trademarks, trade
names, products' names, patents, copyrights, registered designs
and any other intellectual property rights of the Vendor or any
other member of the Lucas Group (including without limitation
all such rights relating to the In-Line Pump Products ) or (save
as expressly permitted by this Agreement or any Ancillary
Agreement or the Umbrella Agreement) any rights to use the same;
2.4.4 any right to use the names "Lucas" or "LucasVarity" or
"CAV" or the Lucas Group diagonal flash or any other similar
trade mark or other distinctive Lucas Group get-up save as
provided herein in the Umbrella Agreement or in the Ancillary
Agreements;
2.4.5 save for and to the extent of any cash included as an asset in
the Final Completion Statement, all cash in the Lucas Group's
hands or any cash in the Lucas Group's bank(s) at Completion and
the benefit of any payments in advance made by the Vendor in
relation to the Activity which are excluded from the
Prepayments;
2.4.6 all cheques and negotiable instruments issued in favour
of the Lucas Group prior to Completion (save where any such
cheque or negotiable instrument in accordance with the
Accounting Principles consistently applied constitutes part of
Debtors sold hereunder, appears as an asset in the Final
Completion Statement and is taken fully into account in
calculating the Net Current Assets Value);
2.4.7 any insurance claim made by or available to the Lucas Group and
all unearned premiums under insurance policies or other rights
to refunds thereunder attributable to any period of time after
the Completion Date except in each case to the extent taken into
account or otherwise reflected in the Final Completion Statement
and Net Current Assets Value;
27
<PAGE>
2.4.8 any claim made by or available to the Lucas Group in respect of
an event occurring prior to Completion other than the Third
Party Rights;
2.4.9 any fixtures and fittings on the part of the Property which is
leasehold which are landlords fixtures and fittings together
with, for the avoidance of doubt any fixtures and fittings on
that part of the Property the subject to the Lease in the nature
of tenants fixtures and fittings which are owned by Lucas
Corporate;
2.4.10 corporation tax losses and the benefit of any claims made
or to be made for repayment of any taxation or tax allowance of
the Vendor or any other company in the Lucas Group in relation
to the Activity in respect of the period prior to Completion;
2.4.11 any Lucas Internal Funding;
2.4.12 the pallets and collars owned by the Lucas Pallet Pool;
2.4.13 any sums owed to or by any member of the Lucas Group by or to
the Vendor in respect of the Activity to or by another Business
Unit in respect of the Activity where such sums are owed on loan
account;
2.4.14 any liability of the Vendor or any member of the Lucas Group in
respect of the Claims.
2.5 If any of the Assets to be sold hereunder by the Vendor is owned by any
other member of the Lucas Group or any of the Transferring Employees is
employed by any such other member or there is any other obligation of the
Vendor hereunder which is only capable of being satisfied by or with the
assistance of any such other member, the Vendor shall not be deemed to be
in breach of this Agreement so long as the Vendor procures, to the extent
necessary, compliance by such other member with the terms and conditions
of this Agreement which the Vendor hereby undertakes to do. Such other
member and, where appropriate, its employees, shall have the benefit of
any exclusions of liability contained herein in relation to the Assets
and any indemnity given by the Purchaser herein to the Vendor in relation
to the Assets, the Activity or the Transferring Employees. If any member
of the Lucas Group other than the Vendor is a party to any of the
Contracts or the Completed Contracts the relevant provisions of clause 5
========
shall apply to such Contract or Completed Contract (as the case may be)
as if the Vendor were party thereto and references in those clauses to
the Vendor, shall where appropriate be construed as references to the
28
<PAGE>
relevant member of the Lucas Group. Accordingly the relevant member of
the Lucas Group shall be entitled to benefit from the obligations
undertaken and indemnities given by the Purchaser in relation to that
Contract or Completed Contract under those Clauses.
2.6 Insofar as tooling, jigs, patterns, dies and similar equipment
("tooling") used in the Activity is owned by a third party other than any
member of Lucas Group (and title to which accordingly does not pass to
the Purchaser hereunder) the Vendor assigns to the Purchaser whatever
right title or interest (if any) it or any other member of Lucas Group
may have in such tooling. The Vendor will if asked by the Purchaser
give reasonable assistance to the Purchaser to help resolve any dispute
which may arise between the Purchaser and any such third party asserting
ownership of tooling or requiring payments which are inconsistent with
practice prior to Completion and in so doing each party shall bear its
own costs.
2.7 The Vendor agrees that the Purchaser may (to the extent that the Vendor
can grant any such right) for a period of 6 months after Completion
represent itself as carrying on the Activity in succession to the Vendor
but this agreement shall not grant or imply (and shall specifically
exclude) any right on the part of the Purchaser (save to the extent
granted herein in the Umbrella Agreement or Ancillary Agreements) in the
names or mark "CAV" or "Lucas" or "LucasVarity" or in the Lucas Group
diagonal flash or any other similar trademark or other distinctive Lucas
Group get-up or in the goodwill attaching thereto.
3. THE CONSIDERATION
-----------------
3.1 The purchase price for the Assets shall be the aggregate of the Fixed
Price Element plus the Net Current Assets Value. The Purchaser's remedies
shall not in any way be limited or affected by the amount apportioned to
any particular Asset or category of the Assets in this Agreement.
3.2 On Completion the Purchaser shall pay to the Vendor (for itself and on
behalf of Lucas) in cash the Provisional Consideration.
3.3 The following provisions shall apply regarding the calculation of the Net
Current Assets Value, namely:
3.3.1 the Vendor and the Purchaser shall, in conjunction with local
management of the Activity, procure that:
3.3.1.1 if not done immediately before then on the day of or
no later than during
29
<PAGE>
the 3 days immediately following
Completion there is carried out a stock-take of the
Stock; and
3.3.1.2 immediately following Completion there is undertaken
a review of the Debtors and Prepayments, Creditors
and Accruals and the Warranty Provision
in each case for the purposes of ascertaining the data to which the
Accounting Principles shall be consistently applied in order to prepare
the statements that are contemplated as being prepared in accordance with
this clause 3 and so as to determine the Net Current Assets Value.
========
3.3.2 Each of the Vendor and the Purchaser shall be entitled to
have several representatives present at such stock-take; neither
shall be entitled, in the absence of manifest error, to raise
any objection as to the correctness of any data relating to the
quantities and descriptions of the items the subject of the
stocktake if no representative of the relevant party attends
such stocktake.
3.3.3 The Purchaser will on and after Completion allow the Vendor full
access to all properties occupied by the Activity and occupied
by any other member of the Purchaser's Group for the purposes of
the Activity all relevant employees and all records, information
and other documentation to enable the Vendor and the Purchaser
to carry out and complete each such stock-take, (if the same is
not completed before Completion) and review and to prepare the
draft Completion Statement defined and referred to in clause
======
3.4. In particular but without limitation to the foregoing the
===
Purchaser will (in so far as such persons shall remain employed
in the Activity) grant and procure that the Vendor is granted
access to and the services of each of John Walker and Z. Iqbal
for all purposes of this clause 3, including, without
========
limitation, the ascertainment of Net Current Assets Value
pursuant to this clause 3.
========
3.3.4 The Net Current Assets Value shall be determined in accordance
with the Accounting Principles consistently applied. If and to
the extent any matter arises which is not dealt with in the
Accounting Principles the same shall be determined on a basis
which is consistent with the Accounts or in the event of a new
issue not dealt with in the Accounts in accordance with
generally accepted accounting principles in the UK, in either
event materiality shall be determined in relation to the
Activity on a
30
<PAGE>
standalone basis.
3.3.5 Without prejudice to the Accounting Principles which
consistently applied shall apply to determine the amount of any
relevant provision or reserve, the draft Completion Statement
and the Final Completion Statement (as each such expression is
defined and referred to in clauses 3.4 and 3.9) shall not
=========== ===
contain any provision or reserve in respect of any liability of
the Activity unless that liability is to be assumed by the
Purchaser hereunder.
3.4 Within 45 days following Completion the Net Current Assets Value shall be
ascertained by the Vendor and the Vendor shall serve a written statement
("the draft Completion Statement") on the Purchaser within such period
relating to the Activity showing the amounts attributable to Net Current
Assets Value. The Vendor shall also serve within such period a further
statement ("the draft Aggregation Statement") containing an aggregation
of the Fixed Price Element and the Net Current Assets Value showing also
the Consideration and the sum due to or from the Purchaser having regard
to the amount of the Provisional Consideration paid by the Purchaser on
Completion. All sums in the draft Completion Statement and the draft
Aggregation Statement shall be expressed in (Pounds) sterling.
3.5 The draft Completion Statement shall adopt the format set out in the pro
forma statement which appears set out in part 1 of Schedule 12 and the
Aggregation Statement shall adopt the format set out in the pro forma
statement which appears set out in part 2 of Schedule 12.
3.6 Unless the Purchaser shall notify the Vendor within 30 days after its
receipt of whichever is the latest to be served of the draft Completion
Statement and the draft Aggregation Statement that it does not accept and
agree that their respective contents have been prepared in accordance
with the provisions of this Agreement then the Purchaser shall be deemed
to have accepted and agreed the contents of each of the draft Completion
Statement and the draft Aggregation Statement for the purposes of this
Agreement. Unless the Vendor shall otherwise agree, any such
notification on the part of the Purchaser shall specify in reasonable
detail the matters in dispute.
3.7 If within the aforesaid period of 30 days the Purchaser shall notify the
Vendor in writing that it does not accept and agree that the contents of
the draft Completion Statement and the draft Aggregation Statement have
been prepared in accordance with the provisions of this Agreement then
the Purchaser and the Vendor shall endeavour to reach agreement upon
adjustments to the draft Completion Statement and the draft Aggregation
Statement to meet the Purchaser's
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<PAGE>
objections. The Purchaser shall be
entitled to notify the Vendor in any number of notices served in
accordance with this clause 3.7 within the aforesaid 30 day period and
==========
for the avoidance of doubt, any matters not objected to in any such
notice(s) served pursuant to this clause 3.7 within the aforesaid period
==========
of 30 days shall be deemed agreed by the Purchaser.
3.8 If the Vendor and the Purchaser are unable to reach agreement as
aforesaid within 21 days of the Purchaser giving to the Vendor the latest
of the written notifications contemplated by clause 3.7 as being capable
==========
of being served by the Purchaser or within such later time as the Vendor
and the Purchaser may agree then any matters not so resolved shall be
submitted to an independent accounting firm of international reputation
mutually acceptable to the Vendor and the Purchaser or in default of
agreement between them within 7 days to be selected at the instance of
either of them by the President for the time being of the Institute of
Chartered Accountants in England and Wales) for final resolution in
accordance solely and exclusively with this Agreement and in accordance
with clause 3.3.4. Such submission shall be in the form of written
============
statements of position by the Vendor and the Purchaser, as well as an
opportunity to respond to such written statements and any request for
statements or information from the Independent Accountant. The Vendor,
any other relevant member of Lucas Group and the Purchaser shall allow
the Independent Accountant full access to all relevant accounting and
other records of or in relation to the Activity, the Property and all
relevant employees as it shall require for the purpose of giving its
determination hereunder. The Vendor and the Purchaser shall co-operate to
procure that the Independent Accountant is able to reach its decision as
to any matter referred to it as expeditiously as possible. If the
Independent Accountant determines that the resolution of a disputed item
requires an interpretation of law then the Independent Accountant may
request an independent law firm of national standing in England chosen by
it to render a legal opinion as to such matter. The Independent
Accountant shall act as an expert and not as an arbitrator and shall be
directed by the Vendor and the Purchaser to make its determination as
soon as possible after the matter in dispute is submitted to it and such
determination shall be final and binding upon the parties hereto. In
giving its determination the Independent Accountant shall also adjust the
draft Completion Statement and the draft Aggregation Statement if
required to reflect the decision of the Independent Accountant. The costs
of such Independent Accountant's review (including reasonable lawyer's
fees, if any) shall be borne by the party or parties in inverse
proportion to their success in the resolution of the dispute between
them.
3.9 For the purposes of this Agreement the expressions "the Final Completion
Statement" and "the
32
<PAGE>
Aggregation Statement" shall mean:
3.9.1 the draft Completion Statement and draft Aggregation
Statement which the Purchaser is deemed to have accepted and
agreed pursuant to Clause 3.6 or with which the Purchaser
==========
indicates its acceptance and agreement within the 30 day period
referred to in clause 3.6 whereupon (in either event) the
==========
contents of the same shall become and be final and binding on
the Vendor and the Purchaser for the purposes of this Agreement;
or
3.9.2 the draft Completion Statement and Aggregation Statement
bearing any adjustment made pursuant to clause 3.7, if clause
========== ======
3.7 applies and agreement is reached between the Vendor and the
===
Purchaser as contemplated therein whereupon the contents of the
same shall become and be final and binding on the Vendor and the
Purchaser for the purposes of this Agreement; or
3.9.3 the draft Completion Statement and Aggregation Statement as
agreed by the Independent Accountant or, as the case may be, any
revised Completion Statement or Aggregation Statement produced
by the Independent Accountant as contemplated by clause
======
3.8 whereupon (in either event) the contents thereof shall
===
become and be final and binding upon the Vendor and the
Purchaser for the purposes of this Agreement.
3.10 For the purposes of determining the Net Current Assets Value and all
other matters contemplated as being determined in this Agreement by
reference to the Final Completion Statement and the Aggregation
Statement, the Final Completion Statement, the Aggregation Statement and
the contents thereof shall (save in the case of manifest error) be final
and binding on the Vendor and the Purchaser.
3.11 Any costs incurred by each of the Purchaser or the Vendor
in acting in the manner contemplated by this clause 3 including, without
========
limitation, any professional costs and expenses shall be borne by the
party incurring the same save as contemplated by clause 3.8 if that
==========
clause applies. It is agreed and declared that in any event no provision
for such costs (including any costs incurred by the Activity) shall be
contained in the Final Completion Statement or the Aggregation Statement
3.12. If the aggregate of the Fixed Price Element and the Net
Current Assets Value in the case of the latter agreed or ascertained in
accordance with clause 3:
========
3.12.1 is less than the Provisional Consideration the Vendor shall pay
to the Purchaser the
33
<PAGE>
deficiency in cash within 5 days of such agreement or
ascertainment together with interest under clause 3.13;
===========
3.12.2 is more than Provisional Consideration the Purchaser shall pay
to the Vendor the excess in cash within 5 days of such agreement
or ascertainment together with interest under clause 3.13.
===========
3.13 The Vendor shall pay to the Purchaser or the Purchaser shall pay to the
Vendor (as the case may be) interest on any sum due under clause 3.12 at
===========
the rate per annum which is 2% above Barclays Bank plc's base lending
rate from time to time, such interest to accrue from day to day from the
Completion Date until the actual date of payment in accordance with the
foregoing provisions of this clause 3.
========
3.14 The following provisions shall apply regarding the payments to be made:
3.14.1 all sums due from the Purchaser to the Vendor under this
Agreement shall be paid in (Pounds) pounds sterling to the
Vendor by way of telegraphic transfer to the following account:
Name: Lucas Limited
Bank: Barclays Bank Plc
Branch: 118, High Street,
Newcastle under Lyme,
Staffordshire
Sort Code: 20-59-23
Account No: 40836370
or to such other account as the Vendor may hereafter
nominate in writing to the Purchaser.
3.14.2 all sums due from the Vendor to the Purchaser under this
Agreement shall be paid in (Pounds) pounds sterling to the
Purchaser by way of telegraphic transfer to the following
account:-
Name: Prestolite Electric Limited
Bank: National Westminster Bank plc
Branch: P O Box 9, 31 Promenade, Cheltenham,
34
<PAGE>
Gloucestershire GL50 1LH
Sort Code: 60-05-16
Account No: 04233204
or to such other account as the Purchaser may hereafter nominate
in writing to the Vendor.
3.15 All payments to be made pursuant to this Agreement shall (save where
otherwise specifically stated) be taken to be exclusive of VAT (if
applicable) and any VAT chargeable in respect of the matters giving rise
to such payments shall be added to the amount thereof and paid in
addition thereto. The parties hereto intend that Section 49(1) of the
Value Added Tax Act 1994 and paragraph 5 of the Value Added Tax (Special
Provisions) Order 1995 S.I. No. 1268 shall apply to the transfer of the
Activity hereunder so that the transaction is treated as a transfer of a
going concern and accordingly:
3.15.1 the Vendor and the Purchaser shall each give notice of such
transfer to H.M. Customs & Excise;
3.15.2 the Vendor shall on the Completion Date deliver to the Purchaser
all records referred to in the said Section 49 in relation to
the Activity and the Assets and shall not thereafter make any
request to H.M. Customs & Excise for such records to be taken
out of the custody of the Purchaser and the Purchaser hereby
undertakes to preserve such records for such periods as may be
required by law;
3.15.3 the Vendor and the Purchaser shall use all reasonable endeavours
to secure that pursuant to the provisions referred to above the
sale of the Activity hereunder is treated as neither a supply of
goods nor a supply of services for the purpose of Value Added
Tax; and
3.15.4 if notwithstanding the above provisions, any Value Added Tax is
chargeable on the sale hereunder or any part thereof then the
Purchaser agrees that such Value Added Tax shall be in addition
to the Consideration, or any relevant part thereof, and the
Purchaser shall pay the amount of any such Value Added Tax and
any penalty or interest incurred by the Vendor for late payment
thereof, (but in respect of such interest or penalty only to
the extent that such interest or penalty is attributable to the
late payment of an amount in respect of VAT by the Purchaser
under this Agreement
35
<PAGE>
or where such VAT was payable by reason of any action or
omission of the Purchaser) provided that the Purchaser shall not
be obliged to make such payment unless the Vendor shall have
issued a tax invoice in respect thereof and until the earlier of
the date on which the Purchaser obtains the benefit of credit
for such amount of VAT (whether by way of deduction from the
output tax due from or by way of payment due to the Purchaser)
and three business days before the date on which the Vendor is
obliged to account for such VAT to H.M. Customs & Excise.
3.15.5 Neither Lucas nor the Vendor has made or will prior to
Completion make an election pursuant to paragraph 2 Schedule 10
Value Added Tax Act 1994 in respect of the Property or any part
of it.
3.16 With regard to the operation of the Activity by the Vendor
3.16.1 All Value Added Tax payable in respect of goods and
services supplied or deemed to be supplied by the Vendor before
the close of business on the Completion Date and all interest
payable thereon and penalties attributable thereto shall be paid
to H.M. Customs & Excise by the Vendor and the Vendor shall
subject to clause 3.16.2 be entitled to receive and to retain
=============
for its own benefit all reimbursement or credit from H.M.
Customs & Excise for Value Added Tax borne by the Vendor on
goods and services supplied to the Vendor prior thereto and any
payments received in respect of Value Added Tax overpaid to H.M.
Customs & Excise prior thereto.
3.16.2 The Vendor or as the case may be any member of Lucas Group or
any Business Unit will use all reasonable endeavours to recover
VAT from HM Customs & Excise in respect of any of the Debtors
where such recovery is (by reason of the debtor in question's
insolvency or the writing off of the amount due from the debtor
in question) permitted by Value Added Tax Regulations 1997 S.I.
No 2518 Parts XVIII or XIX to be made by the Vendor (and not by
the Purchaser), and the amounts recovered shall belong to and be
paid over promptly to the Purchaser by the Vendor or relevant
member of the Lucas Group or Business Unit.
3.16.3 Without prejudice to the provisions of this Agreement as to
discharge of the relevant liability the Purchaser shall give to
the Vendor all necessary co-operation for the purposes of
preparing any VAT return relating to the Activity in respect of
any prescribed accounting period of the Vendor beginning before
the Completion Date or
36
<PAGE>
for the purpose of determining the Vendor's liability to HM
Customs and Excise in respect of the Activity or for the purpose
of answering any questions raised by HM Customs and Excise for
the period prior to the Completion Date such co-operation to
include providing reasonable access to or copies of relevant
documentation (which the Vendor shall be permitted to use and
divulge to the extent that it is required so to do so as to
enable the Vendor to comply with its obligations to HM Customs
and Excise) and allowing reasonable access to the Transferring
Employees. In the event that the Purchaser should transfer the
Activity to another person the Purchaser shall procure that the
person to whom the Activity is transferred enters into a similar
obligation to provide reasonable co-operation and assistance to
the Vendor as is set out in this clause.
3.17 The Purchaser warrants to the Vendor that it is duly registered for the
purposes of value added tax under Schedule 1 Value Added Tax Act 1994.
4. COMPLETION
----------
4.1 Subject to and on the basis contemplated by the Umbrella Agreement
Completion shall take place as provided for in the Umbrella Agreement at
the offices ofMessrs Brobeck, Phleger & Harrison LLP, New York
4.2 On Completion the Vendor shall deliver to the Purchaser:
4.2.1 full management and control of the Activity;
4.2.2 all transfers assignments and novations in respect of the
Assets in the form, if any, set out in the Schedules to this
Agreement or in the Agreed Terms (as the case may be) save that
the provisions of clause 6.1 shall apply to Debtors;
==========
4.2.3 all property hereby agreed to be sold which is capable of
transfer by delivery whereupon the title thereto shall pass to
the Purchaser by such delivery, subject to clause 11;
=========
4.2.4 the Records
4.2.5 the deeds and documents relating to the Property;
4.2.6 the Disclosure Letter;
37
<PAGE>
4.2.7 the Lease signed on behalf of Lucas Corporate;
4.2.8 the Environmental Indemnity Exceptions Letter;
4.2.9 an assignment in the Agreed Terms of the Trade Marks.
4.3 The Purchaser against compliance by the Vendor with the provisions of
clause 4.2 shall on Completion:
==========
4.3.1 pay to the Vendor the Provisional Consideration in cash;
4.3.2 deliver to the Vendor counterparts as required by the
Vendor of the documents referred to in clause 4.2.2;
============
4.3.3 deliver to the Vendor a certified copy of its VAT
registration certificate;
4.3.4 deliver to the Vendor a counterpart of the Lease signed
on behalf of the Purchaser
5. CONSENTS AND THE CONTRACTS
--------------------------
5.1 The Vendor hereby agrees and declares that it will after and
notwithstanding Completion of the sale and purchase hereunder execute and
deliver any other documents and take any other steps as shall reasonably
be required from time to time by the Purchaser, subject to clauses 5.3.1
=============
and 5.5 to vest in the Purchaser, or as it may direct, the benefit of the
=======
Contracts.
5.2 The Purchaser will at and from Completion at its own expense adopt
perform fulfil observe and be bound by all the terms conditions
obligations and liabilities under or in respect of the Contracts and
shall without prejudice to the right (to the extent that the Purchaser
has such a right) of the Purchaser to claim for breach of any of the
Warranties in relation to the Contracts keep the Vendor indemnified
against all expenses, costs, loss, damage, and liability arising
therefrom. The Vendor shall with effect from Completion assign or hold
to the order of the Purchaser or procure the assignment to the order of
the Purchaser of all the Contracts which are capable of assignment
without the consent of the relevant other contracting party or parties
5.3 Insofar as the benefit (subject to the burden) of the Contracts cannot
effectively be transferred by the Vendor or any relevant member of Lucas
Group to the Purchaser except by way of an agreement of novation with or
consent to the assignment from the person, firm or company concerned:
38
<PAGE>
5.3.1 the Vendor and the Purchaser shall co-operate each at its
own cost to do everything they reasonably can to procure that
the Contracts be novated or assigned as aforesaid as soon as
reasonably practicable;
5.3.2 in every novation or assignment as aforesaid the
Purchaser shall undertake to indemnify the Vendor or relevant
member of Lucas Group against all expenses, costs, loss, damage
and liability arising by reason of or in connection with the
non-performance or the defective or negligent performance by the
Purchaser of the Contracts;
5.3.3 unless and until all such Contracts shall be novated or
assigned as aforesaid:
5.3.3.1 the Vendor and any relevant member of Lucas Group
shall continue its corporate existence and shall hold
the benefit of every such Contract which requires to
be novated or assigned but which has not been novated
or assigned, in trust for the Purchaser as from
Completion and shall account to the Purchaser
accordingly (whether in respect of any sums or other
benefits received by it in respect thereof) and
otherwise act at the reasonable direction of the
Purchaser and as its agent in all matters relating
thereto subject to the Purchaser indemnifying and
holding the Vendor (either for itself or as trustee
of the relevant member of the Lucas Group) harmless
against, any expenses, costs, loss, damage, or
liability, which it may have brought against it or
suffer or incur as a consequence; and
5.3.3.2 the Purchaser shall at its own cost and expense with
effect from Completion carry out perform and complete
every such Contract which has not been novated or
assigned as a subcontractor of the Vendor and where
sub contracting is not possible the Purchaser shall
perform the contracts in accordance with their terms
and conditions as agent for the Vendor.
5.4 If the Vendor has before Completion sub-contracted the performance of any
Contracts to any person, the Purchaser shall on Completion assume
responsibility for the relevant sub-contract and on behalf of the
relevant customer seek or accept delivery or performance from such person
of the goods or other products or services in respect of which such
contract was made and shall make the
39
<PAGE>
same available for collection by such customer.
5.5 Any fee or charge or financial penalty in either case in the nature of a
fee levied by a third party in respect of a novation or assignment of any
Contract or in connection with the termination of any existing Contract
to permit novation or assignment to take place will be borne by the
Purchaser and Vendor in equal proportions and the Purchaser shall procure
the execution of any guarantees required by such third party as a
condition of such novation or assignment.
5.6 In respect of Group Sharing Arrangements
5.6.1 the parties will co-operate each with the other and will consult
(including where relevant with the other contracting party to
the Group Sharing Arrangements) and use all reasonable
endeavours to procure that the supplier or customer concerned
continues to deal both with the Activity and with the relevant
Business Unit and/or member of the Lucas Group on the same basis
after Completion as was contemplated by the relevant Group
Sharing Arrangement before Completion and in so doing, each
party shall bear its own costs but shall not be obliged to bear
any financial obligation imposed by the other contracting party
to the relevant Group Sharing Arrangement;
5.6.2 the provisions of clauses 5.3 to 5.5 shall apply with such
==================
modification as shall be necessary in order for those provisions
to apply in the context of the Group Sharing Arrangements until
such time as the relevant Group Sharing Arrangement is either
terminated or reviewed;
5.6.3 if any difficulties shall arise with any other contracting party
to the Group Sharing Arrangements such that it appears that the
Purchaser will in relation to the Activity be unable after
Completion to continue to receive the benefits thereunder in
substantially the same way and on broadly similar terms the
Vendor either for itself or as agent for any other relevant
member of Lucas Group will enter into consultation in good faith
with the Purchaser to determine a mutually agreed course of
action between the Vendor or such other member of Lucas Group in
order to place the Purchaser in relation to the Activity in a
position which commercially shall be as near as is reasonably
achievable to the position which would have been the case had
the difficulties in question not arisen provided that, for the
avoidance of doubt, the Vendor shall not be obliged to bear any
financial penalty or risk.
40
<PAGE>
5.7 The Vendor, Lucas and the Purchaser shall co-operate and use their
reasonable efforts to procure that as soon as practicable following
completion Lex Vehicle Leasing Limited ("Lex") enters into a new Lease
directly with the Purchaser on the same or similar terms as the Master
Lease in respect of the vehicles listed in Schedule 11 and that such
vehicles are thereby excluded from the Master Lease. If required by Lex
the Purchaser shall procure that the Purchaser Guarantor (as defined in
the Umbrella Agreement) and any other member of the Purchaser's Group
enters into an agreement with Lex to guarantee the Purchaser's
obligations under such new lease. Prior to such new lease being
granted:
5.7.1 Lucas shall hold the benefit of the Master Lease in trust
for the Purchaser to the extent it relates to the vehicles
listed in schedule 11; and
5.7.2 the Purchaser shall at its own cost and expense perform
Lucas' obligations under the Master Lease with respect to those
vehicles as agent for Lucas and shall indemnify and hold Lucas
harmless against all charges, payments, penalties, costs,
expenses, liabilities or losses which Lucas may incur or suffer
under the Master Lease following the Completion Date arising
from any failure by the Purchaser so to perform Lucas'
obligations but this indemnity shall not apply to any such
matters incurred or suffered by Lucas as a result of Lucas
allowing the Purchaser possession of such vehicles pursuant to
this clause 5.7.
6. DEBTORS
-------
6.1 The Vendor agrees that it will:
6.1.1 give to the Purchaser such assistance and information
as the Purchaser may reasonably require to assist the
Purchaser in the collection of the Debtors, including
without limitation, the sending at the cost of the
Purchaser of a letter jointly by the Vendor and the
Purchaser, if requested by the Purchaser, to the
Debtors concerning the transfer of the Activity and
the Debtors to the Purchaser; and
6.1.2 when the Consideration has been paid pursuant to
clause 3, if requested by the Purchaser from time to
======== time and at the Purchaser's cost execute an
assignment of any of the amounts owed by Debtors as
specified by the Purchaser in the form of the
assignment set out in Schedule 9 or if a
41
<PAGE>
different form shall be required in any relevant
jurisdiction a form applicable in such jurisdiction
as near to that set out in Schedule 9 as possible.
6.2 The Purchaser will when collecting the Debtors conduct itself in a manner
consistent with the way in which debts of the Activity were collected by
the Vendor prior to Completion and will not issue proceedings for
recovery of any of the Debtors without first giving the Vendor 7 days
prior written notice and, if required by the Vendor, the Purchaser will
re-assign at the Vendor's expense the benefit of any Debtor for an amount
equal to the consideration paid therefor by the Purchaser to the Vendor.
6.3 Any sums received by the Vendor after the Completion Date in relation to
any of the Debtors (other than Debtors re-assigned to the Vendor pursuant
to clause 6.2) shall belong to the Purchaser and the Vendor shall pay the
==========
same to the Purchaser as soon as practicable and in any event within 7
days of receipt of the same by the Vendor.
7. THE TRANSFERRING EMPLOYEES
--------------------------
7.1 The parties acknowledge and agree that pursuant to the Regulations, the
contracts of employment of the Transferring Employees (save insofar as
such contracts relate to any occupational pension scheme) will have and
be deemed to have had effect after Completion as if originally made
between the Purchaser and the Transferring Employees.
7.2 Upon or as soon as practicable after Completion the Vendor and the
Purchaser will make a joint announcement to the Transferring Employees in
the Agreed Terms regarding the transfer of their contract of employment
as referred to in clause 7.1.
==========
7.3 The Vendor covenants with the Purchaser that the Vendor will indemnify
the Purchaser and hold the Purchaser harmless and shall keep the
Purchaser indemnified against all costs, claims, expenses and liabilities
whatsoever (including but not limited to claims for personal injury) and
however arising within a period of 3 years following Completion from any
unlawful, wrongful or negligent act or omission by the Vendor (or any
director officer or employee or agent of the Vendor), (including without
limitation any tortious act or omission, or breach of contract or
statutory duty by the Vendor or any relevant member of the Lucas Group in
relation to the Transferring Employees (or any of them) or any former
employee of the Vendor whose employment was terminated by the Vendor
prior to Completion and who is not listed as a
42
<PAGE>
Transferring Employee) prior to the Completion Date liability for which
is transferred to the Purchaser pursuant to the Regulations or which
otherwise leads to a liability of the Purchaser after Completion and the
Purchaser is able to demonstrate that were it not for such act, omission
or breach the liability of the Purchaser would not have arisen or would
not have been so great. This indemnity shall not apply (a) to the extent
to which any such liability is covered by the Purchaser's indemnity in
favour of the Vendor in clause 7.4.1; and (b) unless within 3 months
=====
after the end of the said 3 year period the Purchaser shall have notified
the Vendor in writing of its indemnity claim and shall have issued and
served proceedings on the Vendor in respect thereof
7.4 The Purchaser covenants with the Vendor that the Purchaser will indemnify
the Vendor and hold the Vendor harmless and shall keep the Vendor
indemnified against all costs, claims, expenses and liabilities
whatsoever (including but not limited to claims for personal injury) and
however arising from:
7.4.1 any matter in relation to the Transferring Employees for
which and to the extent to which a provision or reserve is made
in the Final Completion Statement or is otherwise a liability of
the Purchaser by virtue of the Regulations other than a
liability in relation to which the Vendor's indemnity in clause
======
7.3 applies or an Excluded Liability; and
===
7.4.2 to the extent not covered by 7.4.1 above any unlawful, wrongful
or negligent act or omission by the Purchaser (or any director
officer or employee or agent of the Purchaser (including without
limitation, any tortious act or omission, or breach of contract
or statutory duty by the Purchaser in relation to the
Transferring Employees (or any of them) after the Completion
Date;
7.4.3 any claim pursuant to section 188 of the Trade Unionsim and
Labour Relations (Consolidation) Act 1992 and Regulation 10 of
the Regulations which is made or arises solely by reason of the
Purchaser failing to comply with its legal obligations with
regard to information required to be given to the Vendor as to
the Purchaser or its plans relating to the Activity following
Completion.
7.5 In the event that any of the Transferring Employees brings a claim
against the Vendor or the Purchaser arising out of or in connection with
the transfer of such Transferring Employee to the Purchaser under this
Agreement, the Vendor and the Purchaser shall at the expense of the party
responsible for meeting the claim ( by virtue of this Agreement) give to
the other as soon as
43
<PAGE>
practicable after any request therefor all co-operation, assistance and
information which may be reasonably relevant to the claim.
7.6 The Vendor hereby agrees that the Vendor and any relevant member of Lucas
Group shall at the request of the Purchaser join so far as is reasonable
and practicable in any proceedings for the purpose of enforcing the
benefit of any confidentiality or other undertakings or restrictions
(including, without limitation, restrictive covenants) given to the
Vendor or any relevant member of Lucas Group by any present or former
employees (including the Transferring Employees) of the Vendor or any
relevant member of Lucas Group in relation to the Activity where in
either case they remain bound by such undertakings or restrictions and
where in either case such undertakings or restrictions or the benefit
thereof are not assignable and are not novated to or otherwise vested in
the Purchaser by virtue of the Regulations and accordingly the Vendor
hereby agrees that the Vendor or any relevant member of Lucas Group shall
take such steps, actions and proceedings as the Purchaser shall
reasonably require including the service of appropriate notice to enforce
such undertakings and restrictions (or any of them) for the benefit and
at the cost of the Purchaser, and the Vendor further assures the
Purchaser that it will take such reasonable steps at the Purchaser's
request and cost as are available and appropriate to assign the benefit
of any such undertakings or restrictions to the Purchaser where the same
are assignable.
7.7 The provisions of Schedule 9 relating to Pensions shall apply and have
effect as part of this Agreement.
7.8 The Purchaser shall for a period of 12 months from Completion at the
Vendor's request make available to the Vendor and allow the Vendor to
take copies of those of the Records which relate to the Transferring
Employees' employment prior to Completion.
8. WARRANTIES
----------
8.1 The Vendor hereby warrants to the Purchaser with regard to the Activity
and the Assets in the terms of the Warranties set out in Schedule 7.
8.2 The Vendor agrees that the Purchaser is entering into this Agreement in
reliance on each of the Warranties. Each of the Warranties shall be
separate and independent and, save as expressly provided, shall not be
limited or restricted by reference to, or inference from, the terms of
any other Warranty or anything in this Agreement.
8.3 The Vendor shall be released from the effect of the Warranties to the
extent of the disclosures
44
<PAGE>
fairly disclosed in the Disclosure Letter.
8.4 In substitution for any remedy to sue for damages, the Vendor undertakes
to the Purchaser that in the event of a breach of any of paragraphs
2.2(D)(1) and (2), 2.4(C) and 2.6(J) of Schedule 7 or any of them
proving to be untrue or misleading in any respect and the Activity and/or
the Purchaser suffer any loss damage cost liability or expense, then the
Vendor will on demand pay to the Purchaser or, in the case of a liability
to another person which has not been discharged, the person to whom the
liability has been incurred in each case, (save to the extent to which a
provision or reserve has been made in the Final Completion Statement):
(i) the amount necessary to restore the Activity or as the case may
be reimburse the Purchaser for all costs losses and expenses
suffered or incurred in restoring the Activity and/or in each
case as relevant the Assets to the position which would have
existed if the relevant Warranties had been true or not
misleading; or
(ii) in the case of a liability to another person which has not been
discharged, the amount of that liability; and
(iii) all reasonable costs and expenses (including without limitation
attorneys and consultants fees and expenses) incurred by the
Purchaser or any member of the Purchaser's Group arising out of
or resulting from such breach.
8.5 The Vendor shall be released from the effect of the Warranties (but not
the Indemnities) to the extent that the Purchaser is aware at the date of
this Agreement of any matters, events or circumstances (whether the same
are learned by any investigation or enquiry made by or on behalf of the
Purchaser into the Activity) and which matters, events or circumstances
would but for this clause 8.5 constitute a breach of any of the
Warranties. For the purpose of this clause the Purchaser's awareness
shall be determined by reference only to the actual knowledge of Mr Kim
Packard and Mr Ken Cornelius of Prestolite Electric Incorporated, Dr Mike
Lea and Mr John Wilkinson of the Purchaser and of the Purchaser's
professional advisers (including the Purchaser's Lawyers, Coopers &
Lybrand, William M Mercer and environmental consultants) in respect of
the matters the subject of this Agreement.
8.6 Any claim the Purchaser may have in respect of the Warranties or the
Indemnities shall sound in damages only, subject to the provisions of
this clause 8, and accordingly the Purchaser shall not have the right to
========
rescind this Agreement or treat it as having been repudiated by the
Vendor by
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reason of there having been any breach of such Warranties or a claim by
the Purchaser under any Indemnity.
8.7 The Purchaser hereby agrees and acknowledges that notwithstanding
anything to the contrary contained in this Agreement the Warranties and
certain of the Indemnities (as defined below) are subject to the
following:
8.7.1 no claim shall be capable of being made unless it shall
be notified in writing to the Vendor
8.7.1.1 in the case only of a claim under the Environmental
Indemnity on or by the seventh anniversary of the
date of this Agreement; or
8.7.1.2 in the case only of a claim for breach of any of the
Taxation Warranties on or by the date on which the
relevant statute of limitations would apply so as to
prevent the making of the claim in question against
the Vendor or relevant member of the Lucas Group in
relation to the Activity which would give rise to the
obligation on the part of the Vendor to indemnify
hereunder; or
8.7.1.3 in the case only of a claim made under clause 9.3.(2)
on or by the date on which the relevant statute of
limitations would apply so as to prevent the making
of the claim in question against the relevant member
of the Lucas Group which would give rise to the
obligation on the part of the Vendor to indemnify
hereunder; or
8.7.1.4 in the case of a claim for breach of any of the
remaining Warranties on or before 31 March 1999
and any such claim which has been made shall (if it has not been
previously satisfied settled or withdrawn) be deemed to have
been withdrawn at the expiration of 6 months from the date on
which the claim so notified when aggregated with all other
claims under this Agreement and under the Other Sale Agreements
exceeding (Pounds)5,000, exceeds (Pounds)150,000 unless prior to
such expiration legal proceedings in respect thereof shall have
been issued and served on the Vendor;
8.7.2 the aggregate liability of the Vendor under this Agreement and
all Other Sale
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Agreements in respect of all breaches of the Warranties and
claims under the Capped Indemnities shall not when aggregated
with the liability of the person defined as the Vendor in each
of the Other Sale Agreements in respect of all breaches of the
Other Warranties and Other Capped Indemnities exceed a sum equal
to (Pounds)12,000,000;
8.7.3 the Vendor shall not be liable in respect of any single
claim brought by the Purchaser for a breach of the Warranties,
and claims under the Capped Indemnities arising out of a single
event (provided that for the purposes of this clause 8.7.3
============
liability in respect of a series of claims arising out of the
same subject matter shall be aggregated together as if such
claims were one claim) if the liability in respect of such claim
would not exceed (Pounds)5,000 (five thousand pounds). The
Vendor shall be liable in respect of each and any claim for a
breach of the Warranties or under the Capped Indemnities in
respect of which the liability of the Vendor exceeds
(Pounds)5,000 (five thousand pounds) only if the liability of
the Vendor for that claim, all other such claims exceeding
(Pounds)5,000 and all other such claims made under the Other
Sale Agreements in respect of all breaches of the Other
Warranties and Other Capped Indemnities would in aggregate
exceed (Pounds)150,000 and in that event the Vendor shall only
be liable for the excess;
8.7.4 if any matter arises or gives rise to any claim under the
Warranties or the Indemnities the Purchaser shall as soon as
reasonably practicable (and in any event such time as shall
enable the Vendor to lodge or answer any appeal or claim) give
notice in writing to the Vendor giving such details of the
matter in respect of which the claim is made as are at that time
known to the Purchaser and (on the basis of the facts then known
to the Purchaser) the bona fide estimated liability in respect
thereof and where the claim arises by reason of a claim made
against the Purchaser and/or the Vendor and/or any member of the
Purchaser's Group and/or any member of the Lucas Group by a
third party the Purchaser shall not seek to settle or compromise
the matter and shall (if relevant) procure that the relevant
company does not seek to settle or compromise the same without
the written consent of the Vendor (which consent shall not be
unreasonably withheld or delayed) and shall take such reasonable
action as the Vendor may require to avoid, resist, contest
and/or compromise any such claim on the basis that the Vendor
shall be responsible for and shall bear all the reasonable costs
and expenses of the Purchaser or the relevant
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member of the Purchaser's Group in taking such action and in
addition shall to the extent that the same shall not have been
borne by the Vendor directly indemnify the Purchaser against the
same and against all legal costs incurred by or awarded against
the Purchaser as a direct result thereof;
8.7.5 no claim in respect of any breach or breaches of any of
the Warranties or under the Indemnities shall be made to the
extent that provision or reserve therefor has been made or the
subject matter thereof is otherwise taken account of or
reflected as part of the calculations in the preparation of the
Final Completion Statement;
8.7.6 the Vendor shall not be liable for any claim arising as a result
of a breach of Warranties:
8.7.6.1 or under the Indemnities if such claim would not have
arisen but for anything voluntarily done or omitted
to be done by the Purchaser, or any member of the
Purchaser's Group or any of its or their employees,
agents or successors in title after Completion
outside the ordinary course of business and which the
Purchaser, or any member of the Purchaser's Group or
its or their employees agents or successors in title
were aware or ought reasonably to have been aware
could give rise to a claim; or
8.7.6.2 or the Indemnities to the extent that such claim
relates to any loss for which the Purchaser or any
member of the Purchaser's Group is indemnified by
insurance (but only to the extent of the amount of
the proceeds actually received from any applicable
insurance policy) and the Purchaser agrees to pursue
and to procure that there is pursued all and any
claims which there may be under or in respect of any
policy of insurance which relates or may relate to
the subject matter of the claim in question and to
provide to the Vendor such evidence as the Vendor may
reasonably require of having done so.
8.8 Where the Purchaser or any member of the Purchaser's Group is at any time
entitled to recover from a third party (other than as contemplated in
clause 8.7.6.2) any amount in respect of any matter giving rise to a
==============
claim under the Warranties or the Indemnities or under any other
provisions of this Agreement the Purchaser shall take and shall procure
that there is taken all reasonable steps to enforce any rights of
recovery that the Purchaser or any member of the Purchaser's Group may
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have against any third party in respect of the subject matter of the
claim and the Purchaser or the relevant member of the Purchaser's Group
shall be indemnified by the Vendor against all reasonable costs and
expenses including all legal costs incurred by it or them in doing so.
In the event that the Purchaser or any member of the Purchaser's Group
shall receive any amount from such third party, the amount of the claim
against the Vendor shall be reduced by the amount recovered less where
not already paid all such reasonable costs and expenses incurred by the
Purchaser or any member of the Purchaser's Group Provided always that:
8.8.1 any failure by the Purchaser to comply with such undertaking in
respect of any matter giving rise to a claim under the
Warranties or the Indemnities or otherwise under this Agreement
shall not affect in any way any liability of the Vendor which
liability shall not be conditional upon the Purchaser's
compliance with this undertaking save that the Vendor shall be
entitled to say that the Purchaser has not mitigated its loss or
that the Vendor has a right of action or other claim against the
Purchaser for breach of the provisions of this clause 8.8; and
8.8.2 in respect of any matter giving rise to a claim under the
Warranties or the Indemnities or otherwise under this Agreement
if the Purchaser alleges that any steps which the Vendor
requires it to take or to procure are taken are unreasonable
then the Purchaser shall seek the opinion of Queen's Counsel
(such counsel to be of at least five years' standing), the
identity of whom shall be agreed upon by the Vendor and the
Purchaser and, failing such agreement within three days after
the date on which the arbitration is demanded, shall be
determined by the President of the Law Society (who may be
instructed by either the Vendor or the Purchaser to make the
nomination at any time after the expiry of that three day
period) in respect thereof. The Purchaser shall instruct counsel
in writing (or if such instructions are to be given orally then
the Vendor shall be entitled to be present at and to contribute
to the giving of such instructions) and provide a copy of a
draft of such instructions before submission to counsel and
incorporate the Vendor's comments thereon. Counsel shall be
asked to advise whether, on the basis of the instructions given
to him and the information then made available to him, the
action sought by the Vendor should be taken on the basis that,
on the balance of probabilities, the relevant claim against the
third party stands a reasonable prospect of success and the
parties shall follow the advice given in such opinion save that
nothing herein shall prevent or otherwise
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restrict the ability of the Vendor to argue (if such an argument
is as a matter of law open to it) that the Purchaser has failed
to mitigate its loss.
8.9 If the Vendor pays at any time an amount pursuant to a claim in
respect of any Warranty or under any Indemnity or under any of the other
provisions of this Agreement and the Purchaser and/or any member of the
Purchaser's Group subsequently becomes entitled to recover from some
other person any sum in respect of any matter giving rise to such claim
the Purchaser shall take and shall procure that there is taken all
reasonable steps to enforce such recovery subject to being indemnified by
the Vendor against all reasonable costs and expenses including all legal
costs incurred by any of them in doing so. The Purchaser and/or any
member of the Purchaser's Group shall forthwith upon the making any such
recovery whether by the Purchaser or any member of the Purchaser's Group
and after deducting the costs incurred by the Purchaser or any member of
the Purchaser's Group as contemplated by this clause to the extent that
the Vendor has not indemnified the Purchaser or the relevant member of
the Purchaser's Group for such costs repay to the Vendor so much of the
amount paid by the Vendor to the Purchaser in respect of the claim in
question as does not exceed the sum recovered from such other person.
8.10 Without prejudice to the foregoing provisions of this clause 8 before the
========
Purchaser makes any payment or offers any other remedy or takes any other
remedial or corrective action in respect of any matter for which it is
entitled to an indemnity or to otherwise make a claim against the Vendor
under the provisions of this Agreement, it shall and shall procure that
the relevant member of the Purchaser's Group give a reasonable
opportunity and reasonable assistance to the Vendor to verify and, if
appropriate, remedy the defect, default or omission or other matter
giving rise to the claim for indemnity or other remedy in question.
8.11 Payment or satisfaction by the Vendor of any claim under any one
particular paragraph of the Warranties and/or under any Indemnity shall
to the extent of such payment or satisfaction satisfy and preclude any
other claim which is capable of being made in respect of the same subject
under another particular paragraph of the Warranties or under another
particular Indemnity. If and to the extent that the Purchaser and/or any
member of the Purchaser's Group recovers any sum under any provision of
this Agreement, including under the Indemnities, the amount of any claim
which the Purchaser or any member of the Purchaser's Group may have in
respect of the same subject matter shall be reduced or eliminated
accordingly.
8.12 If any potential claim shall arise by reason of a liability of the
Purchaser or relevant member of the
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Purchaser's Group being contingent only or is otherwise not capable of
being quantified then the Vendor shall not be under any obligation to
make any payment pursuant to such claim until such time as the contingent
liability ceases to be contingent and becomes capable of being quantified
as the case may be.
8.13 Notwithstanding any of the provisions contained in this clause 8, or
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elsewhere in this Agreement, the Purchaser shall not be entitled to
cancel this Agreement as a consequence of any breach of any Warranty.
8.14 Save as specifically provided in this Agreement the Vendor gives no
representations or warranties whether express or implied.
8.15 The Purchaser agrees that notwithstanding the provisions of clause 8.4
==========
the Purchaser will take all relevant steps as may be required to mitigate
its loss in accordance with the provisions of English law in respect of a
breach of the Warranties relevant thereunder.
8.16 Save as expressly provided to the contrary therein the provisions of
clauses 8.5 to 8.15 will apply in respect extent (but only to the extent)
===================
contemplated therein the Indemnities. For the avoidance of any doubt if
clause 8.4.1 applies the claim made by the Purchaser shall be and be
============
treated as a claim under the Warranties (and not under the Indemnities)
so that all the provisions of clauses 8.5 to 8.15 shall apply.
===================
8.17 Any amount payable in respect of breach of any of the Warranties shall be
treated as a reduction in the Consideration.
8.18 Where under this Agreement the Vendor is liable to the Purchaser or any
member of the Purchaser's Group under any of the Indemnities the Vendor
shall for the avoidance of any doubt only be liable to the extent that
the liability relates directly to acts or omissions prior to Completion
and not to the extent that the liability relates directly to acts or
omissions after Completion.
8.19 The Vendor agrees with the Purchaser that it shall and shall procure that
each member of the Lucas Group shall waive and not enforce any right
which it may have against any Transferring Employee (which expression for
the purposes of this clause shall include Paul Marian) in respect of any
misrepresentation, inaccuracy or omission in or from any information or
advice supplied or given by any Transferring Employee for the purpose of
assisting the Vendor to give any of the Warranties or to prepare the
Disclosure Letter or this Agreement, the Umbrella Agreement or any
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of the Ancillary Agreements or documents in Agreed Terms save where such
misrepresentation inaccuracy or omission arises out of or comprises (as
the case may be) fraud or wilful concealment on the part of the relevant
Transferring Employee.
9. INDEMNITY AND LIABILITIES
-------------------------
9.1 The Vendor and the Purchaser agree that the Purchaser shall not assume,
and the Vendor shall remain responsible for, the following liabilities
arising out of the conduct of the Activity by the Vendor or any other
member of the Lucas Group before Completion :
9.1.1 any liability of the Vendor or any other member of Lucas Group
in relation to the Activity for borrowed money or other
indebtedness in the nature of borrowings (other than in respect
of the Leased Assets) and whether as principal obligor or in any
other capacity;
9.1.2 any Lucas Internal Funding;
9.1.3 any liability of the Vendor or any other member of Lucas Group
to Taxation arising from its conduct of the Activity or
ownership of the Assets prior to Completion save to the extent
that provision is made in respect thereof in the Final
Completion Statement;
9.1.4 any liability expressed elsewhere in this Agreement to be
that of the Vendor or any other member of Lucas Group including
but not limited to any liability retained by the Vendor
hereunder in respect of the Claims and the liability of the
Lucas Group to pay any divestment bonus to any Transferring
Employees in connection with the sale of the Activity hereunder;
9.1.5 any criminal liability of the Vendor or Lucas arising out of a
breach of statutory duty or laws applicable to the Activity or
any of the Assets by the Vendor or by any Transferring Employee
in circumstances where the Vendor is vicariously liable prior to
Completion;
9.1.6 any liability after Completion (other than any which arises
solely as a consequence of an act of the Purchaser (excluding
the transaction contemplated by this Agreement) after
Completion) to repay any government or other governmental or
quasi governmental agency grant, allowance or subsidy made prior
to Completion in
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respect of the Activity or the Assets;
9.1.7 any liability arising from any litigation (meaning
proceedings having been issued and served on the Vendor) against
the Vendor in relation to the Activity or the Assets subsisting
on the Completion Date;
9.1.8 any liability of the Vendor or any other member of the Lucas
Group in relation to any leasehold property (other than that
fourthly referred to in Part 1 of Schedule 6) of which the
Vendor or any other member of the Lucas Group has previously
been a tenant, assignee or guarantor;
9.1.9 any liability of the Vendor or any other member of the Lucas
Group in relation to or arising from any past or present
ownership, disposal or occupation of any business, assets or
property which is not at Completion carried on at and from or
forming part of the Property;
and the Vendor hereby indemnifies the Purchaser and holds the Purchaser
harmless from and against all liabilities, losses, damages, costs and
expenses, interest, awards, judgements and penalties (including without
limitation attorneys and consultants fees and expenses) suffered or
incurred by the Purchaser arising out of or resulting from any of the
foregoing.
9.2 To the extent not agreed to be retained by the Vendor or Lucas pursuant
to clause 9.1 and to the extent not the subject of an indemnity by the
==========
Vendor or Lucas pursuant to this Agreement the Purchaser hereby
undertakes to indemnify and hold harmless the Vendor from and against any
and all expenses, costs, loss, damage and liability suffered or incurred
by the Vendor or other member of the Lucas Group (in its capacity in
relation to the claim in question as agent or trustee of the Vendor in
carrying out the Activity) arising out of or in connection with the
operation of the Activity whether by the Vendor or such other member of
the Lucas Group (in such capacity) before the Completion Date or by the
Purchaser on and from the Completion Date.
9.3. The Vendor shall indemnify the Purchaser for itself and as trustee for
each member of the Purchaser's Group and their respective officers,
directors, employees, agents, successors and assigns (each an
"Indemnified Person") with respect to, and hold each of them harmless
from and against any and all liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgements and penalties (including,
without limitation, attorneys' and consultants' fees and expenses, and
investigative, corrective, or remedial action costs) directly suffered,
incurred or
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sustained by an Indemnified Person or to which an Indemnified Person
becomes subject resulting from, arising out of or relating to any of the
following:
(1) Environmental Claims in relation to the Activity and/or any of
the Assets;
(2) Fines.
9.4 The Environmental Indemnity shall be limited as set out in clause 8.
========
9.5 Any sum due from the Vendor under the Environmental Indemnity or clause 9
of the Enviornmental Indemnity Exceptions Letter shall be paid within 28
days of notice of:
9.5.1 completion of any remedial and clean-up action undertaken by the
Purchaser;
9.5.2 the Purchaser incurring the cost of the remedial and clean-up
action carried out by any person other than the Purchaser; or
9.5.3 the date of payment of any liabilities to third parties, fines
or awards (and all expenses incurred in connection therewith).
PROVIDED THAT:
any claim by the Purchaser under the Environmental Indemnity or clause 9
of the Environmental Indemnity Exceptions Letter shall:
9.5.4 state to which item of either the Environmental Indemnity
or the Environmental Indemnity Exception Letter it relates;
9.5.5 include such details and information as is reasonably
required by the Vendor of the nature and extent of the claim;
9.5.6 include evidence that the expenditure to which the claim relates
has been properly incurred by the Purchaser or such third party
contracted by the Purchaser;
9.5.7 be submitted as soon as possible after the date the expenditure
was incurred and in any event within 3 months of the Purchaser
having received an invoice in respect of such expenditure
incurred.
9.6 In respect of any claim under the Environmental Indemnity or clause 9 of
the Environmental Indemnity Exceptions Letter the Purchaser shall permit
the Vendor or persons authorised by it to
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inspect the works and to inspect and take copies of all reports, books,
accounting records and vouchers which are relevant in relation to the
claim with the Purchaser answering promptly and fully all reasonable
questions raised by Vendor.
9.7 Subject to the provisions of this Agreement (but only until a date three
years following the date of Completion), the Vendor agrees to pay (up to
a maximum of (Pounds)37,500) towards the cost of the item H listed in
Schedule 2 of the Environmental Indemnity Exceptions Letter.
9.8 In the event of any circumstances arising which do or may give rise to
any Environmental Claims and which fall within the terms of the
Environmental Indemnity, the Purchaser shall not except as required by
any applicable law make any public statement regarding such circumstances
without the prior written consent of the Vendor such consent not to be
unreasonably withheld or delayed.
9.9 Before the Vendor (or as the case may be the Purchaser) ("the Indemnified
Party") makes any payment or offers any other remedy to a third party in
respect of matters for which the Indemnified Party is entitled to an
indemnity from the other of them ("the Indemnifier") under the terms of
this clause 9 or any other indemnity contained in this Agreement the
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Indemnified Party shall give a reasonable opportunity to the Indemnifier,
to verify and, if appropriate, at the Indemnifier's sole cost remedy the
default, defect, omission or other matter giving rise to the claim in
question subject always to such third party allowing the same.
10. PRODUCT LIABILITY AND PRODUCT WARRANTY AND OTHER SPECIFIC ISSUES
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10.1 Except for claims falling within clause 10.4 without prejudice to the
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generality of but subject nevertheless to any other provision of this
Agreement the Purchaser shall be liable:
10.1.1 other than in relation to the Claims to meet any claims for
breach of a condition or warranty under terms implied by the
Sale of Goods Act 1979 (as amended) or the Supply of Goods and
Services Act 1982 (as amended) or the Supply of Goods (Implied
Terms) Act 1973 (as amended) and to carry out in accordance with
its terms any warranty, guarantee or other similar obligation or
commitment ("Warranty Work" which expression includes any
materials supplied as well as labour involved) given or
undertaken by the Vendor before Completion in respect of any
goods sold, leased or otherwise disposed of, or in respect of
any services performed, under any contract entered into by the
Vendor prior to Completion in relation to the Activity; and
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10.1.2 for all Product Liability whether or not the claim in respect
thereof is made against the Lucas Group or the Purchaser
provided both a written assertion that a claim may be made and
such claim is first made after Completion.
10.2 The Purchaser shall indemnify the Lucas Group against all costs,
expenses, loss, damage or liability arising out of any breach by the
Purchaser of the provisions of clause 10.1.
===========
10.3 In this sub-clause and in sub-clauses 10.4 to 10.6:
================ ====
10.3.1 "Warranty Liability Claim" means a claim (other than a claim in
respect of Product Liability) asserting in relation to a product
manufactured, assembled, repaired, refurbished, serviced, sold
or supplied prior to the Completion Date by the Vendor or any
other member of Lucas Group in relation to the Activity, that it
is or was or will become faulty or defective or does not or did
not or will not comply with any warranty or representation
expressly or impliedly made, or with any applicable regulations,
standards or requirements in respect thereof, and in respect of
which the following conditions are also satisfied namely :-
(i) the claim is made within the contractual warranty period
applicable to the supply (or repair, service or
refurbishment) of the product in question and prior to
31st March 1999, and the Purchaser bona-fide and
reasonably believes it to be a claim which the Purchaser
(by reason of clause 10.1.1) is legally liable to meet;
or
(ii) the claim is made either before or after the expiry of
the contractual warranty period applicable to the supply
(or repair, service or refurbishment) of the product in
question and prior to 31st March 1999 and the Purchaser
(having consulted with the Vendor) bona-fide and
reasonably believes applying the same or substantially
the same investigatory routines and judgemental criteria
as were applied by the Vendor in relation to the Activity
during the period of one year before the Completion Date
:-
(a) that it is a claim which, because of the size of the
particular order, the importance of the customer to
the Activity, or otherwise, it is necessary for the
Purchaser to meet in whole or in part in order to
preserve the goodwill of the Activity; and
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(b) that in the case where the particular customer or a
similar customer had previously made a similar claim
of comparable size against a member of the Lucas
Group, that member of the Lucas Group would have
dealt with the claim in substantially the same way.
10.3.2 "Notifiable Claim" means :
(i) a series of Warranty Liability Claims (whether made
before or after or partly before and partly after the
Completion Date) resulting from substantially the same
fault whether of design, manufacturing technique or
process, workmanship or materials in relation to one or
more products (so that all such products are affected by
substantially the same fault) ("the affected products");
or
(ii) the existence of a state of affairs (whether before or
after the Completion Date) which is likely to lead to a
series of Warranty Liability Claims within (i), whether
or not a Warranty Liability Claim or Claims are actually
made;
where, in either case, in relation to the affected products, the Warranty
Cost in respect of the Warranty Liability Claims met and to be met
becomes and/or exceeds (Pounds)20,000.
10.3.3 "Warranty Cost" means :
(i) in the case of the affected products which are repaired
the Incremental Cost of performing the repairs;
(ii) in the case of affected products which are replaced the
Incremental Cost to the Activity of the replacement
products and the installation thereof; and
(iii) all other customer costs which the Purchaser,
manufacturer or supplier (as the case may be) is
contractually obliged to meet under the warranty in
question.
10.4 In the event that after the Completion Date but prior to 31st March 1999
the Purchaser shall be notified in writing by a customer of a new
Warranty Liability Claim which when aggregated with
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all Warranty Liability Claims previously made in respect of the affected
products (to the intent and effect that the product in respect of which
the new Warranty Liability Claim is made and the products in respect of
which all other Warranty Liability Claims are or have been made all
suffer from substantially the same fault) is also a Notifiable Claim, the
Purchaser shall promptly notify the Vendor in writing of the relevant
circumstances insofar as these are known to the Purchaser and prior to
accepting any such new Warranty Liability Claim allow the Vendor to
investigate the facts surrounding the Warranty Liability Claims met and
to be met by the Purchaser, the cause thereof, the Warranty Cost incurred
or likely to be incurred in relation thereto and to make representations
to the Purchaser thereon, all of which the Vendor will do promptly. The
Purchaser shall take into account such representations in making its
decision whether or not to accept such Warranty Liability Claim, which
decision shall be reasonable.
10.5 The Purchaser shall notify the Vendor on receipt of any Warranty
Liability Claim(s) which it reasonably believes may become Notifiable
Claims. In respect of such Claims so notified the Purchaser shall before
accepting the Warranty Liability Claim allow the Vendor to investigate
the Warranty Liability Claim in question the cause thereof the likely
Warranty Cost in relation thereto and to make representations to the
Purchaser thereon. The Purchaser shall take into account such
representations in making its decision whether or not to accept such
Warranty Liability Claim, which decision shall be reasonable.
10.6 The provisions of clause 10.7 shall not apply to the extent that specific
provision was made in the Final Completion Statement in respect of the
Notifiable Claims in question.
10.7 The Vendor shall from time to time, subject to the Purchaser having
provided the Vendor with a fully detailed breakdown of its Warranty Cost
and allowing the Vendor to verify the same by all reasonable means, pay
promptly to the Purchaser an amount equal to the Warranty Cost incurred
by the Purchaser of meeting Notifiable Claims, each such payment to be
made within twenty one days.
10.8 For the purpose of the application of this clause any Warranty Cost shall
be calculated in pounds Sterling.
10.9 With regard to each of the Claims:
10.9.1 the Vendor agrees that the Purchaser shall not assume and the
Vendor shall retain liability in respect of and remain
responsible for each and all of them;
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10.9.2 the Vendor hereby indemnifies and holds harmless and shall keep
indemnified the Purchaser against all and any costs expenses
losses damage or liability arising out of each and all of them;
and with regard to each of the David Brown Claim and the Bearings
Claims:-
10.9.3 the Purchaser will use all reasonable endeavours to assist the
Vendor with the carrying out of any work whether of
refurbishment, replacement, repair, rectification or otherwise
to or in respect of any product or products being the subject
matter of the David Brown Claim or the Beaings Claims subject to
the Vendor paying the Purchaser's costs and expenses incurred in
so doing which shall be calculated on the basis of Incremental
Cost.
10.10 To assist the Vendor with regard to any litigation which may be commenced
against the Vendor in relation to the David Brown Claims and Bearings
Claims (in this clause 10.10 and clause 10.12, referred to as "the Two
============ ============
Claims") and any litigation which may be commenced by the Vendor (by way
of originating process or third party proceedings) against Ranco Controls
Limited or NSK (or any other party against which employees of the
Activity become actually aware that the Vendor or the Activity has a
possible claim) in respect thereof:
10.10.1 The Purchaser agrees that it shall retain and keep safe and
separate to the Vendor's order all physical evidence and all
documents (within the meaning of 0.24 RSC) whether such physical
evidence or documents exist at the date hereof or come into
existence in the future which employees of the Activity ought
reasonably to be aware are relevant to the Two Claims (also
within the meaning of relevance ascribed by 0.24 RSC).
10.10.2 The Purchaser agrees that it shall in return for a receipt
acknowledgement from the Vendor undertaking in due course to
redeliver the same to the Purchaser, deliver up to the Vendor or
its legal advisers from time to time, such evidence, documents
or classes of such documents which are to be retained
pursuant to clause 10.10.1 immediately on the expiration of such
==============
time period as it shall take to retrieve the same following the
Vendor's demand and without question or justification.
10.10.3 The Vendor will pay to the Purchaser its reasonable costs
incurred in retrieval, copying for its own retention and/or
delivery up of the documents demanded. The
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Purchaser shall not be entitled to exercise any lien or charge
over such documents. There will be no circumstances whatsoever
that shall entitle the Purchaser to refrain from so delivering
up documents in the possession of the Purchaser demanded by the
Vendor or its legal advisers from time to time.
10.10.4 The Purchaser agrees that it shall make available to assist the
Vendor in defending and/or bringing the Two Claims any of the
Transferring Employees that the Vendor and/or its legal advisers
from time to time may require provided that such Transferring
Employee shall then be employed by the Purchaser or any member
of the Purchaser's Group.
10.10.5 The Purchaser shall ensure that such Transferring Employees are
allowed sufficient free time to meet the Vendor's requirements
for assistance, and shall allow such Transferring Employees to
spend such time meeting the Vendor's requirements as the Vendor
and/or its legal advisers from time to time shall request,
including but not limited to assistance with collection of
documents for discovery, instruction of expert witnesses, the
taking of witness statements, attendance at conferences with or
without Counsel, and the attendance at trial.
10.10.6 The Purchaser shall instruct the Transferring Employees that
they shall not without the Vendor's written consent give
assistance to any opposing party whatsoever save if they are
required by Order of Court to give evidence, when for the
avoidance of doubt, nothing in this agreement shall constrain
them from giving full and truthful testimony to the Court.
10.10.7 The Purchaser shall not dismiss any Key Personnel without
first informing the Vendor of its proposal or intentions to do
so and without giving the Vendor the opportunity to secure
consultancy services from such Key Personnel relating to the Two
Claims.
10.11 The Purchaser acknowledges that in the event of a breach by the Purchaser
of its obligations pursuant to clause 10.10 damages may not be an
============
adequate remedy and accordingly the Purchaser agrees that, without
prejudice to any other remedy which may be available to the Vendor, the
Vendor shall be entitled without proof of special damage to the remedy of
an injunction or specific performance.
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10.12 Without prejudice to the provisions of clause 10.9.3 for the purposes of
=============
negotiating settlement of the Two Claims or any part of the Two Claims
the Vendor is entitled to offer as settlement or as part of such
settlement the services of the Activity provided that the Vendor shall
have first consulted with the Purchaser as to the nature of such services
and as to the period for the provision of such services and obtained the
Purchaser's agreement to any services proposed to be offered and the
costs thereof to be reimbursed by the Vendor.
10.13 The Vendor shall reimburse to the Purchaser all costs and expenses
reasonably incurred by the Purchaser in complying with its obligations in
favour of the Vendor contained in clause 10.10 save that the Purchaser
============
shall provide the Vendor with the services of appropriate Transferring
Employees equivalent to one man week per calendar month (a man week being
five working days calculated by reference to a notional annual salary of
(Pounds)30,000) as may be required by the Vendor thereunder at no cost to
the Vendor.
10.14 To assist the Vendor with regard to investigating and resolving any
dispute in relation to the Perkins Claim:
10.14.1 The Purchaser agrees that it shall retain and keep safe and
separate to the Vendor's order all physical evidence and all
documents (within the meaning of 0.24 RSC) whether such physical
evidence or documents exist at the date hereof or come into
existence in the future which employees of the Activity ought
reasonably to be aware are relevant to the Perkins Claim (also
within the meaning of relevance ascribed by 0.24 RSC).
10.14.2 The Purchaser agrees that it shall in return for a receipt
acknowledgement from the Vendor undertaking in due course to
redeliver the same to the Purchaser, deliver up to the Vendor or
its legal advisers from time to time, such evidence,
documents or classes of such documents which are to be retained
pursuant to clause 10.14.1 immediately on the expiration of such
==============
time period as it shall take to retrieve the same following the
Vendor's demand and without question or justification.
10.14.3 The Vendor will pay to the Purchaser its reasonable costs
incurred in retrieval, copying for its own retention and/or
delivery up of the documents demanded and allowing access to
Transferring Employees under clause 10.14.4. The Purchaser
shall not be entitled to exercise any lien or charge over such
documents. There will be no circumstances whatsoever that shall
entitle the Purchaser to refrain from so
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delivering up documents in the possession of the Purchaser
demanded by the Vendor or its legal advisers from time to time.
10.14.4 The Purchaser agrees that it shall, to assist the Vendor in
investigating, resolving and/or defending the Perkins Claim,
allow such reasonable access as the Vendor may require any of
the Transferring Employees provided that such Transferring
Employee shall then be employed by the Purchaser or any member
of the Purchaser's Group.
11. RISK PROPERTY AND TITLE
-----------------------
At Completion the Vendor shall cease to hold insurance coverage for the
Assets, the Leased Assets and the Activity and risk in the Assets and the
Leased Assets shall pass to the Purchaser on the Completion Date. The
property in and title to the Assets (save for the Property which is dealt
with in Schedule 6) shall pass to the Purchaser on Completion. Title to
those of the Assets, where title can pass by delivery, shall so pass.
12. EXCLUSIONS
----------
Save as otherwise expressly provided in this Agreement neither the Vendor
nor Lucas shall be liable under this Agreement for any personal injury,
death, loss or damage of any kind whatsoever (other than death or
personal injury resulting from its negligence) whether consequential or
otherwise (including but not limited to loss of profits) arising from any
defect in the Assets and save as provided in clauses 2 and 8 the Vendor
========= =
hereby (save as above mentioned) excludes in relation to the Assets and
the Activity all conditions, warranties, representations, guarantees and
stipulations express or implied, statutory, customary or otherwise which
but for such exclusion would or might subsist in favour of the Purchaser
except that such exclusion will not apply to any statements made
fraudulently.
13. FURTHER ASSURANCE AND LUCAS GROUP CONTINUING SUPPLY OBLIGATIONS
---------------------------------------------------------------
13.1 The Vendor hereby agrees and declares that it will after and
notwithstanding Completion of the sale and purchase hereunder execute and
deliver any other documents and take any other steps as shall reasonably
be required from time to time by the Purchaser, at the Vendor's expense,
to vest in the Purchaser, or as it may direct, the Assets (other than the
Property which is governed by the provisions of Schedule 5 and Debtors
which are governed by clause 6.1 and Contracts which are governed by
==========
clause 5) and otherwise giving the Purchaser the full benefit of all the
========
provisions of
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this Agreement.
13.2 This clause 13.2 applies where the manufacture or use of a product of the
Activity depends on the availability of a supply of a component or other
product ("a Group Product") which the Vendor, any Business Unit or any
member of the Lucas Group manufactures and/or supplies as at and prior to
Completion and which is not readily available from other sources at such
date. If during the period of one year following Completion the Vendor,
any Business Unit or any member of the Lucas Group indicates a desire to
cease supplying a Group Product to the Activity, the Vendor shall before
ceasing so to supply use its reasonable endeavours to continue to make
and to procure that the relevant member of the Lucas Group continues to
make available to the Purchaser in relation to the Activity on arms
length terms such reasonable supplies of such component or other product
as the Purchaser may in relation to the Activity require for such period
as shall be sufficient to enable the Purchaser (with any reasonable
assistance in such regard as may be agreed between the Vendor and the
Purchaser) to resource the component or product elsewhere. Such period
shall in any event be no more than one year from Completion. If the
Vendor, any Business Unit or any member of the Lucas Group indicates a
desire to cease supplying a Group Product to the Activity, the Purchaser
shall use its reasonable endeavours to source an equivalent product to
the Group Product in question from an alternative supplier.
14. SHARED IP
---------
14.1 In relation to any Shared IP the Vendor shall procure that the member of
Lucas Group which is the owner of such Shared IP shall on or as soon
after Completion as shall be reasonably practicable grant to the
Purchaser a fully paid up licence in respect of all and any such Shared
IP to use and exploit the same for its remaining life (where the same may
in time expire) and otherwise without limit in point of time but subject
to the provisions of clause 14.4 and otherwise on terms that:-
===========
14.1.1 such licence shall be non-exclusive, non-transferable (other
than to a successor in title to the business of the Purchaser),
irrevocable, royalty-free and worldwide;
14.1.2 the Purchaser may, in relation to the Activity, sub-licence any
such Shared IP to any other member of the Purchaser's Group for
so long as it remains a member of the Purchaser's Group;
14.1.3 if the Purchaser (or any other member of the Purchaser's Group)
wishes to sub
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licence any such Shared IP to a party outside the Purchaser's
Group in relation to the Activity, it may only do so with the
consent of the Vendor (such consent not to be unreasonably
withheld).
14.2 Any actions against any third party for infringement of any Shared IP
shall be a matter for the Vendor on behalf of the member of Lucas Group
being the owner thereof provided that the Purchaser shall render such
assistance (at the Vendor's or other member of Lucas Group's expense) as
the Vendor on behalf of such member of Lucas Group may reasonably require
for the purpose of bringing such action. If the Purchaser shall agree in
writing to share in the costs of any such action (but not otherwise), the
Purchaser shall be entitled to a corresponding share of any damages or
other compensation received. If the Vendor decides not to take or within
a reasonable time fails itself to take infringement proceedings after
written request by the Purchaser, the Purchaser shall be free to do so in
its own name and the Vendor shall (at the Purchaser's request and
expense) render such assistance as the Purchaser may reasonably require
(including subject to being appropriately indemnified by the Purchaser
against costs and any other damages or awards lending its name) for the
purpose of bringing such proceedings.
14.3 If the Vendor wishes to cease the prosecution or maintenance of any
Shared IP which is registered or the subject of a pending application, it
shall first give timely notice to the Purchaser offering to transfer to
the Purchaser the Shared IP in question. If such offer is accepted, the
parties shall effect appropriate transfer documentation. Alternatively,
if such offer is not accepted within 7 days, the Vendor shall be at
liberty to cease such prosecution or maintenance and to abandon the
registration of relevant Intellectual Property.
14.4 The licence in respect of Shared IP granted by this clause 14 shall
automatically determine and be of no further force or effect if at any
time:-
14.4.1 the business which enjoys the benefit of such licence (or any
part of such licence) or to which such licence (or part of such
licence) shall have been assigned or sub-licenced; or
14.4.2 the corporate entity which owns (whether directly or indirectly)
the business which enjoys the benefit of such licence (or any
part of such licence) or to which such licence (or part of such
licence) shall have been assigned or sub-licenced
shall be or become part of a group of companies of which a Lucas
Competitor forms part or in
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which a Lucas Competitior is interested whether directly or indirectly.
14.5 For the avoidance of doubt this clause 14 shall not permit the Purchaser
=========
or any member of the Purchaser's Group to sub-licence or assign the
Shared IP or any part thereof to any Lucas Competitor.
15. INSPECTION OF DOCUMENTS
-----------------------
The Vendor shall for a period of 3 years after Completion afford to the
authorised representatives of the Purchaser all reasonable facilities to
inspect records held or retained by the Vendor or its professional
advisers (which are not privileged) relating exclusively to the Activity
(which records the Vendor agrees to maintain for such period) and to make
copies or extracts therefrom. If within such period the Vendor shall
desire to cease holding and maintaining any such records it shall before
taking any action in relation thereto give the Purchaser a reasonable
opportunity to inspect the same and at the Purchaser's request and cost
and take delivery of the same. The Purchaser agrees to maintain at the
registered office of the Purchaser, and allow the Vendor at all
reasonable times access to and to take copies of, the Records insofar as
they relate to the period prior to Completion, wherever held, for a
period of 3 years from Completion or if shorter such period as shall be
sufficient in relation to any of the Records as shall result in the
relevant Record having been preserved for 6 years after its date.
16. ENTIRE AGREEMENT
----------------
This Agreement, the Umbrella Agreement the Other Sale Agreements, the
Ancillary Agreements and the documents referred to in it and them
(including without limitation the Associated Documents but excluding the
Memorandum as defined in the Umbrella Agreement) (collectively "the
Transaction Documents" and individually "a Transaction Document"),
contain the whole agreement between the parties relating to the
transactions contemplated by such Documents and any other transactions or
matters related to them and supersede all previous agreements between the
parties relating to these transactions. The Memorandum shall not
constitute a Transaction Document. Each of the parties to this
Agreement, being also a party to any of the other Transaction
Documentsacknowledges that it has not relied on any pre-contractual
representations warranties or other assurances save for the Warranties
(as defined in this Agreement and the Other Sale Agreements) the
Purchaser Assurances (as contained in this Agreement or the Umbrella
Agreement and the Other Sale Agreements) and the Vendor Assurances (as
contained in this Agreement) and otherwise as expressly set out in any of
the Transaction Documents. Each party
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hereby agrees that it shall have no remedy against any other party for
any negligent or innocent misrepresentation made by such other party in
relation to such transactions prior to the Transaction Documents being
entered into except to the extent that the same shall have been
incorporated in any of such Transaction Documents as a warranty
representation or indemnity in which case any claim in relation to the
same shall be only on the basis of a breach of the relevant Transaction
Document or under the relevant indemnity provision. Nothing in this
clause 16 shall relieve any party from any liability for representations
made fraudulently.
17. ASSIGNMENT PROHIBITED
---------------------
17.1 This Agreement shall not be assignable by either the Vendor or the
Purchaser without the prior written consent of the other (which consent
shall not be unreasonably withheld in the case of an internal group
reorganisation (without insolvency) intended to be made by either the
Vendor or the Purchaser provided always that any assignee shall be a
person of similar substance and standing as the assignor or a suitable
guarantee shall be provided) save that the Vendor or the Purchaser shall
be entitled without the consent of the other to accept the benefits
accruing under this Agreement or to exercise its rights covenants and
obligations hereunder through the agency of any other company in (in the
case of the Vendor) the Lucas Group and (in the case of the Purchaser)
the Purchaser's Group. In cases where the assignee of this Agreement is
a member of the Lucas Group, then, upon ceasing to be a member of the
Lucas Group, the Vendor shall procure that such assignee shall, and such
assignee shall be obliged to, re-assign this Agreement to the Vendor. In
cases where the assignee of this Agreement is a member of the Purchaser's
Group then, upon ceasing to be a member of the Purchaser's Group, the
Purchaser shall procure that such assignee shall, and such assignee shall
be obliged to, re-assign this Agreement to the Purchaser.
17.2 The benefit of this Agreement may be assigned by the Purchaser by way of
security to any provider of secured financing to any member of the
Purchaser's Group but not otherwise.
18. NO MERGER OF OBLIGATIONS AT COMPLETION
--------------------------------------
Except insofar as the same have been fully performed at Completion, each
of the agreements, covenants, obligations, warranties, indemnities and
undertakings contained in this Agreement will continue in full force and
effect notwithstanding Completion.
19. TRUSTS
------
The perpetuity period applicable to any trusts created by this Agreement
shall be twenty years
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commencing on the date of this Agreement.
20. PURCHASER ASSURANCES
--------------------
20.1 The Purchaser warrants to the Vendor (for itself and in each case as
trustee for and on behalf of each other member of the Lucas Group) that
the Purchaser has the necessary corporate power and authority and all
authorisations approvals consents and licences required by the Purchaser
have been unconditionally and irrevocably obtained and are in full force
and effect to permit the Purchaser to enter into and perform this
Agreement and the Agreement has been duly authorised by the Purchaser and
constitutes a valid and binding obligation of the Purchaser.
20.2 The Purchaser acknowledges to and agrees with the Vendor (both for itself
and in each case as trustee for each other member of the Lucas Group and
for the benefit of each of their respective officers employees and
advisers and as trustee for such officers employees and advisers) that:
20.2.1 the invitation to the Purchaser by or on behalf of the Vendor to
consider the purchase of the Activity and the Assets and the
provision of information relating thereto and to the financial
position or prospects of the Activity was made by or on behalf
of the Vendor and accepted by the Purchaser and this Agreement
was entered into on the basis that neither the Vendor nor any
member of the Lucas Group nor any of the Vendor's or any member
of the Lucas Group's officers employees and advisers has or have
made or makes any representation or warranty (other than as set
out in the Warranties) as to the accuracy or completeness of
such information or accepts any duty of care in relation to the
Purchaser in respect of the provision of such information and
save as contemplated by the Warranties (as qualified by the
Disclosure Letter) or in the case of representations made
fraudulently by the Vendor or otherwise as is expressly provided
in this Agreement none of such persons shall be under any
liability to the Purchaser in the event that, for whatever
reason, such information is or becomes inaccurate incomplete or
misleading in any particular; and
20.2.2 the Purchaser has had independent legal and financial advice
relating to the purchase of the Activity and the Assets and to
the terms of this Agreement and the documents to be executed
pursuant hereto including the terms of this clause.
20.3 The Purchaser hereby warrants and represents to the Vendor that:
20.3.1 the Purchaser is duly incorporated under the Companies
Acts in England and Wales
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and validly existing and has all requisite corporate power and
authority to own, lease and operate its properties and business
as presently conducted and to enter into and perform its
obligations under this Agreement;
20.3.2 the execution, delivery and performance of this Agreement by the
Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby have been duly authorised by
all requisite corporate action on the part of the Purchaser.
This Agreement has been duly executed and delivered by the
Purchaser, and constitutes the legal valid and binding
obligation of the Purchaser, is enforceable against the
Purchaser in accordance with its terms except to the extent that
enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of
creditors rights generally and subject to general principles of
equity;
20.3.3 neither the execution nor the delivery of this Agreement by the
Purchaser nor the consummation of the transactions contemplated
hereby will conflict with or result in a breach of any of the
provisions of or constitute a default under the memorandum or
articles of association of the Purchaser as amended to date or
except as would not have a material and adverse effect on its
business assets or financial condition, constitute a breach or
event of default under or any agreement, mortgage, indenture,
lease or other instrument to which the Purchaser is a party or
by which the Purchaser or its property is bound or results in
the violation of any law, rule, regulation, order, judgment or
decree to which the Purchaser or its property is subject;
20.3.4 to the best of the knowledge of the Purchaser no consent,
approval or authorisation of or declaration of filing with any
governmental authority is required on the part of the Purchaser
in connection with the execution, delivery or performance of
this Agreement. No approval, consent or authorisation of any
lender, lessor or any other person is required in order for the
Purchaser to consummate the transactions contemplated by this
Agreement.
20.4 Except to the extent contemplated by any other provision of this
Agreement the Purchaser undertakes to the Vendor for itself and as
trustee for and on behalf of each other member of the Lucas Group that it
will not at any time after Completion hold itself out as a Subsidiary of
or as otherwise connected with the Lucas Group (other than as a successor
to the Activity subject to the terms of this Agreement in that regard) or
at such time as is contemplated (if so contemplated) by
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the Ancillary Agreements and that except and to the extent contemplated
by any of the Ancillary Agreements forthwith following Completion there
is deleted from all printed material including (without limitation)
stationery catalogues brochures sales material and (if relevant) from
electronic media such as interment sites and telephone listings and (if
relevant) from signage at any property occupied for the purposes of the
Group and from motor vehicles used by the Group all references to the
name or mark "Lucas" and/or "CAV" and/or "LucasVarity" and/or the Lucas
Group diagonal flash.
20.5 Without prejudice to the generality of the provisions of clause 20.4 but
===========
subject also to those provisions and except to the extent contemplated by
the Ancillary Agreements or any other provision of this Agreement the
Purchaser undertakes to the Vendor (who for this purpose contracts both
for itself and for and on behalf of each other member of the Lucas Group)
that it will not and will procure that no member of the Purchaser's Group
whether directly or indirectly and in any capacity whatsoever use in
connection with any business the name or mark "Lucas" and/or "CAV" and/or
"LucasVarity" and/or the Lucas Group diagonal flash or any colourable
imitation thereof.
20.6 The Purchaser hereby covenants with the Vendor and (as a separate and
independent covenant) with the Vendor as trustee for each other member of
the Lucas Group that except to the extent (if any) required by law the
Purchaser will not and will procure that no member of the Purchaser's
Group will at any time after Completion disclose or make public any
secret or confidential or professional or financial or commercial
information concerning the Lucas Group and not relating to the Activity
which it has learned by reason of the Activity being owned by the Vendor
and save as aforesaid will not and will procure that no member of the
Purchaser's Group will use to the detriment of any member of the Lucas
Group any information concerning the Lucas Group and not relating to the
Activity which the Purchaser or any member of the Purchaser's Group has
obtained in confidence in the course of or as a result of such ownership
provided always, however, that the provisions of this clause 20.6 shall
===========
cease to apply to any information which is already in or which falls into
the public domain otherwise than by reason of a breach of this provision.
20.7 The Purchaser acknowledges to the Vendor for itself and as trustee for
each member of the Lucas Group the ownership by the Lucas Group of the
names and/or mark "Lucas" and/or "CAV" and/or "LucasVarity" and/or the
Lucas Group diagonal flash and hereby acknowledges that notwithstanding
any arrangements operating between the Vendor and the Purchaser in
respect of the period following Completion all and any goodwill in the
names of Lucas and/or CAV and/or
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LucasVarity and/or the Lucas Group diagonal flash belongs to and remains
vested in the Lucas Group.
21 VENDOR ASSURANCES
-----------------
21.1 The Vendor acknowledges to and agrees with the Purchaser (both for itself
and in each case as trustee for each other member of the Purchaser's
Group) that :
21.1.1 the Vendor hereby unconditionally assigns and the Vendor
undertakes to procure that any other relevant member of Lucas
Group will unconditionally assign to the Purchaser (both for
itself and in each case as trustee for each other member of the
Purchaser's Group) all such rights and interests and benefits
(including all rights of action in respect of any breach by the
other contracting party) which the Vendor and any other member
of Lucas Group has in or under or pursuant to each of the
confidentiality agreements signed by or on behalf of all persons
to whom the Information Memorandum dated February 1997 (copies
of which have been annexed to the Disclosure Letter) with the
intent that the Purchaser and each member of the Purchaser's
Group shall have and obtain the full benefit of all obligations
undertaken by the other contracting parties to such
confidentiality agreements,
21.1.2 the Vendor will and will procure that any relevant member of
Lucas Group will at the request of the Purchaser and at the
Purchaser's cost and expense provide all assistance as the
Purchaser or any relevant member of Purchaser's Group may
hereafter reasonably require in connection with the enforcement
of or taking action against any other relevant contracting party
for breach of the said confidentiality agreements and the
Purchaser hereby agrees to indemnify the Vendor and any relevant
member of Lucas Group against all costs and expenses actually
incurred by them in providing any such assistance.
21.2 The Vendor hereby warrants to the Purchaser that :
21.2.1 each of the Vendor and Lucas is duly incorporated under the
Companies Acts in England and Wales and is validly existing and
has all requisite corporate power and authority to enter into
and perform its obligations under this Agreement.
21.2.2 the execution, delivery and performance of this Agreement by the
Vendor and Lucas and the consummation by the Vendor and Lucas of
the transactions contemplated
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hereby have been duly authorised by all requisite corporate
action on the part of the Vendor and Lucas . This Agreement has
been duly executed and delivered by the Vendor and Lucas and
constitutes the legal valid and binding obligations of the
Vendor and Lucas, are enforceable against the Vendor and Lucas
in accordance with their terms except to the extent that
enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of
creditors rights generally and subject to general principles of
equity;
21.2.3 neither the execution nor the delivery of this Agreement by the
Vendor and Lucas nor the consummation of the transactions
contemplated hereby will conflict with or result in a breach of
any of the provisions of or constitute a default under the
memorandum or articles of association of either of the Vendor or
Lucas as amended to date or any finance agreement, mortgage or
other security instrument to which the Vendor or Lucas is a
party.
22 INTEREST
--------
Save where otherwise contemplated by any other provision of this
Agreement if any sum shall at any time be due and outstanding from any
party to any other party pursuant to the terms of this Agreement interest
shall be payable thereon at the rate per annum which is 2% above
Barclays Bank plc's base lending rate from time to time such interest to
accrue from day to day and to be payable from the due date until payment
whether before or after judgment.
23 WAIVER
------
No waiver by any party to this Agreement of any of the requirements of
this Agreement or any of its rights hereunder shall have effect unless
given in writing and signed by or on behalf of the party giving the
waiver and no delay by any party in exercising any of its rights
hereunder shall impair the same. No single or partial exercise of any
right or remedy shall preclude any further exercise thereof or the
exercise of any other right. Any waiver of any breach of, or any default
under any of the terms of this Agreement will not be deemed a waiver of
any subsequent breach or default and will in no way affect the other
terms of this Agreement.
24 NOTICES
-------
24.1 The address for service of the parties to this Agreement
shall be:
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24.1.1 in the case of the Vendor its registered office
in the United Kingdom from time to time and shall be addressed
to:
The Legal Director - Lucas
Electrical and Electronic Systems; and
24.1.2 in the case of the Purchaser its registered
office in the United Kingdom from time to time and shall be
addressed to the Managing Director and Finance Director
24.2 Any notice will be deemed well served on the party to whom it is
addressed if it be served personally or by courier delivery addressed to
such party at its address for service and service shall be deemed to be
effective upon such personal or courier delivery taking place.
24.3 Any notices or statements to be served pursuant to this Agreement may be
sent by facsimile process:
24.3.1 in the case of notices to the Vendor to the Legal
Director - Lucas Electrical and Electronic Systems; fax 0121 627
4420 or to such other fax number as may be notified to the
Purchaser for the purposes of this clause 24.3; and
===========
24.3.2 in the case of notices to the Purchaser to the Managing
Director and Finance Director, Prestolite Electric Limited; fax
01772 421663 or to such other fax number as may be notified to
the Vendor for the purposes of this clause 24.3;
===========
24.4 Any notice or statement so sent by facsimile process shall be deemed to
have been served at the expiration of 2 hours after the time of despatch
if despatched before 3.00 pm (local time at the place of destination) on
any Business Day and in any other case at 10.00 am (local time at the
place of destination) on the Business Day following the date of despatch
provided that it is followed by a hard copy of the notice or statement
served on the recipient in accordance with clause 24.2
===========
24.5 If the Vendor serves on the Purchaser any notice in accordance with this
clause 24 it shall send a copy of such notice to the Senior Vice
=========
President and Chief Finance Officer at Prestolite Electric Incorporated,
2100 Commonwealth Boulevard, Ann Arbor, MI 48105 USA provided that
failure by the Vendor to send such copy of such notice shall in no way
prejudice the validity of service of such notice.
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25. COSTS
-----
Save as otherwise provided herein each party hereto shall bear its own
costs and expenses in connection with this Agreement and the negotiations
leading thereto.
26. ANNOUNCEMENTS
-------------
No announcement concerning the transactions contemplated by this
Agreement or any matter ancillary to it and no disclosure of the terms of
this Agreement shall (save as required by law or the regulations of the
London Stock Exchange or the New York Stock Exchange) be made by any
party except with the prior written approval of the Vendor and the
Purchaser. The Vendor and the Purchaser agree to procure that each of
their respective advisers and representatives complies with the
provisions of this clause as if such person were party to this Agreement.
27. GOVERNING LAW
-------------
This Agreement shall be governed by English Law and the parties hereby
submit to the exclusive jurisdiction of the English Courts.
28. COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts and by the
several parties hereto on separate counterparts each of which when so
executed and delivered shall be an original but all the counterparts
shall together constitute one document.
29. STAMP DUTY
----------
29.1 The Purchaser shall bear any stamp duty which may be payable on this
Agreement or the transfers and assignments of the Activity and the Assets
but Lucas and the Vendor confirm that neither of them intends to bring or
cause to be brought into the United Kingdom any of such documents
except:-
29.1.1 as part of proceedings to enforce or register the transfer of
its or any of their rights;
29.1.2 in order to comply with any request by the Inland Revenue, H.M.
Customs & Excise and/or H.M. Land Registry or other regulatory
authority that originals of any document be produced in order to
agree matters relating to the tax or other affairs of any member
of Lucas Group;
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29.1.3 if the Inland Revenue, H.M Customs and Excise and/or H.M. Land
Registry or other regulatory authority having powers to do so
require the production of any such document;
Provided that if after Completion the Vendor or Lucas proposes to bring
or cause to be brought into the United Kingdom any such documents the
Vendor shall, if time and circumstances allow, before bringing or causing
to be brought into the United Kingdom any such documents, first give to
the Purchaser notice in writing of such proposal and shall give the
Purchaser a reasonable opportunity to discuss the matter with the Vendor
and its advisers.
29.2 The Purchaser shall cause the Purchaser Guarantor (as defined in the
Umbrella Agreement) to retain the original of this Agreement duly
executed for and on behalf of each of the parties hereto and the Vendor
shall retain (on behalf of itself and as agent of Lucas) a duplicate of
the original Agreement duly executed for and on behalf of each of the
parties hereto and the parties hereby agree that the original of this
Agreement retained by the Purchaser Guarantor shall be deemed to be the
principal instrument for the purposes of sub-section (2) of Section 61 of
the Stamp Act 1891.
29.3 The Purchaser covenants with Lucas and the Vendor that should either
Lucas or the Vendor be required to stamp its duplicate copy of the
Agreement or any other document entered into in consummation of the
transactions contemplated hereby as required by s.72 Stamp Act 1891, and
if it is not possible (without Lucas or the Vendor paying other than
nominal stamp duty) to do so without the principal instrument being
brought back into the United Kingdom, the Purchaser will within 7 days of
being required so to do by the Vendor or Lucas cause to be brought into
the United Kingdom the principal instrument referred to in clause 29.2
and submit the same for stamping and pay all stamp duty required to be
paid thereon and produce the same to Lucas or the Vendor duly stamped so
that Lucas or the Vendor may have its duplicate copy stamped accordingly.
30. GENERAL
-------
30.1 It is agreed and declared that the Purchaser shall be responsible for and
bear all stamp duty which arises or may arise in respect of the
transactions (and the documents recording them) in this
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Agreement.
30.2 No provision of this Agreement, by virtue of which this Agreement is
subject to registration (if such be the case) under the Restrictive Trade
Practices Act 1976 shall take effect until the day after particulars of
this Agreement have been furnished to the Director General of Fair
Trading pursuant to Section 24 of the Restrictive Trade Practices Act.
For this purpose the expression "this agreement" includes any agreement
or arrangement of which this Agreement forms part and which is
registrable or by virtue of which this Agreement is registrable.
AS WITNESS the hands of the duly authorised representatives of the parties to
this Agreement the day and year first above written
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SCHEDULE 1
----------
PART 1
------
THE ACCOUNTING PRINCIPLES
-------------------------
1. FIXED ASSETS
------------
1.1 DETERMINATION OF COST
General
-------
. Purchase Price - subject to any provision for depreciation or
diminution in value the amount to be included in respect of any
fixed asset shall be its purchase price. Purchase price shall
include all consideration, cash or otherwise, in respect of the
asset and may include expenses incidental to the acquisition.
. Improvement and Repair - expenditure may be capitalised where it
increases the expected future benefits from the asset beyond its
previously assessed standard of performance.
. Minimum Cost - all stand alone items of a capital nature (except
computer equipment) costing less than (Pounds)5,000 are written off
to revenue as incurred. All discrete computer equipment is
capitalised.
Specific
--------
. Land and Buildings - will include the cost of basic services and
improvements and alterations which add to the economic or open
market value. Group properties will periodically be professionally
valued and the values will, subject to the approval of the Board of
Lucas Industries plc, be incorporated in the books of account.
Following such a revaluation of property, depreciation will be
calculated on the revised values attributed to buildings and basic
services and the assets will be incorporated in the balance sheet at
valuation less amounts written off.
. Plant and Machinery - cost will include all expenses directly
attributable to bringing the asset into its working condition and
location e.g.
. invoice purchase price
. site preparation
. delivery and handling charges
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. installation costs
. professional fees
. Tooling - defined as equipment which is used to customise machinery
for the production of a particular product and which has a useful
economic life of more than one year. Cost will be calculated as
detailed for plant and machinery above. Tooling, including
consumable tooling, with a useful economic life of less than one
year will be expensed in the year of purchase.
. Computer Hardware - capitalised amount will comprise invoiced cost.
. Computer Software - capitalised amount will comprise invoiced cost.
. Motor Vehicles - capitalised amount will comprise invoiced cost
including VAT for motor cars.
1.2 DEPRECIATION
. All assets, with the exception of freehold land, will be depreciated
from the first day of the month in which they are brought into
service. An item of plant is considered to have come into service
when normal production volume has been achieved. Depreciation will
cease on the last day of the month before the month in which an
asset is sold or scrapped.
. Depreciation will be calculated on a straight line basis over the
useful economic life of the asset. Residual values should normally
be considered to be nil. Assets purchased prior to 1 August 1991
were depreciated on a reducing balance method with relifing in the
later years.
. Economic lives are as follows:
. Land Not depreciated
. Buildings 50 years
. Plant and Machinery 10 - 20 years
. Tooling 3 years
. Computer Hardware 3 - 5 years
. Computer Software 3 years
. Motor Vehicles 5 years
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1.3 PROFIT / LOSS ON SALE OF ASSETS
. Profit or loss on the sale of an asset will be calculated as
disposal proceeds less the net book value of the asset.
1.4 LEASES
. Assets acquired under finance leases will be capitalised and
depreciated as for purchased assets as above.
. Rental payments under operating leases should be charged to the
profit and loss account as incurred.
2. STOCK
-----
2.1 DEFINITION
. Stocks as defined by SSAP9 comprise:
. goods or other assets purchased for resale
. consumable stores (including maintenance stocks)
. raw materials and components purchased for incorporation into
products for sale
. products in intermediate stages of completion
. finished goods
2.2 PHYSICAL STOCK COUNT
. Year end stock balances are taken from the COPICS planning system
and all A class items representing 80% by value) are verified by
physical count during the 3 month period prior to the year end.
. Stock in transit from India is not normally included in the year end
figures by agreement with Lucas TVS.
. Certificates must be obtained for all stocks held by third parties,
including subcontractors.
2.3 VALUATION
Policy
------
. Stocks are valued at the lower of cost and net realisable value of
separate items of stock or
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of groups of similar items.
Definition
----------
. Cost - that expenditure which has been incurred in the normal course
of business in bringing the product to its present location and
condition.
. Cost of Purchase - comprises purchase price including import duties,
transport and handling costs and any other directly attributable
costs, less trade discounts, rebates and subsidies.
. Costs of Conversion - comprises:
. costs specifically attributable to units of production e.g. direct
labour, direct expenses and subcontracted work
. production overheads
. other overheads attributable in the particular circumstances of
the business to bringing the product to its present location and
condition
. Production Overheads - overheads incurred in respect of materials,
labours for production based on the normal level of activity
notwithstanding that they may accrue wholly or partly on a time
basis.
. Net Realisable Value - the actual or estimated selling price net of
trade but before settlement discounts.
Determination of Cost
---------------------
. The gross valuation must include all goods in stock and will be
based on cost, any diminution due to obsolescence and other causes
being dealt with separately by way of provisions. Gross cost will be
arrived at by using standard costing methods. Standard costs will be
brought up-to-date shortly before the year end. The valuation must
be modified to recognise the true cost of stock as required by
SSAP9, adjustments would be made for normal scrap, price variations
etc.
. Work-in-progress - the cost will be that appropriate to the last
completed operation, plus the value of any materials or components
to be used during the next operation(s) which have not been returned
to store.
. Design/engineering costs - engineering costs in support of current
production should be included in the gross valuation.
. Storage costs - may only be included in cost where it is necessary
to store raw materials or
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work in progress prior to a further manufacturing process.
. Non production overheads - overheads relating to service departments
should be allocated between production and other non production
functions, only those that can be allocated to the production
function should be absorbed into the costs of conversion.
. Absorption of overheads - overheads to be included in stock must be
allocated, according to SSAP9, on the basis of a normal level of
activity which should be established with reference to the budgeted
level of production for the current year and the level of activity
achieved in previous years. Abnormal costs such as the cost of
excess facilities will be charged to profit as incurred.
Provisions
----------
. The purpose of provisions is to reduce the stock valuation to the
lower of cost and net realisable value.
. Inactive stock - all stock where no sales have been recorded during
the previous twelve months are inactive stocks, these will be
provided for in full. The only exception being where stock has been
deliberately accumulated in anticipation of a new sales campaign,
the introduction of a new product or model, or new legislation. In
this case the stock will be measured against the expected future
demand and any excess provided for.
. Excess stock - a provision will be made for stocks which have moved
during the preceding year but which are excessive in relation to the
expected demand for the coming year.
. Defective stock - where goods are accepted from suppliers on partial
inspection only, a provision will be made for defective and
perishable items not revealed by the initial check. The amount
should be recalculated each year.
. Overvaluation - in any case where the net stock value exceeds the
net realisable value the difference must be provided for.
. The full provision rule for inactive/excess stock may be varied
where there is a reasonable degree of certainty that any stock which
is unprovided for will be sold in the foreseeable future.
Maintenance Stocks
------------------
. Plant and machine spares will be held as part of stock, being valued
at the lower of cost and net realisable value.
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. Where an item is of a recognisable propriety nature, and considered
to be sufficiently non specific in use (having regard to the
machines in which it might be used) that it is of use both within
and outside the Lucas group, net realisable value should be
estimated with regard to excess and inactivity as follows:
. no use for one year - 25% provision
. no use for two years - 50% provision
. no use for three years - 100% write down to scrap value.
. Where an item is considered to be specific in nature to a Lucas
machine (without further alteration) it should be written off when
acquired, subject to any clearly identifiable scrap value.
3. DEBTORS
-------
3.1 TRADE DEBTORS
. Trade debtors comprise all amounts due from external customers in
respect of goods sold and services provided in the ordinary course
of business. VAT and similar taxes on turnover invoiced to
customers should be included in the outstanding balance for each
debtor.
3.2 PROVISIONS
. The provision for doubtful debts will consist of those debts
considered to be at risk at any point in time. A specific provision
will be created where:
. the customer is in receivership/administration
. there is specific knowledge which indicates payment is unlikely
. the debt is long overdue compared to the normal collection cycle
of the business
. The provision for credit notes will be made for credits which are
likely to be given to customers in respect of alleged shortages,
goods damaged or not in accordance with the order and any other
items in dispute.
3.3 PREPAYMENTS AND ACCRUED INCOME
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. Prepayments consisting of the unexpired portion of payments made in
respect of time related expenses will be included on the balance
sheet.
. Accrued income consisting of income relating to the current period
but not receivable in cash until after the balance sheet date will
be included on the balance sheet.
3.4 OTHER DEBTORS
. Other debtors comprise all amounts falling outside the definition of
trade debtors and shall be included on the balance sheet to the
extent to which they are determined as recoverable.
4. CREDITORS
---------
4.1 TRADE CREDITORS
. Trade creditors comprise all amounts due to external suppliers in
respect of goods purchased and services provided in the ordinary
course of business. Provision must be made for goods and services
received for which invoices have not been received by the balance
sheet date.
4.2 ACCRUALS AND DEFERRED INCOME
. Accruals consist of the amounts payable in respect of benefits
received up to the balance sheet date, generally on a time
apportioned basis. There is no accrual for holiday pay as employees
are paid on a monthly salary basis.
. Deferred income comprises that part of monies received at the date
of the balance sheet which relates to a later period.
4.3 WARRANTY PROVISIONS
. A general provision will be created at the balance sheet date based
on the actual warranty cost of the previous period adjusted for the
increase in OE sales, this calculation to be applied on a consistent
basis.
. An additional specific provision will be created for known faults
peculiar to identified products whose rate of occurrence can be
reasonably estimated.
4.4 CONTINGENT LIABILITIES
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. Contingent liabilities are only provided for if it is both probable
that a liability will occur and the amount is either known or can be
estimated with accuracy.
5. PROFIT AND LOSS ACCOUNT
-----------------------
5.1 REORGANISATION & CLOSURE COSTS
. Reorganisation and closure costs will normally arise from specific
and defined change aimed at achieving long term benefits rather than
relating to more general or incidental expenditure incurred in the
ordinary course of business activity. The costs may arise over more
than one period but must fulfil the following criteria:
. separately and specifically identifiable
. arise out of planned action for change
. outside of the ordinary and incidental costs of the business
activity
. material
5.2 RESEARCH AND DEVELOPMENT
. Expenditure on research and development, other than that which is
specifically recoverable under contract, is written off as incurred.
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PART 2
------
MATTERS RELATING TO THE PREPARATION OF THE COMPLETION STATEMENT
---------------------------------------------------------------
For the purpose of preparation of the Completion Statement and in determining
any adjustments thereto as contemplated by Clause 3 of the foregoing Agreement
the following provisions shall apply so as to vary either the Accounting
Principles or the meaning attributed in the foregoing agreement to the
expression "consistently applied". Except as expressly set out below the
Completion Statement shall be prepared in accordance with the Accounting
Principles set out in Part 1 above consistently applied:
1. There are to be no provisions in respect of future redundancies
2. There is to be no accrual for the annual year end audit
3. Direct liabilities in respect of PAYE/NIC for those employees on the Acton
payroll. For those employees not on the Acton payroll, PAYE/NIC paid by
Lucas and recharged to the Activity
4. There are to be no provisions in respect of the David Brown Claim or the
Bearings Claim or the Perkins Claim
5. Working cash in hand which is passed to the Purchaser on Completion shall
be valued on a (Pounds) for (Pounds) basis and shall, for the purposes of
the Pro-Forma Completion Statement in part 1 of Schedule 12 be included in
Prepayments
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SCHEDULE 7
----------
WARRANTIES
----------
1 DEFINITIONS AND INTERPRETATION
In this Schedule, where the context admits:
(i) `Computer Systems' means the Hardware, Software and Data;
(ii) `Data' means any data or information used by or for the benefit of the
Activity at any time and stored electronically at any time;
(iii) `Hardware' means any computer equipment used by or for the benefit of the
Activity at any time including, without limitation, PCs, mainframes,
screens, terminals, keyboards, disks, printers, cabling, associated and
peripheral electronic equipment but excluding all Software;
(iv) `Software' means any set of instructions for execution by microprocessor
used by or for the benefit of the Activity irrespective of application,
language or medium;
(v) any question whether a person is connected with another shall be
determined in accordance with Income and Corporation Taxes Act 1988, s
839 (subject to the deletion of the words from `Except' to `arrangements'
in subs (4) thereof) which shall apply in relation to this schedule as it
applies in relation to that Act;
(vi) where, in this Schedule, a term is defined in and for the purposes of a
particular Paragraph or Sub-Paragraph, the relevant definition shall
apply, where the context admits, for all other purposes of this Schedule.
(vii) words and expressions used in this Schedule shall unless the context
otherwise requires have the same meanings (if any) as are given to them
in this Agreement ("the Agreement").
(viii) Where any of the Warranties is qualified by words such as "the Vendor is
not aware" or "the Vendor believes" or "to the best of the Vendor's
knowledge" or any similar qualification, the Vendor's awareness or belief
or knowledge shall be determined by reference only to the awareness or
belief or knowledge of the persons whose names are listed in the left
hand column below and whose position is stated opposite his name in the
right hand column below of whom enquiry has been made by the Vendor and
subject to the foregoing the Vendor shall not be liable for breach of
warranty should the fact or circumstance which would otherwise be a
breach of the Warranties be known to any other employee or officer of any
member of the Lucas Group.
Name of Person Position Held
P Almond Legal Director-Lucas Electrical and Electronic
Systems
E Earle Group Property Manager
S Lockwood Patents Manager
C Long-Leather Programme Director-Business Development
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A Lord Divestment Project Manager
M J McKiernan Group Director - Health Safety and Environment
P Marian Director and General Manager
A Toogood Personnel Manager
J Walker Finance and Planning Manager
C Stacey Operations Manager
2 WARRANTIES
2.1 THE VENDOR AND THE VENDOR'S GROUP
(A) Capacity The Vendor has full power and authority to enter into and perform
this Agreement and has full power and authority to carry on the Activity as
it is now being carried on and (save in respect of consents which may be
required by persons other than the Vendor, Lucas, any member of the Lucas
Group or any of their shareholders) to sell the Activity and the Assets
(and each of them) to the Purchaser on the terms of this Agreement and may
execute and deliver this Agreement and perform its obligations under this
Agreement without in any such case requiring or obtaining the consent of
its shareholders or any bank or financial institution or any other person
who may have an interest in any of the Assets and this Agreement
constitutes valid and binding obligations on the Vendor in accordance with
its terms.
(B) Branches and Associations No part of the Activity has ever been conducted
through a branch, agency or permanent establishment (as that expression is
defined in the relevant double taxation relief orders current at the date
of this Agreement) outside the United Kingdom. The Vendor is not, and has
not agreed to become, in relation to the Activity, a member of any
partnership, joint venture, consortium or other unincorporated association,
body or undertaking in which it is to participate with any other in any
business or investment.
2.2 LICENCES, LITIGATION AND THE LAW
(A) Compliance with Laws The Activity has been conducted in all material
respects in accordance with all applicable laws and regulations of the
United Kingdom and any other relevant foreign country or authority and
there is no order, decree or judgement of any court or any governmental or
other competent authority or agency of the United Kingdom or any other
relevant foreign country outstanding against the Activity or the Vendor
which may have a material adverse effect upon the Activity or the Assets.
(B) Licences etc
(1) All licences, consents, permits, approvals and authorisations (public
and private) necessary for utilising any of the Assets in the Activity
or carrying on effectively any aspect of the Activity have been
obtained by the Vendor, are in full force and effect and are not in
the Vendor's reasonable opinion subject to conditions which are both
onerous and peculiar having regard to the nature of the business
carried on by the Activity and the licence in question.
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(2) If pursuant to a provision of law or as a condition of any licence,
consent, permit or other authorisation a report or return is required
to be given to any person or authority, such report or return has been
given.
(3) Apart from any reasons relating to the Purchaser, so far as the Vendor
is aware there is no circumstance which the Vendor reasonably believes
would be likely to lead to the suspension cancellation or revocation
of any licence, consent, permit, approval or authorisation. If any
licence, consent, permit, approval or authorisation has been issued
subject to conditions, the Vendor has complied with such conditions in
all material respects and where the Vendor has not so complied such
non-compliance has no material adverse effect on the Activity.
(C) Breach of statutory provisions The Vendor has not at its registered office
received notice that any of its officers, agents or employees (during the
course of their duties in relation to the Activity) have committed, or
omitted to do, any act or thing the commission or omission of which is, or
could be, in contravention of any Act, Order, Regulation, or the like in
the United Kingdom or elsewhere which is punishable by fine or other
penalty and no notice in respect thereof has been received.
(D) Litigation and disputes
(1) Neither the Activity nor the Vendor nor any of its officers or agents
nor so far as the Vendor is aware any of the Transferring Employees in
circumstances where the Vendor may be vicariously liable is engaged in
or the subject of any litigation, arbitration, administrative or
criminal proceedings, whether as plaintiff, defendant or otherwise,
which materially adversely affects or is reasonably likely to have a
material adverse effect on the Activity and/or the Assets.
(2) No such litigation or arbitration, administrative or criminal
proceedings are served, threatened or expected nor so far as the
Vendor is aware, pending by or against the Activity or the Vendor or
any such officers, agents or employees in circumstances where the
Vendor may be vicariously liable, and so far as the Vendor is aware,
there are no facts or circumstances reasonably likely to give rise to
any such litigation or arbitration or administrative or criminal
proceedings which materially and adversely affect or are reasonably
likely to have a material adverse effect on the Activity.
(3) Neither the Activity nor the Vendor nor any other member of the
Vendor's Group (or any officer or employee of any of them) has or have
been a party to any undertaking or assurance given to any court or
Governmental agency or the subject of any injunction relating to the
Activity and/or the Assets which is still in force.
(4) There are no outstanding material disputes between the Vendor and any
of its Major Customers or Major Suppliers in relation to the Activity.
(E) Fair Trading
(1) No agreement practice or arrangement carried on by the Vendor or any
member of the Lucas Group in connection with or in relation to the
Activity or to which the Vendor is a party (including, but not limited
to, any Contract):
(a) is, is being or ought to have been registered in accordance with
the provisions of the Restrictive Trade Practices Acts 1976 and
1977 or contravenes the provisions of the
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Resale Prices Act 1976 or is or has been the subject of any
enquiry, complaint, investigation or proceeding under any of
those Acts; or
(b) is or has been the subject of an enquiry, complaint,
investigation, reference or report by the Office of Fair Trading
under the Fair Trading Act 1973 (or any previous legislation
relating to monopolies or mergers) or the Competition Act 1980 or
constitutes an anti-competitive practice within the meaning of
the 1980 Act; or
(c) infringes Art 85 of the Treaty of Rome establishing the European
Economic Community or constitutes an abuse of a dominant position
contrary to Art 86 of that Treaty or infringes any regulation or
other enactment made under Art 87 and/or Art 235 of that Treaty
or is or has been the subject of any enquiry, complaint,
investigation or proceeding instituted by a body responsible for
enforcing the same in respect thereof, or
(d) has been notified by the Vendor, nor so far as the Vendor is
aware any third party to the Directorate General for Competition
of the European Commission and/or to the EFTA Surveillance
Authority; or
(e) infringes any other competition, restrictive trade practice,
anti-trust, fair trading or consumer protection law or
legislation applicable in any jurisdiction in which the Activity
is carried on or in which the activities of the Activity may have
an effect.
(2) In relation to the Activity, the Vendor has not given and is not in
default or contravention of any assurance or undertaking (written or
oral) to the Restrictive Practices Court, the Director General of Fair
Trading, the Secretary of State for Trade and Industry, the European
Commission, the EFTA Surveillance Authority or the Courts of Justice
of the European Communities or to any other court, person or body and
is not subject to or in default or contravention of any Article, Act,
decision, regulation, order or other instrument or undertaking
relating to any matter referred to in this Sub-Paragraph 2.2(E).
(3) (a) None of the activities of the Vendor as currently conducted could
give rise to the imposition of any anti-dumping, duty or other
sanction under any trade regulation legislation in respect of any
products manufactured by the Activity or in which the Activity
trades.
(b) no undertaking has been given by the Vendor to any Governmental
authority under any anti-dumping or other trade regulation
legislation.
(4) The Vendor has not at its registered office received notice of nor is
the Vendor aware of any pending or threatened investigation,
complaint, action or decision in relation to the receipt or alleged
receipt by it in respect of the Activity of any aid or alleged aid
falling within Article 92 (1) of the Treaty of Rome.
(F) Product Liability
(1) There is no claim in respect of Product Liability outstanding or
threatened against or so far as the Vendor is aware expected by the
Vendor in relation to the Activity.
(2) The Vendor is not currently aware that it has manufactured, sold or
supplied products during the course of the Activity which:-
(a) is, was, or will become, in any material respect faulty or
defective; or
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(b) do not comply in any material respect with any warranty or
representation expressly or impliedly made by or on behalf of the
Vendor in respect of it or with all applicable regulations,
standards and requirements in respect thereof;
and so that Claims in relation thereto after Completion will be
Notifiable Claims for the purpose of the Agreement
(3) The Vendor has not received a prohibition notice, a notice to warn or
a suspension notice under the Consumer Protection Act 1987 in relation
to any products of the Activity.
(G) Inducements So far as the Vendor is aware no officer, agent or employee of
the Vendor in relation to the Activity has paid or accepted any bribe
(monetary or otherwise) to obtain or provide an advantage for any person.
2.3 THE VENDOR'S SOLVENCY
(A) Winding Up No order has been made, petition presented or resolution passed
for the winding up of the Vendor and no meeting has been convened for the
purpose of winding up the Vendor
(B) Administration and Receivership No steps have been taken for the
appointment of an administrator or receiver (including an administrative
receiver) in respect of the Vendor and/or of all or any part of the Assets.
(C) Compositions The Vendor has not made or proposed any arrangement or
composition with its creditors or any class of its creditors.
(D) Insolvency The Vendor is not insolvent, is not unable to pay its debts
within the meaning of the insolvency legislation applicable to the Vendor
and has not stopped paying its debts as they fall due.
(E) Unsatisfied Judgements No distress, execution or other process has been
levied against the Vendor or action taken to repossess any of the Assets.
No unsatisfied judgement is outstanding against the Vendor in relation to
the Activity.
(F) Floating Charges No floating charge created by the Vendor in relation to
the Activity and/or over any of the Assets has crystallised and, so far as
the Vendor is aware, there are no circumstances likely to cause such a
floating charge to crystallise.
(G) Analogous Events No event analogous to any of the foregoing has occurred in
or outside England.
2.4 ACCOUNTS, RECORDS AND TAXATION
(A) Accounts
(1) Accounts The Accounts:
(a) have been prepared in accordance with generally accepted
accounting principles in the United Kingdom, including all SSAP's
and FRS's in issue at the date thereof (but excluding the
disclosure requirements of such SSAP's and FRS's);
(b) have been prepared in accordance with the Accounting Principles;
(c) state fairly the assets and liabilities of the Activity at the
Accounting Date and the income of the Activity for each period
ended on that date;
(d) are not affected by any unusual or non-recurring items.
(2) Management Accounts The Management Accounts have been carefully
prepared in accordance with the Accounting Principles which have been
applied on a basis consistent with the preparation of the monthly
management accounts of the Activity. The Vendor does not consider the
Management Accounts misleading.
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(3) Accounting Principles The Accounting Principles are the accounting
principles which were adopted by the Activity for the preparation of
its accounts pack produced for the purposes of the Vendor's statutory
accounts to 31 January 1997 and which have been applied on a basis
consistent with the preparation of the unaudited management accounts
of the Vendor comprising solely the unaudited balance sheet and profit
and loss account for the two accounting periods ending on and prior to
31 July 1996;
(B) Books and Records
(1) All the books and other material comprised in the Records which are to
be delivered or otherwise made available to the Purchaser in
accordance with the terms of this Agreement:
(a) have been properly maintained on a consistent basis and are
materially up to date and contain all matters required by law to
be entered therein;
(b) are within the possession and control of the Vendor;
(c) comply with the requirements of section 221 Companies Act 1985 in
the same manner as would be applicable to the Activity, as if the
Activity were a company for the purposes of that section; and
(2) Those of the Records which are necessary for the continued operation
of the Activity without material disruption do not contain any
material inaccuracies or discrepancies.
(C) Taxation
(1) None of the Assets are capital items for the purposes of Part XV of
the Value Added Tax Regulations 1995 (`Part XV') and all adjustments
required to be made pursuant to Part XV on or before the date hereof
have been made and declared to HM Customs & Excise in the appropriate
manner.
(2) The Disclosure Letter contains details and copies of all (if any)
elections, together with the relevant notification, made by the Vendor
or any member of the Lucas Group in each case in relation to the
Activity pursuant to para 2 of Sched 10 to the Value Added Tax Act
1994.
(3) The Vendor is not and has not since 1 August 1989 been in relation to
any land, building or civil engineering work which forms part of the
Assets a developer within the meaning of para 5(5) of Sched 10 to the
Value Added Tax Act 1994.
(4) (a) The Vendor has complied with all statutory provisions and
regulations relating to value added tax and has duly paid or
provided for all amounts of value added tax for which the Vendor
is liable in relation to the Activity.
(b) All supplies made by the Vendor in relation to the Activity are
taxable supplies and the Vendor is not and the Purchaser will not
be denied credit for any input tax by reason of the operation of
s 26 of the Value Added Tax Act 1994 and regulations made
thereunder.
(c) All input tax for which the Vendor in relation to the Activity
has claimed credit has been paid by the Vendor in respect of
supplies made to it relating to goods or services used or to be
used for the purpose of the Activity.
(d) The Vendor has not been and is not liable to be registered for
VAT otherwise than pursuant to the provisions of para 1 of Sched
1 to the Value Added Tax Act 1994.
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2.5 THE CONDUCT OF ACTIVITY AND THE EFFECT OF SALE
(A) Activity since the Accounting Date Since the Accounting Date the Activity
has been carried on in the ordinary and usual course and in accordance with
prior practice so as to maintain it as a going concern and the Vendor has
paid creditors of the Activity in accordance with its prior practice for
payment of creditors;
(B) No substantial customer or supplier representing more than 5 per cent of
sales or supplies of any product or service in the Accounts to 31st January
1997 of the Activity has since the Accounting Date:
(a) ceased or formally indicated an intention to cease trading or
materially reduce its level of trading with the Activity;
(b) changed or formally indicated an intention or desire to change
the terms on which it is prepared to trade with the Activity;
(C) Consequence of acquisition of the Activity by the Purchaser
(1) The acquisition of the Activity and/or the Assets (or any of them) by
the Purchaser or compliance with the terms of this Agreement:
(a) will not give rise to or cause to become exercisable any right of
pre-emption relating to the Activity or any of the Assets; and
(b) will not result in a breach of, or constitute a default under any
order, judgement or decree of any court or governmental agency to
which the Vendor is party or by which, the Vendor or the Activity
or any of the Assets is bound or subject.
(D) Grants The Vendor has not applied for or received any financial assistance
from any supranational, national or local authority or government agency in
relation to the Activity which is capable of being clawed-back.
2.6 THE ACTIVITY AND ITS ASSETS AND LIABILITIES
(A) Assets
(1) There is no agreement or commitment to give or create or allow any
Encumbrance over or in respect of the whole or any part of the Assets
(save in respect of the Property which is dealt with in Schedule 6)
and no claim has been made by any person that he is entitled to any
Encumbrance.
(2) No asset comprised in the Assets is shared by the Activity (or by the
Vendor in relation to the Activity) with any other person (including,
but not limited to, both the Vendor and/or any member of the Lucas
Group in relation to any other business carried on by the Vendor or
any member of the Lucas Group) and the Activity does not (other than
in relation to the Group Sharing Arrangements and save as provided in
the Ancillary Agreements (which is defined in the Umbrella Agreement))
require or depend for its continuation or for the continuation of the
method or manner or scope of operation of its business in the same way
or manner or on the same basis as heretofore upon any assets,
premises, facilities or services owned or supplied
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by the Vendor or any other member of Lucas Group or Business unit.
(B) Debtors
(1) The Vendor has not factored or discounted any of its debts or other
receivables or agreed to do so.
(2) There is annexed to the Disclosure Letter an aged debtor analysis
showing details of all Debtors which are more than 60 days past their
due date for payment and details what action is being taken with
regard to recovery of the same.
(3) The Assets comprise all of the assets, rights and privileges which are
material to the Activity and which are currently or have since the
Accounts Dates been used or required by the Vendor to carry on the
Activity.
(C) Stock
The Stock taken as a whole is sufficient for the normal requirements of
the Activity and taken as a whole is at its normal level having regard to
current orders and to orders reasonably anticipated from customers of the
Vendor in relation to the Activity.
(D) Intellectual Property Rights
(1) No person has been licensed or otherwise authorised to make any use
whatsoever of any Intellectual Property owned by the Vendor and used
exclusively in the Activity.
(2) All the Intellectual Property used by the Vendor in the Activity is
owned by the Vendor and the Vendor does not use in the Activity any
Intellectual Property in respect of which any third party has any
right, title or interest.
(3) No notice has been received alleging that any of the Intellectual
Property is invalid or unenforceable.
(4) So far as the Vendor is aware, none of the processes or products of
the Vendor and/or used in the Activity infringes any intellectual
property rights of any other person or involves the unlicensed use of
confidential information disclosed to the Vendor in relation to the
Activity by any person in circumstances which would entitle that
person to make a claim against the Vendor in relation to the Activity.
(5) None of the Intellectual Property is to the Vendor's knowledge being
used, claimed, applied for, opposed or attacked by any person.
(6) The Vendor is not aware of any infringement of the Intellectual
Property or of any rights relating to it by any person.
(7) There are no outstanding claims against the Vendor or the Activity for
infringement of any intellectual property or of any rights relating to
it used in the Activity and during the last three years no such claims
have been settled by the giving of any undertakings which remain in
force.
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(8) The Vendor has used all reasonable endeavours prior to the Completion
Date to keep confidential information and know-how used in the
Activity confidential and the Vendor operates and fully complies with
procedures which maintain such confidentiality. The Vendor is not
aware of any such confidentiality having been breached. The Vendor has
not disclosed (except in the ordinary course of its business) any of
its know-how, trade secrets or list of customers to any other person.
There is attached to the Disclosure letter a full and accurate list of
the names and addresses of all persons to whom the Information
Memorandum dated February 1997 in relation to (inter alia) the
Activity was provided together with a copy of each confidentiality
undertaking signed by each such person in relation to its provision.
(9) All application and renewal fees, costs, charges, taxes required for
the maintenance or protection of any of the Intellectual Property
which is registered have been duly paid on time and none of such
rights are subject to any existing challenge or attack by a third
party or competent authority.
(10) So far as the Vendor is aware, all agreements relating to the
Intellectual Property (if any) to which the Vendor is a party are
valid and binding and immediately prior to the entering into of this
Agreement the Vendor is not in breach of any of the provisions of such
agreements and copies of all such agreements are annexed to the
Disclosure Letter.
(11) The Vendor has, if required to do so under the Data Protection Act
1984 duly registered as a data user in respect of the Activity and has
complied with the data protection principles as set out in that Act
and a copy of its registration is annexed to the Disclosure Letter.
(12) No member of Lucas Group is the owner or exclusive licensee of any
patents, or registered designs, which in either case confer registered
intellectual property right protection in relation to any product
manufactured used or sold by the Activity at or during the two years
prior to the Completion Date.
(13) The licence of registered and unregistered intellectual property
rights forming part of the Ancillary Agreement grants to the Purchaser
in relation to the Activity no lesser rights in or over the
intellectual property rights of the Grantor than have prior to
Completion been enjoyed or exercised by the Activity.
(E) Computer Systems
(1) The Hardware has been satisfactorily maintained and supported and has
the benefit of appropriate maintenance and support agreements.
(2) In the Vendor's reasonable opinion the Hardware and Software does not
at Completion have inadequate capability and capacity for the
projected requirements of the Activity in the Vendor's budgets for the
Activity for not less than one year following Completion for the
processing and other functions required to be performed for the
purposes of the Activity.
(3) Such disaster recovery plans as are in effect designed to ensure that
Hardware, Software and Data can be replaced or substituted without
material disruption to the Activity are disclosed in the Disclosure
Letter.
(4) In the event that any person providing maintenance or support services
for the Hardware,
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Software and Data ceases or is unable to do so, the Activity has all
necessary rights and information to procure the carrying out of such
services by employees or by a third party without undue expense or
delay.
(5) The Activity has adequate procedures to ensure internal and external
security of the Hardware, Software and Data, including (without
limitation) procedures for preventing unauthorised access, preventing
the introduction of a virus, taking and storing on site and off site
back up copies of Software and Data.
(6) The Vendor owns and is in possession and control of, original copies
of all the manuals, guides, instruction books and technical documents
(including any corrections and updates) required to operate
effectively the Hardware and the Software.
(F) Title Retention The Vendor has not acquired or agreed to acquire any of the
Plant, Machinery and Equipment on terms that property therein or title
thereto does not pass until full payment is made or (if it has) the
property therein or title thereto has now fully passed to the Vendor and no
supplier or other third party has any rights or claims against or in
respect of such Assets accordingly.
(G) Insurances
(1) Brief particulars of all the insurance policies (including, without
limitation, the limit and basis of cover under each policy and the
amount of the applicable excess) in which the Vendor has an interest
in relation to the Activity (the `Insurances') are given in the
Disclosure Letter.
(2) Since the Accounting Date all the Insurances have been in full force
and effect without alteration until Completion, and so far as the
Vendor is aware there are no circumstances which might lead to any
liability under any of the Insurances being avoided by the insurers.
There is no claim outstanding under any Insurance in relation to the
Assets or Transferring Employees nor is the Vendor aware of any
circumstances reasonably likely to give rise to a claim nor (if the
Vendor was to renew the Insurances) is the Vendor aware of any
circumstances as to why the insurers would refuse to renew them.
(H) Trade Associations Full particulars of all trade or business associations of
which the Vendor is a member in relation to the Activity are set out in the
Disclosure Letter.
(I) Terms of Business True and complete copies of the standard terms upon which
the Vendor is prepared to provide goods or services to any person in
relation to the Activity are annexed to the Disclosure Letter.
(J) Liabilities Save in respect of the Creditors, the Contracts, Product
Liability, Warranty Work (pursuant to Clause 11.1.2), the Transferring
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Employees as contemplated by Clause 7 and the Regulations, and in respect of
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the Environment, none of the liabilities which the Purchaser is to assume
under the terms of Clause 10 (being only those liabilities in relation to
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the Activity which the Purchaser would not, but for the provisions of that
clause, otherwise have been obliged to assume hereunder) is material
2.7 CONTRACTS AND CONTRACTUAL ARRANGEMENTS
(A) The Contracts
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(1) Each of the Contracts is valid and binding on the parties thereto and
so far as the Vendor is aware no notice of termination of any such
Contract has been received or served by the Vendor.
(2) Other than as a result of the arrangements contemplated herein the
Vendor is not aware of the invalidity of, or of any grounds for
determination, rescission, avoidance or repudiation, of any of the
Contracts.
(3) The Disclosure Letter lists :
(a) the top twenty suppliers (a "Major Supplier") by value (net
invoice value) to the Vendor in respect of the Activity in the
six months immediately preceding the Accounting Date; and
(b) those customers (a "Major Customer") who have purchased from the
Vendor in respect of the Activity in the two years and six months
which immediately preceded the Accounting Date goods and services
having an average annual net invoice sales value of not less than
(Pounds)250,000.
(4) None of the Contracts including the Material Contracts:
(a) which is not also a Material Contract is an agency or
distributorship agreement;
(b) is known by the Vendor to be likely to result in a loss to the
Vendor or to the Activity on completion of performance; or
(c) is a contract for services (other than contracts for the supply
of electricity or other normal office services); or
(d) requires the Vendor to pay any commission, finder's fee, royalty
or the like; or
(e) involves liabilities which may fluctuate in accordance with an
index or rate of currency exchange; or
(f) is (save for those in respect of Leased Assets) a contract for
the supply of assets to the Vendor on hire, lease, hire purchase,
conditional sale, credit or deferred payment terms; or
(g) is dependent on the guarantee or covenant of or security provided
by any other person; or
(h) is in any way otherwise than in the ordinary course of business;.
(i) in the reasonable opinion of the Vendor cannot readily be
fulfilled or performed by the Vendor on time without undue or
unusual expenditure of money or effort.
(5) Other than the Contracts, there are no agreements or arrangements
relating to the Activity or any part thereof to which the Vendor or
any member of the Lucas Group is a party which in any way restricts
the freedom of the Vendor to carry on the Activity in whole or in part
or to use or exploit any of the Assets in any part of the world as it
thinks fit.
(B) Substantial or significant contracts
(1) For the purposes of this paragraph (B) a "Material Contract" means any
of the Contracts relating to or affecting the Activity which has been
entered into by the Vendor, is still subsisting and which satisfies
any one of the following criteria :
(a) other than Contracts for supply by the Activity under a
negotiated set of terms and conditions pursuant to which the
relevant customer makes "call-off" orders, during the
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life of the Contract will require, or is anticipated to require
any party to it to pay in aggregate a sum of at least
(Pounds)250,000 to the other party or parties;
(b) the contract is incapable of complete performance or cannot be
terminated without cause by any party to it during the period of
six months immediately following Completion;
(c) the contract is one which relates to the supply of services to
the Activity, the supply of which cannot be sourced from an
alternative supplier and is one without the benefit of which the
operation of the Activity is impossible or is materially and
adversely affected;
(d) being Contracts for supply by the Activity under a negotiated set
of terms and conditions pursuant to which the relevant customer
makes "call-off" orders which during the period of 1 year
following Completion will require or is anticipated to require
any party to it to pay in aggregate a sum of at least
(Pounds)1,000,000 to another party or parties.
(2) All Material Contracts are referred to and listed in and annexed to
the Disclosure Letter.
(C) Defaults So far as the Vendor is aware, neither the Vendor nor the Activity
nor any other party to any agreement with the Vendor or the Activity is in
default under any of the Contracts where such as default has a material
adverse effect on the continuance of the Activity.
(D) Powers of Attorney There are not in force at the date hereof any power of
attorney or other authority (express, implied or ostensible) given by or on
behalf of the Vendor in connection with the Activity or the conduct thereof
or any of the Assets which is still outstanding or effective to any person
to enter into any contract, commitment or obligation on behalf of or which
might affect the Activity or the conduct thereof or any of the Assets (save
to Transferring Employees to enter into routine contracts in the ordinary
course of business in the normal course of their duties).
(E) Tenders, etc No offer, tender, or the like is outstanding which is capable
of being converted into an obligation of the Vendor in respect of the
Activity by an acceptance or other act of some other person.
(F) Forward currency exchange The forward currency exchange contracts listed
in Schedule 12 comprise all the forward currency exchange contracts which
the Lucas Group has prior to the Completion Date entered into for the
benefit of the Activity.
2.8 EMPLOYEES
(A) Particulars of Transferring Employees
(1) The Transferring Employees are all employed by the Vendor in the
Activity at the date of this Agreement and no notice of termination
has been given by the Vendor to any of the Transferring Employees on
or before the Completion Date. There are no other individuals
employed at the date of this Agreement in the Activity wheresoever.
(2) The particulars contained in the Schedule annexed to the Disclosure
Letter relating to the Transferring Employees are true and accurate in
all material respects.
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(3) The written contracts of employment of those Transferring Employees
whose basic salary exceeds (Pounds)30,000 per annum or to whom the
Vendor is required to give more than three months' notice to terminate
the employment without cause which derogate from Lucas standard terms
and conditions in force at the time such contract was entered into or
amended are annexed to the Disclosure Letter. In relation to all
other Transferring Employees a pro forma pack incorporating standard
form statements of particulars of employment and other written
statements of employment benefits is annexed to the Disclosure Letter,
the salary or wages and other benefits provided or which the Vendor is
bound to provide of such other Transferring Employees being shown in
the Schedule referred to in paragraph (2) above.
(4) There are no subsisting contracts for the provision by any person of
any consultancy services to the Activity.
(5) None of the Transferring Employees engaged in a senior or managerial
position has given notice terminating his contract of employment.
(6) None of the Transferring Employees is under notice of dismissal or has
any outstanding dispute with the Vendor or any other member of the
Vendor's Group in connection with or arising from his employment nor
is there any liability outstanding to such persons except for
remuneration or other benefits accruing due and no such remuneration
or other benefit which has fallen due for payment has not been paid.
(7) During the period of six months ending with the execution of this
Agreement neither the Vendor nor any member of the Vendor's Group nor
any other person carrying on the Activity has directly or indirectly
terminated the employment of any person employed in or by the Activity
where the reason or principal reason for such termination was the
transfer of the Activity.
(8) The Employee Pack referred to in and annexed to the Disclosure Letter
discloses all agreements or arrangements with trades unions, staff
associations or other associations of employees relating to the
Transferring Employees and the names of all employee representatives
representing all or any of the Transferring Employees.
(9) The Vendor is not under any contractual obligation and, so far as the
Vendor is aware is not under any other obligation :-
(a) to make at any time any increase in the rates of remuneration of
or other similar payment to any of the Transferring Employees;
(b) to make at any time any change in the terms and conditions of
employment of the Transferring Employees.
(10) The Vendor has by the Completion Date complied with all of its
statutory obligations and obligations pursuant to the Regulations and
the Collective Redundancies and Transfer of Undertakings (Protection
of Employment) Regulations 1995 to inform and consult appropriate
representatives as required by law save where any failure so to comply
is as a result of inadequate or inaccurate information provided by the
Purchaser to the Vendor or is at the request of the Purchaser.
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(11) There is no plan, scheme, commitment, custom or practice relating to
redundancy affecting any of the Transferring Employees more generous
than the statutory redundancy requirements.
(12) All plans for the provision of benefits to the Transferring Employees
comply in all respects with all relevant statutes, regulations or
other laws and all necessary consents in relation to such plans have
been obtained and all governmental filings in relation to such plans
have been made.
(13) There are no loans outstanding from the Vendor or the Lucas Group to
any of the Transferring Employees or from any of the Transferring
Employees to the Vendor or the Lucas Group.
(14) Since the Accounting Date, no change has been made in
(i) the rate of remuneration, or the emoluments or pension benefits
or other contractual benefits, of any of the Transferring
Employees; or
(ii) the terms of engagement of any such Transferring Employees.
(15) There are no training schemes, arrangements or proposals whether past
or present in respect of which a levy may henceforth become payable by
the Vendor, or a member of the Lucas Group in each case relating to
the Activity under the Industrial Training Act 1982 (as amended by
the Employment Act 1989).
(16) There is no outstanding undischarged liability of the Vendor in
relation to the Activity to pay any governmental or regulatory
authority in any jurisdiction any contribution, taxation or other duty
arising in connection with the employment or engagement of any of the
Transferring Employees.
(17) None of the Transferring Employees will become entitled by virtue of
their contract of service to any enhancement in or improvement to
their remuneration, benefits or terms and conditions of service only
by reason of the execution of this Agreement or the completion of the
sale and purchase under or pursuant to this Agreement.
(18) Neither the Vendor nor any member of the Vendor's Group have in the
last twelve months, entered into any informal or formal agreement to
amend or change the terms and conditions of employment of any of the
Transferring Employees (whether such amendment or change is to take
effect prior to or after the Completion Date).
(C) Pensions Except for the Lucas Scheme (as defined in Schedule 9) the Vendor
is not under any present or future liability to pay to any of the
Transferring Employees or to any other person who has been in any manner
connected with the Activity any pension, superannuation allowance, death
benefit, retirement gratuity or like benefit or to contribute to any life
assurance scheme, medical insurance scheme, or permanent health scheme and
the Vendor has not made any such payments or contributions on a voluntary
basis nor is it proposing to do so.
(D) Disputes with Employees In relation to the Activity there is no:
(1) outstanding claim by any person who is now or has been an employee of
the Vendor or any member of the Vendor's Group or any dispute
outstanding with any of the said persons or
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with any unions or any other body representing all or any of them in
relation to their employment in the Activity and so far as the Vendor
is aware, there are no circumstances reasonably likely to give rise to
any such dispute;
(2) industrial action involving any employee, whether official or
unofficial, currently occurring or threatened; or
(3) industrial relations matter which has been referred to ACAS or any
similar governmental agency in the applicable jurisdiction for advice,
conciliation or arbitration.
2.9 THE PROPERTY
(1) Save as disclosed in the Disclosure Letter the Property as identified
in Schedule 6 of this Agreement is the only property used in
connection with the Activity in the United Kingdom.
(2) Save as disclosed in the Disclosure Letter, the title documents in
respect of the Property are as at the date this warranty is given, in
the possession of and under the control of the Vendor and all other
members of the Vendor Group.
(3) To the best of the Vendor's knowledge and belief the replies dated 20
October 1997, given by the Vendor's Solicitors on behalf of the
Vendor and all other members of the Lucas Group to the pre-contract
enquiries in respect of the Property raised by the Purchaser's UK
Solicitors dated 19 September 1997 are correct in all material
respects.
2.10 MISCELLANEOUS
(a) Factual statements contained in the Disclosure Letter are true in all
material respects and statements of opinion in the Disclosure Letter
are validly held by the Vendor.
(b) Documents annexed to the Disclosure Letter and referred to in
Appendices are true and accurate copies of the original documents of
which such copies purport to be copies.
(c) Schedule 2 of the Agreement is a comprehensive and complete list of
products manufactured and sold by the Activity.
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SCHEDULE 8
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ASSIGNMENT OF DEBTORS
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Lucas Limited ("the Assignor") HEREBY ASSIGNS for a consideration of (Pounds)[
] to [PURCHASER] ("the Assignee") all of the Assignor's right, title and
interest in and to the [DESCRIPTION OF DEBT] and the full benefit and advantage
of the same to hold to the Assignee absolutely.
Signed and Delivered as a Deed
on this day of 199
LUCAS LIMITED
acting by
----------------------
Director
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Director/Secretary
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SCHEDULE 9
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PENSIONS
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1. INTERPRETATION
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(A) In addition to the provisions of clause 1 of this agreement, this
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schedule is construed as set out in this paragraph.
(B) The following expressions and related expressions have the same meanings
as in the Pension Schemes Act 1993: "CASH EQUIVALENT", "CONTRACTED-OUT"
AND "GUARANTEED MINIMUM PENSION".
(C) The following expressions have the same meanings as in the Rules:
"PENSIONABLE EMPLOYMENT", NORMAL RETIREMENT DATE", "PENSIONABLE PAY",
"FINAL PENSIONABLE PAY".
(D) The following expressions have the following meanings:
"ACTUARY" means a Fellow of the Institute or Faculty of Actuaries or a firm
of those Fellows or a body making available the advice of one of those
Fellows.
"ACTUARY'S LETTER" means the letter from the Lucas Actuary to the
Purchaser's Actuary dated 1998 relating to this schedule, a copy of which
is appendix C hereto.
"ACTUARIAL ASSUMPTIONS" means those assumptions set out in the Actuary
Letter.
"AGREED RATE" means a rate per annum equal to the base rate of Barclays
Bank PLC from time to time compounded half-yearly and references to interest
at the Agreed Rate mean interest accruing daily at the Agreed Rate.
"AVCs" means additional voluntary contributions paid by Members to the Lucas
Scheme.
"CONSENTING MEMBER" means an employee who is a Member immediately before the
Completion Date:-
(a) who is admitted to membership of the Purchaser's Scheme as of the
Completion Date;
(b) who begins to accrue retirement benefits as stated in paragraph 2(C)
under the Purchaser's Scheme as of the Completion Date and who continues
to accrue those benefits at the Payment Date; and
(c) in respect of whom the Lucas Scheme receives, within 2 months after the
date on which the notices referred to in paragraph 3 have been issued a
signed Option Form with Option A (transfer payment) selected and who
does not withdraw his selection of that Option.
"EXEMPT APPROVED SCHEME" has the same meaning as in section 592 of the
Income and Corporation Taxes Act 1988 and "EXEMPT APPROVED" is construed
accordingly.
"LUCAS" means the Vendor.
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"LUCAS ACTUARY" means an Actuary appointed by Lucas and notified to the
Purchaser for the purpose of this schedule. Until further notice, the Lucas
Actuary is Hymans Robertson.
"LUCAS SCHEME" means the Lucas Pension Scheme. Where the context requires,
the "Lucas Scheme" includes its trustees.
"MEMBER" means an active member of the Lucas Scheme (including a member who
is temporarily absent under the Rules on maternity leave) but excluding any
person whose membership is restricted to death in service benefits.
"OPTION FORM" means a form to be completed by Members and delivered to the
Lucas Scheme, being in all material respects in the form set out in appendix
A.
"PAYMENT DATE" means a date agreed between Lucas and the Purchaser which is
not later than one month after all the Transfer Conditions have been
satisified provided they then remain satisfied.
"PURCHASER'S ACTUARY" means an Actuary appointed by the Purchaser and
notified to Lucas for the purpose of this schedule. Until further notice,
the Purchaser's Actuary is R D Harper of William M Mercer Limited.
"PURCHASER'S SCHEME" means the occupational pension scheme or schemes
described in paragraph 2 and, where the context requires, includes its or
their trustees.
"RULES" means, in relation to the Lucas Scheme, the trust deeds, rules and
other documents governing the Lucas Scheme as identified in the Disclosure
Letter.
"TIMING ADJUSTMENT" means the notional investment return over the relevant
period specified in this schedule calculated as follows:
as to 90%: the percentage change in the FT-SE Actuaries All-Share Total
Return index over the period with a reduction for the expenses of
reinvestment equal to 2% of notional income; and
as to 10 per cent: the percentage change in the FT-Actuaries index of prices
for British Government stocks over 15 years over the period (assuming
notional gross interest is reinvested in the same index at the end of each
calendar month).
The indices will be taken from the close of the business on the first day of
the period to the close of business of the last day of the period or, if
either of those days is not a day for which the indices are quoted, the
previous day for which they were quoted is used.
If there is any difference between either of the FT-Actuaries indices as
published in the press and the index in accordance with the basis agreed
between the Financial Times, the Institute of Actuaries and the Faculty of
Actuaries, the latter is used for the purposes of this schedule.
"TRANSFER AMOUNT" and "UNADJUSTED TRANSFER AMOUNT" have the meanings given
in paragraph 4
"TRANSFER CONDITIONS" means all of the following:
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(a) The Board of Inland Revenue has given written approval to the transfer
of assets from the Lucas Scheme to the Purchaser's Scheme in respect of
the Consenting Members and any condition to which that approval is
subject is satisfied.
(b) The Purchaser's Scheme is as described in paragraph 2 and provides the
benefits referred to in that paragraph and neither the Purchaser nor any
member of the Purchaser's Group has made any statement to the effect
that any such benefit will be reduced or discontinued.
(c) The notice referred to in paragraph 3 has been agreed and issued.
(d) The Lucas Scheme has received the Option Forms completed and signed by
the Consenting Members.
(e) The calculation referred to in paragraph 4(C) has become final and
binding as mentioned in that paragraph.
(f) The Lucas Scheme has received the confirmation and undertakings set out
in appendix B executed by the Purchaser's Scheme (together with any
supporting documentary evidence which Lucas may reasonably request) and
those confirmations and undertakings remain true and effective in all
material respects.
2. PURCHASER'S SCHEME
------------------
(A) On or before the Completion Date the Purchaser will establish or
nominate one or more occupational pension schemes as from the Completion
Date and will procure that the scheme or schemes will be as described in
(B) below and provide the benefits described in (C), (D) and (E) below
for and in respect of each person who accepts the offers referred to,
except that in the case of the benefits referred to in (D) actual
payment of the benefits by the Purchaser's Scheme is subject to receipt
of the Transfer Amount; before the full Transfer Amount has been
transferred, those benefits must be paid by the Purchaser's Scheme to
the extent of the assets which have been received from the Lucas Scheme.
(B) The Purchaser's Scheme must be:
(i) an occupational pension scheme to which the Lucas Scheme can by
law, and in accordance with Inland Revenue practice relating to
Exempt Approved Schemes, make a transfer payment in respect of the
Consenting Members' entire rights under the Lucas Scheme
(including rights to guaranteed minimum pensions);
(ii) an Exempt Approved Scheme (or designed so as to be capable of
being Exempt Approved); and
(iii) contracted-out in relation to the Transferring Employees.
(C) The Purchaser's Scheme will offer to each person who is a Transferring
Employee and a Member or eligible to be a Member at Completion, in
relation to employment from and after Completion, final salary type
benefits which include pension accrual at 1/70th of final
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pensionable pay per annum and are otherwise as set out in the notice to
Members of the Lucas Pension Scheme in the Agreed Terms.
(D) The Purchaser's Scheme will offer to each person who is a Transferring
Employee and a Member in respect of his Pensionable Employment up to
Completion, benefits which are equivalent in value, determined on the
Actuarial Assumptions, to those which would prospectively have been
provided for and in respect of him under the Lucas Scheme if his
Pensionable Employment had continued after Completion on the assumption
that the Rules are not altered.
(E) The Purchaser will offer arrangements for additional voluntary
contributions and will procure that the Purchaser's Scheme will provide
under those arrangements, in respect of any Consenting Members' AVCs
transferred to the Purchaser's Scheme, benefits which are at least equal
in value at the date of the transfer to the value so transferred.
(F) In this paragraph: "benefits" includes all options under the Rules and
the rate of contributions required to be paid by Members.
3. NOTICES
-------
(A) Before Completion the Purchaser will supply to Lucas particulars of the
proposed Purchaser's Scheme ("the proposals") and a written statement
by the Purchaser's Actuary, addressed to Lucas, that in his opinion the
proposals are in accordance with paragraph 2. The proposals will
include a draft of a notice ("the notice") to be issued to the persons
referred to in paragraph 2 offering them membership of the Purchaser's
Scheme and benefits in accordance with paragraph 2 with effect on and
from Completion and, in the case of Members, explaining the options
available to them in relation to their accrued rights under the Lucas
Scheme at Completion and incorporating the Option Form.
(B) After receipt of the proposals and the Purchaser's Actuary's statement,
Lucas will inform the Purchaser in writing whether Lucas agrees that the
proposals satisfy paragraph 2 and, in the case of the options referred
to in (A) above, adequately explain the options and accrued rights or
(in either case) of any objection thereto.
(C) As soon as practicable after the proposals and the notice, or any
revised proposals following an objection by Lucas, have been agreed, the
Purchaser will issue the notice in the agreed form to each person
referred to in paragraph 2 and confirm such issue, with a copy of the
notice, to Lucas.
4. CALCULATION OF TRANSFER AMOUNT
------------------------------
(A) The unadjusted Transfer Amount will be calculated in accordance with the
Actuary's Letter and then increased or decreased over the period starting on
the Completion Date and ending at the end of the day which is 3 days before
the Payment Date by the Timing Adjustment and, from (and including) the day
which is 2 days before the Payment Date, until the end of the day
immediately before the Payment Date, by interest at the Agreed Rate.
In calculating the Transfer Amount any benefits under the Lucas Scheme which
are attributable to
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AVCs paid by the Consenting Members and in respect of which the Consenting
Members are not entitled to benefits based on their final pensionable
earnings, and the AVCs themselves, are disregarded. The part of the Transfer
Amount which relates to each Consenting Member and the assets transferred
representing his AVCs will not be less than the cash equivalents of the
Consenting Members.
(B) The Purchaser will provide Lucas promptly with the documents and information
necessary for the calculation of the Transfer Amount and answer any
questions which the Lucas Actuary may reasonably have on the documents and
information provided. The Lucas Actuary will calculate the Transfer Amount
within 1 month of receiving those documents, information and answers in
accordance with the Actuary's Letter.
Not later than 14 days after the Lucas Actuary has calculated the Transfer
Amount (excluding the amount of the interest and Timing Adjustment) Lucas
(or the Lucas Actuary) will notify the Purchaser (or the Purchaser's
Actuary) in writing of the result of that calculation. Within 21 days of
Lucas (or the Lucas Actuary) having so notified the Purchaser (or the
Purchaser's Actuary) the Purchaser's Actuary may request in writing the
Lucas Actuary to supply to him the particulars of the calculation (excluding
the amount of the interest and the Timing Adjustment but including
particulars of the precise manner in which they are calculated) and the data
on which the calculation is based which the Purchaser's Actuary reasonably
requires to enable him to check that the calculation is mathematically
correct and in accordance with the terms of this schedule and the Actuary's
Letter. The Purchaser's Actuary has one month from the date in which those
particulars and data have been supplied to him (or, if he has made no
request for any of those particulars and/or data within the 21 day period
mentioned above, from the date of notification by Lucas or the Lucas
Actuary) in which he may raise any objection in writing that the calculation
is incorrect or not in accordance with the terms of this schedule.
(C) The calculation referred to above is final and binding on Lucas and the
Purchaser on the later of (i) if the Purchaser's Actuary raises no objection
within the terms of (B) above, the expiry of the period mentioned above in
which he may raise an objection, and (ii) if the Purchaser's Actuary raises
an objection within the terms of (B) above, the date of a subsequent
written agreement between the Lucas Actuary and the Purchaser's Actuary that
the calculation (or revised calculation) is mathematically correct.
5. TRANSFER OF TRANSFER AMOUNT AND AVCS
------------------------------------
(A) Lucas will use all reasonable endeavours to procure that on the Payment
Date the Lucas Scheme transfers to the Purchaser's Scheme the Transfer
Amount and the assets representing, as at the date of transfer, the AVCs
paid by the Consenting Members.
If the Transfer Amount or the assets representing AVCs includes an
amount or assets in respect of a person who was considered to be a
Consenting Member but who is not one because he has withdrawn his
selection or lost his right to the cash equivalent as mentioned in
paragraph (c) of the definition of Consenting Member, a deduction will
be made from the amount or assets otherwise transferable under this
paragraph equal to the amount included in the Transfer Amount or the
relevant assets representing AVCs in respect of that person.
(B) Lucas and the Purchaser will use all reasonable endeavours to secure
agreement between the
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Lucas Scheme and the Purchaser's Scheme respectively as to the
particular assets to be transferred representing the Transfer Amount. If
agreement is not reached by the Payment Date, the transfer will be in
the form of assets of the Lucas Scheme listed on The London Stock
Exchange and selected by the Lucas Scheme as a representative selection
of such listed assets held by the Lucas Scheme or, to the extent so
decided by the Lucas Scheme, cash. Any securities to be transferred will
be valued at the mid-market price at the close of business on The London
Stock Exchange on the day before the date of transfer. To the extent
that the Transfer Amount comprises cash, the Transfer Amount will be
reduced by 0.5 per cent (to allow for expenses of realising assets).
(C) The Purchaser will seek promptly from the Board of Inland Revenue
approval to the transfer of assets from the Lucas Scheme to the
Purchaser's Scheme in respect of the Consenting Members and, at Lucas
request, will supply promptly to Lucas the documents and information
which Lucas reasonably requires to enable the Lucas Scheme to obtain a
corresponding approval.
6. PAYMENTS BY LUCAS AND PURCHASER
-------------------------------
(A) If the Transfer Amount is not transferred in full to the Purchaser's
Scheme within three months after the Payment Date as provided for in
paragraph 5, Lucas shall, subject to (B) and (C) below, not later than
one month after receipt of a written demand from the Purchaser, pay to
the Purchaser, by way of an adjustment of the consideration for the
Activity, 100 per cent. less the percentage rate of corporation tax
applying to the Purchaser on the date of receipt of that demand of the
following amount:
(i) if some assets have been transferred from the Lucas Scheme to the
Purchaser's Scheme (whether before or after that written demand is
received) - the amount by which the Transfer Amount (calculated as
at the date on which those assets were transferred) exceeds the
value so transferred but the excess for this purpose shall
(a) be the excess adjusted by the Timing Adjustment from (and
including) the date of that transfer up to (but excluding) the
date of payment by Lucas pursuant to this sub-paragraph; and
(b) be reduced (after the adjustment in (a)) if, despite some
assets having been transferred to the Purchaser's Scheme, any
benefit remains payable to or in respect of a Consenting
Member under the Lucas Scheme; the reduction will be by the
aggregate of the cash equivalents of these benefits;
(ii) if no assets have been transferred - the amount by which the
Transfer Amount (calculated as at the date on which payment is made
to the Purchaser in accordance with this sub-paragraph) exceeds the
aggregate of the cash equivalents of the benefits remaining payable
to or in respect of the Consenting Members under Lucas Scheme when
payment is made in accordance with this sub-paragraph;
less (in either case):
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(iii) any amount, in addition to the amount transferred referred to in
(i) above, transferred from the Lucas Scheme to the Purchaser's
Scheme before payment under this sub-paragraph is made adjusted by
the Timing Adjustment from the date of transfer to the date of
such payment.
For the purpose of this sub-paragraph each of the Consenting Members in
respect of whom benefits are so payable shall be deemed to have a right
to a cash equivalent.
The amount derived under (i) to (iii) above (before the reduction by
reference to corporation tax) is referred to below as "the Shortfall".
(B) If any of the Transfer Conditions ceases to be fulfilled or effective,
the Purchaser shall not demand payment pursuant to (A) above and the
time limit referred to in (A) above will not commence, or (if any of the
Transfer Conditions cease to be fulfilled or effective after the time
limit has started to run) will be suspended, until all those conditions
are again fulfilled and effective.
(C) No payment shall be due from Lucas pursuant to (A) above:-
(i) if the reason for the Transfer Amount (or part of it) not having
been transferred to the Purchaser's Scheme by the expiry of the
time limit referred to above is the failure of the Purchaser's
Scheme for whatever reason to accept the whole or any part of the
Transfer Amount or if the reason is any other reason outside the
control of the Lucas Scheme but, if no payment is due from Lucas
because of any such other reason outside the control of the Lucas
Scheme, payment will become due (subject to the other provisions of
this paragraph 6) if and when such reason ceases to exist;
(ii) unless the Purchaser undertakes in writing to Lucas to pay any
amount received pursuant to (A) above forthwith to the Purchaser's
Scheme and to procure that such amount be applied by the
Purchaser's Scheme to provide benefits for the Consenting Members
in respect of their Pensionable Employment in the Lucas Scheme
before Completion as mentioned in paragraph 2(D);
(D) If payment is made by Lucas in accordance with (A) above the amount of
that payment, grossed up to take account of the deduction by reference
to the rate of corporation tax as mentioned in (A) above, will be
deducted from the amount otherwise payable under paragraph 5(A).
(E) If Lucas pays to the Purchaser an amount (the "Payment") equal to the
percentage referred to in (A) above of the Shortfall then:
(i) forthwith following Lucas making payment pursuant to (A) above an
amount equal to the Shortfall shall be contributed to the
Purchaser's Scheme; and
(ii) provided that the Purchaser and all members of the Purchaser's
Group have taken all reasonable steps (including the claiming of
any relevant deduction from profits and any repayment of tax and
the obtaining of approval of the Purchaser's Scheme as an Exempt
Approved Scheme) to maximise the Aggregate Tax Benefit, Lucas
shall, on the later of the fifth anniversary of the Completion Date
and 2 days after receipt of written notice from the Purchaser that
the Aggregate Tax Benefit has been finally determined by the Inland
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Revenue, pay to the Purchaser, by way of adjustment to the
consideration for the Activity, an amount equal to the excess of
the Shortfall over the sum of the Payment and the Aggregate Tax
Benefit, adjusted by the Timing Adjustment from (and including) the
date on which the Payment was made up to (but excluding) the date
of payment of that excess.
In this sub-paragraph:
"Tax Benefit" means the aggregate of the amount by which the relevant
company's liability to pay corporation tax is reduced and the amount of
any repayment of corporation tax to which the relevant company is
entitled, which, in either case, arises as a result of the contribution
referred to in (i) above (including any such reduction or right which is
attributable to a surrender by way of group relief or consortium relief
under sections 402 to 413 Taxes Act 1988 of a loss which arises as a
result of the payment of the contribution); and
"Aggregate Tax Benefit" means the aggregate of any Tax Benefits arising
to the Purchaser and the Purchaser's Group in respect of all accounting
periods on or before the fifth anniversary of the Completion Date.
(F) If, for a reason outside Lucas' control, the value of the aggregate of
the assets transferred by the Lucas Scheme to the Purchaser's Scheme and
the assets transferred by Lucas to the Purchaser under this paragraph 6
(in the case of non-cash assets based on the value of the assets
transferred as at the date of transfer) exceeds the Transfer Amount, the
Purchaser shall, within one month of such an excess having been
transferred, pay to Lucas, by way of an adjustment of the consideration
for theActivity, a sum in cash equal to such excess adjusted by the
Timing Adjustment from (and including) the date of transfer of the
excess to the Purchaser's Scheme up to (but excluding) the date of
payment of the excess by the Purchaser to Lucas.
7. REDUNDANCIES
------------
If within two years after Completion a Consenting Member is made redundant
by the Purchaser and is then aged 50 or over, Lucas and the Purchaser will
co-operate in good faith to arrange for him to be offered the option of
transferring the value of the rights he has then accrued (or been credited)
under the Purchaser's Scheme to the Lucas Scheme, so that the Lucas Scheme
will provide for him the benefits which he would have received on
redundancy had he remained in active membership of the Lucas Scheme after
Completion until the date when he was made redundant by the Purchaser. Any
such transfer value will be calculated by the Purchaser's Actuary in
accordance with the Actuary's Letter and paragraph 4 (with references to
the Lucas Actuary being to the Purchaser's Actuary and Lucas to the
Purchaser) will apply thereto.
8. SELLER'S PROTECTION
-------------------
(A) In this paragraph:
"CLAIM" means a claim relating to:
(i) any Relevant Benefit; and/or
(ii) access to any Relevant Benefit or to a scheme providing any
Relevant Benefit,
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attributable to employment after Completion or, in the case of a
Consenting Member (or any person claiming through or in respect of him),
attributable to employment before or after Completion.
"CLAIMANT" means a Transferring Employee or any person claiming benefit
through or in respect of him.
"LIABILITY" includes any compensation, damage, loss or requirement of
any court, industrial tribunal or Pensions Ombudsman order or award, and
costs and expenses properly incurred.
"LIABILITY AMOUNT" means the amount of any Liability incurred or
sustained by Lucas or any member of the Vendor's Group or the Lucas
Scheme arising out of or in connection with a Claim by a Claimant.
"RELEVANT BENEFIT" is construed in accordance with section 612 of the
Income and Corporation Taxes Act 1988.
(B) The Purchaser will indemnify, and keep indemnified on a continuing
basis, Lucas, each member of the Lucas Group and the Lucas Scheme
against any Liability Amount.
(C) To the extent that a Claim relates to a period of employment before the
Completion Date: this indemnity is subject to payment of the Transfer
Amount and excludes any Claim (or part of a Claim) which relates to a
default by Lucas, any member of the Lucas Group or the Lucas Scheme.
(D) To the extent that this indemnity relates to a Claim against a member of
Lucas Group (other than Lucas) or the Lucas Scheme, Lucas holds the
benefit of the indemnity as trustee for that member or the Lucas Scheme
(as the case may be). Without prejudice to the ability of that person
to enforce the indemnity, the indemnity may be enforced by Lucas as
trustee for him.
(E) In quantifying any Liability Amount, the Actuary's Letter shall be
applied as nearly as practicable and, in default of agreement as to how
it should apply, the disagreement shall be resolved in accordance with
paragraph 9.
(F) The Purchaser agrees that it will not, and will procure that the
Purchaser's Scheme and the Purchaser's Group will not, take any action
or provide any assistance to any person (direct or indirect) which might
result in the Lucas Scheme transferring a smaller or a larger amount
than the Transfer Amount and the assets representing Consenting Members'
AVCs to the Purchaser's Scheme.
9. DISPUTES
--------
Any dispute between Lucas and the Purchaser or between the Lucas Actuary and
the Purchaser's Actuary concerning the calculation of the Transfer Amount or
compliance with paragraph 2 or 3 shall, in the absence of agreement between
them within one month of the party concerned having notified the other of
the dispute, be referred to an independent actuary chosen by agreement
between the parties or, failing agreement, appointed by the President for
the time being of the Institute of Actuaries at the instance of either
party. The independent actuary shall determine the disputed matter in
accordance with this schedule (including the Actuary's Letter) acting as an
expert and not as an arbitrator and his decision shall be final and binding.
The fees and expenses of the independent Actuary and of the
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President shall be borne equally between the parties, except that the
independent Actuary shall have power to determine, at the request of either
party, that the fees and expenses shall be borne exclusively by the other
party or in such proportions as the Actuary may determine and any such
determination shall be final and binding.
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APPENDIX A
OPTION FORM
TO BE COMPLETED AND RETURNED TO [ ] BY [ ] 199[ ]
To: The trustees of the Lucas Pension Scheme ("the Lucas Scheme")
I have read and understood the notice dated [ ], 199[ ], in which the
[Purchaser's Scheme] (the "[ ] Scheme") has offered to provide benefits
in respect of my Pensionable Employment under the Lucas Scheme up to
[Completion date] and in which the options available to me in respect of my
accrued rights under the Lucas Scheme have been explained.
PLEASE SPECIFY WHICH ONE OF THE OPTIONS YOU SELECT BY TICKING THE BOX
ALONGSIDE IT AND THEN SIGNING AND COMPLETING THIS FORM
OPTION A - TRANSFER TO [PURCHASER'S] SCHEME
I have applied to become a member of the [Purchaser's] Scheme with effect on
and from [Completion date]. I request the trustees of the Lucas Scheme to
transfer the value of all benefits relating to my membership of the Lucas
Scheme which have accrued to or in respect of me under the Lucas Scheme
(including the cash equivalent of those benefits under the Pension Schemes
Act 1993) to the trustees of the [Purchaser's] Scheme to secure benefits for
me as mentioned in the notice referred to above. I understand and
acknowledge that in complying with this request the trustees of the Lucas
Scheme will be discharged from any obligation to provide benefits to me or
any person claiming under me or in respect of my membership.
B - OTHER OPTIONS
I do not want to transfer the value of my accrued benefits to the
[Purchaser's] Scheme. I request the Lucas Scheme to send me further details
of the alternative options which I have.
IMPORTANT - PLEASE NOTE THAT THE BENEFITS OFFERED IN OPTION A WILL BE AVAILABLE
ONLY IF THIS FORM IS
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RETURNED, DULY COMPLETED, BY 199
Signature ................................................
Date .....................................................
Name .....................................................) BLOCK CAPITALS
Address ..................................................)
..........................................................
National Insurance No. ...................................
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APPENDIX B
TRANSFER AGREEMENT
To: The trustees of the Lucas Pension Scheme
From: The trustees of the Butec Electrics Pension Scheme Date:
(the "Receiving Scheme")
RE: EMPLOYEES OF LUCAS HEAVY DUTY PRODUCTS DIVISION OF LUCAS LIMITED
We request the transfer to us of the sum and/or assets referred to in Appendix 2
hereto equal in value to the Transfer Amount calculated in accordance with
Appendix C to Schedule 9 of an agreement between Lucas Limited, Lucas Industries
plc and Prestolite Electric Limited dated 1998 in respect of the members
listed in Appendix 1 hereto (the "Consenting Members") and, in consideration of
that transfer, we hereby confirm and undertake as follows:-
1. The Consenting Members have been offered membership of the Receiving
Scheme as of [ ], 1998 with the benefits and
contribution rate described in the notice issued to them on [ ]
1998, a copy of which is Appendix 3 hereto (the "Notice").
2. Each Consenting Member who has accepted that offer has been admitted to
membership of the Receiving Scheme and has entered employment with an
employer which participates in the Receiving Scheme and that employment
is contracted-out by reference to the Receiving Scheme for the purposes
of the Pension Schemes Act 1993 (a copy of the appropriate contracting-
out certificate(s) is Appendix 4 hereto). Each Consenting Member will be
entitled in respect of the Transfer Amount to benefits from the Receiving
Scheme which are as described in the Notice and, on receipt of the
Transfer Amount, we relieve you of all liabilities to or in respect of
the Consenting Members.
3. We undertake to treat the amounts previously advised as Consenting
Members' contributions for the purposes of the Receiving Scheme and not
to allow a refund of contributions on subsequent cessation of service or
membership except where a refund is not prohibited by Inland Revenue
restrictions or the preservation requirements in force under the Pension
Schemes Act 1993.
4. We confirm that the Receiving Scheme is established and administered
wholly in the United Kingdom and is an exempt approved scheme (within the
meaning of section 592 of the Income and Corporation Taxes Act 1988) and
that we are permitted under the documents governing the scheme and by the
Inland Revenue to receive the Transfer Value.
5. We enter into this agreement as the trustees of the Receiving Scheme so
as to bind us and our successors as trustee(s) of the Receiving Scheme
and we agree to bring the contents of this agreement to the notice of our
successors.
Add names and signatures of trustees of Receiving Scheme.
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APPENDIX 1
[LIST OF CONSENTING MEMBERS]
APPENDIX 2
[FIGURE OF TRANSFER AMOUNT OR LIST OF ASSETS]
APPENDIX 3
[NOTICE SENT TO CONSENTING MEMBERS PER APPENDIX B, PARAGRAPH 1]
APPENDIX 4
[COPY OF CONTRACTING-OUT CERTIFICATE PER APPENDIX B, PARAGRAPH 2]
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SIGNED BY CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
as duly authorised attorney ) ----------------------
for and on behalf of )
LUCAS LIMITED Chris Long-Leather as attorney for
Lucas Limited
SIGNED BY P. KIM PACKARD ) /s/ P. Kim Packard
duly authorised for and on behalf ) -----------------------
of PRESTOLITE ELECTRIC LIMITED )
Director
SIGNED BY CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
as duly authorised attorney ) ------------------------
for and on behalf of )
LUCAS INDUSTRIES PLC )
Chris Long-Leather as attorney for
Lucas Industries plc
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EXHIBIT 2.3
DATED January 22, 1998
(1) LUCAS INDUSTRIES PLC
(2) PRESTOLITE ELECTRIC INCORPORATED
(3) PRESTOLITE NEWCO, INC.
A G R E E M E N T
for the sale and purchase of the
entire issued share capital of Lucas Argentine Holdings, Inc. and shares in
Lucas Indiel Argentina S.A.
Eversheds
10 Newhall Street
Birmingham
B3 3LX
Tel: 0121 233 2001
Fax: 0121 236 1583
-1-
<PAGE>
THIS AGREEMENT is made on January 22, 1998
BETWEEN:-
(1) LUCAS INDUSTRIES PLC whose registered office is at Stratford Road,
Solihull B90 4LA
(2) PRESTOLITE ELECTRIC INCORPORATED whose principal place of business is at
2100 Commonwealth Boulevard, Ann Arbor, MI 48105, USA
(3) PRESTOLITE NEWCO, INC. whose principal place of business is at 2100
Commonwealth Boulevard, Ann Arbor, MI 48105, USA
1. INTERPRETATION
--------------
In this Agreement:
1.1 the following expressions have the following meanings unless
inconsistent with the context:
Expression Meaning
"the Accounting Principles" The accounting policies and principles
as set out in Schedule 5
"the Ancillary Agreements" The meaning attributed to that
expression in the Umbrella Agreement
"the Associated Documents" The meaning attributed to that
expression in the Umbrella Agreement
"the Associated Company" Any person which is either a holding
company (whether direct or indirect) or
a
-2-
<PAGE>
subsidiary company of the relevant
party or a subsidiary company of any
such holding company or is otherwise
directly or indirectly controlled by or
is under the same control, direct or
indirect, or the relevant party
"the Auditors" The auditors for the time being of the
Group
"A$" Argentinean Pesos
"the Bank Debt" All monies due and outstanding from any
member of the Group to any bank
"Business Day" Any day (other than Saturday or Sunday)
on which Banks in Argentina are open
for a full range of banking
transactions
"the Company" Lucas Indiel Argentina S.A., T33, F248,
N25, Registro Publico de Commercio of
the Province of San Luis
"Completion" Completion of the sale and purchase
hereby agreed in accordance with clause
6 and the expression "the Completion
Date" shall be construed accordingly
"the Consideration" The consideration for the sale of the
Indiel Sale Shares and the Lucas Newco
Shares calculated in accordance with
clause 3
"consistently applied" With reference to any particular asset,
liability, income or expenditure, to
the extent not provided to the contrary
in the Accounting
-3-
<PAGE>
Principles, applied on the bases of
practices and methods consistent with
those used in the preparation of the
Accounts (as defined in Schedule 4
below)
"the Disclosure Letter" The letter having the same date as this
Agreement from the Vendor to the
Purchasers qualifying the Warranties
"the Distribution Agreement" The distribution agreement in the
agreed terms between Lucas Aftermarket
Operations a division of Lucas Limited
and the Company
"the "A" Loan Notes" The A$1.0 'A' Guaranteed Unsecured Loan
Notes in the agreed terms to be issued
by Prestolite Newco
"the 'B' Loan Notes" The A$1.0 'B' Guaranteed Unsecured Loan
Notes in the agreed terms to be issued
by Prestolite Newco
"the 'C' Loan Notes" The A$1.0 'C' Guaranteed Unsecured Loan
Notes in the agreed terms to be issued
by Prestolite Newco
"the Loan Notes" All or any of the 'A' Loan Notes, 'B'
Loan Notes or 'C' Loan Notes
"EBITDA" Profit before interest and tax but
adding back depreciation as calculated
and determined in accordance with the
provisions of the 'C' Loan Notes and
this Agreement
-4-
<PAGE>
"the English Sale Agreement" The meaning attributed to that
expression in the Umbrella Agreement
"Environment" The aggregate of surrounding objects
conditions and influences that
influence the life and habits of human
beings or any other organism or
collection of organisms and
"Environmental" shall have a
corresponding meaning
"the Environmental Claims" Save as set out in the Environmental
Indemnity Exceptions Letter any action,
demand, demand letter, claim, notice of
non-compliance or violation, notice of
liability, proceeding, consent order or
consent agreement (including
investigation, corrective and remedial
action costs for works required by any
competent authority or governmental
body of competent jurisdiction) in
respect of any act or omission of any
Group Member prior to Completion
relating in any way to any
Environmental Law, Environmental Permit
or Hazardous Substances or the
generation, transportation, placement,
storage, discharge, treatment, use
and/or disposal by the Company and/or
by any other person of any Hazardous
Substances or other materials the cause
of which arose prior to the Completion
Date in and/or on and/or from, as the
case may be, any site and/or facility
and/or at the
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<PAGE>
Property SAVE THAT any Environmental
Claims arising from an Environmental
Law not in effect at the date of this
Agreement shall be limited to all costs
of remedial or clean-up action incurred
by the Purchasers or any Group Member
in order to meet the minimum
requirements of any competent authority
and arising in consequence of the
condition of the Property prior to or
at Completion or arising from the
activities of any Group Member or its
predecessors in title at the Property
prior to Completion; for the purposes
of this definition it is agreed that
the expression "remedial and clean-up
action" shall be limited to appropriate
treatment of contaminated material,
whether by destruction, removal,
containment or otherwise but shall not
include costs associated with the
continued operation of Environmental
Permits or the general operational
requirements of the business
"the Environmental Indemnity The letter from the Vendor to the
Exceptions Letter" Purchasers having the same date as this
Agreement setting out matters which are
relevant for the purposes of liability
under the Environmental Indemnity
"Environmental Law" Any statute, legislative or other
measure now in effect or in effect by
the fifth anniversary of
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<PAGE>
this agreement as is and to the extent
(in accordance with current policy and
practice) or would be and to the extent
(in accordance with the policy and
practice prevailing at that time)
enforced by the relevant statutory
authority following judicial or
administrative interpretation including
any judicial or administrative order,
consent decree or judgment, relating to
pollution or protection of the
environment, health, safety or natural
resources or any other provincial or
local law, as is now in effect or as
may be amended, modified, enacted,
ratified or which otherwise may become
applicable by the fifth anniversary of
this Agreement and the expression
"Environmental Law" shall also include
any statute, legislative or other
measure not in effect by the fifth
anniversary of this Agreement but under
formal consideration at that time by
any competent authority or governmental
body of competent jurisdiction and
which in the light of the circumstances
then prevailing is reasonably likely to
be brought into effect and which is
subsequently brought into full force
and effect (to the intent and effect
that the relevant authorities are
implementing and enforcing the same) by
the sixth anniversary of this Agreement
("the Potential Legislation") AND IT IS
HEREBY AGREED that the Potential
-7-
<PAGE>
Legislation may only give rise to an
Environmental Claim if written notice
of such Potential Legislation is given
to the Vendor by the Purchasers on or
before the fifth anniversary of this
Agreement
"Environmental Permit" Any permit, approval, identification
number, license or other authorisation
required by any party under any
applicable Environmental Law, bylaws
and/or regulations, as the case may be
"the Environmental The indemnity as to environmental
Indemnity" issues contained in clause 8.1.1
"the Exchange Rate" The exchange rate applicable for
converting A$ into United States
dollars or, as the case may be, pounds
sterling calculated at the average of
the "bid" and "asked" exchange rate
quoted by Reuters (or a different
independent wire service providing
international spot exchange rates as
agreed by the parties) in New York at
1.00 p.m. on (unless the context
otherwise requires) the day which is
the Business Day before payment of the
amount in question is due or, in the
case of a claim under the Warranties or
Indemnities, on the date on which the
claim is made
"Fines" Fines and penalties which the Company
or
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<PAGE>
any of its subsidiaries becomes liable
to pay, to any governmental or
regulatory authority or department as a
result of a violation by or other non-
compliance on the part of the Company
or any of its subsidiaries or any of
their respective agents for whose acts
or omissions the Company or the
relevant subsidiary is vicariously
liable (or where the Company or its
relevant subsidiary is liable to
indemnify such agent such amount for
which the Company or the relevant
subsidiary is liable to pay in
indemnification of such agent) of or
with any law (including any statutory
or regulatory provisions but excluding
any Environmental Law) applicable to
the Company or the relevant subsidiary
at Completion and any other payment in
the nature of a fine or penalty which
the Company or any of its subsidiaries
becomes liable to make to any such
authority or department as a result of
any such violation or non-compliance
where and to the extent that in either
or any such event such violation or
non-compliance occurred prior to the
Completion Date.
"the First Year" The year ending on 31st December 1998
"the Second Year" The year ending on 31st December 1999
-9-
<PAGE>
"the Third Year" The year ending on 31st December 2000
"the First Years Accounts" The profit and loss account of the
Group in respect of the First Year
prepared on a consolidated basis and in
accordance with clause 4
"the Second Years Accounts" The profit and loss account of the
Group in respect of the Second Year
prepared on a consolidated basis and in
accordance with clause 4
"the Third Years Accounts" The profit and loss account of the
Group in respect of the Third Year
prepared on a consolidated basis and in
accordance with clause 4
"the Fixed Asset Amount" A$18,922,000
"the Fixed Assets" The fixed assets, including property
plant equipment and being shown for the
purposes of illustration only in the
proforma statement which appears in
schedule 6
"the Group" Together the Company and each other
company details of which are set out in
Schedule 1 Part 2
"Group Member" Any company which is a member of the
Group
"Hazardous Substances" Any materials or substances defined or
regulated as toxic or hazardous or as a
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<PAGE>
pollutant or contaminant or as a
hazardous waste in terms of the
hazardous substance laws and
regulations of Argentina which are
relevant to the location in question
and/or any other applicable national,
provincial and/or local legislation,
bylaws and/or regulations
"Incremental Cost" In relation to any repair or
replacement, the cost of performing
such repair or replacing such product
(which shall not for the avoidance of
doubt include an apportionment of any
fixed cost or overhead for which the
relevant Group Member would have been
liable or would have incurred had it
not been obliged to carry out such
repair or replacement) less the net
scrap or core value (as appropriate) of
the replaced product or as the case may
be materials actually recovered by the
relevant Group Member or the Purchasers
after allowing for all costs of
recovery
"the Capped Indemnities" All indemnities given by the Vendor
under this Agreement (other than the
Uncapped Indemnities)
"the Uncapped Indemnities The indemnities given by the Vendor in
clauses 7.1 and 8.1.3 of this
Agreement, the indemnities dealing with
expenses and the like contained in each
of clauses 5.5.4, 5.6,
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<PAGE>
5.7, 6.6 and 7.8 and the Taxation
Indemnities
"the Indemnities" The Capped Indemnities and the Uncapped
Indemnities taken together
"the Indiel Option" The option agreement in the agreed
terms made between the Vendor and PEI
pursuant to which options are granted
over the Indiel Option Shares
"the Irrevocable Capital The sum of $3,500,000 provided by the
Contribution" Vendor to the Company by way of
irrevocable capital contribution (to
the intent and effect that the same
shall be and shall be treated as an
accretion to the amount standing to the
credit of the capital and reserves of
the Company)
"Labour Contingencies" i) Any payment made to or other costs
incurred in respect of employees (which
expression shall include persons who
are employees for the purposes of
Argentine Law where the Company has
entered into an agreement with an
independent third party whereby it has
created a labour relationship that
falls under the Argentine Labour
Contract Act, as construed and applied
under Argentine Law) of the Company
where the obligation to make such
payment or incur such costs falls on
the Company and arises directly from an
unlawful or negligent act or omission
by any
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<PAGE>
Group Member prior to Completion (and
then only to the extent that the same
occurred prior to Completion) or from a
breach on the part of any Group Member
of its statutory obligations to
employees where such unlawful or
negligent act or omission or such
breach occurred prior to Completion
(and then only to the extent that the
same occurred prior to Completion) and
which, in any such case, leads to an
obligation to make a payment or to a
liability after Completion on the part
of any Group Member and in respect of
which the Purchaser is able to
demonstrate that, were it not for such
act omission or breach the obligation
or liability would not have arisen, or
would not have been so great; and
ii) any liability of any Group Member
arising in respect of the period prior
to Completion as a direct consequence
of the wrong classification of
personnel as independent contractors
"Lucas Competitor" Bosch, Magneti Marelli and Valeo and
any Associated Company of any such
entity
"the Lucas Group" LucasVarity and any subsidiary or
subsidiary undertaking of LucasVarity
for the time being but excluding the
Group and Lucas Newco
"the Lucas Loan" The sum of A$5million due from the
Group to
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<PAGE>
the Vendor or another member
of the Lucas Group on loan account at
Completion
"Lucas Newco" Lucas Argentine Holdings, Inc. a
Delaware corporation. Further details
of Lucas Newco are set out in Schedule
2
"the Other Sale Agreements" The South African Sale Agreement, the
English Sale Agreement (as each such
expression is defined in the Umbrella
Agreement) and the LAO Sale and
Transition Agreement, one of the
Ancillary Agreements (as defined in the
Umbrella Agreement)
"the Other Warranties and The Warranties and Capped Indemnities
Other Capped Indemnities" on the part of the relevant vendor
contained in each of the Other Sale
Agreements
"PEI" Prestolite Electric Incorporated, a
Delaware Corporation
"Prestolite Newco" Prestolite Newco, Inc., a Delaware
Corporation
"the Property" The property specified in Schedule 3
(and, if more than one, each such
property) and each and every part of
such property
"the Provisional the sum of A$270,000
Consideration"
"the Purchasers" PEI and Prestolite Newco taken together
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<PAGE>
"the Purchasers' Group" The Purchasers, any subsidiary or
subsidiary undertaking of either of
them, any holding company of either of
them and any subsidiary or subsidiary
undertaking of such holding company
"the Purchasers' Counsel" Brobeck Phleger & Harrison LLP of One
Market Plaza Spear Street Tower San
Francisco CA 94105 and Allende & Brea
of Maipu 1300, 1006 Buenos Aires,
Argentina
"Rights" Collectively a) the right to any
dividend declared by the Company in
cash or in kind that has not been
distributed on Completion b) all rights
arising from revocable or irrevocable
capital contributions made by the
Vendor to the Company prior to or on
Completion which at Completion have not
been capitalised (or the capitalisation
of which has not yet been approved by
the respective shareholders meetings of
the Company c) all the capital of the
Company subscribed to by the Vendor
before Completion and not issued at
Completion d) all credits and capital
of the Company and rights (whether
actual or contingent) convertible into
capital of the Company that the Vendor
may have against the Company at
completion e) all rights to subscribe
to capital increases of the Company
which may be
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<PAGE>
outstanding at Completion and f) all
other rights relating to the Indiel
Sale Shares as of Completion
"the Sale Agreements" The meaning attributed to that phrase
in the Umbrella Agreement
"the Indiel Shares" The 7,739,663 shares in the capital of
the Company registered in the name of
the Vendor (as detailed in Schedule 1
part 1)
"the Indiel Sale Shares" 1,393,139 of the Indiel Shares to be
sold by the Vendor to PEI pursuant to
this Agreement
"the Indiel Option Shares" 6,346,524 of the Indiel Shares to be
the subject of the Indiel Option
"the Lucas Newco Shares" The entire issued share capital of
Lucas Argentine Holdings, Inc. such
shares being registered in the name of
the Vendor
"Shared IP" Except as specifically described in and
licensed to the Company or any Group
Member by any of the Ancillary
Agreements all intellectual property
rights (whether registered or
unregistered) other than trade marks
owned by the Vendor or any other member
of the Lucas Group and used by the
Company or any Group Member and also
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<PAGE>
used by the Vendor or another member of
Lucas Group in relation to its
business, subsisting in any part of the
world including service marks, designs,
design rights, copyright (whether in
computer programs or not) patents (and
all applications in respect of any of
the foregoing);
"the Shareholders Funds" The aggregate (calculated at Completion
in accordance with clause 3 and shown
by the Final Completion Statement) of
the amount of the issued share capital
of the Company plus or minus the amount
standing to the credit or debit of the
Company's consolidated reserves
excluding the Tax Receivable as defined
in the 'A' Loan Note but including for
the avoidance of any doubt the sum of
A$7,000,000 capitalised as a
consequence of the shareholders meeting
held on 28th November 1997 which sum is
shown for illustration only as
"additional paid in capital in the
proforma balance sheet set out in
Schedule 6 and the Irrevocable Capital
Contribution
"the Taxation Indemnities" The Deed of Tax Indemnity in the agreed
terms
"the Taxation Warranties" The warranties contained in paragraph
18 of the Warranties
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<PAGE>
"the Umbrella Agreement" An agreement dated the same date as
this Agreement relating to, inter alia,
the transaction contemplated by this
Agreement made between Lucas Industries
plc and others (1) Prestolite Electric
Limited and Others (2) and PEI Holding
Inc (3) in the agreed terms
"the Vendor" Lucas Industries plc , registered
number 54802
"the Vendor's Solicitors" Eversheds of 10 Newhall Street,
Birmingham B3 3LX
"the Vendor's Argentine Negri, Teijeiro & Incera of Av.
Counsel" Corrientes 316, 4th Floor, 1314 Buenos
Aires, Argentina
"the Warranties" The warranties, representations and
undertakings set out or referred to in
clause 5 and Schedule 4;
1.2 references to any statute or statutory provisions will, unless the
context otherwise requires, be construed as Argentinean statutes or
statutory provisions and as including references to any earlier
statute or the corresponding provisions of any earlier statute,
whether repealed or not, directly or indirectly amended, consolidated,
extended or replaced by such statute or provisions, or re-enacted in
such statute or provisions, and to any subsequent statute or the
corresponding provisions of any subsequent statute in force at any
time prior to Completion directly or indirectly amending,
consolidating, extending, replacing or re-enacting the same, and will
include any orders, regulations, instruments or other subordinate
legislation made under the relevant statute or statutory provisions
which are in force prior to Completion;
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<PAGE>
1.3 references to persons will be construed so as to include bodies
corporate, unincorporated associations and partnerships;
1.4 references to a document being "in the agreed terms" will be construed
as references to that document in the form agreed and initialled by or
on behalf of the Vendor and the Purchasers;
1.5 references to clauses and Schedules are to clauses of and Schedules to
this Agreement, and references to paragraphs are to paragraphs in the
Schedule in which such references appear;
1.6 the Schedules form part of this Agreement and will have the same force
and effect as if expressly set out in the body of this Agreement;
1.7 the headings to the clauses of this Agreement and to the paragraphs of
the Schedules (save for the headings in Schedules 1 and 2) will not
affect its construction;
1.8 all obligations of the Purchasers under this Agreement are joint and
several;
1.9 where in this Agreement there is an obligation in favour of the
Purchasers the same shall be an obligation owed to them together as if
they were one person (and accordingly an obligation to pay them a sum
of money shall be an obligation in favour of them together and not to
pay such sum to each of them);
1.10 for the purposes of this Agreement a company is a "subsidiary" of
another company, its "holding company" if that other company:-
1.10.1 holds a majority whether directly or indirectly of the
voting rights in it; or
1.10.2 is a member of it and has the right to appoint or remove a
majority of its board of directors; or
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<PAGE>
1.10.3 is a member of it and controls whether directly or
indirectly alone or pursuant to an agreement with other
shareholders or members, a majority of the voting rights
in it; and
1.11 for the purposes of this Agreement the expression "subsidiary
undertaking" shall have the meaning attributed to that expression in
the Companies Act 1985 (legislation of England)
2. SALE AND PURCHASE
-----------------
2.1 The Vendor will sell and:
2.1.1 Prestolite Newco will buy the Lucas Newco Shares;
2.1.2 PEI will buy the Indiel Sale Shares; and
2.1.3 PEI will buy the Lucas Loan
2.2 Each of the Lucas Newco Shares and the Indiel Sale Shares will be sold
and bought with all Rights, including for the avoidance of doubt the
benefit of the Irrevocable Capital Contribution.
2.3 The Purchasers will not be obliged to complete the purchase of any of
the Lucas Newco Shares or the Indiel Sale Shares or the Lucas Loan
unless the purchase of all of them is completed simultaneously.
3. CONSIDERATION
-------------
3.1 The purchase price for:
3.1.1 the Lucas Newco Shares is
3.1.1.1 A$1 (but subject to adjustment in accordance with
this clause 3 if clause 3.12.2 applies); and
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<PAGE>
3.1.1.2 the issue and allotment to the Vendor of the 'A'
Loan Notes, the 'B' Loan Notes and the 'C' Loan
Notes;
3.1.2 the Indiel Sale Shares is A$270,000 (but subject to
adjustment in accordance with this clause 3); and
3.1.3 the Lucas Loan is A$3,587,000
3.2 On Completion the Purchasers shall pay to the Vendor in cash the
Provisional Consideration, shall pay the consideration for the Lucas
Loan as referred to in clause 3.1.3 and shall discharge or procure
that the Group discharges the Bank Debt.
3.3 The following provisions shall apply regarding the calculation of the
Shareholders Funds, namely:
3.3.1 The Vendor shall, in conjunction with local management of
the Group, and the Purchasers procure that
3.3.1.1 (unless the Vendor and the Purchasers agree to
the contrary) on the day of Completion there is
carried out a stock-take (in the manner set out
in the Accounting Principles); and
3.3.1.2 immediately following Completion there is
undertaken a review of the assets and liabilities
(excluding the Fixed Assets) of each Group
Member;
for the purposes of ascertaining the data to which the
Accounting Principles shall be consistently applied in
order to prepare the
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<PAGE>
statements that are contemplated as being prepared in
accordance with this clause 3 and so as to determine the
Shareholders Funds.
3.3.2 Each of the Vendor and the Purchasers shall be entitled to
have several representatives present at any stock-take;
neither shall be entitled, in the absence of manifest
error, to raise any objection as to the correctness of any
data relating to the quantities and descriptions of the
items the subject of the stocktake if no representative of
the relevant party attends such stocktake.
3.3.3 The Purchasers will on and after Completion allow the
Vendor full access to all properties occupied by any Group
Member and occupied by any other member of the Purchaser's
Group for the purposes of the business carried on by the
Group all relevant employees and all records, information
and other documentation to enable the Vendor to carry out
and complete such stock-take, (if the same is not
completed before Completion) and review and to prepare the
draft Completion Statement defined and referred to in
clause 3.4. In particular but without limitation to the
foregoing the Purchasers will grant and procure that there
is granted to the Vendor access to and the services of
Jose Rocca for all purposes of this clause 3, including,
without limitation, the ascertainment of Shareholders
Funds pursuant to this clause 3.
3.3.4 The Shareholders Funds shall be determined in accordance
with the Accounting Principles consistently applied. If
and to the extent any matter arises which is not dealt
with in the Accounting Principles the same shall be
determined on a basis which is consistent with the
Accounts (as defined in schedule 4) or in the event of a
new issue not dealt with in the Accounts in accordance
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<PAGE>
with generally accepted accounting principles in the UK;
in either event materiality shall be determined in
relation to the Group.
3.3.5 For the purposes of determining Shareholders Funds a sum
equal to the Fixed Asset Amount shall be attributed to the
Fixed Assets, and the Tax Receivable as defined in the 'A'
Loan Note shall not be treated as an asset of the Company.
For the avoidance of doubt the sum of A$7,000,000
capitalised as a consequence of the shareholders meeting
held on 28 November 1997 and the Irrevocable Capital
Contribution shall be shown as assets of the Company.
3.3.6 The provisions of clause 7.12 shall be reflected in the
Final Completion Statement with regard to pensions. No
other provision with regard to pensions shall be made.
3.4 Within 45 days following Completion the Shareholders Funds shall be
ascertained by the Vendor and the Vendor shall serve a written
statement ("the draft Completion Statement") on the Purchasers within
such period relating to the Group showing the amounts attributable to
Shareholders Funds calculated in accordance with clause 3.3. Such
draft Completion Statement shall also show the sum due to or from the
Purchaser having regard to the provisions of clauses 3.12 and 3.13
below and the amount of the Provisional Consideration paid by the
Purchaser on Completion. All sums in the draft Completion Statement
shall be expressed in A$.
3.5 Subject to the provisions of clause 3.3, the Completion Statement
shall adopt the format set out in the pro forma statement which
appears set out in Schedule 6.
3.6 Unless the Purchasers shall notify the Vendor within 30 days after its
receipt of the draft Completion Statement that it does not accept and
agree that its
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<PAGE>
contents have been prepared in accordance with the provisions of this
Agreement then the Purchaser shall be deemed to have accepted and
agreed the contents of the draft Completion Statement for the purposes
of this Agreement. Unless the Vendor shall otherwise agree, any such
notification on the part of the Purchaser shall specify in reasonable
detail the matters in dispute.
3.7 If within the aforesaid period of 30 days the Purchasers shall notify
the Vendor in writing that they do not accept and agree that the
contents of the draft Completion Statement have been prepared in
accordance with the provisions of this Agreement then the Purchasers
and the Vendor shall endeavour to reach agreement upon adjustments to
the draft Completion Statement to meet the Purchasers' objections. For
the avoidance of any doubt any matters not objected to in writing
within the 30 day notice period referred to in clause 3.6 above shall
be deemed agreed by the Purchasers.
3.8 If the Vendor and the Purchasers are unable to reach agreement as
aforesaid within 21 days of receipt by the Vendor of the last
notification of objection validly served under clause 3.7 or within
such later time as the Vendor and the Purchasers may agree then any
matters not so resolved shall be submitted to an independent
accounting firm of international reputation mutually acceptable to the
Vendor and the Purchasers or in default of agreement between them
within 7 days after the expiration of such 21 day period or further
period agreed by the Vendor and the Purchasers to be selected at the
instance of either of them by the President for the time being of the
Institute of Chartered Accountants in England and Wales ('the
Independent Accountant') for final resolution in accordance solely and
exclusively with this Agreement, the Accounting Principles
consistently applied and the provisions of clause 3.3.4. Such
submission shall be in the form of written statements of position by
the Vendor and the Purchasers, as well as an opportunity to respond to
such written statements and any request for statements or information
from the Independent Accountant. The Vendor and the Purchasers shall
allow the Independent
-24-
<PAGE>
Accountant full access to all relevant accounting and other records of
the Group, the Property and all relevant employees as it shall require
for the purpose of giving its determination hereunder. The Vendor and
the Purchasers shall co-operate to procure that the Independent
Accountant is able to reach its decision as to any matter referred to
it as expeditiously as possible. If the Independent Accountant
determines that the resolution of a disputed item requires an
interpretation of law then the Independent Accountant may request an
independent law firm of national standing in Argentina chosen by it to
render a legal opinion as to such matter. Such opinion shall in the
absence of manifest error be final and binding. The Independent
Accountant shall act as an expert and not as an arbitrator and shall
be directed by the Vendor and the Purchasers to make its determination
as soon as possible after the matter in dispute is submitted to it and
such determination shall be final and binding upon the parties hereto.
In giving its determination the Independent Accountant shall also
adjust the draft Completion Statement if required to reflect the
decision of the Independent Accountant. The costs of such Independent
Accountant's review (including reasonable lawyer's fees, if any) shall
be borne by the party or parties in inverse proportion to their
success in the resolution of the dispute between them.
3.9 For the purposes of this Agreement the expression "the Final
Completion Statement" shall mean:
3.9.1 the draft Completion Statement which the Purchasers are
deemed to have accepted and agreed pursuant to clause 3.6
or with which the Purchasers indicate their acceptance and
agreement within the 30 day period referred to in clause
3.6 whereupon (in either event) the contents of the same
shall become and be final and binding on the Vendor and
the Purchasers for the purposes of this Agreement; or
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<PAGE>
3.9.2 the draft Completion Statement bearing any adjustment made
pursuant to clause 3.7, if clause 3.7 applies and
agreement is reached between the Vendor and the Purchasers
as contemplated therein whereupon the contents of the same
shall become and be final and binding on the Vendor and
the Purchasers for the purposes of this Agreement; or
3.9.3 the draft Completion Statement as agreed by the
Independent Accountant or, as the case may be, any revised
Completion Statement produced by the Independent
Accountant as contemplated by clause 3.8 whereupon (in
either event) the contents thereof shall become and be
final and binding upon the Vendor and the Purchasers for
the purposes of this Agreement.
3.10 For the purposes of determining the Shareholders Funds and all other
matters contemplated as being determined in this Agreement by
reference to the Final Completion Statement, the Final Completion
Statement and the contents thereof shall (save in the case of manifest
error) be final and binding on the Vendor and the Purchasers.
3.11 Any costs incurred by the Purchasers, the Vendor, Lucas Newco or any
member of the Group in acting in the manner contemplated by this
clause 3 including, without limitation, any professional costs and
expenses shall be borne by the Purchasers or the Vendor as appropriate
save as contemplated by clause 3.8 if that clause applies. It is
agreed and declared that in any event no provision for such costs
(including any costs incurred by the Group) shall be contained in the
Final Completion Statement.
3.12 If the Shareholders Funds agreed or ascertained in accordance with
clause 3:
3.12.1 are less than A$28,556,000 the Vendor shall pay to or
otherwise reimburse the Purchasers the deficiency ("the
Deficiency") in
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accordance with clause 3.13 together with interest under
clause 3.14;
3.12.2 are more than A$28,556,000 the Purchasers shall pay to the
Vendor the excess in cash within 5 days of such agreement
or ascertainment together with interest under clause 3.14
by way of further consideration for the Lucas Newco
Shares.
3.13 If clause 3.12.1 applies (to the intent and effect that the Vendor is
liable to pay to or otherwise reimburse the Purchasers the Deficiency)
the Vendor shall :
3.13.1 firstly agree that the monies payable to the Vendor
pursuant to the Indiel Option shall be reduced to the
extent of the Deficiency to the intent and effect that the
price of the shares referred to in the Indiel Option shall
be reduced accordingly but so that the price for the
shares referred to therein shall not be less than A$1; and
to the extent that the Deficiency has not been satisfied
3.13.2 secondly reimburse to PEI the Deficiency minus the sums
reimbursed or otherwise dealt with pursuant to clause
3.13.1 from the A$270,000 paid by PEI in respect of the
Indiel Sale Shares; and to the extent the Deficiency has
not been satisfied
3.13.3 finally pay to the Purchasers the balance in cash within 5
days of reaching agreement in respect of or otherwise
ascertaining the amount of the Shareholders Funds in
accordance with this clause 3
3.14 The Vendor shall pay to the Purchasers or the Purchasers shall pay to
the Vendor (as the case may be) interest on any sum due under clause
3.12 at the rate per annum which is 2% above Barclays Bank plc's base
lending rate from time to time, such interest to accrue from day to
day from the Completion Date until the due date for payment in
accordance with the foregoing provisions of
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this clause 3 Provided always that to the extent that the Vendor is
liable under clause 3.12 in respect of the Deficiency and the amount
thereof is set off against and so reduces the price payable in
respect of the Indiel Option Shares (pursuant to clause 3.13.1) no
interest shall arise or be payable in respect of such amount.
3.15 The following provisions shall apply regarding the payments to be
made:
3.15.1 all sums due from the Purchasers to the Vendor under this
Agreement shall be paid in United States Dollars to the
Vendor by way of telegraphic transfer to the following
account:-
Name: Lucas Limited
Bank: Barclays Bank Plc
Branch: Northern Payment Centre
Salford
Sort Code: 20-54-78
Account No: 78352511
or to such other account as the Vendor may hereafter
nominate in writing to the Purchasers;
3.15.2 all sums due from the Vendor to the Purchasers under this
Agreement shall be paid in United States Dollars to the
Purchasers by way of telegraphic transfer to the following
account:
Name: Prestolite Electric Incorporated
Bank: Comerica Bank
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Branch: Detroit MI; USA
ABA: 072000096
Account No: 1850-49735-3
or to such other account as the Purchasers may hereafter
nominate in writing to the Vendor;
3.15.3 any sums due under this clause 3 expressed in A$ shall be
converted into United States Dollars at the Exchange Rate.
3.16 All payments which may be made or be due to or by the Vendor by or to
the Purchasers shall subject to the foregoing provisions of this
clause 3 be made free and clear of all rights of set-off, counterclaim
or any other withholding.
4. RELEVANT MATTERS FOR THE LOAN NOTES
-----------------------------------
4.1 The Purchasers covenant with the Vendor that during the period
commencing on Completion and ending on the date on which the Third
Years Accounts have been certified as fairly reflecting the situation
of the Group by the Auditors the Purchasers will procure that none of
the following will occur in respect of any Group Member:
4.1.1 any material change in its trade or business;
4.1.2 the sale or other disposal of the whole or any material
part of its undertaking or assets;
4.1.3 except in circumstances where the relevant company is
insolvent the presentation of a petition for its
liquidation or the passing of any resolution for its
winding-up where such petition is presented or resolution
passed by the Purchasers or any member of the Purchasers'
Group;
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4.1.4 the transfer or other disposal of the legal or any other
interest in the whole or any part of its issued share
capital (apart from a nominee shareholding), or the
allotment or issue of any shares, or the grant of any
option or right to subscribe for shares, or any other
alteration or reorganisation in respect of its share
capital as a consequence of which the Company would cease
to be the holding company whether direct or indirect of
each Group Member;
4.1.5 the giving of any guarantee, indemnity or security in
respect of the obligations of any person other than the
Company or any Group Member or a member of the Purchasers'
Group;
4.1.6 any material transaction with any member of the Purchasers'
Group which is not at arm's length;
4.1.7 the taking of any action which may interfere with or be
detrimental to the ability of the Group to maximise EBITDA
Provided always that but without prejudice to any provision of either
the 'A' Loan Notes or 'B' Loan Notes (so that their provisions are and
will remain unaffected by the following provisions of this clause 4)
the restrictions contained in clauses 4.1.1, 4.1.2 and 4.1.7 shall not
apply if and only if the Purchasers are able to demonstrate to the
reasonable satisfaction of the Vendor that the overriding and principal
purpose of the act which would otherwise constitute a breach of such
provisions is in the best commercial interests of the Group and is
reasonably necessary to secure the financial position of the Group
going forward and that an incidental but unintentional result of the
same is a deleterious effect on EBITDA and, in the case of an act which
would otherwise be a breach of clause 4.1.2 only the purchaser of the
undertaking or assets concerned gives assurances to the reasonable
satisfaction of the Vendor to ensure that the Vendor's position in
respect of the Loan Notes is appropriately secured and protected
including without limitation the purchaser assuming the
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relevant obligations of Prestolite Newco under this Agreement and under
the 'C' Loan Notes
4.2
4.2.1 In light of the provisions of the Loan Notes but without
prejudice to any of their respective provisions, the
Purchasers shall, and shall procure that each Group Member
shall, treat the Vendor fairly and shall act in good faith
with regard to the interests of the Vendor;
4.2.2 Without prejudice to the generality of the foregoing and
without prejudice to any provision of either the 'A' Loan
Notes or 'B' Loan Notes (so that their provisions are and
will remain unaffected by the following provisions of this
clause 4) the Purchasers shall not and shall procure that
no Group Member shall participate in the implementation of
any scheme, arrangement or transaction or otherwise take
any steps the effect of which is to diminish EBITDA in any
year, reduce the amount which would otherwise be payable
under any of the Loan Notes or otherwise frustrate or
defeat the provisions of those Notes and the intent and
spirit which lies behind them provided always that the
Vendor accepts that nothing contained in this clause 4.2.2
shall prevent the taking of any steps the effect and the
only effect of which would be to diminish EBITDA thereby
reducing the amount which would otherwise be payable under
the 'C' Loan Notes if the Purchasers are able to
demonstrate to the reasonable satisfaction of the Vendor
that the overriding and principal purpose of the act which
would otherwise constitute a breach of this clause 4.2.2 is
in the best commercial interests of the Group and is
reasonably necessary to secure the financial position of
the
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Group going forward and that an incidental but
unintentional result of the same is a deleterious effect on
EBITDA;
4.2.3 Without prejudice to any other provision of this Agreement
and the rights of the Vendor thereunder where the
Purchasers participate or any Group Member participates in
the implementation of any scheme, arrangement or
transaction the effect of which is to diminish EBITDA in
any year or reduce the amount which would otherwise be
payable under the 'C' Loan Notes or otherwise takes any
action which may interfere with or be detrimental to the
ability of the Group to maximise EBITDA the Vendor and the
Purchasers will negotiate in good faith with a view to
agreeing an appropriate adjustment to EBITDA or another
appropriate arrangement so that the Vendor is compensated
for any loss it suffers as a consequence of such
participation or action
4.3 The Purchasers indicate that it is planned to effect the merger of
Prestolite Newco with and into the Company on the basis that (a) the
Company is the survivor of such merger (b) the Company shall pursuant
to such merger assume the obligations of Prestolite Newco under the
Loan Notes and (c) the effects and/or costs of such merger are not
included in any determination of the Company's obligations under such
Notes (including any calculation of EBITDA). The Vendor agrees that,
subject to it being satisfied as to the final documentation produced by
the Purchasers to achieve such merger, that the effects thereof are as
set out above and that its interests are not otherwise prejudiced
(including without limitation receipt by the Vendor of confirmation
that the guarantee contained in the Umbrella Agreement in respect of
the Loan Notes remains in place and unaffected and the benefits of the
VAT promotional regime enjoyed by the Company will not be lost or
otherwise prejudiced), it will consent to such merger being implemented
but that consent shall be without prejudice to the Vendor's rights
under the 'A' Loan Notes and 'B'
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Loan Notes whose provisions are and shall remain unaffected by the
provisions of this clause 4.3.
4.4 The Purchasers shall procure that as soon as reasonably practicable
following the end of each of the First Year, the Second Year and the
Third Year and in any event within 45 days of the end of each such year
the Company will prepare and deliver to the Vendor a draft of the First
Years' Accounts, the Second Years Accounts or the Third Years Accounts
as the case may be and in each case together with a calculation of
EBITDA in each such year extracted from the First, Second or Third
Years Accounts as relevant. All sums shall be expressed in A$. The
First Years Accounts, Second Years Accounts and Third Years Accounts as
the case may be shall be prepared except to the extent contemplated to
the contrary in the calculation of EBITDA (and the Purchasers shall
procure that the same shall be prepared) by the Company in respect of
the year in question in accordance with the Accounting Principles
consistently applied. If and to the extent that any matter arises which
is not dealt with in the Accounting Principles, the same shall be
determined on a basis consistent with the Accounts (as defined in
Schedule 4) or in the event of a new issue not dealt with in the
Accounts in accordance with generally accepted accounting principles in
the United Kingdom. In any event there shall be established and the
Purchasers shall procure that there is established the Restructuring
Reserve (as defined in the 'C' Loan Note).
4.5 Unless the Vendor shall notify the Purchasers within 30 days after its
receipt of the draft First Years Accounts, Second Years Accounts or
Third Years Accounts as the case may be (together with in each case the
calculation of EBITDA) that it does not accept and agree that the same
have been prepared in accordance with the provisions of this Agreement
(and in the case of the calculation of EBITDA with the 'C' Loan Note)
then the Vendor shall be deemed to have accepted and agreed the
contents of such Accounts and calculations for the purposes of this
Agreement. Unless the Purchasers shall
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otherwise agree, any such notification on the part of the Vendor shall
specify in reasonable detail the matters in dispute.
4.6 If within the aforesaid period of 30 days the Vendor shall notify the
Purchasers in writing that it does not accept and agree that the
contents of the relevant Accounts and the calculation of EBITDA have
been prepared in accordance with the provisions of this Agreement (and
in the case of the calculation of EBITDA with the 'C' Loan Note) then
the Vendor and the Purchasers shall endeavour to reach agreement upon
adjustments to the relevant Accounts and calculations to meet the
Vendor's objections. For the avoidance of any doubt any matters not
objected to in writing within the 30 day notice period referred to in
clause 4.5 above shall be deemed agreed by the Vendor.
4.7 If the Vendor and the Purchasers are unable to reach agreement as
aforesaid within 21 days of receipt by the Purchasers of the last
notification of objection validly served under clause 4.6 or within
such later time as the Vendor and the Purchasers may agree then any
matters not so resolved shall be submitted to an independent accounting
firm of international reputation mutually acceptable to the Vendor and
the Purchasers or in default of agreement between them within 7 days
after the expiration of such 21 day period or further period agreed by
the Vendor and the Purchasers to be selected at the instance of either
of them by the President for the time being of the Institute of
Chartered Accountants in England and Wales ("the Independent
Accountant") for final resolution in accordance solely and exclusively
with this Agreement, the Accounting Principles consistently applied,
the provisions of clause 4.4 and the 'C' Loan Note. Such submission
shall be in the form of written statements of position by the Vendor
and the Purchasers, as well as an opportunity to respond to such
written statement and any request for statements or information from
the Independent Accountant. The Vendor and the Purchasers shall allow
the Independent Accountant full access to all relevant accounting and
other records of the Group, all relevant premises occupied by the Group
and all relevant
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employees as it shall require for the purpose of giving its
determination hereunder. The Vendor and the Purchasers shall co-operate
to procure that the Independent Accountant is able to reach its
decisions as to any matter referred to it as expeditiously as possible.
If the Independent Accountant determines that the resolution of a
disputed item requires an interpretation of law then the Independent
Accountant may request an independent law firm of national standing in
Argentina chosen by it to render a legal opinion as to such matter.
Such opinion shall in the absence of manifest error be final and
binding, The Independent Accountant shall act as an expert and not as
an arbitrator and shall be directed by the Vendor and the Purchasers to
make its determination as soon as possible after the matter in dispute
is submitted to it and such determination shall be final and binding
upon the parties hereto. In giving its determination the Independent
Accountant shall also adjust, where relevant, the relevant Accounts and
calculation of EBITDA if required to reflect the decision of the
Independent Accountant. The costs of such Independent Accountant's
review (including reasonable lawyer's fees, if any) shall be borne by
the party or parties in inverse proportion to their success in the
resolution of the dispute between them.
4.8 For the purposes of this Agreement, EBITDA which shall be relevant for
the purposes of clause 3 of the 'C' Loan Note shall be:
4.8.1 the calculation of EBITDA which the Vendor is deemed to
have accepted and agreed pursuant to clause 4.5 or with
which the Vendor indicates its acceptance and agreement
within the 30 day period referred to in clause 4.5
whereupon (in either event) the contents of the same shall
become and be final and binding on the Vendor and the
Purchasers for the purposes of this Agreement; or
4.8.2 the calculation of EBITDA bearing any adjustment made
pursuant to clause 4.6 if clause 4.6 applies and agreement
is reached
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between the Vendor and the Purchasers as contemplated
therein whereupon the contents of the same shall become and
be final and binding on the Vendor and the Purchasers for
the purposes of this Agreement; or
4.8.3 the calculation of EBITDA as agreed by the Independent
Accountant or, as the case may be, any revised calculation
of EBITDA produced by the Independent Accountant as
contemplated by clause 4.7 whereupon (in either event) the
contents thereof shall become and be final and binding upon
the Vendor and the Purchasers for the purposes of this
Agreement.
4.9 For the purposes of determining EBITDA and all sums due in respect
thereof under clause 3 of the 'C' Loan Note by reference to EBITDA,
EBITDA which is relevant ( as contemplated by clause 4.8 above) shall
(save in the case of manifest error) be final and binding on the
Vendor and the Purchasers.
4.10 Any costs incurred by the Purchasers, the Vendor, Lucas Newco or any
member of the Group in acting in the manner contemplated by this
clause 4 including, without limitation, any professional costs and
expenses shall be borne by the Purchasers or the Vendor as appropriate
save as contemplated by clause 4.7 if that clause applies. It is
agreed and declared that in any event no provision for such costs
(including any costs incurred by the Group) shall be contained in any
calculation of EBITDA.
4.11 The Vendor and its professional advisers shall have such access and
the Purchasers shall grant and procure that such access is granted to
the Vendor and its professional advisers to the books and accounts of
each Group Member and such other relevant information and at such
times as shall be requested by the Vendor to enable the Vendor to
assess the calculations referred to in the foregoing provisions of
this clause 4 or otherwise to assess the position
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generally in respect of the Loan Notes (including compliance by the
Purchasers with their obligations under this clause 4).
4.12 The Purchasers shall cause the Company to comply with all its
obligations under the tax incentive regimes provided for by Laws
21,608 and 22,201 and their implementing regulations and shall carry
out and take all necessary steps and file all documentation which may
be necessary for the Company to obtain recognition of credits in the
amount of the Tax Receivable as defined in each of the 'A' Loan Notes
and 'B' Loan Notes by the Argentine tax authorities. The Purchasers
shall also cause the Group to appoint Deloitte Haskins and Sells as
its tax adviser and representative for the purposes of making any such
filings and will not change, and will procure that no member of the
Group changes, its tax adviser without the prior written consent of
the Vendor such consent not to be unreasonably withheld or delayed in
the case of a request to change (where such request is made no earlier
than twelve months after Completion) to Coopers & Lybrand.
4.13 Whilst any of the Loan Notes shall remain in issue:
4.13.1 the Purchasers shall deliver, and shall procure that there
is delivered within 15 Business Days of the end of each
calendar quarter management accounts (prepared on a
consolidated basis) of the Group such management accounts
to be in the same form as delivered to the Purchasers or
any member of the Purchasers' Group; and
4.13.2 the Vendor shall be entitled to require the Purchasers to
deliver to it whatever information regarding the state of
affairs and financial position and prospects of the Group
as the Vendor may reasonably require.
5. WARRANTIES
----------
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5.1 The Vendor:-
5.1.1 warrants to the Purchasers in the terms of the Warranties,
provided however that the Vendor shall be released from
the effect of the Warranties to the extent of the
disclosures fairly disclosed in the Disclosure Letter;
5.1.2 agrees that the Purchasers are entering into this
Agreement in reliance on each of the Warranties;
5.1.3 undertakes that, in the event of any claim being made
against the Vendor whether under the Warranties or
otherwise in connection with the sale of either the Indiel
Sale Shares or the Lucas Newco Shares to the Purchasers,
or either of them the Vendor will not (save in the case of
fraud or wilful concealment) make any claim against any
Group Member or against any director or employee of any
Group Member, on which or on whom the Vendor may have
relied before agreeing to any term of this Agreement or
authorising any statement in the Disclosure Letter.
5.2 Each of the Warranties will be construed as a separate Warranty and
will not be limited or restricted by reference to, or inference from,
the terms of any other Warranty or any other term of this Agreement.
5.3 The Vendor shall be released from the effect of the Warranties (but
not the Indemnities) to the extent that the Purchasers or either of
them is aware at the date of this Agreement of any matters, events or
circumstances (whether the same are learned by any investigation or
enquiry made by or on behalf of the Purchasers into the Company or any
subsidiary of the Company) and which matters, events or circumstances
would but for this clause 5.3 constitute a breach of any of the
Warranties. For the purpose of this clause the Purchasers' awareness
shall be determined by reference only to the actual knowledge of Mr.
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Kim Packard and Mr. Ken Cornelius of PEI and of the Purchasers'
professional advisers (including the Purchasers' lawyers, Coopers &
Lybrand, pensions advisers and environmental consultants) in respect
of the matters the subject of this Agreement.
5.4 Any claim the Purchasers may have in respect of the Warranties or the
Indemnities shall sound in damages only, subject to the provisions of
this clause 5, and accordingly the Purchasers shall not have the right
to cancel this Agreement or treat it as having been repudiated by the
Vendor by reason of there having been any breach of such Warranties or
a claim by the Purchasers under any Indemnity.
5.5 The Purchasers hereby agree and acknowledge that notwithstanding
anything to the contrary contained in this Agreement the Warranties
and certain of the Indemnities (as defined below) are subject to the
following:
5.5.1 no claim shall be capable of being made unless it shall be
notified in writing to the Vendor
5.5.1.1 in the case only of a claim for breach of the
Environmental Indemnity on or by the seventh
anniversary of the date of this Agreement; or
5.5.1.2 in the case only of a claim for breach of any of
the Taxation Warranties and/or under the Taxation
Indemnities on or by the date on which the
relevant statute of limitations would apply so as
to prevent the making of the claim in question
against the relevant member of the Group which
would give rise to the obligation on the part of
the Vendor to indemnify hereunder; or
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5.5.1.3 in the case only of a claim made under the
provisions of any of clauses 7.1, 7.2 or clause
8.1.3 on or by the sixth anniversary of the date
of this Agreement; or
5.5.1.4 in the case only of a claim made under clause
8.1.2 on or by the date on which the relevant
statute of limitations would apply so as to
prevent the making of the claim in question
against the relevant member of the Group which
would give rise to the obligation on the part of
the Vendor to indemnify hereunder; or
5.5.1.5 in the case of a claim for breach of any of the
remaining Warranties on or before 31 March 1999;
and any such claim which has been made shall (if it has
not been previously satisfied settled or withdrawn) be
deemed to have been withdrawn at the expiration of 6
months from the date on which the claim so notified when
aggregated with all other claims under this Agreement and
under the Other Sale Agreements exceeding (Pounds)5,000,
exceeds (Pounds)150,000 unless prior to such expiration
legal proceedings in respect thereof shall have been
issued and served on the Vendor;
5.5.2 the aggregate liability of the Vendor under this Agreement
and the Other Sale Agreements in respect of all breaches
of the Warranties and claims under the Capped Indemnities
shall not when aggregated with the liability of the
persons defined as the Vendor in each of the Other Sale
Agreements in respect of all breaches of
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the Other Warranties and Other Capped Indemnities exceed a
sum equal to (Pounds)12 million;
5.5.3 the Vendor shall not be liable in respect of any single
claim brought by the Purchasers for a breach of the
Warranties, and claims under the Capped Indemnities, under
the Taxation Indemnities or under clause 8.1.3 arising out
of a single event (provided that for the purposes of this
clause 5.5.3 liability in respect of a series of claims
arising out of the same subject matter shall be aggregated
together as if such claims were one claim) if the
liability in respect of such claim would not exceed
(Pounds)5,000 (five thousand pounds). The Vendor shall be
liable in respect of each and any claim for a breach of
the Warranties or under the Capped Indemnities or under
the Taxation Indemnities or under clause 8.1.3 in respect
of which the liability of the Vendor exceeds (Pounds)5,000
(five thousand pounds) only if the liability of the Vendor
for that claim, all other such claims exceeding
(Pounds)5,000 and all other such claims made under the
Other Sale Agreements in respect of all breaches of the
Other Warranties and Other Capped Indemnities would in
aggregate exceed (Pounds)150,000 and in that event the
Vendor shall only be liable for the excess;
5.5.4 if any matter arises or gives rise to any claim under the
Warranties or the Indemnities the Purchasers shall as soon
as reasonably practicable (and in any event within such
time as shall enable the Vendor to lodge or answer any
appropriate appeal or claim ) give notice in writing to
the Vendor giving such details of the matter in respect of
which the claim is made as are at that time known to the
Purchasers or either of them and (on the basis of the
facts then known to the Purchasers or either of them) the
bona fide estimated liability in respect thereof and where
the claim arises by reason of
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a claim made against the Purchasers or either of them
and/or the Company or any other Group Member by a third
party the Purchasers shall not seek to settle or
compromise the matter and shall (if relevant) procure that
the Company or relevant Group Member does not seek to
settle or compromise the same without the written consent
of the Vendor (which consent shall not be unreasonably
withheld or delayed) and shall take such reasonable action
as the Vendor may require to avoid, resist, contest and/or
compromise any such claim on the basis that the Vendor
shall be responsible for and shall bear all the reasonable
costs and expenses of the Purchasers or the Company or the
relevant Group Member in taking such action and in
addition shall to the extent that the same shall not have
been borne by the Vendor directly indemnify the Purchasers
against the same and against all legal costs incurred by
or awarded against the Purchasers as a direct result
thereof;
5.5.5 no claim in respect of any breach or breaches of any of
the Warranties or under the Indemnities shall be made to
the extent that provision or reserve in respect of the
subject matter thereof has been made or the subject matter
thereof is otherwise taken account of or reflected as part
of the calculations in
5.5.5.1 the preparation of the Final Completion
Statement; or
5.5.5.2 in the calculation of EBITDA and then in such
case only to the extent that in consequence of
such taking account or reflection the Vendor has
received no payment (or a reduced payment) under
the "C" Loan Notes in circumstances where
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the Vendor would have received such a payment (or
an increased payment) had the claim in question
not arisen or the amount thereof not been
reflected in the calculation of EBITDA;
5.5.6 the Vendor shall not be liable for any claim arising as a
result of a breach of Warranties:
5.5.6.1 or under the Indemnities if such claim would not
have arisen but for anything voluntarily done or
omitted to be done by the Purchasers or either of
them, any member of the Purchasers' Group, the
Company or any subsidiary of the Company or any
of its or their employees, agents or successors
in title after Completion outside the ordinary
course of business and which the Purchasers or
either of them, any member of the Purchasers'
Group, the Company or any other member of the
Group or its or their employees agents or
successors in title were aware or ought
reasonably to have been aware could give rise to
a claim; or
5.5.6.2 or the Indemnities to the extent that such claim
relates to any loss for which the Purchasers or
either of them or any member of the Purchasers'
Group or the Company or any of its subsidiaries
is indemnified by insurance (but only to the
extent of the amount of the proceeds actually
received from any applicable insurance policy)
and the Purchasers agree to pursue and to procure
that there is pursued all and any claims which
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there may be under or in respect of any policy of
insurance which relates or may relate to the
subject matter of the claim in question and to
provide to the Vendor such evidence as the Vendor
may reasonably require of having done so.
5.6 Where the Purchasers or either of them or any member of the
Purchasers' Group or the Company or any subsidiary of the Company is
at any time entitled to recover from a third party (other than as
contemplated in clause 5.5.6.2) any amount in respect of any matter
giving rise to a claim under the Warranties or the Indemnities or
under any other provisions of this Agreement the Purchasers shall take
and shall procure that there is taken all reasonable steps to enforce
any rights of recovery that the Purchasers or either of them or any
member of the Purchasers' Group or the Company or any of its
subsidiaries may have against any third party in respect of the
subject matter of the claim and the Purchasers or the Company or
relevant subsidiary or relevant member of the Purchasers' Group shall
be indemnified by the Vendor against all reasonable costs and expenses
including all legal costs incurred by it or them in doing so. In the
event that the Purchasers or either of them or the Company or any of
their subsidiaries or any member of the Purchasers' Group shall
receive any amount from such third party, the amount of the claim
against the Vendor shall be reduced by the amount recovered less where
not already paid all such reasonable costs and expenses incurred by
either Purchaser, the relevant member of the Purchasers' Group or the
Company or any relevant subsidiary Provided always that:-
5.6.1 any failure by the Purchasers to comply with such
undertaking in respect of any matter giving rise to a
claim under the Warranties or the Indemnities or otherwise
under this Agreement shall not affect in any way any
liability of the Vendor which liability shall
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not be conditional upon the Purchasers' compliance with
this undertaking save that the Vendor shall be entitled
(to the extent that it is entitled as a matter of law so
to say) to say that the Purchasers have not mitigated
their or its loss or the Vendor shall have a right of
action or other claim against the Purchasers for breach of
the provisions of this clause 5.6; and
5.6.2 in respect of any matter giving rise to a claim under the
Warranties or the Indemnities or otherwise under this
Agreement if the Purchasers allege that any steps which
the Vendor requires it or either of them to take or to
procure are taken are unreasonable then the Purchasers
shall seek counsel's opinion (such counsel to be of at
least ten years standing and from a law firm of
international standing in Argentina) the identity of whom
shall be agreed upon by the Vendor and the Purchasers and,
failing such agreement, within three days after the date
on which the agreement is demanded shall be determined by
the President for the time being of the Centro Empresarial
de Mediacion y Arbitraje (who may be instructed by either
the Vendor or the Purchasers to make the nomination at any
time after the expiry of that three day period). In
respect thereof the Purchasers shall instruct counsel in
writing (or if such instructions are to be given orally
then the Vendor shall be entitled to be present at and to
contribute to the giving of such instructions) and provide
a copy of a draft of such instructions before submission
to counsel and incorporate the Vendor's comments thereon.
Counsel shall be asked to advise whether, on the basis of
the instructions given to him and the information then
made available to him the action sought by the Vendor
should be taken on the basis that, on the balance of
probabilities, the relevant claim against the third party
stands a
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<PAGE>
reasonable prospect of success and the parties shall
follow the advice given in such opinion save that nothing
herein shall prevent or otherwise restrict the ability of
the Vendor to argue (if such an argument is as a matter of
law open to it) that the Purchasers or the entity entitled
to the benefit of the claim have or has failed to mitigate
their or its loss.
5.7 If the Vendor pays at any time an amount pursuant to a claim in
respect of any Warranty or under any Indemnity or under any of the
other provisions of this Agreement and the Purchasers or either of
them or any member of the Purchasers' Group and/or the Company or any
of their subsidiaries subsequently becomes entitled to recover from
some other person any sum in respect of any matter giving rise to such
claim the Purchasers shall take and shall procure that there is taken
all reasonable steps to enforce such recovery subject to being
indemnified by the Vendor against all reasonable costs and expenses
including all legal costs incurred in doing so. The Purchasers shall
forthwith upon the making of any such recovery (whether by either of
them, any member of the Purchasers' Group or any member of the Group
and after deducting the costs incurred by the Purchasers or either of
them or the relevant member of the Purchasers' Group as contemplated
by this clause to the extent that the Vendor has not indemnified the
Purchasers and/or the relevant member of the Purchasers' Group and/or
the Company or relevant subsidiary for such costs) repay to the Vendor
so much of the amount paid by the Vendor in respect of the claim in
question as does not exceed the sum recovered from such other person.
5.8 Without prejudice to the foregoing provisions of this clause 5 before
the Purchasers or either of them or any Group Member makes any payment
or offers any other remedy or takes any other remedial or corrective
action in respect of any matter for which it is entitled to an
indemnity or to otherwise make a claim against the Vendor under or
pursuant to the provisions of this
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Agreement or under the Taxation Indemnities, the Purchasers shall and
shall procure that the Company (and, if relevant, each of its
subsidiaries) gives a reasonable opportunity and reasonable assistance
to the Vendor to verify and, if appropriate, remedy the defect,
default or omission or other matter giving rise to the claim for
indemnity or other remedy in question.
5.9 For the purposes only of determining the applicability of the monetary
thresholds contained in sub-clauses 5.5.2 and 5.5.3 any claim under
the Warranties, the Capped Indemnities the Taxation Indemnities and/or
under clause 8.1.3 which is denominated in A$ shall be converted into
pounds sterling at the Exchange Rate prevailing at in the case of sub
clause 5.5.2 the date on which the claim is paid and in the case of
sub clause 5.5.3 at the date of claim.
5.10 Payment or satisfaction by the Vendor of any claim under any one
particular paragraph of the Warranties and/or under any Indemnity
shall to the extent of such payment or satisfaction satisfy and
preclude any other claim which is capable of being made in respect of
the same subject under another particular paragraph of the Warranties
or under another particular Indemnity. If and to the extent that the
Purchasers and/or any member of the Purchasers' Group and/or any Group
Member recovers any sum under any provision of this Agreement,
including under the Indemnities, the amount of any claim which the
Purchasers or any Group Member may have in respect of the same subject
matter shall be reduced or eliminated accordingly.
5.11 If any potential claim shall arise by reason of a liability of the
Company or any subsidiary of the Company being contingent only or is
otherwise not capable of being quantified then the Vendor shall not be
under any obligation to make any payment pursuant to such claim until
such time as the contingent liability ceases to be contingent and
becomes capable of being quantified as the case may be.
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5.12 Notwithstanding any of the provisions contained in this clause 5 or
elsewhere in this Agreement, the Purchasers shall not be entitled to
cancel this Agreement as a consequence of any breach of any Warranty.
5.13 Save as specifically provided in this Agreement the Vendor gives no
warranties or representations whether express or implied.
5.14 Where under this Agreement the Vendor is liable to the Purchasers or
either of them or any Group Member under any of the Indemnities (other
than the Environmental Indemnity) the Vendor shall for the avoidance
of any doubt only be liable to the extent that the liability relates
directly to acts or omissions prior to Completion and not to the
extent that the liability relates directly to acts or omissions after
Completion
6. COMPLETION
----------
Subject to and on the basis contemplated by the Umbrella Agreement, the
sale and purchase of the Lucas Newco Shares and the Indiel Sale Shares
shall take place as provided for in the Umbrella Agreement at the offices
of the Vendor when:
6.1 the Vendor will produce and deliver to the relevant Purchasers with
respect to each Group Member (except where the context specifically
provides to the contrary):
6.1.1 duly executed transfers of the Lucas Newco Shares or as
the case may be the Indiel Sale Shares in favour of the
relevant Purchaser (or as it will direct) together with
all relevant share certificates in the possession of the
Vendor together with such waivers and consents as the
relevant Purchaser may require to enable the relevant
Purchaser and its nominee(s) to be registered as the
holders of the shares in question;
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6.1.2 duly executed transfers of any shares in any Group Member
(other than the Company) not held by the Company;
6.1.3 the written resignations of John Charles Plant, Julio
Ernesto Curuchet, David Underwood and Francisco Alejo
Lopez Lecube as directors of the Company, Alejandro Martin
de Achaval and Eduardo Luis Vivot as alternate directors
of the Company and of Gustavo Hector Bunge as syndic of
the Company and the written resignation of Francisco Alejo
Lopez Lecube as alternate director of Equipos Originales
S.A. and Jovsa S.A.;
6.1.4 the certificates of incorporation, by-laws, all amendments
thereto, evidence of all filings and registrations with
the Office of Corporations -Public Registry of Commerce,
all receipts of annual corporate tax fees, change of name,
and the statutory books and registers (all entered up to
date) of each Group Member;
6.1.5 all deeds and documents relating to the title of the Group
to the Property (except where such deeds and documents are
held by any Bank);
6.1.6 all papers, books, records, keys, cheque books, credit
cards and other property (if any) of each member of the
Group which are in the possession or under the control of
the Vendor or any other person who resigns as an officer
of the Company in accordance with this clause 6;
6.1.7 a legal opinion issued by the Vendor's Argentine Counsel
as to the existence and good standing of each Group Member
in the agreed terms; and
6.1.8 appropriate resolutions to change the bank mandate of the
Company;
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<PAGE>
6.2 the Vendor will:
6.2.1 deliver to the Company (with a copy to PEI) the letter
notifying the transfer of the Indiel Sale Shares to PEI
pursuant to Article 215 of Law No 19,550;
6.2.2 procure the Company to enter the name of PEI in the
register of shareholders of the Company as the registered
holder of the Indiel Sale Shares;
6.2.3 deliver to PEI a resolution of the statutory syndics of
the Company which are in full force and effect as of
Completion appointing new members of the Board of
Directors nominated by the Purchaser as directors of the
Company;
6.2.4 deliver to Prestolite Newco all books and records relating
to Lucas Newco including all documentation relating to all
actions taken prior to Completion relating to the
restructuring of the Vendor's interest in the Company
which have involved Lucas Newco;
6.2.5 deliver certificates representing all the outstanding
shares of Lucas Newco together with duly executed stock
powers in proper form and any other documentation
reasonably requested by the Purchasers' Counsel in order
to evidence the transfer of such shares of Lucas Newco;
6.2.6 deliver to PEI the Tax Indemnities duly executed; and
6.2.7 procure that the Board of the Company revokes all existing
powers of attorney such revocation to become effective 45
calendar days after Completion;
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6.3 the Purchasers shall pay to the Vendor, in accordance with clause
3.15.1 a sum equal to the Provisional Consideration and the price for
the Lucas Loan (as contemplated by clause 3.1.3) and Prestolite Newco
shall issue and allot to the Vendor the Loan Notes; the Provisional
Consideration shall be paid on account of the Consideration but the
Provisional Consideration, the price for the Lucas Loan and the Loan
Notes shall be so paid or, as the case may be, issued and allotted
subject to the terms of the Umbrella Agreement (regarding Effective
Completion);
6.4 the Purchasers shall procure that as soon as possible after Completion
each member of the Group takes all steps as are legally required of it
to change its corporate name to a name which does not incorporate the
word or name 'Lucas' and the Purchasers shall provide to the Vendor
such evidence and give to the Vendor such undertakings in this regard
as the Vendor shall reasonably require;
6.5 the Purchasers will at or as soon as practicable after Completion use
reasonable endeavours to procure the release of the Vendor and any
other member of the Lucas Group from the guarantees specifically
identified in the Disclosure Letter for the purposes of this provision
and will indemnify and keep indemnified the Vendor (for itself and for
and as trustee for and/or as agent for and for the benefit of each
other member of the Lucas Group) and each other member of the Lucas
Group against any liability (including costs, damages and expenses)
which the Vendor or any other member of the Lucas Group may suffer
under or in relation to such guarantees; provided however that this
clause 6.6 shall be without prejudice to, and the indemnity so given
by the Purchasers shall not extend to any matter giving rise to, any
claim against the Vendor for breach of the Warranties; (i) where those
obligations or liabilities are reflected in the management accounts of
a Group Member or in the Final Completion Statement; or (ii) the
obligations or liabilities are or were incurred in the ordinary course
of business; and
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<PAGE>
6.6 subject to the provisions of clause 6.8 the Vendor will at or as soon
as practicable after Completion use its reasonable endeavours to
procure the release of each Group Member from all guarantees given by
any of them in respect of the obligations of other members of the
Lucas Group and will in the meantime indemnify and keep indemnified
the Purchasers against any liability which the Purchasers or any Group
Member may suffer or incur under or in relation to such guarantees;
6.7 the Vendor and PEI will enter into the Indiel Option;
6.8 the Purchasers shall provide to the Vendor in form and substance
satisfactory to the Vendor a full and effective release in favour of
the Vendor and each member of the Lucas Group from all of its or their
respective obligations howsoever arising with respect to the Bank Debt
or in the absence of such a release repay or procure that there is
repaid and discharged in full the Bank Debt;
6.9 the Purchaser will indemnify and keep the Vendor (for itself and for
and as trustee for and/or as agents for and for the benefit of each
other Member of the Lucas Group) indemnified against any liability
(including costs damages and expenses) which the Vendor or any other
member of the Lucas Group may suffer in respect of any claim which may
be made against the Vendor or any other Member of the Lucas Group
which, whether directly or indirectly relates to or otherwise arises
out of any obligations or liabilities of any Group; and
6.10 the Purchasers shall deliver to the Vendor certificates of the
Secretary of State of Delaware as to the good standing of each of PEI
and Prestolite Newco in such jurisdiction.
7. SPECIFIC INDEMNITIES AND OTHER SPECIAL PROVISIONS RELATING TO TAX AND
---------------------------------------------------------------------
PENSIONS
--------
7.1 The Vendor covenants to pay to the Purchasers an amount equal to the
amount of any relief or credit from or against value added tax which
was taken into
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account in computing (and so reducing or eliminating) any provision
for value added tax which appears or which would have appeared but for
such provision in the accounts of the Group where:-
7.1.1 such relief or credit was made available to any Group
Member in respect of promotional incentives in the
Province of San Luis;
7.1.2 such relief or credit was utilised in either of the
financial periods or years of the Group ended on 31st
January 1997 and/or 1998;
7.1.3 such relief or credit is lost or withdrawn as a direct
consequence (and only as a direct consequence) of the
transaction the subject of this Agreement provided always
that the liability of the Vendor in respect of any claim
made by the Purchasers under this clause 7.1 shall be
limited:
7.1.3.1 in the case of a loss of relief or credit in
respect of the period which ended on 31st January
1997 to A$1.850m; and
7.1.3.2 in the case of a loss of relief or credit in
respect of the year which ends on 31st January
1998 to A$1.619m,
Provided always that the indemnity contained in this clause 7.1 shall
not apply if and to the extent that any relief or credit so lost or
withdrawn (and which would but for the proviso to this clause 7.1,
have been the subject of any indemnity in favour of the Purchasers)
shall reduce the amount of the Closing Date Tax Receivable as defined
in the 'B' Loan Note.
7.2 If the tax incentive regimes provided for by Laws 21,608 and 22,201
are withdrawn by the Argentine Government on or before 31 December
2000, the Vendor covenants with the Purchasers to pay to the
Purchasers an amount equal
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to the amount of tax that would have been saved by the Company in
respect of the accounting years of the Company ending on 31 December
1998, 31 December 1999 and (if the condition in clause 7.3 is met) 31
December 2000 by utilising the tax credits available under such
regime.
7.3 The condition referred to in clause 7.2 is that the amount of
principal paid to the Vendor under the "A" Loan Notes and the "B" Loan
Notes exceeds A$6,300,000 at the date of withdrawal of the regimes.
7.4 The maximum liability of the Vendor under the covenant in clause 7.2
in respect of the accounting years of the Company ending 31 December
1998 and 31 December 1999 is A$3,600,000 in respect of the accounting
year of the Company ending on 31 December 1998, and A$2,700,000 in
respect of the accounting year of the Company ending on 31 December
1999.
7.5 The maximum liability of the Vendor under the covenant in clause 7.2
in respect of the accounting year of the Company ending on 31 December
2000 is the lesser of A$1,900,000 and the amount by which the
principal paid to the Vendor under the "A" Loan Notes, the "B" Loan
Notes and the "C" Loan Notes exceeds A$6,300,000.
7.6 The due date in respect of each payment to be made under clause 7.2 is
the later of twenty (20) Business Days following written notification
of the liability from the Purchasers to the Vendor and the last date
on which the Company is obliged to pay the tax that would have been
saved to the Argentine tax authorities, without incurring interest or
penalties for late payment.
7.7 Upon either of the Purchasers or any Group Member becoming aware of
any claim relevant for the purposes of this clause 7 the Purchasers
shall as soon as reasonably practicable (and in any event within such
time as shall enable the Vendor to lodge any appropriate appeal with
any relevant authority) give notice
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of any such claim to the Vendor but such notice shall not be a
condition precedent to the liability of the Vendor for the purposes of
this clause 7.
7.8 Subject to the provisions of this clause 7 the Purchasers shall take
and shall procure that the Group and each relevant Group Member (at
the Vendor's expense and provided that the Vendor agrees to indemnify
the relevant Group Member to the reasonable satisfaction of the
Purchasers against all losses costs damages and expenses) including
interest on overdue taxation which may be incurred thereby) takes such
action and gives such information and assistance in connection with
its affairs as the Vendor may reasonably and promptly request to avoid
resist appeal against or compromise any notice or demand, assessment
letter or other document issued or action taken by or on behalf of any
taxation authority relevant for the purposes of this clause 7
including but not limited to applying to postpone (so far as legally
possible) the payment of any taxation and/or allowing the Vendor to
undertake at the Vendor's own expense the conduct of all or any
proceedings of whatsoever nature arising in connection with the claim
in question.
7.9 The Vendor shall keep the Purchasers fully informed of all matters
pertaining to any dispute, appeal, negotiations or other proceedings
conducted by or at the request of the Vendor pursuant to the foregoing
provisions of this clause 7 and shall provide the Purchasers with
copies of correspondence and other documents pertaining thereto.
7.10 The Purchasers shall not agree and shall procure that no Group Member
agrees any matter which is likely to affect the liability (whether
actual or contingent) of the Vendor under this clause 7 without the
prior written approval of the Vendor.
7.11 Without prejudice to any other provision of this Agreement the Vendor
and its professional advisers shall have such access and the
Purchasers shall grant and procure that the same is granted to the
Vendor and its professional advisers to
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the books and accounts of each Group Member and such other information
and at such times during normal business hours as shall be requested
by the Vendor to enable the Vendor to assess and verify its potential
liability under the provisions of this clause 7.
7.12 The Final Completion Statement will include a liability of A$1,929,000
in respect of the nine (9) beneficiary Executive Pension Loan (the
"Special Pension Plan"). At any time prior to the third anniversary of
Completion, the Purchasers shall be entitled to request that the
Vendor assume all liability under the Special Pension Plan. Upon such
request, the Vendor shall assume such liability, and in consideration
for such assumption of liability by the Vendor, the Purchasers or
their designee shall pay to the Vendor an amount of money, based upon
an actuarial valuation by Mercers on a similar basis (including the
same interest rates) to that under which the above amount of A$1.929m
was calculated. The Purchasers hereby agree that they will not take,
and they will procure that no Group Member voluntarily takes, any
action which would increase the liability under the Special Pension
Plan without the Vendor's consent and, in particular, but without
limitation will not create a position similar to that formerly
occupied by Senor Narcisso Martin. The Purchasers agree that they will
take, and will procure there is taken, all reasonable steps requested
by the Vendor, to resist any increase in benefits or liability under
the Special Pension Plan.
7.13 The indemnities referred to in this clause 7 shall be limited in
accordance with, and shall be subject to, the provisions of clause 5
of this Agreement.
8. SPECIFIC INDEMNITIES - OTHER MATTERS
------------------------------------
8.1 The Vendor shall indemnify the Purchasers, the Company and each of its
subsidiaries and their respective officers, directors, employees,
agents, successors and assigns (each an "Indemnified Person") with
respect to and hold each of them harmless from and against any and all
liabilities, losses, damages,
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claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, attorney's, consultants' and
arbitration fees and expenses, and, in respect of Environmental Claims
only, any corrective or remedial action costs) directly suffered,
incurred or sustained by an Indemnified Person or to which an
Indemnified Person becomes subject resulting from, arising out of or
relating to any of the following:
8.1.1 Environmental Claims;
8.1.2 Fines;
8.1.3 Labour Contingencies.
8.2 The Environmental Indemnity shall be limited in accordance with, and
shall be subject to, the provisions of clause 5 of this Agreement.
8.3 Any sum due from the Vendor to the Purchasers or any Group Member
under the Environmental Indemnity or clause 9 of the Environmental
Indemnity Exceptions Letter shall be paid within twenty-eight days of
notice of:
8.3.1 completion of any remedial and clean-up action undertaken
by the Purchasers or any Group Member;
8.3.2 the Purchasers or any Group Member incurring the cost of
the remedial and clean-up action carried out by any person
other than the Purchasers or any Group Member; or
8.3.3 the date of payment of any liabilities to third parties,
fines or awards (and all expenses incurred in connection
therewith);
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PROVIDED THAT:
any claim by the Purchasers or any Group Member under the
Environmental Indemnity or Clause 9 of the Environmental Indemnity
Exceptions Letter shall:
8.3.4 state which item of either the Environmental Indemnity or
the Environmental Indemnity Exceptions Letter it relates;
8.3.5 include such details and information as is reasonably
required by the Vendor of the nature and extent of the
claim;
8.3.6 include evidence that the expenditure to which the claim
relates has been properly and reasonably incurred by the
Purchasers, a Group Member or such third party contracted
by the Purchasers or a Group Member; and
8.3.7 be submitted as soon as possible after the date the
expenditure was incurred and in any event within 3 months
of the Purchasers or the relevant Group Member having
received an invoice in respect of such expenditure
incurred.
8.4 In respect of any claim under the Environmental Indemnity or clause 9
of the Environmental Indemnity Exceptions Letter the Purchasers shall
permit and shall procure that each Group Member permits the Vendor or
persons authorised by it to inspect the works and to inspect and take
copies of all reports, books, accounting records and vouchers which
are relevant in relation to the claim with the Purchasers or, as the
case may be, the relevant Group Member answering or procuring that
there are answered promptly and fully all reasonable questions raised
by Vendor.
8.5 Subject to the provisions of this Agreement (but only until a date
three years following the date of Completion), the Vendor agrees to
pay up to a maximum
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of US $159,300 towards the cost of the items listed in Schedule 2 of
the Environmental Indemnity Exceptions Letter.
8.6 In the event of any circumstances arising which do or may give rise to
any Environmental Claims and which fall within the terms of the
Environmental Indemnity, the Purchasers shall not except as required
by any applicable law make any public statement regarding such
circumstances without the prior written consent of the Vendor such
consent not to be unreasonably withheld or delayed.
8.7 Before the Vendor (or as the case may be the Purchaser) ("the
Indemnified Party") makes any payment or offers any other remedy to a
third party in respect of matters for which the Indemnified Party is
entitled to an indemnity from the other of them ("the Indemnifier")
under the terms of this clause 8 or any other indemnity contained in
this Agreement the Indemnified Party shall give a reasonable
opportunity to the Indemnifier, to verify and, if appropriate, at the
Indemnifier's sole cost remedy the default, defect, omission or other
matters giving rise to the claim in question subject always to such
third party allowing the same.
9. PURCHASERS ASSURANCES
---------------------
9.1 The Purchasers warrant to the Vendor (for itself and in each case as
trustee for and/or as agent for and on behalf of each other member of
the Lucas Group) and, for the benefit of, each other member of the
Lucas Group that the Purchasers has or have the necessary corporate
power and authority and all authorisations approvals consents and
licences required by the Purchasers have been unconditionally and
irrevocably obtained and are in full force and effect to permit the
Purchasers to enter into and perform this Agreement and this
Agreement has been duly authorised by the Purchasers and constitutes a
valid and binding obligation of each of them.
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9.2 The Purchasers acknowledge to and agree with the Vendor (both for
itself and in each case as trustee for and as agent for and for the
benefit of and on behalf of each other member of the Lucas Group and
for the benefit of each of their respective officers employees and
advisers and as trustee and agent for and for the benefit of such
officers employees and advisers) that:
9.2.1 the invitation to them by or on behalf of the Vendor to
consider the purchase of the Company (together with its
subsidiaries) and the provision of information relating to
it and them its and their respective financial positions
or prospects was made by or on behalf of the Vendor and
accepted by the Purchasers and this Agreement was entered
into on the basis that neither the Vendor nor any member
of the Lucas Group nor any of the Vendor's or any member
of the Lucas Group's officers employees and advisers has
or have made or makes any representation or warranty
(other than as set out in the Warranties) as to the
accuracy or completeness of such information or accepts
any duty of care in relation to the Purchasers in respect
of the provision of such information and save as
contemplated by the Warranties (as qualified by the
Disclosure Letter) or in the case of representations made
fraudulently by the Vendor or otherwise as is expressly
provided in this Agreement none of such person shall be
under any liability to the Purchasers in the event that,
for whatever reason, such information is or becomes
inaccurate incomplete or misleading in any particular; and
9.2.2 the Purchasers have had independent legal and financial
advice relating to the purchase of the Indiel Sale Shares
and the Lucas Newco Shares and to the terms of this
Agreement and the documents to be executed pursuant hereto
including the terms of this clause.
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9.3 The Purchasers hereby warrant and represent to the Vendor that:
9.3.1 the Purchasers are both corporations duly organised and
validly existing and each of them has all requisite
corporate power and authority to own, lease and operate
its properties and business as presently conducted and to
enter into and perform its obligations under this
Agreement;
9.3.2 the execution, delivery and performance of this Agreement
by each Purchaser and the consummation by each Purchaser
of the transactions contemplated hereby has been duly
authorised by all requisite corporate action on the part
of each Purchaser. This Agreement has been duly executed
and delivered by each Purchaser, and constitutes the legal
valid and binding obligation of each Purchaser, is
enforceable against each Purchaser in accordance with its
terms except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors rights
generally and subject to general principles of equity;
9.3.3 each Purchaser is entitled to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the
ownership of its assets requires such qualification except
where the failure so to qualify would not have a material
adverse effect on its business, assets or financial
condition;
9.3.4 neither the execution nor the delivery of this Agreement
by either Purchaser nor the consummation of the
transactions contemplated hereby will conflict with or
result in a breach of any of the provisions of or
constitute a default under the charter, bylaws or
memorandum or articles of association of either Purchaser
as
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amended to date or except as would not have a material
and adverse effect on its business assets or financial
condition constitute a breach or event of default under
any agreement, mortgage, indenture, lease or other
instrument to which each or either Purchaser is a party or
by which each or either Purchaser or its property is bound
or results in the violation of any law, rule, regulation,
order, judgment or decree to which either Purchaser or its
property is subject;
9.3.5 to the best of the knowledge of each Purchaser no consent,
approval or authorisation of or declaration of filing with
any governmental authority is required on the part of
either Purchaser in connection with the execution,
delivery or performance of this Agreement. No approval,
consent or authorisation of any lender, lessor or any
other person is required in order for either Purchaser to
consummate the transactions contemplated by this
Agreement.
9.4 Except to the extent contemplated by any other provision of this
Agreement the Purchasers undertake to the Vendor for itself and as
trustee for and as agent for and on behalf of each other member of the
Lucas Group that neither of them will and each will procure that
neither the Company nor any of its subsidiaries will at any time after
Completion hold itself out as a Subsidiary of or otherwise connected
with the Lucas Group (other than by virtue of having been so connected
prior to Completion save that any such holding out in this regard
shall cease on the first anniversary of this Agreement or at such time
as is contemplated by the Ancillary Agreements, if so contemplated)
and that except and to the extent contemplated by any of the Ancillary
Agreements forthwith following Completion there is deleted from all
printed material including (without limitation) stationery catalogues
brochures sales material and (if relevant) from electronic media such
as internet sites and telephone listings and (if relevant) from
signage at any property occupied for the purposes of the
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Group and from motor vehicles used by the Group all references to the
name or mark "Lucas" and/or "CAV" and/or "LucasVarity" and/or the
Lucas Group diagonal flash.
9.5 Without prejudice to the generality of the provisions of clause 9.4
but subject also to those provisions and except to the extent
contemplated by the Ancillary Agreements or any other provision of
this Agreement the Purchasers undertake to the Vendor (who for this
purpose contracts both for itself and for and on behalf of each other
member of the Lucas Group) and for the benefit of each other member of
the Lucas Group that neither of them will and each will procure that
no member of the Group whether directly or indirectly and in any
capacity whatsoever uses in connection with any business the name or
mark "Lucas" and/or "CAV" and/or "LucasVarity" and/or the Lucas Group
diagonal flash or any colourable imitation thereof.
9.6 The Purchasers hereby covenant with the Vendor and (as a separate and
independent covenant) with the Vendor as trustee and/or as agent for
and for the benefit of each other member of the Lucas Group that
except to the extent (if any) required by law neither of them will and
each will procure that no member of the Purchasers' Group will at any
time after Completion disclose or make public any secret or
confidential or professional or financial or commercial information
concerning the Lucas Group and not relating to the Company or any of
its subsidiaries which it has learned by reason of the Company or such
subsidiaries or any of them being owned by the Vendor and save as
aforesaid will not and will procure that no member of the Purchasers'
Group will use to the detriment of any member of the Lucas Group any
information which the Company or any subsidiary of the Company has
obtained in confidence in the course of or as a result of such
ownership provided always, however, that the provisions of this clause
9.6 shall cease to apply to any information which is already in or
which falls into the public domain otherwise than by reason of a
breach of this provision.
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9.7 The Purchasers acknowledge to the Vendor for itself and as trustee for
and as agent for and for the benefit of each member of the Lucas Group
the ownership by the Lucas Group of the names and/or mark "Lucas"
and/or "CAV" and/or "LucasVarity" and/or the Lucas Group diagonal
flash and hereby acknowledge that notwithstanding any arrangements
operating between the Vendor and the Purchasers in respect of the
period following Completion all and any goodwill in the names of Lucas
and/or CAV and/or LucasVarity and/or the Lucas Group diagonal flash
belongs to and remains vested in the Lucas Group.
9.8 The Vendor agrees that Lucas Newco shall be permitted to retain the
word "Lucas" as part of its corporate name (but Lucas Newco shall not
be permitted to use the name "Lucas" for any other purpose whatsoever)
for whichever is the shorter of a period of one month after the date
on which the Indiel Option Shares are acquired by the Purchaser (if
they are) and the date on which Lucas Newco first begins to trade. On
the expiry of such period or, as the case may be, on such date the
provisions of clause 6.4 shall mutatis mutandis apply as if Lucas
Newco were a member of the Group. Save to the extent and only to the
extent as aforesaid the preceding provisions of this clause 9 continue
to apply.
10. ENTIRE AGREEMENT
----------------
This Agreement, the Umbrella Agreement, the Other Sale Agreements, the
Ancillary Agreements and the documents referred to in it and them
(including without limitation the Associated Documents but excluding the
Memorandum as defined in the Umbrella Agreement) (collectively "the
Transaction Documents" and individually "a Transaction Document"), contain
the whole agreement between the parties relating to the transactions
contemplated by such Transaction Documents and any other transactions or
matters related to them and supersede all previous agreements between the
parties relating to these transactions. The Memorandum shall not
constitute a Transaction Document. Each of the parties to this Agreement
being also a party to any of the other Transaction Documents acknowledges
that it has not relied on any pre-contractual representations
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warranties or other assurances save for the Warranties (as defined in this
Agreement and the Other Sale Agreements) the Purchaser Assurances (as
contained in this Agreement, the Umbrella Agreement and the Other Sale
Agreements) and the Vendor Assurances (as contained in the English Sale
Agreement) and otherwise as expressly set out in any of the Transaction
Documents. Each party hereby agrees that it shall have no remedy against
any other party for any negligent or innocent misrepresentation made by
such other party in relation to such transactions prior to the Transaction
Documents being entered into except to the extent that the same shall have
been incorporated in any of such Transaction Documents as a warranty
representation or indemnity in which case any claim in relation to the same
shall be only on the basis of a breach of the relevant Transaction Document
or under the relevant indemnity provision. Nothing in this clause 10 shall
relieve any party from any liability for representations made fraudulently.
11. PRODUCT WARRANTY EPIDEMIC
-------------------------
11.1 In this clause 11:
11.1.1 "Product Liability" means liability in respect of death,
personal injury, physical damage to property (other than
to the products themselves) caused by a defect in any
product manufactured assembled or repaired refurbished
serviced sold or supplied (or caused by a failure to carry
out servicing properly) prior to the Completion Date by a
Group Member;
11.1.2 "Warranty Liability Claim" means a claim (other than a
claim in respect of Product Liability) asserting in
relation to a product manufactured, assembled, repaired,
refurbished, serviced, sold or supplied prior to the
Completion Date by a Group Member, that it is or was or
will become faulty or defective or does not or did not or
will not comply with any warranty or representation
expressly or impliedly made, or with any applicable
regulations, standards
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or requirements in respect thereof, and in respect of which
the following conditions are also satisfied namely :
(i) the claim is made within the contractual warranty
period applicable to the supply (or repair, service or
refurbishment) of the product in question and prior to 31st
March 1999, and the Purchasers bona-fide and reasonably
believe it to be a claim which the Group Member is legally
liable to meet; or
(ii) the claim is made either before or after the expiry of
the contractual warranty period applicable to the supply
(or repair, service or refurbishment) of the product in
question and prior to 31st March 1999 and the Purchasers
(having consulted with the Vendor) bona-fide and reasonably
believe applying the same or substantially the same
investigatory routines and judgmental criteria as were
applied by the relevant Group Member during the period of
one year before the Completion Date :
(a) that it is a claim which, because of the size of the
particular order, the importance of the customer to the
Group Member, or otherwise, it is necessary for the
relevant Group Member to meet in whole or in part in order
to preserve the goodwill of the Group Member; and
(b) that in the case where the particular customer or a
similar customer had previously made a similar claim of
comparable size against a Group Member whilst that Group
Member was part of the Lucas Group, that Group Member would
have dealt with the claim in substantially the same way;
11.1.3 "Notifiable Claim" means :
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(i) a series of Warranty Liability Claims (whether made
before or after or partly before and partly after the
Completion Date) resulting from substantially the same fault
(whether of design, manufacturing technique or process,
workmanship or materials) in relation to one or more
products (so that all such products are affected by
substantially the same fault) ("the affected products"); or
(ii) the existence of a state of affairs (whether before or
after the Completion Date) which is likely to lead to a
series of Warranty Liability Claims within (i), whether or
not a Warranty Liability Claim or Claims are actually made;
where in either case in relation to the affected products
the Warranty Cost in respect of the Warranty Liability
Claims met and to be met becomes and/or exceeds
(Pounds)40,000 calculated at the exchange rate applicable
from A$ to (Pounds)sterling (calculated at the average of
the 'bid' and 'asked' exchange rate quoted by Reuters in New
York at 1.00 pm on the date of the claim);
11.1.4 "Warranty Cost" means:
(i) in the case of affected products which are repaired
the Incremental Cost to the relevant Group Member of
performing the repair;
(ii) in the case of affected products which are replaced
the Incremental Cost to the relevant Group Member of the
replacement products and the installation thereof; and
(iii) all other customer costs which the relevant Group
Member, manufacturer or supplier (as the case may be) is
contractually obliged to meet under the warranty in
question.
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11.2 In the event that after the Completion Date but prior to 31st March
1999 a Group Member shall be notified in writing by a customer of a
new Warranty Liability Claim which when aggregated with all Warranty
Liability Claims previously made in respect of the affected products
(to the intent and effect that the product in respect of which the new
Warranty Liability Claim is made and the products in respect of which
all other Warranty Liability Claims are or have been made all suffer
from substantially the same fault) is also a Notifiable Claim, the
Purchasers shall promptly notify and procure that the relevant Group
Member promptly notifies the Vendor in writing of the relevant
circumstances insofar as these are known to the Purchasers or the
relevant Group Member and prior to accepting any such new Warranty
Liability Claim allow the Vendor to investigate the facts surrounding
the Warranty Liability Claims met and to be met by the Purchasers, the
cause thereof, the Warranty Cost incurred or likely to be incurred in
relation thereto and to make representations to the Purchasers and the
relevant Group Member thereon, all of which the Vendor will do
promptly. The Purchaser shall take into account such representations
in making its decision whether or not to accept such Warranty
Liability Claim, which decision shall be reasonable.
11.3 The Purchasers shall and shall procure that each Group Member shall
notify the Vendor on receipt of any Warranty Liability Claim(s) which
they reasonably believe may become Notifiable Claims. In respect of
such claims so notified the Purchaser shall and shall procure that the
relevant Group Member shall before accepting the Warranty Liability
Claim allow the Vendor to investigate the Warranty Liability Claim in
question, the cause thereof, the likely Warranty Cost in relation
thereto and to make representations to the Purchasers and the relevant
Group Member thereon. The Purchaser shall take into account such
representations in making its decision whether or not to accept such
Warranty Liability Claim, which decision shall be reasonable.
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11.4 The Vendor shall from time to time, subject to the Purchasers having
provided the Vendor with a fully detailed breakdown of its Warranty
Cost and allowing the Vendor to verify the same by all reasonable
means, pay promptly to the Purchasers an amount equal to the Warranty
Cost incurred by the relevant Group Member of meeting Notifiable
Claims, each such payment to be made within twenty one days.
11.5 The provisions of clause 11.4 shall not apply to the extent that
specific provision was made in the Final Completion Statement in
respect of the Notifiable Claims in question.
12. INTEREST
--------
Save where otherwise contemplated by any other provision of this Agreement
if any sum shall at any time be due and outstanding from any party to any
other party pursuant to the terms of this Agreement interest shall be
payable thereon at the rate per annum which is 2% above Barclays Bank
plc's base lending rate from time to time or 12% per annum, whichever is
the higher at the date on which such sum is due and payable such interest
to accrue from day to day and to be payable from the due date until payment
whether before or after judgment.
13. WAIVER
------
No waiver by any party to this Agreement of any of the requirements of this
Agreement or any of its rights hereunder shall have effect unless given in
writing and signed by or on behalf of the party giving the waiver and no
delay by any party in exercising any of its rights hereunder shall impair
the same. No single or partial exercise of any right or remedy shall
preclude any further exercise thereof or the exercise of any other right.
Any waiver of any breach of, or any default under any of the terms of this
Agreement will not be deemed a waiver of any subsequent breach or default
and will in no way affect the other terms of this Agreement.
14. NOTICES
-------
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14.1 The address for service of the parties to this Agreement shall be:
14.1.1 in the case of the Vendor its registered office in the
United Kingdom from time to time and shall be addressed
to:-
The Legal Director - Lucas
Electrical and Electronic Systems; and
14.1.2 in the case of each Purchaser - Prestolite Electric
Incorporated 2100 Commonwealth Boulevard, Ann Arbor, MI
48105, USA, attention Kim Packard.
14.2 Any notice will be deemed well served on the party to whom it is
addressed if it be served personally or by courier delivery addressed
to such party at its address for service and service shall be deemed
to be effective upon such personal or courier delivery taking place.
14.3 Any notices or statements to be served pursuant to this Agreement may
be sent by facsimile process:
14.3.1 in the case of notices to the Vendor to the Legal
Director -Lucas Electrical and Electronic Systems; fax
0121 627 4420 or to such other fax number as may be
notified to the Purchaser for the purposes of this clause
14.3; and
14.3.2 in the case of notices to the Purchasers to Kim Packard;
fax (313) 913-6655 or to such other fax number as may be
notified to the Vendor for the purposes of this clause
14.3.2.
14.4 Any notice or statement so sent by facsimile process shall be deemed
to have been served at the expiration of 2 hours after the time of
despatch if despatched before 3.00 pm (local time at the place of
destination) on any Business Day and in any other case at 10.00 am
(local time at the place of destination) on the
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Business Day following the date of despatch provided that it is
followed by a hard copy of the notice or statement served on the
recipient in accordance with clause 14.2.
14.5 For the purposes of this Agreement Prestolite Newco hereby irrevocably
authorises and instructs PEI to act for it and on its behalf in
respect of all matters required to be done by the Purchasers hereunder
and agrees that the Vendor may rely on any agreement reached with PEI
as being an agreement which binds Prestolite Newco. Accordingly where
in this Agreement there is a reference to the Purchasers such
reference shall be interpreted as meaning a reference to PEI for
itself and on behalf of Prestolite Newco.
15. COSTS
-----
Save as otherwise provided herein each party hereto shall bear its own
costs and expenses in connection with this Agreement and the negotiations
leading thereto.
16. SURVIVAL OF CERTAIN PROVISIONS
------------------------------
This Agreement shall remain in force and effect after the Completion Date
in respect of any matters covenants or conditions which shall not have been
done observed or performed prior thereto and all representations warranties
obligations of and indemnities given by the parties shall (except for any
obligations fully performed) continue in full force and effect
notwithstanding Completion.
17. ANNOUNCEMENTS
-------------
No announcement concerning the transactions contemplated by this Agreement
or any matter ancillary to it and no disclosure of the terms of this
Agreement shall (save as required by law or the regulations of the London
Stock Exchange or the New York Stock Exchange) be made by any party except
with the prior written approval of the Vendor and the Purchasers. The
Vendor and the Purchasers agree to procure that each of their
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respective advisers and representatives complies with the provisions of
this clause as if such person were party to this Agreement.
18. SHARED IP
---------
18.1 In relation to any Shared IP the Vendor shall procure that the member
of Lucas Group which is the owner of such Shared IP shall on or as
soon after Completion as shall be reasonably practicable grant to such
Group Member as uses the Shared IP a fully paid up licence in respect
of all and any such Shared IP to use and exploit the same for its
remaining life (where the same may in time expire) and otherwise
without limit in point of time but subject to the provisions of clause
18.4 and otherwise) on terms that:
18.1.1 such licence shall be non-exclusive, non-transferable
(other than to a successor in title to the business of the
Group Member), irrevocable, royalty-free and worldwide;
18.1.2 such Group Member may, in relation to the business carried
on by such Group Member, sub-licence any such Shared IP to
any member of the Purchasers' Group for so long as such
licensee remains a member of the Purchasers' Group;
18.1.3 if the Group Member (or any member of the Purchasers'
Group) wishes to sub-licence any such Shared IP to a party
outside the Purchasers' Group in relation to the business
carried on by such Group Member, it may only do so with
the consent of the Vendor (such consent not to be
unreasonably withheld).
18.2 Any actions against any third party for infringement of any Shared IP
shall be a matter for the Vendor on behalf of the member of the Lucas
Group being the owner thereof provided that the Purchasers and/or the
appropriate Group Member shall render such assistance (at the Vendor's
or other member of the Lucas Group's expense) as the Vendor on behalf
of such member of the Lucas
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Group may reasonably require for the purpose of bringing such action.
If the Purchasers shall agree in writing to share in the costs of any
such action (but not otherwise), the Purchasers shall be entitled to a
corresponding share of any damages or other compensation received. If
the Vendor decides not to take or within a reasonable time fails
itself to take infringement proceedings after written request by the
Purchasers, the Purchasers and/or the appropriate Group Member shall
be free to do so in its/their own name and the Vendor shall (at the
Purchasers' request and expense) render such assistance as the
Purchasers and/or the appropriate Group Member may reasonably require
(including subject to being appropriately indemnified by the
Purchasers against costs and any other damages or awards lending its
name) for the purpose of bringing such proceedings.
18.3 If the Vendor wishes to cease the prosecution or maintenance of any
Shared IP which is registered or the subject of a pending application,
it shall first give timely notice to the Purchasers offering to
transfer to the Purchasers and/or the appropriate Group Member the
Shared IP in question. If such offer is accepted, the parties shall
effect appropriate transfer documentation. Alternatively, if such
offer is not accepted within 7 days, the Vendor shall be at liberty to
cease such prosecution or maintenance and to abandon the registration
of relevant intellectual property.
18.4 The licence in respect of shared IP granted by this clause 18 shall
automatically determine and be of no further force or effect if at any
time:-
18.4.1 the business which enjoys the benefit of such licence (or
any part of such licence) or to which such licence (or
part of such licence) shall have been assigned or sub-
licensed; or
18.4.2 the corporate entity which owns (whether directly or
indirectly) the business which enjoys the benefit of such
licence (or any part
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of such licence) or to which such licence (or part of such
licence) shall have been assigned or sub-licensed
shall be or become part of a group of companies of which a Lucas
Competitor forms part or in which a Lucas Competitor is interested
whether directly or indirectly.
18.5 For the avoidance of doubt, this clause 18 shall not permit the
Purchasers or any Group Member to sub-licence or assign the Shared IP
or any part thereof to any Lucas Competitor.
19. COUNTERPARTS
------------
This Agreement and any other documents to be entered into in accordance
with its terms may be executed in any number of counterparts and by the
several parties hereto on separate counterparts each of which when so
executed and delivered shall be an original but all the counterparts shall
together constitute one document.
20. GENERAL
-------
20.1 This Agreement will be binding on and will enure for the benefit of
each party's successors and assigns (as the case may be).
20.2 The parties agree that they will do all such acts and things and
execute all such documents as may be required on or subsequent to
Completion to vest in the Purchasers legal and beneficial ownership of
the Indiel Sale Shares and the Lucas Newco Shares in accordance with
this Agreement and otherwise to give effect to its terms.
20.3 Save as otherwise expressly contemplated by this Agreement the rights
and remedies expressly provided for by this Agreement will not exclude
any rights or remedies provided by law.
20.4
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20.4.1 The Vendor and the Purchasers agree to make a good faith
effort to resolve any disagreement, dispute, controversy or
claim (for purposes of this clause 20.4, a "Legal Dispute")
arising out of or relating to this Agreement, its
existence, validity, the interpretation hereof, any
agreements relating hereto, or the breach, termination or
invalidity hereof. Failing such a resolution, such Legal
Dispute shall be resolved through mediation to be carried
out by a mediator during a period of thirty days, pursuant
to the Reglas de Procedimiento y Codigo de Etica del Centro
Empresarial de Mediacion y Arbitraje (Asociacion Civil)
("CEMA").
20.4.2 Any unresolved Legal Dispute shall be referred to and
finally settled by arbitration, in accordance with the
Rules of the CEMA.
20.4.3 Each party hereto hereby waives, to the fullest extent
permitted by law, its right to appeal or challenge the
validity of the arbitration award before any court of law,
or that the action, suit or proceeding is brought in an
inconvenient forum or that the venue of the action, suit or
proceeding is improper. Notwithstanding the above, the
party in whose favour the Legal Dispute is resolved may
request the enforcement of the arbitration award before a
court of law if the other party does not comply with what
is resolved.
20.4.4 Each party hereto agrees that service of process in any
action, suit or proceeding referred to in this clause 20.4
shall be deemed in every respect effective service of
process upon it if sent to it at the address for notice
purposes provided for in clause 14.
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20.5 The formation, existence, construction, performance, validity and all
aspects whatsoever of this Agreement or of any term of this Agreement
shall be governed by the laws of Argentina.
20.6 Where and to the extent that the Purchasers or any Group Member is
entitled to make a claim under this Agreement whether under the
Warranties the Indemnities or otherwise the loss or damage in respect
of which any such claim may be made shall be limited to direct loss or
damage to the intent and effect that indirect loss or damage
(including consequential loss or damage) shall be irrecoverable.
20.7 Where under this agreement the Vendor is liable to indemnify a Group
Member and any payment to be made by the Vendor under the indemnity is
taxable in the hands of such Group Member then in those circumstances
the Vendor shall pay to the Purchasers a sum equal to the amount of
the liability to the Group Member (before any upwards adjustment in
respect of any taxation payable by the Group Member) and the
Purchasers and the Group Member in question shall accept the same in
satisfaction of the claim in question.
21. ASSIGNMENT
----------
21.1 This Agreement shall not be assignable by the Vendor or the Purchasers
without the prior written consent of the other(s) (which consent shall
not be unreasonably withheld in the case of an internal group
reorganisation (without insolvency) intended to be made by either the
Vendor or the Purchasers provided always that any assignee shall be a
person of similar substance and standing as the assignor or a suitable
guarantee shall be provided). In cases where the assignee of this
Agreement is a member of the Lucas Group, upon their ceasing to be a
member of the Lucas Group, the Vendor shall procure that such assignee
shall, and such assignee shall be obliged to, re-assign this Agreement
to the Vendor. In cases where the assignee of this Agreement is a
member of the Purchasers' Group then, upon ceasing to be a member of
the
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Purchasers' Group, the Purchasers shall procure that such assignee
shall, and such assignee shall be obliged to, re-assign this Agreement
to the Purchasers.
21.2 The benefit of this Agreement may be assigned by the Purchaser by way
of security to any provider of secured financing to any member of the
Purchasers' Group.
22. STAMP DUTY
----------
If and to the extent that stamp duty arises in respect of the sale and
purchase of the Indiel Sale Shares hereunder or under the Indiel Option
the parties agree that the same shall be shared equally between the Vendor
and the Purchasers and the Vendor agrees to pay its portion thereof within
10 days of receipt of a notice from the Purchasers as to the amount of the
Vendor's share thereof or, if later, the date on which the same is due and
payable to the appropriate authorities.
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SCHEDULE 4
----------
THE WARRANTIES
--------------
1. INTERPRETATION
--------------
1.1 In this Schedule 3 the following expressions have the following
meanings:
Expression Meaning
"the Accounting Date" 31st January 1997
"the Accounts" The audited accounts of each Group
Member, including in the case of the
Company its audited consolidated
accounts, for the financial year which
ended on the Accounting Date, comprising
in each case a balance sheet, a profit
and loss account, notes and directors'
and auditors' reports
"Company" Notwithstanding the definition contained
in clause 1, each company individually
details of which are set out in Schedule
1 as if the Warranties were set out in
full in respect of each such company
provided that where used other than in
this Schedule "Company" shall have the
meaning given in clause 1
"Contract" Any agreement, arrangement or
understanding which is legally binding
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"Intellectual Property Patents, trade marks, service marks,
Rights" registered designs, design rights,
copyright, know how and all other
intellectual property (of whatever
nature) and any applications for the
same
"Shares" The Indiel Shares and the Lucas Newco
Shares
"Stock" Stocks of the Company
"Taxation" (a) Any tax, duty, impost or levy, past
or present, anywhere in the world,
whether governmental, state, provincial,
local governmental or municipal, and (b)
Any fine, penalty, surcharge, interest
or other imposition relating to any tax,
duty, impost or levy mentioned in
paragraph (a) of this definition or to
any account, record, form, return or
computation required to be kept,
preserved, maintained or submitted to
any person for the purposes of any such
tax, duty, impost or levy
"Taxation Authority" Any authority, anywhere in the world,
competent to impose, assess or collect
Taxation,
"Taxation Statute" Any statute (and all regulations and
other documents having the force of law
under such statute) published, enacted,
issued or coming into force on or before
the date of this
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Agreement relating to Taxation
1.2 References in this Agreement to statutes or any statutory provision
shall include any statutory modification, re-enactment or extension
thereof for the time being in force and any orders, regulations,
instruments or other subordinate legislation made thereunder provided
always that this shall not operate to increase the liability of the
parties hereunder.
1.3 Where any of the Warranties is qualified by words such as "the Vendor
is not aware" or "the Vendor believes" or "to the best of the Vendor's
knowledge" or any similar qualification, the Vendor's awareness or
belief or knowledge shall be determined by reference only to the
awareness or belief or knowledge of the persons whose names are listed
in the left hand column below and whose position is stated opposite
his name in the right hand column below, of whom enquiry has been made
by the Vendor and the Vendor shall not be liable for breach of
warranty should the fact or circumstance which would otherwise be a
breach of the Warranties be known to any other employee or officer of
any member of the Lucas Group.
Name of Person Position Held
P Almond Legal Director - Lucas Electrical and
ElectronicSystems
E Earle Group Property Manager
S Lockwood Group Patents Manager
C Long-Leather Programme Director-Business Development
M J McKiernan Group Director - Health Safety and Environment
J. Badger Consultant
Luis Perez General Manager
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Jose Rocca Finance Manager
1.4 In relation to any of the Warranties which are qualified by reference
to ateriality, the materiality of any matter which may constitute a
breach of any such Warranty shall be determined by reference to and in
the context of the Group.
2. SCHEDULE 1 CAPITAL
------------------
2.1 The Company is a sociedad ananima duly organised, validly existing and
in good standing under the laws of Argentina. The Company has all
requisite power and authority to own, lease, hold and operate its
assets and properties and to conduct its business as and where owned,
leased, held, operated and/or conducted, as the case may be, and to
hold all franchises, licences and permits necessary or required
therefor.
2.2 The Company is duly qualified to do business as presently conducted
and is in good standing in every jurisdiction in which the property
owned, leased or operated by the Company, or the nature of the
business conducted by the Company, makes such qualification necessary.
2.3 The aggregate capital stock of the Company consists of 14,786,176
common, nominative, nonendorsable shares with a par value of A$1 each,
entitled to 1 vote per share, which shares are issued, outstanding and
fully paid in. There are no other shares of capital stock of the
Company, issued or outstanding. The Shares have been duly authorised
and validly issued, fully paid and nonassessable, and are owned
beneficially and of record by Vendor; free and clear from any liens of
any kind or nature whatsoever. Upon Completion, Purchaser shall be the
legal and beneficial owner of the Shares and of all irrevocable
contributions on account of future capital increases that might have
been made by Vendor or any other third party into the Company, free
and clear of any liens of any kind or nature whatsoever. Other than as
contemplated by
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this Agreement there are no outstanding obligations, options,
warrants, puts, calls, rights to subscribe, agreements or other
commitments or rights of any kind or nature whatsoever to purchase the
Shares, nor are there any outstanding securities of the Company which
are convertible into or exchangeable for any Shares of the Company.
The Company has no obligations of any kind or nature whatsoever to
issue any additional shares or stock or other securities. Other than
as contemplated by this Agreement neither the Company nor Vendor has
agreed to issue, purchase, sell or transfer any securities of the
Company.
3. ACCOUNTS
--------
3.1 The Accounts have been prepared in accordance with the Accounting
Principles. The Accounts are in accordance with the books and records
of the Company as of the dates and periods indicated.
3.2 The Accounts fairly present the financial position of the Company at
the Accounting Date. The statements of income and cash flows in the
Accounts fairly present the results of operations of the Company and
the cash flows for the periods indicated and covered thereby.
3.3 The Disclosure Letter sets out a list and description of all
indebtedness whether or not matured or contingent or incurred as
principal, guarantor or surety, owed by the Company or to which any of
their respective properties or assets are subject ("Indebtedness"),
and a description of all material terms thereof and all assets pledged
or otherwise subject thereto. Other than as listed on Disclosure
Letter, the Company does not have any Indebtedness with Vendor. The
Company is not in default, nor has any event occurred which, with
notice of the lapse of time or both, would constitute a default, under
any Indebtedness.
4. ORGANISATION
------------
The Vendor is entitled, and has all requisite corporate power and
authority, to enter into and complete the Agreement and the signature,
execution and performance of the
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Agreement and all documents ancillary to it have been duly authorised by
all necessary acts of the Vendor and its board of directors.
ASSETS
- - - - - - - - - - - ------
5. UNENCUMBERED TITLE
------------------
Each asset reflected in the Accounts (save for current assets disposed of
by the Company in the ordinary course of its business since the Accounting
Date) and each asset treated as an asset of the Company and/or used by the
Company at the date of this Agreement is in the legal and beneficial
ownership of the Company, free from any third party right and from any
Contract to grant the same.
6. DEBTORS
-------
The Company has not factored or discounted any existing debt owed to it or
agreed to do so.
7. STOCK
-----
So far as the Vendor is aware, the Stock taken as a whole is sufficient for
the normal requirements of the Company and taken as a whole is at its
normal level and having regard to current orders and those orders
reasonably anticipated from customers of the Company.
8. PROPERTY
--------
8.1 Schedule 3 contains particulars of all real property owned by the
Company and all easements and rights of way (collectively "Real
Property").
8.2 With respect to all real property leased by the Company, including all
leasehold improvements (collectively, the "Leased Property") save as
disclosed in the Disclosure Letter:
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8.2.1 all leases are in writing and are duly executed and, where
required, witnessed, notarized, acknowledged and recorded
to make them valid and binding and in full force and
effect for their full term, and none have been modified,
amended, sublet or assigned;
8.2.2 the rental set forth in each such lease is the actual
rental being paid, and there are no separate agreements or
understandings with respect to the same;
8.2.3 the Company is not in default and so far as the Vendor is
aware, there is no default on the part of any other party
under any Lease under which any Leased Property is held
which materially affects the Leased Property;
8.2.4 all surety bonds, insurance, security, and other deposits
required by such leases have been made and have not been
refunded or returned, or their forfeiture claimed, in
whole or in part, by any lessor
8.3 With respect to the Real Property and Leased Property, including all
leasehold improvements:
8.3.1 there are no outstanding variances or special use permits
affecting the Real Property or the Leased Property or
their respective uses;
8.3.2 the Company has not received any written notice of a
violation of any Laws and Ordinances, or of any covenant,
condition, easement, or restriction affecting the Real
Property or the Leased Property or relating to their use
or occupancy. The Vendor is not aware of any such
violation;
8.3.3 so far as the Vendor is aware there is no material
condemnation or eminent domain proceeding of any kind
pending or, to the
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knowledge of the Company and Vendor, threatened against
any of the Real Property and the Leased Property and for
the purposes of this clause 8.3.3 what is material shall
be determined in the context of the Group as a whole;
8.3.4 the Real Property and the Leased Property are occupied
under valid and current certificates of occupancy where
applicable, governmental authorisations, permits, or the
like, and the transactions contemplated by this Agreement
will not require the issuance of any new amended
certificates of occupancy, governmental authorisations,
permits or the like;
8.3.5 so far as the Vendor is aware, the Real Property and the
Leased Property do not violate, and all improvements have
been constructed in compliance with, any applicable
federal, provincial, state or municipal statutes, laws,
ordinances, regulations, rules, codes, orders, or
requirements, including, without limitation, any building,
land use, zoning, fire or environmental laws or codes
which in any such case have the force of law (the "Laws
and Ordinances"), and so far as the Vendor is aware, the
Company has obtained all material licences, permits,
building permits, occupancy permits and approvals required
to own, possess and operate its Real Property and the
Leased Property and conduct its business as it is
presently being conducted;
8.4 The Disclosure Letter contains particulars of all the leases executed
by the Company under which the Company has obligations which remain
outstanding. All Leases listed in the Disclosure Letter are so far as
the Vendor is aware valid and in full force and there is no event that
with notice or lapse of time, or both, would constitute an event of
default or event of acceleration under any of the Leases.
-85-
<PAGE>
9. INTELLECTUAL PROPERTY RIGHTS
----------------------------
9.1 The Company has no interest in any Intellectual Property Rights
(whether registered or not) relating to starters and alternators save
for the Intellectual Property Rights details of which are given in the
Disclosure Letter.
9.2 So far as the Vendor is aware the Company will be able to continue to
use in Argentina all intellectual property rights (relating to
starters and alternators) which it uses at the date of this Agreement.
9.3 So far as the Vendor is aware none of the goods and/or services
supplied in the course of the business carried on by the Company or
any of the processes employed in such business or any other aspect of
the carrying on of such business infringes any intellectual property
rights of any nature of any third party.
9.4 So far as the Vendor is aware no person is currently infringing any of
the Intellectual Property Rights details of which are given in the
Disclosure Letter.
9.5 So far as the Vendor is aware the Company has not entered into any
subsisting licence with any person under which:-
9.5.1 the Company licenses any of the Intellectual Property
Rights to that person; or
9.5.2 that person licenses any intellectual property rights to
the Company for the purpose of the business carried on by
the Company.
EMPLOYEES
- - - - - - - - - - - ---------
10. REMUNERATION AND EMPLOYEES
--------------------------
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<PAGE>
10.1 The particulars contained in the Schedule annexed to the Disclosure
Letter relating to the employees of the Company are true and accurate.
10.2 The Company is not under any contractual obligation:
10.2.1 to make any increase in the rates of remuneration of or
other similar payment to any of such employees;
10.2.2 to make any change in the terms and conditions of
employment of any such employees.
10.3 The Disclosure Letter discloses all material agreements or
arrangements with trades unions, staff associations or other
associations of employees relating to the employees of the Company.
10.4 In relation to all employees of the Company a pro forma pack
incorporating standard form statements of particulars of employment
and other written statements of employment benefits is annexed to the
Disclosure Letter, the salary or wages of such employees being shown
in the Schedule referred to in paragraph 10.1 above.
10.5 No employee of the Company employed in a managerial or senior
technical or senior sales position has given or has been given notice
to terminate his employment.
10.6 There are no loans outstanding from the Company, the Vendor or any
other member of the Lucas Group to any employee of the Company or from
any of such employees to the Vendor, the Company or any other member
of the Lucas Group.
CONTRACTS
- - - - - - - - - - - ---------
11. INSURANCE
---------
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<PAGE>
11.1 Brief particulars of all the Company's insurances are set out in the
Disclosure Letter.
11.2 There is no insurance claim made by the Company pending or
outstanding.
11.3 All such policies and /or bonds are currently in full force and effect
and neither the Company nor Vendor has received any notice of
cancellations with respect to any of the policies. All premiums due
and payable on such policies and/or bonds have been paid. Neither the
Company nor the Vendor is a co-insurer under any of the terms of any
such insurance policy.
11.4 The Company has not been refused any insurance otherwise available to
comparable companies in the same industry in Argentina related to its
assets and/or business by any insurance carrier during the last five
(5) years.
12. MATERIAL CONTRACTS
------------------
12.1 The Company is not a party to any of the following contracts which is
material:
12.1.1 any partnership, joint venture, consortium, joint
development or similar contract relating to the Company;
12.1.2 any contract requiring the Company to pay any royalty,
commission or like payment in relation to its business;
12.1.3 any contract for the supply of goods and/or services by or
to the Company on terms under which retrospective or
future discounts, price reductions or other financial
incentives are given by or to the Company dependent on the
level of purchases or any other criteria;
12.1.4 any written agency or written distributorship agreement.
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<PAGE>
12.2 None of the Contracts has been entered into or assumed other than on
an arm's length basis save those made with the Vendor or another
member of the Lucas Group . The extent to which any such Contract is
not on terms similar to those that could be expected to have been
agreed with an unaffiliated third party is set out in the Disclosure
Letter.
12.3 The Vendor is not aware of the invalidity of or grounds for rescission
avoidance or repudiation of any agreement to which the Company is
party.
12.4 The Contracts are enforceable in accordance with their terms save
where the fact that any such Contract is not enforceable would not
have a material and adverse effect on the Group.
12.5 The Disclosure Letter lists:
12.5.1 the top fifty suppliers (a "Major Supplier") by value (net
invoice value) to the Company in the twelve months from 1
November 1996 to 31 October 1997; and
12.5.2 those customers (a "Major Customer") who have purchased
from the Company in the twelve months from 1 November 1996
to 31 October 1997 goods and services having in the
aggregate a net invoice sales value of not less than
A$400,000.
COMPLIANCE; DISPUTES
- - - - - - - - - - - --------------------
13. COMPANY LAW MATTERS AND GENERAL COMPLIANCE
------------------------------------------
13.1 Compliance has been made with all legal requirements in connection
with the formation of the Company and all issues and grants of shares
or other securities of the Company.
13.2 The copy of the memorandum and articles of association and by-laws of
the Company and all amendments thereto enclosed with the Disclosure
Letter are
-89-
<PAGE>
true and complete and have been duly filed registered and
approved by the Office of Corporations, Public Registry of Commerce.
13.3 The Company has conducted its business in all material respects in
accordance with all applicable laws and regulations of Argentina and
the laws of such other jurisdictions which are applicable to the
Company and its activities.
13.4 There is not pending, or in existence, any investigation or enquiry
which is known to the Vendor by, or on behalf of, any governmental or
other body in respect of the affairs of the Company nor to the
knowledge of the Vendor is any such investigation or inquiry
threatened.
14. LITIGATION/DISPUTES
-------------------
14.1 Neither the Company nor any person for whose acts or defaults it may
be liable is involved (whether as plaintiff, defendant or any other
party) in any civil, criminal, tribunal, labour or arbitration
proceedings.
14.2 There is no unsatisfied judgment or unfulfilled order outstanding
against the Company and neither the Company nor any person is party to
any undertaking or assurance given to a court, tribunal or any other
person in connection with the determination or settlement of any claim
or proceedings for which the Company would be directly or vicariously
liable.
14.3 The Company is not bound by, subject to or in default under any order,
judgment, award, writ, injunction, or other ruling of any court, or
administrative or governmental authority.
14.4 There are no outstanding material disputes between the Company and any
Major Customer or Major Supplier.
-90-
<PAGE>
15. DEFAULT
-------
The Company is not in breach of any Contract to which it is a party, and so
far as the Vendor is aware no other party to any such Contract is in breach
of it where in either such event such breach is material in the context of
the business of the Group taken as a whole.
16. EVENTS SINCE THE ACCOUNTING DATE
--------------------------------
Since the Accounting Date
16.1 the Company has not other than in the ordinary course of business
acquired, or agreed to acquire, any single asset having a value in
excess of A$100,000 or assets having an aggregate value in excess of
A$100,000 save for stock acquired in the ordinary course of business;
16.2 the Company has not disposed of, or agreed to dispose of, any material
asset other than finished goods other than in the ordinary course of
business;
16.3 the trade and business of the Company has been carried on in the
ordinary and normal course and on a basis consistent with past
practice;
16.4 no dividends have been paid;
16.5 the Company has not:
16.5.1 changed or entered into any obligation to change the terms
and conditions of employment of any senior employee of the
Company;
16.5.2 paid or become obliged to pay any severance or termination
payment;
16.5.3 made any loan or advance to any person, corporation, firm
or other entity other than credit extended to customers in
the ordinary course of business;
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<PAGE>
16.5.4 entered into any sale, licence, assignment or transfer of
any patents, trademarks, trade names or other intellectual
property;
16.5.5 made any commitment (through negotiations or otherwise) or
incurred any liability to any labour organisation;
16.5.6 instituted any bonus, stock option, profit-sharing,
pension plan or similar arrangement or made any changes in
any such existing plans;
16.5.7 terminated , amended or revised any agreement, contract or
other commitment with any of its customers and/or
suppliers where such termination, amendment or revision is
material in the context of the business of the Company nor
has any Major Customer and/or key supplier terminated,
amended, or revised any agreement, contract or commitment
with the Company where such termination, amendment or
revision is material in the context of the business of the
Company, except where any of the same were in the ordinary
course of business, in accordance with the Company past
practices, and were consistent with the Company's
corporate policies and procedures; or
16.5.8 terminated, transferred or granted any rights, except in
the ordinary course of business consistent with past
practices, under any contract, lease, mortgage, indenture,
loan agreement, licence, deed of trust, order, arbitration
award, judgment, decree, instrument or other agreement;
17. EFFECTS OF AGREEMENT
--------------------
The execution, delivery and performance of this Agreement by the Vendor
does not:
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<PAGE>
17.1 violate, conflict with or result in the breach of any provision of the
memorandum or articles of association of the Vendor;
17.2 violate any law to which the Vendor is subject;
17.3 give any other party to a Contract which is material the right to
terminate the same; or
17.4 result in a breach of, or constitute a default under any order,
judgment or decree of any court or governmental agency to which the
Company or the Vendor are party or by which, in either case, the
Vendor or the Company or any of the assets of either is bound or
subject.
TAXATION
- - - - - - - - - - - --------
18. RETURNS AND DISPUTES
--------------------
18.1 All notices, returns, computations, registrations and payments which
should have been made by the Company for any Taxation purpose have
been made within the requisite periods and are up-to-date.
18.2 So far as the Vendor is aware the Company is not involved in any
dispute with any Taxation Authority which is material and which
concerns any matter which is reasonably likely to affect in any way
the liability of the Company to Taxation.
18.3 So far as the Vendor is aware the Taxation affairs of the Company are
not the subject of any investigation or enquiry by any Taxation
Authority (other than routine questions) and so far as the Vendor is
aware there are no such investigations or enquiries threatened.
19. BROKERS, FINDERS, ETC.
----------------------
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<PAGE>
Neither the Vendor nor the Company has retained, and neither the Vendor nor
the Company is subject to any claim of, any broker, finder, consultant or
intermediary in connection with the sale and purchase of the Shares
contemplated by this Agreement who might be entitled to a fee or commission
from Purchaser or the Company upon consummation of the sale and purchase of
the Shares hereunder.
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<PAGE>
SCHEDULE 5
----------
THE ACCOUNTING PRINCIPLES
-------------------------
LUCAS INDIEL ARGENTINA S.A.
---------------------------
ACCOUNTING POLICIES
-------------------
Basis of consolidation
The consolidated accounts will include the figures of LUCAS INDIEL ARGENTINA
S.A., Jovsa S.A. and Equipos Originales S.A. Adjustments will be made to
eliminate the investment of Lucas Indiel Argentina S.A. in its subsidiaries,
inter company balances and other operations between companies.
1. FIXED ASSETS
------------
1.1 Determination of Cost
General
. Purchase price includes all consideration, cash or otherwise, in
respect of the asset and includes expenses incidental to the
acquisition.
. Improvement and Repair - expenditure is capitalised where it
increases the expected future benefits from the assets beyond its
previously assessed standard of performance.
Specific
. Plant and Machinery - cost includes all expense directly
attributable to bringing the asset into its working condition and
location eg.
. Invoice purchase price
. site preparation
. delivery and handling charges
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<PAGE>
. installation cost
. professional fees
. Computer Hardware - capitalised amount comprises invoices cost.
. Computer Software - capitalised amount comprises invoiced cost.
. Motor vehicles - capitalised amount comprises invoiced cost.
1.2 Valuation
. Fixed assets balances as at the beginning of the year have been
revalued as at 31st July 1995 in accordance with the wholesale
prices indices, as from that date the price level restatement has
been discontinued. The differences between the restated cost and
its historical cost has been included in the line "S9844" Reserves
Revaluation.
1.3 Depreciation
. All assets are depreciated from the first day of the month in which
they are brought into service. The depreciation is charges to
Profit & Loss account on annual basis from the year of the
addition. The depreciation ceases on the year before the year in
which the asset is sold or scrapped.
. Depreciation is calculated on a straight line basis over the useful
economic life of the asset.
. Economic lives are as follows:
. Buildings 50 years
. Roads 10 years
. Plant and Equipment 10 years
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. Computer Hardware 10 years
. Computer Software 3 years
. Furniture and Fixtures 10 years
. Vehicles 5 years
1.4 Profit/Loss on sale of Assets
Profit or loss on the sale of an asset is calculated as disposal
proceeds less the net value of the asset.
1.5 Leases
. Assets acquired under finance leases are capitalised and
depreciated as for purchased assets as above.
2. STOCK
-----
2.1 Definition
. Stocks comprise:
. goods or other assets purchased for resale
. raw material and components purchased for incorporation into
products for sale
. products in intermediate stages of completion
. finished goods
. materials in transit
. tooling
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2.2 Physical Stock Count
. A full physical count of work-in-progress is conducted at the end of
each quarter.
. A permanent Physical Inventory procedure is performed for raw
material and components and finished goods.
. Certificates are obtained for all stocks held by third parties,
including subcontractors.
2.3 Valuation
Definition
. Cost - that expenditure which has been incurred in the normal course
of business in bringing the product to its present location and
condition.
. Cost of Purchase - comprises purchase price including import duties,
transport and handling costs and any other directly attributable
costs, less trade discounts, rebates and subsidies.
. Cost of Conversion - comprises:
. costs specifically attributable to units of production e.g.
direct labour, direct expenses and subcontracted work.
. production overheads.
. other overheads attributable in the particular circumstances of
business to bring the product to its present location and
condition.
. Production Overheads - overheads incurred in respect of materials,
labours and production based on the normal level of activity
notwithstanding that they may accrue wholly or partly on the time
basis.
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<PAGE>
. Net Realisable Value - the actual or the estimated selling price net
of trade but before settlement discounts, less further costs to
completion and all costs incurred in marketing, selling and
distributing.
Determination of Cost
. With the exception of material in transit, valued at cost, and
tooling revalued as at 31st July 1995 in accordance with official
wholesale price indices, stocks are valued on the basis of standard
costs, which are substantially the same as replacement costs.
There is no significant difference between the replacement cost and
the F.I.F.O. method.
Where applicable, reserves are constituted on the basis of net
realisable values to cover possible losses in respect of redundancy,
excess and slow moving stock.
. The full provision rule for inactive/excess stock may be varied
where there is a reasonably degree of certainty that any stock which
is unprovided for will be sold in the foreseeable future.
. Work-in-progress - the cost is that appropriate to the last
completed operation, plus the value of any materials or components
used during the next operation(s) which are not been returned to
store.
. Non production overheads - overheads relating to service departments
are allocated between production and non production functions, only
these that are allocated to the production function are absorbed
into the costs of conversion.
. Absorption of overheads - overheads included in stock are allocated
on the basis of a normal level of activity which is established with
reference to the budgeted level of production for the current year
and the level of activity
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<PAGE>
achieved in previous years. Abnormal costs such as the cost of the
excess facilities are charged to profit as incurred.
. Remanufacturing stocks - the amount recorded in the Final Completion
Statement for inventory in the remanufacturing department (A$1.1
million at 31 January 1997) shall not exceed the amount recorded at
31 January 1997 or 40% of sales of remaining products for the 12
months ending the month end prior to Completion.
3. MARKETABLE SECURITIES
---------------------
Marketable securities include Argentine government bonds and other highly
liquid investments in shares that are revalued to their quoted market price
as at the end of the year. The revaluation is credited to profit & loss
accounts.
4. GOODWILL (OTHER THAN CONSOLIDATION)
-----------------------------------
(Consolidation accounts for the year ended 31st January 1997)
During the year ended 31st July 1994 two other businesses were acquired.
On one hand Equipos Originales S.A. acquired the capital stock of a new
company called F.M.R. San Luis S.A. by means of which we increased
substantially the existing ceiling of tax exemption benefits according to
San Luis tax promotion regime.
On the other hand, and in order to obtain a significant increase in the
Company's market share, an agreement letter was signed by Equipos Originales
S.A. for the acquisition of Jovsa S.A. that owns the market share rights of
a local competitor business that operated under the name of Garef S.A.
As of 31st July 1995, the excess of the amounts paid for the acquisition
with regard to the fair value of its assets were written off against
reserves. Such differences were shown as a separate item in the note to the
movements of revaluation reserve.
-100-
<PAGE>
As of 31st July 1996, such differences have been transferred to retained
earnings.
5. DEBTORS
-------
5.1 TRADE DEBTORS
-------------
. Trade debtors comprise all amounts due from external customers in
respect of goods sold and services provided in the ordinary course
of business. VAT invoiced to the customers is included in the
outstanding balance for each debtor.
5.2 PROVISIONS
----------
The provision for doubtful debts consists those debts considered to be
a risk at any point in time.
A specific provision is created where:
. the customer is in receivership/administration and no debt recovery
is anticipated
. there is specific knowledge which indicates payment is unlikely
. the debt is long overdue compared to the normal collection cycle of
the business
5.3 PREPAYMENTS AND ACCRUED INCOME
------------------------------
. Prepayments consisting of the unexpired portion of payment made in
respect of time related expenses are included on the balance sheet.
5.4 OTHER DEBTORS
-------------
. Other debtors comprise all amounts falling outside the definition of
trade debtors and are included on the balance sheet to the extent to
which they are determined as recoverable.
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<PAGE>
6. CREDITORS
---------
6.1 TRADE CREDITORS
---------------
Trade creditors comprise all amounts due to external suppliers in
respect to goods purchased and services provided in the ordinary course
of business. Provision is made for goods and services received for
which invoices have not been received by the balance sheet date.
. ACCRUALS AND DEFERRED INCOME
----------------------------
Accruals consist of the amounts payable in respect of benefits received
up to the balance sheet day, generally on a time apportioned basis. An
accrual is made for outstanding annual holiday entitlement for all
employees.
. No accrual shall be made in respect of the year audit.
6.2 CONTINGENT LIABILITIES
----------------------
. Contingent liabilities are only provided for if it is both probable
that a liability will occur and the amount is either known or can be
estimated with accuracy.
. An accrual for the costs of redundancies of up to 30 persons in the
amount of A$700,000 reduced by the amount of actual payments made by
the Company in respect of such redundancies prior to Completion shall
be included in the Final Completion Statement. No provision will be
made in respect of any proposed termination of employment of Luis
Perez.
7. PROFIT AND LOSS ACCOUNT
-----------------------
7.1 MAINTENANCE STOCKS
------------------
. Expenditure on plant and machine spares is written off as incurred.
8. TAX ON PROFIT
-------------
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<PAGE>
. In recent years, the Company has not paid any Income Taxes as taxable
losses have been incurred. These losses are available to offset profits
in future years but are not shown on the balance sheet.
9. PENSION PLAN
------------
The provision to be made shall be calculated in accordance with the provisions
of clause 7.12
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<PAGE>
SIGNED BY CHRIS LONG-LEATHER ) /S/ CHRIS LONG-LEATHER
----------------------
as duly authorised attorney )
for and on behalf of )
LUCAS INDUSTRIES PLC )
Chris Long-Leather as attorney for Lucas
Industries plc
PRESTOLITE ELECTRIC INC.
By: /S/ P. KIM PACKARD
------------------
Name: P. Kim Packard
Title: President
By: /S/ KENNETH C. CORNELIUS
------------------------
Name: Kenneth C. Cornelius
Title: Vice President
PRESTOLITE NEWCO, INC.
By: /S/ P. KIM PACKARD
------------------
Name: P. Kim Packard
Title: President
By: /S/ KENNETH C. CORNELIUS
------------------------
Name: Kenneth C. Cornelius
Title: Vice President
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<PAGE>
EXHIBIT 2.4
DATED January 22, 1998
----------------------
(1) LUCAS INDUSTRIES plc
(2) PRESTOLITE ELECTRIC INCORPORATED
A G R E E M E N T
-----------------
for the sale and purchase of the
entire issued share capital of
Lucas Holdings South Africa (Proprietary) Limited
Eversheds
10 Newhall Street
Birmingham
B3 3LX
Tel: 0121 233 2001
Fax: 0121 236 1583
DX 13004
Ref: SL/36
-1-
<PAGE>
THIS AGREEMENT is made on January 22, 1998
BETWEEN:
(1) LUCAS INDUSTRIES plc whose registered office is at Stratford Road, Solihull
B90 4LA
(2) PRESTOLITE ELECTRIC INCORPORATED whose principal place of business is at
2100, Commonwealth Boulevard, Ann Arbor, Michigan, 48105, USA
1. INTERPRETATION
- - - - - - - - - - - ------------------
In this Agreement:
1.1 the following expressions have the following meanings unless
inconsistent with the context:
<TABLE>
<CAPTION>
Expression Meaning
---------- -------
<S> <C>
"the Accounting Principles" The accounting policies and principles as set
out in Schedule 4
"the Ancillary Agreements" The meaning attributed to that expression in the
Umbrella Agreement
"Associated Company" Any person which is either a holding company (whether
direct or indirect) or a subsidiary company
"the Associated Documents" The meaning attributed to that expression in the
Umbrella Agreement
"Business Day" Any day (other than Saturday or Sunday) on which Banks
in the Republic of South Africa
</TABLE>
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<TABLE>
<S> <C>
are open for a full range of banking transactions
"the Company" Lucas Holdings South Africa (Proprietary) Limited,
registration number 05/37914/07
"Completion" Completion of the sale and purchase hereby agreed in
accordance with clause 5 and the expression
"the Completion Date" shall be construed accordingly
"the Consideration" The consideration for the sale of the Shares being a
sum equal to Shareholders Funds at Completion calculated
in accordance with clause 3 plus the sum of (Pounds)941,000
"consistently applied" With reference to any particular asset, liability, income or
expenditure, to the extent not provided to the contrary in the
Accounting Principles, applied on the bases of practices and
methods consistent with those used in the preparation of the
Accounts (as defined in Schedule 3)
"the Disclosure Letter" The letter having the same date as this Agreement from the
Vendor to the Purchaser qualifying the Warranties
"the Distribution Agreement" The distribution agreement in the agreed terms between Lucas
Aftermarket Operations a division of Lucas Limited and Lucas
Automotive (Proprietary) Limited
"the English Sale Agreement" The meaning attributed to that expression in
</TABLE>
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<TABLE>
<S> <C>
the Umbrella Agreement
"Environment" The aggregate of surrounding objects conditions and influences
that influence the life and habits of human beings or any other
organism or collection of organisms and "Environmental" shall
have a corresponding meaning
"Environmental Claims" Save as set out in the Environmental Indemnity Exceptions Letter
any action, demand, demand letter, claim, notice of non-compliance
or violation, notice of liability, proceeding, consent order or
consent agreement (including investigation , corrective and remedial
action costs for works required by any competent authority or
governmental body of competent jurisdiction) in respect of an act or
omission of any Group Member prior to Completion relating in any
way to any Environmental Law, Environmental Permit or Hazardous
Substances or the generation, transportation, placement, storage,
discharge, treatment, use and/or disposal by the Company and/or by
any other person of any Hazardous Substances or other materials the
cause of which arose prior to the Completion Date in and/or on and/or
from, as the case may be, any site and/or facility and/or at the Property
SAVE THAT any Environmental Claims arising from an Environmental Law not in
effect at the date of this Agreement shall be
</TABLE>
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<TABLE>
<S> <C>
limited to all costs of remedial or clean-up action incurred by the
Purchaser or any Group Member in order to meet the minimum
requirements of any competent authority and arising in consequence
of the condition of the Property prior to or at Completion or arising
from the activities of any Group Member or its predecessors in title
at the Property prior to Completion; for the purposes of this definition it is
agreed that the expression "remedial and clean-up action" shall be limited to
appropriate treatment of contaminated material, whether by destruction, removal,
containment or otherwise but shall not include costs associated with the continued
operation of Environmental Permits or the general operational requirements of the
business
"the Environmental Indemnity
Exceptions Letter" The letter from the Vendor to the Purchaser having the same date as this
Agreement setting out matters which are relevant for the purposes of
liability under the Environmental Indemnity
"Environmental Law" Any statute, legislative or other measure now in effect or in effect by
the fifth anniversary of this Agreement as is and to the extent (in
accordance with current policy and practice) or would be and to the
extent (in accordance with the policy and practise prevailing at that
time) enforced by the relevant statutory authority following judicial
or administrative
</TABLE>
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<TABLE>
<S> <C>
interpretation including any judicial or administrative order, consent
decree or judgment, relating to pollution or protection of the
environment, health, safety or natural resources or any other provincial
or local law, as is now in effect or as may be amended, modified, enacted,
ratified or which otherwise may become applicable by the fifth anniversary
of this Agreement and the expression "Environmental Law" shall also
include any statute, legislative or other measure not in effect by the
fifth anniversary of this Agreement but under formal consideration at that
time by any competent authority or governmental body of competent jurisdiction
and which in the light of the circumstances then prevailing is reasonably
likely to be brought into effect and which is subsequently brought into full
force and effect (to the intent and effect that the relevant authorities are
implementing and enforcing the same) by the sixth anniversary of this Agreement
("the Potential Legislation") AND IT IS HEREBY AGREED that the Potential
-----------------------
Legislation may only give rise to an Environmental Claim if written notice of
such Potential Legislation is given to the Vendor by the Purchasers on or
before the fifth anniversary of this Agreement.
" Environmental Permit" Any permit, approval, identification number, license or other authorisation
required by any
</TABLE>
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<TABLE>
<S> <C>
party under any applicable Environmental Law, bylaws and/or regulations,
as the case may be
"the Environmental Indemnity" The indemnity as to environmental issues contained in clause 6.2.1
"the Exchange Rate" R7.5 to (Pounds)1 sterling
"Fines" Fines and penalties which the Company or any of its subsidiaries
becomes liable to pay to any governmental or regulatory authority
or department as a result of a violation by, or other non-compliance
on the part of, the Company or any of its subsidiaries or any of their
respective agents for whose acts or omissions the Company or the relevant
subsidiary is vicariously liable (or where the Company or its relevant
subsidiary is liable to indemnify such agent such amounts for which
the Company or the relevant subsidiary is liable to pay in indemnification
of such agent) of or with any law (including any statutory or regulatory
provisions but excluding any Environmental Law as to which the provisions of
clause 6.2.1 shall exclusively apply) applicable to the Company or the relevant
subsidiary at Completion and any other payment in the nature of a fine or
penalty which the Company or any of its subsidiaries becomes liable to make to
any such authority or department as a result of any such violation or non-
compliance where and
</TABLE>
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<TABLE>
<S> <C>
to the extent that in either or any such event such violation or
non-compliance occurred prior to the Completion Date.
"the Fixed Asset Amount" (Pounds)1,478,000
"the Fixed Assets" The fixed assets, including property, plant, equipment and tooling
shown for the purposes of illustration only in the pro forma statement
which appears in Schedule 5
"the Group" Together the Company and each other company details of which are set out
in Schedule 1 Part 2
"Group Member" Any company which is a member of the Group
"Hazardous Substances" Any materials or substances defined or regulated as toxic or hazardous
or as a pollutant or contaminant or as a hazardous waste in terms of
the Hazardous Substances Act No 15 of 1973 and/or any other applicable
national, provincial and/or local legislation, bylaws and/or regulations
"Incremental Cost" In relation to any repair or replacement, the cost of performing such
repair or replacing such product (which shall not for the avoidance
of doubt include any apportionment of any fixed cost or overhead
for which the relevant Group Member would have been liable or would have
incurred had it not been obliged to carry out such repair or
</TABLE>
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<TABLE>
<S> <C>
replacement) less the net scrap or core value (as appropriate) of the
replaced product or as the case may be materials actually recovered
by the Purchaser or the relevant Group Member after allowing for all
costs of recovery
"the Capped Indemnities" All indemnities given by the Vendor under this Agreement (other than
the Uncapped Indemnities)
"the Uncapped Indemnities" The indemnities given by the Vendor in clauses 6.1 and 7.1 of this
Agreement and the indemnities dealing with expenses and the like
contained in each of clauses 4.5.4, 4.6, 4.7 and 5.5
"the Indemnities" The Capped Indemnities and the Uncapped Indemnities taken together
"Lucas Competitor" Bosch, Magneti Marelli and Valeo, and any Associated Company of any
such entity
"the Lucas Group" LucasVarity, and any subsidiary or subsidiary undertaking of LucasVarity
for the time being but excluding the Group
"the Other Sale Agreements" The Argentinean Sale Agreement, the English Sale Agreement, (as each
such expression is defined in the Umbrella Agreement) and the LAO
Sale and Transition Agreement, one of the Ancillary Agreements (as
defined in the Umbrella Agreement)
"the Other Warranties and The Warranties and Capped Indemnities on
</TABLE>
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<TABLE>
<S> <C>
Other Capped Indemnities" the part of the relevant vendor contained in each of the Other Sale Agreements
"the Property" The property specified in Schedule 2 and each and every part of such
==========
property
"the Provisional Consideration" The sum of (Pounds)4,325,000, of which (Pounds)3,384,000 is the
estimated Shareholders Funds at 15th December 1997
"the Purchaser" Prestolite Electric Incorporated, a Delaware Corporation
"the Purchaser's Group" The Purchaser, any subsidiary or subsidiary undertaking of
the Purchaser, any holding company of the Purchaser and any
subsidiary or subsidiary undertaking of such holding company
"the Purchaser's Lawyers" Werksmans of Werksmans Chambers, 22 Girton Road, Parktown 2193,
Johannesburg, Republic of South Africa and Brobeck Phleger &
Harrison LLP of One Market Plaza Spear Street Tower San Francisco
CA 94105
"the Sale Agreements" The meaning attributed to that phrase in the Umbrella Agreement
"Shared IP" Except as specifically described in and licensed to the Company
or any Group Member by any of the Ancillary Agreements all
intellectual property rights (whether registered or unregistered)
other than trade marks owned by the Vendor or any other member of
the Lucas Group and used by the
</TABLE>
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<TABLE>
<S> <C>
Company or any Group Member and also used by the Vendor or another
member of Lucas Group in relation to its business, subsisting in
any part of the world including service marks, designs, design
rights, copyright (whether in computer programs or not) patents
(and all applications in respect of any of the foregoing);
"the Shares" All the issued shares in the capital of the Company
"the Shareholders Funds" The aggregate (calculated at Completion in accordance with
clause 3 and shown by the Final Completion Statement) of the
amount of the issued share capital of the Company plus or
minus the amount standing to the credit or debit of the
Company's consolidated reserves
"the Taxation Indemnities" The indemnity as to taxation contained in clause 7.1
"the Taxation Warranties" The warranties contained in paragraph 19 of the Warranties
"the Umbrella Agreement" An agreement dated the same date as this Agreement relating
to, inter alia, the transaction contemplated by this
Agreement made between Lucas Industries plc and Others (1)
Prestolite Electric Limited and Others (2) and PEI Holding
Inc (3)in the agreed terms
"the Vendor" Lucas Industries plc , registered number
</TABLE>
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<TABLE>
<S> <C>
54802
"the Vendor's Lawyers" Eversheds of 10 Newhall Street, Birmingham B3 3LX and Webber Wentzel
Bowens of 60, Main Street, Johannesburg, Republic of South Africa
"the Warranties" The warranties set out or referred to in clause 4 and Schedule 3;
</TABLE>
1.2 references to any statute or statutory provisions will, unless the
context otherwise requires, be construed as South African statutes or
statutory provisions and as including references to any earlier statute
or the corresponding provisions of any earlier statute, whether
repealed or not, directly or indirectly amended, consolidated, extended
or replaced by such statute or provisions, or re-enacted in such
statute or provisions, and to any subsequent statute or the
corresponding provisions of any subsequent statute in force at any time
prior to Completion directly or indirectly amending, consolidating,
extending, replacing or re-enacting the same, and will include any
orders, regulations, instruments or other subordinate legislation made
under the relevant statute or statutory provisions which are in force
prior to Completion;
1.3 references to persons will be construed so as to include bodies
corporate, unincorporated associations and partnerships;
1.4 references to a document being "in the agreed terms" will be construed
as references to that document in the form agreed and initialled by or
on behalf of the Vendor and the Purchaser;
1.5 references to clauses and Schedules are to clauses of and Schedules to
this Agreement, and references to paragraphs are to paragraphs in the
Schedule in which such references appear;
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1.6 the Schedules form part of this Agreement and will have the same force
and effect as if expressly set out in the body of this Agreement;
1.7 for the purposes of this Agreement a company is a "subsidiary" of
another company, its "holding company" if that other company:
1.7.1 holds a majority whether directly or indirectly of the voting
rights in it; or
1.7.2 is a member of it and has the right to appoint or remove a
majority of its board of directors; or
1.7.3 is a member of it and controls whether directly or indirectly
alone, or pursuant to an agreement with other shareholders or
members, a majority of the voting rights in it
1.8 for the purposes of this Agreement the expression "subsidiary
undertaking" shall have the meaning attributed to that expression in
the Companies Act 1985 (Legislation of England).
1.9 the headings to the clauses of this Agreement and to the paragraphs of
the Schedules (save for the headings in Schedules 1, 2 and 3) will not
affect its construction .
2. SALE AND PURCHASE
- - - - - - - - - - - ---------------------
2.1 The Vendor will sell, and the Purchaser will buy, the Shares.
2.2 Each of the Shares will be sold and bought free from any claim, charge,
lien, encumbrance or third party right, and with all rights attached or
accruing to it including all rights to any dividends or other
distributions declared, made or paid after the execution of this
Agreement save that the Vendor shall be entitled to retain the
aggregate dividend of Rand 3,000,000 declared in respect of the Shares
on 1 December 1997
2.3 The Purchaser will not be obliged to complete the purchase of any of
the Shares unless the purchase of all the Shares is completed
simultaneously.
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CONSIDERATION
-------------
3.1 The purchase price for the Shares shall be the Consideration.
3.2 On Completion the Purchaser shall pay to the Vendor in cash the
Provisional Consideration.
3.3 The following provisions shall apply regarding the calculation of the
Shareholders Funds, namely:
3.3.1 The Vendor shall, in conjunction with local management of the
Group, procure that
3.3.1.1 (unless the Vendor and the Purchaser agree to the
contrary) on Completion there is carried out a stock-
take (as described in the Accounting Principles); and
3.3.1.2 immediately following Completion there is undertaken a
review of the assets and liabilities (excluding the
Fixed Assets) of each Group Member;
for the purposes of ascertaining the data to which the
Accounting Principles shall be applied in order to prepare the
statements that are contemplated as being prepared in accordance
with this clause 3 and so as to determine the Shareholders
Funds.
3.3.2 Each of the Vendor and the Purchaser shall be entitled to have
several representatives present at any stock-take; neither shall
be entitled, in the absence of manifest error, to raise any
objection as to the correctness of any data relating to the
quantities and descriptions of the items the subject of the
stock take if no representative of the relevant party attends
such stock take.
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3.3.3 The Purchaser will on and after Completion allow the Vendor full
access to all properties occupied by any Group Member and
occupied by any other member of the Purchaser's Group for the
purposes of the business carried on by the Group all relevant
employees and all records, information and other documentation
to enable the Vendor to carry out and complete such stock-take,
(if the same is not completed before Completion) and review and
to prepare the draft Completion Statement defined and referred
to in clause 3.4. In particular but without limitation to the
foregoing the Purchaser will grant and procure that there is
granted to the Vendor access to and the services of John Jenkins
for all purposes of this clause 3, including, without
limitation, the ascertainment of Shareholders Funds pursuant to
this clause 3.
3.3.4 The Shareholders Funds shall be determined in accordance with
the Accounting Principles consistently applied. If and to the
extent any matter arises which is not dealt with in the
Accounting Principles the same shall be determined on a basis
which is consistent with the Accounts (as defined in Schedule 3)
or in the event of a new issue not dealt with in the Accounts in
accordance with generally accepted accounting principles in the
UK; in either event materiality shall be determined in relation
to the Group.
3.3.5 For the purposes of determining Shareholders Funds a sum equal
to the Fixed Asset Amount shall be attributed to the Fixed
Assets.
3.4 Within 45 days following Completion the Shareholders Funds shall be
ascertained by the Vendor and the Vendor shall serve a written
statement ("the draft Completion Statement") on the Purchaser within
such period relating to the Group showing the amounts attributable to
Shareholders
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Funds. Such draft Completion Statement shall also show the
Consideration and the sum due to or from the Purchaser having regard to
the amount of the Provisional Consideration paid by the Purchaser on
Completion. All sums in the draft Completion Statement shall be
expressed in (Pounds) sterling calculated at the Exchange Rate.
3.5 The Completion Statement shall adopt the format set out in the pro
forma statement which appears set out in Schedule 5.
3.6 Unless the Purchaser shall notify the Vendor within 30 days after its
receipt of the draft Completion Statement that it does not accept and
agree that its contents have been prepared in accordance with the
provisions of this Agreement then the Purchaser shall be deemed to have
accepted and agreed the contents of the draft Completion Statement for
the purposes of this Agreement.Unless the Vendor shall otherwise agree,
any such notification on the part of the Purchaser shall specify in
reasonable detail the matters in dispute.
3.7 If within the aforesaid period of 30 days the Purchaser shall notify
the Vendor in writing that it does not accept and agree that the
contents of the draft Completion Statement have been prepared in
accordance with the provisions of this Agreement then the Purchaser and
the Vendor shall endeavour to reach agreement upon adjustments to the
draft Completion Statement to meet the Purchaser's objections. For the
avoidance of any doubt any matters not objected to in writing within
the 30 day notice period referred to in clause 3.6 above shall be
deemed agreed by the Purchaser.
3.8 If the Vendor and the Purchaser are unable to reach agreement as
aforesaid within 21 days of receipt by the Vendor of the last
notification of objection validly served under clause 3.7 or within
such later time as the Vendor and the Purchaser may agree in writing
then any matters not so resolved shall be submitted to an independent
accounting firm of international reputation mutually acceptable to the
Vendor and the Purchaser or in default of agreement between them within
7 days after the expiration of such 21 day
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period or further period agreed between the Vendor and the Purchaser to
be selected at the instance of either of them by the President for the
time being of the Institute of Chartered Accountants in England and
Wales) (`the Independent Accountant') for final resolution in
accordance solely and exclusively with this Agreement, the Accounting
Principles consistently applied and the provisions of clause 3.3.4.
Such submission shall be in the form of written statements of position
by the Vendor and the Purchaser, as well as an opportunity to respond
to such written statements and any request for statements or
information from the Independent Accountant. The Vendor and the
Purchaser shall allow the Independent Accountant full access to all
relevant accounting and other records of the Group, the Property and
all relevant employees as it shall require for the purpose of giving
its determination hereunder. The Vendor and the Purchaser shall co-
operate to procure that the Independent Accountant is able to reach its
decision as to any matter referred to it as expeditiously as possible.
If the Independent Accountant determines that the resolution of a
disputed item requires an interpretation of law then the Independent
Accountant may request an independent law firm of national standing in
South Africa chosen by it to render a legal opinion as to such matter.
Such opinion, in the absence of manifest error, shall be final and
binding. The Independent Accountant shall act as an expert and not as
an arbitrator and shall be directed by the Vendor and the Purchaser to
make its determination as soon as possible after the matter in dispute
is submitted to it and such determination shall be final and binding
upon the parties hereto. In giving its determination the Independent
Accountant shall also adjust the draft Completion Statement if required
to reflect the decision of the Independent Accountant. The costs of
such Independent Accountant's review (including reasonable lawyer's
fees, if any) shall be borne by the party or parties in inverse
proportion to their success in the resolution of the dispute between
them
3.9 For the purposes of this Agreement the expression "the Final Completion
Statement" shall mean:
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3.9.1 the draft Completion Statement which the Purchaser is deemed to
have accepted and agreed pursuant to clause 3.6 or with which
the Purchaser indicates its acceptance and agreement within the
30 day period referred to in clause 3.6 whereupon (in either
event) the contents of the same shall become and be final and
binding on the Vendor and the Purchaser for the purposes of this
Agreement; or
3.9.2 the draft Completion Statement bearing any adjustment made
pursuant to clause 3.7, if clause 3.7 applies and agreement is
reached between the Vendor and the Purchaser as contemplated
therein whereupon the contents of the same shall become and be
final and binding on the Vendor and the Purchaser for the
purposes of this Agreement; or
3.9.3 the draft Completion Statement as agreed by the Independent
Accountant or, as the case may be, any revised Completion
Statement produced by the Independent Accountant as contemplated
by clause 3.8 whereupon (in either event) the contents thereof
shall become and be final and binding upon the Vendor and the
Purchaser for the purposes of this Agreement.
3.10 For the purposes of determining the Shareholders Funds and all other
matters contemplated as being determined in this Agreement by
reference to the Final Completion Statement, the Final Completion
Statement and the contents thereof shall (save in the case of manifest
error) be final and binding on the Vendor and the Purchaser.
3.11 Any costs incurred by the Purchaser, the Vendor or any member of the
Group in acting in the manner contemplated by this clause 3 including,
without limitation, any professional costs and expenses shall be borne
by the party incurring the same save as contemplated by clause 3.8 if
that clause applies. It is agreed and declared that in any event no
provision for
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such costs (including any costs incurred by the Group) shall be
contained in the Final Completion Statement.
3.12 If the Consideration agreed or ascertained in accordance with this
clause 3:
3.12.1 is less than (Pounds)4,325,000 (being the Provisional
Consideration) the Vendor shall pay to the Purchaser the
deficiency in cash within 5 days of such agreement or
ascertainment together with interest under clause 3.13;
3.12.2 is more than (Pounds)4,325,000 (being the Provisional
Consideration) the Purchaser shall pay to the Vendor the
excess in cash within 5 days of such agreement or
ascertainment together with interest under clause 3.13.
3.13 The Vendor shall pay to the Purchaser or the Purchaser shall pay to
the Vendor (as the case may be) interest on any sum due under clause
3.12 at the rate per annum which is 2% above Barclays Bank plc's base
lending rate from time to time, such interest to accrue from day to
day from the Completion Date until the due date for payment in
accordance with the foregoing provisions of this clause 3.
3.14 The following provisions shall apply regarding the payments to be
made:-
3.14.1 all sums due from the Purchaser to the Vendor under this
Agreement shall be paid in (Pounds) pounds sterling to the
Vendor by way of telegraphic transfer to the following
account:-
Name: Lucas Limited
Bank: Barclays Bank Plc
Branch: 118, High Street,
Newcastle under Lyme,
Staffordshire
Sort Code: 20-59-23
Account No: 40836370
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or to such other account as the Vendor may hereafter nominate
in writing to the Purchaser.
3.14.2 all sums due from the Vendor to the Purchaser under this Agreement
shall be paid in (Pounds) pounds sterling to the Purchaser by way of
telegraphic transfer to the following account:-
Name: Prestolite Electric Incorporated
Bank: Comerica Bank
Branch: Detroit MI; USA
ABA: 072000096
Account No: 1850-49735-3
or to such other account as the Purchaser may hereafter nominate in
writing to the Vendor.
3.15 All payments which may be made or be due to or by the Vendor by or to
the Purchaser shall be made free and clear of all rights of set-off,
counterclaim or any other withholding.
4. WARRANTIES
4.1 The Vendor:
4.1.1 warrants to the Purchaser in the terms of the Warranties,
provided however that the Vendor shall be released from the
effect of the Warranties to the extent of the disclosures fairly
disclosed in the Disclosure Letter;
4.1.2 agrees that the Purchaser is entering into this Agreement in
reliance on each of the Warranties;
4.1.3 undertakes that, in the event of any claim being made against
the Vendor whether under the Warranties or otherwise in
connection with the sale of the Shares to the Purchaser, the
Vendor will not (save in the case of fraud or wilful
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concealment) make any claim against any Group Member or against
any director or employee of any Group Member, on which or on
whom the Vendor may have relied before agreeing to any term of
this Agreement or authorising any statement in the Disclosure
Letter.
4.2 Each of the Warranties will be construed as a separate Warranty and
will not be limited or restricted by reference to, or inference from,
the terms of any other Warranty or any other term of this Agreement.
4.3 The Vendor shall be released from the effect of the Warranties (but not
the Indemnities) to the extent that the Purchaser is aware at the date
of this Agreement of any matters, events or circumstances (whether the
same are learned by any investigation or enquiry made by or on behalf
of the Purchaser into the Company or any subsidiary of the Company) and
which matters, events or circumstances would but for this clause 4.3
constitute a breach of any of the Warranties. For the purpose of this
clause the Purchaser's awareness shall be determined by reference only
to the actual knowledge of Mr Kim Packard and Mr Ken Cornelius of the
Purchaser, Dr Mike Lea of Prestolite Electric Limited and of the
Purchaser's professional advisers (including the Purchaser's lawyers,
Coopers & Lybrand, pensions advisers and environmental consultants) in
respect of the matters the subject of this Agreement.
4.4 Any claim the Purchaser may have in respect of the Warranties or the
Indemnities shall sound in damages only, subject to the provisions of
this clause 4, and accordingly the Purchaser shall not have the right
to cancel this Agreement or treat it as having been repudiated by the
Vendor by reason of there having been any breach of such Warranties or
a claim by the Purchaser under any Indemnity.
4.5 The Purchaser hereby agrees and acknowledges that notwithstanding
anything to the contrary contained in this Agreement the Warranties and
certain of the Indemnities (as defined below) are subject to the
following:
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4.5.1 no claim shall be capable of being made unless it shall be
notified in writing to the Vendor:
4.5.1.1 in the case only of a claim for breach of the
Environmental Indemnity on or by the seventh
anniversary of the date of this Agreement; or
4.5.1.2 in the case only of a claim for breach of any of the
Taxation Warranties and/or under the Taxation
Indemnities on or by the date of the expiration of all
applicable periods of prescription which would prevent
the making of the claim in question against the
relevant member of the Group which would give rise to
the obligation on the part of the Vendor to indemnity
hereunder; or
4.5.1.3 in the case only of a claim made under the provisions
of clause 6.1 on or by the sixth anniversary of the
date of this Agreement; or
4.5.1.4 in the case only of a claim made under clause 6.2.2 on
or by the date of the expiration of all applicable
periods of prescription which would apply so as to
prevent the making of the claim in question against the
relevant member of the Group which would give rise to
the obligation on the part of the Vendor to indemnify
hereunder; or
4.5.1.5 in the case of a claim for breach of any of the
remaining Warranties on or before 31 March 1999
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and any such claim which has been made shall (if it has not been
previously satisfied settled or withdrawn) be deemed to have
been withdrawn at the expiration of 6 months from the date on
which the claim so notified when aggregated with all other
claims under this Agreement and under the Other Sale Agreements
exceeding (Pounds)5,000, exceeds (Pounds)150,000 unless prior to
such expiration legal proceedings in respect thereof shall have
already commenced by the delivery of a summons on the Vendor.
4.5.2 the aggregate liability of the Vendor under this Agreement and the
Other Sale Agreements in respect of all breaches of the Warranties
and claims under the Capped Indemnities shall not when aggregated
with the liability of the persons defined as the Vendor in each of
the Other Sale Agreements in respect of all breaches of the Other
Warranties and Other Capped Indemnities exceed a sum equal to
(Pounds)12 million;
4.5.3 the Vendor shall not be liable in respect of any single claim brought
by the Purchaser for a breach of the Warranties, and claims under the
Capped Indemnities or under the provisions of clause 7.1 arising out
of a single event (provided that for the purposes of this clause
4.5.3 liability in respect of a series of claims arising out of the
same subject matter shall be aggregated together as if such claims
were one claim) if the liability in respect of such claim would not
exceed (Pounds)5,000 (five thousand pounds). The Vendor shall be
liable in respect of each and any claim for a breach of the
Warranties or under the Capped Indemnities or under the provisions of
clause 7.1 in respect of which the liability of the Vendor exceeds
(Pounds)5,000 (five thousand pounds) only if the liability of the
Vendor for that claim, all other such claims exceeding (Pounds)5,000
and all other such claims made under the Other Sale Agreements in
respect
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of all breaches of the Other Warranties and Other Capped Indemnities
would in aggregate exceed (Pounds)150,000 and in that event the
Vendor shall only be liable for the excess;
4.5.4 if any matter arises or gives rise to any claim under the Warranties
or the Indemnities the Purchaser shall as soon as reasonably
practicable (and in any event within such time as shall enable the
Vendor to lodge or answer any appropriate appeal or claim) give
notice in writing to the Vendor giving such details of the matter in
respect of which the claim is made as are at that time known to the
Purchaser and (on the basis of the facts then known to the Purchaser)
the bona fide estimated liability in respect thereof and where the
claim arises by reason of a claim made against the Purchaser and/or
the Company or any other Group Member by a third party the Purchaser
shall not seek to settle or compromise the matter and shall (if
relevant) procure that the Company or relevant Group Member does not
seek to settle or compromise the same without the written consent of
the Vendor (which consent shall not be unreasonably withheld or
delayed) and shall take such reasonable action as the Vendor may
require to avoid, resist, contest and/or compromise any such claim on
the basis that the Vendor shall be responsible for and shall bear all
the reasonable costs and expenses of the Purchaser or the Company or
the relevant Group Member in taking such action and in addition shall
to the extent that the same shall not have been borne by the Vendor
directly indemnify the Purchaser against the same and against all
legal costs incurred by or awarded against the Purchaser as a direct
result thereof;
4.5.5 no claim in respect of any breach or breaches of any of the
Warranties or under the Indemnities shall be made to the extent that
provision or reserve therefor has been made or the
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subject matter thereof is otherwise taken account of or reflected as
part of the calculations in the preparation of the Final Completion
Statement;
4.5.6 the Vendor shall not be liable for any claim arising as a result of a
breach of Warranties:
4.5.6.1 or under the Indemnities if such claim would not have arisen
but for anything voluntarily done or omitted to be done by
the Purchaser, any member of the Purchaser's Group, the
Company or any subsidiaries of the Company or any of its or
their employees, agents or successors in title after
Completion outside the ordinary course of business and which
the Purchaser any member of the Purchaser's Group, the
Company or any other member of the Group or its or their
employees agents or successors in title were aware or ought
reasonably to have been aware could give rise to a claim; or
4.5.6.2 or the Indemnities to the extent that such claim relates to
any loss for which the Purchaser or any member of the
Purchaser's Group or the Company or any of its subsidiaries
is indemnified by insurance (but only to the extent of the
amount of the proceeds actually received from any applicable
insurance policy) and the Purchaser agrees to pursue and to
procure that there is pursued all and any claims which there
may be under or in respect of any policy of
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insurance which relates or may relate to the subject matter
of the claim in question and to provide to the Vendor such
evidence as the Vendor may reasonably require of having done
so.
4.6 Where the Purchaser or any member of the Purchaser's Group or the
Company or any subsidiary of the Company is at any time entitled to
recover from a third party (other than as contemplated in clause
4.5.6.2 - insurance proceeds) any amount in respect of any matter
giving rise to a claim under the Warranties or the Indemnities or under
any other provisions of this Agreement the Purchaser shall take and
shall procure that there is taken all reasonable steps to enforce any
rights of recovery that the Purchaser or any member of the Purchaser's
Group or the Company or any of its subsidiaries may have against any
third party in respect of the subject matter of the claim and the
Purchaser or any member of the Purchaser's Group or the Company or
relevant subsidiary of either of them shall be indemnified by the
Vendor against all reasonable costs and expenses including all legal
costs incurred by it or them in doing so. In the event that the
Purchaser or any member of the Purchaser's Group or the Company or any
of their subsidiaries shall receive any amount from such third party,
the amount of the claim against the Vendor shall be reduced by the
amount recovered less where not already paid all such reasonable costs
and expenses incurred by the Purchaser or any member of the Purchaser's
Group or the Company or any subsidiary of either of them Provided
always that:-
4.6.1 any failure by the Purchaser to comply with such undertaking in
respect of any matter giving rise to a claim under the
Warranties or the Indemnities or otherwise under this Agreement
shall not affect in any way any liability of the Vendor which
liability shall not be conditional upon the Purchaser's
compliance with this undertaking save that the Vendor shall be
entitled (to the extent that it is entitled as a
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matter of law so to say) to say that the Purchaser has not
mitigated its loss or the Vendor shall have a right of action or
other claim against the Purchaser for breach of the provisions
of this clause 4.6; and
4.6.2 in respect of any matter giving rise to a claim under the
Warranties or the Indemnities or otherwise under this Agreement
if the Purchaser alleges that any steps which the Vendor
requires it to take or to procure are taken are unreasonable
then the Purchaser shall seek counsel's opinion (such counsel to
be of at least ten years' standing) and whose identity shall be
agreed upon by the Vendor and the Purchaser and, failing such
agreement within three days after the date on which the
agreement is demanded, shall be determined by the Chairman of
the Johannesburg Bar Council (who may appoint one of its number)
who may be instructed by either the Vendor or the Purchaser to
make the nomination at any time after the expiry of that three
day period. In respect thereof the Purchaser shall instruct such
counsel in writing (or if such instructions are to be given
orally then the Vendor shall be entitled to be present at and to
contribute to the giving of such instructions) and provide a
copy of a draft of such instructions before submission to
counsel and incorporate the Vendor's comments thereon. Counsel
shall be asked to advise whether, on the basis of the
instructions given to him and the information then made
available to him, the action sought by the Vendor should be
taken on the basis that, on the balance of probabilities, the
relevant claim against the third party stands a reasonable
prospect of success and the parties shall follow the advice
given in such opinion save that nothing herein shall prevent or
otherwise restrict the ability of the Vendor to argue (if such
an argument is as a matter of law open to it) that the
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<PAGE>
Purchaser or the entity entitled to the benefit of the claim has
failed to mitigate its loss.
4.7 If the Vendor pays at any time an amount pursuant to a claim in respect
of any Warranty or under any Indemnity or under any of the other
provisions of this Agreement and the Purchaser or any member of the
Purchaser's Group and/or the Company or any of their subsidiaries
subsequently becomes entitled to recover from some other person any sum
in respect of any matter giving rise to such claim the Purchaser shall
take and shall procure that there is taken all reasonable steps to
enforce such recovery subject to being indemnified by the Vendor
against all reasonable costs and expenses including all legal costs
incurred in doing so. The Purchaser shall forthwith upon the making of
any such recovery (whether by it, any member of the Purchaser's Group
or any member of the Group and after deducting the costs incurred by
the Purchaser or any of them as contemplated by this clause to the
extent that the Vendor has not indemnified the Purchaser or any member
of the Purchaser's Group and/or the Company or relevant subsidiary for
such costs) repay to the Vendor so much of the amount paid by the
Vendor in respect of the claim in question as does not exceed the sum
recovered from such other person.
4.8 Without prejudice to the foregoing provisions of this clause 4 before
the Purchaser or any Group Member makes any payment or offers any other
remedy or takes any other remedial or corrective action in respect of
any matter for which it is entitled to an indemnity or to otherwise
make a claim against the Vendor under or pursuant the provisions of
this Agreement or under the Taxation Indemnities, the Purchaser shall
and shall procure that the Company (and, if relevant, each of its
subsidiaries) gives a reasonable opportunity and reasonable assistance
to the Vendor to verify and, if appropriate, remedy the defect, default
or omission or other matter giving rise to the claim for indemnity or
other remedy in question.
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4.9 For the purposes only of determining the applicability of the monetary
thresholds contained in sub-clauses 4.5.2 and 4.5.3 any claim under the
Warranties or the Capped Indemnities or under clause 7.1 which is
denominated in South African Rand shall be converted into pounds
sterling at the exchange rate applicable for converting South African
Rand into (Pounds)Sterling calculated at the average of the "bid" and
"asked" exchange rate quoted by Reuters (or a different independent
wire service providing international spot exchange rates as agreed by
the parties) in London at 1.00 pm prevailing at, in the case of sub-
clause 4.5.2, the date on which the claim is paid and, in the case of
sub-clause 4.5.3, at the date of claim.
4.10 Payment or satisfaction by the Vendor of any claim under any one
particular paragraph of the Warranties and/or under any Indemnity
shall to the extent of such payment or satisfaction satisfy and
preclude any other claim which is capable of being made in respect of
the same subject under another particular paragraph of the Warranties
or under another particular Indemnity. If and to the extent that the
Purchaser or any member of the Purchaser's Group and/or any Group
Member recovers any sum under any provision of this Agreement,
including under the Indemnities, the amount of any claim which the
Purchaser or any Group Member may have in respect of the same subject
matter shall be reduced or eliminated accordingly.
4.11 If any potential claim shall arise by reason of a liability of the
Company or any subsidiary of the Company being contingent only or is
otherwise not capable of being quantified then the Vendor shall not be
under any obligation to make any payment pursuant to such claim until
such time as the contingent liability ceases to be contingent and
becomes capable of being quantified as the case may be.
4.12 Save as specifically provided in this Agreement the Vendor gives no
warranties or representations whether express or implied.
4.13 Where under this Agreement the Vendor is liable to the Purchaser or
any Group Member under any of the Indemnities (other than the
Environmental
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<PAGE>
Indemnity) the Vendor shall for the avoidance of any doubt only be
liable to the extent that the liability relates directly to acts
or omissions prior to Completion and not to the extent that the
liability relates directly to acts or omissions after Completion.
5. COMPLETION
- - - - - - - - - - - --------------
Subject to and on the basis contemplated by the Umbrella Agreement, the sale
and purchase of the Shares shall take place as provided for in the Umbrella
Agreement at the offices of the Vendor when:-
5.1 the Vendor will produce and deliver to the Purchaser:
5.1.1 duly executed transfer forms of the Shares in favour of the
Purchaser (or as it will direct) together with all relevant
share certificates (or in the case of any lost certificate an
indemnity satisfactory to the Purchaser in relation to it) and
together also with such waivers and consents as the Purchaser
may require to enable the Purchaser and its nominee(s) to be
registered as the holders of the Shares;
5.1.2 the written resignations of John Anthony, John Plant and David
Underwood as directors of the Company;
5.1.3 the certificate of incorporation and the statutory books and
registers (all entered up to date) of each member of the Group;
5.1.4 all deeds and documents relating to the title of the Group to
the Property (except where those deeds and documents are held by
any Bank)
5.1.5 all papers, books, records, keys, credit cards and other
property (if any) of each member of the Group which are in the
possession or under the control of the Vendor or any other
person who resigns as an officer of the Company in accordance
with this clause 5;
========
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<PAGE>
5.1.6 a resolution of the Company's board of directors:
5.1.6.1 approving the transfer of the Shares (subject to
stamping if not previously effected) pursuant to this
Agreement;
5.1.6.2 accepting the resignations of the persons referred to
in clause 5.1.3 of this Agreement;
5.1.6.3 appointing all persons nominated by the Purchaser as
directors of the Company with effect from the date of
Completion;
5.1.7 all such resolutions as may be required to change the name of
each Group Member to such name as the Purchaser may require (but
excluding the name "Lucas") and, if the Purchaser gives no
directions in this regard, to a name of the Vendor's choice
5.2 the Purchaser shall pay to the Vendor, in accordance with clause 3.14.1
=============
a sum equal to the Provisional Consideration which such payment shall
be paid on account of the Consideration but shall be so paid subject to
the terms of the Umbrella Agreement (regarding Effective Completion);
5.3 the Purchaser shall procure that as soon as possible after Completion
each member of the Group takes all steps as are legally required of it
to change its corporate name to a name which does not incorporate the
word or name `Lucas' (including without limitation to register the
resolutions referred to in clause 5.1.7) and the Purchaser shall
provide to the Vendor such evidence and give to the Vendor such
undertakings in this regard as the Vendor shall reasonably require
5.4 the Purchaser will at or as soon as practicable after Completion use
reasonable endeavours to procure the release of the Vendor and any
other member of the Lucas Group from the guarantees specifically
identified in
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<PAGE>
the Disclosure Letter for the purposes of this provision and will in
the meantime indemnify and keep indemnified the Vendor (for itself and
for and as trustee and/or agent for and for the benefit of each other
member of the Lucas Group) and each other member of the Lucas Group
against any liability (including costs, damages and expenses) which the
Vendor or any other member of the Lucas Group may suffer under or in
relation to such guarantees; provided however that this clause 5.4
==========
shall be without prejudice to, and the indemnity so given by the
Purchaser shall not extend to any matter giving rise to, any claim
against the Vendor for breach of the Warranties;
5.5 the Vendor will at or as soon as practicable after Completion use
reasonable endeavours to procure the release of each Group Member from
all guarantees given by any of them in respect of the obligations of
members of the Lucas Group and will in the meantime indemnify and keep
indemnified the Purchaser against any liability which the Purchaser or
any Group Member may suffer or incur under or in relation to such
guarantees
6. Specific Indemnities
- - - - - - - - - - - ------------------------
6.1 The Vendor shall indemnify each of the Purchaser and each Group Member
against any loss, liability, damage and/or expense directly suffered or
incurred by it as a consequence of a claim by any employee member or
former employee member of the Lucas South Africa Fund ("LSA Fund") or
the Lucas Automotive Pension Fund ("LAP Fund") against it :
6.1.1 if and to the extent that the transfer of that employee member
or former employee member to the LAP Fund was at the time of
such transfer illegal, unlawful or in breach of any statutory,
fiduciary or other duty owed by such Group Member or such fund's
board of trustees to such employee member or former employee
member;
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<PAGE>
6.1.2 if and to the extent that the transfer of monies from the LSA
Fund to the LAP Fund, including, without any limitation, a
surplus amount of R3,004,740 during the year 1994 was at the
time of such transfer illegal, unlawful or in breach of any
statutory, fiduciary or other duty owed by such Group Member or
such fund's board of trustees to such employee member or former
employee member;
6.1.3 if and to the extent that any such Group Member has prior to
Completion extracted or benefited from any surplus from the LSA
Fund or the LAP Fund in circumstances where such extraction or
benefit was in relation to such employee member or former
employee member unlawful or illegal at the time of such
extraction or benefit.
6.2 The Vendor shall indemnify the Purchaser the Company and each of its
subsidiaries and each of their respective officers, directors,
employees, agents, successors and assigns (each an "Indemnified
Person") with respect to and hold each of them harmless from and
against any and all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, attorney's, consultants' and arbitration fees and expenses,
and, in respect of Environmental Claims only, corrective or remedial
action costs) directly suffered, incurred or sustained by an
Indemnified Person or to which an Indemnified Person becomes subject
resulting from, arising out of or relating to any of the following:-
6.2.1 Environmental Claims;
6.2.2 Fines
6.3 The indemnities referred to in clauses 6.1 and 6.2 above shall be
limited in accordance with, and shall be subject to, the provisions of
clause 4 of this Agreement.
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6.4 Any sum due from the Vendor under the Environmental Indemnity or Clause
9 of the Environmental Indemnity Exceptions Letter shall be paid within
twenty-eight days of notice of:
6.4.1 completion of any remedial and clean-up action undertaken by the
Purchaser or any Group Member;
6.4.2 the Purchaser or any Group Member incurring the cost of the
remedial and clean-up action carried out by any person other
than the Purchaser or any Group Member; or
6.4.3 the date of payment of any liabilities to third parties, fines
or awards (and all expenses incurred in connection therewith).
PROVIDED THAT:
any claim by the Purchaser or any Group Member under the Environmental
Indemnity or Clause 9 of the Environmental Indemnity Exceptions Letter
shall:
6.4.4 state to which item of either the Environmental Indemnity or the
Environmental Indemnity Exceptions Letter it relates;
6.4.5 include such details and information as is reasonably required
by the Vendor of the nature and extent of the claim;
6.4.6 include evidence that the expenditure to which the claim relates
has been properly and reasonably incurred by the Purchaser, a
Group Member or such third party contracted by the Purchaser or
a Group Member;
6.4.7 be submitted as soon as possible after the date the expenditure
was incurred and in any event within 3 months of the Purchaser
or the relevant Group Member having received an invoice in
respect of such expenditure incurred.
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6.5 In respect of any claim under the Environmental Indemnity or Clause 9
of the Environmental Indemnity Exceptions Letter the Purchaser shall
permit and procure that each Group Member permits the Vendor or persons
authorised by it to inspect the works and to inspect and take copies of
all reports, books, accounting records and vouchers which are relevant
in relation to the claim with the Purchaser or as the case may be the
relevant Group Member answering or procuring that there are answered
promptly and fully all reasonable questions raised by the Vendor.
6.6 Subject to the provisions of this Agreement (but only until a date
three years following the date of Completion), the Vendor agrees to pay
up to a maximum of US$11,700 towards the cost of the items listed in
Schedule 2 of the Environmental Indemnity Exceptions Letter.
6.7 In the event of any circumstances arising which do or may give rise to
any Environmental Claims and which fall within the terms of the
Environmental Indemnity, the Purchaser shall not except as required by
any applicable law make any public statement regarding such
circumstances without the prior written consent of the Vendor such
consent not to be unreasonably withheld or delayed.
6.8 For the purposes of clause 6.1 an "employee member" or "former employee
member" includes any person who may benefit from the LSA Fund or LAP
Fund as a consequence of such employee member's or former employee
member's membership of the LSA Fund or LAP Fund, such as his dependant
or spouse but specifically excludes, without limitation, any Group
Member or employer.
6.9 Before the Vendor (or as the case may be the Purchaser) ("the
Indemnified Party") makes any payment or offers any other remedy to a
third party in respect of matters for which the Indemnified Party is
entitled to an indemnity from the other of them ("the Indemnifier")
under the terms of this clause 6 or clause 7 or any other indemnity
contained in this Agreement the Indemnified Party shall give a
reasonable opportunity to the Indemnifier, to
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verify and, if appropriate, at the Indemnifier's sole cost remedy the
default, defect, omission or other matter giving rise to the claim in
question subject always to such third party allowing the same.
7. Tax Indemnity
- - - - - - - - - - - -----------------
7.1 Without prejudice to any of the rights of the Purchaser arising from
any of the provisions of this Agreement, the Vendor shall pay to the
Purchaser an amount equal to any liability of any Group Member for
taxation not provided for or reserved in the Final Completion Statement
relating to the Company arising from or out of the profits or income of
such Group Member for all periods ending on or before the Completion
Date for which purpose the term "taxation" shall mean
7.1.1 normal taxation;
7.1.2 value-added tax;
7.1.3 secondary tax on companies;
7.1.4 Regional Services Council levies;
7.1.5 local authority levies, PAYE and SITE taxes;
7.1.6 all other forms of taxation;
7.1.7 any taxation arising from new assessments of taxation and/or the
reopening of any income tax assessments of any Group Member;
7.1.8 any penalties or interest as a result thereof;
and any claim the Purchaser may have under this clause 7 shall be a
"Tax Liability" for the purposes of the following provisions of this
clause.
7.2 Without prejudice to the provisions of clause 4 the Vendor's liability
under this clause 7 shall be limited to the extent that such Tax
Liability would not
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<PAGE>
have arisen but for any change in rates of taxation or change in law or
published practice after the date hereof (including where provision or
reserve in the Final Completion Statement in respect of that Tax
Liability is insufficient because of such change).
7.3 Where the Company or any other Group Member is entitled to recover from
some other person (not being a Group Member but including any tax
authority) any sum in respect of any Tax Liability, the amount of the
Tax Liability shall nevertheless be payable in full by the Vendor on
the date which is three Business Days before the date on which the
taxation in respect of which the Tax Liability in question is due for
payment to the relevant Tax Authority or, if later, ten Business Days
after the date on which the Purchaser notifies the Vendor of its
liability to make such payment ("the due date") and the Purchaser
shall:
7.3.1 procure that the Vendor is promptly notified of such
entitlement;
7.3.2 take such action as the Vendor may reasonably and promptly by
written notice request to enforce such recovery; and
7.3.3 account to the Vendor for an amount equal to any amount so
recovered (including any interest or repayment supplement
included in such recovery less any taxation chargeable in
respect of that interest) not exceeding the amount paid by the
Vendor under Clause 7.1 in respect of that Tax Liability save to
the extent that to do so would leave the Group in a worse
position than it would have been in had the Tax Liability in
question not arisen.
7.4 If any Tax Liability represents tax for which credit is or may become
due to any Group Member or the Purchaser's Group at a later date or in
respect of which it is subsequently found that there arises a
corresponding credit or right to repayment of tax, the amount of the
Tax Liability shall nevertheless
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<PAGE>
be payable in full by the Vendor on the due date but if subsequently
any reduction is made in the Tax Liability or it is found that the
Vendor's liability in respect of the Tax Liability falls short of the
amount claimed or such credit or repayment is received by any Group
Member or any member of the Purchaser's Group, the Purchaser shall
promptly repay to the Vendor an amount equal to such reduction,
shortfall, credit or repayment up to the amount previously paid by the
Vendor in respect of that Tax Liability and without interest save to
the extent that interest or repayment supplement is included (or
allowed) in such credit, repayment, reduction or shortfall. For this
purpose, no credit shall be taken to have been received unless it shall
have relieved the Company or any member of the Purchaser's Group of a
present obligation to pay tax.
7.5 The Taxation Indemnities shall be limited in accordance with, and shall
be subject to, the provisions of clause 4 of this Agreement.
8. Purchaser Assurances
- - - - - - - - - - - ------------------------
8.1 The Purchaser warrants to the Vendor (for itself and in each case as
trustee for or as agent for and on behalf of each other member of the
Lucas Group) and to, and for the benefit of, each other member of the
Lucas Group that the Purchaser has the necessary corporate power and
authority and all authorisations approvals consents and licences
required by the Purchaser have been unconditionally and irrevocably
obtained and are in full force and effect to permit the Purchaser to
enter into and perform this Agreement and this Agreement has been duly
authorised by the Purchaser and constitutes a valid and binding
obligation of the Purchaser.
8.2 The Purchaser acknowledges to and agrees with the Vendor (both for
itself and in each case as trustee for or as agent for and for the
benefit of each other member of the Lucas Group and for the benefit of
each of their respective officers employees and advisers and as trustee
for such officers employees and advisers) that:
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8.2.1 the invitation to them by or on behalf of the Vendor to consider
the purchase of the Company (together with its subsidiaries) and
the provision of information relating to it and them its and
their respective financial positions or prospects was made by or
on behalf of the Vendor and accepted by the Purchaser and this
Agreement was entered into on the basis that neither the Vendor
nor any member of the Lucas Group nor any of the Vendor's or any
member of the Lucas Group's officers employees and advisers has
or have made or makes any representation or warranty (other than
as set out in the Warranties) as to the accuracy or completeness
of such information or accepts any duty of care in relation to
the Purchaser in respect of the provision of such information
and save as contemplated by the Warranties (as qualified by the
Disclosure Letter) or in the case of representations made
fraudulently by the Vendor or otherwise as is expressly provided
in this Agreement none of such persons shall be under any
liability to the Purchaser in the event that, for whatever
reason, such information is or becomes inaccurate incomplete or
misleading in any particular; and
8.2.2 the Purchaser has had independent legal and financial advice
relating to the purchase of the Shares and to the terms of this
Agreement and the documents to be executed pursuant hereto
including the terms of this clause.
8.3 The Purchaser hereby warrants and represents to the Vendor that:
8.3.1 the Purchaser is a corporation duly organised and validly
existing and has all requisite corporate power and authority to
own, lease and operate its properties and business as presently
conducted and to enter into and perform its obligations under
this Agreement;
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<PAGE>
8.3.2 the execution, delivery and performance of this Agreement by the
Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby have been duly authorised by
all requisite corporate action on the part of the Purchaser.
This Agreement has been duly executed and delivered by the
Purchaser, and constitutes the legal valid and binding
obligation of the Purchaser, is enforceable against the
Purchaser in accordance with its terms except to the extent that
enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of
creditors rights generally and subject to general principles of
equity;
8.3.3 the Purchaser is entitled to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the
ownership of its assets requires such qualification except where
the failure so to qualify would not have a material adverse
effect on its business, assets or financial condition;
8.3.4 neither the execution nor the delivery of this Agreement by the
Purchaser nor the consummation of the transactions contemplated
hereby will conflict with or result in a breach of any of the
provisions of or constitute a default under the charter, bylaws
or memorandum or articles of association of the Purchaser as
amended to date or except as would not have a material and
adverse effect on its business assets or financial condition
constitute a breach or event of default under any agreement,
mortgage, indenture, lease or other instrument to which the
Purchaser is a party or by which the Purchaser or its property
is bound or results in the violation of any law, rule,
regulation, order, judgment or decree to which the Purchaser or
its property is subject;
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<PAGE>
8.3.5 to the best of the knowledge of the Purchaser no consent,
approval or authorisation of or declaration of filing with any
governmental authority is required on the part of the Purchaser
in connection with the execution, delivery or performance of
this Agreement. No approval, consent or authorisation of any
lender, lessor or any other person is required in order for the
Purchaser to consummate the transactions contemplated by this
Agreement.
8.4 Except to the extent contemplated by any other provision of this
Agreement the Purchaser undertakes to the Vendor for itself and as
trustee for or as agent for and on behalf of and for the benefit of
each other member of the Lucas Group that it will not and will procure
that neither the Company nor any of its subsidiaries will at any time
after Completion hold itself out as a Subsidiary of or otherwise
connected with the Lucas Group (other than by virtue of having been so
connected prior to Completion save that any such holding out in this
regard shall cease on the first anniversary of this Agreement or at
such time as is contemplated (if so contemplated) by the Ancillary
Agreements) and that except and to the extent contemplated by any of
the Ancillary Agreements forthwith following Completion there is
deleted from all printed material including (without limitation)
stationery catalogues brochures sales material and (if relevant) from
electronic media such as internet sites and telephone listings and (if
relevant) from signage at any property occupied for the purposes of the
Group and from motor vehicles used by the Group all references to the
name or mark "Lucas" and/or "CAV" and/or "LucasVarity" and/or the Lucas
Group diagonal flash.
8.5 Without prejudice to the generality of the provisions of clause 8.4 but
subject also to those provisions and except to the extent contemplated
by the Ancillary Agreements or any other provision of this Agreement
the Purchaser undertakes to the Vendor (who for this purpose contracts
both for itself and for and on behalf of each other member of the Lucas
Group) and for the benefit of each other member of the Lucas Group that
it will not and
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<PAGE>
will procure that no member of the Group whether directly or indirectly
and in any capacity whatsoever use in connection with any business the
name or mark "Lucas" and/or "CAV" and/or "LucasVarity" and/or the Lucas
Group diagonal flash or any colourable imitation thereof.
8.6 The Purchaser hereby covenants with the Vendor and (as a separate and
independent covenant) with the Vendor as trustee for or as agent for
and for the benefit of each other member of the Lucas Group that except
to the extent (if any) required by law the Purchaser will not and will
procure that no member of the Purchasers Group will at any time after
Completion disclose or make public any secret or confidential or
professional or financial or commercial information concerning the
Lucas Group and not relating to the Company or any of its subsidiaries
which it has learned by reason of the Company or such subsidiaries or
any of them being owned by the Vendor and save as aforesaid will not
and will procure that no member of the Purchasers Group will use to the
detriment of any member of the Lucas Group any information which the
Company or any subsidiary of the Company has obtained in confidence in
the course of or as a result of such ownership provided always,
however, that the provisions of this clause 8.6 shall cease to apply to
any information which is already in or which falls into the public
domain otherwise than by reason of a breach of this provision.
8.7 The Purchaser acknowledges to the Vendor for itself and as trustee for
or as agent for and for the benefit of each member of the Lucas Group
the ownership by the Lucas Group of the names and/or mark "Lucas"
and/or "CAV" and/or "LucasVarity" and/or the Lucas Group diagonal flash
and hereby acknowledges that notwithstanding any arrangements operating
between the Vendor and the Purchaser in respect of the period following
Completion all and any goodwill in the names of Lucas and/or CAV and/or
LucasVarity and/or the Lucas Group diagonal flash belongs to and
remains vested in the Lucas Group.
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<PAGE>
9. Entire Agreement
- - - - - - - - - - - --------------------
This Agreement, the Umbrella Agreement, the Other Sale Agreements, the
Ancillary Agreements and the documents referred to in it and them (including
without limitation the Associated Documents but excluding the Memorandum as
defined in the Umbrella Agreement) (collectively "the Transaction Documents"
and individually "a Transaction Document"), contain the whole agreement
between the parties relating to the transactions contemplated by such
Transaction Documents and any other transactions or matters related to them
and supersede all previous agreements between the parties relating to these
transactions. The Memorandum shall not constitute a Transaction Document.
Each of the parties to this Agreement being also a party to any of the other
Transaction Documents, acknowledges that it has not relied on any pre-
contractual representations warranties or other assurances save for the
Warranties (as defined in this Agreement and the Other Sale Agreements) the
Purchaser Assurances (as contained in this Agreement or the Umbrella
Agreement and the Other Sale Agreements) and the Vendor Assurances (as
-----------------------------
contained in the English Sale Agreement) and otherwise as expressly set out
---------------------------------------
in any of the Transaction Documents. Each party hereby agrees that it shall
have no remedy against any other party for any negligent or innocent
misrepresentation made by such other party in relation to such transactions
prior to the Transaction Documents being entered into except to the extent
that the same shall have been incorporated in any of such Transaction
Documents as a warranty representation or indemnity in which case any claim
in relation to the same shall be only on the basis of a breach of the
relevant Transaction Document or under the relevant indemnity provision.
Nothing in this clause 9 shall relieve any party from any liability for
representations made fraudulently.
10.
- - - - - - - - - - - ----
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<PAGE>
Product Warranty Epidemic
-------------------------
10.1 In this clause 10:
10.1.1 "Product Liability" means liability in respect of death,
personal injury, physical damage to property (other than to the
products themselves) caused by a defect in any product
manufactured assembled or repaired refurbished serviced sold or
supplied (or caused by a failure to carry out servicing
properly) prior to the Completion Date by a Group Member
10.1.2 "Warranty Liability Claim" means a claim (other than a claim in
respect of Product Liability) asserting in relation to a
product manufactured, assembled, repaired, refurbished,
serviced, sold or supplied prior to the Completion Date by a
Group Member, that it is or was or will become faulty or
defective or does not or did not or will not comply with any
warranty or representation expressly or impliedly made, or with
any applicable regulations, standards or requirements in
respect thereof, and in respect of which the following
conditions are also satisfied namely :
(i) the claim is made within the contractual warranty period
applicable to the supply (or repair, service or refurbishment)
of the product in question and prior to 31st March 1999, and
the Purchaser bona-fide and reasonably believes it to be a
claim which the Group Member is legally liable to meet; or
(ii) the claim is made either before or after the expiry of the
contractual warranty period applicable to the supply (or
repair, service or refurbishment) of the product in question
and prior to 31st March 1999 and the Purchaser (having
consulted with the Vendor) bona-fide and reasonably believes
applying the same or substantially the same investigatory
routines and judgmental criteria as were applied by the
relevant Group
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<PAGE>
Member during the period of one year before the Completion
Date:
(a) that it is a claim which, because of the size of the
particular order, the importance of the customer to the Group
Member, or otherwise, it is necessary for the relevant Group
Member to meet in whole or in part in order to preserve the
goodwill of the Group Member; and
(b) that in the case where the particular customer or a
similar customer had previously made a similar claim of
comparable size against a Group Member whilst that Group Member
was part of the Lucas Group, that Group Member would have dealt
with the claim in substantially the same way.
10.1.3 "Notifiable Claim" means :
(i) a series of Warranty Liability Claims (whether made before
or after or partly before and partly after the Completion Date)
resulting from substantially the same fault (whether of design,
manufacturing technique or process, workmanship or materials)
in relation to one or more products (so that all such products
are affected by substantially the same fault) ("the affected
products"); or
(ii) the existence of a state of affairs (whether before or
after the Completion Date) which is likely to lead to a series
of Warranty Liability Claims within (i), whether or not a
Warranty Liability Claim or Claims are actually made;
where, in either case in relation to the affected products the
Warranty Cost in respect of the Warranty Liability Claims met
and to be met becomes and/or exceeds (Pounds)20,000 calculated
at the exchange rate applicable from Rand to (Pounds)sterling
(calculated
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<PAGE>
at the average of the `bid' and `asked' exchange rate quoted by
Reuters in New York at 1.00 pm on the date of the claim)
10.1.4 "Warranty Cost" means:
(i) in the case of affected products which are repaired the
Incremental Cost to the relevant Group Member of performing the
repair;
(ii) in the case of affected products which are replaced the
Incremental Cost to the relevant Group Member of the
replacement products and the installation thereof; and
(iii) all other customer costs which the relevant Group Member,
manufacturer or supplier (as the case may be) is contractually
obliged to meet under the warranty in question
10.2 In the event that after the Completion Date but prior to 31st March
1999 a Group Member shall be notified in writing by a customer of a
new Warranty Liability Claim which when aggregated with all Warranty
Liability Claims previously made in respect of the affected products
(to the intent and effect that the product in respect of which the new
Warranty Liability Claim is made and the products in respect of which
all other Warranty Liability Claims are or have been made all suffer
from substantially the same fault) is also a Notifiable Claim, the
Purchaser shall promptly notify and procure that the relevant Group
Member promptly notifies the Vendor in writing of the relevant
circumstances insofar as these are known to the Purchaser or the
relevant Group Member and prior to accepting any such new Warranty
Liability Claim allow the Vendor to investigate the facts surrounding
the Warranty Liability Claims met and to be met by the Purchaser, the
cause thereof, the Warranty Cost incurred or likely to be incurred in
relation thereto and to make representations to the Purchaser and the
relevant Group Member thereon, all of which the Vendor will do
promptly. The Purchaser shall take into account such representations
in making its decision whether
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<PAGE>
or not to accept such Warranty Liability Claim, which decision shall
be reasonable.
10.3 The Purchaser shall and shall procure that each Group Member shall
notify the Vendor on receipt of any Warranty Liability Claim(s) which
it reasonably believes may become Notifiable Claims. In respect of
such claims so notified the Purchaser shall and shall procure that the
relevant Group Member shall before accepting the Warranty Liability
Claim allow the Vendor to investigate the Warranty Liability Claim in
question, the cause thereof, the likely Warranty Cost in relation
thereto and to make representations to the Purchaser and the relevant
Group Member thereon. The Purchaser shall take into account such
representations in making its decision whether or not to accept such
Warranty Liability Claim, which decision shall be reasonable.
10.4 The Vendor shall from time to time, subject to the Purchaser having
provided the Vendor with a fully detailed breakdown of its Warranty
Cost and allowing the Vendor to verify the same by all reasonable
means, pay promptly to the Purchaser an amount equal to the Warranty
Cost incurred by the relevant Group Member of meeting Notifiable
Claims, each such payment to be made within twenty one days.
10.5 The provisions of clause 10.4 shall not apply to the extent that
specific provision was made in the Final Completion Statement in
respect of the Notifiable Claims in question.
11. Interest
- - - - - - - - - - - -------------
Save where otherwise contemplated by any other provision of this Agreement
if any sum shall at any time be due and outstanding from any party to any
other party pursuant to the terms of this Agreement interest shall be
payable thereon at the rate per annum which is 2% above Barclays Bank plc's
base lending rate from time to time or 12% per annum, whichever is the
higher at the date on which such sum is due and
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<PAGE>
payable such interest to accrue from day to day and to be payable from the
due date until payment whether before or after judgment.
12. Waiver
- - - - - - - - - - - -----------
No waiver by any party to this Agreement of any of the requirements of this
Agreement or any of its rights hereunder shall have effect unless given in
writing and signed by or on behalf of the party giving the waiver and no
delay by any party in exercising any of its rights hereunder shall impair
the same. No single or partial exercise of any right or remedy shall
preclude any further exercise thereof or the exercise of any other right.
Any waiver of any breach of, or any default under any of the terms of this
Agreement will not be deemed a waiver of any subsequent breach or default
and will in no way affect the other terms of this Agreement.
13. Notices
- - - - - - - - - - - ------------
13.1 The address for service of the parties to this Agreement shall be:-
13.1.1 in the case of the Vendor its registered office in the United
Kingdom from time to time and shall be addressed to:-
The Legal Director - Lucas
Electrical and Electronic Systems; and
13.1.2 in the case of the Purchaser - Prestolite Electric
Incorporated, 2100 Commonwealth Boulevard, Ann Arbor,
MI48105, USA - attention Kim Packard.
13.2 Any notice will be deemed well served on the party to whom it is
addressed if it be served personally or by courier delivery addressed
to such party at its address for service and service shall be deemed
to be effective upon such personal or courier delivery taking place.
13.3 Any notices or statements to be served pursuant to this Agreement may
be sent by facsimile process:
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<PAGE>
13.3.1 in the case of notices to the Vendor to the Legal Director -
Lucas Electrical and Electronic Systems; fax 0121 627 4420 or
to such other fax number as may be notified to the Purchaser
for the purposes of this clause 13.3; and
13.3.2 in the case of notices to the Purchaser to Kim Packard; fax
(313) 913-6655 or to such other fax number as may be notified
to the Vendor for the purposes of this clause 13.3.2;
13.4 Any notice or statement so sent by facsimile process shall be deemed
to have been served at the expiration of 2 hours after the time of
despatch if despatched before 3.00 pm (local time at the place of
destination) on any Business Day and in any other case at 10.00 am
(local time at the place of destination) on the Business Day following
the date of despatch provided that it is followed by a hard copy of
the notice or statement served on the recipient in accordance with
clause 13.2.
14. Costs
- - - - - - - - - - - ----------
Save as otherwise provided herein each party hereto shall bear its own costs
and expenses in connection with this Agreement and the negotiations leading
thereto.
15. Survival of Certain Provisions
- - - - - - - - - - - -----------------------------------
This Agreement shall remain in force and effect after the Completion Date in
respect of any matters covenants or conditions which shall not have been
done observed or performed prior thereto and all representations warranties
obligations of and indemnities given by the parties shall (except for any
obligations fully performed) continue in full force and effect
notwithstanding Completion.
16. Announcements
- - - - - - - - - - - ------------------
No announcement concerning the transactions contemplated by this Agreement
or any matter ancillary to it and no disclosure of the terms of this
Agreement shall (save as required by law or the regulations of the London
Stock Exchange or the New York Stock Exchange) be made by any party except
with the prior written approval of the
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<PAGE>
Vendor and the Purchaser. The Vendor and the Purchaser agree to procure that
each of their respective advisers and representatives complies with the
provisions of this clause as if such person were party to this Agreement.
17. Counterparts
- - - - - - - - - - - -----------------
This Agreement and any other documents to be entered into in accordance with
its terms may be executed in any number of counterparts and by the several
parties hereto on separate counterparts each of which when so executed and
delivered shall be an original but all the counterparts shall together
constitute one document.
18. General
- - - - - - - - - - - ------------
18.1 This Agreement will be binding on and will enure for the benefit of
each party's successors and assigns (as the case may be).
18.2 The parties agree that they will do all such acts and things and
execute all such documents as may be required on or subsequent to
Completion to vest in the Purchaser legal and beneficial ownership of
the Shares in accordance with this Agreement and otherwise to give
effect to its terms.
18.3 Save as otherwise expressly contemplated by this Agreement the rights
and remedies expressly provided for by this Agreement will not exclude
any rights or remedies provided by law.
18.4 The formation, existence, construction, performance, validity and all
aspects whatsoever of this Agreement or of any term of this Agreement
shall be governed by the laws of the Republic of South Africa . The
High Court of South Africa and the English Courts shall have exclusive
jurisdiction to settle any disputes which may arise out of or in
connection with this Agreement.
18.5 The Purchaser agrees and acknowledges that the Purchaser shall be
responsible for all and any stamp duty payable in respect of the sale
of the Shares hereunder.
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<PAGE>
18.6 Any claim which may be made under this Agreement shall be made in
(Pounds)sterling. Where any amount the subject matter of the claim is
in South African Rand, the amount shall be converted into
(Pounds)sterling at the exchange rate prevailing at the date on which
the claim is made.
18.7 Where and to the extent that the Purchaser or any Group Member is
entitled to make a claim under this Agreement whether under the
Warranties the Indemnities or otherwise the loss or damage in respect
of which any such claim may be made shall be limited to direct loss or
damage to the intent and effect that indirect loss or damage
(including consequential loss or damage) shall be irrecoverable.
18.8 Where under this agreement the Vendor is liable to indemnify a Group
Member and any payment to be made by the Vendor under the indemnity is
taxable in the hands of such Group Member then in those circumstances
the Vendor shall pay to the Purchaser a sum equal to the amount of the
liability to the Group Member (before any upwards adjustment in
respect of any taxation payable by the Group Member) and the Purchaser
and the Group Member in question shall accept the same in satisfaction
of the claim in question.
19. Shared IP
- - - - - - - - - - - --------------
19.1 In relation to any Shared IP the Vendor shall procure that the member
of Lucas Group which is the owner of such Shared IP shall on or as
soon after Completion as shall be reasonably practicable grant to such
Group Member as uses the Shared IP a fully paid up licence in respect
of all and any such Shared IP to use and exploit the same for its
remaining life (where the same may in time expire) and otherwise
without limit in point of time but subject to the provisions of clause
19.4 and otherwise on terms that:-
19.1.1 such licence shall be non-exclusive, non-transferable (other
than to a successor in title to the business of the Group
Member), irrevocable, royalty-free and worldwide;
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<PAGE>
19.1.2 such Group Member may, in relation to the business carried on
by such Group Member, sub-licence any such Shared IP to any
member of the Purchaser's Group for so long as such licensee
remains a member of the Purchaser's Group;
19.1.3 if the Group Member (or any member of the Purchaser's Group)
wishes to sub-licence any such Shared IP to a party outside
the Purchaser's Group in relation to the business carried on
by such Group member, it may only do so with the consent of
the Vendor (such consent not to be unreasonably withheld).
19.2 Any actions against any third party for infringement of any Shared IP
shall be a matter for the Vendor on behalf of the member of the Lucas
Group being the owner thereof provided that the Purchaser and/or the
appropriate Group Member shall render such assistance (at the Vendor's
or other member of the Lucas Group's expense) as the Vendor on behalf
of such member of the Lucas Group may reasonably require for the
purpose of bringing such action. If the Purchaser shall agree in
writing to share in the costs of any such action (but not otherwise),
the Purchaser shall be entitled to a corresponding share of any
damages or other compensation received. If the Vendor decides not to
take or within a reasonable time fails itself to take infringement
proceedings after written request by the Purchaser, the Purchaser
and/or the appropriate Group Member shall be free to do so in its own
name and the Vendor shall (at the Purchaser's request and expense)
render such assistance as the Purchaser and/or the appropriate Group
Member may reasonably require (including subject to being
appropriately indemnified by the Purchaser against costs and any other
damages or awards lending its name) for the purpose of bringing such
proceedings.
19.3 If the Vendor wishes to cease the prosecution or maintenance of any
Shared IP which is registered or the subject of a pending application,
it shall first give timely notice to the Purchaser offering to
transfer to the Purchaser
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<PAGE>
and/or the appropriate Group Member the Shared IP in question. If such
offer is accepted, the parties shall effect appropriate transfer
documentation. Alternatively, if such offer is not accepted within 7
days, the Vendor shall be at liberty to cease such prosecution or
maintenance and to abandon the registration of relevant intellectual
property.
19.4 The licence in respect of shared IP granted by this clause 19 shall
automatically determine and be of no further force or effect if at any
time:
19.4.1 the business which enjoys the benefit of such licence (or any
part of such licence) or to which such licence (or part of
such licence) shall have been assigned or sub-licensed; or
19.4.2 the corporate entity which owns (whether directly or
indirectly) the business which enjoys the benefit of such
licence (or any part of such licence) or to which such licence
(or part of such licence) shall have been assigned or sub-
licensed
shall be or become part of a group of companies of which a Lucas
Competitor forms part or in which a Lucas Competitor is interested
whether directly or indirectly.
19.5 For the avoidance of doubt, this clause 19 shall not permit the
Purchaser or any Group Member to sub-licence or assign the Shared IP
or any part thereof to any Lucas Competitor.
20. Assignment
- - - - - - - - - - - ---------------
20.1 This Agreement shall not be assignable by either the Vendor or the
Purchaser without the prior written consent of the other (which
consent shall not be unreasonably withheld in the case of an internal
group reorganisation (without insolvency) intended to be made by
either the Vendor or the Purchaser provided always that any assignee
shall be a person of similar substance and standing as the assignor or
a suitable guarantee shall be
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<PAGE>
provided). In cases where the assignee of this Agreement is a member
of the Lucas Group upon then ceasing to be a member of the Lucas Group
the Vendor shall procure that such assignee shall, and such assignee
shall be obliged to re-assign this Agreement to the Vendor. In cases
where the assignee of this Agreement is a member of the Purchaser's
Group then upon ceasing to be a member of the Purchaser's Group the
Purchaser shall procure that such assignee shall, and such assignee
shall be obliged to re-assign this Agreement to the Purchaser.
20.2 The benefit (and not the burden) of this Agreement may be assigned by
the Purchaser way of security to any provider of secured financing to
any member of the Purchaser's Group.
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<PAGE>
SCHEDULE 3
----------
The Warranties
--------------
1.
- - - - - - - - - - - ----
1. INTERPRETATION
- - - - - - - - - - - ------------------
1.1 In this Schedule 3 the following expressions have the following
==========
meanings:-
Expression Meaning
---------- -------
"the Accounting Date" 31st January 1997
"the Accounts" The audited accounts of each Group
Member, including in the case of
the Company its audited
consolidated accounts, for the
financial year which ended on the
Accounting Date, comprising in each
case a balance sheet, a profit and
loss account, notes and directors'
and auditors' reports
"Company" Notwithstanding the definition
contained in clause 1, each company
individually details of which are
set out in Schedule 1 as if the
Warranties were set out in full in
respect of each such company
provided that where used other than
in this Schedule "Company" shall
have the meaning given in clause 1
"Contract" Any agreement, arrangement or
understanding which is legally
binding.
"Intellectual Property Rights" Patents, trade marks, service
marks, registered
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designs, design rights, copyright,
know how and all other intellectual
property (of whatever nature) and
any applications for the
registration of the same
"Stock" Stocks of the Company
"Taxation" (a) Any tax, duty, impost or levy,
past or present, anywhere in the
world, whether governmental, state,
provincial, local governmental or
municipal, and
(b) Any fine, penalty, surcharge,
interest or other imposition
relating to any tax, duty, impost
or levy mentioned in paragraph (a)
of this definition or to any
account, record, form, return or
computation required to be kept,
preserved, maintained or submitted
to any person for the purposes of
any such tax, duty, impost or levy
"Taxation Authority" Any authority, anywhere in the
world, competent to impose, assess
or collect Taxation,
"Taxation Statute" Any statute (and all regulations
and other documents having the
force of law under such statute)
published, enacted, issued or
coming into force on or before the
date of this Agreement relating to
Taxation
1.2 References in this Agreement to statutes or any statutory provision
shall include any statutory modification, re-enactment or extension
thereof for the time being in force and any orders, regulations,
instruments or other
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<PAGE>
subordinate legislation made thereunder provided always that this shall
not operate to increase the liability of the parties hereunder.
1.3 Where any of the Warranties is qualified by words such as "the Vendor
is not aware" or "the Vendor believes" or "to the best of the Vendor's
knowledge" or any similar qualification, the Vendor's awareness or
belief or knowledge shall be determined by reference only to the
awareness or belief or knowledge of the persons whose names are listed
in the left hand column below and whose position is stated opposite his
name in the right hand column below, of whom enquiry has been made by
the Vendor and the Vendor shall not be liable for breach of warranty
should the fact or circumstance which would otherwise be a breach of
the Warranties be known to any other employee or officer of any member
of the Lucas Group.
<TABLE>
<CAPTION>
Name of Person Position Held
<S> <C>
P Almond Legal Director - Lucas Electrical and Electronic Systems
E Earle Group Property Manager
S Lockwood Group Patents Manager
C Long-Leather Programme Director-Business Development
John Longstaff-Tyrrell Divestment Project Manager - South Africa
Anthony Dixon-Seager Managing Director
John Jenkins Finance Manager
M J McKiernan Group Director - Health Safety and Environment
</TABLE>
1.4 In relation to any of the Warranties which are qualified by reference
to materiality, the materiality of any matter which may constitute a breach of
any such Warranty shall be determined by reference to and in the context of the
business of the Group.
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<PAGE>
2. SCHEDULE 1 CAPITAL
- - - - - - - - - - - ----------------------
2.1 The information contained in Schedule 1 is complete and accurate in all
respects. Lucas Holdings SA (Pty) Limited is a holding company and does
not carry on any trade or business. Holdings has no liabilities not
reflected in its unconsolidated accounts prepared as at the Accounting
Date except as would not have a material adverse effect on Holdings.
2.2 The Shares and the shares of the Group Members (other than the Company)
shown in Schedule 1 Part 2 are in issue fully paid and are beneficially
owned and registered as set out in Schedule 1 free from any third party
right.
2.3 No Contract has been entered into which requires or may require the
Company to allot or issue any share or loan capital.
2.4 The Company has no interest in the share capital of any body corporate
save as specified in Schedule 1 Part 2..
2.5 The Vendor is entitled and able to give free and unencumbered title to
the Shares to the Purchaser.
2.6 No person has any right (including, inter alia, any option or right of
first refusal) to acquire any of the Shares in the Company.
2.7 Regarding Group Members other than Lucas Holdings South Africa
(Proprietary) Limited ("Holdings"):
2.7.1 Holdings is the sole beneficial owner of the entire issued share
capital of Lucas Automotive (Proprietary) Limited ("Automotive")
and Automotive is the sole beneficial owner of the entire issued
share capital of Lucas Properties (Proprietary) Limited
("Properties");
2.7.2 Holdings has free and unencumbered title to the entire issued
share capital of Automotive and Automotive has free and
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unencumbered title to the entire issued share capital of
Properties;
2.7.3 no person has any right to acquire any of the issued share
capital in either Automotive or Properties; and
2.7.4 Holdings, Automotive and Properties are the only Group Members.
3. ACCOUNTS
- - - - - - - - - - - ------------
The Accounts:-
3.1 comply with all material legal requirements which relate to their
preparation and have been prepared in accordance with all applicable
accounting standards and with the provisions of the Companies Act
Number 61 of 1973 as amended;
3.2 have been prepared on bases and principles which are consistent with
those used in the preparation of the audited statutory accounts of the
Company for each of the financial years ended on 31 July 1995 and 31
July 1996 and for the six month period ended on the Accounting Date;
3.3 fairly present the financial position of the Company at the Accounting
Date and the results of their operations for the six months then ended.
3.4 are not affected (except as disclosed in the Accounts) by any
extraordinary or exceptional item.
4. ORGANISATION
- - - - - - - - - - - ----------------
The Vendor is entitled, and has all requisite corporate power and authority,
to enter into and complete the Agreement and the signature, execution and
performance of the Agreement and all documents ancillary to it have been
duly authorised by all necessary acts of the Vendor and its board of
directors.
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ASSETS
- - - - - - - - - - - ------
5. Unencumbered title
- - - - - - - - - - - ----------------------
Each asset reflected in the Accounts (save for current assets disposed of by
the Company in the ordinary course of its business since the Accounting
Date) and each asset treated as an asset of the Company and/or used by the
Company at the date of this Agreement is in the legal and beneficial
ownership of the Company, free from any third party right and from any
Contract to grant the same;
6. Debtors
- - - - - - - - - - - -----------
The Company has not factored or discounted any debt or agreed to do so.
7. Stock
- - - - - - - - - - - ---------
So far as the Vendor is aware, the Stock taken as a whole is sufficient for
the normal requirements of the Company and taken as a whole is at its normal
level and having regard to current orders and those orders reasonably
anticipated from customers of the Company
8. Property
- - - - - - - - - - - ------------
8.1 The particulars of the Property shown in Schedule 2 (including in the
case of registered land the class of title and title number) are true,
complete and correct. The use of the Property for the purpose stated in
Schedule 2 corresponds to the use to which it is in fact put.
8.2 The Company is not in occupation of or entitled to any estate or
interest in any land or premises save the Property.
8.3 The Property is not subject to any mortgage bond, lease, lien or other
encumbrance of any nature whatever, save as set out in the title deed
to the Property;
8.4 So far as the Vendor is aware all buildings and improvements on the
Property comply in all material respects with all applicable town
planning
-60-
<PAGE>
schemes, by-laws, regulations, legislation and properly approved
building plans as well as the conditions of title under which the
Property is held;
9. Intellectual Property Rights
- - - - - - - - - - - --------------------------------
9.1 The Company has no interest in any Intellectual Property Rights in
South Africa relating to starters and alternators which is registered
or for which registration is pending save for the Intellectual Property
Rights details of which are given in the Disclosure Letter.
9.2 So far as the Vendor is aware the Company will be able to continue to
use in South Africa, Namibia, Botswana and Swaziland all Intellectual
Property Rights (relating to starters and alternators) which it uses at
the date of this Agreement).
9.3 So far as the Vendor is aware none of the goods and/or services
supplied in the course of the business carried on by the Company or any
of the processes employed in such business or any other aspect of the
carrying on of such business infringes any intellectual property rights
of any nature of any third party
9.4 So far as the Vendor is aware no person is currently infringing any of
the Intellectual Property Rights details of which are given in the
Disclosure Letter.
9.5 The Company has not entered into any subsisting licence with any person
under which:-
9.5.1 the Company licenses any of the Intellectual Property Rights to
that person; or
9.5.2 that person licenses any intellectual property rights to the
Company for the purpose of the business carried on by the
Company.
-61-
<PAGE>
EMPLOYEES
- - - - - - - - - - - ---------
10. Remuneration and employees
- - - - - - - - - - - -------------------------------
10.1 The particulars contained in the Schedule annexed to the Disclosure
Letter relating to the employees of the Company are true and accurate.
10.2 The Company is not under any contractual obligation:-
10.2.1 to make any increase in the rates of remuneration of or other
similar payment to any of such employees;
10.2.2 to make any change in the terms and conditions of employment
of any such employees.
10.3 The Disclosure Letter discloses all material agreements or
arrangements with trades unions, staff associations or other
associations of employees relating to the employees of the Company.
10.4 The written contracts of employment of those employees who constitute
the executive committee of the Company are annexed to the Disclosure
Letter. In relation to all other employees of the Company a pro forma
pack incorporating standard form statements of particulars of
employment and other written statements of employment benefits is
annexed to the Disclosure Letter, the salary or wages of such other
employees being shown in the Schedule referred to in paragraph 10.1
above.
10.5 No employee of the Company employed in a managerial or senior
technical or senior sales position has given or has been given notice
to terminate his employment.
10.6 There are no loans outstanding from the Company, the Vendor or any
other member of the Lucas Group to any employee of the Company or from
any of such employees to the Vendor, the Company or any other member
of the Lucas Group.
11. Pensions
- - - - - - - - - - - -------------
-62-
<PAGE>
There has not been any breach by any or all of the members of the committee
of management and/or board of the Lucas Automotive Pension Fund ("the Fund")
of any of:-
11.1 the provisions of the Pension Funds Act 24 of 1956, as amended;
11.2 the rules of the Fund; and/or
11.3 their respective fiduciary and/or other duties at common law in
respect of the Fund;
which has had a material adverse effect on any Group Member.
CONTRACTS
- - - - - - - - - - - ---------
12. Insurance
- - - - - - - - - - - --------------
12.1 Brief particulars of all the Company's insurances are set out in the
Disclosure Letter.
12.2 There is no insurance claim made by the Company pending or
outstanding.
12.3 All such policies are currently in full force and effect and neither
the Company nor Vendor has received any notice of cancellations with
respect to any of the policies. All premiums due and payable on such
policies have been paid. Neither the Company nor the Vendor is a co-
insurer under any of the terms of any such insurance policy.
12.4 The Company has not been refused any insurance otherwise available to
comparable companies in the same industry in South Africa related to
its assets and/or business by any insurance carrier during the last
five (5) years.
13. Material Contracts
- - - - - - - - - - - -----------------------
13.1 For the purposes of this paragraph 13 a "Material Contract" means a
contract relating to or affecting the Company which has been entered
into
-63-
<PAGE>
by the Company, is still subsisting and which satisfies any one of the
following criteria:
13.1.1 during the life of the contract will require, or is
anticipated to require, any party to it to pay to the other
party or parties:
13.1.1.1 in excess of R1,000,000 in any one year; or
13.1.1.2 in aggregate in excess of R1,000,000 and such
contract is not also a blanket purchase and sale
order.
13.1.2 the contract cannot be terminated without cause or penalty by
any party to it during the period of six months immediately
following Completion;
13.1.3 it is a lease relating to immovable property.
13.2 All Material Contracts are referred to or listed in and annexed to the
Disclosure Letter. The Material Contracts are, so far as the Vendor is
aware, in full force and effect in accordance with their terms and, so
far as the Vendor is aware, the Company is not in breach of any such
Material Contracts where such breach is reasonably likely to have a
material and adverse effect on the Group.
13.3 The Company is not a party to any of the following contracts which are
not Material Contracts:
13.3.1 any partnership, joint venture, consortium, joint development
or similar contract relating to the Company;
13.3.2 any contract requiring the Company to pay any royalty,
commission or like payment in relation to its business;
13.3.3 any contract for the supply of goods and/or services by or to
the Company on terms under which retrospective or future
discounts, price reductions or other financial incentives are
-64-
<PAGE>
given by or to the Company dependent on the level of purchases
or any other criteria;
13.3.4 any agency or distributorship agreement.
13.4 None of the Material Contracts has been entered into other than on an
arm's length basis save those made with the Vendor or another member
of the Lucas Group . The extent to which any such Contract is not on
terms similar to those that could be expected to have been agreed
with an unaffiliated third party are set out in the Disclosure
Letter.
13.5 The Vendor is not aware of the invalidity of or grounds for
rescission, termination, cancellation or repudiation of any agreement
to which the Company is party
13.6 The Disclosure Letter lists:
13.6.1 the top five suppliers (a "Major Supplier") by value (net
invoice value) to the Company in the nine months immediately
following the Accounting Date; and
13.6.2 those customers (a "Major Customer") who have purchased from
the Company in any of the two and a half years which
immediately preceded the Accounting Date goods and services
having a net invoice sales value of at least R1 million per
annum.
13.7 The assets of the Company are not subject to any hire purchase
agreement, lease, pledge, mortgage, lien, notarial bond or other right
in favour of any third person;
-65-
<PAGE>
COMPLIANCE; DISPUTES
- - - - - - - - - - - --------------------
14. Company law matters and general compliance
- - - - - - - - - - - -----------------------------------------------
14.1 Compliance has been made with all legal requirements in connection
with the formation of the Company and all issues and grants of shares
or other securities of the Company.
14.2 The copy of the memorandum and articles of association of the Company
enclosed with the Disclosure Letter is true and complete.
14.3 So far as the Vendor is aware the Company has conducted its business
in accordance with all laws and regulations of the Republic of South
Africa and the laws of such other jurisdictions which are applicable
to the Company and its activities except where non compliance would
not have a material and adverse effect on the Company
14.4 So far as the Vendor is aware, there is not pending, or in existence,
any investigation or enquiry which is known to the Vendor by, or on
behalf of, any governmental or other body in respect of the affairs of
the Company.
15. Litigation
- - - - - - - - - - - ---------------
15.1 Neither the Company nor any person for whose acts or defaults it may
be liable is involved (whether as plaintiff, defendant or any other
party) in, nor is the Vendor aware of any facts, matters or
circumstances which could reasonably be expected to give rise to any
income tax appeals, civil, criminal, tribunal or arbitration
proceedings.
15.2 There is no unsatisfied judgment or unfulfilled order outstanding
against the Company and the Company is not party to any undertaking or
assurance given to a court, tribunal or any other person in connection
with the determination or settlement of any claim or proceedings.
-66-
<PAGE>
16. Default
- - - - - - - - - - - ------------
So far as the Vendor is aware the Company is not in breach of any Material
Contract to which it is a party, and no other party to any such Material
Contract is in breach of it where in either such event such breach is
material in the context of the business of the Group taken as a whole.
17. EVENTS SINCE THE ACCOUNTING DATE
- - - - - - - - - - - -------------------------------------
Since the Accounting Date so far as the Vendor is aware:6
17.1 the Company has not acquired, or agreed to acquire, any single asset
having a value in excess of R 100,000 or assets having an aggregate
value in excess of R 500,000;
17.2 the Company has not disposed of, or agreed to dispose of, any asset
other than completed product offered for sale by the Company in the
ordinary course of business;
17.3 the trade and business of the Company has been carried on in the
ordinary and normal course and in accordance with the trading style
presently adopted by it; and
17.4 no dividends have been paid.
18. EFFECTS OF AGREEMENT
- - - - - - - - - - - -------------------------
The execution, delivery and performance of this Agreement by the Vendor does
not:-
18.1 violate, conflict with or result in the breach of any provision of the
memorandum or articles of association of the Vendor;
18.2 violate any law to which the Vendor is subject; or
18.3 constitute a breach of, or give any other party to a Material Contract
the right to terminate the same
-67-
<PAGE>
TAXATION
- - - - - - - - - - - --------
19. Returns and disputes
- - - - - - - - - - - -------------------------
19.1 All notices, returns, computations, registrations and payments which
should have been made by the Company for any Taxation purpose have
been made within the requisite periods and are up-to-date.
19.2 The Company is not involved in any dispute with any Taxation Authority
which is material and which concerns any matter which is reasonably
likely to affect in any way the liability of the Company to Taxation.
19.3 So far as the Vendor is aware the Taxation affairs of the Company are
not the subject of any investigation or enquiry by any Taxation
Authority (other than routine questions).
19.4 All stamp duty in terms of the Stamp Duties Act, 1968, as amended
(from which no exemption is applicable) has been paid in respect of
the Shares;
19.5 Between the incorporation of the Company and the date of Completion,
the Company has not made an award of any capitalisation or bonus
shares;
19.6 Between the incorporation of the Company and the date of Completion,
the Company has not transferred any amount from reserves (excluding
any share premium account) or profits to its stated capital, share
capital or share premium account;
19.7 The Company is not party to any agreement with the Commissioner for
Inland Revenue of the nature referred to in section 24A of the Income
Tax Act, 1962;
19.8 The Vendor has disclosed in writing to the Purchaser all material
written queries of a non routine nature addressed to the Company or
any of its representatives by any tax official and the replies
thereto, as well as all material details of any tax objections lodged
by the Company and which have not been fully disposed of.
-68-
<PAGE>
20.
20.1 the Company is incorporated as a private company with limited
liability according to the laws of the Republic of South Africa;
20.2 no steps in terms of section 73 of the Companies Act are pending or
contemplated in respect of the Company;
20.3 all of the issued shares in the capital of the Company are of one
class and rank pari passu with each other;
20.4 the Company is not under any obligation (whether contingently upon the
exercise of any right or otherwise) and no resolution has been passed
since the Accounting Date requiring the Company to increase or to
reduce its authorised or issued share capital or to vary any of the
rights attaching to the issued shares;
20.5 the Company is not obliged to alter the memorandum or articles of
association of the Company or to create or to issue any debentures;
20.6 so far as the Vendor is aware, no person has any right to obtain an
order for the rectification of the register of members of the Company;
20.7 so far as the Vendor is aware, the Company's books and records have
been maintained in all material respects according to law;
20.8 so far as the Vendor is aware no person has any right (including inter
alia, any option or right of first refusal) to purchase any of the
assets of the Company other than its merchandise in the ordinary
course of business;
20.9 the Company is not liable, whether contingently or otherwise and
whether as surety, co-principal debtor, guarantor or indemnifier, for
the liabilities of any third party;
20.10 no employee of the Company is entitled to any exceptional leave
privilege, accumulated leave, payment in lieu of leave, pension or
the like.
-69-
<PAGE>
21. Supplier Agreement
- - - - - - - - - - - -----------------------
In the warranties which follow, the expression "the Company" means Lucas
Automotive (Pty) Limited, the expression "the Supply Agreement" means the
South African Supply Agreement to be entered into at Completion between
Lucas Limited (1) and the Company (2) and the expression 'Lucas' means Lucas
Limited.
21.1 The minimum off-take quantities and lead times specified in Schedule 2
Part 1 to the Supply Agreement have been applicable in relation to
orders by Lucas during the 12 months prior to Completion.
21.2 During the 12 months prior to Completion the Company has been
labelling Lucas Branded Products in accordance with Lucas
specification 06021188.
21.3 The Company has supplied Lucas with Lucas Branded Products during the
past 9 months boxed in accordance with Lucas packaging standards
manual XXB201A and all Lucas Branded products documentation and
packaging has during such period been and is at the Completion Date in
line with Lucas' supplier guide for local presentation and
documentation XXB425.
21.4 Each type of Lucas Branded Product is at the Completion Date and has
during the 12 months prior to that been supplied in accordance with
the technical specification as defined in the Lucas Parts Acceptance
Specification (PAS) current and in force at the Completion Date.
-70-
<PAGE>
SCHEDULE 4
----------
The Accounting Principles
-------------------------
1. STOCK
- - - - - - - - - - - ---------
1.1 Definition
. Stocks comprise:
- goods or other assets purchased for resale
- raw materials and components purchased for incorporation into
products for sale
- products in intermediate stages of completion
- finished goods
- consumable goods
1.2 Physical Stock Count
. A full physical stock count is conducted twice during each
financial year and will, unless the parties agree to the contrary
be undertaken at Completion.
Certificates must be obtained for all stocks held by third
parties, including subcontractors.
1.3 Valuation
Policy
. Stocks are valued at the lower of cost and net realisable value.
Definition
. Cost - that expenditure which has been incurred in the normal
course of business in bringing the product to its present location
and condition.
-71-
<PAGE>
. Cost of Purchase - comprises purchase price including import
duties, transport and handling costs and any other directly
attributable costs, less trade discounts, rebates and subsidies.
. Costs of Conversion - comprises:
- costs specifically attributable to units of production e.g.
direct labour, direct expenses and subcontractor work
- production overheads
- other overheads attributable in the particular circumstances of
the business to bringing the product to its present location
and condition
. Production Overheads - overheads incurred in respect of materials,
labours for production based on the normal level of activity
notwithstanding that they may accrue wholly or partly on a time
basis.
. Net Realisable Value - the actual or estimated selling price net
of trade but before settlement discounts, less all further costs
to completion and all costs to be incurred in marketing, selling
and distributing.
Determination of Cost
. The gross valuation must include all goods in stock and will be
based on cost, any diminution due to obsolescence and other causes
being dealt with separately by way of provisions. Gross cost will
be arrived at by using standard costing methods. Standard costs
will be brought up-to-date shortly before the year end. The
valuation must be modified to recognize the true cost of stock as
required by SSAP9, adjustments would be made for normal scrap,
price variations etc.
-72-
<PAGE>
. Work-in-Progress - the cost will be that appropriate to the last
completed operation, plus the value of any materials or components
to be used during the next operation(s) which have not been
returned to store.
. Absorption of Overheads - overheads to be included in stock must
be allocated, according to SSAP9, on the basis of a normal level
of activity which should be established with reference to the
budgeted level of production for the current year and the level of
activity achieved in previous years. Abnormal costs such as the
cost of excess facilities will be charged to profit as incurred.
Provisions
. The purpose of provisions is to reduce the stock valuation to the
lower of cost and net realisable value.
. Inactive stock - all stock where no sales have been recorded
during the previous twelve months are inactive stocks, these will
be provided for in full. The only exception being where stock has
been deliberately accumulated in anticipation of the introduction
of a new product or model, or new legislation. In this case the
stock will be measured against the expected future demand and any
excess provided for.
. Excess stock - a provision will be made for stocks which have
moved during the preceding year but which are excessive in
relation to the expected demand for the coming year.
. Defective stock - where goods are accepted from suppliers on
partial inspection only, a provision will be made for defective
and perishable items not revealed by the initial check. The amount
should be recalculated each year.
. Overvaluation - in any case where the net stock value exceeds the
net realisable value the difference must be provided for.
-73-
<PAGE>
. The full provision rule for inactive/excess stock may be varied
where there is a reasonable degree of certainty that any stock
which is unprovided for will be sold in the foreseeable future.
. The provision for excess stocks purchased from Hitachi shall not
exceed R1,200,000.
2. DEBTORS
- - - - - - - - - - - -----------
2.1 Trade Debtors
. Trade debtors comprise all amounts due from external customers in
respect of goods sold and services provided in the ordinary course
of business. VAT and similar taxes on turnover invoiced to
customers should be included in the outstanding balance for each
debtor.
2.2 Provisions
. The provision for doubtful debts will consist of those debts
considered to be at risk at any point in time. A specific
provision will be created where:
- the customer is in receivership/administration
- there is specific knowledge which indicates payment is unlikely
- the debt is long overdue compared to the normal collection
cycle of the business
. The provision for credit notes will be made for credits which are
likely to be given to customers in respect of alleged shortages,
goods damaged or not in accordance with the order and any other
items in dispute.
2.3 Prepayments and Accrued Income
-74-
<PAGE>
. Prepayments consisting of the unexpired portion of payments made
in respect of time related expenses will be included on the
balance sheet.
. Accrued income consisting of income relating to the current period
but not receivable in cash until after the balance sheet date will
be included on the balance sheet.
2.4 Other Debtors
. Other debtors comprise all amounts falling outside the definition
of trade debtors and shall be included on the balance sheet to the
extent to which they are determined as recoverable.
3. CREDITORS
- - - - - - - - - - - -------------
3.1 Trade Creditors
. Trade creditors comprise all amounts due to external suppliers in
respect of goods purchased and services provided in the ordinary
course of business. Provision must be made for goods and services
received for which invoices have not been received by the balance
sheet date.
3.2 Accruals and Deferred Income
. Accruals consist of the amounts payable in respect of benefits
received up to the balance sheet date, generally on a time
apportioned basis. An accrual is made for outstanding annual
holiday entitlement and bonus for all employees.
. Deferred income comprises that part of monies received at the date
of the balance sheet which relates to a later period.
3.3 Warranty Provisions
. A fixed general warranty provision is maintained.
-75-
<PAGE>
. An additional specific provision will be created for known faults
peculiar to identified products whose rate of occurrence can be
reasonably estimated.
3.4 Contingent Liabilities
. Contingent liabilities are only provided for if it is both
probable that a liability will occur and the amount is either
known or can be estimated with accuracy.
4. PROFIT AND LOSS ACCOUNT
- - - - - - - - - - - ---------------------------
4.1 Maintenance Stocks
. Expenditure on plant and machine spares is written off as
incurred.
4.2 Tooling
. Expenditure on tooling, tool materials and in-house tool making
costing less than R1000 is written off as incurred.
4.3 Research and Development
. Expenditure on research and development, other than that which is
specifically recoverable under contract, is written off as
incurred.
5. PENSIONS
- - - - - - - - - - - ------------
. No provision is made in respect of the Lucas Automotive Pension
Fund on the basis that the Group is enjoying a contributions
holiday, which is expected to continue until the year 2001.
-76-
<PAGE>
SCHEDULE 5
----------
PRO-FORMA
---------
Estimated Position as at November 1997
<TABLE>
<CAPTION>
South Africa
------------
R000's
------
4.55
----
Assets
- - - - - - - - - - - ------
<S> <C>
Current Assets
Cash XXX
Accounts receivable XXX
Other receivables XXX
Inventories XXX
Tooling XXX
Prepaid and other assets XXX
---------
Total current assets XXX
---------
Investments XXX
Property, plant and equipment
---------
Total assets XXX
---------
Liabilities and shareholders' equity
Current liabilities
Borrowings
Accounts payable XXX
Accrued liabilities XXX
Accrued royalties payable to Lucas XXX
---------
Total current liabilities XXX
---------
Other liabilities
Long-term debt
New Credit Facility
Provision
Long Term Operation Liabilities
Capital Lease
</TABLE>
-77-
<PAGE>
<TABLE>
<S> <C>
Deferred compensation
Other loans - external
Other loans - Lucas XXX
Shareholders' equity
Common stock XXX
Additional paid-in capital
Divisional equity
Retained earnings (deficit) XXX
Revaluation reserve XXX
Other reserves XXX
---------
Total shareholders' equity XXX
---------
---------
Total liabilities and shareholders' equity XXX
---------
</TABLE>
NOTES
- - - - - - - - - - - -----
South Africa
- - - - - - - - - - - ------------
1. Provisions for Hitachi stock of R1.2M has been included in above figures
2. No corporation tax reserve created - possibly a small liability will exist
3. The above Lucas loans have been adjusted to reflect repayment of R521K loan
from Lucas Namibia - actual repayment expected first week in December
(dependent on Namibian exchange controls approval)
4. Figures adjusted to reflect payment of R3.0M dividend as agreed with the
Purchaser
Fixed Assets (excluding Tooling)
- - - - - - - - - - - --------------------------------
<TABLE>
<CAPTION>
South Africa
R000's
4.55
<S> <C>
NBV at September (actual) XXX
October - additions XXX
- disposals
- depreciation XXX
---------
NBV at October (actual) XXX
November - additions XXX
- disposals
- depreciation XXX
---------
Forecast NBV at November XXX
15 December - additions XXX
- disposals
- depreciation XXX
---------
Forecast NBV at 15 December XXX
---------
</TABLE>
-78-
<PAGE>
<TABLE>
<CAPTION>
Tooling
- - - - - - - - - - - -------
<S> <C>
NBV at September (actual) XXX
October - additions XXX
- disposals
- depreciation XXX
---------
NBV at October (actual) XXX
November - additions XXX
- disposals
- depreciation XXX
---------
Forecast NBV at November XXX
15 December - additions XXX
- disposals
- depreciation XXX
---------
Forecast NBV at 15 December XXX
---------
</TABLE>
-79-
<PAGE>
SIGNED by CHRIS LONG-LEATHER )
as duly authorised attorney ) /s/ Chris Long-Leather
for and on behalf of ) ----------------------
LUCAS INDUSTRIES PLC )
Chris Long-Leather as attorney of Lucas
Industries plc
PRESTOLITE ELECTRIC INCORPORATED
By: /s/ P. Kim Packard
------------------
Name: P. Kim Packard
Title: President
By: /s/ Kenneth C. Cornelius
------------------------
Name: Kenneth C. Cornelius
Title: Vice President
-80-
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
PEI 1991 Acquisition, Inc.
1. The name of the corporation is:
PEI 1991 Acquisition, Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of Common Stock which the corporation shall
have authority to issue is One Thousand (1,000) and the par value of each of
such shares is One Cent ($.01) amounting in the aggregate to Ten Dollars
($10.00).
5. The board of directors is authorized to make, alter or repeal the by-
laws of the corporation. Election of directors need not be by written ballot.
6. The name and mailing address of the incorporator is:
J.L. Austin
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
7. A director of the corporation shall not be personally liable to the
corporation or its stockholders far monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
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) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derives any improper
personal benefit.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 20th day of June, 1991.
/s/ J.L. Austin
----------------------
J.L. Austin
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PEI 1991 ACQUISITION, INC.
--------------------------
(Pursuant to Section 242 of the
Delaware General Corporation Laws)
PEI 1991 Acquisition, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
THAT, the name of the Corporation is PEI 1991 Acquisition, Inc. and that
the date of filing of its original certificate of incorporation with the
Secretary of State of Delaware was June 20, 1991;
THAT, this amendment has been duly adopted in accordance with Section 242
of the Delaware General Corporation Law; and
THAT, the Certificate of Incorporation of the Corporation is hereby amended
by changing Article I thereof to read as herein set forth in full:
"ARTICLE I
Name
----
The name of the corporation is Prestolite Electric Incorporated (the
"Corporation")."
<PAGE>
IN WITNESS WHEREOF, PEI 1991 ACQUISITION, INC. has caused this Certificate
of Amendment of Certificate of Incorporation to be signed by Richard D.
Paterson, its President and attested by Mark E. Bandeen, its Assistant Secretary
this 16th day of October, 1991.
PEI 1991 ACQUISITION, INC.
By: /s/ Richard D. Paterson
-----------------------
Name: Richard D. Paterson
Title: President
ATTEST:
/s/ Mark E. Bandeen
- - - - - - - - - - - --------------------
Name: Mark E. Bandeen
Title: Assistant Secretary
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PEI 1991 HOLDING, INC.
----------------------
(Pursuant to Sections 241 and 245 of the
Delaware General Corporation Laws)
PEI 1991 Holding, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
THAT, the name of the Corporation is PEI 1991 Holding, Inc. and that
the date of filing of its original certificate of incorporation with the
Secretary of State of Delaware was June 20, 1991:
THAT, the directors of the Corporation duly adopted, in accordance
with Sections 241 and 245 of the Delaware General Corporation Law, resolutions
declaring advisable and adopting this amendment and restatement of the
Certificate of Incorporation of the Corporation; and
THAT, the Corporation has not received any payment for any of its
capital stock; and
THAT, the text of the Certificate of Incorporation is hereby restated
and amended to read as herein set forth in full;
"ARTICLE I
Name
----
The name of the corporation is PEI Holding, Inc. (the "Corporation").
ARTICLE II
Registered Office and Registered Agent
--------------------------------------
The address of the registered office of the Corporation in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
1.
<PAGE>
ARTICLE III
Corporate Purpose
-----------------
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
-----------------------
ARTICLE IV
Capital Stock
-------------
A. Number and Types of Shares. The total number of shares of all classes of
--------------------------
stock that the corporation shall have authority to issue is 4,000,000 shares
consisting of: 2,000,000 shares of class A common stock, par value $0.01 per
share (herein called the "Class A Common Stock"); and 2,000,000 shares of class
--------------------
B common stock, par value of $0.01 per share (herein called the "Class B Common
--------------
Stock"). The Class A Common Stock and the Class B Common Stock are sometimes
- - - - - - - - - - - -----
collectively referred to herein as the "Common Stock."
B. Rights, Powers Preferences and Privileges of the Common Stock.
-------------------------------------------------------------
Section 1.0. Dividends. The holders of Common Stock shall be paid
----------- ---------
dividends, when, as and if declared by the Board of Directors of the
Corporation, out of assets of the Corporation available For the payment of
dividends to the extent permitted by law; provided, however, that no dividend
-------- -------
may be declared or paid with respect to any class of Common Stock unless an
equal dividend is declared and paid, share for share, with respect to all other
outstanding classes of Common Stock.
Section 2.0. Voting. (a) General. Except as is otherwise provided by law
----------- ------ -------
or is provided in Section 2.0(b) below, each holder of Common Stock shall be
entitled to one vote for each share of Common Stock held by such stockholder on
all matters to be voted on by the common stockholders of the Corporation, and
the holders of Common Stock shall vote together as a single class on all matters
to be voted on by the common stockholder of the Corporation.
(b) Class B Common Stock. Except as is otherwise provided by law, shares
--------------------
of Class B Common Stock shall have no voting rights whatsoever and each hold of
Class B Common Stock shall have to voting rights as a stockholder with respect
to shares of Class B Common Stock held by such holder.
2.
<PAGE>
Section 3.0. Conversion and Exchange. (a) Right of Conversion. Subject to
----------- ----------------------- -------------------
and upon compliance with this Section 3.0, shares of Class A Common Stock shall
be convertible into fully paid and nonassessable shares of Class B Common Stock
on the basis of one share of Class B Common Stock for each share of Class A
Common Stock surrendered for conversion; provided, that, a share of Class A
-------- ----
Common Stock shall not be convertible into class B Common Stock if, after giving
effect to such conversion, no shares of Class A Common stock would be issued and
outstanding.
(b) Reservation of Shares. The Corporation hereby reserves and shall at
---------------------
all times reserve and keep available, out of its authorized and unissued shares,
or Class B Common Stock, for the purposes of effecting conversions, such number
of duly authorized shares of Class B Common Stock sufficient to affect the
conversion of all outstanding shares of Class A Common Stock.
(c) Certificate Name. If a certificate for shares of Class B Common Stock
----------------
issued upon conversion is to be issued in a name other than the person in whose
name the certificate formerly representing the shares of Class A Common Stock
for which such shares are exchanged is issued, then the holder of the
certificate being surrendered shall be required to pay any stock transfer taxes
payable on account of such transfer.
(d) Limit of Conversion. Shares of Class A Common Stock shall not be
-------------------
convertible into shares of any other class of stock of the Corporation.
(e) Cancellation. Shares of Class A Common Stock which are converted into
------------
shares of Class B Common Stock pursuant to this Section 3.0 shall be cancelled
by the Corporation and may not be reissued.
(f) Required Deliveries. Any holder of shares of Class A Common Stock may,
-------------------
at any time and from time to time, convert any or all of such shares held by
such holder into an equal number of shares of Class B Common Stock by delivering
to the office of the Corporation (i) the certificate or certificates
representing the share or shares of Class A Common Stock to be converted, duly
endorsed and (ii) written notice to the Corporation stating that such holder
elected to convert such share or shares and stating the name in which each
certificate for shares of Class B Common Stock issued upon such conversion is to
be issued and the address of the holder to be recorded on the books of the
Corporation.
(g) Time of Conversion. Conversion shall be deemed to have been effected
------------------
at the close of business on the date when such delivery in made and such date is
referred to herein as the "Conversion Date." On the Conversion Date or as
promptly thereafter as practicable, the Corporation or its transfer agent shall
deliver to each holder electing to convert shares of Class A Common Stock a
certificate for the number of full shares of Class B Common Stock issuable upon
the conversion of such holder's shares of Class A Common Stock. Except as is
provided in Section 3.0(c) above, any and all transfer taxes, stamp taxes or
other expenses
3.
<PAGE>
incurred or payable in connection with any conversion made pursuant to this
Section 3.0 shall be borne and paid by the Corporation.
Section 4.0 Preemptive Rights. Holders of shares of Common Stock shall
----------- -----------------
not, as such, have any preemptive or other right to subscribe for or purchase
any shares of capital stock of the Corporation or any class now or hereafter
authorized or issued by the Corporation.
ARTICLE V
Directors
---------
Elections of directors of the Corporation need not be by written ballot,
except and to the extent provided in the by law of the Corporation. To the
fullest extent permitted by law as it now exists and as it may hereafter be
amended, no director or the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.
ARTICLE VI
Indemnification of Directors, Officers and Others
-------------------------------------------------
Section 1.0. The Corporation shall indemnify any person who was or is a
-----------
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2.0. The Corporation shall indemnify any person who was or is a
-----------
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
4.
<PAGE>
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
mate in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State or Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
Section 3.0. To the extent that a director, officer, employee or agent of
-----------
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1.0 and 2.0 of this Article
VI, or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
Section 4.0. Any indemnification under Sections 1.0 and 2.0 of this
-----------
Article VI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in such Sections 1.0. and
2.0. Such determinations shall be made (i) by the Board of Directors of the
Corporation by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders of the Corporation.
Section 5.0. Notwithstanding any contrary determination in the specific
-----------
case under Section 4.0 of this Article VI, and notwithstanding the absence of
any determination thereunder, any director, officer, employee or agent may apply
to any court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1.0 and 2.0
of this Article VI. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director, officer,
employee or agent is proper in the circumstances because be has met the
applicable standards of conduct set forth in Section 1.0 or 2.0 of this Article
VI, as the case may be. Notice of any application for indemnification pursuant
to this Section 5.0 shall be given to the Corporation promptly upon the filing
of such application.
Section 6.0. Expenses (including attorneys' fees) incurred by an officer
-----------
or director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the
5.
<PAGE>
Corporation authorized in this Article VI. Such expenses (including attorneys'
fees) incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors of the Corporation deems
appropriate.
Section 7.0. The indemnification and advancement of expenses provided by,
-----------
or granted pursuant to, the other Sections of this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Section 1.0 and 2.0 shall be made to the fullest extent
permitted by law. The provisions of this Article VI shall not be deemed to
preclude the indemnification of any person who is not specified in Sections 1.0
and 2.0 but whom the Corporation has the power or obligation to indemnify under
the provisions of the General Corporation Law, or otherwise.
Section 8.0. The Corporation may purchase and maintain insurance on behalf
-----------
of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of Section 145 of the General Corporation
Law.
Section 9.0. For purposes of this Article VI, references to "the
-----------
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article VI with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
Section 10.0. For purposes of this Article VI, references to "other
------------
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent or the
Corporation which imposes duties on, or involves service by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith acted in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VI.
6.
<PAGE>
Section 11.0. For purposes of any determination under Section 4.0 of this
------------
Article VI, a person shall be deemed to have acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on the records or books of account of the Corporation or another enterprise, or
on information supplied to him by the officers of the Corporation or another
enterprise in the course of their duties, or on the advice of legal counsel for
the Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 11.0 shall mean any other corporation or any
partnership, joint venture, trust or other enterprise of which such person is or
was serving at the request of the Corporation as a director, officer, employee
or agent. The provisions of this Section 11.0 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Section 1.0
or 2.0 of this Article VI, as the case may be.
Section 12.0. The indemnification and advancement of expenses provided
------------
by, or granted pursuant to, this Article VI shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VII
By-Laws
-------
The directors of the Corporation shall have the power to adopt, amend or
repeal by-laws.
ARTICLE VIII
Amendment
---------
The Corporation reserves the right to amend, alter, change or repeal
any provision of this Certificate of Incorporation, in the manner now or
hereafter prescribed by law, and all rights conferred on stockholders in this
Certificate of Incorporation are subject to this reservation."
7.
<PAGE>
IN WITNESS WHEREOF, PEI 1991 HOLDING, INC. has caused this Amended and
Restated Certificate of Incorporation to be signed by Richard D. Paterson, its
President and attested by Mark E. Bandeen, its Assistant Secretary this 8th day
of October, 1991.
PEI 1991 HOLDING, INC.
By: /s/ Richard D. Paterson
-----------------------
Name: Richard D. Paterson
Title: President
ATTEST:
/s/ Mark E. Bandeen
- - - - - - - - - - - -------------------
Name: Mark E. Bandeen
Title: Assistant Secretary
8.
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PEI HOLDING, INC.
(Pursuant to Section 242 of the
Delaware General Corporation Law)
PEI HOLDING, INC., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
THAT, the name of the Corporation is PEI Holding, Inc. and that the
date of filing of its Amended and Restated Certificate of Incorporation
with the Secretary of State of Delaware was October 15, 1991;
THAT, the directors of the Corporation duly adopted at a meeting held
on March 10, 1998 resolutions recommending to the stockholders of the
Corporation that (a) each of the outstanding 99,650 shares of Class A
Common Stock of the Corporation be subdivided into twenty (20) shares of
Class A Common Stock of the Corporation and (b) that the authorized shares
of the Corporation be increased to 5,000,000 shares consisting of 2,500,000
shares of Class A Common Stock, par value $0.01 per share and 2,500,000
shares of Class B Common Stock, par value $0.01 per share;
THAT, that stockholders of the Corporation, by unanimous written
consent filed with the corporate records of the Corporation, adopted such
recommendations of the directors of the Corporation and authorized the
officers of the Corporation to cause this Certificate to be prepared,
executed and duly filed;
THAT, each of the outstanding 99,650 shares of Class A Common Stock of
the Corporation is hereby and shall be deemed to be subdivided into twenty
(20) shares of Class A Common Stock of the Corporation, as a result of such
subdivision there are as of this date 1,993,000 shares of Class A Common
Stock of the Corporation outstanding, and the officers of the Corporation
shall cause replacement stock certificates to be issued to the holders of
shares of Class A Common Stock of the Corporation to evidence such
subdivision; and
THAT, the Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended by changing Article IV.A, thereof to read as
herein set forth in full:
"ARTICLE IV
CAPITAL STOCK
A. Number and Types of Shares. The total number of shares of all
--------------------------
classes of stock that the corporation shall have authority to issue is
5,000,000 shares consisting of: 2,500,000 shares of Class A common
stock, par value $0.01 per share (herein called the "Class A Common
Stock"); and 2,500,000 shares of Class B common stock, par value of
$0.01 per share (herein called the "Class B Common Stock"). The Class
A Common Stock and the Class B Common Stock are sometimes collectively
referred to herein as the "Common Stock."
<PAGE>
IN WITNESS WHEREOF, PEI Holding, Inc. has caused this Certificate of
Amendment of Amended and Restated Certificate of Incorporation to be signed by
Kenneth C. Cornelius, its Senior Vice President, and attested by Dennis P.
Chelminski, its Treasurer, this 25th day of March, 1998.
PEI HOLDING, INC.
By: /s/ Kenneth C. Cornelius
----------------------------
Kenneth C. Cornelius,
Senior Vice President
Attest:
/s/ Dennis P. Chelminski
- - - - - - - - - - - ------------------------------
Dennis P. Chelminski, Treasurer
2
<PAGE>
EXHIBIT 3.5
----------------------------------------
BY-LAWS
OF
PRESTOLITE ELECTRIC INCORPORATED
----------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Section Page
- - - - - - - - - - - ------- ----
<S> <C>
ARTICLE I
OFFICES
1.01. Registered Office.......................... 1
1.02. Other Offices.............................. 1
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.01. Annual Meetings............................ 1
2.02. Special Meetings........................... 2
2.03. Notice of Meetings......................... 2
2.04. Waiver of Notice........................... 2
2.05. Adjournments............................... 3
2.06. Quorum 3
2.07. Voting 3
2.08. Proxies 3
2.09. Stockholders' Consent in Lieu of Meeting... 4
ARTICLE III
BOARD OF DIRECTORS
3.01. General Powers............................. 4
3.02. Number and Term of Office.................. 4
3.03. Resignation................................ 4
3.04. Removal.................................... 4
3.05. Vacancies.................................. 5
3.06. Meetings................................... 5
3.07. Committees of the Board.................... 6
3.08. Directors' Consent in Lieu of Meeting...... 7
3.09. Action by Means of Telephone or Similar
Communications Equipment................... 8
3.10. Compensation............................... 8
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Section Page
- - - - - - - - - - - ------- ----
<S> <C>
ARTICLE IV
OFFICERS
4.01. Officers.................................... 8
4.02. Authority and Duties........................ 8
4.03. Term of Office, Resignation and Removal..... 8
4.04. Vacancies................................... 8
4.05. The Chairman................................ 8
4.06. The President............................... 8
4.07. Vice Presidents............................. 9
4.08. The Secretary............................... 10
4.09. Assistant Secretaries....................... 10
4.10. The Treasurer............................... 10
4.11. Assistant Treasurers........................ 11
ARTICLE V
CHECKS, DRAFTS, NOTES AND PROXIES
5.01. Checks, Drafts and Notes................... 11
5.02. Execution of Proxies....................... 11
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
6.01. Certificates Evidencing Shares............. 11
6.02. Stock Ledger............................... 12
6.03. Transfers of Shares........................ 12
6.04. Addresses of Stockholders.................. 12
6.05. Lost Destroyed and Mutilated Certificates.. 12
6.06. Regulations................................ 13
6.07. Fixing Date for Determination of Stockholders
of Record.................................. 13
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Section Page
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<S> <C>
ARTICLE VII
SEAL
7.01. Seal.............................................. 13
ARTICLE VIII
FISCAL YEAR
8.01. Fiscal Year....................................... 14
ARTICLE IX
INDEMNIFICATION AND INSURANCE
9.01. Indemnification................................... 14
9.02. Insurance for Indemnification..................... 17
ARTICLE X
AMENDMENTS
10.01. Amendments....................................... 17
</TABLE>
(iii)
<PAGE>
BY-LAWS
OF
PRESTOLITE ELECTRIC INCORPORATED
ARTICLE I
OFFICES
SECTION 1.01. Registered Office. The registered office of
-----------------
Prestolite Electric Incorporated (the "Corporation") in the State of Delaware
-----------
shall be at the principal office of The Corporation Trust Company in the City of
Wilmington, County of New Castle, and the registered agent in charge thereof
shall be The Corporation Trust Company.
SECTION 1.02. Other Offices. The Corporation may also have an office
-------------
or offices at any other place or places within or without the State of Delaware
as the Board of Directors of the Corporation (the "Board") may from time to time
-----
determine or the business of the Corporation may from time to time require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. Annual Meetings. The annual meeting of stockholders of
---------------
the Corporation for the election of directors of the Corporation ("Directors"),
---------
and for the transaction of such other business as may properly come before such
meeting, shall be held at such place, date and time as shall be fixed by the
Board and designated in the notice or waiver of notice of such annual meeting;
provided, however, that no annual meeting of stockholders need be held if all
- - - - - - - - - - - -------- -------
actions, including the election of Directors, required by the General
Corporation Law of the State of Delaware (the "General Corporation Law") to be
-----------------------
taken at such annual meeting, are taken by written consent in lieu of meeting
pursuant to Section 2.09 hereof.
SECTION 2.02. Special Meetings. Special meetings of stockholders for
----------------
any purpose or purposes may be called by the Board or the Chairman of the Board,
the President or the Secretary of the Corporation or by the recordholders of at
least a majority of the shares of common stock of the Corporation issued and
outstanding ("Shares") and entitled to vote thereat, to be held at such place,
------
date and time as shall be designated in the notice or waiver of notice thereof.
<PAGE>
2
SECTION 2.03. Notice of Meetings. (a) Except as otherwise provided
------------------
by law, written notice of each annual or special meeting of stockholders stating
the place, date and time of such meeting and, in the case of a special meeting,
the purpose or purposes for which such meeting is to be held, shall be given
personally or by first-class mail (airmail in the case of international
communications) to each recordholder of Shares (a "Stockholder") entitled to
-----------
vote thereat, not less than 10 nor more than 60 days before the date of such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the Stockholder at such
Stockholder's address as it appears on the records of the Corporation. If,
prior to the time of mailing, the Secretary of the Corporation (the "Secretary")
---------
shall have received from any Stockholder a written request that notices intended
for such Stockholder are to be mailed to some address other than the address
that appears on the records of the Corporation, notices intended for such
Stockholder shall be mailed to the address designated in such request.
(b) Notice of a special meeting of Stockholders may be given by
the person or persons calling the meeting, or, upon the written request of such
person or persons, such notice shall be given by the Secretary on behalf of such
person or persons. If the person or persons calling a special meeting of
Stockholders give notice thereof, such person or persons shall deliver a copy of
such notice to the Secretary. Each request to the Secretary for the giving of
notice of a special meeting of Stockholders shall state the purpose or purposes
of such meeting .
SECTION 2.04. Waiver of Notice. Notice of any annual or special
----------------
meeting of Stockholders need not be given to any Stockholder who files a written
waiver of notice with the Secretary, signed by the person entitled to notice,
whether before or after such meeting. Neither the business to be transacted at,
nor the purpose of, any meeting of Stockholders need be specified in any written
waiver of notice thereof. Attendance of a Stockholder at a meeting, in person
or by proxy, shall constitute a waiver of notice of such meeting, except when
such Stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds that
the notice of such meeting was inadequate or improperly given.
SECTION 2.05. Adjournments. Whenever a meeting of Stockholders,
------------
annual or special, is adjourned to another date, time or place, notice need not
be given of the adjourned meeting if the date, time and place thereof are
announced at the meeting at which the adjournment is taken. If the adjournment
is for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned
<PAGE>
3
meeting shall be given to each Stockholder entitled to vote thereat. At the
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
SECTION 2.06. Quorum. Except as otherwise provided by law or the
------
Certificate of Incorporation of the Corporation (the "Certificate of
--------------
Incorporation"), the recordholders of a majority of the Shares entitled to vote
- - - - - - - - - - - -------------
thereat, present in person or by proxy, shall constitute a quorum for the
transaction of business at all meetings of Stockholders, whether annual or
special. If, however, such quorum shall not be present in person or by proxy at
any meeting of Stockholders, the Stockholders entitled to vote thereat may
adjourn the meeting from time to time in accordance with Section 2.05 hereof
until a quorum shall be present in person or by proxy.
SECTION 2.07. Voting. Each Stockholder shall be entitled to one vote
------
for each Share held of record by such Stockholder. Except as otherwise provided
by law or the Certificate of Incorporation, when a quorum is present at any
meeting of Stockholders, the vote of the recordholders of a majority of the
Shares constituting such quorum shall decide any question brought before such
meeting.
SECTION 2.08. Proxies. Each Stockholder entitled to vote at a
-------
meeting of Stockholders or to express, in writing, consent to or dissent from
any action of Stockholders without a meeting may authorize another person or
persons to act for such Stockholder by proxy. Such proxy shall be filed with
the Secretary before such meeting of Stockholders or such action of Stockholders
without a meeting, at such time as the Board may require. No proxy shall be
voted or acted upon more than three years from its date, unless the proxy
provides for a longer period.
SECTION 2.09. Stockholders' Consent in Lieu of Meeting. Any action
----------------------------------------
required by the General Corporation Law to be taken at any annual or special
meeting of Stockholders, and any action which may be taken at any annual or
special meeting of Stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the recordholders of Shares having not less than the
minimum number of votes necessary to authorize or take such action at a meeting
at which the recordholders of all Shares entitled to vote thereon were present
and voted.
<PAGE>
4
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. General Powers. The business and affairs of the
--------------
Corporation shall be managed by the Board, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by law, the
Certificate of Incorporation or these By-Laws directed or required to be
exercised or done by Stockholders.
SECTION 3.02. Number and Term of Office. The number of Directors
-------------------------
shall be three or such other number as shall be fixed from time to time by the
Board. Directors need not be Stockholders. Directors shall be elected at the
annual meeting of Stockholders or, if, in accordance with Section 2.01 hereof,
no such annual meeting is held, by written consent in lieu of meeting pursuant
to Section 2.09 hereof, and each Director shall hold office until his successor
is elected and qualified, or until his earlier death or resignation or removal
in the manner hereinafter provided.
SECTION 3.03. Resignation. Any Director may resign at any time by
-----------
giving written notice to the Board, the Chairman of the Board of the Corporation
(the "Chairman") or the Secretary. Such resignation shall take effect at the
--------
time specified in such notice or, if the time be not specified, upon receipt
thereof by the Board, the Chairman or the Secretary, as the case may be. Unless
otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective.
SECTION 3.04. Removal. Any or all of the Directors may be removed,
-------
with or without cause, at any time by vote of the recordholders of a majority of
the Shares then entitled to vote at an election of Directors, or by written
consent of the recordholders of Shares pursuant to Section 2.09 hereof.
SECTION 3.05. Vacancies. Vacancies occurring on the Board as a
---------
result of the removal of Directors without cause may be filled only by vote of
the recordholders of a majority of the Shares then entitled to vote at an
election of Directors, or by written consent of such recordholders pursuant to
Section 2.09 hereof. Vacancies occurring on the Board for any other reason,
including, without limitation, vacancies occurring as a result of the creation
of new directorships that increase the number of Directors, may be filled by
such vote or written consent or by vote of the Board or by written consent of
the Directors pursuant
<PAGE>
5
to Section 3.08 hereof. If the number of Directors then in office is less than a
quorum, such other vacancies may be filled by vote of a majority of the
Directors then in office or by written consent of all such Directors pursuant to
Section 3.08 hereof. Unless earlier removed pursuant to Section 3.04 hereof,
each Director chosen in accordance with this Section 3.05 shall hold office
until the next annual election of Directors by the Stockholders and until his
successor shall be elected and qualified.
SECTION 3.06. Meetings. (a) Annual Meetings. As soon as
-------- ---------------
practicable after each annual election of Directors by the Stockholders, the
Board shall meet for the purpose of organization and the transaction of other
business, unless it shall have transacted all such business by written consent
pursuant to Section 3.08 hereof.
(b) Other Meetings. Other meetings of the Board shall be held at
such times as the Chairman, the President of the Corporation (the "President"),
---------
the Secretary or a majority of the Board shall from time to time determine.
(c) Notice of Meetings. The Secretary shall give written notice to
------------------
each Director of each meeting of the Board, which notice shall state the place,
date, time and purpose of such meeting. Notice of each such meeting shall be
given to each Director, if by mail, addressed to him at his residence or usual
place of business, at least two days before the day on which such meeting is to
be held, or shall be sent to him at such place by telecopy, telegraph, cable, or
other form of recorded communication, or be delivered personally or by telephone
not later than the day before the day on which such meeting is to be held. A
written waiver of notice, signed by the Director entitled to notice, whether
before or after the time of the meeting referred to in such waiver, shall be
deemed equivalent to notice, Neither the business to be transacted at, nor the
purpose of any meeting of the Board need be specified in any written waiver of
notice thereof. Attendance of a Director at a meeting of the Board shall
constitute a waiver of notice of such meeting, except as provided by law.
(d) Place of Meetings. The Board may hold its meetings at such place
-----------------
or places within or without the State of Delaware as the Board or the Chairman
may from time to time determine, or as shall be designated in the respective
notices or waivers of notice of such meetings.
(e) Quorum and Manner of Acting. One-third of the total number of
---------------------------
Directors then in office (but in no event less than two if the total number of
directorships, including vacancies, is greater than one and in no event a number
less than
<PAGE>
6
one-third of the total number of directorships, including vacancies) shall be
present in person at any meeting of the Board in order to constitute a quorum
for the transaction of business at such meeting, and the vote of a majority of
those Directors present at any such meeting at which a quorum is present shall
be necessary for the passage of any resolution or act of the Board, except as
otherwise expressly required by law, the Certificate of Incorporation or these
By-Laws. In the absence of a quorum for any such meeting, a majority of the
Directors present thereat may adjourn such meeting from time to time until a
quorum shall be present.
(f) Organization. At each meeting of the Board, one of the following
------------
shall act as chairman of the meeting and preside, in the following order of
precedence:
(i) the Chairman;
(ii) the President;
(iii) any Director chosen by a majority of the Directors present.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary is present) whom the chairman of
the meeting shall appoint shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 3.07. Committees of the Board. The Board may, by resolution
-----------------------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more Directors. The Board may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of such committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another Director to act at the
meeting in the place of any such absent or disqualified member. Any committee
of the Board, to the extent provided in the resolution of the Board designating
such committee, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; provided, however, that no such committee shall have such power or
-------- -------
authority in reference to amending the Certificate of Incorporation (except that
such a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board as provided
in Section 151(a) of the General Corporation Law, fix the designations and any
of the preferences
<PAGE>
7
or rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes of stock of
the Corporation or fix the number of shares of any series of stock or authorize
the increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation under Section 251 or 252 of the General Corporation Law,
recommending to the Stockholders the sale, lease or exchange of all or
substantially all the Corporation's property and assets, recommending to the
Stockholders a dissolution of the Corporation or the revocation of a
dissolution, or amending these By-Laws; provided further, however, that, unless
-------- ------- -------
expressly so provided in the resolution of the Board designating such committee,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law. Each committee of
the Board shall keep regular minutes of its proceedings and report the same to
the Board when so requested by the Board.
SECTION 3.08. Directors' Consent in Lieu of Meeting. Any action
-------------------------------------
required or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by all the members of the Board or such committee and such
consent is filed with the minutes of the proceedings of the Board or such
committee.
SECTION 3.09. Action by Means of Telephone or Similar Communications
------------------------------------------------------
Equipment. Any one or more members of the Board, or of any committee thereof,
- - - - - - - - - - - ---------
may participate in a meeting of the Board or such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
SECTION 3.10. Compensation. Unless otherwise restricted by the
------------
Certificate of Incorporation, the Board may determine the compensation of
Directors. In addition, as determined by the Board, Directors may be reimbursed
by the Corporation for their expenses, if any, in the performance of their
duties as Directors. No such compensation or reimbursement shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
<PAGE>
8
ARTICLE IV
OFFICERS
SECTION 4.01. Officers. The officers of the Corporation shall be the
--------
Chairman, the President, the Secretary and a Treasurer and may include one or
more Vice Presidents and one or more Assistant Secretaries and one or more
Assistant Treasurers. Any two or more offices may be held by the same person.
SECTION 4.02. Authority and Duties. All officers shall have such
--------------------
authority and perform such duties in the management of the Corporation as may be
provided in these By-Laws or, to the extent not so provided, by resolution of
the Board.
SECTION 4.03. Term of Office, Resignation and Removal. (a) Each
---------------------------------------
officer shall be appointed by the Board and shall hold office for such term as
may be determined by the Board. Each officer shall hold office until his
successor has been appointed and qualified or his earlier death or resignation
or removal in the manner hereinafter provided. The Board may require any
officer to give security for the faithful performance of his duties.
(b) Any officer may resign at any time by giving written notice to the
Board, the Chairman, the President or the Secretary. Such resignation shall
take effect at the time specified in such notice or, if the time be not
specified, upon receipt thereof by the Board, the Chairman, the President or the
Secretary, as the case may be. Unless otherwise specified therein, acceptance
of such resignation shall not be necessary to make it effective.
(c) All officers and agents appointed by the Board shall be subject to
removal, with or without cause, at any time by the Board or by the action of the
recordholders of a majority of the Shares entitled to vote thereon.
SECTION 4.04. Vacancies. Any vacancy occurring in any office of the
---------
Corporation, for any reason, shall be filled by action of the Board. Unless
earlier removed pursuant to Section 4.03 hereof, any officer appointed by the
Board to fill any such vacancy shall serve only until such time as the unexpired
term of his predecessor expires unless reappointed by the Board.
SECTION 4.05. The Chairman. The Chairman shall have the power to
------------
call special meetings of Stockholders, to call special meetings of the Board
and, if present, to preside at all
<PAGE>
9
meetings of Stockholders and all meetings of the Board. The Chairman shall
perform all duties incident to the office of Chairman of the Board and all such
other duties as may from time to time be assigned to him by the Board or these
By-Laws.
SECTION 4.06. The President. The President shall be the chief
-------------
executive officer of the Corporation and shall have general and active
management and control of the business and affairs of the Corporation, subject
to the control of the Board, and shall see that all orders and resolutions of
the Board are carried into effect. The President shall perform all duties
incident to the office of President and all such other duties as may from time
to time be assigned to him by the Board or these By-Laws.
SECTION 4.07. Vice Presidents. Vice Presidents, if any, in order of
---------------
their seniority or in any other order determined by the Board, shall generally
assist the President and perform such other duties as the Board or the President
shall prescribe, and in the absence or disability of the President, shall
perform the duties and exercise the powers of the President.
SECTION 4.08. The Secretary. The Secretary shall, to the extent
-------------
practicable, attend all meetings of the Board and all meetings of Stockholders
and shall record all votes and the minutes of all proceedings in a book to be
kept for that purpose, and shall perform the same duties for any committee of
the Board when so requested by such committee. He shall give or cause to be
given notice of all meetings of Stockholders and of the Board, shall perform
such other duties as may be prescribed by the Board, the Chairman or the
President and shall act under the supervision of the Chairman. He shall keep in
safe custody the seal of the Corporation and affix the same to any instrument
that requires that the seal be affixed to it and which shall have been duly
authorized for signature in the name of the Corporation and, when so affixed,
the seal shall be attested by his signature or by the signature of the Treasurer
of the Corporation (the "Treasurer") or an Assistant Secretary or Assistant
---------
Treasurer of the Corporation. He shall keep in safe custody the certificate
books and stockholder records and such other books and records of the
Corporation as the Board, the Chairman or the President may direct and shall
perform all other duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Board, the Chairman or
the President.
SECTION 4.09. Assistant Secretaries. Assistant Secretaries of the
---------------------
Corporation ("Assistant Secretaries"), if any, in order of their seniority or in
---------------------
any other order determined by
<PAGE>
10
the Board, shall generally assist the Secretary and perform such other duties as
the Board or the Secretary shall prescribe, and, in the absence or disability of
the Secretary, shall perform the duties and exercise the powers of the
Secretary.
SECTION 4.10. The Treasurer. The Treasurer shall have the care and
-------------
custody of all the funds of the Corporation and shall deposit such funds in such
banks or other depositories as the Board, or any officer or officers, or any
officer and agent jointly, duly authorized by the Board, shall, from time to
time, direct or approve. He shall disburse the funds of the Corporation under
the direction of the Board and the President. He shall keep a full and accurate
account of all moneys received and paid on account of the Corporation and shall
render a statement of his accounts whenever the Board, the Chairman or the
President shall so request. He shall perform all other necessary actions and
duties in connection with the administration of the financial affairs of the
Corporation and shall generally perform all the duties usually appertaining to
the office of treasurer of a corporation. When required by the Board, he shall
give bonds for the faithful discharge of his duties in such sums and with such
sureties as the Board shall approve.
SECTION 4.11. Assistant Treasurers. Assistant Treasurers of the
--------------------
Corporation ("Assistant Treasurers"), if any, in order of their seniority or in
--------------------
any other order determined by the Board, shall generally assist the Treasurer
and perform such other duties as the Board or the Treasurer shall prescribe,
and, in the absence or disability of the Treasurer, shall perform the duties and
exercise the powers of the Treasurer.
ARTICLE V
CHECKS, DRAFTS, NOTES, AND PROXIES
SECTION 5.01. Checks, Drafts and Notes. All checks, drafts and other
------------------------
orders for the payment of money, notes and other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall be
determined, from time to time, by resolution of the Board.
SECTION 5.02. Execution of Proxies. The Chairman or the President,
--------------------
or, in the absence or disability of both of them, any Vice President, may
authorize, from time to time, the execution and issuance of proxies to vote
shares of stock or other securities of other corporations held of record by the
<PAGE>
11
Corporation and the execution of consents to action taken or to be taken by any
such corporation. All such proxies and consents, unless otherwise authorized by
the Board, shall be signed in the name of the Corporation by the Chairman, the
President or any Vice President.
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
SECTION 6.01. Certificates Evidencing Shares. Shares shall be
------------------------------
evidenced by certificates in such form or forms as shall be approved by the
Board. Certificates shall be issued in consecutive order and shall be numbered
in the order of their issue, and shall be signed by the Chairman, the President
or any Vice President and by the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer. If such a certificate is manually signed
by one such officer, any other signature on the certificate may be a facsimile.
In the event any such officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to hold such office or to be
employed by the Corporation before such certificate is issued, such certificate
may be issued by the Corporation with the same effect as if such officer had
held such office on the date of issue.
SECTION 6.02. Stock Ledger. A stock ledger in one or more
------------
counterparts shall be kept by the Secretary, in which shall be recorded the name
and address of each person, firm or corporation owning the Shares evidenced by
each certificate evidencing Shares issued by the Corporation, the number of
Shares evidenced by each such certificate, the date of issuance thereof and, in
the case of cancellation, the date of cancellation. Except as otherwise
expressly required by law, the person in whose name Shares stand on the stock
ledger of the Corporation shall be deemed the owner and recordholder thereof for
all purposes.
SECTION 6.03. Transfers of Shares. Registration of transfers of
-------------------
Shares shall be made only in the stock ledger of the Corporation upon request of
the registered holder of such shares, or of his attorney hereunto authorized by
power of attorney duly executed and filed with the Secretary, and upon the
surrender of the certificate or certificates evidencing such Shares properly
endorsed or accompanied by a stock power duly executed, together with such proof
of the authenticity of signatures as the Corporation may reasonably require.
<PAGE>
12
SECTION 6.04. Addresses of Stockholders. Each Stockholder shall
-------------------------
designate to the Secretary an address at which notices of meetings and all other
corporate notices may be served or mailed to such Stockholder, and, if any
Stockholder shall fail to so designate such an address, corporate notices may be
served upon such Stockholder by mail directed to the mailing address, if any, as
the same appears in the stock ledger of the Corporation or at the last known
mailing address of such Stockholder.
SECTION 6.05. Lost, Destroyed and Mutilated Certificates. Each
------------------------------------------
recordholder of Shares shall promptly notify the Corporation of any loss,
destruction or mutilation of any certificate or certificates evidencing any
Share or Shares of which he is the recordholder. The Board may, in its
discretion, cause the Corporation to issue a new certificate in place of any
certificate theretofore issued by it and alleged to have been mutilated, lost,
stolen or destroyed, upon the surrender of the mutilated certificate or, in the
case of loss, theft or destruction of the certificate, upon satisfactory proof
of such loss, theft or destruction, and the Board may, in its discretion,
require the recordholder of the Shares evidenced by the lost, stolen or
destroyed certificate or his legal representative to give the Corporation a bond
sufficient to indemnify the Corporation against any claim made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
SECTION 6.06. Regulations. The Board may make such other rules and
-----------
regulations as it may deem expedient, not inconsistent with these ByLaws,
concerning the issue, transfer and registration of certificates evidencing
Shares.
SECTION 6.07. Fixing Date for Determination of Stockholders of
------------------------------------------------
Record. In order that the Corporation may determine the Stockholders entitled
- - - - - - - - - - - ------
to notice of or to vote at any meeting of Stockholders or any adjournment
thereof, or to express consent to, or to dissent from, corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other such action. A
determination of the Stockholders entitled to notice of or to vote at a meeting
of Stockholders shall apply to any adjournment of such meeting; provided,
--------
however, that the Board may fix a new record date for the adjourned meeting.
- - - - - - - - - - - -------
<PAGE>
13
ARTICLE VII
SEAL
SECTION 7.01. Seal. The Board may approve and adopt a corporate
----
seal, which shall be in the form of a circle and shall bear the full name of the
Corporation, the year of its incorporation and the words "Corporate Seal
Delaware."
ARTICLE VIII
FISCAL YEAR
SECTION 8.01. Fiscal Year. The fiscal year of the Corporation shall
-----------
end on the thirty-first day of December of each year unless changed by
resolution of the Board.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 9.01. Indemnification. (a) The Corporation shall indemnify
---------------
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
<PAGE>
14
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 9.01(a) and (b) of these By-
Laws, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under Section 9.01(a) and (b) of these By-Laws
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 9.01(a) and (b) of these By-
Laws. Such determination shall be made (i) by the Board by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders of the Corporation.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of
<PAGE>
15
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation pursuant
to this Article IX. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board deems appropriate .
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, other Sections of this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(g) For purposes of this Article IX, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article IX with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(h) For purposes of this Article IX, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves service by, such director, officer, employee or
agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner
<PAGE>
16
"not opposed to the best interests of the Corporation" as referred to in this
Article IX.
(i) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 9.02. Insurance for Indemnification. The Corporation may
-----------------------------
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of Section 145 of the General Corporation Law.
ARTICLE X
AMENDMENTS
SECTION 10.01. Amendments. Any By-law (including these By-Laws) may be
----------
adopted, amended or repealed by the vote of the recordholders of a majority of
the Shares then entitled to vote at an election of Directors or by written
consent of Stockholders pursuant to Section 2.09 hereof, or by vote of the Board
or by a written consent of Directors pursuant to Section 3.08 hereof.
<PAGE>
EXHIBIT 3.6
----------------------------------------
BY-LAWS
OF
PEI HOLDING, INC.
----------------------------------------
<PAGE>
TABLE OF CONTENTS
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ARTICLE I
OFFICES
1.01. Registered Office........................... 1
1.02. Other Offices............................... 1
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.01. Annual Meetings............................. 1
2.02. Special Meetings............................ 2
2.03. Notice of Meetings.......................... 2
2.04. Waiver of Notice............................ 2
2.05. Adjournments................................ 3
2.06. Quorum...................................... 3
2.07. Voting...................................... 3
2.08. Proxies..................................... 3
2.09. Stockholders' Consent in Lieu of Meeting.... 4
ARTICLE III
BOARD OF DIRECTORS
3.01. General Powers.............................. 4
3.02. Number and Term of Office................... 4
3.03. Resignation................................. 4
3.04. Removal..................................... 4
3.05. Vacancies................................... 5
3.06. Meetings.................................... 5
3.07. Committees of the Board..................... 6
3.08. Directors' Consent in Lieu of Meeting....... 7
3.09. Action by Means of Telephone or Similar-
Communications Equipment.................... 8
3.10. Compensation................................ 8
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ARTICLE IV
OFFICES
4.01. Officers.................................. 8
4.02. Authority and Duties...................... 8
4.03. Term of Office, Resignation and Removal... 8
4.04. Vacancies................................. 8
4.05. The Chairman.............................. 8
4.06. The President............................. 8
4.07. Vice Presidents........................... 9
4.08. The Secretary............................. 10
4.09. Assistant Secretaries..................... 10
4.010. The Treasurer............................. 10
4.11. Assistant Treasurers...................... 11
ARTICLE V
CHECKS, DRAFTS, NOTES AND PROXIES
5.01. Checks, Drafts and Notes.................. 11
5.02. Execution of Proxies...................... 11
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
6.01. Certificates Evidencing Shares............. 11
6.02. Stock Ledger............................... 12
6.03. Transfers of Shares........................ 12
6.04. Addresses of Stockholders.................. 12
6.05. Lost Destroyed and Mutilated Certificates.. 12
6.06. Regulations................................ 13
6.07. Fixing Date for Determination of
Stockholders of Record..................... 13
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TABLE OF CONTENTS
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ARTICLE VII
SEAL
7.01. Seal........................................ 13
ARTICLE VIII
FISCAL YEAR
8.01. Fiscal Year................................. 14
ARTICLE IX
INDEMNIFICATION AND INSURANCE
9.01. Indemnification............................. 14
9.02. Insurance for Indemnification............... 17
ARTICLE X
AMENDMENTS
10.01. Amendments.................................. 17
(iii)
<PAGE>
BY-LAWS
OF
PEI HOLDING INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office. The registered office of PEI Holding
-----------------
Inc. (the "Corporation") in the State of Delaware shall be at the principal
-----------
office of The Corporation Trust Company in the City of Wilmington, County of New
Castle, and the registered agent in charge thereof shall be The Corporation
Trust Company.
SECTION 1.02. Other Offices. The Corporation may also have an office
-------------
or offices at any other place or places within or without the State of Delaware
as the Board of Directors of the Corporation (the "Board") may from time to time
-----
determine or the business of the Corporation may from time to time require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. Annual Meetings. The annual meeting of stockholders of
---------------
the Corporation for the election of directors of the Corporation ("Directors"),
---------
and for the transaction of such other business as may properly come before such
meeting, shall be held at such place, date and time as shall be fixed by the
Board and designated in the notice or waiver of notice of such annual meeting;
provided, however, that no annual meeting of stockholders need be held if all
- - - - - - - - - - - -------- -------
actions, including the election of Directors, required by the General
Corporation Law of the State of Delaware (the "General Corporation Law") to be
-----------------------
taken at such annual meeting, are taken by written consent in lieu of meeting
pursuant to Section 2.09 hereof.
SECTION 2.02. Special Meetings. Special meetings of stockholders for
----------------
any purpose or purposes may be called by the Board or the Chairman of the Board,
the President or the Secretary of the Corporation or by the recordholders of at
least a majority of the shares of common stock of the Corporation issued and
outstanding ("Shares") and entitled to vote thereat, to be held at such place,
------
date and time as shall be designated in the notice or waiver of notice thereof.
<PAGE>
2
SECTION 2.03. Notice of Meetings. (a) Except as otherwise provided
------------------
by law, written notice of each annual or special meeting of stockholders stating
the place, date and time of such meeting and, in the case of a special meeting,
the purpose or purposes for which such meeting is to be held, shall be given
personally or by first-class mail (airmail in the case of international
communications) to each recordholder of Shares (a "Stockholder") entitled to
-----------
vote thereat, not less than 10 nor more than 60 days before the date of such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the Stockholder at such
Stockholder's address as it appears on the records of the Corporation. If,
prior to the time of mailing, the Secretary of the Corporation (the "Secretary")
---------
shall have received from any Stockholder a written request that notices intended
for such Stockholder are to be mailed to some address other than the address
that appears on the records of the Corporation, notices intended for such
Stockholder shall be mailed to the address designated in such request.
(b) Notice of a special meeting of Stockholders may be given by the
person or persons calling the meeting, or, upon the written request of such
person or persons, such notice shall be given by the Secretary on behalf of such
person or persons. If the person or persons calling a special meeting of
Stockholders give notice thereof, such person or persons shall deliver a copy of
such notice to the Secretary. Each request to the Secretary for the giving of
notice of a special meeting of Stockholders shall state the purpose or purposes
of such meeting.
SECTION 2.04. Waiver of Notice. Notice of any annual or special
----------------
meeting of Stockholders need not be given to any Stockholder who files a written
waiver of notice with the Secretary, signed by the person entitled to notice,
whether before or after such meeting. Neither the business to be transacted at,
nor the purpose of, any meeting of Stockholders need be specified in any written
waiver of notice thereof. Attendance of a Stockholder at a meeting, in person
or by proxy, shall constitute a waiver of notice of such meeting, except when
such Stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds that
the notice of such meeting was inadequate or improperly given.
SECTION 2.05. Adjournments. Whenever a meeting of Stockholders,
------------
annual or special, is adjourned to another date, time or place, notice need not
be given of the adjourned meeting if the date, time and place thereof are
announced at the meeting
<PAGE>
3
at which the adjournment is taken. If the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each Stockholder
entitled to vote thereat. At the adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.
SECTION 2.06. Quorum. Except as otherwise provided by law or the
------
Certificate of Incorporation of the Corporation (the "Certificate of
--------------
Incorporation"), the recordholders of a majority of the Shares entitled to vote
- - - - - - - - - - - -------------
thereat, present in person or by proxy, shall constitute a quorum for the
transaction of business at all meetings of Stockholders, whether annual or
special. If, however, such quorum shall not be present in person or by proxy at
any meeting of Stockholders, the Stockholders entitled to vote thereat may
adjourn the meeting from time to time in accordance with Section 2.05 hereof
until a quorum shall be present in person or by proxy.
SECTION 2.07. Voting. Each Stockholder shall be entitled to one vote
------
for each Share held of record by such Stockholder. Except as otherwise provided
by law or the Certificate of Incorporation, when a quorum is present at any
meeting of Stockholders, the vote of the recordholders of a majority of the
Shares constituting such quorum shall decide any question brought before such
meeting.
SECTION 2.08. Proxies. Each Stockholder entitled to vote at a
-------
meeting of Stockholders or to express, in writing, consent to or dissent from
any action of Stockholders without a meeting may authorize another person or
persons to act for such Stockholder by proxy. Such proxy shall be filed with
the Secretary before such meeting of Stockholders or such action of Stockholders
without a meeting, at such time as the Board may require. No proxy shall be
voted or acted upon more than three years from its date, unless the proxy
provides for a longer period.
SECTION 2.09. Stockholders' Consent in Lieu of Meeting. Any action
----------------------------------------
required by the General Corporation Law to be taken at any annual or special
meeting of Stockholders, and any action which may be taken at any annual or
special meeting of Stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the recordholders of Shares having not less than the
minimum number of votes necessary to authorize or take such action at a meeting
at which the recordholders of all Shares entitled to vote thereon were present
and voted.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. General Powers. The business and affairs of the
--------------
Corporation shall be managed by the Board, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by law, the
Certificate of Incorporation or these By-Laws directed or required to be
exercised or done by Stockholders.
SECTION 3.02. Number and Term of Office. The number of Directors
-------------------------
shall be three or such other number as shall be fixed from time to time by the
Board. Directors need not be Stockholders. Directors shall be elected at the
annual meeting of Stockholders or, if, in accordance with Section 2.01 hereof,
no such annual meeting is held, by written consent in lieu of meeting pursuant
to Section 2.09 hereof, and each Director shall hold office until his successor
is elected and qualified, or until his earlier death or resignation or removal
in the manner hereinafter provided.
SECTION 3.03. Resignation. Any Director may resign at any time by
-----------
giving written notice to the Board, the Chairman of the Board of the Corporation
(the "Chairman") or the Secretary. Such resignation shall take effect at the
--------
time specified in such notice or, if the time be not specified, upon receipt
thereof by the Board, the Chairman or the Secretary, as the case may be. Unless
otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective.
SECTION 3.04. Removal. Any or all of the Directors may be removed,
-------
with or without cause, at any time by vote of the recordholders of a majority of
the Shares then entitled to vote at an election of Directors, or by written
consent of the recordholders of Shares pursuant to Section 2.09 hereof.
SECTION 3.05. Vacancies. Vacancies occurring on the Board as a
---------
result of the removal of Directors without cause may be filled only by vote of
the recordholders of a majority of the Shares then entitled to vote at an
election of Directors, or by written consent of such recordholders pursuant to
Section 2.09 hereof. Vacancies occurring on the Board for any other reason,
including, without limitation, vacancies occurring as a result of the creation
of new directorships that increase the number of Directors, may be filled by
such vote or written consent or by vote of the Board or by written consent of
the Directors pursuant to Section 3.08 hereof. If the number of Directors then
in office is less than a quorum, such other vacancies may be filled by vote of a
majority of the Directors then in office or by
<PAGE>
5
written consent of all such Directors pursuant to Section 3.08 hereof. Unless
earlier removed pursuant to Section 3.04 hereof, each Director chosen in
accordance with this Section 3.05 shall hold office until the next annual
election of Directors by the Stockholders and until his successor shall be
elected and qualified.
SECTION 3.06. Meetings. (a) Annual Meetings. As soon as
-------- ---------------
practicable after each annual election of Directors by the Stockholders, the
Board shall meet for the purpose of organization and the transaction of other
business, unless it shall have transacted all such business by written consent
pursuant to Section 3.08 hereof.
(b) Other Meetings. Other meetings of the Board shall be held at such
--------------
times as the Chairman, the President of the Corporation (the "President"), the
---------
Secretary or a majority of the Board shall from time to time determine.
(c) Notice of Meetings. The Secretary shall give written notice to
------------------
each Director of each meeting of the Board, which notice shall state the place,
date, time and purpose of such meeting. Notice of each such meeting shall be
given to each Director, if by mail, addressed to him at his residence or usual
place of business, at least two days before the day on which such meeting is to
be held, or shall be sent to him at such place by telecopy, telegraph, cable, or
other form of recorded communication, or be delivered personally or by telephone
not later than the day before the day on which such meeting is to be held. A
written waiver of notice, signed by the Director entitled to notice, whether
before or after the time of the meeting referred to in such waiver, shall be
deemed equivalent to notice, Neither the business to be transacted at, nor the
purpose of any meeting of the Board need be specified in any written waiver of
notice thereof. Attendance of a Director at a meeting of the Board shall
constitute a waiver of notice of such meeting, except as provided by law.
(d) Place of Meetings. The Board may hold its meetings at such place
-----------------
or places within or without the State of Delaware as the Board or the Chairman
may from time to time determine, or as shall be designated in the respective
notices or waivers of notice of such meetings.
(e) Quorum and Manner of Acting. One-third of the total number of
---------------------------
Directors then in office (but in no event less than two if the total number of
directorships, including vacancies, is greater than one and in no event a number
less than one-third of the total number of directorships, including vacancies)
shall be present in person at any meeting of the Board
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6
in order to constitute a quorum for the transaction of business at such meeting,
and the vote of a majority of those Directors present at any such meeting at
which a quorum is present shall be necessary for the passage of any resolution
or act of the Board, except as otherwise expressly required by law, the
Certificate of Incorporation or these By-Laws. In the absence of a quorum for
any such meeting, a majority of the Directors present thereat may adjourn such
meeting from time to time until a quorum shall be present.
(f) Organization. At each meeting of the Board, one of the following
------------
shall act as chairman of the meeting and preside, in the following order of
precedence:
(i) the Chairman;
(ii) the President;
(iii) any Director chosen by a majority of the Directors present.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary is present) whom the chairman of
the meeting shall appoint shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 3.07. Committees of the Board. The Board may, by resolution
-----------------------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more Directors. The Board may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of such committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another Director to act at the
meeting in the place of any such absent or disqualified member. Any committee
of the Board, to the extent provided in the resolution of the Board designating
such committee, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; provided, however, that no such committee shall have such power or
-------- -------
authority in reference to amending the Certificate of Incorporation (except that
such a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board as provided
in Section 151(a) of the General Corporation Law, fix the designations and any
of the preferences or rights of such shares relating to dividends, redemption,
<PAGE>
7
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
of stock of the Corporation or fix the number of shares of any series of stock
or authorize the increase or decrease of the shares of any series), adopting an
agreement of merger or consolidation under Section 251 or 252 of the General
Corporation Law, recommending to the Stockholders the sale, lease or exchange of
all or substantially all the Corporation's property and assets, recommending to
the Stockholders a dissolution of the Corporation or the revocation of a
dissolution, or amending these By-Laws; provided further, however, that, unless
-------- ------- -------
expressly so provided in the resolution of the Board designating such committee,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law. Each committee
of the Board shall keep regular minutes of its proceedings and report the same
to the Board when so requested by the Board.
SECTION 3.08. Directors' Consent in Lieu of Meeting. Any action
-------------------------------------
required or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by all the members of the Board or such committee and such
consent is filed with the minutes of the proceedings of the Board or such
committee.
SECTION 3.09. Action by Means of Telephone or Similar Communications
------------------------------------------------------
Equipment. Any one or more members of the Board, or of any committee thereof,
- - - - - - - - - - - ---------
may participate in a meeting of the Board or such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
SECTION 3.10. Compensation. Unless otherwise restricted by the
------------
Certificate of Incorporation, the Board may determine the compensation of
Directors. In addition, as determined by the Board, Directors may be reimbursed
by the Corporation for their expenses, if any, in the performance of their
duties as Directors. No such compensation or reimbursement shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
<PAGE>
8
ARTICLE IV
OFFICERS
SECTION 4.01. Officers. The officers of the Corporation shall be the
--------
Chairman, the President, the Secretary and a Treasurer and may include one or
more Vice Presidents and one or more Assistant Secretaries and one or more
Assistant Treasurers. Any two or more offices may be held by the same person.
SECTION 4.02. Authority and Duties. All officers shall have such
--------------------
authority and perform such duties in the management of the Corporation as may be
provided in these By-Laws or, to the extent not so provided, by resolution of
the Board.
SECTION 4.03. Term of Office, Resignation and Removal. (a) Each
---------------------------------------
officer shall be appointed by the Board and shall hold office for such term as
may be determined by the Board. Each officer shall hold office until his
successor has been appointed and qualified or his earlier death or resignation
or removal in the manner hereinafter provided. The Board may require any
officer to give security for the faithful performance of his duties.
(b) Any officer may resign at any time by giving written notice to the
Board, the Chairman, the President or the Secretary. Such resignation shall
take effect at the time specified in such notice or, if the time be not
specified, upon receipt thereof by the Board, the Chairman, the President or the
Secretary, as the case may be. Unless otherwise specified therein, acceptance
of such resignation shall not be necessary to make it effective.
(c) All officers and agents appointed by the Board shall be subject to
removal, with or without cause, at any time by the Board or by the action of the
recordholders of a majority of the Shares entitled to vote thereon.
SECTION 4.04. Vacancies. Any vacancy occurring in any office of the
---------
Corporation, for any reason, shall be filled by action of the Board. Unless
earlier removed pursuant to Section 4.03 hereof, any officer appointed by the
Board to fill any such vacancy shall serve only until such time as the unexpired
term of his predecessor expires unless reappointed by the Board.
SECTION 4.05. The Chairman. The Chairman shall have the power to
------------
call special meetings of Stockholders, to call special meetings of the Board
and, if present, to preside at all
<PAGE>
9
meetings of Stockholders and all meetings of the Board. The Chairman shall
perform all duties incident to the office of Chairman of the Board and all such
other duties as may from time to time be assigned to him by the Board or these
By-Laws.
SECTION 4.06. The President. The President shall be the chief
-------------
executive officer of the Corporation and shall have general and active
management and control of the business and affairs of the Corporation, subject
to the control of the Board, and shall see that all orders and resolutions of
the Board are carried into effect. The President shall perform all duties
incident to the office of President and all such other duties as may from time
to time be assigned to him by the Board or these By-Laws.
SECTION 4.07. Vice Presidents. Vice Presidents, if any, in order of
---------------
their seniority or in any other order determined by the Board, shall generally
assist the President and perform such other duties as the Board or the President
shall prescribe, and in the absence or disability of the President, shall
perform the duties and exercise the powers of the President.
SECTION 4.08. The Secretary. The Secretary shall, to the extent
-------------
practicable, attend all meetings of the Board and all meetings of Stockholders
and shall record all votes and the minutes of all proceedings in a book to be
kept for that purpose, and shall perform the same duties for any committee of
the Board when so requested by such committee. He shall give or cause to be
given notice of all meetings of Stockholders and of the Board, shall perform
such other duties as may be prescribed by the Board, the Chairman or the
President and shall act under the supervision of the Chairman. He shall keep in
safe custody the seal of the Corporation and affix the same to any instrument
that requires that the seal be affixed to it and which shall have been duly
authorized for signature in the name of the Corporation and, when so affixed,
the seal shall be attested by his signature or by the signature of the Treasurer
of the Corporation (the "Treasurer") or an Assistant Secretary or Assistant
---------
Treasurer of the Corporation. He shall keep in safe custody the certificate
books and stockholder records and such other books and records of the
Corporation as the Board, the Chairman or the President may direct and shall
perform all other duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Board, the Chairman or
the President.
SECTION 4.09. Assistant Secretaries. Assistant Secretaries of the
---------------------
Corporation ("Assistant Secretaries"), if any, in order of their seniority or in
---------------------
any other order determined by
<PAGE>
10
the Board, shall generally assist the Secretary and perform such other duties as
the Board or the Secretary shall prescribe, and, in the absence or disability of
the Secretary, shall perform the duties and exercise the powers of the
Secretary.
SECTION 4.10. The Treasurer. The Treasurer shall have the care and
-------------
custody of all the funds of the Corporation and shall deposit such funds in such
banks or other depositories as the Board, or any officer or officers, or any
officer and agent jointly, duly authorized by the Board, shall, from time to
time, direct or approve. He shall disburse the funds of the Corporation under
the direction of the Board and the President. He shall keep a full and accurate
account of all moneys received and paid on account of the Corporation and shall
render a statement of his accounts whenever the Board, the Chairman or the
President shall so request. He shall perform all other necessary actions and
duties in connection with the administration of the financial affairs of the
Corporation and shall generally perform all the duties usually appertaining to
the office of treasurer of a corporation. When required by the Board, he shall
give bonds for the faithful discharge of his duties in such sums and with such
sureties as the Board shall approve.
SECTION 4.11. Assistant Treasurers. Assistant Treasurers of the
--------------------
Corporation ("Assistant Treasurers"), if any, in order of their seniority or in
--------------------
any other order determined by the Board, shall generally assist the Treasurer
and perform such other duties as the Board or the Treasurer shall prescribe,
and, in the absence or disability of the Treasurer, shall perform the duties and
exercise the powers of the Treasurer.
ARTICLE V
CHECKS, DRAFTS, NOTES, AND PROXIES
SECTION 5.01. Checks, Drafts and Notes. All checks, drafts and other
------------------------
orders for the payment of money, notes and other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall be
determined, from time to time, by resolution of the Board.
SECTION 5.02. Execution of Proxies. The Chairman or the President,
--------------------
or, in the absence or disability of both of them, any Vice President, may
authorize, from time to time, the execution and issuance of proxies to vote
shares of stock or other securities of other corporations held of record by the
<PAGE>
11
Corporation and the execution of consents to action taken or to be taken by any
such corporation. All such proxies and consents, unless otherwise authorized by
the Board, shall be signed in the name of the Corporation by the Chairman, the
President or any Vice President.
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
SECTION 6.01. Certificates Evidencing Shares. Shares shall be
------------------------------
evidenced by certificates in such form or forms as shall be approved by the
Board. Certificates shall be issued in consecutive order and shall be numbered
in the order of their issue, and shall be signed by the Chairman, the President
or any Vice President and by the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer. If such a certificate is manually signed
by one such officer, any other signature on the certificate may be a facsimile.
In the event any such officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to hold such office or to be
employed by the Corporation before such certificate is issued, such certificate
may be issued by the Corporation with the same effect as if such officer had
held such office on the date of issue.
SECTION 6.02. Stock Ledger. A stock ledger in one or more
------------
counterparts shall be kept by the Secretary, in which shall be recorded the name
and address of each person, firm or corporation owning the Shares evidenced by
each certificate evidencing Shares issued by the Corporation, the number of
Shares evidenced by each such certificate, the date of issuance thereof and, in
the case of cancellation, the date of cancellation. Except as otherwise
expressly required by law, the person in whose name Shares stand on the stock
ledger of the Corporation shall be deemed the owner and recordholder thereof for
all purposes.
SECTION 6.03. Transfers of Shares. Registration of transfers of
-------------------
Shares shall be made only in the stock ledger of the Corporation upon request of
the registered holder of such shares, or of his attorney hereunto authorized by
power of attorney duly executed and filed with the Secretary, and upon the
surrender of the certificate or certificates evidencing such Shares properly
endorsed or accompanied by a stock power duly executed, together with such proof
of the authenticity of signatures as the Corporation may reasonably require.
<PAGE>
12
SECTION 6.04. Addresses of Stockholders. Each Stockholder shall
-------------------------
designate to the Secretary an address at which notices of meetings and all other
corporate notices may be served or mailed to such Stockholder, and, if any
Stockholder shall fail to so designate such an address, corporate notices may be
served upon such Stockholder by mail directed to the mailing address, if any, as
the same appears in the stock ledger of the Corporation or at the last known
mailing address of such Stockholder.
SECTION 6.05. Lost, Destroyed and Mutilated Certificates. Each
------------------------------------------
recordholder of Shares shall promptly notify the Corporation of any loss,
destruction or mutilation of any certificate or certificates evidencing any
Share or Shares of which he is the recordholder. The Board may, in its
discretion, cause the Corporation to issue a new certificate in place of any
certificate theretofore issued by it and alleged to have been mutilated, lost,
stolen or destroyed, upon the surrender of the mutilated certificate or, in the
case of loss, theft or destruction of the certificate, upon satisfactory proof
of such loss, theft or destruction, and the Board may, in its discretion,
require the recordholder of the Shares evidenced by the lost, stolen or
destroyed certificate or his legal representative to give the Corporation a bond
sufficient to indemnify the Corporation against any claim made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
SECTION 6.06. Regulations. The Board may make such other rules and
-----------
regulations as it may deem expedient, not inconsistent with these ByLaws,
concerning the issue, transfer and registration of certificates evidencing
Shares.
SECTION 6.07. Fixing Date for Determination of Stockholders of
------------------------------------------------
Record. In order that the Corporation may determine the Stockholders entitled
- - - - - - - - - - - ------
to notice of or to vote at any meeting of Stockholders or any adjournment
thereof, or to express consent to, or to dissent from, corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other such action. A
determination of the Stockholders entitled to notice of or to vote at a meeting
of Stockholders shall apply to any adjournment of such meeting; provided,
--------
however, that the Board may fix a new record date for the adjourned meeting.
- - - - - - - - - - - -------
<PAGE>
13
ARTICLE VII
SEAL
SECTION 7.01. Seal. The Board may approve and adopt a corporate
----
seal, which shall be in the form of a circle and shall bear the full name of the
Corporation, the year of its incorporation and the words "Corporate Seal
Delaware."
ARTICLE VIII
FISCAL YEAR
SECTION 8.01. Fiscal Year. The fiscal year of the Corporation shall
-----------
end on the thirty-first day of December of each year unless changed by
resolution of the Board.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 9.01. Indemnification. (a) The Corporation shall indemnify
---------------
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
<PAGE>
14
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 9.01(a) and (b) of these By-
Laws, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under Section 9.01(a) and (b) of these By-Laws
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 9.01(a) and (b) of these By-
Laws. Such determination shall be made (i) by the Board by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders of the Corporation.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be
<PAGE>
15
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation pursuant to this Article IX. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the Board deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, other Sections of this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(g) For purposes of this Article IX, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article IX with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(h) For purposes of this Article IX, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves service by, such director, officer, employee or
agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner
<PAGE>
16
"not opposed to the best interests of the Corporation" as referred to in this
Article IX.
(i) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 9.02. Insurance for Indemnification. The Corporation may
-----------------------------
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of Section 145 of the General Corporation Law.
ARTICLE X
AMENDMENTS
SECTION 10.01. Amendments. Any By-law (including these By-Laws) may be
----------
adopted, amended or repealed by the vote of the recordholders of a majority of
the Shares then entitled to vote at an election of Directors or by written
consent of Stockholders pursuant to Section 2.09 hereof, or by vote of the Board
or by a written consent of Directors pursuant to Section 3.08 hereof.
<PAGE>
EXHIBIT 4.1
================================================================================
PRESTOLITE ELECTRIC INCORPORATED,
Issuer
PEI HOLDING, INC.,
Parent Guarantor
9-5/8% Senior Notes Due 2008
=====================
INDENTURE
Dated as of January 22, 1998
====================
First Trust National Association,
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- - - - - - - - - - - ------- ---------
<S> <C>
310(a)(1)................................................... 7.10
(a)(2)................................................... 7.10
(a)(3)................................................... N.A.
(a)(4)................................................... N.A.
(b)...................................................... 7.8; 7.10
(c)...................................................... N.A.
311(a)...................................................... 7.11
(b)...................................................... 7.11
(c)...................................................... N.A.
312(a)...................................................... 2.5
(b)...................................................... 11.3
(c)...................................................... 11.3
313(a)...................................................... 7.6
(b)(1)................................................... N.A.
(b)(2)................................................... 7.6
(c)...................................................... 7.6
(d)...................................................... 7.6
314(a)...................................................... 4.2
4.15; 11.2
(b)...................................................... N.A.
(c)(1)................................................... 11.4
(c)(2)................................................... 11.4
(c)(3)................................................... N.A.
(d)...................................................... N.A.
(e)...................................................... 11.5
(f)...................................................... 4.13
315(a)...................................................... 7.1
(b)...................................................... 7.5; 11.2
(c)...................................................... 7.1
(d)...................................................... 7.1
(e)...................................................... 6.11
316(a)(last sentence)....................................... 11.6
(a)(1)(A)................................................ 6.5
(a)(1)(B)................................................ 6.4
(a)(2)................................................... N.A.
(b)...................................................... 6.7
317(a)(1)................................................... 6.8
(a)(2)................................................... 6.9
(b)...................................................... 2.4
318(a)...................................................... 11.1
</TABLE>
N.A. means Not Applicable.
- - - - - - - - - - - --------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I
Definitions and Incorporation by Reference........ 1
SECTION 1.1. Definitions....................................... 1
SECTION 1.2. Other Definitions................................. 23
SECTION 1.3. Incorporation by Reference of Trust
Indenture Act..................................... 24
SECTION 1.4. Rules of Construction............................. 24
SECTION 1.5. One Class of Securities........................... 25
ARTICLE II
The Securities.................................... 25
SECTION 2.1. Form and Dating................................... 25
SECTION 2.2. Execution and Authentication...................... 25
SECTION 2.3. Registrar and Paying Agent........................ 26
SECTION 2.4. Paying Agent To Hold Money in Trust............... 26
SECTION 2.5. Securityholder Lists.............................. 27
SECTION 2.6. [Intentionally Omitted]........................... 27
SECTION 2.7. Replacement Securities............................ 27
SECTION 2.8. Outstanding Securities............................ 27
SECTION 2.9. Temporary Securities.............................. 28
SECTION 2.10. Cancellation..................................... 28
SECTION 2.11. Defaulted Interest............................... 28
SECTION 2.12. CUSIP Numbers.................................... 29
ARTICLE III
Redemption........................................ 29
SECTION 3.1. Notices to Trustee................................ 29
SECTION 3.2. Selection of Securities To Be Redeemed............ 29
SECTION 3.3. Notice of Redemption.............................. 30
SECTION 3.4. Effect of Notice of Redemption.................... 30
SECTION 3.5. Deposit of Redemption Price....................... 31
SECTION 3.6. Securities Redeemed in Part....................... 31
ARTICLE IV
Covenants......................................... 31
SECTION 4.1. Payment of Securities............................. 31
SECTION 4.2. SEC Reports....................................... 32
SECTION 4.3. Limitation on Indebtedness........................ 32
SECTION 4.4. Limitation on Indebtedness and Preferred
Stock of Restricted Subsidiaries.................. 34
SECTION 4.5. Limitation on Restricted Payments................. 36
SECTION 4.6. Limitation on Restrictions on
Distributions from Restricted Subsidiaries........ 39
SECTION 4.7. Limitation on Sale of Assets and
Subsidiary Stock.................................. 40
SECTION 4.8. Limitation on Transactions With
Affiliates........................................ 44
SECTION 4.9. Change of Control................................. 45
SECTION 4.10. Limitation on Sale or Issuance of
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Capital Stock of Restricted Subsidiaries............... 47
SECTION 4.11. Limitation on Liens.................................... 47
SECTION 4.12. Limitation on Sale/Leaseback
Transactions........................................... 47
SECTION 4.13. Limitation on Business Activities and
Investments of the Guarantor and Existing Non-
Company Guarantor Subsidiaries......................... 48
SECTION 4.14. Compliance Certificate................................. 48
SECTION 4.15. Further Instruments and Acts........................... 49
SECTION 4.16. Maintenance of Office or Agency........................ 49
SECTION 4.17. Corporate Existence.................................... 49
SECTION 4.18. Payment of Taxes and Other Claims...................... 49
SECTION 4.19. Maintenance of Properties and Insurance................ 50
ARTICLE V
Successor Company....................................... 50
SECTION 5.1. When the Company May Merge or Transfer Assets........... 50
ARTICLE VI
Defaults and Remedies................................... 51
SECTION 6.1. Events of Default....................................... 51
SECTION 6.2. Acceleration............................................ 54
SECTION 6.3. Other Remedies.......................................... 54
SECTION 6.4. Waiver of Past Defaults................................. 54
SECTION 6.5. Control by Majority..................................... 54
SECTION 6.6. Limitation on Suits..................................... 55
SECTION 6.7. Rights of Holders To Receive Payment.................... 55
SECTION 6.8. Collection Suit by Trustee.............................. 55
SECTION 6.9. Trustee May File Proofs of Claim........................ 56
SECTION 6.10. Priorities............................................. 56
SECTION 6.11. Undertaking for Costs.................................. 56
SECTION 6.12. Waiver of Stay or Extension Laws....................... 57
ARTICLE VII
Trustee................................................. 57
SECTION 7.1. Duties of Trustee....................................... 57
SECTION 7.2. Rights of Trustee....................................... 58
SECTION 7.3. Individual Rights of Trustee............................ 59
SECTION 7.4. Trustee's Disclaimer.................................... 59
SECTION 7.5. Notice of Defaults...................................... 59
SECTION 7.6. Reports by Trustee to Holders........................... 59
SECTION 7.7. Compensation and Indemnity.............................. 60
SECTION 7.8. Replacement of Trustee.................................. 61
SECTION 7.9. Successor Trustee by Merger............................. 62
SECTION 7.10. Eligibility; Disqualification.......................... 62
SECTION 7.11. Preferential Collection of Claims
Against Company........................................ 62
ARTICLE VIII
Discharge of Indenture; Defeasance.................... 62
SECTION 8.1. Discharge of Liability on Securities;
Defeasance.............................................. 62
SECTION 8.2. Conditions to Defeasance................................ 64
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 8.3. Application of Trust Money.............................. 65
SECTION 8.4. Repayment to Company.................................... 65
SECTION 8.5. Indemnity for Government Obligations.................... 65
SECTION 8.6. Reinstatement........................................... 65
ARTICLE IX
Amendments.............................................. 66
SECTION 9.1. Without Consent of Holders.............................. 66
SECTION 9.2. With Consent of Holders................................. 67
SECTION 9.3. Compliance with Trust Indenture Act..................... 68
SECTION 9.4. Revocation and Effect of Consents and
Waivers................................................. 68
SECTION 9.5. Notation on or Exchange of Securities................... 68
SECTION 9.6. Trustee To Sign Amendments.............................. 68
SECTION 9.7. Payment for Consent..................................... 68
ARTICLE X
PEI Guarantee.......................................... 69
SECTION 10.1. PEI Guarantee.......................................... 69
SECTION 10.2. Limitation on Liability................................ 71
SECTION 10.3. Successors and Assigns................................. 71
SECTION 10.4. No Waiver.............................................. 71
SECTION 10.5. Modification........................................... 71
ARTICLE XI
Miscellaneous.......................................... 72
SECTION 11.1. Trust Indenture Act Controls........................... 72
SECTION 11.2. Notices................................................ 72
SECTION 11.3. Communication by Holders with other
Holders................................................ 73
SECTION 11.4. Certificate and Opinion as to Conditions
Precedent.............................................. 73
SECTION 11.5. Statements Required in Certificate or
Opinion................................................ 73
SECTION 11.6. When Securities Disregarded............................ 74
SECTION 11.7. Rules by Trustee, Paying Agent and
Registrar.............................................. 74
SECTION 11.8. Legal Holidays......................................... 74
SECTION 11.9. Governing Law.......................................... 74
SECTION 11.10. No Recourse Against Others............................ 74
SECTION 11.11. Successors............................................ 74
SECTION 11.12. Multiple Originals.................................... 74
SECTION 11.13. Variable Provisions................................... 75
SECTION 11.14. Qualification of Indenture............................ 75
SECTION 11.15. Table of Contents; Headings........................... 75
</TABLE>
Rule 144A/Regulation S Appendix
Exhibit 1 to Appendix - Form of Initial Security
Exhibit A - Form of Exchange Security and Private Exchange Security
-iii-
<PAGE>
INDENTURE dated as of January 22, 1998, among PRESTOLITE ELECTRIC
INCORPORATED, a Delaware corporation (as further defined below, the
"Company"), PEI HOLDING, INC., the Company's Parent Corproation (the
-------
Guarantor), and FIRST TRUST NATIONAL ASSOCIATION, a national banking
- - - - - - - - - - - ---------
association, as trustee (the "Trustee ").
-------
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's 9-5/8% Senior
Notes Due 2008 (the "Initial Securities") and, if and when issued in exchange
------------------
for Initial Securities as provided in the Registration Rights Agreement (as
hereinafter defined), the Company's Series B 9-5/8% Senior Notes Due 2008 (the
"Exchange Securities") and if and when issued pursuant to a private exchange for
-------------------
Initial Securities, the Company's Series C 9-5/8% Senior Notes Due 2008 (the
"Private Exchange Securities"):
---------------------------
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.1. Definitions.
-----------
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Wholly Owned Restricted Subsidiary as a result of the
acquisition of such Capital Stock by the Company or another Wholly Owned
Restricted Subsidiary; (iii) shares of Capital Stock of a Person that becomes a
Non-U.S./U.K. Subsidiary as a result of the acquisition of such Capital Stock by
the Company or a Wholly Owned Restricted Subsidiary; or (iv) Capital Stock
constituting a minority interest in any Person that at such time is a Restricted
Subsidiary; provided, however, that, in the case of clauses (ii), (iii) and
(iv), such Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing;
provided that for purposes of the covenants in this Indenture, "Affiliate" shall
also mean any beneficial owner of Capital Stock representing 10% or more of the
total voting power of the Voting Stock (on a fully diluted basis) of the Company
or of rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
<PAGE>
2
"Argentina Credit Facility" means one or more credit facilities to be
entered into on or after the Issue Date among one or more of Lucas Argentina or
any other Non-U.S./U.K. Subsidiary having more than 66-2/3% of its tangible
assets located in Argentina or Brazil and the lenders from time to time party
thereto, including any collateral documents, instruments and agreements executed
in connection therewith, and the term Argentina Credit Facility shall also
include any amendments, supplements, modifications, extensions, renewals,
restatements or refundings thereof and any credit facilities that replace,
refund or refinance any part of the loans, other credit facilities or
commitments thereunder, including any such replacement, refunding or refinancing
facility that increases the amount borrowable thereunder or alters the maturity
thereof.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or similar shares
or shares required by applicable law to be held by a Person other than the
Company or a Restricted Subsidiary or issuances of shares permitted under
Section 4.10), (ii) all or substantially all the assets of any division or line
of business of the Company or any Restricted Subsidiary or (iii) any other
assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary (other than, in
the case of (i), (ii) and (iii) above, (v) a pledge, sale or transfer of title
of receivables in connection with a Permitted Lien described in clause (l) of
the definition thereof, (w) a disposition of obsolete or worn-out assets, (x) a
disposition by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Wholly Owned Subsidiary, (y) for purposes of Section
4.7 only, a disposition that constitutes a Restricted Payment permitted by
Section 4.5 and (z) disposition of assets with a fair market value of less than
$500,000).
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the product of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred
<PAGE>
3
Stock multiplied by the amount of such payment by (ii) the sum of all such
payments.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee thereof duly authorized to act on
behalf of such Board of Directors.
"Business Day" means a day other than a Saturday, Sunday or other day on
which banking institutions in New York City are authorized or required by law to
close.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following events:
(i) prior to the first public offering of Common Stock of the
Guarantor or the Company, the Permitted Holders cease to be the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of a majority in the aggregate of the total voting
power of the Voting Stock of the Company, whether as a result of issuance
of securities of the Guarantor or the Company, any merger, consolidation,
liquidation or dissolution of the Guarantor or the Company, any direct or
indirect transfer of securities by the Guarantor or the Company or
otherwise (for purposes of this clause (i) and clause (ii) below, the
Permitted Holders shall be deemed to beneficially own any Voting Stock of a
corporation (the "specified corporation") held by any other corporation
(the "parent corporation") so long as the Permitted Holders beneficially
own (as so defined), directly or indirectly, in the aggregate a majority of
the voting power of the Voting Stock of the parent corporation);
(ii) subsequent to the first public offering of common stock
of the Guarantor or the Company, (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in clause
(i) above) directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of the Company and (B) the Permitted Holders
"beneficially own" (as defined in
<PAGE>
4
clause (i) above), directly or indirectly, in the aggregate a lesser
percentage of the total voting power of the Voting Stock of the Company
than such other person and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the Board of Directors of the Company (for the purposes of this clause
(ii), such other person shall be deemed to beneficially own any Voting
Stock of a specified corporation held by a parent corporation, if such
other person is the beneficial owner (as defined in clause (i) above),
directly or indirectly, of more than 35% of the voting power of the Voting
Stock of such parent corporation and the Permitted Holders "beneficially
own" (as defined in clause (i) above), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of
such parent corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of such parent corporation); provided, however,
that a Person shall not be deemed the "beneficial owner" of shares tendered
pursuant to a tender or exchange offer made by such Person or any Affiliate
of such Person until the tendered shares are accepted for purchase or
exchange;
(iii) during any period of two consecutive years (or, in the
case this event occurs within the first two years after the Issue Date,
such shorter period as shall have begun on the Issue Date), individuals who
at the beginning of such period constituted the Board of Directors of the
Guarantor or the Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by the
shareholders of the Guarantor or the Company was approved by a vote of
66 2\3% of the directors of the Guarantor or the Company then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the
Guarantor or the Company then in office; or
(iv) the merger or consolidation of the Guarantor or the
Company with or into another Person or the merger of another Person with or
into the Guarantor or the Company, or the sale of all or substantially all
the assets of the Guarantor or the Company to another Person (other than a
Person that is controlled by the Permitted Holders), and, in the case of
any such merger or consolidation, the securities of the Guarantor or the
Company that are outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of the Voting Stock of
the Guarantor or the Company are changed into or
<PAGE>
5
exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in addition
to any other consideration, securities of the surviving corporation that
represent immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending prior to the date of such
determination for which financial statements are available to (ii) Consolidated
Interest Expense for such four fiscal quarters; provided, however, that (1) if
the Company or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period, (2) if the Company or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the beginning of such
period or if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Indebtedness Incurred under any
revolving credit facility unless such Indebtedness has been permanently repaid
and has not been replaced) on the date of the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated
Interest Expense for such period shall be calculated on a pro forma basis as if
such discharge had occurred on the first day of such period and as if the
Company or such Restricted Subsidiary has not earned the interest income
actually earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise discharge such
Indebtedness, (3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition or if the
transaction giving rise to the need to calculate the Consolidated Coverage Ratio
is an Asset Disposition, the EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive) directly attributable to the assets
which are the subject of such Asset Disposition for such period, or increased by
an amount equal to the EBITDA (if negative) directly attributable thereto for
such period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
for such
<PAGE>
6
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (4) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction requiring a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first day of
such period and (5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
of assets occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent Incurred by the Company or its Restricted Subsidiaries, without
duplication, (i) interest expense attributable to Capitalized Lease Obligations
and to leases constituting part of a Sale/Leaseback Transaction, (ii)
amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) non-cash interest expense, (v) commissions and discounts owed
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs associated with Hedging Obligations (including amortization of fees),
(vii) Preferred Stock dividends in respect of all Preferred Stock of
<PAGE>
7
the Company and its Subsidiaries held by Persons other than the Company or a
Wholly Owned Subsidiary, (viii) interest incurred in connection with Investments
in discontinued operations, (ix) interest accruing on any Indebtedness of any
other Person to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than the Company) in connection with Indebtedness Incurred
by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss)
of the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income:
(i) any net income (loss) of any Person (other than the Company) if
such Person is not a Restricted Subsidiary, except that (A), subject to the
exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to a Restricted Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Company's
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(ii) any net income (loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A),
subject to the exclusion contained in clause (iv) below, the Company's
equity in the net income of any such Restricted Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Restricted Subsidiary during
such period to the Company or another Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other
distribution paid to another Restricted Subsidiary, to the limitation
contained in this clause) and (B) the Company's equity in a net loss of any
such Restricted Subsidiary for such period shall be included in determining
such Consolidated Net Income;
<PAGE>
8
(iv) any gain or loss realized upon the sale or other disposition of
any assets of the Company, its consolidated Subsidiaries or any
other Person (including pursuant to any Sale/Leaseback
Transaction) which is not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon
the sale or other disposition of any Capital Stock of any
Person;
(v) any extraordinary gain or loss; and
(vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of Section 4.5 only,
there shall be excluded from Consolidated Net Income any dividends, repayments
of loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under Section 4.5(a)(3)(D).
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending prior to the taking of any action for the
purpose of which the determination is being made for which financial statements
are available, as (i) the par or stated value of all outstanding Capital Stock
of the Company plus (ii) paid-in capital or capital surplus relating to such
Capital Stock plus (iii) any retained earnings or earned surplus less (A) any
accumulated deficit and (B) any amounts attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement
designed to protect such Person against fluctuations in currency values as to
which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Securities; provided, however, that any Capital Stock
that would not constitute Disqualified Stock but for provisions
<PAGE>
9
thereof giving holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Securities shall not constitute Disqualified Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock than the provisions described in
Sections 4.7 and 4.9.
"EBITDA" for any period means the sum of Consolidated Net Income, plus the
following to the extent deducted in calculating such Consolidated Net Income:
(a) Consolidated Interest Expense, (b) all income tax expense of the Company and
its consolidated Restricted Subsidiaries, (c) depreciation expense of the
Company and its consolidated Restricted Subsidiaries, (d) amortization expense
of the Company and its consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid cash item that was paid in a
prior period) and (e) all other non-cash charges of the Company and its
consolidated Restricted Subsidiaries (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash expenditures in any
future period), in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and non-cash charges of, a Restricted Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Non-Company Guarantor Subsidiaries" means, collectively, PEI
1998 LLC, a Delaware limited liability company, Prestolite International Sales
Corporation, a Delaware corporation, Prestolite Electric of Michigan,
Incorporated, a Delaware corporation, Megatron Industries Incorporated, a
Delaware corporation, Leece-Neville Corporation, a Delaware corporation, and
Beech Electric Corporation, a Delaware corporation.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
in (i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii)
<PAGE>
10
such other statements by such other entity as approved by a significant segment
of the accounting profession and (iv) the rules and regulations of the SEC
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
All ratios and computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a non-
interest bearing or other discount security shall be deemed the Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable, including, in each case, any premium
<PAGE>
11
on such indebtedness to the extent such premium has become due and payable;
(ii) all Capitalized Lease Obligations of such Person and all
Attributable Indebtedness in respect of Sale/Leaseback Transactions entered
into by such Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement (but excluding Trade Payables arising in the ordinary course of
business);
(iv) all obligations of such Person for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following receipt by such Person of a demand for
reimbursement following a payment on the letter of credit);
(v) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified Stock
or, with respect to any Subsidiary of such Person, the liquidation
preference with respect to, any Preferred Stock (but excluding, in each
case, any accrued dividends);
(vi) all obligations of the type referred to in clauses (i)
through (v) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise, including by
means of any Guarantee;
(vii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or asset
of such Person (whether or not such obligation is assumed by such Person),
the amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition,
net Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum
<PAGE>
12
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date; provided, however, that the amount
outstanding at any time of any Indebtedness Incurred with original issue
discount is the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement designed to protect such Person against
fluctuations in interest rates as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definitions of
"Unrestricted Subsidiary" and "Restricted Payment" and Section 4.5, (i)
"Investment" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time that such Subsidiary is so re-
designated a Restricted Subsidiary; and (ii) any property transferred to or from
an Unrestricted Subsidiary shall be valued at its fair market value at the time
of such transfer, in each case as determined in good faith by the Board of
Directors and evidenced by a resolution of such Board of Directors of the
Company certified in an Officers' Certificate to the Trustee.
"Issue Date" means the date on which the Initial Securities are
originally issued.
<PAGE>
13
"Legal Holiday" has the meaning ascribed in Section 11.8.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Lucas Acquisition" means the acquisition of certain power conversion
and related businesses of Lucas Industries plc, as described in the Offering
Circular dated January 16, 1998 relating to the Initial Securities.
"Lucas Argentina" means, collectively, Lucas Indiel Argentina S.A., an
Argentine corporation, Prestolite Newco, Inc., a Delaware corporation, and Lucas
Argentine Holdings Inc., a Delaware corporation, or any successor entity to
either or any of the foregoing.
"Lucas Argentina Option" means the right of the Company to acquire,
directly or indirectly, all of the shares of Capital Stock of Lucas Argentina
not owned, directly or indirectly, by the Company as of the Issue Date, other
than approximately 1% of the outstanding shares of Capital Stock of Lucas
Argentina, for an aggregate purchase price not to exceed 1.23 million Argentine
Pesos.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other non-
cash form) therefrom, in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon or other
security arrangement of any kind with respect to such assets, or which must by
its terms, or in order to obtain a necessary consent to such Asset Disposition,
or by applicable law be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries or joint ventures as a result of
such Asset Disposition and (iv) the deduction of appropriate amounts to be
provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Disposition
<PAGE>
14
and retained by the Company or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"New U.S. Credit Facility" means that certain credit facility to be
entered into on the Issue Date among the Company and the lenders from time to
time party thereto, including any collateral documents, instruments and
agreements executed in connection therewith, and the term New U.S. Credit
Facility shall also include any amendments, supplements, modifications,
extensions, renewals, restatements or refundings thereof and any credit
facilities or agreements that replace, refund or refinance any part of the
loans, other credit facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility that increases the amount
borrowable thereunder or alters the maturity thereof.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any Restricted Subsidiary (a) provides any Guarantee or credit
support of any kind (including any undertaking, Guarantee, indemnity, agreement
or instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise) and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Non-U.S./U.K. Subsidiary" means any Restricted Subsidiary of the
Company having more than 66 2/3% of its tangible assets located in one or
more jurisdictions outside of the United States or the United Kingdom.
"Offering Circular" means the Offering Circular dated January 16, 1998
relating to the Initial Securities; provided that after the issuance of Exchange
Securities, all references herein to "Offering Circular" shall be deemed
references to the prospectus contained in the registration statement relating to
the Exchange Securities.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company, as applicable.
<PAGE>
15
"Officers' Certificate" means a certificate signed by any two
Officers.
"Opinion of Counsel" means a written opinion from Brobeck, Phleger &
Harrison L.L.P., Hooper, Hathaway, Price, Beuche & Wallace or any other legal
counsel who is reasonably acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company or the Trustee.
"PEI Guarantee" means the guarantee of the Securities by the
Guarantor.
"Permitted Holders" means Genstar Capital Corporation, its Affiliates
and its stockholders and the Company's executive officers as of the Issue Date.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a Person
which will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (ii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practice of the Company or such Restricted Subsidiary;
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (viii) any Person (including a joint
venture) to the extent such investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to Section
4.7; (ix) Lucas Argentina in connection with the exercise by the Company of the
Lucas Argentina Option; (x) joint ventures in Related Businesses made in
exchange for or conversion of Investments existing on the Issue Date in other
joint ventures in Related Businesses; and (xi) joint ventures in an aggregate
amount at any one time outstanding not to exceed $10.0 million, provided that
such joint ventures are engaged in a Related Business.
<PAGE>
16
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness) or leases
to which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits or cash or United States government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, in
each case incurred in the ordinary course of business; (b) Liens imposed by law,
such as carriers', warehousemen's and mechanics' Liens, in each case for sums
not yet due or being contested in good faith by appropriate proceeding or other
Liens arising out of judgments or awards against such Person with respect to
which such Person shall then be proceeding with an appeal or other proceedings
for review; (c) Liens for property taxes not yet subject to penalties for non-
payment, which are being contested in good faith by appropriate proceedings or
with respect to which adequate reserves have been recorded in accordance with
GAAP; (d) Liens in favor of issuers of surety bonds or letters of credit issued
pursuant to the request of and for the account of such Person in the ordinary
course of its business; (e) survey exceptions, encumbrances, easements or
reservations of, or rights of others for, licenses, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real properties or liens
incidental to the conduct of the business of such Person or to the ownership of
its properties; (f) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under this Indenture, secured by a Lien
on the same property securing such Hedging Obligations; (g) leases and subleases
of real property which do not interfere with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries, and which are
made on customary and usual terms applicable to similar properties; (h) Liens
existing as of the Issue Date and Liens created by this Indenture; (i) Liens
created solely for the purpose of securing the payment of all or a part of the
purchase price of assets or property acquired or constructed in the ordinary
course of business after the date on which the Securities are originally issued;
provided, however, that (A) the aggregate principal amount of Indebtedness
secured by such Liens shall not exceed the lesser of cost or fair market value
of the assets or property so acquired or constructed, (B) the Indebtedness
secured by such Liens shall have otherwise been permitted to be issued under
this Indenture and (C) such Liens shall not encumber any other assets or
property of the Company or any of its Restricted Subsidiaries and shall attach
to such assets or property within 180 days of the construction or acquisition of
such assets or property; (j) Liens on the assets or property of a Restricted
Subsidiary of the Company existing at the time such Restricted Subsidiary became
a Subsidiary of the Company and not incurred as a result of (or in connection
with or in anticipation of) such Restricted Subsidiary
<PAGE>
17
becoming a Subsidiary of the Company; provided, however, that (A) any such Lien
does not by its terms cover any property or assets after the time such
Restricted Subsidiary becomes a Subsidiary which were not covered immediately
prior to such transaction, (B) the incurrence of the Indebtedness secured by
such Lien shall have otherwise been permitted to be issued under this Indenture,
and (C) such Liens do not extend to or cover any other property or assets of the
Company or any of its Restricted Subsidiaries; (k) Liens to secure Capitalized
Lease Obligations permitted to be Incurred under this Indenture; (l) Liens on
accounts receivable, inventory and general intangibles securing Indebtedness
outstanding or committed under the New U.S. Credit Facility and the South Africa
Credit Facility and Liens securing Indebtedness outstanding or committed under
the Argentina Credit Facility and the U.K. Credit Facility; (m) Liens extending,
renewing or replacing in whole or in part a Lien permitted by this Indenture;
provided, however, that (A) such Liens do not extend beyond the property subject
to the existing Lien and improvements and construction on such property and (B)
the Indebtedness secured by the Lien may not exceed the Indebtedness secured at
the time by the existing Lien; (n) Liens on inventory deemed to arise by reason
of the consignment of inventory in the ordinary course of business of the
Company and its Restricted Subsidiaries; and (o) Liens on the assets or property
of a Restricted Subsidiary of the Company to secure Indebtedness of such
Restricted Subsidiary owing to and held by the Company.
"Person" means any individual, corporation, partnership joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.
"Principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to become
due at the relevant time; provided, however, that for purposes of calculating
any such premium, the term "principal" shall not include the premium with
respect to which such calculation is being made.
"Public Equity Offering" means an underwritten primary public offering
of common stock of the Guarantor or the Company pursuant to an effective
registration statement under the Securities Act.
"Recapitalization" means any one or more of the following
transactions, any one or more of which may occur on or
<PAGE>
18
following the Issue Date: (i) the payment of a dividend by the Company to
Guarantor; (ii) the making by the Guarantor of an Investment in a Wholly Owned
Subsidiary for the purpose of effecting a repurchase of the Capital Stock of the
Guarantor, (iii) the purchase by the Guarantor or such Wholly Owned Subsidiary
of shares of Capital Stock of the Guarantor from the holders thereof, (iv) the
purchase by the Guarantor of options or warrants to purchase shares of Capital
Stock of the Guarantor from the holders thereof, and/or (v) the payment by the
Guarantor of certain additional amounts to the holders of options to purchase
shares of Capital Stock of the Guarantor; provided, however, that the total of
the payments referred to in clauses (i) through (v), net of any amounts received
from the holders of such shares, options or warrants in connection with such
transactions, shall not exceed $30.1 million in the aggregate.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness, and shall
include the Refinancing of multiple facilities with a single facility and the
Refinancing of a single facility with multiple facilities. 'Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture (including Indebtedness of
the Company that Refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that Refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that Refinances
Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being Refinanced, (ii) the Refinancing Indebtedness has an Average
Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being Refinanced and (iii)
such Refinancing Indebtedness is Incurred in an aggregate principal amount (or
if issued with original issue discount, an aggregate issue price) that is equal
to or less than the sum of the aggregate principal amount (or if issued with
original issue discount, the aggregate accreted value) then outstanding or
committed (plus fees and expenses, including any premium and defeasance costs)
under the Indebtedness being Refinanced; provided further, however, that
Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary that
Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a
Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or
complementary to the business of the Company and the Restricted Subsidiaries on
the date of this Indenture.
<PAGE>
19
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held by any Person
or of any Capital Stock of a Restricted Subsidiary held by any Person (other
than a Restricted Subsidiary), including the exercise of any option to exchange
any Capital Stock (other than into Capital Stock of the Company that is not
Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) or (iv) the making of any Investment in any
Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases such property from such Person.
"SEC" means the U.S. Securities and Exchange Commission, or any
successor agency.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities" means the Initial Securities, the Exchange Securities and
the Private Exchange Securities issued or to be issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means (i) Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter
<PAGE>
20
Incurred, and (ii) accrued and unpaid interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company to the extent post-filing interest is allowed in such proceeding)
in respect of (A) indebtedness of the Company for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which the Company is responsible or liable unless, in the
case of (i) and (ii), in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such obligations
are subordinate in right of payment to the Company; provided, however, that
Senior Indebtedness shall not include (1) any obligation of the Company to any
Subsidiary, (2) any liability for Federal, state, local or other taxes owed or
owing by the Company, (3) any Trade Payables arising in the ordinary course of
business, (4) any Indebtedness of the Company (and any accrued and unpaid
interest respect thereof) which is subordinate or junior in any respect to any
other Indebtedness or other obligation of the Company, (5) that portion of any
Indebtedness which at the time of Incurrence is Incurred in violation of this
Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"South Africa Credit Facility" means one or more credit facilities to
be entered into on or after the Issue Date among Lucas Holdings South Africa
(Proprietary) Limited, or any successor entity, and the lenders from time to
time party thereto, including any collateral documents, instruments and
agreements executed in connection therewith, and the term South Africa Credit
Facility shall also include any amendments, supplements, modifications,
extensions, renewals, restatements or refundings thereof and any credit
facilities that replace, refund or refinance any part of the loans, other credit
facilities or commitments thereunder, including any such replacement, refunding
or refinancing facility that increases the amount borrowable thereunder or
alters the maturity thereof.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement.
<PAGE>
21
"Subsidiary" of any Person means any corporation, association,
partnership, limited liability company or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) such
Person, (ii) such Person and one or more Subsidiaries of such Person or (iii)
one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and undivided
profits aggregating in excess of $50.0 million (or the foreign currency
equivalent thereof) and whose long-term debt is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money market fund sponsored by a registered broker dealer or mutual fund
distributor including those offered by the Trustee or an affiliate of the
Trustee, (iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered into
with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of a Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard &
Poor's Ratings Group, (v) investments in securities with maturities of six
months or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.; and
(vi) investments in mutual funds, whose investment guidelines restrict such
funds' investments to investments which are substantially similar to those
described in clauses (i)-(v).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
------
77bbbb) as in effect on the date of this Indenture; provided, however, that, in
the event the Trust Indenture Act of 1939 is amended after such date, "TIA"
means, to the extent required by any such amendments, the Trust Indenture Act of
1939 as so amended.
<PAGE>
22
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means such successor.
"Trust Officer" means any trust officer, assistant vice president, or
vice president of the Trustee assigned by the Trustee to administer this
Indenture.
"U.K. Credit Facility" means one or more credit facilities to be
entered into or on or after the Issue Date among Prestolite Electric Limited, or
any successor entity, or any of its Wholly Owned Subsidiaries and the lenders
from time to time party thereto, including any collateral documents, instruments
and agreements executed in connection therewith, and the term U.K. Credit
Facility shall also include any amendments, supplements, modifications,
extensions, renewals, restatements or refundings thereof and any credit
facilities that replace, refund or refinance any part of the loans, other credit
facilities or commitments thereunder, including any such replacement, refunding
or refinancing facility that increases the amount borrowable thereunder or
alters the maturity thereof.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Subsidiary of the Company that
is not a Subsidiary of the Subsidiary to be so designated; provided, however,
that either (A) the Subsidiary to be so designated has total consolidated assets
of $1,000 or less or (B) if such Subsidiary has consolidated assets greater than
$1,000, then such designation would be permitted under Section 4.5. The Board
of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
Section 4.3(a) and (y) no Default shall have occurred and
<PAGE>
23
be continuing. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership of interests) of such Person then outstanding
and normally entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers, or trustee thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company
all the Capital Stock of which (other than directors' qualifying shares or
similar shares and, in the case of a Non-U.S./U.K. Subsidiary, shares required
to be owned by citizens of such Subsidiary's jurisdiction of organization) is
owned by the Company or one or more other Wholly Owned Subsidiaries; provided
that, notwithstanding the foregoing, the term "Wholly Owned Subsidiary" shall be
deemed to include Lucas Argentina, unless the Company shall not have exercised
the Lucas Argentina Option prior to August 31, 1998.
SECTION I.2. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction"....... 4.8
"Appendix".................... 2.1
"Authenticating Agent......... 2.2
"Bankruptcy Law".............. 6.1
"covenant defeasance option".. 8.1(b)
"Custodian"................... 6.1
"Event of Default"............ 6.1
"Exchange Transaction"........ 4.7(a)
"Guaranteed Obligations"...... 10.1
"legal defeasance option"..... 8.1(b)
"Offer"....................... 4.7(b)
"Offer Amount"................ 4.7(b)
"Offer Period"................ 4.7(b)
"Paying Agent"................ 2.3
"Purchase Date................ 4.7(b)
"Registrar"................... 2.3
"Successor Company"........... 5.1
</TABLE>
<PAGE>
24
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. The
-------------------------------------------------
mandatory provisions of the TIA are incorporated by reference in and made a part
of this Indenture. The following TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the Guarantor
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by the TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.4. Rules of Construction. Unless the context otherwise
---------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation preference of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater; and
<PAGE>
25
(9) all references to the date the Securities were originally issued
shall refer to the date the Initial Securities were originally issued.
SECTION 1.5. One Class of Securities. The Initial Securities, the
-----------------------
Private Exchange Securities and the Exchange Securities shall vote and consent
together on all matters as one class and none of the Initial Securities, the
Private Exchange Securities or the Exchange Securities shall have the right to
vote or consent as a separate class on any matter.
ARTICLE II
The Securities
--------------
SECTION 2.1. Form and Dating. Provisions relating to the Initial
---------------
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix"),
--------
which is hereby incorporated in and expressly made a part of this Indenture.
The Initial Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to the Appendix, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities, the Private Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A, which is hereby
incorporated by reference and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, rule of
any securities exchange or over-the-counter market on which such Securities are
then listed or quoted, or usage, in addition to those set forth on the Appendix
and Exhibit A. The Company and the Trustee shall approve the forms of the
Securities and any notation, endorsement or legend on them. Each Security shall
be dated the date of its authentication. The terms of the Securities set forth
in the Appendix and Exhibit A are part of the terms of this Indenture and, to
the extent applicable, the Company, the Guarantor and the Trustee, by their
execution and delivery of this Indenture, expressly agree to be bound by such
terms.
SECTION 2.2. Execution and Authentication. Two Officers shall sign
----------------------------
the Securities for the Company by manual or facsimile signature and may be
imprinted or otherwise reproduced.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually authenticates the Security. The signature of the Trustee on a
Security shall be conclusive evidence that such Security has been duly and
validly authenticated and issued under this Indenture.
<PAGE>
26
The Trustee may appoint an agent (the "Authenticating Agent")
--------------------
reasonably acceptable to the Company to authenticate the Securities. Unless
limited by the terms of such appointment, any such Authenticating Agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent.
SECTION 2.3. Registrar and Paying Agent. The Company shall maintain
--------------------------
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
---------
Securities may be presented for payment (the "Paying Agent"). The Registrar
------------
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any such additional paying agent.
In the event the Company shall retain any Person not a party to this
Indenture as an agent hereunder, the Company shall enter into an appropriate
agency agreement with any Registrar, Paying Agent or co-registrar not a party to
this Indenture, which shall incorporate the terms of the TIA. The agreement
shall implement the provisions of this Indenture that relate to such agent. The
Company shall notify the Trustee of the name and address of each such agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act
as such and shall be entitled to appropriate compensation therefor pursuant to
Section 7.7. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent for the Securities.
SECTION 2.4. Paying Agent To Hold Money in Trust. By at least 11:00
-----------------------------------
a.m. (New York City time) on the date on which any Principal or interest on any
Security is due and payable, the Company shall deposit with the Paying Agent a
sum sufficient to pay such Principal or interest when due. The Company shall
require each Paying Agent (other than the Trustee) to agree in writing that such
Paying Agent shall hold in trust for the benefit of Securityholders or the
Trustee all money held by such Paying Agent for the payment of Principal of or
interest on the Securities and shall notify the Trustee of any default by the
Company in making any such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund. The Company at any time may require a Paying Agent
(other than the Trustee) to pay all money held by it to the Trustee and to
account for any funds disbursed by such Paying Agent. Upon complying with this
Section, the Paying Agent (if other than the Company or a Subsidiary) shall have
no further liability for the money delivered to the Trustee. Upon any
bankruptcy,
<PAGE>
27
reorganization or similar proceeding with respect to the Company,
the Trustee shall serve as Paying Agent for the Securities.
SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as
--------------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall cause the Registrar to furnish to the Trustee, in
writing at least five Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Securityholders.
SECTION 2.6. [Intentionally Omitted]
-----------------------
SECTION 2.7. Replacement Securities. If a mutilated Security is
----------------------
surrendered to the Registrar or if the Holder of a Security shall provide the
Company and the Trustee with evidence to their satisfaction that the Security
has been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security if the requirements of Section
8-405 of the Uniform Commercial Code are met and the Holder satisfies any other
reasonable requirements of the Trustee. If required by the Trustee or the
Company, such Holder shall furnish an indemnity bond sufficient in the judgment
of the Company and the Trustee to protect the Company, the Trustee, the Paying
Agent, the Registrar and any co-registrar from any loss which any of them may
suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security, including reasonable fees and
expenses of counsel. Every replacement Security is an additional obligation of
the Company.
SECTION 2.8. Outstanding Securities. Securities outstanding at any
----------------------
time are all Securities authenticated by the Trustee except for those canceled,
those delivered for cancellation and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all Principal and interest payable on that date with respect to the Securities
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that date
such Securities (or
<PAGE>
28
portions thereof) cease to be outstanding and interest on them ceases to accrue.
SECTION 2.9. Temporary Securities. Until definitive Securities are
--------------------
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities. After
the preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency maintained by the Company for that purpose
and such exchange shall be without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute,
and the Trustee shall authenticate and deliver in exchange therefor, one or more
definitive Securities representing an equal principal amount of Securities.
Until so exchanged, the Holder of temporary Securities shall in all respects be
entitled to the same benefits under this Indenture as a Holder of definitive
Securities.
SECTION 2.10. Cancellation. The Company at any time may deliver
------------
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee for cancellation any Securities surrendered to them
for registration of transfer or exchange or payment. The Trustee and no one
else shall cancel and destroy (subject to the record retention requirements of
the Exchange Act) all Securities surrendered for registration of transfer or
exchange, payment or cancellation and deliver a certificate of such destruction
to the Company unless the Company directs the Trustee to deliver canceled
Securities to the Company. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
------------------
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) at the rate
specified therefor in the Securities in any lawful manner. The Company may pay
the defaulted interest to the Persons who are Securityholders on a subsequent
special record date. The Company shall fix or cause to be fixed (or upon the
Company's failure to do so the Trustee shall fix) any such special record date
and payment date to the reasonable satisfaction of the Trustee which specified
record date shall not be less than 10 days prior to the payment date for such
defaulted interest and shall promptly mail or cause to be mailed to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Security and the date of the proposed payment, and at the same time
<PAGE>
29
the Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such defaulted interest or
shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when so deposited to be held in
trust for the benefit of the Person entitled to such defaulted interest as
provided in this Section 2.11.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities
-------------
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders,
provided, however, that any such notice may state that no representation is made
- - - - - - - - - - - -------- -------
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE III
Redemption
----------
SECTION 3.1. Notices to Trustee. If the Company elects to redeem
------------------
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date and the principal amount of Securities
to be redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Company to the effect that such redemption will comply with
the conditions herein. The record date relating to such redemption shall be
selected by the Company and set forth in the related notice given to the
Trustee, which record date shall be not less than 15 days prior to the date
selected for redemption by the Company.
SECTION 3.2. Selection of Securities To Be Redeemed. If fewer than
--------------------------------------
all the Securities then outstanding are to be redeemed, the Trustee shall select
the Securities to be redeemed pro rata or by lot or by a method that complies
with applicable legal and securities exchange requirements, if any, and that the
Trustee in its sole discretion considers to be fair and appropriate. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of
<PAGE>
30
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. Upon request of the Company, the
Trustee shall notify the Company of the Securities or portions of Securities to
be redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days but not more
--------------------
than 60 days before a date for redemption of Securities, the Trustee at the
expense of the Company shall mail a notice of redemption by first-class mail to
each Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued and unpaid
interest, if any;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
The Trustee shall give the notice of redemption in the Company's name
and at the Company's expense. In such event, the Company shall provide the
Trustee with the information required by this Section 3.3.
SECTION 3.4. Effect of Notice of Redemption. Once notice of
------------------------------
redemption is mailed, Securities called for redemption shall become due and
payable on the redemption date and at the redemption price stated in the notice.
Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price stated in the notice, plus accrued and unpaid interest to the
redemption date; provided that the Company shall have
<PAGE>
31
deposited the redemption price with the Paying Agent or the Trustee on or before
11:00 a.m. (New York City time) on the date of redemption; provided, further,
that if the redemption date is after a regular record date and on or prior to
the interest payment date, the accrued and unpaid interest shall be payable to
the Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.5. Deposit of Redemption Price. By at least 11:00 a.m.
---------------------------
(New York City time) on the date on which any Principal of or interest on any
Security is due and payable, the Company shall deposit with the Paying Agent
(or, if the Company or a Subsidiary is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued and
unpaid interest on all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which are owned by
the Company or a Subsidiary and have been delivered by the Company or such
Subsidiary to the Trustee for cancellation.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such redemption price, interest on the
Securities to be redeemed will cease to accrue on and after the applicable
redemption date, whether or not such Securities are presented for payment.
SECTION 3.6. Securities Redeemed in Part. Upon surrender of a
---------------------------
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in a principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE IV
Covenants
---------
SECTION 4.1. Payment of Securities. The Company shall promptly pay
---------------------
the Principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on or before 11:00 a.m. (New York City
time) on such date the Trustee or the Paying Agent holds (or, if the Company or
a Subsidiary is the Paying Agent, the segregated account or separate trust fund
maintained by the Company or such Subsidiary pursuant to Section 2.4) in
accordance with this Indenture money sufficient to pay all Principal and
interest then due and the Trustee or the Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, the Company or such Subsidiary), as the case may
be, is not prohibited from paying such money to the Securityholders on that date
pursuant to the terms of this Indenture.
<PAGE>
32
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful as provided in
Section 2.11.
Notwithstanding anything to the contrary contained in this Indenture,
the Company or the Paying Agent may, to the extent it is required to do so by
law, deduct or withhold income or other similar taxes imposed by the United
States of America or other domestic or foreign taxing authorities from Principal
or interest payments hereunder.
SECTION 4.2. SEC Reports. Notwithstanding that the Guarantor and the
-----------
Company may not be subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, the Guarantor and the Company will file with the SEC
(unless the SEC will not accept such a filing) and provide within 15 days the
Trustee and Securityholders with the annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed at the times specified
for the filing of such information, documents and reports under such Sections
and so provided within 15 days thereafter. In lieu of filing and providing
separate reports as set forth above, the Guarantor and the Company may, so long
as the Guarantor owns 100% of the Capital Stock of the Company and if permitted
by the SEC, include in the reports filed and provided by the Guarantor as set
forth above such financial information and narrative disclosure regarding the
Company and the PEI Guarantee as required by the SEC in lieu of filing such
separate reports. The Guarantor and the Company also will comply with the other
provisions of TIA Section 314(a).
SECTION 4.3. Limitation on Indebtedness. (a) The Company will not
--------------------------
Incur, directly or indirectly, any Indebtedness unless, on the date of such
Incurrence and after giving effect to such Incurrence and the application of the
net proceeds therefrom, the Consolidated Coverage Ratio would exceed 2.00:1 if
such Incurrence shall occur prior to February 1, 2000 or would exceed 2.25:1 if
such Incurrence shall occur thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company may
Incur any or all of the following Indebtedness:
(i) Indebtedness of the Company Incurred under the New U.S.
Credit Facility in an aggregate principal amount outstanding at any time
not to exceed the greater of (A) $23.0 million and (B) the sum of (x) 50%
of the book value of the inventory of the Company and its Restricted
Subsidiaries and (y) 85% of the book value of the accounts receivable of
the Company and its Restricted Subsidiaries, provided that the amount in
clause (A) shall be reduced by the aggregate amount of all proceeds from
all Asset
<PAGE>
33
Dispositions that have been applied since the Issue Date to permanently
reduce the outstanding amount of such Indebtedness pursuant to Section 4.7
and less the aggregate amount of all mandatory prepayments of principal of
term loans thereunder that have been made since the Issue Date;
(ii) Indebtedness of the Company owing to and held by any
Wholly Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any such
Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of any such Indebtedness (except to another Wholly
Owned Subsidiary) will be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the Company unless such Indebtedness is
assumed by the buyer of such Wholly Owned Subsidiary or otherwise
discharged in connection with such transaction and such Wholly Owned
Subsidiary is fully released in connection therewith;
(iii) Indebtedness represented by the Securities;
(iv) Indebtedness of the Company (other than the Indebtedness
described in clauses (i), (ii) or (iii) above) outstanding on the Issue
Date;
(v) Indebtedness (including Capitalized Lease Obligations) of
the Company Incurred to finance the acquisition, construction or
improvement of fixed or capital assets in an aggregate principal amount at
any one time outstanding not to exceed $10.0 million, provided that such
Indebtedness is Incurred within 180 days after the date of such
acquisition, construction or improvement and does not exceed the fair
market value of such acquired, constructed or improved assets, as
determined in good faith by the Board of Directors of the Company and
evidenced by a board resolution certified by the Secretary of the Company
and furnished to the Trustee;
(vi) Refinancing Indebtedness Incurred in respect of any
Indebtedness Incurred pursuant to Section 4.3(a) or pursuant to clause
(iii), (iv) or this clause (vi) of this Section 4.3(b);
(vii) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by the
Company in the ordinary course of its business and which do not secure
Indebtedness other than the Indebtedness and the obligations with respect
to which such instruments were issued and (B) under Currency Agreements and
Interest Rate Agreements Incurred which, at the time of Incurrence, is in
the ordinary course of business; provided, however, that, in the case of
Currency Agreements which relate to Indebtedness and Interest Rate
Agreements, such Currency Agreements and Interest Rate
<PAGE>
34
Agreements are directly related to Indebtedness permitted to be Incurred by
the Company pursuant to this Indenture;
(viii) Indebtedness represented by Guarantees by the Company
of Indebtedness otherwise permitted to be Incurred pursuant to this Section
4.3 or Section 4.4; and
(ix) other Indebtedness in an aggregate principal amount
outstanding at any one time not to exceed $10.0 million.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to Section 4.3(b) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations unless such
new Indebtedness shall be subordinated to the Securities to at least the same
extent as such Subordinated Obligations being Refinanced.
(d) For purposes of determining compliance with this Section 4.3,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses in
Section 4.3(b) and (ii) an item of Indebtedness may be divided and classified in
more than one of the types of Indebtedness described in Section 4.3(b).
SECTION 4.4. Limitation on Indebtedness and Preferred Stock of
-------------------------------------------------
Restricted Subsidiaries. The Company shall not permit any Restricted Subsidiary
- - - - - - - - - - - -----------------------
to Incur, directly or indirectly, any Indebtedness or Preferred Stock except:
(a) Indebtedness (1) Incurred under the U.K. Credit Facility
(including Guarantees thereof by Wholly-Owned Subsidiaries of Prestolite
Electric Limited) in an aggregate principal amount outstanding at any time not
to exceed the greater of (A) (Pounds)9.0 million and (B) the sum (such sum, the
"Borrowing Base") of (x) 50% of the book value of the inventory of Prestolite
Electric Limited (or any successor entity) and its Restricted Subsidiaries and
(y) 80% of the book value of the accounts receivable of such entities, (2)
Incurred under the Argentina Credit Facility in an aggregate principal amount
outstanding at any time not to exceed the greater of (A) $8.0 million and (B)
the Borrowing Base of Lucas Argentina or any other Non-U.S./U.K. Subsidiary
having more than 66-2/3% of its tangible assets located in Argentina or Brazil,
and its Restricted Subsidiaries and (3) Incurred under the South Africa Credit
Facility in an aggregate principal amount outstanding at any time not to exceed
the greater of (A) $3.0 million and (B) the Borrowing Base of Lucas Holdings
South Africa (Proprietary) Ltd. (or any successor entity) and its Restricted
Subsidiaries, provided that each of the amounts in clauses (1)(A), (2)(A) and
(3)(A) shall be reduced by the aggregate amount of all proceeds
<PAGE>
35
from all Asset Dispositions that have been applied since the Issue Date to
permanently reduce the outstanding amount of such Indebtedness pursuant to
Section 4.7 and less the aggregate amount of all mandatory prepayments of
principal of term loans thereunder that have been made since the Issue Date;
(b) Indebtedness or Preferred Stock of a Restricted Subsidiary issued
to and held by the Company or a Wholly Owned Subsidiary; provided, however, that
any subsequent issuance or transfer of any Capital Stock which results in any
such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of such Indebtedness or Preferred Stock (other than to the
Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the issuance of such Indebtedness or Preferred Stock by the issuer
thereof unless such Indebtedness is assumed by the buyer of such Wholly Owned
Subsidiary or otherwise discharged in connection with such transaction and such
Wholly Owned Subsidiary is fully released in connection therewith;
(c) Indebtedness or Preferred Stock of a Restricted Subsidiary
Incurred and outstanding on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness or Preferred
Stock Incurred in connection with, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company); provided, however, that on the date
of such acquisition and after giving effect thereto, the Company would have been
able to Incur at least $1.00 of additional Indebtedness pursuant to clause (a)
of Section 4.3;
(d) Indebtedness or Preferred Stock outstanding on the Issue Date,
including (i) any such Indebtedness acquired or assumed in connection with the
Lucas Acquisition and (ii) promissory notes issued by Lucas Argentina in
connection with any contingent obligations of Lucas Argentina pursuant to the
terms of the Lucas Acquisition, (in each case other than Indebtedness described
in clauses (a) and (b) of this Section 4.4);
(e) Refinancing Indebtedness Incurred in respect of Indebtedness or
Preferred Stock referred to in clauses (c) or (d)(i) of this Section 4.4 or this
clause (e); provided, however, that to the extent such Refinancing Indebtedness
directly or indirectly Refinances Indebtedness or Preferred Stock of a
Subsidiary described in clause (c) of this Section 4.4, such Refinancing
Indebtedness shall be Incurred only by such Subsidiary; and
(f) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by a
Restricted Subsidiary in the ordinary course
<PAGE>
36
of its business and which do not secure Indebtedness other than the Indebtedness
and obligations with respect to which they were issued and (B) under Currency
Agreements which relate to other Indebtedness and Interest Rate Agreements
Incurred which, at the time of Incurrence, is in the ordinary course of
business; provided, however, that, in the case of Currency Agreements and
Interest Rate Agreements, such Currency Agreements and Interest Rate Agreements
are directly related to Indebtedness permitted to be Incurred by a Restricted
Subsidiary pursuant to this Indenture.
(g) The Company will not permit any Unrestricted Subsidiary to Incur
any Indebtedness other than Non-Recourse Debt, provided, however, if any such
Indebtedness ceases to be Non-Recourse Debt, such event shall be deemed to
constitute an Incurrence of Indebtedness by the Company or a Restricted
Subsidiary.
(h) For purposes of determining compliance with this Section 4.4,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses in
this Section 4.4 and (ii) an item of Indebtedness may be divided and classified
in more than one of the types of Indebtedness described in this Section 4.4.
SECTION 4.5. Limitation on Restricted Payments. (a) The Company
---------------------------------
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, make any Restricted Payment if at the time of such Restricted
Payment:
(1) a Default or Event of Default shall have occurred and be
continuing (or would result therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.3(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors of the Company, whose
determination will be evidenced by a resolution of such Board of Directors
certified in an Officers' Certificate to the Trustee) declared or made
subsequent to the Issue Date, would exceed the sum of: (A) 50% of the
Consolidated Net Income accrued during the period (treated as one
accounting period) from the beginning of the fiscal quarter immediately
following the fiscal quarter during which the Issue Date occurs to the end
of the most recent fiscal quarter ending prior to the date of such
Restricted Payment for which financial statements are available (or, in
case such Consolidated Net Income will be a deficit, minus 100% of such
deficit); (B)
<PAGE>
37
the aggregate Net Cash Proceeds received by the Company from
the issue or sale of Capital Stock (other than Disqualified Stock) or other
cash contributions from the Guarantor to its capital subsequent to the
Issue Date (other than an issuance or sale to a Subsidiary of the Company
and other than a sale or issuance to a trust established by the Company, or
any of its Restricted Subsidiaries); (C) the amount by which Indebtedness
of the Company is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Restricted Subsidiary) subsequent
to the Issue Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the
Company (less the amount of any cash, or the fair value of any other
property, distributed by the Company upon such conversion or exchange); and
(D) an amount equal to the sum of (i) the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, repayments of the
principal of loans or advances or other transfers of assets to the Company
or any Restricted Subsidiary from Unrestricted Subsidiaries and (ii) the
portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of an Unrestricted Subsidiary at
the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; provided, that the foregoing sum shall not exceed, in the case
of any Unrestricted Subsidiary, the amount of Investments previously made
by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary, which amount was included in the calculation of the amount of
Restricted Payments.
(b) The provisions of Section 4.5(a) will not prohibit:
(i) any purchase, redemption, defeasance or other acquisition of
Capital Stock of the Company or Subordinated Obligations made by exchange
for, or out of the net proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary of the Company or to a trust
established by the Company or any of its Subsidiaries); provided, however,
that (A) such purchase, redemption, defeasance or other acquisition will be
excluded in the calculation of the amount of Restricted Payments pursuant
to Section 4.5(a)(3) and (B) the Net Cash Proceeds from such sale will be
excluded from Section 4.5(a)(3)(B);
(ii) any purchase, redemption, defeasance or other acquisition of
Subordinated Obligations made by exchange for, or out of the net proceeds
of the substantially concurrent sale of, Subordinated Obligations of the
Company; provided, however, that (A) the principal amount of such new
Indebtedness does not exceed the principal amount of the Subordinated
Obligations being so redeemed, repurchased, acquired or retired for value
(plus the amount of any
<PAGE>
38
premium required to be paid under the terms of the instrument governing the
Subordinated Obligations so redeemed, repurchased acquired or retired), (B)
such new Indebtedness is subordinated to the Securities at least to the
same extent as such Subordinated Obligations so purchased, exchanged,
redeemed, repurchased, acquired or retired for value, (C) such new
Indebtedness has a final scheduled maturity date later than the earlier of
the final scheduled maturity date of the Subordinated Obligations being so
redeemed and the final scheduled maturity date of the Securities and (D)
such new Indebtedness has an Average Life equal to or greater than the
Average Life of the Securities; provided further, however, that such
purchase, redemption, defeasance or other acquisition will be excluded in
the calculation of the amount of Restricted Payments;
(iii) the purchase by the Company or a Wholly Owned Subsidiary of
shares of Lucas Argentina pursuant to the Lucas Argentina Option; provided
that the amount of any such purchase shall be excluded from the calculation
of the amount of Restricted Payments;
(iv) the purchase by the Company or a Wholly Owned Subsidiary of any
of the approximately 1% of the outstanding shares of Lucas Argentina not
owned by the Company, directly or indirectly, on or after the Issue Date
and not subject to the Lucas Argentina Option for an aggregate purchase
price not to exceed $300,000; provided that the amount of any such purchase
shall be excluded from the calculation of the amount of Restricted
Payments;
(v) any dividend, distribution, purchase or payment made to the
Guarantor on or after the Issue Date in connection with the
Recapitalization in an aggregate amount not to exceed $30.1 million;
provided that the amount of any such dividend shall be excluded from the
calculation of the amount of Restricted Payments;
(vi) any dividend paid to the Guarantor the proceeds of which are
used for repurchases by the Guarantor of Common Stock of the Guarantor from
employees, officers and directors of the Guarantor, the Company or any of
their respective Subsidiaries or their authorized representatives upon the
death, disability or termination of employment of such employees, in an
aggregate amount not to exceed the sum of (A) $1.0 million in any calendar
year plus (B) to the extent previously received by the Company, the
aggregate net cash proceeds from any reissuance during such calendar year
of Common Stock of the Guarantor to employees, officers or directors of the
Guarantor, the Company and their respective Subsidiaries plus (C) to the
extent previously received by the Company, the aggregate net cash proceeds
from any payments on life insurance policies with respect to any employees,
officers or directors of the Guarantor, the
<PAGE>
39
Company and their respective Subsidiaries which proceeds are used to
purchase the Common Stock of the Guarantor held by any such employees,
officers or directors; provided that the amount of any such dividend shall
be included in the calculation of the amount of Restricted Payments;
(vii) any dividend paid to the Guarantor in respect of overhead
expenses, tax liabilities and legal, accounting and other professional fees
and expenses that are directly attributable to the operations of the
Company and its Restricted Subsidiaries, provided that the amount of any
such dividends will be excluded from the calculation of the amount of
Restricted Payments; and
(viii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that the amount of such dividend
will be included in the calculation of the amount of Restricted Payments;
and, provided further, that, at the time of, and after giving effect to, any
Restricted Payment permitted by clauses (i), (ii), (iv) and (vi) of this Section
4.5(b) no Default or Event of Default shall have occurred and be continuing.
SECTION 4.6. Limitation on Restrictions on Distributions from
------------------------------------------------
Restricted Subsidiaries. The Company will not, and will not permit any
- - - - - - - - - - - -----------------------
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness or other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company or any Restricted Subsidiary, except:
(1) any encumbrance or restriction pursuant to an agreement in effect at or
entered into on the Issue Date;
(2) any encumbrance or restriction with respect to the Argentina Credit
Facility, the South Africa Credit Facility or the U.K. Credit Facility;
provided, however, that, except during a period when a default or an event of
default under such facilities shall have occurred and be continuing, no such
encumbrance or restriction shall limit the ability of the applicable borrower
under any such facility to dividend, loan, advance or otherwise transfer funds
to the Company required to pay interest, including additional cash interest and
Principal on the Securities;
(3) any encumbrance or restriction with respect to a Restricted Subsidiary
pursuant to an agreement relating to any Indebtedness Incurred by such
Restricted Subsidiary on or prior
<PAGE>
40
to the date on which such Restricted Subsidiary was acquired by the Company or a
Restricted Subsidiary (other than Indebtedness Incurred as consideration in, or
to provide all or any portion of the funds or credit support utilized to
consummate the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Subsidiary or was acquired by the Company or
a Restricted Subsidiary) and outstanding on such date;
(4) any encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred pursuant to an agreement referred to in
clause (1), (2) or (3) of this Section 4.6 or contained in any amendment to an
agreement referred to in clause (1), (2) or (3) of this Section 4.6; provided,
however, that the encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such refinancing agreement or amendment are no less
favorable to the Securityholders than the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in any such predecessor
agreements, as determined in good faith by the Company and evidenced by an
Officers' Certificate;
(5) in the case of clause (iii) of this Section 4.6, any encumbrance or
restriction that restricts in a customary manner the subletting, assignment or
transfer of any property or asset that is subject to a lease, license or similar
contract;
(6) in the case of clause (iii) of this Section 4.6, contained in security
agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the
extent such encumbrance or restrictions restrict the transfer of the property
subject to such security agreements or mortgages;
(7) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and
(8) any such encumbrance or restriction imposed by applicable law.
SECTION 4.7. Limitation on Sale of Assets and Subsidiary Stock. (a)
-------------------------------------------------
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, consummate any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value of the shares and assets
subject to such Asset Disposition (including as to the value of all non cash
consideration), as determined in good faith by the Board of Directors of the
Company and evidenced by a board resolution certified by the Secretary of the
Company and furnished to the Trustee, (ii) at least 75% of the consideration
thereof received by the Company or such Restricted Subsidiary is
<PAGE>
41
in the form of cash or cash equivalents and (iii) an amount equal to 100% of the
Net Available Cash from such Asset Disposition is applied by the Company or such
Restricted Subsidiary, as the case may be, (A) first, to the extent the Company
or any Restricted Subsidiary, as the case may be, elects (or is required by the
terms of any Senior Indebtedness), to prepay, repay, redeem or purchase Senior
Indebtedness of the Company or Indebtedness (other than Disqualified Stock) of a
Restricted Subsidiary (in each case other than Indebtedness owed to the Company
or an Affiliate of the Company) within 180 days from the later of the date of
such Asset Disposition or the receipt of such Net Available Cash; provided,
however, that any temporary prepayment or temporary repayment of amounts
outstanding under the New U.S. Credit Facility pending application pursuant to
clause (B) shall not constitute a prepayment or repayment of Senior Indebtedness
pursuant to this clause (A); (B) second, to the extent of the balance of Net
Available Cash after application in accordance with clause (A), to the extent
the Company or such Restricted Subsidiary, as the case may be, elects, to the
investment by the Company or any Wholly Owned Subsidiary in Additional Assets
within 360 days from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; (C) third, to the extent of the balance of
such Net Available Cash after application in accordance with clauses (A) and (B)
of this Section 4.7(a), to make an Offer (as defined below) to Holders of the
Securities to purchase Notes pursuant to and subject to the conditions set forth
in paragraph (b) of this Section 4.7; and (D) fourth, to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A), (B) and (C) of this Section 4.7(a), to (x) the acquisition by the Company
or any Wholly Owned Subsidiary of Additional Assets or (y) the prepayment,
repayment or purchase of Indebtedness of the Company (other than Indebtedness
owed to an Affiliate of the Company and other than Disqualified Stock of the
Company) or Indebtedness of any Restricted Subsidiary (other than Indebtedness
owed to the Company or an Affiliate of the Company), in each case within 360
days from the later of the receipt of such Net Available Cash and the date the
Offer is consummated; provided, however that in connection with any prepayment,
repayment or purchase of Indebtedness pursuant to clause (A) or (C) of this
Section 4.7(a), the Company or such Restricted Subsidiary will permanently
retire such Indebtedness and will cause any related loan commitment or
availability (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section 4.7(a), the
Company and its Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance herewith except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
accordance with this Section 4.7 exceeds $5,000,000. Pending application of Net
Available Cash pursuant to this Section 4.7, such Net Available Cash shall be
invested in Permitted
<PAGE>
42
Investments or to reduce outstanding loans under any working capital facility.
For the purposes of this Section 4.7(a) but not for purposes of the
definition of "Net Available Cash", the following are deemed to be cash: (x) the
assumption by the transferee of Indebtedness of the Company (other than
Disqualified Stock of the Company and other than Indebtedness that is
subordinated to the Securities) or Indebtedness of any Restricted Subsidiary and
the release of the Company or such Restricted Subsidiary from all liability on
such Indebtedness in connection with such Asset Disposition and (y) securities
received by the Company or any Restricted Subsidiary from the transferee that
are promptly converted by the Company or such Restricted Subsidiary into cash.
Notwithstanding the requirement in clause (ii) of Section 4.7(a) that
at least 75% of the consideration received in connection with an Asset
Disposition consist of cash or cash equivalents, the Company or its Restricted
Subsidiaries may sell or cause to be sold (A) assets of Lucas Argentina or its
Subsidiaries or (B) shares of Capital Stock of Lucas Argentina or its
Subsidiaries representing less than 50% of the total voting power of the Capital
Stock thereof in exchange for Additional Assets, equity interests in joint
ventures or other Persons engaged in a Related Business; provided that (1) in
the event such exchange transaction or series of related exchange transactions
(each an "Exchange Transaction") involves an aggregate value in excess of $1.0
million, the terms of such Exchange Transaction shall have been approved by a
majority of the members of the Board of Directors of the Company having no
personal stake in such Exchange Transaction, (2) in the event such Exchange
Transaction involves an aggregate value in excess of $5.0 million, the Company
shall have received a written opinion from a nationally recognized independent
investment banking firm that the Company has received consideration equal to the
fair market value of the assets or Capital Stock being disposed of and (3) the
fair market value (as determined in good faith by the Board of Directors of the
Company as of the date of each such Exchange Transaction) of all such Exchange
Transactions made since the Issue Date is no more than $10.0 million in the
aggregate.
(b) In the event of an Asset Disposition that requires the purchase of
Securities pursuant to Section 4.7(a)(iii)(C), the Company will be required to
purchase Securities tendered pursuant to an offer by the Company for the
Securities (the "Offer") at a purchase price of 100% of their principal amount
(without premium) plus accrued interest to the date of purchase in accordance
with the procedures (including prorating in the event of oversubscription) set
forth in this Indenture. If the aggregate purchase price of Securities tendered
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase of the Securities, the Company will apply the remaining Net Available
Cash in accordance with Section 4.7(a)(iii)(D).
<PAGE>
43
The Company shall not be required to make an Offer for Notes pursuant to this
Section 4.7(b) if the Net Available Cash available therefor (after application
of the proceeds as provided in clauses (A) and (B) of Section 4.7(a)) are less
than $10.0 million for all Asset Dispositions (which lesser amounts shall be
carried forward for purposes of determining whether an Offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).
(c)(1) Promptly, and in any event within 30 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, at the address
appearing in the security register, a written notice stating that the Holder may
elect to have his Securities purchased by the Company either in whole or in part
(subject to prorationing as hereinafter described in the event the Offer is
oversubscribed) in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice shall specify a purchase date not less
than 30 days nor more than 60 days after the date of such notice (the "Purchase
Date") and shall contain all instructions and materials necessary to tender
Securities pursuant to the Offer.
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, the Company shall deliver to
the Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the
Asset Dispositions pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.7(a). Upon
the expiration of the period for which the Offer remains open (the "Offer
Period"), the Company shall deliver to the Trustee for cancellation the
Securities or portions thereof which have been properly tendered to and are
to be accepted by the Company. Not later than 11:00 a.m. (New York City
time) on the Purchase Date, the Company shall irrevocably deposit with the
Trustee or with a paying agent (or, if the Company is acting as Paying
Agent, segregate and hold in trust) an amount in cash sufficient to pay the
Offer Amount for all Securities properly tendered to and accepted by the
Company. The Trustee shall, on the Purchase Date, mail or deliver payment
to each tendering Holder in the amount of the purchase price.
(3) Holders electing to have a Security purchased will be required to
surrender the Security, together with all necessary endorsements and other
appropriate materials duly completed, to the Company at the address
specified in the notice at least three Business Days prior to the Purchase
Date. Holders will be entitled to withdraw their election in whole or in
part if the Trustee or the Company receives not later than one Business Day
prior to the Purchase Date,
<PAGE>
44
a facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Security (which shall be $1,000 or an integral
multiple thereof) which was delivered for purchase by the Holder, the
aggregate principal amount of such Security (if any) that remains subject
to the original notice of the Offer and that has been or will be delivered
for purchase by the Company and a statement that such Holder is withdrawing
his election to have such Security purchased. If at the expiration of the
Offer Period the aggregate principal amount of Securities surrendered by
Holders exceeds the Offer Amount, the Company shall select the Securities
to be purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only securities in denominations of
$1,000, or integral multiples thereof, shall be purchased). Holders whose
Securities are purchased only in part will be issued new Securities equal
in principal amount to the unpurchased portion of the Securities
surrendered.
(4) A Security shall be deemed to have been accepted for purchase at
the time the Trustee, directly or through an agent, mails or delivers
payment therefor to the surrendering Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.7. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.7, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.7 by virtue
thereof.
SECTION 4.8. Limitation on Transactions With Affiliates. (a) The
------------------------------------------
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into or conduct any transaction or series of transactions
(including the purchase, sale, lease or exchange of any property, employee
compensation arrangements or the rendering of any service) with any Affiliate of
the Company (an "Affiliate Transaction") unless (i) the terms of such
transaction are no less favorable to the Company or such Restricted Subsidiary,
as the case may be, than those that could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an Affiliate;
(ii) in the event such Affiliate Transaction involves an aggregate amount in
excess of $1,000,000, the terms of such transaction are set forth in writing and
shall have been approved by a majority of the members of the Board of Directors
of the Company having no personal stake in such Affiliate Transaction (and such
majority determines that such Affiliate Transaction satisfies the criteria in
clause (i) of this Section 4.8(a)) and (iii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $5,000,000, the Company
has
<PAGE>
45
received a written opinion from a nationally recognized independent investment
banking firm that such Affiliate Transaction is fair to the Company and its
Restricted Subsidiaries from a financial point of view.
(b) The foregoing provisions of Section 4.8(a) shall not prohibit:
(i) any Restricted Payment permitted to be made pursuant to
Section 4.5;
(ii) any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved
by the Board of Directors of the Company;
(iii) the grant of stock options or similar rights to employees
and directors of the Company pursuant to plans approved by the Board of
Directors of the Company;
(iv) loans or advances to employees in the ordinary course of
business in accordance with the past practices of the Company or its
Restricted Subsidiaries, but in any event not to exceed $1.5 million in the
aggregate outstanding at any one time;
(v) the payment of reasonable fees and indemnities to
directors of the Company and its Restricted Subsidiaries who are not
employees of the Company or its Restricted Subsidiaries;
(vi) any transaction between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries;
(vii) the issuance or sale of any Capital Stock (other than
Disqualified Stock) of the Company; and
(viii) the payment to Genstar Investment Corporation or an
affiliate of an annual management fee not to exceed an amount per annum
equal to the greater of $900,000 and 0.3% of the Company's consolidated net
sales, plus, in each case, the reimbursement of reasonable out-of-pocket
expenses.
SECTION 4.9. Change of Control. (a) Upon the occurrence of a
-----------------
Change of Control, each Holder shall have the right to require that the Company
repurchase all or any part of such Holder's Securities at a purchase price in
cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date), in accordance with the terms contemplated in Section
4.9(b).
<PAGE>
46
(b) (i) Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder at its registered address with a copy to the
Trustee stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase any or all of such Holder's
Securities in denominations of $1,000 or any integral multiple thereof at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase (subject to
the right of Holders of record on the relevant record date to receive
interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of
Control);
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this
covenant, that a Holder must follow in order to have its Securities
purchased by the Company.
(c) Holders electing to have a Security purchased will be required to
surrender the Security, together with all necessary endorsements and other
appropriate materials duly completed, to the Company at the address specified in
the notice at least three Business Days prior to the purchase date. Holders
will be entitled to withdraw their election if the Trustee or the Company
receives not later than one Business Day prior to the purchase date, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder as to
which such notice of withdrawal is being submitted and a statement that such
Holder is withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered to the Trustee for cancellation, and the
Company shall pay the purchase price, including premium, if any, plus accrued
and unpaid interest, if any, to the Holders entitled thereto.
(e) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.9. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.9, the Company will
comply with the applicable securities laws and regulations and
<PAGE>
47
will not be deemed to have breached its obligations under this Section 4.9 by
virtue thereof.
(f) Notwithstanding the occurrence of a Change of Control, the
Company shall not be obligated to repurchase the Securities or otherwise comply
with this Section if the Company has irrevocably elected to redeem all the
Securities in accordance with Article 3; provided that the Company does not
default in its redemption obligations pursuant to such election.
SECTION 4.10. Limitation on Sale or Issuance of Capital Stock of
--------------------------------------------------
Restricted Subsidiaries. The Company (i) will not, and will not permit any
- - - - - - - - - - - -----------------------
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Restricted Subsidiary to any
Person (other than to the Company or a Wholly Owned Subsidiary), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock of such Restricted Subsidiary (or, (x) in the case of a non-Wholly Owned
Subsidiary, all of the Capital Stock of such Subsidiary owned by the Company and
(y) in the case of Lucas Argentina and its Subsidiaries, shares of Capital Stock
in Exchange Transactions in accordance with Section 4.7 so long as after any
such sale Lucas Argentina continues to constitute a Restricted Subsidiary) and
(b) the net cash proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with Section 4.7 and (ii) will not permit
any Restricted Subsidiary to issue any of its Capital Stock (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying shares
or similar shares and, in the case of a Non-U.S./U.K. Subsidiary, shares
required to be owned by citizens of such Subsidiary's jurisdiction of
organization) to any Person other than to the Company or a Wholly Owned
Subsidiary or to officers or employees of such Restricted Subsidiary in
connection with stock options or stock ownership or other benefit plans approved
by the Board of Directors of the Company.
SECTION 4.11. Limitation on Liens. The Company will not, and will
-------------------
not permit any Restricted Subsidiary of the Company to, directly or indirectly,
create or permit to exist any Lien on any of its property or assets (including
Capital Stock), whether owned on the Issue Date or thereafter acquired, securing
any obligation, other than Permitted Liens, unless contemporaneously therewith
effective provision is made to secure the Securities equally and ratably with
(or on a senior basis to, in the case of Subordinated Obligations) such
obligation for so long as such obligation is so secured.
SECTION 4.12. Limitation on Sale/Leaseback Transactions. The
-----------------------------------------
Company will not, and will not permit any Restricted Subsidiary of the Company
to, enter into any Sale/Leaseback Transaction with respect to any property
unless (i) the Company or such Restricted Subsidiary would be entitled to (A)
Incur Indebtedness in an amount equal to the Attributable
<PAGE>
48
Indebtedness with respect to such Sale/Leaseback Transaction pursuant to Section
4.3 and (B) create a Lien on such property securing such Attributable
Indebtedness without equally and ratably securing the Securities pursuant to
Section 4.11, (ii) the net cash proceeds received by the Company or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair value (as determined in good faith by the Board of
Directors of the Company and certified in an Officers' Certificate to the
Trustee) of such property and (iii) the transfer of such property is permitted
by, and the Company or such Restricted Subsidiary applies the proceeds of such
transaction in compliance with Section 4.7.
SECTION 4.13. Limitation on Business Activities and Investments of
----------------------------------------------------
the Guarantor and Existing Non-Company Guarantor Subsidiaries. (a) The
- - - - - - - - - - - -------------------------------------------------------------
Guarantor shall not (i) engage in any activities or hold any assets other than
the Capital Stock of the Company and of the Existing Non-Company Guarantor
Subsidiaries or (ii) Incur any liabilities other than (A) liabilities under the
PEI Guarantee, (B) liabilities under Guarantees by the Guarantor of amounts
under the New U.S. Credit Facility, (C) liabilities under Guarantees by the
Guarantor of the performance of the Company's obligations in connection with the
Lucas Acquisition and (D) liabilities for overhead expenses, taxes and legal,
accounting and other professional fees and expenses. The Guarantor shall not
make any Investment other than in (i) the Voting Stock of the Company and of the
Existing Non-Company Guarantor Subsidiaries, (ii) Guarantees permitted by this
Section 4.13 (iii) Temporary Cash Investments and (iv) connection with the
Recapitalization; provided, however, that if the Guarantor merges into the
Company, the covenant in this Section 4.13(a) shall no longer be applicable.
(b) The Guarantor shall cause each Existing Non-Company Guarantor
Subsidiary not to (i) engage in any activities other than activities conducted
by such Existing Non-Company Guarantor Subsidiary as of the Issue Date or (ii)
Incur any liabilities; provided, however, that if any Existing Non-Company
Guarantor Subsidiary shall merge into the Company or any Wholly Owned
Subsidiary, the covenant in this Section 4.3(b) shall no longer be applicable
with respect to such Existing Non-Company Guarantor Subsidiary.
SECTION 4.14. Compliance Certificate. The Company and the Guarantor
----------------------
shall deliver to the Trustee within 120 days after the end of each fiscal year
of the Company an Officers' Certificate signed by the chief executive officer,
the chief financial officer or the chief accounting officer stating that in the
course of the performance by the signers of their duties as Officers of the
Company they would normally have knowledge of any Default or Event of Default
and whether or not the signers know of any Default or Event of Default that
occurred during such period. If they do, the certificate shall describe the
Default or Event of Default, its status and what action the Company is
<PAGE>
49
taking or proposes to take with respect thereto. The Company also shall comply
with TIA (S) 314(a)(4).
SECTION 4.15. Further Instruments and Acts. Upon reasonable request
----------------------------
of the Trustee, the Company will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
SECTION 4.16. Maintenance of Office or Agency. The Company shall
-------------------------------
maintain the office or agency required under Section 2.3. The Company shall
give prior written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 11.2.
SECTION 4.17. Corporate Existence. Except as otherwise permitted by
-------------------
Article V and Section 4.9, the Company shall do or cause to be done, at its own
cost and expense, all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate existence of each of its
Subsidiaries in accordance with the respective organizational documents of each
such Subsidiary and the material rights (charter and statutory) and franchises
of the Company and each such Subsidiary; provided, however, that the Company
shall not be required to preserve, with respect to itself, any material right or
franchise and, with respect to any of its Subsidiaries, any such existence,
material right or franchise, if the Board of Directors of the Company shall
determine in good faith (such determination to be evidenced by a board
resolution certified by the Secretary of the Company and furnished to the
Trustee), that the preservation thereof is no longer desirable in the conduct of
the business of the Company and the Subsidiaries, taken as a whole.
SECTION 4.18. Payment of Taxes and Other Claims. The Company shall
---------------------------------
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all material taxes, assessments and governmental charges
(including withholding taxes and any penalties, interest and additions to taxes)
levied or imposed upon it or any of its Subsidiaries or properties of it or any
of its Subsidiaries and (ii) all lawful claims for labor, materials and supplies
that, if unpaid, might by law become a Lien upon the property of it or any of
its Subsidiaries; provided, however, that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings properly instituted and diligently
conducted for which adequate reserves, to the extent required under GAAP, have
been taken.
<PAGE>
50
SECTION 4.19. Maintenance of Properties and Insurance. (a) The Company
---------------------------------------
shall, and shall cause each of its Subsidiaries to, maintain its material
properties in good working order and condition (subject to ordinary wear and
tear) and make or cause to be made all necessary repairs, renewals,
replacements, additions, betterments and improvements thereto and actively
conduct and carry on its business, all as in the reasonable judgment of the
Company as is necessary so that the business carried on by Company and its
Subsidiaries may be actively conducted; provided, however, that nothing in this
Section 4.19 shall prevent the Company or any of its Subsidiaries from
discontinuing the operation and maintenance of any of its properties, if such
discontinuance is, in the good faith judgment of the Board of Directors of the
Company or the Subsidiary, as the case may be (such judgment to be evidenced by
a board resolution certified by the Secretary of the Company and furnished to
the Trustee), desirable in the conduct of their respective businesses and is not
disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for itself and
each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the good faith judgment of the
Board of Directors of the Company, are adequate and appropriate for the conduct
of the business of the Company and such Subsidiaries in a prudent manner, with
reputable insurers or with the government of the United States of America, any
state thereof or any agency or instrumentality of such governments, in such
amounts, with such deductibles, and by such methods as shall be customary, in
the good faith judgment of the Board of Directors of the Company, for companies
similarly situated in the industry.
ARTICLE V
Successor Company
-----------------
SECTION 5.1. When the Company May Merge or Transfer Assets. The
---------------------------------------------
Company will not consolidate with or merge with or into, or convey, transfer or
lease, in one transaction or a series of transactions, all or substantially all
its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") will be a Person organized and existing under the laws
------------------
of the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) will expressly
assume, by supplemental indenture, executed and delivered to the Trustee,
in form satisfactory to the Trustee, all the obligations of the Company
under the Securities and this Indenture;
<PAGE>
51
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Restricted Subsidiary
at the time of such transaction), no Default or Event of Default will have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness under Section 4.3(a);
(iv) immediately after giving effect to such transaction, the
Successor Company will have a Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(v) the Company will have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture, as set forth in this Indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease of all its
assets or substantially all its assets will not be released from the obligation
to pay the Principal of and interest on the Securities.
ARTICLE VI
Defaults and Remedies
---------------------
SECTION 6.1. Events of Default. An "Event of Default" occurs if:
-----------------
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, and such default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or
otherwise;
(3) the Company fails to comply with Article V;
(4) the Guarantor or the Company fails to comply with Section 4.2,
4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12 or 4.13 (other than a
failure to repurchase Securities when required pursuant to Section 4.7 or
4.9 which failure
<PAGE>
52
shall constitute an Event of Default under Section 6.1(2)) and such failure
continues for 30 days after the notice specified below;
(5) the Company or the Guarantor fails to comply with any of its
agreements in the Securities or this Indenture (other than those referred
to in (1), (2), (3) or (4) above) and such failure continues for 60 days
after the notice specified below;
(6) the Company or the Guarantor or any Significant Subsidiary of the
Company fails to pay any interest or Principal on any Indebtedness within
any applicable grace period provided in such Indebtedness after final
maturity or the acceleration of any such Indebtedness by the holders
thereof because of a default and the total amount of such Indebtedness
unpaid or accelerated exceeds $10.0 million or its foreign currency
equivalent at the time;
(7) the Company, the Guarantor or a Significant Subsidiary of the
Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case in which it is the debtor;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company, the Guarantor or any
Significant Subsidiary of the Company in an involuntary case;
(B) appoints a Custodian of the Company, the Guarantor or any
Significant Subsidiary or for any substantial part of its property of
the Company, the Guarantor or Significant Subsidiary; or
(C) orders the winding up or liquidation of the Company, the
Guarantor or any Significant Subsidiary of the Company;
<PAGE>
53
(or any similar relief is granted under any foreign laws) and the order,
decree or relief remains unstayed and in effect for 60 days; or
(9) any judgment or decree by a court of competent jurisdiction for
the payment of money in excess of $10.0 million or its foreign currency
equivalent at the time is entered against the Company, the Guarantor or any
Significant Subsidiary of the Company and either (A) an enforcement
proceeding has been commenced by any creditor upon such judgment or decree
and is not discharged, waived or stayed within 10 days after notice and is
not covered by an insurance company which has accepted coverage or (B) such
judgment or decree remains unpaid and outstanding for a period of 60 days
following such judgment and is not discharged, waived or stayed within 10
days after notice and is not covered by an insurance company which has
accepted coverage.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
------------------
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4), (5), (6) and (9) of this Section 6.1 is
not an Event of Default until the Trustee by notice to the Company or the
Holders of at least 25% in aggregate principal amount of the outstanding
Securities by notice to the Company gives notice of the Default and the Company
does not cure such Default within the time specified in said clause (4), (5),
(6) or (9) after receipt of such notice. Such notice must specify the Default,
demand that it be remedied and state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) of this Section 6.1 and any event which
with the giving of notice or the lapse of time would become an Event of Default
under clause (4), (5) or (9) of this Section 6.1 and what action the Company is
taking or proposes to take with respect thereto. In addition, the Company is
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year.
<PAGE>
54
SECTION 6.2. Acceleration. If an Event of Default (other than an
------------
Event of Default specified in Section 6.1(7) or (8) with respect to the Company)
occurs and is continuing, the Trustee by notice to the Company, or the Holders
of at least 25% in aggregate principal amount of the outstanding Securities by
notice to the Company and the Trustee, may declare the Principal of and accrued
but unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such Principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.1(7) or (8) with respect to the
Company occurs and is continuing, the Principal of and accrued interest on all
the Securities shall ipso facto become and be immediately due and payable
---- -----
without any declaration or other act on the part of the Trustee or any Holders.
The Holders of a majority in aggregate principal amount of the outstanding
Securities by notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of Principal or interest that has become due solely because of
acceleration and the Trustee has been paid all amounts due to it pursuant to
Section 7.7. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy to collect the payment
of Principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are, to the extent
permitted by law, cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in
-----------------------
aggregate principal amount of the Securities then outstanding by notice to the
Trustee may waive any past or existing Default and its consequences except (i) a
Default in the payment of the Principal of or interest on a Security or (ii) a
Default in respect of a provision that under Section 9.2 cannot be amended
without the consent of each Securityholder affected. When a Default is waived,
it is deemed cured, and any Event of Default arising therefrom shall be deemed
to have been cured, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.
SECTION 6.5. Control by Majority. Upon provision of reasonable
-------------------
indemnity to the Trustee satisfactory to the Trustee, the Holders of a majority
in aggregate principal amount of the
<PAGE>
55
Securities then outstanding may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee,
which may rely on opinions of counsel, may refuse to follow any direction that
conflicts with law or this Indenture or, subject to Section 7.1, that the
Trustee determines is unduly prejudicial to the rights of other Securityholders
or would involve the Trustee in personal liability; provided, however, that the
-------- -------
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction.
SECTION 6.6. Limitation on Suits. A Holder may not pursue any
-------------------
remedy with respect to this Indenture or the Securities unless:
(i) the Holder gives to the Trustee previous written notice
stating that an Event of Default is continuing;
(ii) the Holders of at least 25% in aggregate principal amount
of the Securities then outstanding make a written request to the Trustee to
pursue the remedy;
(iii) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or indemnity;
and
(v) the Holders of a majority in aggregate principal amount of
the Securities then outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. Rights of Holders To Receive Payment. Notwithstanding
------------------------------------
any other provision of this Indenture, the right of any Holder to receive
payment of Principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.8. Collection Suit by Trustee. If an Event of Default
--------------------------
specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid
<PAGE>
56
interest to the extent lawful) and the amounts provided for in Section
7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file
--------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or
----------
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for Principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for Principal and interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Company shall mail to each Securityholder and the Trustee a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the
---------------------
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.7 or a suit by Holders of more than 10% in aggregate principal amount of the
outstanding Securities.
<PAGE>
57
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the
--------------------------------
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE VII
Trustee
-------
SECTION 7.1. Duties of Trustee. (a) If an Event of Default has
-----------------
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 7.1;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
<PAGE>
58
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(f) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.1 and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. (a) The Trustee may rely on any
-----------------
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
-------- -------
misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
<PAGE>
59
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
(g) The Trustee shall not be charged with knowledge of any Default or
Event of Default with respect to the Securities unless either (1) a Trust
Officer shall have actual knowledge of such Default or Event of Default or (2)
written notice of such Default or Event of Default shall have been given to the
Trustee by the Company or any other obligor on the Securities or by any Holder
of the Securities.
SECTION 7.3. Individual Rights of Trustee. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its respective Affiliates with the
same rights it would have if it were not Trustee. Any Paying Agent, Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
--------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture, the Securities or the PEI Guarantee, it shall not be accountable
for the Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company or any Subsidiary Guarantor in this
Indenture or in any document issued in connection with the sale of the
Securities or in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.5. Notice of Defaults. If a Default or an Event of
------------------
Default occurs and is continuing and if it is known to the Trustee, the Trustee
shall mail to each Securityholder notice of the Default within 30 days after it
is known to a Trust Officer or written notice of it is received by the Trustee.
Except in the case of a Default in payment of Principal of or interest on any
Security, the Trustee may withhold the notice if and so long as a committee of
its Trust Officers in good faith determines that withholding the notice is not
opposed to the interests of Securityholders.
SECTION 7.6. Reports by Trustee to Holders. As promptly as
-----------------------------
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of such May 15 that
complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)
313(b). The Trustee shall promptly deliver to the Company a copy of any report
it delivers to Holders pursuant to this Section 7.6.
<PAGE>
60
A copy of each report at the time of its mailing to Securityholders
shall be filed by the Trustee with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall pay to
--------------------------
the Trustee from time to time such compensation for its services as the Company
and the Trustee shall from time to time agree in writing. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to such compensation for its services, except any such
expense, disbursement or advance as may arise from its negligence, wilful
misconduct or bad faith, unless the Trustee shall have complied with the
applicable standard of care required by the TIA. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. The Trustee shall provide
the Company reasonable notice of any expenditure not in the ordinary course of
business; provided that prior approval by the Company of any such expenditure
--------
shall not be a requirement for the making of such expenditure nor for
reimbursement by the Company thereof. The Company shall indemnify each of the
Trustee and any predecessor Trustees against any and all loss, damage, claim,
liability or expense (including attorneys' fees and expenses) (other than taxes
applicable to the Trustee's compensation hereunder) incurred by it in connection
with the acceptance or administration of this trust and the performance of its
duties hereunder. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee may have separate counsel, and the Company will
pay the reasonable fees and expenses of such counsel. The Company need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own wilful misconduct, negligence
or bad faith, unless the Trustee shall have complied with the applicable
standard of care required by the TIA.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
Principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section 7.7 shall
survive the resignation or removal of the Trustee and discharge of this
Indenture. When the Trustee incurs expenses after the occurrence of a Default
specified in Section
<PAGE>
61
6.1(7) or (8) with respect to the Company, the expenses are intended to
constitute expenses of administration under the Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any
----------------------
time with 30 days notice to the Company. The Holders of a majority in principal
amount of the Securities then outstanding, may remove the Trustee with 30 days
notice to the Trustee and may appoint a successor Trustee. The Company shall
remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Trustee
or its property; or
(iv) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
<PAGE>
62
SECTION 7.9. Successor Trustee by Merger. If the Trustee
---------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee, provided that such corporation shall
--------
be eligible under this Article Seven and TIA Section 3.10(a).
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
-----------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
-------- -------
of TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with (S) TIA 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.1. Discharge of Liability on Securities; Defeasance.
------------------------------------------------
(a) When (i) the Company delivers to the Trustee all outstanding Securities
(other than Securities replaced pursuant to Section 2.7) for cancellation or
(ii) all outstanding Securities have become due and payable, whether at maturity
or as a result of the mailing of a notice of redemption pursuant to Article 3
hereof or the Securities will become due and payable at their Maturity within 91
days, or the Securities are to be called
<PAGE>
63
for redemption within 91 days under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company, and, in each case of this clause (ii), the Company
irrevocably deposits or causes to be deposited with the Trustee funds sufficient
to pay at maturity or upon redemption all outstanding Securities, including
interest thereon to maturity or such redemption date (other than Securities
replaced pursuant to Section 2.7), and if in either case the Company pays all
other sums payable hereunder by the Company, then this Indenture shall, subject
to Section 8.1(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel from the
Company that all conditions precedent provided herein for relating to
satisfaction and discharge of this Indenture have been complied with and at the
cost and expense of the Company.
(b) Subject to Sections 8.1(c) and 8.2, the Company at any time may
terminate (i) all of its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations and the obligations of the
Guarantor under Sections 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11,
4.12 and 4.13 and the operation of Sections 6.1(4), 6.1(5), 6.1(6), 6.1(7) (but
only with respect to a Significant Subsidiary), 6.1(8) (but only with respect to
a Significant Subsidiary), 6.1(9), 5.1(iii) and 5.1(iv) ("covenant defeasance
option"). The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section 6.1(4),
6.1(5), 6.1(6), 6.1(7) (but only with respect to a Significant Subsidiary),
6.1(8) (but only with respect to a Significant Subsidiary) or 6.1(9) or because
of the failure of the Company to comply with Sections 5.1(iii) and 5.1(iv). If
the Company exercises its legal defeasance option, the Guarantor will be
released from all of its obligations under the PEI Guarantee.
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.3, 2.4, 2.5, 2.7, 4.1, 4.16, 4.17, 7.7, 7.8, 8.4, 8.5
and 8.6 shall survive until the Securities have been paid in full. Thereafter,
the Company's obligations in Sections 7.7, 8.4 and 8.5 shall survive.
<PAGE>
64
SECTION 8.2. Conditions to Defeasance. The Company may exercise
------------------------
its legal defeasance option or its covenant defeasance option only if:
(i) the Company irrevocably deposits or causes to be deposited
in trust with the Trustee money or U.S. Government Obligations which
through the scheduled payment of Principal and interest in respect thereof
in accordance with their terms will provide cash at such times and in such
amounts as will be sufficient to pay Principal and interest when due on all
outstanding Securities (except Securities replaced pursuant to Section 2.7)
to maturity or redemption, as the case may be;
(ii) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of Principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay Principal and interest when due
on all outstanding Securities (except Securities replaced pursuant to
Section 2.7) to maturity or redemption, as the case may be;
(iii) 91 days pass after the deposit is made and during the 91-day
period no Default specified in Section 6.1(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
(iv) the deposit does not constitute a default under any other
material agreement binding on the Company;
(v) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does not constitute,
or is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(vi) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Securityholders will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such deposit
and defeasance had not occurred;
(vii) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of
<PAGE>
65
Counsel to the effect that the Securityholders will not recognize income,
gain or loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such deposit and covenant defeasance had not occurred; and
(viii) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.3. Application of Trust Money. The Trustee shall hold in
--------------------------
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S. Government
Obligations either directly or through the Paying Agent as the Trustee may
determine and in accordance with this Indenture to the payment of Principal of
and interest on the Securities.
SECTION 8.4. Repayment to Company. The Trustee and the Paying
--------------------
Agent shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of Principal or interest that remains unclaimed for two
years after the date of payment of such Principal and interest, and, thereafter,
Securityholders entitled to the money must look to the Company for payment as
general creditors.
SECTION 8.5. Indemnity for Government Obligations. The Company
------------------------------------
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
Principal and interest received on such U.S. Government Obligations other than
any such tax, fee or other charge which by law is for the account of the Holders
of the defeased Securities; provided that the Trustee shall be entitled to
charge any such tax, fee or other charge to such Holder's account.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is
-------------
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under
<PAGE>
66
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, (a) if
-------- -------
the Company has made any payment of interest on or Principal of any Securities
following the reinstatement of their obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent and (b) unless otherwise required by any legal proceeding or any
order or judgment of any court or governmental authority, the Trustee or Paying
Agent shall return all such money and U.S. Government Obligations to the Company
promptly after receiving a written request therefor at any time, if such
reinstatement of the Company's obligations has occurred and continues to be in
effect.
ARTICLE IX
Amendments
----------
SECTION 9.1. Without Consent of Holders. The Company, the Guarantor
--------------------------
and the Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:
(i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article 5;
(iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
-------- -------
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are as described in Section 163(f)(2)(B) of the Code;
(iv) to add Guarantees with respect to the Securities;
(v) to secure the Securities;
(vi) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(vii) to make any change that does not adversely affect the rights of
any Securityholder; and
(viii) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA.
<PAGE>
67
After an amendment under this Section 9.1 becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section 9.1.
SECTION 9.2. With Consent of Holders. The Company, the Guarantor and
-----------------------
the Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities then outstanding (including
consents obtained in connection with a tender offer or exchange for Securities).
However, without the consent of each Securityholder affected, an amendment may
not:
(i) reduce the amount of Securities whose Holders must consent to
an amendment, supplement or waiver;
(ii) reduce the rate of or extend the time for payment of interest
on any Security;
(iii) reduce the principal of or extend the Stated Maturity of any
Security;
(iv) reduce the premium payable upon the redemption of any Security
or change the time at which any Security may be redeemed in accordance
with Article 3;
(v) make any Security payable in money other than that stated in
the Security;
(vi) impair the right of any Holder to receive payment of Principal
of and interest on such Holder's Securities on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such Holder's Securities; or
(vii) make any change in the second sentence of this Section 9.2.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.2 becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section 9.2.
<PAGE>
68
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to
-----------------------------------
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers. A
---------------------------------------------
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. After an
amendment or waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment
-------------------------------------
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determine, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. Trustee To Sign Amendments. The Trustee shall sign any
--------------------------
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, in addition to the documents required by Section 12.4, an Officers'
Certificate and an Opinion of Counsel stating that such amendment complies with
the provisions of this Article 9.
SECTION 9.7. Payment for Consent. Neither the Company nor any
-------------------
affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for, or as an inducement to any consent, waiver or amendment of any of the
<PAGE>
69
terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid to all Holders that so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating to
such consent, waiver or agreement.
ARTICLE X
PEI Guarantee
-------------
SECTION 10.1. PEI Guarantee. (a) The Guarantor, as primary obligor
-------------
and not merely as surety, hereby unconditionally and irrevocably guarantees on a
senior basis to each Holder and to the Trustee and its successors and assigns
(a) the full and punctual payment of Principal of and interest on the Securities
when due, whether at Stated Maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Company under this
Indenture (including obligations to the Trustee) and the Securities and (b) the
full and punctual performance within applicable grace periods of all other
obligations of the Company under this Indenture and the Securities (all the
foregoing being hereinafter collectively called the "Guaranteed Obligations").
The Guarantor further agrees that the Guaranteed Obligations may be extended or
renewed, in whole or in part, without notice or further assent from the
Guarantor, and that the Guarantor will remain bound under this Article X
notwithstanding any extension or renewal or any Guaranteed Obligation.
(b) The Guarantor waives presentation to, demand of, payment from and
protest to the Company of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. The Guarantor waives notice of any default
under the Securities or the Guaranteed Obligations. The obligations of the
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any thereof;
(c) any rescission, waiver, amendment or modification of any of the terms or
provisions of this Indenture, the Securities or any other agreement; (d) the
release of any security held by any Holder or the Trustee for the Guaranteed
Obligations or any of them; (e) the failure of any Holder or Trustee to exercise
any right or remedy against any other guarantor of the Guaranteed Obligations;
or (f) any change in the ownership of the Guarantor.
(c) The Guarantor further agrees that the PEI Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Holder or the Trustee to any security held for payment of the
Guaranteed Obligations.
<PAGE>
70
(d) The PEI Guarantee is an unsecured senior obligation of the
Guarantor and ranks pari passu with other senior unsecured indebtedness of the
Guarantor.
(e) The obligations of the Guarantor hereunder shall not be subject
to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Guaranteed Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of the Guarantor herein shall
not be discharged or impaired or otherwise affected by the failure of any Holder
or the Trustee to assert any claim or demand or to enforce any remedy under this
Indenture, the Securities or any other agreement, by any waiver or modification
of any thereof, by any default, failure or delay, willful or otherwise, in the
performance of the obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of the Guarantor or would otherwise operate as a discharge
of the Guarantor as a matter of law or equity.
(f) The Guarantor further agrees that the PEI Guarantee herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of Principal of or interest on any Guaranteed
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.
(g) The PEI Guarantee is a continuing guarantee and shall (a) remain
in full force and effect until payment in full of all the Guaranteed
Obligations, (b) be binding upon the Guarantor and (c) enure to the benefit of
and be enforceable by the Trustee, the Holders and their successors, transferees
and assigns.
(h) In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against the
Guarantor by virtue hereof, upon the failure of the Company to pay the Principal
of or interest on any Guaranteed Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Guaranteed Obligation, the Guarantor hereby
promises to and will, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid Principal amount of such Guaranteed Obligations,
(ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the
extent not prohibited by law) and (iii) all other monetary Guaranteed
Obligations of the Company to the Holders and the Trustee.
<PAGE>
71
(i) The Guarantor agrees that it shall not be entitled to any right
of subrogation in relation to the Holders in respect of any Guaranteed
Obligations guaranteed hereby until payment in full of all Guaranteed
Obligations. The Guarantor further agrees that, as between it, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
Guaranteed Obligations guaranteed hereby may be accelerated as provided in
Article VI for the purposes of the PEI Guarantee herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Guaranteed Obligations hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article VI, such Guaranteed
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purposes of this Section 10.1.
(j) The Guarantor also agrees to pay any and all costs and expenses
(including reasonable counsel fees and expenses) incurred by the Trustee or any
Holder in enforcing any rights under this Section 10.1.
SECTION 10.2. Limitation on Liability. Any term or provision of
-----------------------
this Indenture to the contrary notwithstanding, the maximum, aggregate amount of
the obligations guaranteed hereunder by the Guarantor shall not exceed the
maximum amount that can be hereby guaranteed without rendering this Indenture,
as it relates to the Guarantor, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer.
SECTION 10.3. Successors and Assigns. This Article X shall be
----------------------
binding upon the Guarantor and its successors and assigns and shall enure to the
benefit of the successors and assigns of the Trustee and the Holders and, in the
event of any transfer or assignment of rights by any Holder or the Trustee, the
rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 10.4. No Waiver. Neither a failure nor a delay on the part
---------
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article X shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article X at law,
in equity, by statute or otherwise.
SECTION 10.5. Modification. No modification, amendment or waiver of
------------
any provision of this Article X, nor the consent to any departure by the
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed
<PAGE>
72
by the Trustee, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand on
the Guarantor in any case shall entitle the Guarantor to any other or further
notice or demand in the same, similar or other circumstances.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.1. Trust Indenture Act Controls. If any provision of this
----------------------------
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control.
SECTION 11.2. Notices. Any notice or communication shall be in
-------
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Prestolite Electric Incorporated
2100 Commonwealth Boulevard
Ann Arbor, Michigan 48105
Attention: Kenneth C. Cornelius
if to the Guarantor:
PEI Holding, Inc.
2100 Commonwealth Boulevard
Ann Arbor, Michigan 48105
Attention: Kenneth C. Cornelius
if to the Trustee:
First Trust National Association
Buhl Building, Suite 740
535 Griswold
Detroit, Michigan 48226
Attention: Corporate Trust Administration
The Company, the Guarantor, or the Trustee by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar
<PAGE>
73
and shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.3. Communication by Holders with other Holders. Security-
-------------------------------------------
holders may communicate pursuant to TIA (S) 312(b) with other Securityholders
with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA (S) 312(c).
SECTION 11.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(i) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(ii) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.5. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(i) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(iv) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
<PAGE>
74
SECTION 11.6. When Securities Disregarded. In determining whether
---------------------------
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which a Trust Officer of the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
SECTION 11.7. Rules by Trustee, Paying Agent and Registrar. The
--------------------------------------------
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 11.8. Legal Holidays. A "Legal Holiday" is a Saturday, a
-------------- -------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period. If a regular record date is
a Legal Holiday, the record date shall not be affected.
SECTION 11.9. Governing Law. This Indenture and the Securities shall
-------------
be governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 11.10. No Recourse Against Others. A director, officer,
--------------------------
employee or stockholder, as such, of the Company or the Guarantor shall not have
any liability for any obligations of the Company or the Guarantor under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.
SECTION 11.11. Successors. All agreements of the Company and the
----------
Guarantor in this Indenture and the Securities shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.12. Multiple Originals. The parties may sign any number
------------------
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
<PAGE>
75
SECTION 11.13. Variable Provisions. The Company initially appoints
-------------------
the Trustee as Paying Agent and Registrar and custodian with respect to any
Global Securities.
SECTION 11.14. Qualification of Indenture. The Company shall qualify
--------------------------
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees for the Company, the Trustee and the Holders)
incurred in connection therewith, including, but not limited to, costs and
expenses of qualification of this Indenture and the Securities and printing this
Indenture and the Securities. The Trustee shall be entitled to receive from the
Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 11.15. Table of Contents; Headings. The table of contents,
---------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE>
76
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
PRESTOLITE ELECTRIC INCORPORATED
By: /s/ Kenneth C. Cornelius
______________________________
Name: Kenneth C. Cornelius
Title: Vice President and
Chief Financial Officer
PEI HOLDING, INC.
By: /s/ Kenneth C. Cornelius
______________________________
Name: Kenneth C. Cornelius
Title: Vice President and
Chief Financial Officer
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By: /s/ James D. Khami
______________________________
Name: James D. Khami
Title: Vice President
<PAGE>
RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN
RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
------------------------------------------
PRIVATE EXCHANGE SECURITIES
---------------------------
AND EXCHANGE SECURITIES
-----------------------
1. Definitions.
-----------
1.1 Definitions.
-----------
For the purposes of this Appendix the following terms shall have
the meanings indicated below:
"Depositary" means The Depository Trust Company, its nominees and
their respective successors and assigns.
"Exchange Securities" means the 9-5/8% Senior Notes Due 2008 to be
issued pursuant to this Indenture in connection with a Registered Exchange Offer
pursuant to the Registration Rights Agreement.
"Initial Purchasers" means Credit Suisse First Boston Corporation and
BT Alex.Brown Incorporated.
"Initial Securities" means the 9-5/8% Senior Notes Due 2008, issued
under this Indenture on or about the date hereof.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchasers to issue and deliver to
each Initial Purchaser, in exchange for the Initial Securities held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"Private Exchange Securities" means the 9-5/8% Senior Notes Due 2008,
if any, to be issued pursuant to this Indenture to the Initial Purchasers in a
Private Exchange.
"Purchase Agreement" means the Purchase Agreement dated January 16,
1998, among the Company, the Guarantor and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Rights Agreement, to certain Holders of Initial Securities,
to issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.
<PAGE>
2
"Registration Rights Agreement" means the Registration Rights
Agreement dated January 22, 1998 among the Company, the Guarantor and the
Initial Purchasers.
"Securities" means the Initial Securities, the Exchange Securities and
the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary), or any successor person thereto and
shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement issued
by the Company, in connection with the offer and sale of Initial Securities or
Private Exchange Securities, pursuant to the Registration Rights Agreement.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.3(d) hereto.
1.2 Other Definitions
-----------------
Defined in
----------
Term Section:
---- -------
"Agent Members"............................................ 2.1(b)
"Global Security".......................................... 2.1(a)
"Regulation S"............................................. 2.1(a)
"Rule 144A"................................................ 2.1(a)
2. The Securities.
--------------
2.1 Form and Dating.
---------------
The Initial Securities are being offered and sold by the Company
pursuant to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to a
-----------------
QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act ("Regulation S"), in each case
as provided in the Purchase Agreement, shall be issued initially in the form of
one or more permanent global Securities in definitive, fully registered form
without interest coupons with the global securities legend and restricted
securities legend set forth in Exhibit 1 hereto (each, a "Global Security"),
which shall be deposited on behalf of the purchasers of the Initial Securities
represented thereby with the Trustee as custodian for the Depositary (or with
such other custodian as the Depositary may direct), and registered in the name
of the Depositary or a
<PAGE>
3
nominee of the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the Global
Securities may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depositary or its nominee as hereinafter
provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
---------------------
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary for such
Global Security or Global Securities or the nominee of such Depositary and (b)
shall be delivered by the Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as provided in this Section 2.1
-----------------------
or Section 2.3 or 2.4, owners of beneficial interests in Global Securities will
not be entitled to receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
--------------
Initial Securities for original issue in an aggregate principal amount of U.S.
$125.0 million and (2) Exchange Securities or Private Exchange Securities for
issue only in a Registered Exchange Offer or a Private Exchange, respectively,
pursuant to the Registration Rights Agreement, for a like principal amount of
Initial Securities, in each case upon a written order of the Company signed by
two Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of the Securities
to be authenticated and the date on which the original issue of Securities is to
be authenticated and whether the Securities are to be Initial Securities,
Exchange Securities
<PAGE>
4
or Private Exchange Securities. The aggregate principal amount of Securities
outstanding at any time may not exceed U.S. $125 million except as provided in
Section 2.7 of this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Global
--------------------- -------------------------------
Securities. (i) The transfer and exchange of Global Securities or beneficial
- - - - - - - - - - - ----------
interests therein shall be effected through the Depositary, in accordance with
this Indenture (including applicable restrictions on transfer set forth herein,
if any) and the procedures of the Depositary therefor. A transferor of a
beneficial interest in a Global Security shall deliver to the Registrar a
written order given in accordance with the Depositary's procedures containing
information regarding the participant account of the Depositary to be credited
with a beneficial interest in the Global Security. The Registrar shall, in
accordance with such instructions instruct the Depositary to credit to the
account of the Person specified in such instructions a beneficial interest in
the Global Security and to debit the account of the Person making the transfer
the beneficial interest in the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary of another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(iii) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 of this Appendix or
Section 2.9 of this Indenture, prior to the consummation of a Registered
Exchange Offer or the effectiveness of a Shelf Registration Statement with
respect to such Securities, such Securities may be exchanged only in
accordance with such procedures as are substantially consistent with the
provisions of this Section 2.3 (including the certification requirements
set forth on the reverse of the Initial Securities intended to ensure that
such transfers comply with Rule 144A or Regulation S, as the case may be)
and such other procedures as may from time to time be adopted by the
Company.
(b) Legend.
------
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing the Global Securities (and all
Securities issued in exchange therefor or in substitution thereof) shall
bear a legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE
<PAGE>
5
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS
NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS
NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT (A)
THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (ii) OUTSIDE THE UNITED STATES IN A TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i)
THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE
FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act, in the case of any
Transfer Restricted Security that is represented by a Global Security, the
Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Security for a certificated Security that does not bear the
legend set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder certifies in writing to the
Registrar that its request for such exchange was made in reliance on Rule
144 (such certification to be in the form set forth on the reverse of the
Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to legends on
such Initial Securities or such Private Exchange Securities will cease to
apply, but the requirements requiring such Initial Securities or such
Private Exchange Securities issued to certain Holders be issued in global
form will continue to apply, and Initial Securities or Private Exchange
Securities in global form without legends
<PAGE>
6
will be available to the transferee of the Holder of such Initial
Securities or Private Exchange Securities upon exchange of such
transferring Holder's Initial Securities or Private Exchange Securities or
directions to transfer such Holder's interest in the Global Security, as
applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
continue to apply and Initial Securities in global form with the restricted
securities legend set forth in Exhibit 1 hereto will be available to
Holders of such Initial Securities that do not exchange their Initial
Securities, and Exchange Securities in global form will be available to
Holders that exchange such Initial Securities in such Registered Exchange
Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
still apply, and Private Exchange Securities in global form with the
Restricted Securities Legend set forth in Exhibit 1 hereto will be
available to Holders that exchange such Initial Securities in such Private
Exchange.
(c) Cancellation or Adjustment of Global Security. At such time as
---------------------------------------------
all beneficial interests in a Global Security have either been exchanged for
certificated Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depositary for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for certificated Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an adjustment shall be made on the books
and records of the Trustee (if it is then the Securities Custodian for such
Global Security) with respect to such Global Security, by the Trustee or the
Securities Custodian, to reflect such reduction.
(d) Obligations with Respect to Transfers and Exchanges of Securities.
-----------------------------------------------------------------
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate certificated
Securities and Global Securities at the Registrar's or any co-registrar's
request.
<PAGE>
7
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 3.6, 4.9 and Section 9.5.
(iii) The Registrar or any co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated Security
selected for redemption in whole or in part pursuant to Article III of this
Indenture, except the unredeemed portion of any certificated Security being
redeemed in part, or (b) any Security for a period beginning 15 Business
Days before the mailing of a notice of an offer to repurchase or redeem
Securities or 15 Business Days before an interest payment date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or
any co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of Principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(e) No Obligation of the Trustee.
----------------------------
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Security, a member of, or a participant in
the Depositary or other Person with respect to the accuracy of the records
of the Depositary or its nominee or of any participant or member thereof,
with respect to any ownership interest in the Securities or with respect to
the delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be
the Depositary or its nominee in the case of a Global Security). The rights
of beneficial owners in any
<PAGE>
8
Global Security shall be exercised only through the Depositary subject to
the applicable rules and procedures of the Depositary. The Trustee may rely
and shall be fully protected in relying upon information furnished by the
Depositary with respect to its members, participants and any beneficial
owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depositary participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Certificated Securities.
-----------------------
(a) A Global Security deposited with the Depositary or with the
Trustee as custodian for the Depositary pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for such Global
Security or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depositary to the
Trustee, to be so transferred, in whole or from time to time in part, without
charge, and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Security, an equal aggregate principal amount of
certificated Initial Securities of authorized denominations. Any portion of a
Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Security delivered in exchange for an interest in the
Global Security shall, except as otherwise provided by Section 2.3(d), bear the
restricted securities legend set forth in Exhibit 1 hereto.
<PAGE>
9
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events specified
in Section 2.4(a), the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive, fully registered
form without interest coupons.
<PAGE>
EXHIBIT 1
TO RULE 144A/REGULATION S
APPENDIX
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THIS
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS NOTE
MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) INSIDE THE
UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE UNITED
STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH
(iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE."
<PAGE>
2
PRESTOLITE ELECTRIC INCORPORATED
No. __ Principal Amount $_____________
CUSIP NO. _________
9-5/8% Senior Note Due 2008
Prestolite Electric Incorporated, a Delaware corporation, promises to
pay to __________, or registered assigns, the principal sum of
________________________ Dollars on February 1, 2008.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: January 22, 1998 PRESTOLITE ELECTRIC INCORPORATED
by__________________________________________
by__________________________________________
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Securities
referred to in the Indenture.
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
by
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
(Reverse of Security)
9-5/8% Senior Note Due 2008
1. Interest
--------
Prestolite Electric Incorporated, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above; provided,
however, that if a Registration Default (as defined in the Registration Rights
Agreement) occurs, additional cash interest will accrue on this Security at a
rate of 0.50% per annum from and including the date on which any such
Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured, calculated on the principal amount of
this Security as of the date on which such interest is payable. Such interest
is payable in addition to any other interest payable from time to time with
respect to this Security. The Trustee will not be deemed to have notice of a
Registration Default until it shall have received actual notice of such
Registration Default.
The Company will pay interest semiannually on February 1 and August 1
of each year, commencing August 1, 1998. Interest on the Securities will accrue
from the most recent date to which interest has been paid on the Securities or,
if no interest has been paid, from January 22, 1998. The Company shall pay
interest on overdue Principal at 1% per annum in excess of the rate borne by the
Securities to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment
-----------------
By at least 11:00 a.m. (New York City time) on the date on which any
Principal of or interest on any Security is due and payable, the Company shall
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such Principal and/or interest. The Company will pay interest (except defaulted
interest) to the Persons who are registered Holders of Securities at the close
of business on the January 15 or July 15 next preceding the interest payment
date even if Securities are cancelled, repurchased or redeemed after the record
date and on or before the interest payment date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will pay
Principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. However, the Company
may pay Principal
<PAGE>
3
and interest by check payable in such money. It may mail an interest check to a
Holder's registered address.
3. Paying Agent and Registrar
--------------------------
Initially, First Trust National Association, a national banking
association (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice to any Securityholder. The Company or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent.
4. Indenture
---------
The Company issued the Securities under an Indenture dated as of
January 22, 1998 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), among the Company, PEI
Holding, Inc., the parent corporation of the Company (the "Guarantor") and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the
------
"Act"). Capitalized terms used herein and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such
terms, and Securityholders are referred to the Indenture and the Act for a
statement of those terms.
The Securities are unsecured senior obligations of the Company limited
to $125.0 million aggregate principal amount (subject to Section 2.7 of the
Indenture). The Security is one of the Initial Securities referred to in the
Indenture. The Securities include the Initial Securities and any Private
Exchange Securities and Exchange Securities issued in exchange for the Initial
Securities pursuant to the Indenture and the Registration Rights Agreement. The
Initial Securities, the Private Exchange Securities and the Exchange Securities
are treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the Incurrence of Indebtedness by the Company and
its Restricted Subsidiaries, the payment of dividends and other distributions on
the Capital Stock of the Company and its Restricted Subsidiaries, the purchase
or redemption of Capital Stock of the Company and Capital Stock of such
Restricted Subsidiaries, certain purchases or redemptions of Subordinated
Obligations, the sale or transfer of assets and Capital Stock of Restricted
Subsidiaries, the issuance or sale of Capital Stock of Restricted Subsidiaries,
the investments of the Company and its Subsidiaries and transactions with
Affiliates. In addition, the Indenture limits the ability of the Company and
its Restricted Subsidiaries to restrict distributions and dividends from
Restricted Subsidiaries.
<PAGE>
4
To guarantee the due and punctual payment of the Principal and
interest, if any, on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Guarantor, as primary obligor and
not merely as surety, has unconditionally and irrevocably guaranteed such
obligations on a senior basis pursuant to the terms of Article X the Indenture.
5. Optional Redemption
-------------------
Except as set forth in this paragraph 5, the Securities will not be
redeemable at the option of the Company prior to February 1, 2003. On and after
such date, the Securities will be redeemable, at the Company's option, in whole
or in part, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount) plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date):
If redeemed during the 12-month period commencing on February 1 of the
years set forth below:
Year Redemption Price
---- ----------------
2003 ............................... 104.8125%
2004 ............................... 103.2083%
2005 ............................... 101.6042%
2006 and thereafter................. 100.0000%
Notwithstanding the foregoing, at any time or from time to time prior
to February 1, 2001, the Company may redeem in the aggregate up to 35% of the
aggregate principal amount of the Securities originally issued with the proceeds
of one or more Public Equity Offerings to the extent that, in the case of a
Public Equity Offering of the Guarantor, the net cash proceeds thereof are
contributed to the equity capital of the Company, at a redemption price
(expressed as a percentage of principal amount thereof) of 109.625% plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that after giving effect to
-------- -------
such redemption, at least $81.25 million principal amount of the Securities
remain outstanding after each such redemption.
6. Notice of Redemption
--------------------
<PAGE>
5
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date by first-class mail to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
of principal amount larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. Put Provisions
--------------
Upon a Change of Control, any Holder of Securities will have the right
to cause the Company to repurchase all or any part of the Securities of such
Holder at a repurchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, to the date of repurchase as provided in, and
subject to the terms of, the Indenture.
8. Registration Rights
-------------------
The Company is party to a Registration Rights Agreement, dated as of
January 22, 1998, among the Company, the Guarantor, Credit Suisse First Boston
Corporation and BT Alex.Brown Incorporated pursuant to which it is obligated to
pay Liquidated Damages (as defined therein) upon the occurrence of certain
Registration Defaults (as defined therein).
9. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of principal amount of $1,000 and whole multiples of $1,000. A Holder may
register, transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange (i) any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
for a period beginning 15 days before a selection of Securities to be redeemed
and ending on the date of such selection or (ii) any Securities for a period
beginning 15 days before an interest payment date and ending on such interest
payment date.
10. Persons Deemed Owners
---------------------
<PAGE>
6
The registered holder of this Security may be treated as the owner of
it for all purposes.
11. Unclaimed Money
---------------
If money for the payment of Principal or interest remains unclaimed
for two years after the date of payment of Principal and interest, the Trustee
or Paying Agent shall pay the money back to the Company at its request unless an
abandoned property law designates another Person. After any such payment,
Holders entitled to the money must look only to the Company and not to the
Trustee for payment.
12. Defeasance
----------
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations under the Securities
and the Indenture if the Company deposits with the Trustee money or U.S.
Government Obligations for the payment of Principal of and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Securityholder, the Company, the Guarantor
and the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the Indenture,
or to provide for uncertificated Securities in addition to or in place of
certificated Securities, or to add guarantees with respect to the Securities or
to secure the Securities, or to add additional covenants of or surrender rights
and powers conferred on the Company, or to comply with any request of the SEC in
connection with qualifying the Indenture under the Act, or to make any change
that does not adversely affect the rights of any Securityholder.
14. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
Principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the
<PAGE>
7
Securities, upon required repurchase, upon declaration or otherwise; (iii)
failure by the Company or the Guarantor to comply with other agreements in the
Indenture or the Securities, in certain cases subject to notice and lapse of
time; (iv) certain accelerations (including failure to pay within any grace
period after final maturity) of other indebtedness of the Company, the Guarantor
or the Company's Restricted Subsidiaries if the amount accelerated (or so
unpaid) exceeds $10.0 million; (v) certain events of bankruptcy or insolvency
with respect to the Company, the Guarantor or any Significant Subsidiary; and
(vi) certain judgments or decrees for the payment of money in excess of $10.0
million against the Company, the Guarantor or any Significant Subsidiary. If an
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in aggregate principal amount of the Securities may declare all the
Securities to be due and payable immediately. Certain events of bankruptcy or
insolvency are Events of Default which will result in the Securities being due
and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of Principal
or interest) if it determines that withholding notice is not opposed to their
interest.
15. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations set forth in this Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of the Company
or the Guarantor shall not have any liability for any obligations of the Company
or the Guarantor under the Securities or this Indenture or for any claim based
on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.
<PAGE>
8
17. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
18. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
19. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. Governing Law
-------------
This Security shall be governed by, and construed in accordance with,
the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to: Prestolite
Electric Incorporated, 2100 Commonwealth Boulevard, Ann Arbor, Michigan 48105,
Attention: Chief Financial Officer.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: ____________________ Your Signature: ___________________
Signature Guarantee: _________________________________________
(Signature must be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program or other signature guarantor program reasonably
acceptable to the Trustee)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being transferred:
CHECK ONE BOX BELOW:
(1) [_]1 to the Company; or
(2) [_]2 pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [_]3 inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4) [_]4 outside the United States in an offshore transaction within the
meaning of Regulation S
<PAGE>
under the Securities Act in compliance with Rule 904 under
the Securities Act of 1933; or
(5) [_]5 pursuant to another available exemption from registration
provided by Rule 144 under the Securities act of 1933.
Unless one of the boxes is checked, the trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any Person other
than the registered holder thereof; provided, however, that if box (4) or (5) is
-------- -------
checked, the trustee may require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
______________________________
Signature
Signature Guarantee:
_____________________________ ______________________________
Signature
(Signature must be guaranteed by a
participant in a recognized Signature
Guarantee Medallion Program or other
signature guarantor program reasonably
acceptable to the Trustee)
_______________________________________________________________________
<PAGE>
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.7 or 4.9 of the Indenture, check the box:
[_]6
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.7 or 4.9 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ____________________________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global
Security have been made:
<TABLE>
<CAPTION>
Date of Amount of decrease in Amount of increase in Principal Amount of Signature of
Exchange Principal Amount of Principal Amount of this Global Security authorized officer of
this Global Security this Global Security following such Trustee or
decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY [OR PRIVATE
EXCHANGE SECURITY]]
*/
**/
PRESTOLITE ELECTRIC INCORPORATED
No. __ Principal Amount $_____________
CUSIP NO. _________
9-5/8% Senior Note Due 2008
Prestolite Electric Incorporated, a Delaware corporation, promises to
pay to __________, or registered assigns, the principal sum of
___________________________ Dollars on February 1, 2008.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: __________ PRESTOLITE ELECTRIC INCORPORATED
by_____________________________________
by_____________________________________
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Securities
referred to in this Indenture.
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
by
Authorized Signatory
________________
*/ [If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".]
**/ [If the Security is a Private Exchange Security issued in a Private
Exchange to an Initial Purchaser holding an unsold portion of its initial
allotment, add the Restricted Securities Legend from Exhibit 1 to Appendix
A and replace the Assignment Form included in such Exhibit 1.]
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY [OR
PRIVATE EXCHANGE SECURITY]]
9-5/8% Senior Note Due 2008
1. Interest
--------
Prestolite Electric Incorporated, a Delaware corporation (such
corporation, and its successors and assigns under this Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above[; provided,
however, that if a Registration Default (as defined in the Registration Rights
Agreement) occurs, additional cash interest will accrue on this Security at a
rate of 0.50% per annum from and including the date on which any such
Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured, calculated on the principal amount of
this Security as of the date on which such interest is payable. Such interest
is payable in addition to any other interest payable from time to time with
respect to this Security. The Trustee will not be deemed to have notice of a
Registration Default until it shall have received actual notice of such
Registration Default]./***/
The Company will pay interest semiannually on February 1 and August 1
of each year, commencing August 1, 1998 Interest on the Securities will accrue
from the most recent date to which interest has been paid on the Securities or,
if no interest has been paid, from January 22, 1998. The Company shall pay
interest on overdue Principal at 1% per annum in excess of the rate borne by the
Securities to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment
-----------------
By at least 11:00 a.m. (New York City time) on the date on which any
Principal of or interest on any Security is due and payable, the Company shall
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such Principal and/or interest. The Company will pay interest (except defaulted
interest) to the Persons who are registered Holders of Securities at the close
of business on the January 15 or July 15 next preceding the interest payment
date even if Securities are cancelled, repurchased or redeemed after the record
date and on
________________
/***/ Insert if at the time of issuance of the Exchange Security or Private
Exchange Security (as the case may be) neither the Registered Exchange
Offer has been consummated nor a Shelf Registration Statement has been
declared effective in accordance with the Registration Rights Agreement.
<PAGE>
2
or before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay Principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
Principal and interest by check payable in such money. It may mail an interest
check to a Holder's registered address.
3. Paying Agent and Registrar
--------------------------
Initially, First Trust National Association, a national banking
association (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice to any Securityholder. The Company or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent.
4. Indenture
---------
The Company issued the Securities under an Indenture dated as of
January 22, 1998 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), among the Company, PEI
Holding, Inc., the parent corporation of the Company (the "Guarantor") and the
Trustee. The terms of the Securities include those stated in this Indenture and
those made part of this Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture
------
(the "Act"). Capitalized terms used herein and not defined herein have the
meanings ascribed thereto in this Indenture. The Securities are subject to all
such terms, and Securityholders are referred to this Indenture and the Act for a
statement of those terms.
The Securities are unsecured senior subordinated obligations of the
Company limited to $125.0 million aggregate principal amount (subject to Section
2.7 of the Indenture). The Security is one of the Exchange Securities referred
to in the Indenture. The Securities include the Initial Securities and any
Private Exchange Securities and Exchange Securities issued in exchange for the
Initial Securities pursuant to the Indenture and the Registration Rights
Agreement. The Initial Securities, the Private Exchange Securities and the
Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and its Restricted Subsidiaries, the payment of
dividends and other distributions on the Capital Stock of the Company and its
Restricted Subsidiaries, the purchase or redemption of Capital Stock of the
Company and Capital Stock of such Restricted Subsidiaries, certain purchases or
redemptions of Subordinated Obligations, the sale or transfer of assets and
Capital Stock of Restricted Subsidiaries, the issuance or sale of Capital Stock
of Restricted Subsidiaries, the investments of the
<PAGE>
3
Company and its Subsidiaries and transactions with Affiliates. In addition, the
Indenture limits the ability of the Company and its Restricted Subsidiaries to
restrict distributions and dividends from Restricted Subsidiaries.
To guarantee the due and punctual payment of the Principal and
interest, if any, on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Guarantor, as primary obligor and
not merely as surety, has unconditionally and irrevocably guaranteed such
obligations on a senior basis pursuant to the terms of Article X of the
Indenture.
5. Optional Redemption
-------------------
Except as set forth in this paragraph 5, the Securities will not be
redeemable at the option of the Company prior to _______ __, 2003. On and after
such date, the Securities will be redeemable, at the Company's option, in whole
or in part, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount) plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date):
If redeemed during the 12-month period commencing on _______ __ of the
years set forth below:
Year Redemption Price
---- ----------------
2003 .............................. 104.8125%
2004 .............................. 103.2083%
2005 .............................. 101.6042%
2006 and thereafter................ 100.0000%
Notwithstanding the foregoing, at any time or from time to time prior
to February 1, 2001, the Company may redeem in the aggregate up to 35% of the
aggregate principal amount of the Securities originally issued with the proceeds
of one or more Public Equity Offerings to the extent that, in the case of a
Public Equity Offering of the Guarantor, the net cash proceeds thereof are
contributed to the equity capital of the Company, at a redemption price
(expressed as a percentage of principal amount thereof) of 109.625% plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that after giving effect to
-------- -------
such redemption, at least $81.25 million principal
<PAGE>
4
amount of the Securities remain outstanding after each such redemption.
6. Notice of Redemption
--------------------
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date by first-class mail to each Holder of
Securities to be redeemed at his registered address. Securities in
denominations of principal amount larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000. If money sufficient to pay the redemption
price of and accrued and unpaid interest on all Securities (or portions thereof)
to be redeemed on the redemption date is deposited with the Paying Agent on or
before the redemption date and certain other conditions are satisfied, on and
after such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. Put Provisions
--------------
Upon a Change of Control, any Holder of Securities will have the right
to cause the Company to repurchase all or any part of the Securities of such
Holder at a repurchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, to the date of repurchase as provided in, and
subject to the terms of, the Indenture.
8. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of principal amount of $1,000 and whole multiples of $1,000. A Holder may
register transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange (i) any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
for a period beginning 15 days before a selection of Securities to be redeemed
and ending on the date of such selection or (ii) any Securities for a period
beginning 15 days before an interest payment date and ending on such interest
payment date.
9. Persons Deemed Owners
---------------------
The registered holder of this Security may be treated as the owner of
it for all purposes.
<PAGE>
5
10. Unclaimed Money
---------------
If money for the payment of Principal or interest remains unclaimed
for two years after the date of payment of Principal and interest, the Trustee
or Paying Agent shall pay the money back to the Company at its request unless an
abandoned property law designates another Person. After any such payment,
Holders entitled to the money must look only to the Company and not to the
Trustee for payment.
11. Defeasance
----------
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations under the Securities
and the Indenture if the Company deposits with the Trustee money or U.S.
Government Obligations for the payment of Principal of and interest on the
Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Securityholder, the Company, the Guarantor
and the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the Indenture,
or to provide for uncertificated Securities in addition to or in place of
certificated Securities, or to add guarantees with respect to the Securities or
to secure the Securities, or to add additional covenants of or surrender rights
and powers conferred on the Company, or to comply with any request of the SEC in
connection with qualifying the Indenture under the Act, or to make any change
that does not adversely affect the rights of any Securityholder.
13. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon required repurchase, upon declaration or otherwise;
(iii) failure by the Company or the Guarantor to comply with other agreements in
the Indenture or the Securities, in certain cases subject to notice and lapse of
time; (iv)
<PAGE>
6
certain accelerations (including failure to pay within any grace period after
final maturity) of other indebtedness of the Company, the Guarantor or the
Company's Restricted Subsidiaries if the amount accelerated (or so unpaid)
exceeds $10.0 million; (v) certain events of bankruptcy or insolvency with
respect to the Company, the Guarantor or any Significant Subsidiary; and (vi)
certain judgments or decrees for the payment of money in excess of $10.0 million
against the Company, the Guarantor or any Significant Subsidiary. If an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Securities may declare all the Securities to
be due and payable immediately. Certain events of bankruptcy or insolvency are
Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of Principal
or interest) if it determines that withholding notice is not opposed to their
interest.
14. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations set forth in this Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
15. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of the Company
or the Guarantor shall not have any liability for any obligations of the Company
or the Guarantor under the Securities or this Indenture or for any claim based
on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Securities.
<PAGE>
7
16. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
17. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
18. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
19. Governing Law
-------------
This Security shall be governed by, and construed in accordance with,
the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to: Prestolite
Electric Incorporated, 2100 Commonwealth Boulevard, Ann Arbor, Michigan 48105,
Attention: Chief Financial Officer.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
- - - - - - - - - - - --------------------------------------------------------------------------------
Date: ____________________ Your Signature: ___________________
Signature Guarantee: ________________________________________
(Signature must be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program or other signature guarantor program reasonably
acceptable to the Trustee)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.7 or 4.9 of the Indenture, check the box:
[_]7
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.7 or 4.9 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ____________________________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
EXHIBIT 4.2
$125,000,000
PRESTOLITE ELECTRIC INCORPORATED
9-5/8% SENIOR NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
-----------------------------
January 22, 1998
Credit Suisse First Boston Corporation
BT Alex.Brown Incorporated
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
Prestolite Electric Incorporated, a Delaware corporation (the "Issuer"),
proposes to issue and sell to Credit Suisse First Boston Corporation and BT
Alex.Brown Incorporated (collectively, the "Initial Purchasers"), upon the terms
set forth in a purchase agreement of even date herewith (the "Purchase
Agreement"), $125,000,000 aggregate principal amount of its 9-5/8% Senior Notes
Due 2008 (the "Initial Securities") to be unconditionally guaranteed by PEI
Holding, Inc. (the "Guarantor" and together with the Issuer, the "Company").
The Initial Securities will be issued pursuant to an Indenture, dated as of
January 22, 1998, (the "Indenture") among the Issuer, the Guarantor and First
Trust National Association (the "Trustee"). As an inducement to the Initial
Purchasers, the Company agrees with the Initial Purchasers, for the benefit of
the holders of the Initial Securities (including, without limitation, the
Initial Purchasers), the Exchange Securities (as defined below) and the Private
Exchange Securities (as defined below) (collectively the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its own cost, prepare
and, not later than 90 days after (or if the 90th day is not a business day, the
first business day thereafter) the date of original issue of the Initial
Securities (the "Issue Date"), file with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to a proposed offer (the "Registered
Exchange Offer") to the Holders of Transfer Restricted Securities (as defined in
Section 6 hereof), who are not prohibited by any law or policy of the Commission
from participating in the Registered Exchange Offer, to issue and deliver to
such Holders, in exchange for the Initial Securities, a like aggregate principal
amount of debt securities (the "Exchange Securities") of the Company issued
under the Indenture and identical in all material respects to the Initial
Securities (except for the transfer restrictions relating to the Initial
Securities and the provisions relating to the matters described in Section 6
hereof) that would be registered under the Securities Act. The Company shall
use its best efforts to cause such Exchange Offer Registration Statement to
become effective under the Securities Act within 150 days (or if the 150th day
is not a business day, the first business day thereafter) after the Issue Date
of the Initial Securities and shall keep the Exchange Offer Registration
Statement effective for not less than
<PAGE>
2
30 days (or longer, if required by applicable law) after the date notice of the
Registered Exchange Offer is mailed to the Holders (such period being called the
"Exchange Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company will be
entitled to close the Registered Exchange Offer 30 days after the commencement
thereof provided that the Company has accepted all the Initial Securities
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities (as defined in Section 6
hereof) electing to exchange the Initial Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Company within the meaning
of the Securities Act, acquires the Exchange Securities in the ordinary course
of such Holder's business and has no arrangements with any person to participate
in the distribution of the Exchange Securities and is not prohibited by any law
or policy of the Commission from participating in the Registered Exchange Offer)
to trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States.
The Company acknowledges that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Securities, acquired for its own account as a result of
market making activities or other trading activities, for Exchange Securities
(an "Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and (c) Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Securities received by
such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an
Initial Purchaser that elects to sell Exchange Securities acquired in exchange
for Securities constituting any portion of an unsold allotment is required to
deliver a prospectus containing the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in connection with such
sale.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided, however, that (i) in the
case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be
the lesser of 180 days and the date on which all Exchanging Dealers and the
Initial Purchasers have sold all Exchange Securities held by them (unless such
period is extended pursuant to Section 3(j) below) and (ii) the Company shall
make such prospectus and any amendment or supplement thereto, available to any
broker-dealer for use in connection with any resale of any Exchange Securities
for a period of not less than 90 days after the consummation of the Registered
Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "Private Exchange") for the Initial Securities held by such
Initial Purchaser, a like principal amount
<PAGE>
3
of debt securities of the Company issued under the Indenture and identical in
all material respects (including the existence of restrictions on transfer under
the Securities Act and the securities laws of the several states of the United
States, but excluding provisions relating to the matters described in Section 6
hereof) to the Initial Securities (the "Private Exchange Securities"). The
Initial Securities, the Exchange Securities and the Private Exchange Securities
are herein collectively called the "Securities".
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer or
the Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Securities validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(y) deliver to the Trustee for cancellation all the Initial
Securities so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to each
Holder of the Initial Securities, Exchange Securities or Private Exchange
Securities, as the case may be, equal in principal amount to the Initial
Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be subject
to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has been
paid on the Initial Securities, from the date of original issue of the Initial
Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent
<PAGE>
4
to the Company that at the time of the consummation of the Registered Exchange
Offer (i) any Exchange Securities received by such Holder will be acquired in
the ordinary course of business, (ii) such Holder will have no arrangements or
understanding with any person to participate in the distribution of the
Securities or the Exchange Securities within the meaning of the Securities Act,
(iii) such Holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or if it is an affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is
not engaged in, and does not intend to engage in, the distribution of the
Exchange Securities and (v) if such Holder is a broker-dealer, that it will
receive Exchange Securities for its own account in exchange for Initial
Securities that were acquired as a result of market-making activities or other
trading activities and that it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
180 days of the Issue Date, (iii) any Initial Purchaser so requests with respect
to the Initial Securities (or the Private Exchange Securities) not eligible to
be exchanged for Exchange Securities in the Registered Exchange Offer and held
by it following consummation of the Registered Exchange Offer or (iv) any Holder
(other than an Exchanging Dealer) is not eligible to participate in the
Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Securities on the date of the
exchange, the Company shall take the following actions:
(a) The Company shall, at its cost, as promptly as practicable (but
in no event more than 30 days after so required or requested pursuant to
this Section 2) file with the Commission and thereafter shall use its best
efforts to cause to be declared effective a registration statement (the
"Shelf Registration Statement" and, together with the Exchange Offer
Registration Statement, a "Registration Statement") on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities (as defined in Section 6 hereof) by the Holders
thereof from time to time in accordance with the methods of distribution
set forth in the Shelf Registration Statement and Rule 415 under the
Securities Act (hereinafter, the "Shelf Registration"); provided, however,
that no Holder (other than an Initial Purchaser) shall be entitled to have
the Securities held by it covered by such Shelf Registration Statement
unless such Holder agrees in writing to be bound by all the provisions of
this Agreement applicable to such Holder.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement
<PAGE>
5
continuously effective in order to permit the prospectus included therein
to be lawfully delivered by the Holders of the relevant Securities, until
the earlier of (i) the time when all Securities covered by the Shelf
Registration Statement can be sold pursuant to Rule 144 under the
Securities Act, or any successor rule thereof, without being subject to any
of the limitations set forth in clauses (c), (e), (f) and (h) of Rule 144
and (ii) two years (or for such longer period if extended pursuant to
Section 3(j) below) from the Issue Date; provided, however, the Company
shall not be obligated to keep the Shelf Registration Statement
continuously effective to the extent set forth below if (i) the Company
determines, in its reasonable judgment, upon advice of counsel, as
authorized by a resolution of its Board of Directors, that the continued
effectiveness and usability of the Shelf Registration Statement would (x)
require the disclosure of material information, which the Company has a
bona fide business reason for preserving as confidential, or (y) interfere
with any financing, acquisition, corporate reorganization or other material
transaction involving the Company or any of its subsidiaries or its parent,
provided that the failure to keep the Shelf Registration Statement
effective and usable for offers and sales of Securities for such reason
shall last no longer than 45 days in any 12-month period (whereafter
Additional Interest (as defined in Section 6(a)) shall accrue and be
payable), and (ii) the Company promptly thereafter complies with the
requirements of Section 3(j) hereof, if applicable; provided further that
the number of days of any actual Suspension Period shall be added on to the
end of the two-year period specified above. Any such period during which
the Company is excused from keeping the Shelf Registration Statement
effective and usable for offers and sales of Securities is referred to
herein as a "Suspension Period." A Suspension Period shall commence on and
include the date that the Company gives notice that the Shelf Registration
Statement is no longer effective or the prospectus included therein is no
longer usable for offers and sales of Securities and shall end on the
earlier to occur of (1) the date on which each seller of Securities covered
by the Shelf Registration Statement either receives the copies of the
supplemented or amended prospectus contemplated by Section 3(j) hereof or
is advised in writing by the Company that the use of the prospectus may be
resumed and (2) the expiration of 45 days in any 12-month period during
which one or more Suspension Periods has been in effect. Except as provided
above, the Company shall be deemed not to have used its best efforts to
keep the Shelf Registration Statement effective during the requisite period
if it voluntarily takes any action that would result in Holders of
Securities covered thereby not being able to offer and sell such Securities
during that period, unless such action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event
<PAGE>
6
that an Initial Purchaser (with respect to any portion of an unsold
allotment from the original offering) is participating in the Registered
Exchange Offer or the Shelf Registration Statement, the Company shall use
its best efforts to reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchaser reasonably may propose;
(ii) include the information set forth in Annex A hereto on the cover, in
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose
of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of the prospectus forming a part of the Exchange
Offer Registration Statement and include the information set forth in Annex
D hereto in the Letter of Transmittal delivered pursuant to the Registered
Exchange Offer; (iii) if requested by an Initial Purchaser holding
Securities constituting any portion of an unsold allotment, include the
information required by Items 507 or 508 of Regulation S-K under the
Securities Act, as applicable, in the prospectus forming a part of the
Exchange Offer Registration Statement; (iv) include within the prospectus
contained in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution," reasonably acceptable to the Initial Purchasers,
which shall contain a summary statement of the positions taken or policies
made by the staff of the Commission with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of Exchange Securities received by such broker-dealer
in the Registered Exchange Offer (a "Participating Broker-Dealer"), whether
such positions or policies have been publicly disseminated by the staff of
the Commission or such positions or policies, in the reasonable judgment of
the Initial Purchasers based upon advice of counsel (which may be in-house
counsel), represent the prevailing views of the staff of the Commission;
and (v) in the case of a Shelf Registration Statement, include, to the
extent required by Item 507 of Regulation S-K under the Securities Act, the
names of the Holders, who propose to sell Securities pursuant to the Shelf
Registration Statement, as selling securityholders.
(b) The Company shall give written notice to the Initial Purchasers,
the Holders of the Securities and any Participating Broker-Dealer from whom
the Company has received prior written notice that it will be a
Participating Broker-Dealer in the Registered Exchange Offer (which notice
pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction
to suspend the use of the prospectus until the requisite changes have been
made):
(i) when the Registration Statement or any amendment thereto
has been filed with the Commission and when the Registration Statement
or any post-effective amendment thereto has become effective;
(ii) following the effective date of the Registration
Statement, of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
<PAGE>
7
(v) following the effective date of the Registration
Statement, of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in order
that the Registration Statement or the prospectus do not contain an
untrue statement of a material fact nor omit to state a material fact
required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in light of the circumstances
under which they were made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall, in the case of a Shelf Registration, furnish
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, at least one copy of the Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, all
exhibits thereto (including those, if any, incorporated by reference).
(e) The Company shall, in the case of a Registered Exchange Offer,
deliver to each Exchanging Dealer and each Initial Purchaser, and to any
other Holder who so requests, without charge, at least one copy of the
Exchange Offer Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if any Initial
Purchaser or any such Holder requests, all exhibits thereto (including
those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Shelf Registration Statement
and any amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this Agreement,
to the use of the prospectus or any amendment or supplement thereto by each
of the selling Holders of the Securities in connection with the offering
and sale of the Securities covered by the prospectus, or any amendment or
supplement thereto, included in the Shelf Registration Statement.
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto by any Initial Purchaser, if
necessary, any Participating Broker-Dealer and such other persons required
to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Securities covered by
the prospectus, or any amendment or supplement thereto, included in such
Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Company shall use its best efforts to register
or qualify or cooperate with the Holders of the Securities included therein
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification or
<PAGE>
8
preemption of such registration or qualification by federal law) of the
Securities for offer and sale under the securities or "blue sky" laws of
such states of the United States as any Holder of the Securities reasonably
requests in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the
Securities covered by such Registration Statement; provided, however, that
the Company shall not be required to (i) qualify generally to do business
in any jurisdiction where it is not then so qualified or (ii) take any
action which would subject it to general service of process or to taxation
in any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such
names as the Holders may request a reasonable period of time prior to sales
of the Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company
is required to maintain an effective Registration Statement, the Company
shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
If the Company notifies the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the prospectus have been made,
then the Initial Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and the
period of effectiveness of the Shelf Registration Statement provided for in
Section 2(b) above and the Exchange Offer Registration Statement provided
for in Section 1 above shall each be extended by the number of days from
and including the date of the giving of such notice to and including the
date when the Initial Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Initial
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, and provide the applicable trustee with printed
certificates for the Initial Securities, the Exchange Securities or the
Private Exchange Securities, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make generally
available to its security holders (or otherwise provide in accordance with
Section 11(a) of the Securities Act) an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45 days
after the end of a 12-month period (or 90 days, if such period is a fiscal
year) beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Registration Statement, which
statement shall cover such 12-month period.
<PAGE>
9
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Securities as
the Company may from time to time reasonably require for inclusion in the
Shelf Registration Statement, and the Company may exclude from such
registration the Securities of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
(o) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form if
the Securities are to be sold in an underwritten offering) and take all
such other action, if any, as any Holder of the Securities shall reasonably
request in order to facilitate the disposition of the Securities pursuant
to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained
by the Holders of the Securities or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties
of the Company and (ii) cause the Company's officers, directors, employees,
accountants and auditors to supply all relevant information reasonably
requested by the Holders of the Securities or any such underwriter,
attorney, accountant or agent in connection with the Shelf Registration
Statement, in each case, as shall be reasonably necessary to enable such
persons, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that the foregoing
inspection and information gathering shall be coordinated on behalf of the
Initial Purchasers by you and on behalf of the other parties, by one
counsel designated by and on behalf of such other parties as described in
Section 4 hereof; provided further, that any person to whom information is
provided under this Section 3(p) agrees in writing to maintain the
confidentiality of such information to the extent such information is not
in the public domain.
(q) In the case of any Shelf Registration, the Company, if requested
by the Holders of a majority in principal amount of the Securities covered
thereby, shall use its best efforts to cause (i) its counsel to deliver an
opinion and updates thereof relating to the Securities in customary form
addressed to such Holders and the managing underwriters, if any, thereof
and dated, in the case of the initial opinion, the effective date of such
Shelf Registration Statement, covering the matters customarily covered in
opinions requested in underwritten offerings in the form requested by the
managing underwriters; (ii) its officers to execute and deliver all
customary documents and certificates and updates thereof requested by any
underwriters of the applicable Securities and (iii) its independent public
accountants and the independent public accountants with respect to any
other entity for which financial information is provided in the Shelf
Registration Statement to provide to the selling Holders of the applicable
Securities and any underwriter therefor a comfort letter in customary form
and covering matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards
<PAGE>
10
No. 72.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Company
shall use its best effort, to cause (i) its counsel to deliver to such
Initial Purchaser or such Participating Broker-Dealer a signed opinion in
the form set forth in Section 6(c) of the Purchase Agreement with such
changes as are customary in connection with the preparation of a
Registration Statement and (ii) its independent public accountants and the
independent public accountants with respect to any other entity for which
financial information is provided in the Registration Statement to deliver
to such Initial Purchaser or such Participating Broker-Dealer a comfort
letter or comfort letters, in customary form, meeting the requirements as
to the substance thereof as set forth in Sections 6(a) and 6(f) of the
Purchase Agreement, with appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be, the Company shall mark, or caused to be marked, on the Initial
Securities so exchanged that such Initial Securities are being canceled in
exchange for the Exchange Securities or the Private Exchange Securities, as
the case may be; in no event shall the Initial Securities be marked as paid
or otherwise satisfied.
(t) The Company will use its best efforts to, if the Initial
Securities have been rated prior to the initial sale of such Initial
Securities, confirm such ratings will apply to the Securities covered by a
Registration Statement.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "participate in the
distribution" (within the meaning of the Conduct Rules (the "Rules") of the
National Association of Securities Dealers, Inc. ("NASD")) thereof, whether
as a Holder of such Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, the Company
will assist such broker-dealer in complying with the requirements of such
Rules, including, without limitation, by (i) if such Rules, including Rule
2720, shall so require, engaging a "qualified independent underwriter" (as
defined in Rule 2720) to participate in the preparation of the Registration
Statement relating to such Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering
contemplated by such Registration Statement is an underwritten offering or
is made through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent underwriter to
the extent of the indemnification of underwriters provided in Section 5
hereof and (iii) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the requirements of
the Rules.
(v) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a
Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof (including the reasonable fees and expenses, if any, of Simpson
Thacher & Bartlett, counsel for the Initial Purchasers, incurred in connection
with the Registered Exchange Offer), whether or not the
<PAGE>
11
Registered Exchange Offer or a Shelf Registration is filed or becomes effective,
and, in the event of a Shelf Registration, shall bear or reimburse the Holders
of the Securities covered thereby for the reasonable fees and disbursements of
one firm of counsel designated by the Holders of a majority in principal amount
of the Initial Securities covered thereby to act as counsel for the Holders of
the Initial Securities in connection therewith.
5. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Holder of the Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such Participating Broker-Dealer
within the meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "Indemnified Parties") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
(i) the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration in reliance
upon and in conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein and (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus relating
to a Shelf Registration Statement, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Holder or Participating
Broker-Dealer from whom the person asserting any such losses, claims, damages or
liabilities purchased the Securities concerned, to the extent that a prospectus
relating to such Securities was required to be delivered by such Holder or
Participating Broker-Dealer under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder or
Participating Broker-Dealer results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Securities to such person, a copy of the final prospectus if the Company
had previously furnished copies thereof to such Holder or Participating Broker-
Dealer; provided further, however, that this indemnity agreement will be in
addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters, their
officers and directors and each person who controls such underwriters within the
meaning of the Securities Act or the Exchange Act to the same extent as provided
above with respect to the indemnification of the Holders of the Securities if
requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company, its directors, its officers and each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act from and against any losses, claims, damages or
liabilities or any actions in respect thereof, to which the Company or any such
director, officer or controlling person may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in a Registration
<PAGE>
12
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading, but in each case only
to the extent that the untrue statement or omission or alleged untrue statement
or omission was made in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein; and, subject to the limitation set
forth immediately preceding this clause, shall reimburse, as incurred, the
Company, its directors, its officers or any such controlling person for any
legal or other expenses reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating or defending any
loss, claim, damage, liability or action in respect thereof. This indemnity
agreement will be in addition to any liability which such Holder may otherwise
have to the Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 5, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof the indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is unavailable
or insufficient to hold harmless an indemnified party under subsections (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the exchange of the Securities, pursuant to
the Registered Exchange Offer, or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
<PAGE>
13
The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection (d)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any action
or claim which is the subject of this subsection (d). Notwithstanding any other
provision of this Section 5(d), the Holders of the Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities pursuant to a
Registration Statement exceeds the amount of damages which such Holders have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
indemnified party and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Initial Securities
shall be assessed as follows if any of the following events occur (each such
event in clauses (i) through (iii) below a "Registration Default":
(i) If by April 22, 1998, neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been filed
with the Commission;
(ii) If by July 21, 1998, neither the Registered Exchange Offer
is consummated nor, if required in lieu thereof, the Shelf Registration
Statement is declared effective by the Commission; or
(iii) If after either the Exchange Offer Registration Statement
or the Shelf Registration Statement is declared effective (A) such
Registration Statement thereafter ceases to be effective; or (B) such
Registration Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b)) in connection with resales of
Transfer Restricted Securities during the periods specified herein because
either (1) any event occurs as a result of which the related prospectus
forming part of such Registration Statement would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Initial Securities over and above the
interest set forth in the title of the Securities from and including the date on
which any such Registration Default shall occur to but until and excluding the
date on which all such Registration Defaults have been cured, at a rate of 0.50%
per annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B) hereof
shall be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related
<PAGE>
14
prospectus if (i) such Registration Default has occurred solely as a result of
(x) the filing of a post-effective amendment to such Shelf Registration
Statement to incorporate annual audited financial information with respect to
the Company where such post-effective amendment is not yet effective and needs
to be declared effective to permit Holders to use the related prospectus, (y)
other material events, with respect to the Company that would need to be
described in such Shelf Registration Statement or the related prospectus or (z)
a Suspension Period not to exceed 45 days in any 12-month period pursuant to
Section 2(b) and (ii) in the case of clause (y), the Company is proceeding
promptly and in good faith to amend or supplement such Shelf Registration
Statement and related prospectus to describe such events; provided, however,
that in any case if such Registration Default occurs for a continuous period in
excess of 30 days, Additional Interest shall be payable in accordance with the
above paragraph from the day such Registration Default occurs until such
Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) of Section 6(a) above will be payable in cash on the regular interest
payment dates with respect to the Initial Securities. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Initial Securities, multiplied by a
fraction, the numerator of which is the number of days such Additional Interest
rate was applicable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the
date on which such Transfer Restricted Security has been exchanged by a person
other than a broker-dealer for a freely transferable Exchange Security in the
Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the
Registered Exchange Offer of a Initial Security for an Exchange Note, the date
on which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Initial Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Initial Securities is distributed to the public pursuant to
Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under
the Securities Act.
7. Rules 144 and 144A. The Company shall use its best efforts to file the
reports required to be filed by it under the Securities Act and the Exchange Act
in a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Initial Securities, make
publicly available other information so long as necessary to permit sales of
their securities pursuant to Rules 144 and 144A. The Company covenants that it
will take such further action as any Holder of Initial Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Initial Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy of this
Agreement to prospective purchasers of Initial Securities identified to the
Company by the Initial Purchasers upon request. Upon the request of any Holder
of Initial Securities, the Company shall deliver to such Holder a written
statement as to whether it has complied with such requirements. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to require the Company
to register any of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted
<PAGE>
15
Securities to be included in such offering and shall be reasonably acceptable to
the Company.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Company.
(2) if to the Initial Purchasers;
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Vincent Pagano, Jr., Esq.
(3) if to the Company, at its address as follows:
Prestolite Electric Incorporated
2100 Commonwealth Boulevard
Ann Arbor, MI 48105
Attention: Kenneth C. Cornelius
<PAGE>
16
with a copy to:
Brobeck Phleger & Harrison LLP
Spear Street Tower
One Market
San Francisco, CA 94105
Attention: Michael J. Kennedy, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company, the Initial Purchasers and their respective successors and assigns,
including, without limitation and without the need for an express assignment,
subsequent holders of the Initial Securities.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Issuer a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the several Initial Purchasers, the Issuer and the Guarantor in accordance with
its terms.
Very truly yours,
Prestolite Electric Incorporated
/s/ Kenneth C. Cornelius
By:------------------------------
Name: KENNETH C. CORNELIUS
Title: SR. VICE PRESIDENT & CFO
PEI Holding, Inc.
/s/ Kenneth C. Cornelius
By:------------------------------
Name: KENNETH C. CORNELIUS
Title: SR. VICE PRESIDENT & CFO
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
Credit Suisse First Boston Corporation
BT Alex.Brown Incorporated
By: Credit Suisse First Boston Corporation
/s/ Joe Carrabino, Jr.
By:--------------------------------
Name: JOE CARRABINO, JR.
Title: DIRECTOR
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Initial Securities where such Initial Securities were acquired by such broker-
dealer as a result of market-making activities or other trading activities. The
Company has agreed that, for a period of 180 days after the Expiration Date (as
defined herein), it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Securities, where such Initial Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until ,
199 , all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus./1/
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
____________________
/1/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
ANNEX D
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ___________________________________________
Address: ___________________________________________
___________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
EXHIBIT 10.1
EXECUTION COPY
======================================================
PRESTOLITE ELECTRIC INCORPORATED
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JANUARY 22, 1998
COMERICA BANK
======================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
1. DEFINITIONS....................................................... 1
2. THE INDEBTEDNESS: Facility A......................................10
3. INTEREST AND PREPAYMENTS..........................................12
4. CONDITIONS; SECURITY..............................................12
5. REPRESENTATIONS AND WARRANTIES....................................13
6. AFFIRMATIVE COVENANTS.............................................16
7. NEGATIVE COVENANTS................................................20
8. ENVIRONMENTAL PROVISIONS..........................................23
9. EVENTS OF DEFAULT.................................................25
10. MISCELLANEOUS.....................................................27
</TABLE>
This Table of Contents shall not, for any purpose, be considered to be a part of
the Credit Agreement.
i
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
THIS AMENDED AND RESTATED CREDIT AGREEMENT, made as of the 22nd day of
January, 1998, by and between PRESTOLITE ELECTRIC INCORPORATED, a Delaware
corporation, of Ann Arbor, Michigan (herein called "Company"), and COMERICA
BANK, a Michigan banking corporation, of Detroit, Michigan (herein called
"Bank");
RECITALS:
A. Company and Bank are parties to the Credit Agreement dated as of
October 25, 1994, as amended by the First Amendment dated as of February 20,
1996 and the Second Amendment dated as of October 26, 1997 ("Prior Credit
Agreement").
B. Company has requested Bank to amend certain provisions of the Prior
Credit Agreement.
C. Company and Bank wish to amend and restate the Prior Credit Agreement
on the terms and conditions provided herein.
NOW, THEREFORE, Bank and Company agree that the Prior Credit Agreement is
amended and restated in its entirety as follows:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
"Account" shall have the meaning assigned to it in the Michigan Uniform
Commercial Code on the date of this Agreement.
"Account Debtor" shall mean the party who is obligated on or under any
Account.
"Advance" shall mean a borrowing requested by Company and made by Bank
under Section 2 of this Agreement.
"Affiliate" shall mean, with respect to any Person, any other Person or
group acting in concert in respect of the first Person that, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with such first Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person or group of Persons, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise. Unless otherwise specified to the
1
<PAGE>
contrary herein, or the context requires otherwise, Affiliate shall refer to the
Company's Affiliates.
"Approved Account Debtors" shall mean Ford Motor Company, General Motors
Corporation, Chrysler Corporation, Freightliner Corporation, Caterpillar
Corporation, Cummins Corporation, Western Star Corporation, Navistar
Corporation, or Thermo King Corporation, or any subsidiary thereof, or any other
Person approved in writing by Bank in its sole discretion.
"Applicable Prime-based Margin" shall mean (i) at all times other than
during a Margin Reduction Period, one-eighth of one percent (1/8%) per annum,
and (ii) during any Margin Reduction Period, zero percent (0%) per annum.
"Borrowing Base" shall mean as of any date of determination, (i) at all
times other than during a Margin Reduction Period, the sum of (a) eighty-four
percent (84%) of Eligible Accounts plus (b) the lesser of thirty-five percent
----
(35%) of Eligible Inventory or Nine Million Dollars ($9,000,000), and (ii)
during any Margin Reduction Period, the sum of (a) eighty percent (80%) of
Eligible Accounts plus the lesser of twenty-five percent (25%) of Eligible
----
Inventory or Nine Million Dollars ($9,000,000).
"Business Day" shall mean any day on which commercial banks are open for
domestic and international business in Detroit, Michigan.
"Capital Expenditure" shall mean any payment made directly or indirectly
for the purpose of acquiring or constructing fixed assets, real property or
equipment which in accordance with GAAP would be added as a debit to the fixed
asset account of the Person making such expenditure, including, without
limitation, amounts paid or payable under any conditional sale or other title
retention agreement or under any lease or other periodic payment arrangement
which is of such a nature that payment obligations of the lessee or obligor
thereunder would be required by GAAP to be capitalized and shown as liabilities
on the balance sheet of such lessee or obligor.
"Collateral Assignments" shall mean the three Collateral Assignments of the
Indemnity Agreements dated as of October 25, 1994, executed and delivered by
Company to Bank.
"Collateral Documents" shall mean the Security Agreement and any other
document or instrument of security executed and delivered by Company or any
Domestic Subsidiary after the date hereof.
"Consolidated" or "consolidated" shall mean, when used with reference to
any financial term in this Agreement, the aggregate for two or more persons of
the amounts signified by such term for all such persons determined on a
consolidated basis in accordance with GAAP. Unless otherwise indicated herein,
"Consolidated" shall mean the consolidated accounts of PEI and its Subsidiaries.
2
<PAGE>
"Consolidated Capitalization" shall mean, as of any date of determination,
the sum of Consolidated Tangible Net Worth plus the principal balance of the
----
Senior Debt.
"Consolidated Income Taxes" shall mean for any period the aggregate amount
of taxes based on income or profits for such period of the operations of PEI and
its Subsidiaries determined in accordance with GAAP (to the extent such income
and profits were included in computing Consolidated Net Income).
"Consolidated Interest Expense" shall mean for any period the aggregate
gross interest expense (excluding amortization of original issue discount and
non-cash interest expense and including the interest component of capitalized
lease obligations) of PEI and its Subsidiaries for such period as determined in
accordance with GAAP (to the extent such interest expense was included in
computing Consolidated Net Income).
"Consolidated Net Income" shall mean the net income (or loss) of PEI and
its Subsidiaries for any period determined in accordance with GAAP but excluding
in any event any gains or losses on the sale or other disposition, not in the
ordinary course of business, of investments or fixed or capital assets, and any
taxes on the excluded gains and any tax deductions or credits on account of any
excluded losses.
"Consolidated Net Worth" shall mean at any time the net worth of PEI and
its Subsidiaries as determined in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean at any time Consolidated Net
Worth less the net book value of investments in unconsolidated subsidiaries and
prepaid expenses (other than deferred taxes) and all intangible assets of PEI
and its Subsidiaries such as patents, patent rights, trademarks, trade names,
copyrights, goodwill and similar intangible assets as determined in accordance
with GAAP.
"Debt to Capitalization Ratio" shall mean as of any date of determination
the ratio of total liabilities of PEI and its Subsidiaries determined in
accordance with GAAP, to Consolidated Capitalization.
"Default" shall mean any event, act or omission which, with the giving of
notice, the running of time, or both, would constitute an Event of Default.
"Domestic Subsidiary" shall mean any Subsidiary of PEI that is incorporated
under the laws of any state of the United States of America. For purposes of
this Agreement, 756780 Ontario Limited shall be deemed to be a Domestic
Subsidiary.
"EBITDA" shall mean for any period the sum of Consolidated Net Income for
such period plus Consolidated Income Taxes, Consolidated Interest Expense and
----
Consolidated depreciation, amortization and other non-cash charges for such
period.
3
<PAGE>
"Eligible Account" shall mean an Account (but shall not include interest
and service charges) arising in the ordinary course of Company's business which
meets each of the following requirements:
(a) it is not owing more than ninety (90) days after the date of the
original invoice or other writing evidencing such Account;
(b) it is not owing by an Account Debtor (other than an Approved Account
Debtor) who has failed to pay twenty-five percent (25%) or more of the
aggregate amount of its Accounts owing to Company within ninety (90)
days after the due date of the respective invoices or other writings
evidencing such Accounts;
(c) it arises from the sale or lease of goods and such goods have been
shipped or delivered to the Account Debtor under such Account; or it
arises from services rendered and such services have been performed;
(d) it is evidenced by an invoice, dated not later than the date of
shipment or performance, rendered to such Account Debtor or some other
evidence of billing acceptable to Bank;
(e) it is not evidenced by any note, trade acceptance, draft or other
negotiable instrument or by any chattel paper;
(f) it is a valid, legally enforceable obligation of the Account Debtor
thereunder, and is not subject to any offset, counterclaim or other
defense on the part of such Account Debtor or to any claim on the part
of such Account Debtor denying liability thereunder in whole or as to
any portion greater than 25% of such Account (provided, however, that
-------- -------
any offset asserted by such Account Debtor [up to 25% of the amount of
such Account] shall decrease the amount of such Eligible Account by the
amount of such claimed offset);
(g) it is not subject to any sale of accounts, any rights of offset,
assignment, lien or security interest whatsoever other than to Bank;
(h) it is not owing by a subsidiary or affiliate of Company nor by an
Account Debtor which (i) does not maintain its chief executive office
in the United States of America or is not described in sub-section (ii)
of this Section (h), (ii) is not organized under the laws of the United
States of America, or any state thereof (unless the Account Debtor is
an Approved Account Debtor, or unless the Account is covered by FCIA
insurance or a letter of credit issued by a bank which is acceptable to
Bank in the exercise of its sole discretion), or (iii) is the
government of any foreign country or sovereign state, or of any state,
province, municipality or other instrumentality thereof;
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<PAGE>
(i) it is not an Account owing by the United States of America or any state
or political subdivision thereof, or by any department, agency, public
body corporate or other instrumentality of any of the foregoing, unless
all necessary steps are taken to comply with the Federal Assignment of
Claims Act of 1940, as amended, or with any comparable state law, if
applicable, and all other necessary steps are taken to perfect Bank's
security interest in such Account (provided, however, that this sub-
-------- -------
section (i) shall apply only during the continuance of a Default or
Event of Default);
(j) it is not owing by an Account Debtor for which Company has received a
notice of (i) the death of the Account Debtor or any partner of the
Account Debtor, (ii) the dissolution, liquidation, termination of
existence, insolvency or business failure of the Account Debtor, (iii)
the appointment of a receiver for any part of the property of the
Account Debtor, or (iv) an assignment for the benefit of creditors, the
filing of a petition in bankruptcy, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against the
Account Debtor;
(k) it is not an account billed in advance, payable on delivery, for
consigned goods, for guaranteed sales, for unbilled sales, for progress
billings, payable at a date more than thirty (30) days after the
invoice date in accordance with its terms, subject to a retainage or
holdback by the Account Debtor or insured by a surety company; and
(l) it is not owing by any Account Debtor whose obligations Bank, acting in
its sole discretion, shall have notified Company are not deemed to
constitute Eligible Accounts.
(m) it is not a "core receivable", as currently identified on Company's
books and records.
An Account which is at any time an Eligible Account, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account.
"Eligible Inventory" shall be valued at the lesser of cost or present
market value in accordance with GAAP, on a first in/first out basis, and shall
mean all of Company's Inventory which is in good and merchantable condition, is
not obsolete or discontinued, and which would properly be classified as "raw
materials", "work in process" or as "finished goods inventory" under GAAP,
excluding (a) cores, consigned goods, inventory located outside the United
States of America, (b) Inventory covered by or subject to a seller's right to
repurchase, or any consensual or nonconsensual lien or security interest
(including without limitation purchase money security interests) other than in
favor of Bank, whether senior or junior to Bank's security interest, and (c)
Inventory that Bank, acting in its reasonable discretion, after having notified
Company, excludes.
5
<PAGE>
Inventory which is at any time Eligible Inventory, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be
Eligible Inventory.
"Environmental Laws" shall mean all federal, state and local laws including
statutes, regulations, ordinances, codes, rules, and other governmental
restrictions and requirements, relating to environmental pollution,
contamination or other impairment of any nature, any hazardous or other toxic
substances of any nature, whether liquid, solid and/or gaseous, including smoke,
vapor, fumes, soot, acids, alkalis, chemicals, wastes, by-products, and recycled
materials. These Environmental Laws shall include but not be limited to the
Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976, the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act of 1986,
regulations of the Environmental Protection Agency, regulations of the Nuclear
Regulatory Agency, regulations of any state department of natural resources or
state environmental protection agency now or at any time hereafter in effect and
local health department ordinances.
"Equipment Security Agreement" shall mean the Security Agreement
(Equipment) dated October 25, 1994, executed and delivered by Company to Bank.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, or any successor act or code.
"Event of Default" shall mean any of the Events of Default specified in
Section 9 hereof.
"Facility A Maturity Date" shall mean January 31, 2000.
"Facility A Note" shall mean the Note described in Section 2.1 hereof made
by Company to Bank in the form annexed to this Agreement as Exhibit "A".
"Fixed Charge Coverage Ratio" shall mean as of any date of determination, a
ratio, the numerator of which is EBITDA for the four fiscal quarters then ended
and the denominator of which is the sum of all principal payments paid or
payable during such period with respect to any indebtedness (including capital
leases) of PEI and its Subsidiaries, plus Consolidated Interest Expense for such
----
period.
"Funded Debt" shall mean, as of any date of determination, all indebtedness
of PEI and its Subsidiaries for borrowed money or on account of capitalized
lease obligations as of such date, as determined in accordance with GAAP.
"Funded Debt Ratio" shall mean, as of any date of determination thereof, a
ratio, the numerator of which shall be Funded Debt as of such date and the
denominator of which shall be EBITDA for the four fiscal quarters then ended.
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<PAGE>
"GAAP" shall mean, as of any applicable date of determination, generally
accepted accounting principles consistently applied.
"Guaranty" shall mean the unconditional guaranty of the Indebtedness dated
October 25, 1994, executed and delivered by PEI to the Bank.
"Indebtedness" shall mean all loans, advances, indebtedness, obligations
and liabilities of Company to Bank under this Agreement, together with all other
indebtedness, obligations and liabilities whatsoever of Company to Bank, whether
matured or unmatured, liquidated or unliquidated, direct or indirect, absolute
or contingent, joint or several, due or to become due, now existing or hereafter
arising.
"Indemnity Agreements" shall mean the agreements dated September 30, 1991,
December 7, 1993 and October 28, 1991 among Company and Allied-Signal, Inc.,
Sheller-Globe Corporation and Motorola, Inc., respectively, concerning
environmental remediation and other matters.
"Inventory" shall have the meaning assigned to it in the Michigan Uniform
Commercial Code on the date of this Agreement.
"Letter(s) of Credit" shall mean any standby letters of credit issued by
Bank for the account of Company pursuant to Section 2.6 hereof.
"Letter of Credit Reserve" shall mean, as of any applicable date of
determination, an amount equal to the aggregate face amount of all Letters of
Credit.
"Loan Documents" shall mean collectively, this Agreement, the Note, the
Security Agreement, the Letters of Credit, and any other instruments or
agreements executed at any time pursuant to or in connection with any such
documents.
"Lucas Acquisition" shall have the meaning given to such term in the
Offering Circular. For purposes of this Agreement, "Lucas Acquisition" shall be
deemed to include (a) the purchase by Company or a Wholly Owned Subsidiary of
shares of Lucas Argentina pursuant to the Lucas Argentina Option and (b) the
purchase by Company or a Wholly Owned Subsidiary of any of the approximately 1%
of the outstanding shares of Lucas Argentina not owned by Company, directly
or indirectly, on the Issue Date and not subject to the Lucas Argentina Option
for an aggregate purchase price not to exceed $300,000. Capitalized terms used
in the immediately preceding sentence and not otherwise defined in this
Agreement shall have the meanings given to such terms in the Offering Circular.
"Margin Reduction Period" is defined in Section 3.3(c).
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on (a) the business, operations, property, or financial
condition of such Person, or (b) the ability of such Person to perform its
obligations under the Loan Documents.
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<PAGE>
"Mortgages" shall mean the mortgages of Company's real estate located in
Arcade, New York and Decatur, Alabama.
"Note" shall mean the Facility A Note, as amended from time to time, and
promissory note(s) issued in extension or renewal thereof.
"Offering Circular" shall mean the Confidential Offering Circular dated
January 16, 1998, relating to the Senior Debt.
"PEI" shall mean PEI Holding, Inc., a Delaware corporation.
"Pension Plans" shall mean all pension plans of Company or any Domestic
Subsidiary which are subject to ERISA.
"Permitted Liens" shall mean with respect to any Person:
(a) liens for taxes not yet due and payable or which are being
contested in good faith by appropriate proceedings diligently pursued, provided
that provision for the payment of all such taxes has been made on the books of
such Person as may be required by GAAP;
(b) mechanics', materialmen's, banker's, carriers', warehousemen's and
similar liens and encumbrances arising in the ordinary course of business and
securing obligations of such Person that are not overdue for a period of more
than 60 days or are being contested in good faith by appropriate proceedings
diligently pursued, provided that in the case of any such contest (i) any
proceedings commenced for the enforcement of such liens and encumbrances shall
have been duly suspended; and (ii) such provision for the payment of such liens
and encumbrances has been made on the books of such Person as may be required by
GAAP;
(c) liens arising in connection with worker's compensation,
unemployment insurance, old age pensions and social security benefits and
similar statutory obligations which are not overdue or are being contested in
good faith by appropriate proceedings diligently pursued, provided that in the
case of any such contest (i) any proceedings commenced for the enforcement of
such liens shall have been duly suspended; and (ii) such provision for the
payment of such liens has been made on the books of such Person as may be
required by GAAP;
(d)(i) liens incurred in the ordinary course of business to secure the
performance of statutory obligations arising in connection with progress
payments or advance payments due under contracts with the United States
government or any agency thereof entered into in the ordinary course of business
and (ii) liens incurred or deposits made in the ordinary course of business to
secure the performance of statutory obligations, bids, leases, fee and expense
arrangements with trustees and fiscal agents and other similar obligations
(exclusive of obligations incurred in connection with the borrowing of money,
any lease-purchase arrangements or the payment of the deferred purchase price of
property), provided
8
<PAGE>
that full provision for the payment of all such obligations set forth in
clauses (i) and (ii) has been made on the books of such Person as may be
required by GAAP;
(e) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties,
which do not materially interfere with the business of such Person; and
(f) liens described in attached Schedule 7.7.
"Permitted Prepayments" shall mean (a) the repayment by Company of
approximately $47,300,000 in outstanding indebtedness with the proceeds of the
Senior Debt, as described in the Offering Circular, (b) prepayments made while
no Default or Event of Default has occurred and is then continuing (either
before the prepayment or after giving effect thereto) (i) at any time that an
asset disposition permitted by Section 7.2 or as to which Bank has otherwise
consented, requires a mandatory prepayment of the Senior Notes, and/or (ii) at
any time prior to February 1, 2001 of up to $43,750,000 principal of the Senior
Debt with the proceeds of a public offering of the common stock of PEI or
Company, and (c) prepayments of debt permitted by Section 7.4(d) made while no
Default or Event of Default has occurred and is then continuing.
"Person" or "person" shall mean any individual, corporation, partnership,
joint venture, association, trust, unincorporated association, joint stock
company, government, municipality, political subdivision or agency, or other
entity.
"Prime Rate" shall mean the per annum interest rate established by Bank as
its prime rate for its borrowers as such rate may vary from time to time, which
rate is not necessarily the lowest rate on loans made by Bank at any such time.
"Prime-based Advance" shall mean an Advance which bears interest at the
Prime-based Rate.
"Prime-based Rate" shall mean a per annum interest rate which is the sum of
the Applicable Prime-based Margin plus the Prime Rate.
"Recapitalization Dividend" shall mean the dividend and related payments of
not more than $30,100,000 to be declared and paid by Company to PEI with the
proceeds of the Senior Debt, as described in the Offering Circular.
"Request for Advance" shall mean a Request for Advance issued by Company
under this Agreement in the form annexed to this Agreement as Exhibit "B".
"Security Agreement" shall mean the Security Agreement (Accounts, Chattel
Paper, and Inventory) dated October 25, 1994, executed and delivered by Company
to Bank.
9
<PAGE>
"Senior Debt" shall mean the indebtedness of Company evidenced by the
Senior Notes.
"Senior Debt Documents" shall mean the Senior Notes, the Senior Debt
Indenture, and all other documents and agreements to evidence the Senior Debt,
as the same may be amended from time to time (subject to the terms of this
Agreement), and any and all other documents executed in exchange therefor or
replacement or renewal thereof.
"Senior Debt Indenture" shall mean the Indenture relating to the Senior
Notes.
"Senior Notes" shall mean the 9-_% Senior Notes of Company due February 1,
2008 in the original principal amount of $125,000,000, and the notes of Company
issued in exchange therefor pursuant to the Registration Rights Agreement
entered into in connection with the Senior Debt Documents.
"Subsidiary(ies)" shall mean any corporation, association, joint stock
company, business trust, limited liability company or any other business entity
of which more than fifty percent (50%) of the outstanding voting stock, share
capital, membership or other interests, as the case may be, is owned either
directly or indirectly by any Person or one or more of its Subsidiaries, or the
management of which is otherwise controlled, directly, or indirectly through one
or more intermediaries, or both, by any Person and/or its Subsidiaries. Unless
otherwise specified to the contrary herein, Subsidiary(ies) shall refer to PEI's
Subsidiary(ies).
2. THE INDEBTEDNESS: Facility A
2.1 Bank agrees to make Advances to Company at any time and from time to
time from the effective date hereof until the Facility A Maturity Date, not to
exceed Twenty-Three Million Dollars ($23,000,000) in aggregate principal amount
at any one time outstanding. All of the Advances under this Section 2 shall be
evidenced by the Facility A Note under which advances, repayments and readvances
may be made, subject to the terms and conditions of this Agreement.
2.2 The Facility A Note shall mature on the Facility A Maturity Date and
each Advance from time to time outstanding thereunder shall bear interest at the
Prime-based Rate. The amount and date of each Advance and the amount and date of
any repayment shall be noted on Bank's records, which records will be conclusive
evidence thereof absent demonstrable error in computation.
2.3 Company may request an Advance under this Section 2 upon the delivery
to Bank of a Request for Advance executed by an authorized officer of Company,
subject to the following:
(a) each such Request for Advance shall set forth the information required
on the Request for Advance form annexed hereto as Exhibit "B";
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<PAGE>
(b) each such Request for Advance shall be delivered to Bank by 11 a.m. on
the proposed date of Advance;
(c) the principal amount of such Advance, plus the sum of the amount of all
other outstanding Advances under this Section 2 and the Letter of
Credit Reserve shall not exceed the Borrowing Base; and
(d) a Request for Advance, once delivered to Bank, shall not be revocable
by Company.
Bank may at its option lend under this Section 2 upon Company's telephone or
facsimile request upon execution by Company of a Borrower's Telephone and
Facsimile Authorization in the form of Exhibit "D" attached hereto.
2.4 The aggregate principal amount at any one time outstanding under the
Facility A Note plus the Letter of Credit Reserve shall never exceed the lesser
of Twenty-Three Million Dollars ($23,000,000) or the Borrowing Base. Company
shall immediately make all payments necessary to comply with this provision.
2.5 Company agrees to pay to Bank a commitment fee on the average daily
balance of the unused portion of the Facility A commitment at the rate of three-
eighths of one percent (3/8%) per annum, computed on the actual number of days
elapsed using a year of 360 days. The commitment fee shall be payable quarterly
in arrears on the first day of each calendar quarter and on the Facility A
Maturity Date. For purposes of calculating the commitment fee, the face amount
of outstanding Letters of Credit shall be considered usage of the Facility A
commitment.
2.6 In addition to Advances under the Facility A Note to be provided to
Company by Bank under and pursuant to Section 2.1 of this Agreement, Bank
further agrees to issue, or commit to issue, from time to time, standby Letters
of Credit for the account of Company in aggregate undrawn amounts not to exceed
Two Million Dollars ($2,000,000) at any one time outstanding; provided, however,
-------- -------
that the sum of the aggregate amount of Advances outstanding under the Facility
A Note plus the Letter of Credit Reserve shall not exceed the lesser of Twenty-
Three Million Dollars ($23,000,000) or the Borrowing Base at any time; provided
--------
further, that except as described in the following proviso, no Letter of Credit
- - - - - - - - - - - -------
shall, by its terms, have an expiration date which extends beyond the earlier to
occur of one year after issuance or the Facility A Maturity Date; and provided
--- --------
further, that in the event any Letter of Credit has an expiration date later
- - - - - - - - - - - -------
than the Facility A Maturity Date, Company shall deliver to Bank on demand cash
collateral in an amount equal to the maximum undrawn amount of such Letter of
Credit. In addition to the terms and conditions of this Agreement, the issuance
of any Letters of Credit shall also be subject to the terms and conditions of
any letter of credit applications and agreements executed and delivered by
Company to Bank with respect thereto. Company shall pay to Bank annually in
advance a fee of two percent (2%) per annum of the amount of each Letter of
Credit.
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2.7 Letters of Credit and proceeds of Advances under the Facility A Note
shall be used solely for (a) general corporate and working capital purposes and
(b) investments permitted by Section 7.6 hereof.
3. INTEREST AND PREPAYMENTS; MARGIN REDUCTION OPTION
3.1 Interest. The Facility A Note and the Advances shall bear interest
--------
from the date thereof on the unpaid principal balance thereof from time to time
outstanding at a rate per annum equal to the Prime-based Rate. Interest shall be
payable monthly on the first day of each month, commencing on February 1, 1998.
Notwithstanding the foregoing, from and after the occurrence of any Event of
Default and during the continuation thereof, the Advances shall bear interest,
payable on demand, at a rate per annum equal to three percent (3%) above the
Prime-based Rate. Interest on all Advances shall be calculated on the basis of a
360 day year for the actual number of days elapsed. The interest rate with
respect to any Advance shall change on the effective date of any change in the
Prime-based Rate.
3.2 Optional Prepayments. At its option Company may prepay the Advances in
--------------------
whole at any time or in part from time to time, without premium or penalty, but
with accrued interest on the principal being prepaid to the date of such
prepayment.
3.3 Margin Reduction Option. (a) From time to time and at any time during
-----------------------
which no Default or Event of Default has occurred and is then continuing,
Company may elect (the "Margin Reduction Option") to reduce the Applicable
Prime-based Margin to zero percent (0%) by delivery to Bank of a notice on the
form of Exhibit "C" attached hereto. From and after the delivery of such
notice, and until such notice is revoked as provided in subsection (b), the
"Applicable Prime-based Margin" and the "Borrowing Base" shall be as defined in
subsection (ii) of such definitions.
(b) Company may revoke any effective exercise of the Margin Reduction
Option by delivery to Bank of a notice in the form of Exhibit "E" attached
hereto. From and after delivery of such notice, the "Applicable Prime-based
Margin" and the "Borrowing Base" shall be as defined in subsection (i) of such
definitions.
(c) Company may exercise the Margin Reduction Option no more frequently
than twice in any calendar year. Any period during which a Margin Reduction
Option shall be in effect is referred to herein as a "Margin Reduction Period."
4. CONDITIONS; SECURITY
4.1 Company agrees to furnish Bank prior to the initial borrowing under
this Agreement, in form and substance to be satisfactory to Bank, with (i) an
opinion of Company's legal counsel in form and substance satisfactory to Bank;
(ii) certified copies of resolutions of the Board of Directors of Company
evidencing approval of the borrowings and transactions contemplated hereunder;
(iii) a certificate of good standing from the state of Company's incorporation
and from the state(s) in which it is required to be qualified to do business;
and (iv) such other documents and instruments as Bank may reasonably require.
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<PAGE>
4.2 Prior to the initial borrowing hereunder, Company shall provide to
Bank, in form and substance satisfactory to Bank, with the following:
(a) evidence that the Senior Notes have been issued, and that Company
has received gross cash consideration (before underwriters'
discounts and commissions and other expenses of issuance) therefor
of not less than $125,000,000;
(b) certified copies of the Senior Debt Documents, which shall be
satisfactory to Bank; and
(c) evidence satisfactory to Bank that the Lucas Acquisition has
closed on terms substantially similar to those described in the
Offering Circular.
4.3 On the date of execution of this Agreement, Company shall pay to Bank
a non-refundable closing fee in the amount of $57,500. Such fee shall be deemed
fully earned upon execution of this Agreement.
4.4 Company reaffirms and ratifies all of its obligations to Bank under
the Collateral Documents, and agrees that the Collateral Documents shall secure
the Indebtedness in accordance with their terms.
4.5 Company and Bank hereby terminate the Equipment Security Agreement,
the Collateral Assignments, and each of the Mortgages. Bank shall promptly file
UCC termination statements and mortgage discharges with respect to the
collateral covered by such agreements.
5. REPRESENTATIONS AND WARRANTIES
Company represents and warrants and such representations and warranties
shall be deemed to be continuing representations and warranties during the
entire life of this Agreement and after giving effect to the Lucas Acquisition
and the issuance of the Senior Debt:
5.1 Company and each Domestic Subsidiary is a corporation duly organized
and existing in good standing under the laws of the jurisdiction of its
incorporation; Company and each Domestic Subsidiary is in good standing in each
jurisdiction in which it is required to be qualified to do business; execution,
delivery and performance of this Agreement and other documents and instruments
required under this Agreement, and the issuance of the Note by Company, are
within its corporate powers, have been duly authorized, are not in contravention
of law or the terms of Company's Certificate of Incorporation or Bylaws, and do
not require the consent or approval of any governmental body, agency or
authority; and this Agreement and other documents and instruments required under
this Agreement and the Note, when issued and delivered, will be valid and
binding on the Company in accordance with their terms.
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<PAGE>
5.2 The execution, delivery and performance of this Agreement and any
other documents and instruments required under this Agreement, and the issuance
of the Note by Company, are not in contravention of the unwaived terms of any
indenture, agreement or undertaking to which Company is a party or by which it
is bound.
5.3 No litigation or other proceeding before any court or administrative
agency is pending, or to the knowledge of the officers of Company is threatened
against Company or any Domestic Subsidiary, the outcome of which could
materially impair Company's or any Domestic Subsidiary's financial condition or
the ability of Company or any Domestic Subsidiary to carry on its business.
5.4 There are no security interests in, liens, mortgages, or other
encumbrances on any of Company's or any Domestic Subsidiary's assets, except to
Bank or as otherwise permitted by this Agreement.
5.5 Neither Company nor any Domestic Subsidiary maintains or contributes to
any employee pension benefit plan subject to title IV of the "Employee
Retirement Income Security Act of 1974" (herein called "ERISA"), except those
set forth in attached Schedule 5.5. Except as set forth on Schedule 5.5, there
was no unfunded past service liability of any Pension Plan as of December 31,
1997, and there is no accumulated funding deficiency within the meaning of
ERISA, or any existing material liability with respect to any pension plan owed
to the Pension Benefit Guaranty Corporation ("PBGC") or any successor thereto,
except any funding deficiency for which an application to the PBGC for waiver is
pending or for which a waiver has been granted by the PBGC.
5.6 The audited financial statements of PEI and its consolidated
Subsidiaries dated December 31, 1996, previously furnished Bank, are complete
and correct and fairly present the financial condition of PEI and its
consolidated Subsidiaries in accordance with GAAP as of such date; the unaudited
financial statements of PEI and its consolidated Subsidiaries dated October 4,
1997, previously furnished Bank, are complete and correct and, to the best of
the knowledge of Company's officers, fairly present the financial condition of
PEI and its consolidated Subsidiaries as of such date; since October 4, 1997
there has been no material adverse change in the financial condition of PEI and
its Subsidiaries (taken as a whole); and to the best of the knowledge of
Company's officers, neither Company nor any Subsidiary has any material
contingent obligations (including any liability for taxes) not disclosed by or
reserved against in said balance sheets, and at the present time there are no
material unrealized or anticipated losses from any present commitment of Company
or any Subsidiary.
5.7 The financial projections dated December 12, 1997 previously furnished
by Company to Bank, the receipt of which Bank acknowledges, were as of the date
thereof and are as of the date of execution of this Agreement reasonable in all
material respects taking into account all facts and information known to or
reasonably available to Company.
5.8 All tax returns and tax reports of Company and each Domestic
Subsidiary required by law to have been filed have been duly filed or extensions
obtained, and all taxes, assessments and other governmental charges or levies
(other than those presently payable
14
<PAGE>
without penalty and those currently being contested in good faith for which
adequate reserves have been established) upon Company or any Domestic Subsidiary
(or any of its properties) which are due and payable have been paid. The
charges, accruals and reserves on the books of Company and the Domestic
Subsidiaries in respect of the Federal income tax for all periods are adequate
in the opinion of Company.
5.9 There are no Subsidiaries of PEI, except as set forth in attached
Schedule 5.9.
5.10 Company and each Domestic Subsidiary are, in the conduct of their
business, in compliance in all material respects with all federal, state or
local laws, statutes, ordinances and regulations applicable to any of them, the
enforcement of which, if Company or any Domestic Subsidiary were not in
compliance, would have a Material Adverse Effect on Company and the Domestic
Subsidiaries (taken as a whole). Company and each Domestic Subsidiary have all
approvals, authorizations, consents, licenses, orders and other permits of all
governmental agencies and authorities, whether federal, state or local, required
to permit the operation of their business as presently conducted, except such
approvals, authorizations, consents, licenses, orders and other permits with
respect to which the failure to have can be cured without having a Material
Adverse Effect on Company and the Domestic Subsidiaries (taken as a whole).
5.11 Neither Company nor any Domestic Subsidiary is a party to any
litigation or administrative proceeding, nor so far as is known by Company is
any litigation or administrative proceeding threatened against Company or any
Domestic Subsidiary, the outcome of which could have a Material Adverse Effect
on Company and the Domestic Subsidiaries (taken as a whole) which in either case
(A) asserts or alleges that Company or any Domestic Subsidiary violated
Environmental Laws, (B) asserts or alleges that Company or any Domestic
Subsidiary is required to clean up, remove, or take remedial or other response
action due to the disposal, depositing, discharge, leaking or other release of
any hazardous substances or materials, (C) asserts or alleges that Company or
any Domestic Subsidiary is required to pay all or a portion of the cost of any
past, present, or future cleanup, removal or remedial or other response action
which arises out of or is related to the disposal, depositing, discharge,
leaking or other release of any hazardous substances or materials by Company or
any Domestic Subsidiary.
5.12 Neither Company nor any Domestic Subsidiary is in violation of any
Environmental Laws which would subject Company or any Domestic Subsidiary to
damages, penalties, injunctive relief or cleanup costs under any applicable
Environmental Laws or which require or are likely to require cleanup, removal,
remedial action or other response pursuant to applicable Environmental Laws by
Company or any Domestic Subsidiary, except for such violations which are not
likely to have a Material Adverse Effect on Company and the Domestic
Subsidiaries (taken as a whole).
5.13 Neither Company nor any Domestic Subsidiary is subject to any
judgment, decree, order or citation related to or arising out of applicable
Environmental Laws which could have a Material Adverse Effect on Company and the
Domestic Subsidiaries (taken as a whole) and to the best knowledge of the
Company, neither Company nor any Domestic
15
<PAGE>
Subsidiary has been named or listed as a potentially responsible party by any
governmental body or agency in a matter arising under any applicable
Environmental Laws, the result of which is likely to have a Material Adverse
Effect on Company and the Domestic Subsidiaries (taken as a whole).
5.14 Company and each Domestic Subsidiary has all permits, licenses and
approvals required under applicable Environmental Laws.
5.15 Neither Company nor any Domestic Subsidiary is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended. Neither
Company nor any Domestic Subsidiary is engaged principally, or as one of its
important activities, directly or indirectly, in the business of extending
credit for the purpose of purchasing or carrying margin stock, and none of the
proceeds of any of the loans hereunder will be used, directly or indirectly, for
any purpose which would violate the provisions of Regulation U or X of the Board
of Governors of the Federal Reserve System. Terms for which meanings are
provided in Regulation U of the Board of Governors of the Federal Reserve System
or any regulations substituted therefor, as from time to time in effect, are
used in this paragraph with such meanings.
5.16 Company has good and valid title to the collateral covered by the
Collateral Documents, subject only to Permitted Liens.
6. AFFIRMATIVE COVENANTS
Company covenants and agrees that it will, so long as Bank may make any
Advance under this Agreement and thereafter so long as any Indebtedness remains
outstanding under this Agreement:
6.1 Furnish Bank:
(a) within ninety (90) days after and as of the end of each fiscal year of
PEI, detailed consolidated and consolidating financial statements of
PEI and its consolidated Subsidiaries, audited and certified by
independent certified public accountants satisfactory to Bank;
(b) within thirty (30) days after and as of the end of each month other
than December, and within sixty (60) days after the end of each
December, a consolidated balance sheet and consolidated statement of
profit and loss and surplus reconciliation of PEI and the Subsidiaries
presented in the form previously submitted to Bank, certified by an
authorized officer of Company as being correct and accurate to the best
of his knowledge;
(c) within twenty (20) days after and as of the end of each month,
including the last month of each fiscal year, the monthly aging of
Company's Accounts and accounts payable and an inventory report;
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(d) Within twenty (20) days after and as of the end of each month (and at
such other times as Bank may request), a schedule identifying each
Eligible Account as of the end of such month and any such schedule
shall be accompanied, if so requested by Bank, by a true and correct
copy of the invoices evidencing such Eligible Account and by evidence
of shipment or performance;
(e) within ninety (90) days after the beginning of each fiscal year of PEI,
financial projections for PEI and the Subsidiaries (on a month by month
basis) for such fiscal year;
(f) such information as required by the terms and conditions of any
security agreements referred to in this Agreement;
(g) simultaneously with the delivery of any financial statements or
reports, certificates, notices of default or other material
correspondence to the holders of the Senior Debt, copies thereof; and
(h) promptly, and in form to be satisfactory to Bank, such other
information as Bank may reasonably request from time to time.
6.2 Pay and discharge, and cause each Domestic Subsidiary to pay and
discharge, all taxes and other governmental charges before the same shall become
overdue, unless and to the extent only that such payment is being contested in
good faith.
6.3 Maintain, and cause each Domestic Subsidiary to maintain, insurance
coverage on their physical assets and against other business risks in such
amounts and of such types as are customarily carried by companies similar in
size and nature, and in the event of acquisition of additional property, real or
personal, or of incurrence of additional risks of any nature, increase such
insurance coverage in such manner and to such extent as prudent business
judgment and present practice would dictate; and in the case of all policies
covering property hereafter mortgaged or pledged to Bank or property in which
Bank shall have a security interest of any kind whatsoever, other than those
policies protecting against casualty liabilities to strangers, all such
insurance policies shall provide that the loss payable thereunder shall be
payable to Company (or the Domestic Subsidiary) and Bank (as mortgagee) as their
respective interests may appear, all said policies or copies thereof, including
all endorsements thereon and those required hereunder, to be deposited with
Bank.
6.4 Permit, and cause each Domestic Subsidiary to permit, Bank, through
its authorized attorneys, accountants and representatives, to examine Company's
and each Domestic Subsidiary's books, accounts, records, ledgers and assets of
every kind and description at all reasonable times upon oral or written request
of Bank, which shall include but shall not be limited to collateral audits of
Company conducted by Bank, at Company's cost and expense (provided that so long
as Company shall not be in default, Company shall be obligated to pay for no
more than two (2) collateral audits of its North American operations per year).
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6.5 Promptly notify Bank of any Default or Event of Default, and promptly
inform Bank of the existence or occurrence of any condition or event (other than
conditions having an effect on the economy in general) which could have a
material adverse effect upon Company's or any Subsidiary's financial condition.
6.6 Maintain, and cause each Domestic Subsidiary to maintain, in good
standing all licenses required by any state or any agency thereof, or other
governmental authority that may be necessary or required for Company and the
Domestic Subsidiaries to carry on their general business objects and purposes.
6.7 Reserved.
6.8 Comply, and cause each Domestic Subsidiary to comply, with all
material requirements imposed by ERISA as presently in effect or hereafter
promulgated, including but not limited to, the minimum funding requirements of
any Pension Plan.
6.9 Promptly notify Bank after the occurrence thereof in writing of any of
the following events:
(a) the termination of a Pension Plan pursuant to Subtitle C of Title IV of
ERISA or otherwise;
(b) the appointment of a trustee by a United States District Court to
administer a Pension Plan;
(c) the commencement by the Pension Benefit Guaranty Corporation, or any
successor thereto of any proceeding to terminate a Pension Plan;
(d) the failure of a Pension Plan to satisfy the minimum funding
requirements for any plan year as established in Section 412 of the
Internal Revenue Code of 1954, as amended or any similar provision
under the Internal Revenue Code of 1986, as amended;
(e) the withdrawal of Company or any Domestic Subsidiary from a Pension
Plan; or
(f) a reportable event, within the meaning of Title IV of ERISA.
6.10 Furnish to the Bank concurrently with the delivery of each of the
financial statements required by Section 6.1(a) and each financial statement
required by Section 6.1(b) for the months of March, June, September and
December, a statement prepared and certified by the chief financial officer of
Company (or in his absence, a responsible senior officer of Company) (a) setting
forth all computations necessary to show compliance by Company with the
financial covenants contained in Sections 6.11 through 6.14 hereof, (b) stating
that as of the date thereof, no Default or Event of Default hereunder has
occurred and is continuing, or if any such event or condition has occurred and
is continuing or exists, specifying in detail the
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nature and period of existence thereof and any action taken with respect thereto
taken or contemplated to be taken by Company and (c) stating that the signer has
personally reviewed this Agreement and that such certificate is based on an
examination sufficient to assure that such certificate is accurate.
6.11 Maintain Consolidated Capitalization of not less than the following on
the dates indicated below:
June 30, 1998 $81,500,000
December 31, 1998 $87,500,000
December 31, 1999 and
each December 31 thereafter $95,000,000
6.12 Maintain a Debt to Capitalization Ratio of not more than the following
on the dates indicated below:
June 30, 1998 2.5 to 1
December 31, 1998 2.5 to 1
December 31, 1999 and
each December 31 thereafter 2.25 to 1
6.13 Maintain a Fixed Charge Coverage Ratio of not less than the following
on the dates indicated below:
June 30, 1998 2 to 1
December 31, 1998 2 to 1
December 31, 1999 and
each December 31 thereafter 2.5 to 1
6.14 Maintain a Funded Debt Ratio of not more than the following on the
dates indicated below:
June 30, 1998 7.5 to 1
December 31, 1998 6 to 1
December 31, 1999 and
each December 31 thereafter 5 to 1
6.15 Except as otherwise agreed by Bank in writing, maintain, and cause the
Domestic Subsidiaries to maintain, all cash collection and general disbursement
accounts with Bank, other than the existing cash collection account with
Philadelphia National Bank and the existing lockbox and disbursement accounts
with NBD Bank.
6.16 Comply, and cause each Domestic Subsidiary to comply, in all material
respects with all applicable laws, rules, regulations and orders of any
governmental authority
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(such compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments and governmental charges imposed upon it or
upon its property), except to the extent that compliance with any of the
foregoing is then being contested in good faith by appropriate legal proceedings
and with respect to which adequate financial reserves have been established on
the books and records of the Company or such Domestic Subsidiary.
6.17 Pay and discharge, and cause each Domestic Subsidiary to pay and
discharge, all contractual obligations calling for the payment of money (other
than trade payables incurred in the ordinary course of business) before the same
shall become overdue, unless and to the extent only that such payment is being
contested in good faith.
6.18 In the event that, at any time while this Agreement is in effect,
Company shall issue any indebtedness for borrowed money which is not by its
terms subordinate and junior to the Indebtedness and such indebtedness shall
include, or be issued pursuant to a trust indenture or other agreement which
includes, financial covenants which are not substantially identical to the
financial covenants set forth in this Agreement, or in the event Company desires
to amend the Senior Debt Documents to revise any financial covenants or to add
any new financial covenants, Company shall so advise Bank in writing. Such
notice shall be accompanied by a copy of the applicable agreement containing
such financial covenants. If Bank determines in its sole discretion that some or
all of the financial covenants set forth in such agreement are more favorable to
the lender thereunder than the financial covenants set forth in this Agreement
("More Favorable Terms") and that Bank desires that this Agreement be amended to
incorporate the More Favorable Terms, then Bank shall give written notice of
such determination to Company. Thereupon, and in any event within thirty (30)
days following the date of notice by Bank to Company, Company and Bank shall
enter into an amendment to this Agreement incorporating, on terms and conditions
acceptable to Bank, the More Favorable Terms.
7. NEGATIVE COVENANTS
Company covenants and agrees that, so long as Bank may make any Advances
under this Agreement and thereafter so long as any Indebtedness remains
outstanding under this Agreement, it will not, and it will not permit any of the
Domestic Subsidiaries to, without the prior written consent of Bank:
7.1 Purchase, acquire or redeem any of its capital stock or other
securities or make any material change in its capital structure or general
business objectives or purpose, except that Company may redeem stock options, or
capital stock issued as a result of the exercise of such options, in an amount
not to exceed $1,000,000 in any fiscal year if no Event of Default has occurred
and is then continuing, either before or as a result of such redemption.
7.2 Enter into any merger or consolidation or sell, lease, transfer, or
dispose of all, substantially all, or any material part of its assets, except in
the ordinary course of its business.
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7.3 Guarantee, endorse, or otherwise become secondarily liable for or upon
the obligations of others, except by endorsement for deposit in the ordinary
course of business and guaranties in favor of Bank and except for guaranties
incurred while no Default or Event of Default has occurred and is then
continuing of liabilities not to exceed $1,000,000 in the aggregate at any time.
7.4 Become or remain obligated for any indebtedness for borrowed money, or
for any indebtedness incurred in connection with the acquisition of any
property, real or personal, tangible or intangible, except:
(a) indebtedness to Bank;
(b) current unsecured trade, utility or non-extraordinary accounts payable
arising in the ordinary course of Company's or any Domestic
Subsidiary's business; and
(c) Senior Debt, and any renewals, refundings or refinancings thereof in
amounts not exceeding the original Senior Debt less all permitted
prepayments thereof;
(d) other indebtedness incurred while no Default or Event of Default has
occurred and is continuing, not to exceed $1,000,000 in the aggregate
at any time; and
(e) indebtedness described in attached Schedule 7.4.
7.5 Purchase or otherwise acquire or become obligated for the purchase of
all or substantially all of the assets or business interests of any person, firm
or corporation or any shares of stock of any corporation, trusteeship or
association or in any other manner effectuate an expansion of present business
by acquisition, other than (a) the Lucas Acquisition, (b) as permitted by
Section 7.6, and (c) any acquisition in which the sum of the total consideration
paid by Company and the Domestic Subsidiaries (including cash paid, indebtedness
assumed and all other consideration), plus the total consideration paid in
connection with all other acquisitions consummated during the same fiscal year,
does not exceed $1,000,000.
7.6 Make or allow to remain outstanding any investment (whether such
investment shall be of the character of investment in shares of stock, evidences
of indebtedness or other securities or otherwise) in, or any loans or advances
to, any Person, except (a) Company's existing investment in the Subsidiaries
(including the pending "roll over" of Company's 50% interest in Leece Neville
Autolek, Ltd. into a 5% interest in Auto-Ignition, Ltd., and the contemporaneous
dissolution of Prestolite Electric Mauritius, Ltd.), (b) new investments in, or
loans or advances to, any Subsidiary made while no Default or Event of Default
has occurred and is then continuing or would result therefrom (including
investments, loans or advances in connection with the Lucas Acquisition), (c)
investments in preferred stock of DAX Industries, Inc. not to exceed $2,000,000
in the aggregate ($500,000 of which has been so invested as of the date of this
Agreement), and (d) other investments made while no Default or Event of Default
has occurred and is continuing, not to exceed $1,000,000 in the aggregate at any
time; provided, however, that in no event may Company use more than $8,000,000
-------- -------
of the proceeds of Advances hereunder to make investments or loans or advances;
provided further that such
- - - - - - - - - - - -------- -------
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$8,000,000 limitation shall not be applicable to the remaining $1,500,000
investment in preferred stock of DAX Industries, Inc., or to investments, loans
or advances of not more than $1,600,000 with respect to post-closing purchases
of shares of Lucas Argentina (as such purchases are referenced in the second
sentence of the definition of Lucas Acquisition specified in this Agreement).
7.7 Affirmatively pledge or mortgage any of its assets, whether now owned
or hereafter acquired, or create, suffer or permit to exist any lien, security
interest in, or encumbrance thereon, except:
(a) to Bank; and
(b) the Permitted Liens.
7.8 Sell, assign, transfer or confer a security interest in any account,
contract, note, trade acceptance or other receivable, except to Bank.
7.9 Enter into, maintain, or make contribution to, directly or indirectly,
any employee pension plan that is subject to Title IV of ERISA, except the
Pension Plans.
7.10 Make loans, advances of credit or extensions of credit to any of its
Affiliates or to its officers, directors or shareholders or any member of their
immediate families or any entity controlled by any of the foregoing or to any
other Person, except for (a) sales on open account or in the ordinary course of
business, (b) advances to employees in an amount not exceeding $100,000 at any
time outstanding, and (c) loans or advances permitted by Section 7.6.
7.11 Declare or pay any dividends or make any other distribution upon its
shares of capital stock, except (a) dividends payable in the capital stock of
Company, and (b) dividends by Subsidiaries to Company, and (c) the
Recapitalization Dividend.
7.12 Make any Capital Expenditure during any fiscal year if, after giving
effect thereto, the aggregate amount of all Capital Expenditures made by PEI and
its Subsidiaries during such calendar year would exceed $15,000,000.
7.13 Pay any management, consulting or similar fees to Genstar Capital
Corporation or Genstar Investment Corporation or any of their Affiliates during
any fiscal year if, after giving effect thereto, the aggregate amount of such
payments during such calendar year would exceed the greater of $900,000 or
three-tenths of one percent (0.3%) of PEI's Consolidated net sales for the
preceding fiscal year.
7.14 Enter into any transaction with any of its stockholders or officers,
or its or their Affiliates, except in the ordinary course of business and on
terms not materially less favorable than would be usual and customary in similar
transactions between Persons dealing at arm's length, and except as permitted by
Section 7.13.
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7.15 Enter into or become subject to any agreement (other than loan
documents evidencing or otherwise related to the Senior Debt) (i) prohibiting
the guaranteeing by Company or any Subsidiary of any obligations, (ii)
prohibiting the creation or assumption of any lien or encumbrance upon the
properties or assets of Company or any Subsidiary, whether now owned or
hereafter acquired, or (iii) requiring an obligation to become secured (or
further secured) if another obligation is secured or further secured.
7.16 Except for Permitted Prepayments, prepay, purchase, redeem or defease
any debt for money borrowed, excluding, subject to the terms hereof, the
Indebtedness.
7.17 Amend, modify or otherwise alter (or suffer to be amended, modified or
altered) or waive (or permit to be waived) in any material respect, any
documents or instruments evidencing or otherwise related to Senior Debt so as to
shorten the original maturity date or amortization thereof or increase the
interest rate applicable thereto, or amend, modify or otherwise alter (or suffer
to be amended, modified or altered) any documents or instruments evidencing or
otherwise related to Senior Debt to limit the maximum amount of the Indebtedness
to an amount less than the amount permitted by the Senior Debt Documents as in
effect on the date hereof or to include any covenants or other provisions, that
require, for the amendment of any term or provision of this Agreement, or the
waiver of any term or provision hereof, the approval or consent of any other
creditor of Company or any Subsidiary; provided, however, that any increase in
-------- -------
the interest rate applicable to the Senior Debt (not in excess of 0.5% per
annum) as a result of the failure to file or lack of effectiveness of the Shelf
Registration Statement or the Exchange Offer Registration Statement described in
the Offering Circular shall not be a violation of this Section 7.17.
8. ENVIRONMENTAL PROVISIONS
8.1 Company shall comply, and cause the Domestic Subsidiaries to comply,
in all material respects with all applicable Environmental Laws.
8.2 Company shall provide to Bank, immediately upon receipt, copies of any
correspondence, notice, pleading, citation, indictment, complaint, order,
decree, or other document from any source asserting or alleging a circumstance
or condition which requires or may require a financial contribution by Company
or any Domestic Subsidiary in respect of a cleanup, removal, remedial action, or
other response by or on the part of Company or any Domestic Subsidiary under
applicable Environmental Laws or which seeks damages or civil, criminal or
punitive penalties from Company or any Domestic Subsidiary for an alleged
violation of Environmental Laws; provided, however, that no such copies shall be
-------- -------
required to be delivered unless it reasonably appears that the matter may result
in a Material Adverse Effect on Company and the Domestic Subsidiaries (taken as
a whole).
8.3 Company shall promptly notify Bank in writing as soon as Company
becomes aware of the occurrence or existence of any condition or circumstance
which makes the environmental warranties contained in this Agreement incomplete
or inaccurate in any material respect as of any date.
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8.4 In the event of any condition or circumstance that makes any
environmental warranty, representation and/or agreement incomplete or inaccurate
in any material respect as of any date, Company shall, at the request of Bank
(but only in cases in which Bank reasonably believes there may be a Material
Adverse Effect on Company and the Domestic Subsidiaries (taken as a whole)), at
its sole expense, retain an environmental professional consultant, reasonably
acceptable to Bank, to conduct a thorough and complete investigation regarding
the changed condition and/or circumstance and any environmental concerns arising
from that changed condition and/or circumstance. A copy of the environmental
consultant's report will be promptly delivered to both Bank and Company upon
completion.
8.5 At any time Company or any Domestic Subsidiary, directly or indirectly
through any professional consultant or other representative, determines to
undertake an environmental audit, assessment or investigation, Company shall
promptly provide Bank with written notice of the initiation of the environmental
audit, fully describing the purpose and intended scope of the environmental
audit. Upon receipt, Company will promptly provide to Bank copies of all final
findings and conclusions of any such environmental investigation.
8.6 Company hereby indemnifies, saves and holds Bank and any of its past,
present and future officers, directors, shareholders, employees, representatives
and consultants harmless from any and all loss, damages, suits, penalties,
costs, liabilities and expenses (including but not limited to reasonable
investigation, environmental audit(s), and legal expenses) arising out of any
claim, loss or damage of any property, injuries to or death of persons,
contamination of or adverse affects on the environment, or any violation of any
applicable Environmental Laws, caused by or in any way related to any property
owned or operated by Company or any Subsidiary, or due to any acts of Company or
any Subsidiary or such person's, officers, directors, shareholders, employees,
consultants and/or representatives; provided, however, that the foregoing
indemnification shall not be applicable when arising from events or conditions
occurring while the Bank is in sole possession (subject to the rights of any
creditors of Company) of such property. In no event shall Company be liable
hereunder for any loss, damages, suits, penalties, costs, liabilities or
expenses arising from any act of gross negligence of Bank, or its agents or
employees.
It is expressly understood and agreed that the indemnifications granted
herein are intended to protect Bank, its past, present and future officers,
directors, shareholders, employees, consultants and representatives from any
claims that may arise by reason of the security interest, liens and/or mortgages
granted to Bank, or under any other document or agreement given to secure
repayment of any indebtedness from Company, whether or not such claims arise
before or after Bank has foreclosed upon and/or otherwise become the owner of
any such property. All obligations of indemnity as provided hereunder shall be
secured by the Collateral Documents until payment in full of all indebtedness of
Company to Bank, unless there is a then known violation of the Environmental
Laws and Bank has asserted in writing a claim for indemnification from Company,
in which event the same shall continue until the violation is remediated.
It is expressly agreed and understood that the provisions hereof shall and
are intended to be continuing and shall survive the repayment of any
indebtedness from Company to Bank.
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8.7 Company and the Domestic Subsidiaries shall maintain all permits,
licenses and approvals required under applicable Environmental Laws.
9. EVENTS OF DEFAULT
9.1 Upon non-payment of any installment of the principal or interest on
the Note when due in accordance with the terms thereof, or upon non-payment of
any other outstanding Indebtedness when due in accordance with the terms
thereof, and continuance in either case of such non-payment for five (5) days or
more, the Note may at Bank's option become immediately due and payable, and
thereafter Bank's commitment to make further Advances and to issue additional
Letters of Credit under this Agreement shall automatically terminate.
9.2 Upon occurrence of any of the following events of default:
(a) default in the observance or performance of any of the conditions,
covenants or agreements of Company set forth in Sections 2.4, 6.2,
6.3, 6.4, 6.5, 6.9, 6.11 through 6.14, 7 or 8 herein;
(b) default in the observance or performance of any of the conditions,
covenants or agreements of Company set forth in Sections 6.1 or 6.10,
and continuance thereof for five (5) Business Days after written
notice to Company by Bank;
(c) default in observance or performance of any of the other conditions,
covenants or agreements of Company herein set forth, and continuance
thereof for thirty (30) days after written notice to Company by Bank;
(d) any material representation or warranty made by Company herein or in
any instrument submitted pursuant hereto proves untrue in any material
respect when made or deemed made;
(e) default in the observance or performance of any of the conditions,
covenants or agreements of Company set forth in any collateral
document of security which may be given to secure the indebtedness
hereunder or in any other collateral document related to or connected
with this Agreement or the indebtedness hereunder and lapse of any
applicable notice or cure period;
(f) default in the payment of any other obligation of Company or any
Subsidiary for borrowed money in an aggregate amount in excess of One
Hundred Thousand Dollars ($100,000), or in the observance or
performance of any conditions, covenants or agreements related or
given with respect thereto, and lapse of any applicable notice, grace
or cure period;
(g) judgment(s) for the payment of money in excess of the sum of One
Hundred Thousand Dollars ($100,000) in the aggregate shall be rendered
against Company or any Subsidiary and any such judgment(s) shall
remain unpaid, unvacated, unbonded or unstayed by appeal or otherwise
for a period of thirty
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(30) consecutive days from the date of its entry and such judgment is
not covered by insurance from a solvent insurer who is defending such
action without reservation of rights;
(h) the occurrence of any "reportable event", as defined in the Employee
Retirement Income Security Act of 1974 and any amendments thereto,
which is determined to constitute grounds for termination by the
Pension Benefit Guaranty Corporation of any employee pension benefit
plan maintained by or on behalf of Company or any Subsidiary for the
benefit of any of its employees or for the appointment by the
appropriate United States District Court of a trustee to administer
such plan and such reportable event is not corrected and such
determination is not revoked within thirty (30) days after notice
thereof has been given to the plan administrator or Company; or the
institution of proceedings by the Pension Benefit Guaranty Corporation
to terminate any such employee benefit pension plan or to appoint a
trustee to administer such plan; or the appointment of a trustee by
the appropriate United States District Court to administer any such
employee benefit pension plan;
(i) if there shall be any change for any reason whatsoever in the
ownership of Company or any Subsidiary which shall in the reasonable
judgment of Bank adversely affect future prospects for the successful
operation of Company or any Subsidiary;
(j) if PEI shall revoke its Guaranty or disavow any of its obligations
thereunder;
(k) if Company shall, or become obligated to, redeem, repurchase or prepay
any Senior Debt as a result of or in connection with an actual or
proposed change in control of Company, PEI or any Subsidiary ;
then, or at any time thereafter, unless such default is remedied, Bank may give
notice to Company declaring all outstanding indebtedness hereunder and under the
Note to be due and payable, whereupon all indebtedness then outstanding
hereunder and under the Note shall immediately become due and payable without
further notice or demand, and Bank shall not be obligated to make any further
Advances or issue any Letter of Credit hereunder.
9.3 If a creditors' committee shall have been appointed for the business
of Company or any Subsidiary; or if Company or any Subsidiary shall have made a
general assignment for the benefit of creditors or shall have been adjudicated
bankrupt, or shall have filed a voluntary petition in bankruptcy or for
reorganization or to effect a plan or arrangement with creditors; or shall file
an answer to a creditor's petition or other petition filed against it, admitting
the material allegations thereof for an adjudication in bankruptcy or for
reorganization; or shall have applied for or permitted the appointment of a
receiver, or trustee or custodian for any of its property or assets; or such
receiver, trustee or custodian shall have been appointed for any of its property
or assets (otherwise than upon application or consent of Company or a
Subsidiary, as applicable) and such receiver, trustee or custodian so appointed
shall not have been discharged within sixty (60) days after the date of his
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appointment or if an order shall be entered and shall not be dismissed or stayed
within sixty (60) days from its entry, approving any petition for reorganization
of Company or any Subsidiary; then the Note and all indebtedness then
outstanding hereunder shall automatically become immediately due and payable,
and Bank shall not be obligated to make any further Advances or issue any
Letters of Credit under this Agreement.
9.4 Upon the occurrence of an Event of Default, unless all of the
Indebtedness is then immediately fully paid, Bank shall have and may exercise
any one or more of the rights and remedies for which provision is made for a
secured party under the UCC, under the Collateral Documents, or under any other
document contemplated hereby or for which provision is provided by law or in
equity, including, without limitation, the right to take possession and sell,
lease or otherwise dispose of any or all of the collateral and to set off
against the Indebtedness any amount owing by Bank to Company and/or any property
of Company in possession of Bank. Company agrees, upon request of Bank, to
assemble the collateral and make it available to Bank at any place designated by
Bank which is reasonably convenient to Bank and Company.
9.5 All of the Indebtedness shall constitute one loan secured by Bank's
security interest in the collateral and by all other security interests,
mortgages, liens, claims, and encumbrances now and from time to time hereafter
granted from Company to Bank. Upon the occurrence of an Event of Default, Bank
may in its sole discretion apply the collateral to any portion of the
Indebtedness. The proceeds of any such sale or other disposition of the
Collateral authorized by this Agreement shall be applied by Bank, first upon all
expenses authorized by the Michigan Uniform Commercial Code (or other applicable
law) or otherwise in connection with the sale and all reasonable attorneys' fees
and legal expenses incurred by Bank; the balance of the proceeds of such sale or
other disposition shall be applied in the payment of the Indebtedness, first to
interest, then to principal, then to other Indebtedness and the surplus, if any,
shall be paid over to Company or to such other Person or Persons as may be
entitled thereto under applicable law. Company shall remain liable for any
deficiency, which Company shall pay to Bank immediately upon demand.
9.6 The remedies provided for herein are cumulative to the remedies for
collection of the Indebtedness as provided by law, in equity or by any mortgage,
security agreement or other document contemplated hereby. Nothing herein
contained is intended, nor shall it be construed, to preclude Bank from pursuing
any other remedy for the recovery of any other sum to which Bank may be or
become entitled for the breach of this Agreement by Company.
9.7 Upon the occurrence of any Event of Default, Company shall immediately
upon demand by Bank deposit with Bank cash collateral in the amount equal to the
maximum amount available to be drawn at any time under any Letter of Credit then
outstanding.
10. MISCELLANEOUS
10.1 This Agreement shall be binding upon and shall inure to the benefit of
Company and Bank and their respective successors and assigns, except that the
credit provided
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for under this Agreement and no part thereof and no obligation
of Bank hereunder shall be assignable or otherwise transferable by Company.
10.2 Company shall pay all closing costs and expenses, including, by way of
description and not limitation, reasonable outside attorney fees, title and lien
search fees and title policy premiums incurred by Bank in connection with the
commitment, consummation and closing of this Agreement. All of said amounts
required to be paid by Company may, at Bank's option, be charged by Bank as an
Advance against the proceeds of the Note. All costs, including reasonable
attorney fees incurred by Bank in reviewing, revising, protecting or enforcing
any of its or any of the Bank's rights against Company or any collateral or in
defending Bank from any claims or liabilities by any party or otherwise incurred
by Bank in connection with an event of default or the enforcement of this
Agreement or the related documents, including by way of description and not
limitation, such charges in any court or bankruptcy proceedings or arising out
of any claim or action by any person against Bank which would not have been
asserted were it not for Bank's relationship with Company hereunder, shall also
be paid by Company.
10.3 Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, it shall be done in accordance with GAAP.
10.4 No delay or failure of Bank in exercising any right, power or
privilege hereunder shall affect such right, power or privilege, nor shall any
single or partial exercise thereof preclude any further exercise thereof, or the
exercise of any other power, right or privilege. The rights of Bank under this
Agreement are cumulative and not exclusive of any right or remedies which Bank
would otherwise have.
10.5 All notices with respect to this Agreement shall be deemed to be
completed upon mailing by certified mail to the following or to such other
address as may be designated by Company or Bank in a notice that complies as to
delivery with the terms of this Section 10.5:
To Company:
2100 Commonwealth Boulevard
Suite 300
Ann Arbor, Michigan 48105
Attention: Chief Financial Officer
To Bank:
One Detroit Center
500 Woodward Avenue
Mail Code 3258
Detroit, Michigan 48226
Attention: Business Finance Division I
28
<PAGE>
Bank shall use best efforts to send copies of all notices to Company's
legal counsel at the address set forth below, but failure to do so shall not be
a violation of this Agreement and shall not affect the validity of any notice
properly sent to Company:
Hooper, Hathaway, Price, Beuche & Wallace
126 South Main Street
Ann Arbor, Michigan 48104-1945
Attention: Bruce C. Conybeare, Jr.
10.6 This Agreement and the Note have been delivered at Detroit, Michigan,
and shall be governed by and construed and enforced in accordance with the laws
of the State of Michigan. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.7 No amendments or waiver of any provisions of this Agreement nor
consent to any departure by Company therefrom shall in any event be effective
unless the same shall be in writing and signed by the Bank, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No amendment, waiver or consent
with respect to any provision of this Agreement shall affect any other provision
of this Agreement.
10.8 All sums payable by Company to Bank under this Agreement or the other
documents contemplated hereby shall be paid directly to Bank at its principal
office set forth Section 10.5 hereof in immediately available United States
funds, without set off, deduction or counterclaim. In its sole discretion, Bank
may charge any and all deposit or other accounts (including without limit an
account evidenced by a certificate of deposit) of Company with Bank for all or a
part of any Indebtedness then due; provided, however, that this authorization
-------- -------
shall not affect Company's obligation to pay, when due, any Indebtedness whether
or not account balances are sufficient to pay amounts due.
10.9 Any payment of the Indebtedness made by mail will be deemed tendered
and received only upon actual receipt by Bank at the address designated for such
payment, whether or not Bank has authorized payment by mail or any other manner,
and shall not be deemed to have been made in a timely manner unless received on
the date due for such payment, time being of the essence. Company expressly
assumes all risks of loss or liability resulting from non-delivery or delay of
delivery of any item of payment transmitted by mail or in any other manner.
Acceptance by Bank of any payment in an amount less than the amount then due
shall be deemed an acceptance on account only, and the failure to pay the entire
amount then due shall be and continue to be an Event of Default, and at any time
thereafter and until the entire amount then due has been paid, Bank shall be
entitled to exercise any and all rights conferred upon it herein upon the
occurrence of an Event of Default. Company waives the right to direct the
application of any and all payments at any time or times hereafter received by
Bank from or on behalf of Company. Company agrees
29
<PAGE>
that Bank shall have the continuing exclusive right to apply and to reapply any
and all payments received at any time or times hereafter against the
Indebtedness in such manner as Bank may deem advisable, notwithstanding any
entry by Bank upon any of its books and records. Company expressly agrees that
to the extent that Bank receives any payment or benefit and such payment or
benefit, or any part thereof, is subsequently invalidated, declared to be
fraudulent or preferential, set aside or is required to be repaid to a trustee,
receiver, or any other party under any bankruptcy act, state or federal law,
common law or equitable cause, then to the extent of such payment or benefit,
the Indebtedness or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if such payment or benefit had not been
made and, further, any such repayment by Bank, to the extent that Bank did not
directly receive a corresponding cash payment, shall be added to and be
additional Indebtedness payable upon demand by Bank.
10.10 In the event Company's obligation to pay interest on the
principal balance of the Notes is or becomes in excess of the maximum interest
rate which Company is permitted by law to contract or agree to pay, giving due
consideration to the execution date of this Agreement, then, in that event, the
rate of interest applicable shall be deemed to be immediately reduced to such
maximum rate and all previous payments in excess of such maximum rate shall be
deemed to have been payments in reduction of principal and not of interest.
10.11 This Agreement shall become effective upon the execution hereof
by Bank and Company.
10.12 COMPANY AND BANK HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY
JURY WITH RESPECT TO ANY AND ALL ACTIONS OR PROCEEDINGS AT ANY TIME IN WHICH
COMPANY AND BANK ARE PARTIES ARISING OUT OF THIS AGREEMENT OR THE OTHER
DOCUMENTS CONTEMPLATED HEREBY.
WITNESS the due execution hereof as of the day and year first above written.
COMERICA BANK PRESTOLITE ELECTRIC INCORPORATED
By:/s/ Gregory A. Wernette By:/s/ Dennis P. Chelminski
_______________________ _______________________
Its: VP Its: Controller - Treasurer
______________________ _______________________
30
<PAGE>
LIST OF SCHEDULES
Schedule 5.5 - Pension Plans
Schedule 5.9 - Subsidiaries
Schedule 7.4 - Permitted Debt
Schedule 7.7 - Permitted Liens
LIST OF EXHIBITS
Exhibit A - Facility A Note
Exhibit B - Request for Advance
Exhibit C - Notice of Election of Margin Reduction Option
Exhibit D - Borrower's Telephone and Facsimile Authorization
Exhibit E - Notice of Revocation of Margin Reduction Option
<PAGE>
EXHIBIT "A"
FACILITY A NOTE
Detroit, Michigan
$23,000,000 January 22, 1998
On or before the Facility A Maturity Date, FOR VALUE RECEIVED, PRESTOLITE
ELECTRIC INCORPORATED, a Delaware corporation (herein called "Company"),
promises to pay to the order of COMERICA BANK, a Michigan banking corporation
(herein called "Bank"), at its Main Office at 500 Woodward Avenue, Detroit,
Michigan, in lawful money of the United States of America the indebtedness or so
much of the sum of Twenty-Three Million Dollars ($23,000,000) as may from time
to time have been advanced and then be outstanding hereunder pursuant to the
Amended and Restated Credit Agreement dated as of January 22, 1998, by and
between Company and Bank (herein called "Agreement"), together with interest
thereon as hereinafter set forth.
Each of the Advances hereunder shall bear interest at the Prime-based Rate
from time to time applicable thereto under the Agreement or as otherwise
determined thereunder, and interest shall be computed, assessed and payable as
set forth in the Agreement.
This Note is a note under which advances, repayments and readvances may be
made from time to time, subject to the terms and conditions of the Agreement.
This Note evidences borrowing under, is subject to, is secured in accordance
with, and may be matured under, the terms of the Agreement, to which reference
is hereby made. As additional security for this Note, Company grants Bank a lien
on all property and assets including deposits and other credits of the Company,
at any time in possession or control of or owing by Bank for any purpose.
Company hereby waives presentment for payment, demand, protest and notice
of dishonor and nonpayment of this Note and agrees that no obligation hereunder
shall be discharged by reason of any extension, indulgence, release, or
forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note. Any transferees of,
or endorser, guarantor or surety paying this Note in full shall succeed to all
rights of Bank, and Bank shall be under no further responsibility for the
exercise thereof or the loan evidenced hereby. Nothing herein shall limit any
right granted Bank by other instrument or by law.
<PAGE>
All capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.
PRESTOLITE ELECTRIC
INCORPORATED
By:___________________________________
Its:__________________________________
2
<PAGE>
EXHIBIT "B"
REQUEST FOR ADVANCE
-------------------
Pursuant to the Amended and Restated Credit Agreement dated as of January
22, 1998 (herein called "Agreement"), the undersigned hereby requests COMERICA
BANK to make an Advance to the undersigned on _____________________, 199___, in
the amount of____________________________________ DOLLARS, ($____________) under
the Facility A Note dated January 22, 1998, issued by the undersigned to said
Bank (herein called "Note").
The undersigned certifies that no Default or Event of Default has occurred
and is continuing, and none will exist upon the making of the Advance requested
hereunder. The undersigned further certifies that upon advancing the sum
requested hereunder, the aggregate principal amount outstanding under the Note
will not exceed the face amount thereof or any advance formula applicable to
Advances under such Note. If the amount advanced to the undersigned under the
Note shall at any time exceed the face amount thereof or any Advance formula
applicable to Advances under such Note, the undersigned will pay such excess
amount on demand.
The undersigned hereby authorizes said Bank to disburse the proceeds of
this Request for Advance by crediting the account of the undersigned with Bank
separately designated by the undersigned or as the undersigned may otherwise
direct.
Dated this _______ day of __________________________, 199___.
PRESTOLITE ELECTRIC
INCORPORATED
By:________________________________
Its:_______________________________
<PAGE>
EXHIBIT "C"
NOTICE OF ELECTION OF MARGIN REDUCTION OPTION
---------------------------------------------
To: Comerica Bank
Pursuant to Section 3.3(a) of the Amended and Restated Credit Agreement
dated as of January 22, 1998 between the undersigned and the Bank, the
undersigned hereby elects the Margin Reduction Option as provided therein. The
undersigned hereby certifies that no Default or Event of Default has occurred
and is continuing as of the date hereof.
Dated this _____ day of _______________, ______.
PRESTOLITE ELECTRIC
INCORPORATED
By:________________________________
Its:_______________________________
<PAGE>
EXHIBIT "D"
BORROWER'S TELEPHONE AND FACSIMILE AUTHORIZATION
------------------------------------------------
See form attached.
<PAGE>
EXHIBIT "E"
NOTICE OF REVOCATION OF MARGIN REDUCTION OPTION
-----------------------------------------------
To: Comerica Bank
Pursuant to Section 3.3(b) of the Amended and Restated Credit Agreement
dated as of January 22, 1998 between the undersigned and the Bank, the
undersigned hereby revokes the Notice of Election of Margin Reduction Option
dated ____________________, _______, delivered by the undersigned to the Bank.
Dated this _____ day of _______________, ______.
PRESTOLITE ELECTRIC
INCORPORATED
By:________________________________
Its:_______________________________
<PAGE>
EXHIBIT 10.4
MANAGEMENT CONSULTING AGREEMENT
MANAGEMENT CONSULTING AGREEMENT, dated as of October 31, 1991 (the
"Agreement") between Prestolite Electric Incorporated, a Delaware corporation
(the "Company"), and Genstar Investment Corporation, a Delaware corporation on
("GIC").
WHEREAS, the Company desires to avail itself of the business
experience and expertise possessed by GIC in arranging financing, strategic
planning, negotiating and procuring contracts and other areas or corporate
management;
WHEREAS, the Company has requested GIC and GIC has agreed to provide
the Company on an ongoing basis, subject to the terms and conditions specified
herein, with management consulting and advisory services related to the business
and affairs of the Company; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Retention of GIC. The Company retains GIC as its
----------------
exclusive management and corporate consultant and GIC accepts such retention on
the terms and conditions set forth herein.
SECTION 2. Services. (a) GIC shall advise the Company concerning
--------
such management matters as relate to strategic planning, proposed financial
transactions, procurement of contracts and other management matters related to
the Company's business and administration, and as to such other matters as the
Company may reasonably request. The services provided will not be duplicative
or supervisory in nature.
(b) GIC shall perform all such services as an independent contractor
to the Company and neither GIC nor its affiliates nor any of their respective
directors, officers, agents or employees shall be liable for any advice offered
or action taken by it or the them in connection with this Agreement. GIC shall
not be considered an employee, agent or representative of the company and will
not have any authority to act for or bind the Company without the Company's
prior written consent.
SECTION 3. Compensation. (a) In consideration of the services
------------
provided by GIC hereunder, the Company shall pay to GIC a management consulting
fee of $800,000 per annum, payable in installments of $200,000 on the last day
of December, March, June and September during the term hereof, commencing
December 31, 1991; provided, that the first such payment shall be in the amount
-------- ----
of $132,000. Any amount not paid when due hereunder shall bear interest at the
rate of 10% per annum.
1
<PAGE>
(b) The Company shall reimburse GIC for all out-of-pocket costs and
expenses incurred by GIC in connection with the provision of services hereunder
promptly upon receipt of a statement of such costs and expenses from GIG.
SECTION 4. Company's Further Obligation. The Company shall in good
----------------------------
faith consider all advice and recommendations of GIC relating to the subject
matter of this Agreement. Notwithstanding the foregoing, the Company shall not
have any obligation whatsoever to follow or implement any such advice or
recommendation of GIC.
SECTION 5. Term. This Agreement shall commence on the date hereof
----
and shall continue through the period ending on December 31, 2002.
SECTION 6. Amendments, Etc. No amendment or waiver of provision of
---------------
this Agreement nor consent to any departure herefrom shall in any event be
effective unless the same shall be in writing and signed by the parties hereto,
and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7. No Waivers. Except as otherwise provided in this
----------
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or conditions shall not operate as waiver of, or
estoppel with respect to, any subsequent or other failure.
SECTION 8. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if personally delivered,
telocopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to the Company, to
Prestolite Electric Incorporated
Four SeaGate
Toledo, OH 43691-0904
Attention: President
2
<PAGE>
(b) If to GIC, to:
Genstar Investment Corporation
801 Montgomery Street, Suite 500
San Francisco, CA 94133
Attention: Chairman
SECTION 9. Assignment. Neither of the parties hereto shall have the
----------
right to assign this Agreement or the rights or obligations hereunder.
SECTION 10. Headings. The headings contained in this Agreement
--------
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11. Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 12. Entire Agreement. This Agreement constitutes the
----------------
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both written and
oral, between the parties hereto with respect to the subject matter hereof.
SECTION 13. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware.
SECTION l4. Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which when executed shall be deemed to be an
original, but all of which taken together shall constitute one and the same
agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.
PRESTOLITE ELECTRIC INCORPORATED
By: /s/ Richard D. Patterson
-------------------------------
Name: Richard D. Patterson
Title: Executive Vice President
By: /s/ Mark E. Bandeen
-------------------------------
Name: Mark E. Bandeen
Title: Vice President
GENSTAR INVESTMENT CORPORATION
By: /s/ Richard D. Patterson
--------------------------------
Name: Richard D. Patterson
Title: Executive Vice President
By: /s/ Mark E. Bandeen
--------------------------------
Name: Mark E. Bandeen
Title: Vice President
4
<PAGE>
EXHIBIT 10.5
AMENDMENT NO. 1
TO MANAGEMENT CONSULTING AGREEMENT
AMENDMENT NO. 1, dated as of January 1, 1998 ("Amendment No. 1"), to that
certain Management Consulting Agreement, dated as of October 31, 1991 (the
"Agreement"), between PRESTOLITE ELECTRIC INCORPORATED, a corporation organized
and existing under the laws of the State of Delaware (the "Company"), and
GENSTAR INVESTMENT CORPORATION, a corporation organized and existing under the
laws of the State of Delaware ("GIC").
W I T N E S S E T H:
-------------------
WHEREAS, the parties to the Agreement, pursuant to Section 6 of the
Agreement, desire to amend the Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree to amend the Agreement pursuant to Section 6 of the Agreement as
follows:
SECTION 1. Amendments to the Agreement. Section 3(a) of the Agreement is
amended and restated as follows:
"SECTION 3. Compensation. (a) In consideration of the service provided
------------
by GIC hereunder, the Company shall pay to GIC a management consulting fee equal
to the greater of (i) $900,000 per annum or (ii) 0.3% of the Company's annual
net sales for the prior fiscal year as reflected in the Company's annual audited
Consolidated Statements of Operations for the prior fiscal year, in either case
payable in four equal installments thirty days following the last day of March,
June, September and December during the term hereof, commencing March 31, 1998.
Any amount not paid when due hereunder shall bear interest at the rate of 10%
per annum."
SECTION 2. Reference to and Effect on the Agreement.
(a) Upon the effectiveness of Section 1 hereof, on and after the date
hereof each reference in the Agreement to "this Agreement," "the Agreement,",
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Agreement as amended by Section 1 hereof.
(b) Except as specifically amended above, the Agreement shall remain in
full force and effect and is hereby ratified and confirmed.
<PAGE>
SECTION 3. Execution and Counterparts. This Amendment No. 1 may be
executed in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, each party hereto has executed, or caused its duly
authorized officer to execute, this Amendment No. 1 as of the date first written
above.
PRESTOLITE ELECTRIC INCORPORATED
By: /s/ Kenneth C. Cornelius
---------------------------
Name: Kenneth C. Cornelius
Title: Senior Vice President and
Chief Financial Officer
GENSTAR INVESTMENT CORPORATION
By: /s/ Richard D. Paterson
---------------------------
Name: Richard D. Paterson
Title: Executive Vice President and
Director
<PAGE>
EXHIBIT 10.6
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND IS BEING SOLD PURSUANT TO AN EXEMPTION FROM
REGISTRATION THEREUNDER. THIS SECURITY MAY NOT BE TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
PRESTOLITE NEWCO, INC.
----------------------
A$1.00 January 22, 1998
FOR VALUE RECEIVED, the undersigned PRESTOLITE NEWCO, INC., a Delaware
corporation (the "Company"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order
of LUCAS INDUSTRIES PLC, an English corporation (the "Holder"), the principal
sum of ONE ARGENTINE PESO (A$1.00), or such other amount as shall be payable
from time to time under Clause 2 hereof, subject to the following terms and
conditions, on the Due Date (as defined below). DEFINITIONS
As used in this Note, the following terms shall have the following meanings,
such terms to be equally applicable to the singular and the plural forms of the
terms so defined:
"A$" means Argentine Pesos, the legal currency of
Argentina.
"Affiliate" of any specified person means
(i) any other person which, directly or
indirectly, is in control of, is controlled by or
is under common control
1
<PAGE>
with such specified person or
(ii) any other person who is a director or
executive officer
(A) of such specified person,
(B) of any Subsidiary of such specified person or
(C) of any person described in clause (i) above.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City,
United States, London, England or Buenos Aires,
Argentina.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or
other equivalents of or interests in (however
designated) corporate stock, including any
preferred stock.
"Date of Utilization" means :-
(i) where the Settlement Consideration is cash,
the date of receipt of such cash; or
(ii) where the Settlement Consideration is a
freely transferable bond, the date of transfer by
Indiel of such bond either to the Holder or a
third party, or if such bond is not transferred,
the date such bond is utilized to reduce or
eliminate any liability of Indiel or any Affiliate
of Indiel to make an actual payment of taxation;
2
<PAGE>
(iii) where the Settlement Consideration
is a credit or relief against taxation (other than
a freely transferable bond) the date that the
payment of taxation would be due against which
such Settlement Consideration is utilized to
reduce or eliminate said liability of Indiel or
any Affiliate of Indiel to make such payment of
taxation.
"Due Date" means the earlier of 5 years from the date of this
note and the date falling twenty (20) Business
Days following the Date of Utilisation.
"Indiel" means Lucas Indiel Argentina S.A., an Argentine
corporation.
"Settlement means any consideration credit, relief or bond
Consideration" received by Indiel or any Affiliate of Indiel in
satisfaction or partial satisfaction of the Tax
Receivable.
"Subsidiary" means any corporation, association, partnership or
other business entity of which more than 50% of
the total voting power of shares of Capital Stock
or other interests (including partnership
interests) entitled (without regard to the
occurrence of any contingency) to vote in the
election of directors, managers or trustees
thereof is at the time owned or controlled,
directly or indirectly, by
(i) the Company,
3
<PAGE>
(ii) the Company and one or more Subsidiaries or
(iii)one or more Subsidiaries.
"Tax Receivable" means the long term receivable deferred tax
recorded as an asset on the balance sheet of
Indiel in its audited accounts for the year ended
31 January 1997 which arises from the suspended
tax benefits available under the VAT Promotional
Scheme.
"Tax Payment" means:
(i) where the Settlement Consideration is cash the
amount of such cash; or
(ii) where the Settlement Consideration is a
freely transferable bond, either (a) the face
value of such bond if transferred to the Holder,
(b) the amount received by Indiel or any Affiliate
on the transfer of such bond if transferred to a
third party, or (c) the amount of taxation saved
by Indiel or any Affiliate by utilising such bond
together, in each case, with any interest received
on such bonds less any tax paid on such interest;
or
(iii) where the Settlement Consideration is a
credit or relief against taxation (other than a
freely transferable bond) the amount of taxation
actually saved by Indiel or any Affiliate by
utilising such credit or relief.
"VAT Promotional Scheme" means the regime set forth by Laws 21,608 and
22,021
4
<PAGE>
and its implementing regulations, including
Decress 435/90, 1033/91 and 2054/92 and DGI RG
3838 and 3905.
5
<PAGE>
1. PAYMENTS, CURRENCY AND COMPUTATIONS.
1.1 The Company shall make each payment hereunder not later than 2:00 P.M.
(New York City time) on the Due Date in United States dollars (or such
other currency as the Company and the Holder may agree) to the Holder
at its address referred to in Clause 10, in same day funds. The amount
of such payment shall be converted from the amount due hereunder in
Argentine pesos at the exchange rate (calculated at the average of the
"bid" and "asked" exchange rate) quoted by Reuters (or a different
independent wire service providing international spot exchange rates
as agreed to by the Parties) in New York at 1:00 p.m. on the Due Date.
1.2 Whenever a Due Date would otherwise occur on a day other than a
Business Day, the last day of such Due Date shall be extended to occur
on the next succeeding Business Day.
1.3 Any failure by the Company to make a payment within five days after a
Due Date when due shall obligate the Company to pay interest to the
Holder at a rate per annum 5% above the prime rate as quoted in the
Eastern edition of the Wall Street Journal as of the Due Date and, in
the event such a rate is not quoted on such date then on the
immediately preceding date such rate is quoted, such interest due and
payable upon the payment of principal otherwise due and payable. All
computations of interest shall be made on the basis of a year of 365
or 366, as the case may be, days for the actual number of days
(including the first day but excluding the last day) occurring in the
period for which interest is payable.
2. TOTAL OBLIGATION
----------------
2.1 The obligation of the Company to pay principal hereunder shall
automatically, and without any further action on the part of either
the Company or the Holder, from time to time be increased on each Date
of Utilisation to an amount equal to the aggregate amount of all Tax
Payments received by Indiel at and prior to such
6
<PAGE>
time less any principal payments made by the Company to the Holder at
and prior to such time.
2.2 In the event of a dispute between the Company and the Holder
concerning the amount of any Tax Payment or any Date of Utilisation,
an independent auditor and location for audit (chosen by the Holder
and the Company (and in the absence of agreement as to the auditor,
the audit shall be by Coopers & Lybrand in New York City, New York)
and acting as an expert and not as an arbitrator) shall determine the
issue in dispute; such decision to be final and binding on the Parties
in the absence of manifest error. The Company and Indiel shall allow
such auditor reasonable access to Indiel and its books and records.
The costs of such auditor shall be borne equally by the Company and
the Holder.
2.3 If Indiel is no longer entitled to receive any Tax Payments as a
consequence of any action or omission of Indiel or any Affiliate of
Indiel which reduces the obligation of the Argentine Government to
make a Tax Payment, then Clause 2.1 shall apply as if a Tax Payment
had been received by Indiel equal to the amount of Tax Receivable less
the aggregate amount of all principal payments made by the Company to
the Holder prior to such time.
3. PAYMENTS OF PRINCIPAL
---------------------
3.1 The Company shall pay to the Holder in full on any Due Date the
aggregate principal amount due hereunder.
3.2 Where the Settlement Consideration is a freely transferable bond, the
Company shall notify the Holder of the receipt and procure that Indiel
or any Affiliate takes such action to either transfer such bond or
utilize it to reduce or eliminate any tax liability as the Holder may
request.
3.3 Where the Settlement Consideration is a relief or credit from taxation
(other than a freely transferable bond) the Company shall notify the
holder of the receipt and
7
<PAGE>
procure that Indiel or any Affiliate takes such action as is necessary
to utilize such relief or credit as soon as possible.
3.4 If Indiel has the opportunity of recovering part or all of the Tax
Receivable in advance of the scheduled date (under DGI RG 4182) the
Company will notify the Holder and (at the cost of the Holder) procure
that Indiel takes any reasonable steps to apply for and obtain such
recovery PROVIDED THAT Indiel shall not be required to take any steps
which put it in default under any other agreement. Any amounts
received by virtue of such action will be treated as Settlement
Consideration received in cash.
3.5 Following a notification referred to in clause 3.2 or 3.3, the Company
shall procure that Indiel gives the Holder reasonable access at all
reasonable times to its financial and tax books, records, computations
and accounts for the purpose of confirmation of such Settlement
Consideration or its Date of Utilisation.
4. REDUCTION OF PRINCIPAL OBLIGATION
---------------------------------
After all Settlement Consideration has been received and has resulted in
all Tax Payments in respect of all Tax Receivable and all principal and any
other amounts due hereunder have been paid in full, this Note shall be
surrendered to the Company for cancellation and shall not be released.
5. CANCELLATION
------------
Notwithstanding any other provision contained herein, if the Tax Receivable
shall be reduced to zero pursuant to a termination of the VAT
Promotional Scheme by the Argentine Government related to such Tax
Receivable, then upon payment of all Tax Payments received prior to
such time, or in respect of Settlement Consideration then in
existence, this note shall be deemed paid in full and surrendered for
cancellation.
8
<PAGE>
6. TAXES
-----
If the Company makes any payment hereunder in respect of which it is
required by law to make any deduction or withholding, it shall pay the full
amount to be deducted or withheld to the relevant taxation or other
authority within the time allowed for such payment under applicable law and
promptly thereafter shall furnish to the Holder an original or certified
copy of a receipt evidencing payment thereof, together with such other
information and documents as the Holder may reasonably request.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants as follows:
7.1 The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware.
7.2 The execution, delivery and performance by the Company of this Note
are within the Company's corporate powers, have been duly authorised
by all necessary corporate action, and do not contravene (a) the
Company's charter or by-laws or (b) any law or any contractual
restriction binding on or affecting the Company.
7.3 No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Company of this
Note.
7.4 This Note is the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
8. REPRESENTATIONS AND WARRANTIES OF THE HOLDER
--------------------------------------------
The Holder represents and warrants as follows:
8.1 The Holder has been advised and understands that this Note has not
been registered under the Securities Act. The Holder, by purchasing
this Note, agrees
9
<PAGE>
for the benefit of the Company that this Note may not be resold,
pledged or otherwise transferred.
8.2 The Holder has the full legal right and power and all authority and
approvals required to execute and deliver, or authorize execution and
delivery of, this Note and all other instruments executed and
delivered by or on behalf of such Holder in connection with the
purchase of this Note, and to purchase this Note. The signature of the
party signing on behalf of the Holder is binding on the Holder.
9. AMENDMENTS, ETC
---------------
No amendment or waiver of any provision of this Note, nor consent to any
departure by the Company herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Holder and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.
10. NOTICES, ETC.
-------------
10.1 All notices and other communications provided for hereunder shall be
in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled or
delivered, if to the Company, to it care of Prestolite Electric
Incorporated, 2100 Commonwealth Blvd., Ann Arbor, MI 48105, Attention:
President; and if to the Holder, care of Lucas Industries plc, at its
address at Stratford Road, Solihull, B90 4LA; or, as to each party, at
such other address as shall be designated by such party in a written
notice to the other party. All such notices and communications shall,
when mailed, telecopied, telegraphed, telexed or cabled, be effective
when deposited in the mails, telecopied, delivered to the telegraph
company, confirmed by telex answerback or delivered to the cable
company, respectively, except that notices to the Holder shall not be
effective until received by the Holder. Upon request from the Holder,
the Company will
10
<PAGE>
provide the Holder with the information required in Treasury
Regulation, Section 1.1275-3(b)(1)(i).
10.2 The Company waives presentment demand protest notice of dishonour,
notice of demand and notice of non-payment.
11. NO WAIVER; REMEDIES
-------------------
No failure on the part of the Holder to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
12. REIMBURSEMENT OF HOLDER
-----------------------
The Company shall reimburse the Holder upon demand for any and all costs
and expenses (including without limitation Court costs, legal expenses and
reasonable attorney fees whether or not suit is instituted and if suit is
instituted whether at the trial court level, appellate level in a
bankruptcy probate or administrative proceeding or otherwise) incurred in
collecting this note or incurred in any other matter or proceeding relating
to this note where in such matter or proceeding the Holder is successful.
13. BINDING EFFECT
--------------
13.1 Subject to Clause 13.2 , this Note shall be binding upon and inure to
the benefit of the Company and the Holder and their respective
successors, except that the Company shall not have the right to assign
any of its rights or obligations hereunder.
13.2 The Holder may, upon at least 20 Business Days' notice to the Company,
assign to a controlled Affiliate all of its rights and obligations
under this Note; all costs and expenses relating to such assignment
shall be borne by the parties thereto.
11
<PAGE>
14. GOVERNING LAW
-------------
This Note shall be governed by, and construed in accordance with, the laws
of the internal State of New York, United States.
15. CONSENT TO JURISDICTION: VENUE
------------------------------
The Company irrevocably consents to the jurisdiction of any state or
federal Court located in the Borough of Manhattan, City of New York United
States; provided however that nothing contained in this note shall prohibit
the holder from bringing any action enforcing any award of judgment or
exercising any other rights against the Company or against any property of
the Company within any other County, State or foreign or domestic
jurisdiction. The Company acknowledges and agrees that the venue provided
above is the most convenient forum for the Company and the Holder and the
Company waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this note.
16. WAIVER OF JURY TRIAL
--------------------
The Company irrevocably waives any and all rights the Company may have to a
trial by jury in any action proceeding or claim of any nature relating to
this Note, any documents executed in connection with this Note or any
transaction contemplated in any of such documents. The Company
acknowledges that the foregoing waiver is knowing and voluntary.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its
officer thereunto duly authorised, as of the date first above written.
12
<PAGE>
PRESTOLITE NEWCO, INC.
By: /s/ P. Kim Packard
------------------
Name: P. Kim Packard
Title: President
By: /s/ Kenneth C. Cornelius
------------------------
Name: Kenneth C. Cornelius
Title: Vice President
SIGNED by CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
----------------------
as duly authorised attorney )
for and on behalf of )
LUCAS INDUSTRIES PLC, as )
to Clause 10 only )
Chris Long-Leather as attorney for Lucas
Industries plc
13
<PAGE>
EXHIBIT 10.7
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND IS BEING SOLD PURSUANT TO AN EXEMPTION FROM
REGISTRATION THEREUNDER. THIS SECURITY MAY NOT BE TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
PRESTOLITE NEWCO, INC.
----------------------
A$1.00 January 22, 1998
FOR VALUE RECEIVED, the undersigned PRESTOLITE NEWCO, INC., a Delaware
corporation (the "Company"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order
of LUCAS INDUSTRIES PLC, an English corporation (the "Holder"), the principal
sum of ONE ARGENTINE PESO (A$1.00), or such other amounts as shall be payable
under clause 3 hereof, in instalments payable on such dates and in such amounts
as are specified herein on and subject to the following terms and conditions.
ARTICLE I
1. DEFINITIONS/TERMS OF PAYMENT, ETC.
As used in this Note, the following terms shall have the following
meanings, such terms to be equally applicable to the singular and the
plural forms of the terms so defined:
<TABLE>
<S> <C>
"A$" means Argentine Pesos, the lawful
currency of Argentina
"Affiliate" of any specified person means (i)
any other person which, directly
or indirectly, is in control
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
of, is controlled by or is under
common control with such specified
person or (ii) any other person
who is a director or executive
officer (A) of such specified
person, (B) of any Subsidiary of
such specified person or (C) of
any person described in clause (i)
above.
"Annual Audit" means the profit and loss
statement of Indiel conducted on
an annual basis and prepared in
accordance with international
accounting standards.
"Business Day" means a day of the year on which
banks are not required or
authorised to close in New York
City, United States, London,
England or Buenos Aires, Argentina.
"Capital Stock" means any and all shares,
interests, rights to purchase,
warrants, options, participations
or other equivalents of or
interests in (however designated)
corporate stock, including any
preferred stock.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
"Closing Date Tax Receivable" means the lesser of A$4,100,000
and the value of the tax
receivable recorded as an asset in
the Final Completion Statement (as
defined in the Purchase Agreement)
due to Indiel from the Argentine
government, and arising in
connection with the VAT
Promotional Scheme .
"Date of Utilisation" means :-
(i) where any amount taken into
account in calculating the Tax
Receivable is cash, the date of
receipt of such cash; or
(ii) where any amount taken into
account in calculating the Tax
Receivable is a freely
transferable bond, the date of
transfer by Indiel of such bond
either to the Holder or a third
party, or if such bond is not
transferred, the date such bond is
utilised to reduce or eliminate
any liability of Indiel or any
Affiliate of Indiel to make an
actual payment of taxation;
(iii) where any amount taken
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
into account in calculating the Tax
Receivable is a credit or relief
against taxation (other than a
freely transferable bond) the date
that the payment of taxation would
be due against which such amount
Settlement Consideration is
utilised to reduce or eliminate
any liability of Indiel or any
Affiliate of Indiel to make such
payment of taxation.
"Indiel" means Lucas Indiel Argentina S.A.,
an Argentine corporation.
"Payment Calculation Date" means 31 March, 30 June, 30
September and 31 December in every
year from the date of this note
until all amounts due under this
note (determined in accordance
with clause 3 have been paid in
full).
"Payment Date" means the date which is 10
business days after each
corresponding Payment Calculation
Date
Purchase Agreement" means an agreement entered into
between Lucas Industries plc,
Prestolite Electric Incorporated
and the Company on the date of
this document for the sale and
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
purchase of the entire issued
share capital of Lucas Argentine
Holdings, Inc. and shares in Lucas
Indiel Argentina S.A.
"Subsidiary" means any corporation,
association, partnership or other
business entity of which more than
50% of the total voting power of
shares of Capital Stock or other
interests (including partnership
interests) entitled (without
regard to the occurrence of any
contingency) to vote in the
election of directors, managers or
trustees thereof is at the time
owned or controlled, directly or
indirectly, by (i) the Company,
(ii) the Company and one or more
Subsidiaries or (iii) one or more
Subsidiaries.
"Tax Receivable" means the tax receivable recorded
as an asset in the accounting
records of Indiel as being due to
Indiel from the Argentine
government, and arising in
connection with the VAT
Promotional Scheme (and taking
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
into account any consideration,
credit relief or bond received by
Indiel or any Affiliate of Indiel
in satisfaction or partial
satisfaction of the Closing Date
Tax Receivable) provided that if
Indiel fails to keep in its
accounting records a balance for
such asset on the above basis
calculated consistently with the
calculation of the Closing Date
Tax Receivable (disregarding the
words "the lesser of A$4,100,000
and" in that definition for this
purpose only) or with the
provisions of this note then "Tax
Receivable" shall mean the amount
that would have been so recorded
if Indiel had kept such accounting
records
"VAT Promotional Scheme" means the regime set forth by Laws
21,608 and 22,021 and its
implementing regulations,
including Decress 435/90, 1033/91
and 2054/92 and DGI RG 3838 and
3905.
</TABLE>
2. PAYMENTS, CURRENCY AND COMPUTATIONS
-----------------------------------
6
<PAGE>
2.1 The Company shall make each payment hereunder not later than 2:00 P.M.
(New York City time) on the Payment Date in United States dollars (or such
other currency as the Company and the Holder may agree) to the Holder at
its address referred to in clause 11, in same day funds. The amount of
such payment shall be converted from the amount due hereunder in Argentine
pesos at the average exchange rate (calculated at the average of the "bid"
and "asked" exchange rate) quoted by Reuters (or a different independent
wire service providing international spot exchange rates as agreed to by
the Company and the Holder) in New York at 1:00 p.m. on the Payment Date.
2.2 Any failure by the Company to make a payment within five days after a
Payment Date when due shall obligate the Company to pay interest to the
Holder at a rate per annum 5% above prime rate as quoted in the Eastern
edition of the Wall Street Journal as of the Payment Date and, in the
event such a rate is not quoted on such date then on the immediately
preceding date such rate is quoted, such interest due and payable upon the
payment of principal otherwise due and payable. All computations of
interest shall be made on the basis of a year of 365 or 366, as the case
may be, days for the actual number of days (including the first day but
excluding the last day) occurring in the period for which interest is
payable.
3. TOTAL OBLIGATION; CALCULATION OF PAYMENT AMOUNT
-----------------------------------------------
3.1 The obligation of the Company to pay principal hereunder shall
automatically, and without any further action on the part of either the
Company or the Holder, be increased from time to time to an amount equal
to the amount by which the Tax Receivable has reduced since the date of
this Note less any principal payments made by the Company to the Holder at
and prior to such date, provided however, reductions in the balance of the
Tax Receivable attributable to a termination of the VAT.Promotional Scheme
by the Argentine Government related to such Tax Receivable shall not be
included in such calculations
7
<PAGE>
(unless they give rise to an "amount" as defined in clause 3.4).. The
total aggregate principal balance due under this note shall not exceed the
Closing Date Tax Receivable. Two examples of how the amounts under this
clause 3.1 will be calculated are contained in the Schedule.
3.2 In the event of a dispute between the Company and the Holder concerning
the amount of the Tax Receivable or any Date of Utilisation, an
independent auditor and location for audit (chosen by the Holder and the
Company (and in the absence of agreement as to the auditor, the audit
shall be by Coopers & Lybrand in New York City, New York) and acting as an
expert and not as an arbitrator) shall determine the issue in dispute;
such decision to be final and binding on the Company and the Holder in the
absence of manifest error. The Company and Indiel shall allow such auditor
reasonable access to Indiel and its books and records. The costs of such
auditor shall be borne equally by the Company and the Holder.
3.3 If Indiel and allor any Affiliates of Indiel areis no longer entitled to
receive any consideration, credit, relief or bond that would otherwise
have been taken into account in calculating the Tax Receivable as a
consequence of any action or omission of Indiel or any Affiliate of Indiel
which reduces such obligation of the Argentine Government (or if any such
company takes any voluntary action outside the ordinary course of its
business which has the result of materially reducing or materially
delaying any payment under this Note) then Clause 3.1 shall apply as if
the Tax Receivable were reduced at that time and all subsequent times) to
nil.
3.4 In calculating the Tax Receivable consideration, credits, reliefs and
bonds ("amounts") shall be taken as having the following value:-
(i) where the amount is cash the amount of such cash; or
8
<PAGE>
(ii) where the amount is a freely transferable bond, either (a) the face
value of such bond if transferred to the Holder, (b) the amount
received by Indiel or any Affiliate on the transfer of such bond if
transferred to a third party, or (c) the amount of taxation saved by
Indiel or any Affiliate by utilising such bond together, in each
case, with any interest received on such bonds less any tax paid on
such interest; or
(iii) where the amount is a credit or relief against taxation (other than
a freely transferable bond) the amount of taxation actually saved by
Indiel or any Affiliate by utilising such credit or relief
and these amounts will be taken into account on the relevant Date of
Utilisation.
4. PAYMENTS OF PRINCIPAL
- - - - - - - - - - - -- ---------------------
4.1 The Company shall pay to the Holder in full on each Payment Date an
amount equal to the reduction (if any) in the Tax Receivable since
the previous Payment Calculation Date to the current Payment
Calculation Date (or in the case of the first Payment Calculation
Date to the current Payment Calculation Date, since the date of
this note until the current Payment Calculation Date).
4.2 Where an amount taken into account in calculating the Tax
Receivable is a freely transferable bond, the Company shall notify
the Holder of the receipt and procure that Indiel or any Affiliate
takes such action to either transfer such bond or utilise it to
reduce or eliminate any tax liability as the Holder may request.
4.3 Where an amount taken into account in calculating the Tax
Receivable is a relief or credit from taxation (other than a freely
transferable bond) the Company shall notify the holder of the
receipt and procure that Indiel or any Affiliate takes such action
as is necessary to utilise such relief or credit as soon as
possible.
9
<PAGE>
4.4 If Indiel has the opportunity of recovering part or all of the Tax
Receivable in advance of the scheduled date (under DGI RG 4182) the
Company will notify the Holder and (at the cost of the Holder)
procure that Indiel takes any reasonable steps to apply for and
obtain such recovery PROVIDED THAT Indiel shall not be required to
take any steps which put it in default under any other agreement.
Any amounts received by virtue of such action will be treated as
received in cash for the purposes of calculating the Tax
Receivable.
4.5 Following a notification referred to in clause 4.2 or 4.3, the
Company shall procure that Indiel gives the Holder reasonable
access at all reasonable times to its financial and tax books,
records, computations and accounts for the purpose of confirmation
of the Tax Receivable at any date or any Date of Utilisation.
5. REDUCTION OF PRINCIPAL OBLIGATION
---------------------------------
After all payments have been received under this note in respect of all of
the Closing Date Tax Receivable and all principal and any other amounts due
hereunder have been paid in full, this Note shall be surrendered to the
Company for cancellation and shall not be released.
6. CANCELLATION
------------
Notwithstanding any other provision contained herein, if the Tax Receivable
shall be reduced to zero pursuant to a termination of the VAT Promotional
Scheme by the Argentine Government related to such Tax Receivable, then
upon payment of all amounts due under clause 3.1 this note shall be deemed
paid in full and surrendered for cancellation.
7. TAXES
-----
If the Company makes any payment hereunder in respect of which it is
required by law to make any deduction or withholding, it shall pay the full
amount to be deducted or withheld to the relevant taxation or other
authority within the time allowed for such
10
<PAGE>
payment under applicable law and promptly thereafter shall furnish to the
Holder an original or certified copy of a receipt evidencing payment
thereof, together with such other information and documents as the Holder
may reasonably request.
8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants as follows:
8.1 The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware.
8.2 The execution, delivery and performance by the Company of this Note
are within the Company's corporate powers, have been duly
authorised by all necessary corporate action, and do not contravene
(a) the Company's charter or by-laws or (b) any law or any
contractual restriction binding on or affecting the Company.
8.3 No authorisation or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the
Company of this Note
8.4 This Note is the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
9. REPRESENTATIONS AND WARRANTIES OF THE HOLDER
--------------------------------------------
The Holder represents and warrants as follows:
9.1 The Holder has been advised and understands that this Note has not
been registered under the Securities Act. The Holder, by purchasing
this Note, agrees for the benefit of the Company that this Note may
not be resold, pledged or otherwise transferred.
11
<PAGE>
9.2 The Holder has the full legal right and power and all authority and
approvals required to execute and deliver, or authorise execution
and delivery of, this Note and all other instruments executed and
delivered by or on behalf of such Holder in connection with the
purchase of this Note, and to purchase this Note. The signature of
the party signing on behalf of the Holder is binding on the Holder.
10. AMENDMENTS, ETC
---------------
No amendment or waiver of any provision of this Note, nor consent to any
departure by the Company herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Holder and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.
11. NOTICES, ETC
------------
11.1 All notices and other communications provided for hereunder shall
be in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled
or delivered, if to the Company, to it care of Prestolite Electric
Incorporated, 2100 Commonwealth Blvd., Ann Arbor, MI 48105,
Attention: President; and if to the Holder care of Lucas Industries
plc, at its address at Stratford Road, Solihull, B90 4LA; or, as to
each party, at such other address as shall be designated by such
party in a written notice to the other party. All such notices and
communications shall, when mailed, telecopied, telegraphed, telexed
or cabled, be effective when deposited in the mails, telecopied,
delivered to the telegraph company, confirmed by telex answerback
or delivered to the cable company, respectively, except that
notices to the Holder shall not be effective until received by the
Holder. Upon request from the Holder, the Company will provide the
Holder with the information required in Treasury Regulation,
Section 1.1275-3(b)(1)(i).
12
<PAGE>
11.2 The Company waives presentment demand protest notice of dishonour,
notice of demand and notice of non-payment.
12. NO WAIVER; REMEDIES
-------------------
No failure on the part of the Holder to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
13. REIMBURSEMENT OF HOLDER
-----------------------
The Company shall reimburse the Holder upon demand for any and all costs
and expenses (including without limitation Court costs, legal expenses and
reasonable attorney fees whether or not suit is instituted and if suit is
instituted whether at the trial court level, appellate level in a
bankruptcy probate or administrative proceeding or otherwise) incurred in
collecting this note or incurred in any other matter or proceeding relating
to this note where in such matter or proceeding the Holder is successful.
14. BINDING EFFECT
--------------
14.1 Subject to clause 14.2 this Note shall be binding upon and inure to
the benefit of the Company and the Holder and their respective
successors, except that the Company shall not have the right to assign
any of its rights or obligations hereunder.
14.2 The Holder may, upon at least 20 Business Days' notice to the
Company, assign to a controlled Affiliate all of its rights and
obligations under this Note; all costs and expenses relating to such
assignment shall be borne by the parties thereto.
15. GOVERNING LAW
-------------
13
<PAGE>
This Note shall be governed by, and construed in accordance with, the laws
of the internal State of New York, United States.
16. CONSENT TO JURISDICTION: VENUE
------------------------------
The Company irrevocably consents to the jurisdiction of any state or
federal Court located in the Borough of Manhattan, City of New York United
States; provided however that nothing contained in this note shall prohibit
the holder from bringing any action enforcing any award of judgement or
exercising any other rights against the Company or against any property of
the Company within any other County, State or foreign or domestic
jurisdiction. The Company acknowledges and agrees that the venue provided
above is the most convenient forum for the Company and the Holder and the
Company waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this note.
17. WAIVER OF JURY TRIAL
The Company irrevocably waives any and all rights the Company may have to a
trial by jury in any action proceeding or claim of any nature relating to
this Note, any documents executed in connection with this Note or any
transaction contemplated in any of such documents. The Company
acknowledges that the foregoing waiver is knowing and voluntary.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its
officer thereunto duly authorised, as of the date first above written.
14
<PAGE>
SCHEDULE
These are the example calculations referred to in clause 3.1
Example:- (Volumes increase in Quarter 3 - 4 of 1998 to cause an increase in the
Tax Receivable)
<TABLE>
<CAPTION>
- - - - - - - - - - - --------------------------------------------------------------------------------------------------------------------
1998 1999
- - - - - - - - - - - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A $ M Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
- - - - - - - - - - - --------------------------------------------------------------------------------------------------------------------
Opening Balance of 4.3 4.2 4.0 4.2 4.6 4.4 3.9 3.4
Tax Receivable
- - - - - - - - - - - --------------------------------------------------------------------------------------------------------------------
Change (0.1) (0.2) 0.2 0.4 (0.2) (0.5) (0.5) (0.6)
- - - - - - - - - - - --------------------------------------------------------------------------------------------------------------------
Closing Balance 4.2 4.0 4.2 4.6 4.4 3.9 3.4 2.8
- - - - - - - - - - - --------------------------------------------------------------------------------------------------------------------
Amount to be paid 0.1 0.2 NIL NIL NIL 0.1 0.5 0.6
to the Holder
under clause 3.1
- - - - - - - - - - - --------------------------------------------------------------------------------------------------------------------
</TABLE>
Example 2:- (Volumes increase, but reductions in the Tax Receivable continue)
<TABLE>
<CAPTION>
1998 1999
- - - - - - - - - - - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A $ M Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
- - - - - - - - - - - ----------------------------------------------------------------------------------------------------------------------
Opening Balance of 4.3 4.1 3.9 3.8 3.7 3.0 2.3 1.7
Tax Receivable
- - - - - - - - - - - ----------------------------------------------------------------------------------------------------------------------
Change (0.2) (0.2) (0.1) (0.1) (0.7) (0.7) (0.6) (0.6)
- - - - - - - - - - - ----------------------------------------------------------------------------------------------------------------------
Closing Balance 4.1 3.9 3.8 3.7 3.0 2.3 1.7 1.1
- - - - - - - - - - - ----------------------------------------------------------------------------------------------------------------------
Amount to be paid 0.2 0.2 0.1 0.1 0.7 0.7 0.6 0.6
to the Holder
under clause 3.1
- - - - - - - - - - - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Position in 2000 onwards not shown in examples
15
<PAGE>
PRESTOLITE NEWCO, INC.
By: /s/ P. Kim Packard
-------------------
Name: P. Kim Packard
Title: President
By: /s/ Kenneth C. Cornelius
------------------------
Name: Kenneth C. Cornelius
Title: Vice President
SIGNED by CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
as duly authorised attorney ) ----------------------
for and on behalf of )
LUCAS INDUSTRIES PLC, as )
to clause 11 only: )
Chris Long- Leather as attorney for Lucas
Industries plc
16
<PAGE>
EXHIBIT 10.8
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND IS BEING SOLD PURSUANT TO AN EXEMPTION FROM
REGISTRATION THEREUNDERCorinne ScallyFinancial Printing GroupTHIS SECURITY HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND IS BEING SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION
THEREUNDER. THIS SECURITY MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
PRESTOLITE NEWCO, INC.
A$1.00 January 22, 1998
FOR VALUE RECEIVED, the undersigned PRESTOLITE NEWCO, INC., a Delaware
corporation (the "Company"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order
of LUCAS INDUSTRIES PLC, an English corporation (the "Holder"), the principal
sum of ONE ARGENTINE PESO (A$1.00), or such other amount as shall be payable
from time to time under Article II hereof, on such dates and in such amounts as
are specified herein on and subject to the following terms and conditions
ARTICLE I
DEFINITIONS/TERMS OF PAYMENT, ETC.
1. Definitions
As used in this Note, the following terms shall have the following meanings,
such terms to be equally applicable to the singular and the plural forms of the
terms so defined:
"A$" means Argentine Pesos, the legal
currency of Argentina.
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
"Accounting Principles" means the accounting policies and principles as set out
in schedule 5 to the Purchase Agreement
"Accounting Standards Board" means the Accounting Standards Board Limited, an
English Company
"Affiliate" of any specified person means
(i) any other person which, directly or indirectly, is
in control of, is controlled by or is under common
control with such specified person or
(ii) any other person who is a director or executive
officer
(A) of such specified person,
(B) of any Subsidiary of such specified person or
(C) of any person described in clause (i) above.
"Auditors" has the meaning assigned to such term in the Purchase
Agreement
"Business Day" means a day of the year on which banks are not
required or authorised to close in New York City,
United States of America, London, England or Buenos
Aires, Argentina.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other
equivalents of or interests in (however designated)
corporate stock, including any preferred stock.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
"consistently applied" has the meaning attributed to that phrase in the
Purchase Agreement
"Due Date" means the date five 5 Business Days following the
determination of EBITDA which is relevant in
accordance with clause 4 of the Purchase Agreement
"EBITDA" means the profit before interest and tax of the Group
but after taking account of the San Luis tax benefits
and adding back depreciation prepared on a
consolidated basis as shown by and extracted from the
consolidated profit and loss account of Indiel (such
extraction and profit and loss account and calculation
of EBITDA being agreed or certified in accordance
with clause 4 of the Purchase Agreement) for the First
Year, the Second Year and the Third Year
respectively, adjusted so far as necessary to take
account of the following matters:
(a) any taxation on profits shall not be deducted but
profits shall be calculated after taking account of
the San Luis tax benefits;
(b) profits and losses shall be calculated after
taking account of the San Luis tax benefits but
subject thereto after exceptional items and before
extraordinary items (as defined in Financial Reporting
Standard number 3 adopted by the Accounting Standards
Board));
(c) any profit or loss on the disposal, other than
routine disposals made in the normal and ordinary
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
course of business of any fixed assets (including,
without limitation, any intellectual property rights
or any interest in the Property (as defined in the
Purchase Agreement));
(d) the effects, including any increased depreciation
charges, of any revaluation of any fixed assets shall
be excluded;
(e) any management, administration or like charge
made by the Purchasers or any member of the
Purchasers' Group (as each such expression is defined
in the Purchase Agreement) shall not be deducted;
(f) the fees, remuneration and pension contributions
of any director or officer of any Group Member
nominated by either Purchaser (or Lucas Newco), not
being a full-time employee, shall not be deducted
(g) any compensation or other payment for loss of
office or employment to any director or senior
employee of any Group Member shall not be deducted;
(h) in respect of any transaction between any member
of the Purchasers Group and any Group Member which is
not at arms length, there shall be substituted terms
which are at arms length
(i) there shall be included any amounts which would
have been included but for any breach by either
Purchaser of any of the provisions of clause 4. of
the
</TABLE>
4
<PAGE>
Purchase Agreement
(j) redundancy costs, training,
learning and double working costs
associated with transfers between
factories, asset repositioning costs and
write down costs, compensation or other
payments for loss of office or
employment to any director or senior
employee of any Group Member and plant
closing costs will be charged to the
Restructuring Reserve and not reflected
in the calculation of EBITDA
(k) any payments actually received by
either Purchaser or by any Group Member
(i) under the indemnity contained in
clause 7.2 of the Purchase Agreement;
or
(ii) under any other indemnity
contained in the Purchase Agreement
but only to the extent to which the
indemnity applies in respect of a loss
or liability which would but for the
indemnity have reduced EBITDA and then
only to the extent that EBITDA would
have been, but for the indemnity,
reduced
shall be included as earnings of the
Group in the calculation of EBITDA in
the period to which the payment received
by the recipient relates
"First Year" means the year ending on 31 December
1998.
"First Years Accounts" means the profit and loss account of the
Group in
5
<PAGE>
respect of the First Year prepared on a
consolidated basis in accordance with
clause 4 of the Purchase Agreement
"Group" has the meaning ascribed to it in the
Purchase Agreement
"Group Member" has the meaning ascribed to it in the
Purchase Agreement
"Indiel" means Lucas Indiel Argentina S.A., an
Argentine corporation.
"Purchase Agreement" means that certain Sale and Purchase
Agreement, dated ____________ 1998, by
and between Lucas Industries plc,
Prestolite Electric Incorporated and
Prestolite Newco, Inc. relating to the
acquisition of shares in Indiel and the
entire issued share capital of Lucas
Argentine Holdings, Inc.
"Restructuring Reserve" means the provision for reorganisation
expenses anticipated to be in the region
of $7.0 million but which will not be
less than $6.0 million to be recorded by
the Purchasers and the Group as part of
their acquisition accounting in
accordance with United States GAAP
pertaining to the transaction
contemplated by the Purchase Agreement.
"Second Year" means the year ending on 31 December
1999
"Second Years Accounts" means the profit and loss account of the
Group in respect of the Second Year
prepared on a consolidated
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
basis in accordance with clause 4 of the Purchase
Agreement
"Subsidiary" means any corporation, association, partnership or
other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other
interests (including partnership interests) entitled
(without regard to the occurrence of any contingency)
to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled,
directly or indirectly, by
(i) the Company,
(ii) the Company and one or more Subsidiaries or
(iii) one or more Subsidiaries.
"Third Year" means the year ending on 31 December 2000
"Third Year Accounts" means the profit and loss account of the Group in
respect of the Third Year prepared on a consolidated
basis in accordance with clause 4 of the Purchase
Agreement
</TABLE>
2. PAYMENTS, CURRENCY AND COMPUTATIONS.
2. The Company shall make each payment hereunder not later than 2:00 P.M.
(NewYork City time) on the Due Date in United States dollars (or such
other currency as the Company and the Holder may agree) to the Holder
at its address referred to in Clause 10, in same day funds. The amount
of such payment shall be converted from the amount due hereunder in
Argentine pesos at the exchange rate
7
<PAGE>
(calculated at the average of the "bid" and "asked" exchange rate)
quoted by Reuters (or a different independent wire service providing
international spot exchange rates as agreed to by the Parties) in New
York at 1:00 p.m. on the Due Date.
2.2 Whenever a Due Date would otherwise occur on a day other than a
Business Day, the Due Date shall be changed to be the closest Business
Day.
2.3 Any failure by the Company to make a payment within five days after a
Due Date when due shall obligate the Company to pay interest to the
Holder at a rate per annum 5% above the prime rate as quoted in the
Eastern edition of the Wall Street Journal as of the Due Date and, in
the event such a rate is not quoted on such date then on the
immediately preceding date such rate is quoted, such interest due and
payable upon the payment of principal otherwise due and payable. All
computations of interest shall be made on the basis of a year of 365
or 366, as the case may be, days for the actual number of days
(including the first day but excluding the last day) occurring in the
period for which interest is payable.
ARTICLE II
INCREASE IN OBLIGATION
3. Total Obligation
3.1 The obligation of the Company to pay principal hereunder shall
automatically, and without any further action on the part of either
the Company or the Holder, from time to time be increased pursuant to
the provisions of this clause 3. The Company shall be obligated to
pay principal hereunder as aforesaid to the Holder on the Due Date in
the following amounts in the event of the occurrence of the following
events (each an "Earnout Payment"). If EBITDA :
8
<PAGE>
(a) in the First Year shall exceed A$5,800,000 the Company shall pay
to the Holder a sum equal to ninety percent (90%) of the excess up
to a maximum payment of ninety percent (90%) of A$3,900,000 on the
Due Date; and
(b) in the Second Year, shall exceed A$7,500,000 the Company shall
pay to the Holder a sum equal to ninety percent (90%) of the excess
up to a maximum further payment of ninety percent (90%) of
A$3,800,000 on the Due Date; and
(c) in the Third Year, shall exceed A$9,000,000 the Company shall
pay to the Holder a sum equal to ninety percent (90%) of the excess
up to a maximum further payment of ninety percent (90%)of
A$3,500,000 on the Due Date
3.2 If the Due Date is later than 75 days from the end of whichever is
relevant of the first Year, the Second Year or the Third Year as the
case may be the amount of principal payable pursuant to clause 3.1
shall be increased by a sum equal to interest on such principal
accruing at the rate referred to in clause 2.3 from (but excluding)
the 75th day from the end of the relevant Year to the Due Date
4. PAYMENTS OF PRINCIPAL
The Company shall pay to the Holder in full on any Due Date the aggregate
principal amount due hereunder.
5. REDUCTION OF PRINCIPAL OBLIGATION
Upon the making of each Earnout Payment under the provisions of this Note,
if applicable, the principal amount due hereunder shall automatically
reduce by an amount equal to such Earnout Payment. After all principal and
any other amounts due or which may become due hereunder have been paid in
full, this Note shall be surrendered to the Company for cancellation and
shall not be reissued.
9
<PAGE>
6. TAXES
If the Company makes any payment hereunder in respect of which it is
required by law to make any deduction or withholding, it shall pay the full
amount to be deducted or withheld to the relevant taxation or other
authority within the time allowed for such payment under applicable law and
promptly thereafter shall furnish to the Holder an original or certified
copy of a receipt evidencing payment thereof, together with such other
information and documents as the Holder may reasonably request.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as follows:
7.1 The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware.
7.2 The execution, delivery and performance by the Company of this Note
are within the Company's corporate powers, have been duly authorised
by all necessary corporate action, and do not contravene (a) the
Company's charter or by-laws or (b) any law or any contractual
restriction binding on or affecting the Company.
7.3 No authorisation or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Company of this
Note
7.4 This Note is the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
10
<PAGE>
8. REPRESENTATIONS AND WARRANTIES OF THE HOLDER
The Holder represents and warrants as follows:
8.1 The Holder has been advised and understands that this Note has not
been registered under the Securities Act. The Holder, by purchasing
this Note, agrees for the benefit of the Company that this Note may
not be resold, pledged or otherwise transferred.
8.2 The Holder has the full legal right and power and all authority and
approvals required to execute and deliver, or authorise execution and
delivery of, this Note and all other instruments executed and
delivered by or on behalf of such Holder in connection with the
purchase of this Note, and to purchase this Note. The signature of
the party signing on behalf of the Holder is binding on the Holder.
ARTICLE IV
MISCELLANEOUS
9. Amendments, Etc
No amendment or waiver of any provision of this Note, nor consent to any
departure by the Company herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Holder and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.
10. NOTICES, ETC
10.1 All notices and other communications provided for hereunder shall be
in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled or
delivered, if to the Company, to it care of Prestolite Electric
Incorporated, 2100 Commonwealth Blvd., Ann Arbor, MI 48105, Attention:
President; and if to the Holder, care of Lucas Industries Plc, at
11
<PAGE>
its address at Stratford Road, Solihull, B90 4LA, England; or, as to
each party, at such other address as shall be designated by such party
in a written notice to the other party. All such notices and
communications shall, when mailed, telecopied, telegraphed, telexed or
cabled, be effective when deposited in the mails, telecopied,
delivered to the telegraph company, confirmed by telex answerback or
delivered to the cable company, respectively, except that notices to
the Holder pursuant to the provisions of Article I shall not be
effective until received by the Holder. Upon request from the Holder,
the Company will provide the Holder with the information required in
Treasury Regulation, Section 1.1275-3(b)(1)(i).
10.2 The Company waives presentment demand protest notice of dishonour,
notice of demand and notice of non-payment.
11. NO WAIVER; REMEDIES
No failure on the part of the Holder to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
12. REIMBURSEMENT OF HOLDER
The Company shall reimburse the Holder upon demand for any and all costs
and expenses (including without limitation Court costs, legal expenses and
reasonable attorney fees whether or not suit is instituted and if suit is
instituted whether at the trial court level, appellate level in a
bankruptcy probate or administrative proceeding or otherwise) incurred in
collecting this note or incurred in any other matter or proceeding relating
to this note where in such matter or proceeding the Holder is successful.
12
<PAGE>
13. BINDING EFFECT
13.1 Subject to Clause 13.2 , this Note shall be binding upon and inure to
the benefit of the Company and the Holder and their respective
successors, except that the Company shall not have the right to
assign any of its rights or obligations hereunder.
13.2 The Holder may, upon at least 20 Business Days' notice to the
Company, assign to a controlled Affiliate all of its rights and
obligations under this Note; all costs and expenses relating to such
assignment shall be borne by the parties thereto.
14. GOVERNING LAW
This Note shall be governed by, and construed in accordance with, the laws
of the internal State of New York, United States.
15. CONSENT TO JURISDICTION: VENUE
The Company irrevocably consents to the jurisdiction of any state or
federal Court located in the Borough of Manhattan, City of New York United
States; provided however that nothing contained in this note shall prohibit
the holder from bringing any action enforcing any award of judgment or
exercising any other rights against the company or against any property of
the Company within any other County, State or foreign or domestic
jurisdiction. The Company acknowledges and agrees that the venue provided
above is the most convenient forum for the Company and the holder and the
Company waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this note.
16. WAIVER OF JURY TRIAL
The Company irrevocably waives any and all rights the Company may have to a
trial by jury in any action proceeding or claim of any nature relating to
this note, any documents executed in connection with this note or any
transaction contemplated in any of such
13
<PAGE>
documents. The Company acknowledges that the foregoing waiver is knowing
and voluntary.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its
officer thereunto duly authorised, as of the date first above written.
PRESTOLITE NEWCO, INC.
By: /s/ P. Kim Packard
------------------
Name: P. Kim Packard
Title: President
By: /s/ Kenneth C. Cornelius
------------------------
Name: Kenneth C. Cornelius
Title: Vice President
SIGNED by CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
) ----------------------
as duly authorised attorney )
for and on behalf of )
LUCAS INDUSTRIES PLC, as )
to Clause 10 only )
Chris Long-Leather as attorney for Lucas
Industries plc
14
<PAGE>
EXHIBIT 10.9
DATED JANUARY 22, 1998
______________________
LUCAS INDUSTRIES PLC
- and -
PRESTOLITE ELECTRIC INCORPORATED
_____________________________
OPTION AGREEMENT
_____________________________
Eversheds
10 Newhall Street
Birmingham
B3 3LX
Tel: 0121 233 2001
Fax: 0121 236 1583
DX 13004
Ref: JPL/36
1
<PAGE>
THIS AGREEMENT is made on 1998
BETWEEN:
(1) LUCAS INDUSTRIES PLC whose registered office is at Stratford Road,
Solihull, West Midlands, B90 4LA ("the Vendor")
(2) PRESTOLITE ELECTRIC INCORPORATED whose principal place of business is at
2100 Commonwealth Boulevard, Ann Arbor, Michigan, 48105, United States
("the Purchaser")
BACKGROUND
(A) This Agreement is supplemental to the Acquisition Agreement.
(B) The Vendor is the registered holder of the Option Shares.
(C) The Purchaser and the Vendor have agreed to enter into this Agreement to
provide for cross Options for the sale and purchase of the Option Shares
upon the terms and in the manner hereinafter appearing.
OPERATIVE PART
1. INTERPRETATION
--------------
1.1 In this Agreement the following expressions shall have the meanings
here ascribed to them unless the context otherwise requires:
"the Acquisition Agreement" a share sale and purchase agreement of
even date herewith made between the
Vendor, the Purchaser and Prestolite
Newco Inc. for, inter alia, the sale and
purchase of 1,393,139 shares of A$1 each
in the capital of Lucas Indiel Argentina
S.A.
1
<PAGE>
"A$" Argentine Pesos
"the Company" Lucas Indiel Argentina S.A.
"the Lucas Group" LucasVarity plc and any Subsidiary (as
defined in section 736 Companies Act
1985) or Subsidiary Undertaking (as
defined in section 258 Company Act 1985)
of LucasVarity plc for the time being,
excluding the Company and Lucas Argentine
Holdings Inc.
"Option" means any option granted pursuant to this
Agreement
"the Option Period" the period from 1 August 1998 to 31
August 1998 (inclusive)
"the Option Price" the sum of A$1,230,000 less any reduction
required in accordance with the
provisions of clause 3.13 of the
Acquisition Agreement
"the Option Shares" 6,346,524 shares of A$1 each in the
capital of the Company registered in the
name of or beneficially owned by the
Vendor or its successors in title as such
number of shares may be adjusted from
time to time for changes in the capital
of the Company, including but not limited
to stock
2
<PAGE>
splits, stock dividends or reverse stock
splits. Option Shares shall also include
any securities, rights or property of any
nature issued by the Company in respect
of said 6,346,524 shares
"the Purchaser's Group" the Purchaser, any subsidiary or holding
company thereof and any subsidiary of
such holding company for the time being
where the terms "subsidiary", "subsidiary
undertaking" and "holding company" shall
have the meanings ascribed to them by
clauses 1.10 and 1.11 of the Acquisition
Agreement
"the Purchaser's Option" the option to purchase the Option
Shares granted to the Purchaser pursuant
to clause 2
"the Vendor's Option" the option to sell the Option Shares to
the Purchaser granted to the Vendors
pursuant to clause 3
1.2 Words and phrases defined in the United Kingdom Companies Act 1985 shall
bear the same meaning when used herein.
1.3 References herein to clauses are, unless expressly stated to the contrary,
references to clauses of this Agreement.
1.4 References to the masculine shall include the feminine and the neuter and
the singular shall include the plural and vice versa
as the context shall admit or require.
3
<PAGE>
2. TERM OF THE OPTION
------------------
The Vendor and the Purchaser agree that this Agreement, shall apply to the
Option Shares from the date hereof until the earlier of such time as the
purchase of the Option Shares is completed in accordance with provisions of
clause 5 hereof or the end of the Option Period. If the latter date occurs
before the former, then the terms of this Agreement shall forthwith no
longer apply thereto.
3. PURCHASER'S OPTION
------------------
3.1 The Vendor hereby irrevocably grants to the Purchaser the Option to
purchase all (but not some only) of the Option Shares for a
consideration equal to the Option Price.
3.2 The Option granted to the Purchaser pursuant to this clause 3 shall be
exercisable at any time during the Option Period by notice in writing
given to the Vendor by the Purchaser stating that the Purchaser wishes
to exercise its Option in respect of all of the Option Shares in
accordance with and subject to the provisions of clause 6.
4. VENDOR'S OPTION
---------------
4.1 The Purchaser hereby irrevocably grants to the Vendor the Option to
require the Purchaser to buy all (but not some only) of the Option
Shares for a consideration equal to the Option Price.
4.2 The Option granted to the Vendor pursuant to this clause 4 shall be
exercisable at any time during the Option Period by notice in writing
given to the Purchaser by the Vendor stating that the Vendor wishes to
exercise its Option in respect of all of the Option Shares in
accordance with and subject to the provisions of clause 5.
5. SALE AND PURCHASE
-----------------
If notice shall be given by the Purchaser or the Vendor pursuant to clause
3 or clause 4 (as the case may be), then the Vendor will sell, or procure
the sale of, and the
4
<PAGE>
Purchaser will purchase the Option Shares at the Option Price in accordance
with the provisions of this Agreement.
6. COMPLETION
----------
6.1 If the Purchaser shall give notice to the Vendor or the Vendor shall
give notice to the Purchaser, pursuant to clause 3 or clause 4 (as the
case may be), the Vendor shall within seven days, if and to the extent
that any of the Option Shares are or remain partly paid, pay the
relevant shares up in full, or procure such payment.
6.2 The sale and purchase of the Option Shares shall take place within
fourteen days from the service of such notice referred to in clause
6.1 on such date within this period, and at such time and place, as
agreed by the Vendor and the Purchaser as soon as reasonably
practicable after the service of said notice and upon completion:
6.2.1 the Purchaser will make payment to the Vendor for the
Option Shares by way of telegraphic transfer in United
States dollars to the following account:
Name: Lucas Limited
Bank: Barclays Bank plc
Branch: 118 High Street
Newcastle-under-Lyme
Staffordshire
Sort Code: 20-59-23
Account No: 40836370
or to such other account as the Vendor may hereafter
nominate in writing to the Purchaser;
6.2.2 the Vendor will execute and deliver to the Purchaser, or
procure the execution and delivery of, a transfer of the
Option
5
<PAGE>
Shares to the Purchaser or, as it may direct, to
any member of the Purchaser's Group; and
6.2.3 the Vendor will deliver to the Purchaser or procure the
delivery to the Purchaser of, the share certificate(s) in
respect of all of the Option Shares.
6.3 In the event of the Vendor not complying with the provisions of this
clause 6 the Vendor hereby irrevocably appoints the Purchaser its
attorney in its name and on its behalf to do all such things and
execute all such documents to give effect to its obligations
hereunder.
6.4 The Purchaser shall be deemed to have performed its obligations to pay
the Option Price by payment to the Vendor pursuant to this clause 6
and shall not be further concerned as to the application of any moneys
so paid.
6.5 All payments which are due to the Vendor from the Purchaser hereunder
shall be converted into United States Dollars at the Exchange Rate as
defined in the Acquisition Agreement.
7. WARRANTY
--------
The Vendor hereby warrants to the Purchaser that it is the registered
holder and beneficial owner of all of the Option Shares and that it has the
right power and authority to sell and transfer the Option Shares free from
any claims charges liens encumbrances or equities and this warranty shall
be deemed to be repeated immediately prior to the completion of the
purchase of the Option Shares pursuant to this Agreement by the Vendor
and/or the member of the Lucas Group to whom any of the Option Shares have
been transferred in the meantime.
8. RESTRICTION ON TRANSFER
-----------------------
During the subsistence of this Agreement, and except as otherwise provided
herein, the Vendor shall not:
6
<PAGE>
8.1 sell, pledge or otherwise dispose of any Option Shares or interest
therein other than to another member of the Lucas Group or to the
Purchaser;
8.2 deposit the Option Shares into a voting trust or enter into a voting
agreement or arrangement with respect to the Option Shares; or
8.3 enter into any contract, option or other arrangement or undertaking
with respect to the direct or indirect acquisition or sale,
assignment, transfer or other disposition of the Option Shares.
9. NOTICES
-------
9.1 The addresses for service of the parties to this Agreement shall be:
9.1.1 in the case of the Vendor its registered office in the
United Kingdom from time to time and shall be addressed
to:
The Legal Director - Lucas Electrical and Electronic
Systems; and
9.1.2 in the case of the Purchaser:
Prestolite Electric Incorporated
2100 Commonwealth Boulevard
Ann Arbor,
Michigan 48105
United States
Attention: Kim Packard
9.2 Any notice will be deemed well served on the party to whom it is
addressed if it be served personally or by courier delivery addressed
to such party at its address for service and service shall be deemed
to be effective upon such personal or courier delivery taking place.
9.3 Any notices or statements to be served pursuant to this Agreement may
be sent by facsimile process:
9.3.1 in the case of notices to the Vendor to the
Legal Director - Lucas Electrical and Electronic
Systems (fax: 0121 627 4420)
7
<PAGE>
or to such other fax number as may be notified to
the Purchaser for the purposes of this clause 9.3, and
9.3.2 in the case of notices to the Purchaser to Kim Packard
(fax: (313) 913-6655) or to such other fax number as may
be notified to the Vendor for the purposes of this clause
9.3.2.
9.4 Any notice or statement so sent by facsimile process shall be deemed
to have been served at the expiration of 2 hours after the time of
despatch if despatched before 3.00 pm (local time at the place of
destination) on any Business Day and in any other case at 10.00 am
(local time at the place of destination) on the Business Day following
the date of despatch provided that it is followed by a hard copy of
the notice or statement served on the recipient in accordance with
clause 9.2. For the purposes of this clause, "Business Day" shall mean
any day (other than Saturday or Sunday) on which banks in the United
Kingdom (for service on the Vendor) or the United States (for service
on the Purchaser) are open for a full range of banking transactions.
10. ASSIGNMENT
----------
This Agreement shall not be assigned by operation of law or otherwise
without the prior written consent of the other parties hereto (such consent
not to be unreasonably withheld or delayed) provided that the Purchaser may
assign its rights, interests and obligations hereunder to any member of the
Purchaser's Group and the Vendor may assign its rights, interests and
obligations hereunder to a member of the Lucas Group to whom the Vendor has
transferred any of the Option Shares in accordance with the provisions of
clause 8.1 hereof.
11. ENTIRE AGREEMENT
----------------
This Agreement constitutes the entire agreement between the parties hereto
with respect to the Option and supersedes all prior agreements and
undertakings, both written and oral, between the Vendor and the Purchaser
with respect to such subject matter.
8
<PAGE>
12. SEVERABILITY
------------
12.1 If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated by
this Agreement is not affected in any manner materially adverse to
any party.
12.2 Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in
a mutually acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally
contemplated to the fullest extent possible.
13. NO THIRD PARTY BENEFICIARIES
----------------------------
This Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
14. GOVERNING LAW
-------------
Except to the extent that Argentine law is mandatorily applicable to the
rights of the shareholders of the Company, this Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.
The Purchaser and the Vendor each hereby irrevocably submits to the non-
exclusive jurisdiction of any New York state or Federal court sitting in
the City of New York, New York County, in any action or proceedings arising
out of or relating to this Agreement, and the Purchaser and the Vendor each
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State court or such
Federal court.
9
<PAGE>
15. PREVAILING AGREEMENT
--------------------
Where the provisions of the documents governing the constitution of the
Company conflict with the provisions of this Agreement the parties hereby
agree that the provisions hereof shall prevail to the intent that they
shall, if necessary in any case, procure the amendment of the said
documents to the extent required to enable the parties to comply with the
provisions of this Agreement.
16. COUNTERPARTS
------------
This Agreement may be executed in one or more counterparts, and by
different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which when taken
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF the parties hereto have entered into this document on the
day and year first before written
10
<PAGE>
SIGNED by CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
as duly authorised attorney ) ----------------------
for and on behalf of )
LUCAS INDUSTRIES PLC )
Chris Long-Leather as attorney for
Lucas Industries plc
PRESTOLITE ELECTRIC INCORPORATED
By: /s/ P. Kim Packard
------------------
Name: P. Kim Packard
Title: President
By: /s/ Kenneth C. Cornelius
------------------------
Name: Kenneth C. Cornelius
Title: Vice President
11
<PAGE>
EXHIBIT 10.10
DATED January 22, 1998
LUCAS INDUSTRIES PLC
- and -
PRESTOLITE ELECTRIC INCORPORATED
- and -
LUCAS INDIEL ARGENTINA S.A.
_____________________________
TAX DEED
_____________________________
Eversheds
10 Newhall Street
Birmingham
B3 3LX
Tel: 0121 233 2001
Fax: 0121 236 1583
DX 13004
Ref: JPL/36
<PAGE>
THIS DEED dated the 22nd day of January 1998 and made
BETWEEN:
(1) LUCAS INDUSTRIES PLC a company registered in England under number 54802
whose registered office is at Stratford Road, Solihull B90 4LA (the
"Vendor");
(2) PRESTOLITE ELECTRIC INCORPORATED a company registered in the State of
Delaware, United States whose principal place of business is at 2100
Commonwealth Boulevard, Ann Arbor, Michigan, 48105, USA (the "Purchaser"),
and
(3) LUCAS INDIEL ARGENTINA S.A. a company registered in Argentina under number
T/O/33, F/O/248, N/O/ 25 whose registered office is at Av. San Martin
4205, 1752 - Lomas del Mirador, Buenes Aires, Argentina (the "Company").
WHEREAS
This Deed has been entered into pursuant to that certain Sale and Purchase
Agreement dated 1998 made between the Vendor, the Purchaser and
Prestolite Newco, Inc (the "Agreement") under which, inter alia, the Purchaser
has agreed to purchase from the Vendor certain shares of the Company, as
described thereunder (the "Sale Shares"), with the intention that an amount
equal to certain tax liabilities of the Company shall be paid by the Vendor to
the Purchaser.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
--------------
1.1 DEFINITIONS
-----------
In this Deed, unless the contrary intention appears:
words and expressions defined in the Agreement have the same meaning in
this Deed and any provisions in the Agreement concerning matters of
construction or interpretation shall also apply in this Deed:
"Accounting Period" has the same meaning as in Section 18 of the
1
<PAGE>
Argentine Income Tax Law.
"Actual Tax Liability" means a liability of the Company or Lucas
Argentine Holdings, Inc, a Delaware Company and
wholly owned subsidiary of the Vendor to make an
actual payment of Tax whether or not such Tax is
also or alternatively chargeable against or
attributable to any other person.
"Auditors" means the Company's auditors from time to time,
"Business Day" means an administrative business day according to
Section 14 of the Argentine Procedural Tax Law.
"Claim" means any assessment, notice, demand or other
document issued or action taken by or on behalf
of any Tax Authority or any form of self-
assessment from which it appears that the Company
is subject to, or is sought to be made subject
to, or might become subject to, any Tax
Liability.
"Closing Date Tax means the value of the tax receivable recorded as
Receivable" an asset in the Final Completion Statement (as
defined in the Agreement) due to Indiel from the
Argentine government, and arising in connection
with the regime set forth by Laws 21,608 and
22,021 and its implementing regulations,
including Decrees 435/90, 1033/91 and 2054/92 and
DGI RG 3838 and 3905.
"Company" means Lucas Indiel Argentina S.A. and each of its
Subsidiaries (Jovsa S.A. and Equipos
2
<PAGE>
Originales S.A.)
"Deemed Tax Liability" means, in any of the circumstances set out in
column (1) below, an amount determined as set out
in column (2) below:
<TABLE>
<S> <C>
(1) (2)
Either
1 The Unavailability of all or any 1 Either (a) the amount of Tax payable
part of any Relief which has been by the Company which would not have been
treated as an asset in the Final payable if such Relief had been
Completion Statement (except the available; or (b) in the case of a right
Closing Date Tax Receivable). to a repayment of Tax, the amount of the
repayment which is found to be
Unavailable; or (c) in the case of any
other Relief treated as an asset, that
proportion of the amount so taken into
account as corresponds to the proportion
of the Relief which is Unavailable.
2 The use of a Relief which has been 2 The amount by which such Actual Tax
treated as an asset in preparing the Liability is reduced by such use of the
Final Completion Statement (except Relief.
the Closing Date Tax Receivable)
(either by way of reduction of
taxable profits or by way of set-off
against a Liability to pay Tax) to
reduce an Actual Tax Liability in
respect of which the Vendor would,
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
but for that reduction or set off,
have been liable to make a payment
to the Purchaser under this Deed.
3 The use of a Purchaser's Relief to 3 The amount by which such Actual Tax
reduce an Actual Tax Liability in Liability is reduced by the use of the
respect of which the Vendor would, Purchaser's Relief.
but for that use, have been liable
to make a payment to the Purchaser
under this Deed.
</TABLE>
1.2 "Event" includes (without limitation):
<TABLE>
<C> <S>
1.2.1 any act, omission, transaction or Distribution whether or not the Company is a party thereto;
1.2.2 the death of any person;
1.2.3 the failure by any person to avoid an apportionment or Distribution of income (whether
or not it is or was possible by taking action after Completion to avoid such apportionment or Distribution);
1.2.4 the Company ceasing to be a member of any group or associated with any person;
1.2.5 Completion; and
any event which is treated as having occurred for the purposes of any
legislation;
</TABLE>
and references to the result of an Event occurring on or before Completion
shall include the combined result of two or more Events both or all of
which shall have taken place on or before Completion;
4
<PAGE>
"Purchaser's Group" means the Purchaser and those companies (other than the
Company) which may be treated for relevant Tax purposes as being, or as
having at any time been, either a member of the same group of companies as
the Purchaser or otherwise associated with the Purchaser;
"Purchaser's Relief" means
1.2.6 any Relief arising to the Purchaser or any member of the
Purchaser's Group as a consequence of, or by reference to, an
Event occurring (or deemed to have occurred) or income earned
after Completion; and
"Relief" means any relief, allowance or credit in respect of Tax or any
right to repayment of Tax or any deduction, exemption or set-off relevant
in computing income, profits or gains for the purposes of Tax pursuant to
any legislation or otherwise;
"Tax", "Taxes" and "Taxation" includes (without limitation), income tax,
value added tax, personal assets tax, excises taxes, customs and other
import duties, turnover taxes, stamp taxes, tax on immovables and vehicles,
municipal taxes, foreign taxation and duties and any payment whatsoever
which the Company may be or become bound to make to any Tax Authority as a
result of the operation of any enactment relating to any such taxes or
duties and all fines, penalties and interest relating to the foregoing or
resulting from failure to comply with the provisions of any enactment
relating to Tax;
"Tax Authority" means any person entitled to enforce or collect Taxes;
"Tax Liability" means an Actual Tax Liability;
"Taxes Law" means the (i) Argentine Income Tax Law (as amended), (ii) Value
Added Tax Law (as amended), (iii) Procedural Tax Law (as amended), (iv)
Criminal Tax Law, (v) Provincial Tax Codes and Laws, (vi) Industrial
Promotion Laws, and (vii) related legislation and regulations;
5
<PAGE>
"Unavailability" means in relation to a Relief, the setting-off, reduction,
modification, clawback, counteraction, nullification, disallowance or
cancellation of or withdrawal of or failure to obtain that Relief; and
references to any "income earned" means any profits, gains or income
earned, accrued or received or deemed for Tax purposes to be earned,
accrued or received.
2. COVENANT BY THE VENDOR
----------------------
2.1 COVENANT
--------
Subject to the provisions of this Deed, the Vendor covenants to pay to
the Purchaser an amount equal to:
2.1.1 any Actual Tax Liability arising in respect of:
2.1.1.1 any Event occurring on or before Completion; or
2.1.1.2 any income earned on or before, or in respect of
any accounting period ending on or before, the date
of Completion;
2.1.2 any Deemed Tax Liability arising as a consequence of, or by
reference to, an Event occurring (or deemed to have occurred)
on or before Completion;
2.1.3 any Actual Tax Liability of the Company arising as a result of
the application of Taxes Law provided that such Actual Tax
Liability is in respect of undischarged liability of the
Vendor or of a company controlled (as defined by Taxes Law) by
the Vendor in the six years ending on or before Completion,
2.1.4 any reasonable costs and expenses properly incurred and
payable by the Purchaser or the Company in connection with
6
<PAGE>
any Tax Liability or Deemed Tax Liability giving rise to a
claim made under this Deed.
2.2 ADJUSTMENT TO CONSIDERATION
---------------------------
Any payments made pursuant to Clause 2.1 shall, so far as possible, be
treated as an adjustment to the consideration paid by the Purchaser's
Group for the Sale Shares.
2.3 LIMITS OF VENDOR'S LIABILITY UNDER THIS DEED
--------------------------------------------
The Vendor's liability under this Deed arising from any Tax Liability
or Deemed Tax Liability shall be limited in accordance with the
provisions of clause 5.5.3 to the Agreement and to the extent that:
2.3.1 provision or reserve in respect to that Tax Liability or
Deemed Tax Liability has been made in the Completion
Statements or to the extent that payment or discharge of such
claim has been taken into account in the Completion
Statements;
2.3.2 such Tax Liability or Deemed Tax Liability would not have
arisen but for any change in rates of Tax or change in law or
published practice after the date hereof (including where
provision or reserve in the Completion Statements in respect
of that Tax Liability or Deemed Tax Liability is insufficient
because of such change);
2.3.3 it is a Tax Liability or Deemed Tax Liability for which the
Company is or may become liable as a result of transactions
entered into by the Company or a member of the Purchaser's
Group (including the Purchaser) in the ordinary course of
business or the ordinary course of buying or selling assets
after the Balance Sheet Date and for the purposes of this Sub-
Clause any liability in respect of any Distribution shall not
be regarded as arising in the ordinary course of business;
7
<PAGE>
2.3.4 it is a Tax Liability or Deemed Tax Liability which would not
have arisen but for a voluntary act or omission or transaction
carried out by the Purchaser's Group (or persons deriving
title from it) or the Company after the date of Completion
otherwise than in the ordinary course of business and which
the Purchaser's Group was aware or ought reasonably to have
been aware could give rise to a claim;
2.3.5 recovery has already been made in respect of the Tax Liability
or Deemed Tax Liability under clause 7 of the Agreement.
2.4 DISCLOSURE NOT RELEVANT
-----------------------
The Vendor's obligation to make payments under Clause 2.1 shall not be
affected by the Purchaser's Group (or its officers, employees, agents
or advisors) knowledge or the disclosure, in the Disclosure Letter or
otherwise, of the Tax Liability giving rise to the payment.
3. NOTICE AND MITIGATION
---------------------
3.1 NOTICE OF CLAIM
---------------
If the Purchaser shall become aware of any Claim which is likely to
give rise to a liability on the Vendor under Clause 2.1, it shall if
possible not later than 10 days prior to the expiry of any time for
appeal give notice or procure that notice is given to the Vendor
setting out reasonable particulars of the Claim but no failure by the
Purchaser to comply with this Sub-Clause shall affect the Vendor's
obligations under Clause 2.1.
3.2 TIME LIMIT FOR CLAIMS UNDER THIS DEED
-------------------------------------
No claim shall be brought by the Purchaser under this Deed unless
notice in writing of such claim specifying (in reasonable detail) the
matter which gives rise to the claim has been given to the Vendor not
later than the date on which the statute of limitations for filing
claims passes for claims arising during such period in question,
including any periods of appeal.
8
<PAGE>
3.3 INFORMATION AND ASSISTANCE
--------------------------
The Purchaser shall, and shall procure that the Company shall, take
such action and give such information and assistance in connection
with the affairs of the Company as the Vendor may reasonably and
promptly by written notice request to avoid, resist, appeal, or
compromise a Claim or pay an amount in respect of the Tax Liability
provided that:
3.3.1 the Purchaser's Group and the Company shall not be obliged to
appeal against any assessment, notice, demand or decision if,
having given the Vendor notice in accordance with Clause 3.1,
the Purchaser has not, by the earlier of 45 days from receipt
by the Vendor of such notice, and 2 days prior to the expiry
of any time for appeal, received instructions in writing from
the Vendor to do so; and
3.3.2 The Purchaser's Group and the Company shall not be obliged to
comply with any request of the Vendor which involves
contesting any assessment for Tax before any tribunal, court
or other appellate body (except the tribunal court or body of
first instance or appeal) (a) unless they have been advised in
writing by leading Tax counsel instructed by the Purchaser and
the Vendor at the expense of the Vendor that an appeal against
the assessment will, on the balance of probabilities, be
successful, or (b) if the Purchaser can demonstrate to the
reasonable satisfaction of the Vendor that in the opinion of
the Purchaser such action would involve the disclosure of
information confidential to the Company's business or result
in a material adverse effect on the financial results of the
Company's business.
9
<PAGE>
3.4 NO SETTLEMENT OF A CLAIM WITHOUT CONSENT
----------------------------------------
Following receipt of any instructions as referred to in Clause 3.3.1 the
Purchaser shall procure that the Claim is not settled or otherwise
compromised without the Vendor's prior written consent, such consent not to
be unreasonably withheld or delayed.
3.5 ACTION REQUIRED BY VENDOR
-------------------------
The action which the Vendor may request under Sub-Clause 3.3 above shall
include (without limitation but subject to the provisions of Sub-Clause
3.3.1 and Sub-Clause 3.3.2 the Company applying to postpone (so far as
legally possible), the payment of any Tax but shall not include allowing
the Vendor to take on or take over the conduct of any proceedings of
whatsoever nature arising in connection with the Claim in question.
3.6 RECOVERY FROM OTHER PERSONS
---------------------------
Where the Company is entitled to recover from some other person (not being
the Company or any Subsidiary but including any Tax Authority) any sum in
respect of any Claim the amount of the Claim shall nevertheless be payable
in full by the Vendor on the due date ascertained in accordance with Clause
4 and the Purchaser shall:
3.6.1 procure that the Vendor is promptly notified of such entitlement;
3.6.2 take such action as the Vendor may reasonably and promptly by
written notice request to enforce such recovery; and
3.6.3 account to the Vendor for an amount equal to any amount so
recovered by the Company (including any interest or repayment
supplement included in such recovery less any Tax chargeable on the
Company in respect of that interest) not exceeding the amount paid
by the Vendor under Clause 2 in respect of that Claim save to the
extent that to do so would
10
<PAGE>
leave the Company and the Purchaser together in a worse position
than they would have been in had the Tax Liability in question not
arisen.
3.7 INDEMNITY FOR COSTS, ETC.
-------------------------
Notwithstanding anything in the Agreement or this Deed neither the
Purchaser's Group nor the Company shall be obliged to take any steps to
reduce the amount of any Claim or to recover any amount from any other
person unless the Vendor shall first indemnify the Company and the
Purchaser's Group to their reasonable satisfaction against all reasonable
costs and expenses which they may so incur.
4. DATE FOR PAYMENT
----------------
4.1 DATE FOR PAYMENT
----------------
Where any amount is required to be paid to the Purchaser by the Vendor
in respect of an Actual Tax Liability, the Vendor shall pay such
amount in cleared funds three Business Days before the date on which
the Tax in question is due for payment to the relevant Tax Authority
or, if later, ten Business Days following the date on which the
Purchaser notifies the Vendor of its liability to make such payment.
4.2 NOTIFICATION OF AMOUNT
----------------------
Where any amount is required to be paid by the Vendor other than in
respect of an Actual Tax Liability, the Purchaser will notify the
Vendor in writing of the amount which the Vendor is required to pay
and the Vendor shall pay such amount in cleared funds on or before the
date ten Business Days after the date on which it receives save that
where the payment is in respect of a Deemed Tax Liability relating to
the Unavailability of a right to repayment of Tax, payment shall be
made on the date on which that repayment would otherwise have become
due. Any dispute as to the amount contained in such notice shall be
determined by the Auditors acting as
11
<PAGE>
experts and not arbitrators (the costs of which shall be determined
and allocated by the Auditors).
4.3 BUSINESS DAYS
-------------
Any payment which becomes due on a day which is not a Business Day
shall be paid on the previous Business Day, and any payment which is
made after noon (London time) on any day shall, for the purposes of
calculating interest, be deemed to have been paid on the next
following Business Day.
4.4 DUE DATE AND INTEREST
---------------------
The Vendor shall make all payments under this Deed in immediately
available funds before noon on the due date for payment without
deduction or withholding on any account (save as expressly provided in
this Deed) and if any amount is not paid when due the Vendor shall pay
to the Purchaser interest on such amount accruing from day to day (as
well after judgement as before) at the rate of 5 per cent per annum
above the base rate of Barclays Bank plc from time to time from the
due date until the date of actual payment (or the next Business Day if
such day of actual payment is not a Business Day), compounded
quarterly. All payments hereunder shall be in Argentine Pesos
5. DEDUCTION AND WITHHOLDINGS
--------------------------
5.1 NO DEDUCTIONS, ETC.
-------------------
Any amount payable pursuant to this Deed shall be paid free and clear
of all deductions, withholdings, counter-claims or set-off whatsoever,
save only as may be required by law.
5.2 DEDUCTIONS AND WITHHOLDINGS REQUIRED BY LAW
-------------------------------------------
If any deductions or withholdings are required by law to be made from
any sums, the Vendor shall be obliged to pay the Purchaser such amount
as will, after the deduction or withholding has been made, leave the
Purchaser with
12
<PAGE>
the same amount as it would have been entitled to receive in the
absence of such requirement to make a deduction, withholding or set-
off provided that if the Purchaser subsequently receives a credit for
such deduction or withholding then such credit shall be applied in
accordance with the provisions of Clause 6.
5.3 ACCOUNTING FOR DEDUCTIONS AND WITHHOLDINGS
------------------------------------------
If the Vendor is required by law to make a deduction or withholding as
is referred to in Sub Clause 5.2 the Vendor shall:
5.3.1 make such deduction or withholding;
5.3.2 account for the full amount deducted or withheld to the
relevant authority in accordance with applicable law; and
5.3.3 provide to the Purchaser the original, or a certified copy, of
a receipt or other documentation evidencing the above.
6. CREDITS AND REDUCTIONS
----------------------
6.1 If any Claim represents Tax for which credit is or may become due to
the Company or a member of the Purchaser's Group or the Purchaser at a
later date or in respect of which it is subsequently found that there
arises a corresponding credit or right to repayment of Tax, the amount
of the Claim shall nevertheless be payable in full by the Vendor on
the due date ascertained in accordance with Clause 4 but if
subsequently any reduction is made in the Claim or it is found that
the Vendor's liability in respect of the Claim falls short of the
amount claimed or such credit or repayment is received by the Company
or any member of the Purchaser's Group, the Purchaser shall promptly
repay to the Vendor an amount equal to such reduction, shortfall,
credit or repayment up to the amount previously paid by the Vendor in
respect of that Claim and without interest save to the extent that
interest or repayment supplement is included (or allowed) in such
credit, repayment, reduction or shortfall. For this purposes, no
credit
13
<PAGE>
shall be taken to have been received unless it shall have relieved the
Company or any member of the Purchaser's Group of a present obligation
to pay Tax.
7. LAW AND JURISDICTION
--------------------
7.1 ARGENTINE LAW
-------------
This Deed shall be governed by, and construed in accordance with the
law of the Republic of Argentina.
7.2 JURISDICTION
------------
The parties hereby submit to the non-exclusive jurisdiction of the
English Courts.
7.3 CONFLICTS
---------
This Deed constitutes the Tax Indemnities referred to in the Agreement
as defined in clause 1.1 of the Agreement. In the case of any conflict
between the Agreement and this Deed, the Agreement will prevail over
this Deed unless the parties sign a written document agreeing
otherwise.
IN WITNESS WHEREOF this Deed was executed by the parties on the day and year
first above written.
14
<PAGE>
SIGNED AS A DEED by )
CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
as duly authorized attorney ) ----------------------
for and on behalf of )
LUCAS INDUSTRIES PLC )
in the presence of: )
Witness: /s/ Mark Stevens
----------------
Name: Mark Stevens
Address: 10 Newhall Street
Birmingham
B 3 3LX
Occupation: Solicitor
PRESTOLITE ELECTRIC INCORPORATED
By: /s/ P. Kim Packard
------------------
Name: P. Kim Packard
Title: President
By: /s/ Kenneth C. Cornelius
------------------------
Name: Kenneth C. Cornelius
Title: Vice President
SIGNED by Kenneth Cornelius )
as attorney in fact for and on )
behalf of LUCAS INDIEL ) /s/ Kenneth C. Cornelius
ARGENTINA SA ) ------------------------
15
<PAGE>
EXHIBIT 10.11
DATED JANUARY 22, 1998
----------------------
(1) LUCAS LIMITED
- and -
(2) LUCAS AUTOMOTIVE (PTY) LTD
----------------------------
DISTRIBUTION AGREEMENT
----------------------------
South Africa
<PAGE>
THIS AGREEMENT is made on 22nd day of January 1998
BETWEEN:-
(1) LUCAS AFTERMARKET OPERATIONS, a division of LUCAS LIMITED a company
incorporated in England and Wales with Registered Number 872948 whose
registered office is at Stratford Road, Solihull B90 4LA, England
("Lucas").
AND
(2) LUCAS AUTOMOTIVE (PTY) LTD whose registered office is at 5 Yaron Avenue,
Lea Glen, Florida, Transvaal, South Africa ("the Distributor").
WHEREBY IT IS AGREED as follows:
1. DEFINITIONS
-----------
In this Agreement the expressions set out in column 1 of the First
Schedule shall (unless inconsistent with the context) have the meanings
set out opposite them in column 2 of that Schedule.
2. APPOINTMENT
-----------
2.1 With effect on and from the Commencement Date Lucas hereby appoints
the Distributor to be a distributor of the Products in the
Aftermarket in the Territory and the Distributor agrees to act as
such distributor upon and subject to the terms set out in this
Agreement. Lucas shall not during the term of this Agreement grant
any distributor, agent or person, whether within or outside the
Territory other than the Distributor, the right to sell, offer for
sale or negotiate the sale of Products in the Aftermarket within, or
for delivery in, the Territory nor shall Lucas itself directly or
indirectly (but subject to clauses 6.1 to 6.3) sell or offer for
sale any Products in the
1
<PAGE>
Aftermarket to customers in, or who require delivery in, the
Territory or who Lucas knows or has good reason to believe intend to
sell Products in the Aftermarket in the Territory.
2.2 Notwithstanding clause 2.1 the Distributor shall not supply or agree
to supply any Original Equipment Manufacturer with any of the
Products for any application whatsoever without first obtaining
Lucas' prior written consent which Lucas may in its absolute
discretion refuse. Nothing in this Agreement shall however in any
way restrict the Distributor from manufacturing or selling whether
directly or through appointed Distribution Outlets any other spare
and replacement parts in the Territory provided that they are not
Competitive Goods, this being without prejudice to the Distributor's
obligations under this Agreement.
3. TERM
----
Subject to clauses 12 and 14.4, this Agreement shall continue in force for
the Minimum Period and shall thereafter continue in force unless and until
either party shall have given the other at least 12 months' prior written
notice expiring on or at any time after the expiry of the Minimum Period.
4. SUPPLY OF PRODUCTS
------------------
Lucas shall use all reasonable endeavours to supply or procure the supply
of Products written orders for which are made by the Distributor in
accordance with the provisions of this Agreement. Products shall be
supplied within such lead time period for orders as may be agreed between
the parties from time to time and subject thereto Lucas shall deliver
Products at the times required by the Distributor.
5. RELATIONSHIP OF PARTIES
-----------------------
Each of the parties is an independent contractor and nothing contained in
this Agreement shall be construed to imply that there is any relationship
between the parties of partnership or of principal/agent or of
employer/employee nor are the parties
2
<PAGE>
hereby engaging in a joint venture; and accordingly neither of the parties
shall have any right or authority to pledge the credit of the other or to
act on behalf of the other nor to bind the other by contract or otherwise
unless expressly permitted by the terms of this Agreement.
6. LUCAS' RIGHTS AND OBLIGATIONS
-----------------------------
6.1 Subject to clauses 6.2 and 6.3 Lucas will sell Products in the
Territory only to the Distributor PROVIDED ALWAYS that Lucas may sell
Products in the Territory:
6.1.1 to Original Equipment Manufacturers;
6.1.2 to Government Departments;
6.1.3 to Armed Forces;
provided that, subject to clause 2.2, the Distributor may sell
Products in the Territory to the classes of customer specified in
this clause 6.1.
6.2 If the Distributor is unable or refuses to distribute any of the
Products in the Territory in accordance with the terms of this
Agreement then Lucas may at its sole discretion sell such Products in
the Territory either for its own account or through a third party.
6.3 In good time prior to the commencement of each Agreement Year other
than the first Agreement Year, Lucas and the Distributor will meet to
discuss and negotiate in good faith with a view to agreeing the
Minimum Purchase Target for the forthcoming Agreement Year and if the
parties reach such agreement the sum agreed will be the Minimum
Purchase Target for such Agreement Year but if the parties fail to
reach such agreement the Minimum Purchase Target for the Agreement
Year immediately preceding such forthcoming Agreement Year shall be
the Minimum Purchase Target for such forthcoming Agreement Year. If
at the end of the third or fourth
3
<PAGE>
Agreement Year the Distributor shall not have achieved the Minimum
Purchase Target for such third or fourth Agreement Year Lucas' sole
right in relation to such non-achievement (but without prejudice to
the other express terms of this Agreement) shall be to convert the
rights granted to the Distributor under clause 6.1 into Non-Exclusive
Rights (but otherwise on the terms of this Agreement) by summarily
giving written notice to the Distributor to that effect and Lucas
shall then be entitled following the giving of such notice freely to
sell Products in the Territory and/or appoint any other
distributor(s) in the Territory to do so provided always that Lucas
shall not be entitled so to convert if and to the extent that the
Minimum Purchase Target in respect of the third or fourth Agreement
Year has not been achieved because of (a) Force Majeure (b) any
breach of this Agreement by Lucas or (c) prevailing local market
conditions which have generally affected all distributors' selling
products which are similar to the Products in the Aftermarket in the
Territory and which are beyond the control of the Distributor and
which have materially changed since the Commencement Date or, if
applicable, since the end of the latest Agreement Year in which the
Minimum Purchase Target has been achieved.
6.4 Lucas will supply to the Distributor such Documentation as shall be
reasonably necessary to support the sale of Products in the Territory
and will provide such other promotional support as Lucas in its sole
discretion considers necessary.
6.5 Insofar as it is appropriate to do so, Lucas will within a reasonable
time following a request from the Distributor and without charge to
the Distributor (a) at the reasonable request of the Distributor
train or advise on the training of service, sales and marketing
personnel of the Distributor; and (b) supply to the Distributor
technical literature for use in connection with the service and
repair of Products.
6.6 Lucas will reimburse the Distributor for Warranty Replacement in
accordance with the Lucas labour scales current at the Commencement
Date
4
<PAGE>
or such other scales as may be agreed between Lucas and the
Distributor from time to time.
6.7 Lucas will, at the reasonable request of, and subject to reasonable
prior notice being given by, the Distributor, make available
personnel support which Lucas in its absolute discretion considers
appropriate for promotional events such as exhibitions and/or
customer visits.
6.8 Lucas will appoint a person as the main point of contact at Lucas for
all matters concerning this Agreement and whose responsibility it
will be to ensure that the Distributor has a ready point of contact
at all reasonable times. Lucas will notify the Distributor of the
name, business address, telephone and fax numbers of such person
within 14 days of the Commencement Date. Lucas may change its
appointee from time to time.
6.9 Based on market statistics and sales history, Lucas will from time to
time make recommendations to the Distributor in relation to the
quantities of stock of Products which it would be appropriate for the
Distributor to hold provided that Lucas shall have no liability
whatsoever to the Distributor in relation to any such recommendation.
6.10 The Distributor will have the right to participate in any Lucas stock
cleanse policy which is from time to time in force, the terms of
which shall be in the absolute discretion of Lucas.
6.11 Lucas will indemnify and hold the Distributor harmless against all
actions, claims, costs, demands, expenses and liabilities in respect
of any death, personal injury and loss or damage to property made
against, incurred or suffered by the Distributor from any defective
Product supplied by Lucas pursuant to this Agreement provided that
the limit of Lucas' liability under this clause shall be an amount
equal to US$10,000,000 for each and every event and in the aggregate
in any one year of insurance pursuant to the policy of insurance
effected under clause 6.13.
5
<PAGE>
6.12 Without prejudice to the provisions of clause 6.11 above, Lucas will
effect and maintain or cause another Lucas Associate Company to
effect and maintain for its and the Lucas Associate Company's benefit
insurance in respect of product liability for the Products supplied
by Lucas to the Distributor in an amount equal to not less than
US$10,000,000 for each and every event and in the aggregate in any
one year of insurance under such policy and will at the request of
the Distributor from time to time during the life of this Agreement
produce written evidence that such insurance is in force. Insofar as
and to the extent that Lucas or any such Lucas Associate Company
receives any proceeds of insurance in respect of a claim made by the
Distributor in respect of Products supplied to the Distributor
pursuant to this Agreement such proceeds shall be held on trust by
Lucas or any such other Lucas Associate Company for the Distributor,
pro rata where the insurance proceeds recovered include monies in
respect of claim(s) other than the Distributor's claim.
7. DISTRIBUTOR'S OBLIGATIONS
-------------------------
7.1 The Distributor will use its reasonable endeavours to achieve the
maximum possible sales of Products in the Territory by appropriate
means including, without limitation, (a) through Distribution
Outlets, attendance at trade shows and the organisation of sales and
other promotions; (b) by employing proficient marketing and sales
technical specialists and other personnel; and (c) by maintaining a
sufficient stock of Products.
7.2 The Distributor warrants that it will maintain during the continuance
of this Agreement (at the Distributor's cost and expense unless
otherwise agreed by Lucas in writing) all permissions, licences,
consents, authorisations, orders, grants or approvals that it has at
the Commencement Date and will use its best efforts to obtain any
additional ones that may after the Commencement Date be required to
enable the Distributor to sell the Products and perform its other
obligations in accordance with the terms of this Agreement.
6
<PAGE>
7.3 The Distributor shall notify Lucas in writing of any change of
Controllers within five days after such change.
7.4 The Distributor shall at its own cost and expense:
7.4.1 be entitled to use Distribution Outlets to maximise sales of
the Products in or to the Territory subject always to the
provisions of clause 7.8;
7.4.2 provide to any Distribution Outlet used pursuant to clause
7.8 such Documentation as may be reasonably required by such
Distribution Outlet;
7.4.3 provide Lucas with such other information relating to the
performance, development and operation of the Distributor's
marketing and sales of Products and the market for the same
as Lucas may from time to time reasonably request.
7.5 The Distributor will carry out Warranty Replacement on behalf of
Lucas according to the provisions contained in the appropriate
warranty policy set out in clause 7 of the Conditions of Sale as may
be modified by agreement between the Distributor and Lucas from time
to time.
7.6 The Distributor shall not without the previous written consent of
Lucas be engaged, concerned or interested either directly or
indirectly in the supply of Competitive Goods in the Territory,
provided always that:
7.6.1 the foregoing provisions of this clause 7.6 shall not apply
to any products which, or the packaging of which, are not
branded with the Trade Marks and which:-
7.6.1.1 at the date hereof are in the product portfolio of
the Prestolite Group;
7
<PAGE>
7.6.1.2 become part of the product portfolio of the
Prestolite Group hereafter and Lucas shall have
given its prior written consent to the Distributor
supplying the same in the Territory, such consent
not to be unreasonably withheld;
7.6.1.3 are manufactured at the date hereof by Lucas Indiel
Argentina S.A. in Argentina or by any other company
or business which on the Commencement Date becomes
part of the Prestolite Group by acquisition from
Lucas or a Lucas Associate Company;
7.6.1.4 are Second Tier Products; or
7.6.1.5 are products which are similar to or competitive
with Lucas KK Products but which are now or at any
time hereafter manufactured by the Distributor or by
any other member of the Prestolite Group.
7.6.2 notwithstanding the provisions of clause 7.6.1 the
Distributor shall not be engaged, concerned or interested
either directly or indirectly in the supply of diesel spare
or replacement parts in the Original Equipment Service in the
Territory.
7.7 The Distributor shall provide such technical facilities as are
necessary to enable the Distributor to repair and service Products
and provide warranty support to a standard consistent with that which
exists at the Commencement Date or to such higher standard as shall
be necessary in the future to keep up to date with developments in
the marketplace generally and which shall be reasonably stipulated by
Lucas to its distributors generally.
8
<PAGE>
7.8 The Distributor shall have the right to continue dealing with any
Distribution Outlets in the Territory in existence at the
Commencement Date on such terms and under such agreements as shall
then be in place (but not so that Lucas shall have any liability if
any Distribution Outlet does not independently of any direction from
Lucas wish to deal with the Distributor) and shall have the right
after the Commencement Date to appoint Distribution Outlets in the
Territory in respect of Products subject to the following
provisions:
7.8.1 the Distributor shall notify Lucas in writing within 14 days
of the appointment of each additional Lucas Authorised
Distribution Outlet;
7.8.2 the Distributor shall not grant or seek to grant any
Distribution Outlet any rights in relation to the Trade Marks
without the prior written consent of Lucas which it may
either refuse in its absolute discretion or grant subject to
such conditions as it shall in its absolute discretion
decide;
7.8.3 the Distributor shall not hereafter grant any Distribution
Outlet exclusivity in relation to the sale or use of Products
in any country or part thereof;
7.8.4 in relation to the appointment of any additional Lucas
Authorised Distribution Outlets, each Sub-Agreement shall (a)
be capable of termination by the Distributor no later than
the termination of this Agreement; and (b) incorporate a
provision enabling the benefit and burden of the Sub-
Agreement to be assigned to Lucas, or a person nominated by
Lucas, on the termination of this Agreement.
7.9 The Distributor agrees to fully indemnify and keep Lucas fully
indemnified against all actions, claims, costs, damages, expenses and
liabilities
9
<PAGE>
whatsoever suffered or incurred by Lucas (a) as a result of things
done to or in respect of any Products for which things the
Distributor is responsible, including, without limitation, the mode
of sale, storage, fitting or repair of Products; (b) arising directly
or indirectly from any breach of this Agreement by the Distributor;
or (c) as a result of a claim made against Lucas by any third party
as a result of any act or omission of a Distribution Outlet which
would have been a breach of this Agreement if the Distribution Outlet
had been a party to this Agreement. In addition the Distributor will
use reasonable endeavours to ensure that Distribution Outlets comply
with the terms and agreements applicable to them in relation to the
sale of Products.
7.10 The Distributor will not actively seek customers for the Products
outside the Territory nor establish any branch reselling Products nor
maintain any distribution depot for Products outside the Territory.
7.11 Save where any mandatory provision of any applicable law prohibits
such a restriction, the Distributor shall not without the prior
written consent of Lucas sell any of the Products outside the
Territory or to any person, firm or company inside the Territory
where the Distributor knows or has good reason to believe that the
Products in question will be sold outside the Territory.
7.12 The Distributor shall promptly refer to Lucas any enquiries or orders
for Products received by the Distributor from persons, firms or
companies outside the Territory.
8. PRICE AND TERMS OF CONTRACT
---------------------------
8.1 The prices for the Products to the Distributor shall be those from
time to time agreed by the parties and failing such agreement shall
be those prices notified from time to time by Lucas to the
Distributor. Such prices are on the basis of delivery FOB English
Port which is the manner in which Lucas shall deliver the Products to
the Distributor.
10
<PAGE>
8.2 Payment for Products supplied by Lucas to the Distributor pursuant to
this Agreement shall be made in sterling 60 days after the end of the
month in which delivery is made.
8.3 The Conditions of Sale and the terms of this Agreement shall apply in
relation to the sale of any Products by Lucas to the Distributor
pursuant to this Agreement, which Conditions of Sale and the other
provisions of this Agreement shall apply to the exclusion of any
terms and conditions of purchase from time to time used by the
Distributor, whether or not such terms and conditions are endorsed
upon or delivered with any document sent by either party to the other
from time to time. In the event of any conflict between the
Conditions of Sale and the terms of this Agreement, the terms of this
Agreement shall prevail.
9. INTELLECTUAL PROPERTY
---------------------
9.1 The Distributor acknowledges that the Trade Marks are owned and
controlled by Lucas and disclaims any rights (save as may separately
be or have been granted in writing by Lucas or any Lucas Associate
Company to the Distributor) to the Trade Marks.
9.2 The Distributor will inform Lucas of any infringement of any patents,
trade marks, copyright or other intellectual property rights owned by
Lucas relating to Products immediately the Distributor becomes aware
of any such infringement.
9.3 The Distributor will not without the prior written consent of Lucas
remove, obscure or in any way tamper with the name plates, marks or
numbers on Products or on the packaging of Products.
9.4 The Distributor will not use the Trade Marks in any manner not
previously approved in writing by Lucas and in particular but without
limiting the generality of the foregoing the Distributor shall not
use the Trade Marks as
11
<PAGE>
part of the corporate or trading name of the Distributor nor permit
any Distribution Outlet to do likewise provided that the Distributor
shall not be required to take any action against any Distribution
Outlet which at the date hereof is using the Trade Marks as part of
its corporate or trading name.
10. CONFIDENTIALITY
---------------
Each party undertakes that it shall not and shall ensure that its
employees shall not disclose, use or permit the use of any confidential
information disclosed to it by the other party except as may be necessary
for complying with its obligations under this Agreement and then only in
such a manner as to protect fully the confidentiality of such confidential
information. The obligations of non-disclosure by each party shall
continue to apply notwithstanding the termination of this Agreement
howsoever arising but shall not apply to any information which falls into
the public domain other than by breach of such obligation of non-
disclosure. Registration or notification of this Agreement with or to any
regulatory authority shall not be a breach of confidence for the purposes
of this clause.
11. PRODUCTS
--------
Without prejudice to the other provisions of this Agreement Lucas reserves
the right to add Products to the Second Schedule or to vary Products
either by making such changes in the design, specification, production or
packing of the Products as Lucas thinks fit or on reasonable notice to the
Distributor withdraw from this Agreement a Product or Products if Lucas in
its sole judgement considers that there are reasonable grounds for so
doing.
12. TERMINATION
-----------
12.1 Either party may terminate this Agreement forthwith by notice if the
other of them is in breach of this Agreement and shall have failed to
remedy the breach (where the breach is capable of remedy), within
three months after receipt of a request in writing from the party not
in breach to remedy the
12
<PAGE>
breach, such request indicating that failure to remedy the breach may
result in termination of this Agreement.
12.2 Lucas will also be entitled to terminate this Agreement forthwith by
notice to the Distributor if:
12.2.1 at any time the Distributor is insolvent or has a receiver,
manager, administrator, administrative receiver, or
liquidator, (or a person of similar status in any country)
appointed over it or its undertaking assets or income or any
part thereof or Lucas reasonably apprehends that any such
event is about to occur in relation to the Distributor;
12.2.2 there is a change in Controllers of the Distributor or of any
direct or indirect parent company of the Distributor or of
any company to which this Agreement may be novated as
contemplated by clause 12.2.5, the new Controllers being a
Lucas Competitor;
12.2.3 the Distributor fails after having been given 7 days' notice
of being in default of payment to pay any material sum due to
Lucas;
12.2.4 any distraint, execution or other process is levied or
enforced on any property of the Distributor and is not paid
out withdrawn or discharged within 21 days; or
12.2.5 the Distributor has ceased to trade other than pursuant to
any corporate reorganisation without insolvency under which
another company in the Prestolite Group trades in place of
the Distributor and to whom this Agreement is novated with
Lucas' prior written consent, not to be unreasonably
withheld.
13
<PAGE>
13. EFFECTS OF TERMINATION
----------------------
13.1 The termination of this Agreement howsoever arising will be without
prejudice to the rights and duties of either party accrued prior to
termination. The clauses in this Agreement which expressly or
impliedly have effect after termination will continue to be
enforceable notwithstanding termination howsoever arising. Any
indemnities given in this Agreement will continue to apply
notwithstanding termination.
13.2 As from the date of termination howsoever arising the Distributor
will forthwith cease to hold himself out as a distributor for Lucas.
13.3 On the termination of this Agreement howsoever arising Lucas will
have the option (to be exercised by notice to be served within one
month after the date of termination) of buying all or any Products
owned by the Distributor at the date of exercising such option and
which the Distributor is not committed by contract at such date to
sell to a third party. The price for such Products will be agreed
between the parties or failing such agreement will be the price
previously charged by Lucas to the Distributor for the Products in
question (excluding the costs of supply and sales taxes) and upon the
exercise of such option the Distributor will yield up such Products
to Lucas or to such person as Lucas may nominate.
13.4 On termination of this Agreement howsoever arising the Distributor
shall (at the Distributor's cost and expense) forthwith yield up to
Lucas or to such person as Lucas may nominate any Products in the
possession of the Distributor the property in which has not passed to
the Distributor.
13.5 On termination of this Agreement howsoever arising the Distributor
shall (at the Distributor's costs and expense) forthwith return to
Lucas or to such other person as Lucas may nominate all technical
data, commercial information, written documents and other things on
loan or free issue from Lucas and all copies thereof made by the
Distributor which are in the Distributor's possession, custody or
control at the date of such termination
14
<PAGE>
and shall destroy all stationery, business literature, advertisement
and similar materials bearing any of the Trade Marks (unless
permitted or authorised pursuant to any other agreement in writing
between Lucas or any Lucas Associate Company and the Distributor) or
which refers to the Distributor as a distributor of Lucas products.
13.6 On the termination of this Agreement howsoever arising Lucas will
have the option (to be exercised by notice to be served on the
Distributor on or before the date of termination) of taking an
assignment of the benefit and burden of the Sub-Agreements, or any of
them insofar as they relate to Products, with effect from the date of
termination, without being required to pay any consideration or
compensation to the Distributor in relation thereto other than as may
be required by applicable law and cannot be contracted out of under
such applicable law.
13.7 The Distributor shall not be entitled to any compensation, indemnity
or damages on the termination of this Agreement howsoever arising for
the loss of its rights under this Agreement provided always that this
clause shall (a) not exempt Lucas from liability for any breach of
this Agreement by Lucas which occurred prior to termination and (b)
only apply to the extent permitted by applicable law and cannot be
contracted out of under such applicable law.
14. FORCE MAJEURE
-------------
Neither party shall be liable to the other for any failure or delay in
performing its obligations under this Agreement due to Force Majeure
provided always that:
14.1 The Distributor shall not be excused by reason of Force Majeure from
its obligations to pay Lucas for Products as required by this
Agreement.
14.2 Subject to the provisions of clause 14.4 the date for performance of
the contractual obligation which has been delayed by Force Majeure
shall be deemed suspended for a period equal to the delay thereby
caused.
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<PAGE>
14.3 The party seeking to exempt itself from liability by virtue of the
provisions of this clause 14 shall give notice to the other party
within 7 days of becoming aware of the Force Majeure event or
circumstance and shall at all times use all reasonable endeavours to
mitigate the severity of the same.
14.4 If the failure or delay caused by the Force Majeure event or
circumstance shall extend for a continuous period of 180 days in any
365 day period, either party shall have the right to terminate this
Agreement by notice to the other at any time after the expiry of such
period while such Force Majeure event or circumstance continues to be
operative, without thereby incurring any liability to the other
party.
14.5 The party seeking to exempt itself from liability by virtue of the
provisions of this clause 14 shall not be entitled to payment from
the other party in respect of extra costs and expenses incurred by
virtue of the Force Majeure event or circumstance.
14.6 If the Distributor is unable to distribute Products in the Territory
in accordance with the provisions of this Agreement by reason of
Force Majeure for a continuous period of one month then Lucas shall
be entitled to distribute the Products in the Territory either itself
or through another distributor but only while such Force Majeure
event or circumstance continues to be operative.
15. ASSIGNMENT
----------
Neither party shall be entitled to assign the benefit or delegate the
burden of this Agreement without the prior written consent of the other
party save that Lucas shall be entitled to do so to any Lucas Associate
Company without such consent.
16. SEVERABILITY
------------
16
<PAGE>
The illegality, invalidity or unenforceability of any clause or part of
this Agreement will not affect the legality, validity or enforceability of
the remainder. If any such clause or part is found by any competent court
or competent authority to be illegal, invalid or unenforceable the parties
agree that they will substitute provisions whose effect is as similar to
the offending provisions as is possible without thereby rendering them
illegal, invalid or unenforceable.
17. ENTIRE AGREEMENT
----------------
17.1 This Agreement and the documents referred to in it, contain the whole
agreement between the parties relating to the transactions
contemplated by this Agreement and supersede all previous agreements
between the parties relating to such transactions.
17.2 Each of the parties acknowledges that in agreeing to enter into this
Agreement it has not relied on any pre-contractual representations,
warranties or other assurances in relation to the subject matter of
this Agreement except those set out in this Agreement but without
prejudice to any representations, warranties or other assurances
given in any other agreement between the parties or between any Lucas
Associate Company and the Distributor or any other company in the
Prestolite Group.
17.3 Each party hereby agrees that it shall have no remedy against the
other party for any innocent or negligent misrepresentation made by
such other party in relation to such transactions prior to this
Agreement being entered into except to the extent that the same shall
have been incorporated in this Agreement as a warranty representation
or indemnity in which case any claim in relation to the same shall
lie only on the basis of a breach of this Agreement or under the
relevant indemnity provision.
18. VARIATIONS
----------
No variations to this Agreement shall be effective unless in writing
signed by a duly authorised representative of each of the parties hereto.
17
<PAGE>
19. WAIVER
------
19.1 Failure to exercise or delay in exercising on the part of either
party any right, power or privilege of that party under this
Agreement shall not in any circumstances operate as a waiver thereof
nor shall any single or partial exercise of any right, power or
privilege in any circumstances preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
19.2 Any waiver of a breach of any of the terms hereof or of any default
hereunder shall not be deemed a waiver of any subsequent breach or
default and shall in no way affect the other terms of this Agreement.
20. NOTICES
-------
Any demand, notice or communication shall be made in writing and served by
hand, by registered airmail post or by facsimile transmission addressed to
the recipient at its registered office or its address stated in this
Agreement (or such other address or facsimile number as the recipient may
nominate in writing from time to time). Lucas hereby nominates:
Lucas Limited
Stratford Road
Solihull
West Midlands
B90 4LA
England
Attn: Sales and Distribution Director
Facsimile No: 0121 697 5003
with a copy of the notice to be sent to the Company Secretary of Lucas
Limited at the above address.
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<PAGE>
The Distributor hereby nominates:
Lucas Automotive (Pty) Limited
5 Yaron Avenue
Lea Glen
Florida
Transvaal
South Africa
Attn: Managing Director
Facsimile No: +27011 472 4326
With a copy of the notice to be addressed to "Managing Director and
Finance Director" Prestolite Electric Limited, Cleveland Road, Leyland,
Preston, Lancashire, PR5 1XB, England
21. HEADINGS
--------
The headings to the clauses of this Agreement shall not affect its
construction.
22. LANGUAGE
--------
22.1 The English language version of this Agreement shall be the
authoritative version even though it may have been translated into
some other language.
22.2 All communications between the parties shall unless otherwise agreed
in writing be in the English language.
23. EXPENSES
--------
Except where otherwise expressly provided herein each party will bear its
own costs and expenses in relation to the preparation completion and
operation of this Agreement.
19
<PAGE>
24. ENGLISH LAW
-----------
The formation, construction, performance, validity and all aspects
whatsoever of this Agreement shall be governed by English law. If any party
wishes to take legal action arising out of this Agreement it shall have the
option of either proceeding in the English Courts or (if different) in the
Courts having jurisdiction in the place of residence or business of the
proposed defendant.
20
<PAGE>
FIRST SCHEDULE
--------------
(DEFINITIONS)
-------------
Column 1 Column 2
- - - - - - - - - - - -------- --------
"the Aftermarket" means the market for (a) spare and
replacement parts for components and
sub-assemblies comprised within
products of Original Equipment
Manufacturers and (b) automotive
accessories and test equipment.
"Agreement Year" means (i) the period from the
Commencement Date until 31st December
1998; or (ii) a period of twelve (12)
months beginning thereafter on each
1st January during the life of this
Agreement except that should this
Agreement terminate on a day other
than 31st December in any year the
final "Agreement Year" shall be the
period from the last 1st January
preceding the date of termination to
the date of termination.
"the Commencement Date" means the date hereof.
"Competitive Goods" means those goods which are similar
to and/or competitive with those
Products listed in the Second
Schedule which are marked with an
asterisk, and including but not
limited to Lucas KK Products.
"Conditions of Sale" means the terms and conditions of
sale set out in Annex "A" or any
modification thereof from time to
time agreed between
21
<PAGE>
the Distributor and Lucas.
"Controllers" means persons able to decide or
influence the management or policies
of the relevant company in any
material respect including (without
prejudice to the generality of the
foregoing), its owners, its
directors, any of its partners or any
majority of its shareholders.
"Distribution Outlets" means wholesalers, retailers,
sub-distributors, dealers, stockists,
service outlets, garages, workshops
and other persons who buy or acquire
or are to buy or acquire Products
from the Distributor otherwise than
as the ultimate end user of those
Products and includes Lucas
Authorised Distribution Outlets.
"Documentation" means designs and literature
including, without prejudice to the
generality of the foregoing,
catalogues and leaflets, produced by
or at the direction of Lucas for the
purpose of promoting Products.
"FOB" has the meaning given to such
expression in Incoterms 1990 provided
that where there is a conflict
between the rights, duties and
obligations of the parties as set out
in Incoterms and those set out in
this Agreement, those set out in this
Agreement shall prevail
"Force Majeure" means any event or circumstance of
the
22
<PAGE>
following kinds which is beyond
the reasonable control of the party
in question: governmental actions,
war, riots, civil commotion, fire,
flood, tempests or other extreme
weather conditions, epidemics, acts
of terrorism, bombings, explosion,
acts of God, other natural disasters
or any event or circumstance similar
in nature to the foregoing.
"Lucas Associate Company" means LucasVarity plc or any company
or entity which is ultimately
controlled by or under the same
control direct or indirect as
LucasVarity plc from time to time and
at the time that the relevant clause
in which such expression appears has
application, which where a claim is
to be made under the relevant clause
shall mean when the cause of action
accrued under such clause.
"Lucas Authorised means Distribution Outlets which, by
Distribution Outlets" virtue of the specialist activities
they undertake, need to be associated
with the Lucas name, including by way
of example only, Diesel Diagnostic
Centres.
"Lucas Competitor" means any of the following companies
or entities and any company or entity
which from time to time and at the
time that the relevant clause in
which such expression appears has
application is ultimately controlled
by or under the same control direct
23
<PAGE>
or indirect as any of the following:
Bosch, Magneti Marelli and Valeo.
"Lucas KK Products" means (a) those starter motors and
alternators which are at the
Commencement Date in the product
range of Lucas Aftermarket KK (a
Japanese corporation)namely starter
motors and alternators which are for
vehicles whose country of origin is
in Asia or whose original electrics
equipment is of Asian origin ("Asian
Vehicles") as such starter motors and
alternators may be improved or
modified from time to time; and (b)
those starter motors and alternators
which are sold by Lucas Aftermarket
KK after the Commencement Date for
Asian Vehicles ("New KK Products")
provided that products will only be
Competitive Goods in relation to New
KK Products for the purposes of this
Agreement if the Distributor so
consents, such consent not to be
unreasonably withheld or delayed and
it shall not be reasonable for the
Distributor to withhold its consent
if neither the Distributor nor any
other company in the Prestolite Group
at the time such consent is sought
manufactures, sells or distributes a
product or has a product in actual
development which in either case is
interchangeable with such New KK
Product.
"Minimum Period" means the period of 5 years
commencing on the Commencement Date.
24
<PAGE>
"Minimum Purchase Target" means in respect of the first
Agreement Year sales of Products by
Lucas to the Distributor having a Net
Invoice Value of
(Pounds)830,000 and in respect of
each subsequent Agreement Year such
sales having a Net Invoice Value of
the amount agreed between the parties
or determined pursuant to clause 6.3.
"Net Invoice Value" means the invoiced value of Products
after deduction of (a) discounts
(other than discounts for prompt
payment); (b) VAT or similar taxes;
and (c) any freight or insurance
charges shown separately on the
relevant invoice.
"Non-Exclusive Right" means a right enjoyed by the
Distributor in common with Lucas and
all other persons to whom Lucas shall
grant a like right.
"Original Equipment means any manufacturer or assembler
Manufacturer" of transport vehicles, engines or
similar equipment including, but not
limited to, a manufacturer or
assembler of motor cars, vans, buses,
coaches, forklifts, industrial
vehicles, trucks, tractors, or
marine, motive power or stationary
engines or a manufacturer of
components or sub-assemblies to be
fitted as original equipment to such
vehicles, engines or similar
equipment.
25
<PAGE>
"Original Equipment Service" means the market for supplies of
spare and replacement parts to any
Original Equipment Manufacturer other
than for fitting as original
equipment or to any dealer of any
Original Equipment Manufacturer in
its capacity as a dealer for such
Original Equipment Manufacturer.
"Prestolite Group" means PEI Holdings Incorporated and
any company or entity which is
ultimately controlled by or under the
same control direct or indirect as
PEI Holding Incorporated from time to
time and at the time that the
relevant clause in which such
expression appears has application,
which where a claim is to be made
under the relevant clause shall mean
when the cause of action accrued
under such clause.
"Products" means the range of products set out
in the Second Schedule hereto
available from the Lucas Aftermarket
Operations division of Lucas and such
other product as may be agreed
between Lucas and the Distributor
from time to time subject to the
provisions of clause 11.
"Second Tier Products" means a starter motor or alternator
which is clearly aimed at a different
market sector than a Lucas branded
starter motor or alternator being a
market which does not
26
<PAGE>
require a premium branded product but
requires a product which is markedly
cheaper than a premium branded product
and which is prepared to accept a
product which is of inferior quality
and/or is sold with a less favourable
warranty or other less favourable
conditions that that or those
applicable to premium branded products,
"Second Tier Products" being best
illustrated by the starter motors and
alternators which are manufactured or
sourced at the date hereof by the
Distributor in South Africa and
marketed under the brand name
"Electrotech".
"Sub-Agreement" means any agreement between the
Distributor and a Lucas Authorised
Distribution Outlet of the
Distributor.
"The Territory" means the Republic of South Africa,
Namibia, Botswana Swaziland and
Lesotho.
"Trade Marks" means the trade and service marks
"Lucas" and/or the diagonal device
and/or such other trade, service and
other marks and names as Lucas may
from time to time use in relation to
the Products.
"Warranty Replacement" means a repair and/or replacement to
a Product sold by the Distributor in
the Aftermarket in the Territory that
is also sold by Lucas to the
Distributor after the Commencement
Date and which a customer
27
<PAGE>
is entitled to have carried out under
the terms of the Product Warranty given
to such customer and includes a repair
or replacement carried out after this
Agreement has been terminated.
28
<PAGE>
SIGNED by CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
- - - - - - - - - - - ------ ------------------ ----------------------
as duly authorised attorney for and ) Chris Long-Leather as
------------------
on behalf of LUCAS LIMITED ) attorney of Lucas Limited
------------- -------------
SIGNED by P. KIM PACKARD )
- - - - - - - - - - - ------ --------------
duly authorised for and on behalf of ) /s/ P. Kim Packard
------------------
LUCAS AUTOMOTIVE (PTY) LTD )
- - - - - - - - - - - -------------------------- ------------------
29
<PAGE>
EXHIBIT 10.12
DATED JANUARY 22, 1998
----------------------
(1) LUCAS LIMITED
- and -
(2) LUCAS INDIEL ARGENTINA S.A.
-------------------------------------
DISTRIBUTION AGREEMENT
-------------------------------------
Argentina
<PAGE>
THIS AGREEMENT is made on 22nd day of January 1998
BETWEEN:
(1) LUCAS AFTERMARKET OPERATIONS, a division of LUCAS LIMITED a company
incorporated in England and Wales with Registered Number 872948 whose
registered office is at Stratford Road, Solihull B90 4LA, England
("Lucas").
AND
(2) LUCAS INDIEL ARGENTINA S.A. whose principal place of business is at Calle
111 entre 3 y 1 bis - Parque Industrial Zona Norte, 5700 San Luis,
(Pcia.San Luis) - C. Correo 572, Argentina ("the Distributor").
WHEREBY IT IS AGREED as follows:
1. DEFINITIONS
-----------
In this Agreement the expressions set out in column 1 of the First Schedule
shall (unless inconsistent with the context) have the meanings set out
opposite them in column 2 of that Schedule.
2. APPOINTMENT
-----------
2.1 With effect on and from the Commencement Date Lucas hereby appoints
the Distributor to be a distributor of the Products in the
Aftermarket in the Territory and the Distributor agrees to act as
such distributor upon and subject to the terms set out in this
Agreement. Lucas shall not during the term of this Agreement grant
any distributor, agent or person, whether within or outside the
Territory other than the Distributor, the right to sell, offer for
sale or negotiate the sale of Products in the Aftermarket within, or
for delivery in, the Territory nor shall Lucas itself directly or
indirectly (but subject to clauses 6.1 to 6.4) sell or offer for
sale any Products in the Aftermarket to customers in, or who require
delivery in, the Territory or who Lucas knows or has good reason to
believe intend to sell Products in the Aftermarket in the Territory.
1
<PAGE>
2.2 Notwithstanding clause 2.1 the Distributor shall not supply or agree
to supply any Original Equipment Manufacturer with any of the
Products for any application whatsoever without first obtaining
Lucas' prior written consent which Lucas may in its absolute
discretion refuse. Nothing in this Agreement shall however in any
way restrict the Distributor from manufacturing or selling whether
directly or through appointed Distribution Outlets any other spare
and replacement parts in the Territory provided that they are not
Competitive Goods, this being without prejudice to the Distributor's
obligations under this Agreement.
3. TERM
----
Subject to clauses 12 and 14.4, this Agreement shall continue in force for
the Minimum Period and shall thereafter continue in force unless and until
either party shall have given the other at least 12 months' prior written
notice expiring on or at any time after the expiry of the Minimum Period.
4. SUPPLY OF PRODUCTS
------------------
Lucas shall use all reasonable endeavours to supply or procure the supply
of Products written orders for which are made by the Distributor in
accordance with the provisions of this Agreement. Products shall be
supplied within such lead time period for orders as may be agreed between
the parties from time to time and subject thereto Lucas shall deliver
Products at the times required by the Distributor.
5. RELATIONSHIP OF PARTIES
-----------------------
Each of the parties is an independent contractor and nothing contained in
this Agreement shall be construed to imply that there is any relationship
between the parties of partnership or of principal/agent or of
employer/employee nor are the parties hereby engaging in a joint venture;
and accordingly neither of the parties shall have any right or authority to
pledge the credit of the other or to act on behalf of the other nor to bind
the other by contract or otherwise unless expressly permitted by the terms
of this Agreement.
2
<PAGE>
6. LUCAS' RIGHTS AND OBLIGATIONS
-----------------------------
6.1 Subject to clauses 6.2, 6.3 and 6.4 Lucas will sell Products in the
Territory only to the Distributor PROVIDED ALWAYS that Lucas may
sell Products in the Territory:
6.1.1 to Original Equipment Manufacturers;
6.1.2 to Government Departments;
6.1.3 to Armed Forces;
provided that, subject to clause 2.2, the Distributor may sell
Products in the Territory to the classes of customer specified in
this clause 6.1.
6.2 If the Distributor is unable or refuses to distribute any of the
Products in the Territory in accordance with the terms of this
Agreement then Lucas may at its sole discretion sell such Products
in the Territory either for its own account or through a third
party.
6.3 In good time prior to the commencement of each Agreement Year other
than the first Agreement Year, Lucas and the Distributor will meet
to discuss and negotiate in good faith with a view to agreeing the
Minimum Purchase Target for the forthcoming Agreement Year and if
the parties reach such agreement the sum agreed will be the Minimum
Purchase Target for such Agreement Year but if the parties fail to
reach such agreement the Minimum Purchase Target for the Agreement
Year immediately preceding such forthcoming Agreement Year shall be
the Minimum Purchase Target for such forthcoming Agreement Year. If
at the end of the third or fourth Agreement Year the Distributor
shall not have achieved the Minimum Purchase Target for such third
or fourth Agreement Year Lucas' sole right in relation to such non-
achievement (but without prejudice to the other express terms of
this Agreement) shall be to convert the rights granted to the
Distributor under clause 6.1 into Non-Exclusive Rights (but
otherwise on the terms of this Agreement) by summarily giving
written notice to the Distributor to that effect and Lucas shall
then be entitled following the
3
<PAGE>
giving of such notice freely to sell Products in the Territory
and/or appoint any other distributor(s) in the Territory to do so
provided always that Lucas shall not be entitled so to convert if
and to the extent that the Minimum Purchase Target in respect of the
third or fourth Agreement Year has not been achieved because of (a)
Force Majeure (b) any breach of this Agreement by Lucas or (c)
prevailing local market conditions which have generally affected all
distributors' selling products which are similar to the Products in
the Aftermarket in the Territory and which are beyond the control of
the Distributor and which have materially changed since the
Commencement Date or, if applicable, since the end of the latest
Agreement Year in which the Minimum Purchase Target has been
achieved.
6.4 Nothing contained in this Agreement shall prevent or restrict Varga
if and when it becomes a Lucas Associate Company from selling in the
Territory its range of braking products whether under any Varga
brand name or trade mark or under any of the Trade Marks.
6.5 Lucas will supply to the Distributor such Documentation as shall be
reasonably necessary to support the sale of Products in the
Territory and will provide such other promotional support as Lucas
in its sole discretion considers necessary.
6.6 Insofar as it is appropriate to do so, Lucas will within a
reasonable time following a request from the Distributor and without
charge to the Distributor (a) at the reasonable request of the
Distributor train or advise on the training of service, sales and
marketing personnel of the Distributor; and (b) supply to the
Distributor technical literature for use in connection with the
service and repair of Products.
6.7 Lucas will reimburse the Distributor for Warranty Replacement in
accordance with the Lucas labour scales current at the Commencement
Date or such other scales as may be agreed between Lucas and the
Distributor from time to time.
4
<PAGE>
6.8 Lucas will, at the reasonable request of, and subject to reasonable
prior notice being given by, the Distributor, make available
personnel support which Lucas in its absolute discretion considers
appropriate for promotional events such as exhibitions and/or
customer visits.
6.9 Lucas will appoint a person as the main point of contact at Lucas
for all matters concerning this Agreement and whose responsibility
it will be to ensure that the Distributor has a ready point of
contact at all reasonable times. Lucas will notify the Distributor
of the name, business address, telephone and fax numbers of such
person within 14 days of the Commencement Date. Lucas may change its
appointee from time to time.
6.10 Based on market statistics and sales history, Lucas will from time
to time make recommendations to the Distributor in relation to the
quantities of stock of Products which it would be appropriate for
the Distributor to hold provided that Lucas shall have no liability
whatsoever to the Distributor in relation to any such
recommendation.
6.11 The Distributor will have the right to participate in any Lucas
stock cleanse policy which is from time to time in force, the terms
of which shall be in the absolute discretion of Lucas.
6.12 Lucas will indemnify and hold the Distributor harmless against all
actions, claims, costs, demands, expenses and liabilities in respect
of any death, personal injury and loss or damage to property made
against, incurred or suffered by the Distributor from any defective
Product supplied by Lucas pursuant to this Agreement provided that
the limit of Lucas' liability under this clause shall be an amount
equal to US$10,000,000 for each and every event and in the aggregate
in any one year of insurance pursuant to the policy of insurance
effected under clause 6.13.
6.13 Without prejudice to the provisions of clause 6.12 above, Lucas will
effect and maintain or cause another Lucas Associate Company to
effect and maintain for its and the Lucas Associate Company's
benefit insurance in respect of product liability for the Products
supplied by Lucas to the
5
<PAGE>
Distributor in an amount equal to not less than US$10,000,000 for
each and every event and in the aggregate in any one year of
insurance under such policy and will at the request of the
Distributor from time to time during the life of this Agreement
produce written evidence that such insurance is in force. Insofar as
and to the extent that Lucas or any such other Lucas Associate
Company receives any proceeds of insurance in respect of a claim
made by the Distributor in respect of Products supplied to the
Distributor pursuant to this Agreement such proceedings shall be
held on trust by Lucas or any such Lucas Associate Company for the
Distributor, pro rata where the insurance proceeds recovered include
monies in respect of claim(s) other than the Distributor's claim.
7. DISTRIBUTOR'S OBLIGATIONS
-------------------------
7.1 The Distributor will use its reasonable endeavours to achieve the
maximum possible sales of Products in the Territory by appropriate
means including, without limitation (a) through Distribution
Outlets, attendance at trade shows and the organisation of sales and
other promotions; (b) by employing proficient marketing and sales
technical specialists and other personnel; and (c) by maintaining a
sufficient stock of Products.
7.2 The Distributor warrants that it will maintain during the
continuance of this Agreement (at the Distributor's cost and expense
unless otherwise agreed by Lucas in writing) all permissions,
licences, consents, authorisations, orders, grants or approvals that
it has at the Commencement Date and will use its best efforts to
obtain any additional ones that may after the Commencement Date be
required to enable the Distributor to sell the Products and perform
its other obligations in accordance with the terms of this
Agreement.
7.3 The Distributor shall notify Lucas in writing of any change of
Controllers within five days after such change.
7.4 The Distributor shall at its own cost and expense:
6
<PAGE>
7.4.1 be entitled to use Distribution Outlets to maximise sales
of the Products in or to the Territory subject always to
the provisions of clause 7.8;
7.4.2 provide to any Distribution Outlet used pursuant to clause
7.8 such Documentation as may be reasonably required by
such Distribution Outlet;
7.4.3 provide Lucas with such other information relating to the
performance, development and operation of the Distributor's
marketing and sales of Products and to the market for the
same as Lucas may from time to time reasonably request.
7.5 The Distributor will carry out Warranty Replacement on behalf of
Lucas according to the provisions contained in the appropriate
warranty policy set out in clause 7 of the Conditions of Sale as may
be modified by agreement between the Distributor and Lucas from time
to time.
7.6 The Distributor shall not without the previous written consent of
Lucas be engaged, concerned or interested either directly or
indirectly in the supply of Competitive Goods in the Territory
provided always that:
7.6.1 the foregoing provisions of this clause 7.6 shall not apply
to any products which, or the packaging of which, are not
branded with the Trade Marks and which:
7.6.1.1 at the date hereof are in the product portfolio
of the Prestolite Group;
7.6.1.2 become part of the product portfolio of the
Prestolite Group hereafter and Lucas shall have
given its prior written consent to the
Distributor supplying the same in the Territory,
such consent not to be unreasonably withheld;
7
<PAGE>
7.6.1.3 are manufactured at the date hereof by Lucas
Automotive (Pty) Limited in South Africa or by
any other company or business which on the
Commencement Date becomes part of the Prestolite
Group by acquisition from Lucas or a Lucas
Associate Company;
7.6.1.4 are Second Tier Products; or
7.6.1.5 are products which are similar or competitive
with Lucas KK Products but which are now or at
any time hereafter manufactured by the
Distributor or any other member of the
Prestolite Group.
7.6.2 notwithstanding the provisions of clause 7.6.1 the
Distributor shall not be engaged, concerned or interested
either directly or indirectly in the supply of diesel spare
or replacement parts in the Original Equipment Service in
the Territory.
7.7 The Distributor shall provide such technical facilities as are
necessary to enable the Distributor to repair and service Products
and provide warranty support to a standard consistent with that
which exists at the Commencement Date or to such higher standard as
shall be necessary in the future to keep up to date with
developments in the marketplace generally and which shall be
reasonably stipulated by Lucas to its distributors generally.
7.8 The Distributor shall have the right to continue dealing with any
Distribution Outlets in the Territory in existence at the
Commencement Date on such terms and under such agreements as shall
then be in place (but not so that Lucas shall have any liability if
any Distribution Outlet does not independently of any direction from
Lucas wish to deal with the Distributor) and shall have the right
after the Commencement Date to
8
<PAGE>
appoint Distribution Outlets in the Territory in respect of Products
subject to the following provisions:
7.8.1 the Distributor shall notify Lucas in writing within 14
days of the appointment of each additional Lucas Authorised
Distribution Outlet;
7.8.2 the Distributor shall not grant or seek to grant any
Distribution Outlet any rights in relation to the Trade
Marks without the prior written consent of Lucas which it
may either refuse in its absolute discretion or grant
subject to such conditions as it shall in its absolute
discretion decide;
7.8.3 the Distributor shall not hereafter grant any Distribution
Outlet exclusivity in relation to the sale or use of
Products in any country or part thereof;
7.8.4 in relation to the appointment of any additional Lucas
Authorised Distribution Outlets, each Sub-Agreement shall
(a) be capable of termination by the Distributor no later
than the termination of this Agreement; and (b) incorporate
a provision enabling the benefit and burden of the Sub-
Agreement to be assigned to Lucas, or a person nominated by
Lucas, on the termination of this Agreement.
7.9 The Distributor agrees to fully indemnify and keep Lucas fully
indemnified against all actions, claims, costs, damages, expenses
and liabilities whatsoever suffered or incurred by Lucas (a) as a
result of things done to or in respect of any Products for which
things the Distributor is responsible, including, without
limitation, the mode of sale, storage, fitting or repair of
Products; (b) arising directly or indirectly from any breach of this
Agreement by the Distributor; or (c) as a result of a claim made
against Lucas by any third party as a result of any act or omission
of a Distribution Outlet which would have been a breach of this
Agreement if the Distribution Outlet had been a party to this
Agreement. In addition the
9
<PAGE>
Distributor will use reasonable endeavours to ensure that
Distribution Outlets comply with the terms and agreements applicable
to them in relation to the sale of Products.
7.10 The Distributor will not actively seek customers for the Products
outside the Territory nor establish any branch reselling Products
nor maintain any distribution depot for Products outside the
Territory.
7.11 Save where any mandatory provision of any applicable law prohibits
such a restriction, the Distributor shall not without the prior
written consent of Lucas sell any of the Products outside the
Territory or to any person, firm or company inside the Territory
where the Distributor knows or has good reason to believe that the
Products in question will be sold outside the Territory.
7.12 The Distributor shall promptly refer to Lucas any enquiries or
orders for Products received by the Distributor from persons, firms
or companies outside the Territory.
8. PRICE AND TERMS OF CONTRACT
---------------------------
8.1 The prices for the Products to the Distributor shall be those from
time to time agreed by the parties and failing such agreement shall
be those prices notified from time to time by Lucas to the
Distributor. Such prices are on the basis of delivery FOB the
country from which the Products are being supplied which is the
manner in which Lucas shall deliver the Products to the Distributor.
8.2 Payment for Products supplied by Lucas to the Distributor pursuant
to this Agreement shall be made in sterling 120 days after the end
of the month in which delivery is made.
8.3 The Conditions of Sale and the terms of this Agreement shall apply
in relation to the sale of any Products by Lucas to the Distributor
pursuant to this Agreement, which Conditions of Sale and the other
provisions of this Agreement shall apply to the exclusion of any
terms and conditions of
10
<PAGE>
purchase from time to time used by the Distributor, whether or not
such terms and conditions are endorsed upon or delivered with any
document sent by either party to the other from time to time. In the
event of any conflict between the Conditions of Sale and the terms
of this Agreement, the terms of this Agreement shall prevail.
9. INTELLECTUAL PROPERTY
---------------------
9.1 The Distributor acknowledges that the Trade Marks are owned and
controlled by Lucas and disclaims any rights (save as may separately
be or have been granted in writing by Lucas or any Lucas Associate
Company to the Distributor) to the Trade Marks.
9.2 The Distributor will inform Lucas of any infringement of any
patents, trade marks, copyright or other intellectual property
rights owned by Lucas relating to Products immediately the
Distributor becomes aware of any such infringement.
9.3 The Distributor will not without the prior written consent of Lucas
remove, obscure or in any way tamper with the name plates, marks or
numbers on Products or on the packaging of Products.
9.4 The Distributor will not use the Trade Marks in any manner not
previously approved in writing by Lucas and in particular but
without limiting the generality of the foregoing the Distributor
shall not use the Trade Marks as part of the corporate or trading
name of the Distributor nor permit any Distribution Outlet to do
likewise provided that the Distributor shall not be required to take
any action against any Distribution Outlet which at the date hereof
is using the Trade Marks as part of its corporate or trading name.
10. CONFIDENTIALITY
---------------
Each party undertakes that it shall not and shall ensure that its employees
shall not disclose, use or permit the use of any confidential information
disclosed to it by the other party except as may be necessary for complying
with its obligations under this Agreement and then only in such a manner as
to protect fully the confidentiality of
11
<PAGE>
such confidential information. The obligations of non-disclosure by each
party shall continue to apply notwithstanding the termination of this
Agreement howsoever arising but shall not apply to any information which
falls into the public domain other than by breach of such obligation of
nondisclosure. Registration or notification of this Agreement with or to
any regulatory authority shall not be a breach of confidence for the
purposes of this clause.
11. PRODUCTS
--------
Without prejudice to the other provisions of this Agreement Lucas reserves
the right to add Products to the Second Schedule or to vary Products either
by making such changes in the design, specification, production or packing
of the Products as Lucas thinks fit or on reasonable notice to the
Distributor withdraw from this Agreement a Product or Products if Lucas in
its sole judgement considers that there are reasonable grounds for so
doing.
12. TERMINATION
-----------
12.1 Either party may terminate this Agreement forthwith by notice if the
other of them is in breach of this Agreement and shall have failed
to remedy the breach (where the breach is capable of remedy), within
three months after receipt of a request in writing from the party
not in breach to remedy the breach, such request indicating that
failure to remedy the breach may result in termination of this
Agreement.
12.2 Lucas will also be entitled to terminate this Agreement forthwith by
notice to the Distributor if:
12.2.1 at any time the Distributor is insolvent or has a receiver,
manager, administrator, administrative receiver, or
liquidator, (or a person of similar status in any country)
appointed over it or its undertaking assets or income or
any part thereof or Lucas reasonably apprehends that any
such event is about to occur in relation to the
Distributor;
12
<PAGE>
12.2.2 there is a change in Controllers of the Distributor or of
any direct or indirect parent company of the Distributor or
of any company to which this Agreement may be novated as
contemplated by clause 12.2.5, the new Controllers being a
Lucas Competitor;
12.2.3 the Distributor fails after having been given 7 days'
notice of being in default of payment to pay any material
sum due to Lucas;
12.2.4 any distraint, execution or other process is levied or
enforced on any property of the Distributor and is not paid
out withdrawn or discharged within 21 days; or
12.2.5 the Distributor has ceased to trade other than pursuant to
any corporate reorganisation without insolvency under which
another company in the Prestolite Group trades in place of
the Distributor and to whom this Agreement is novated with
Lucas' prior written consent, not to be unreasonably
withheld.
13. EFFECTS OF TERMINATION
----------------------
13.1 The termination of this Agreement howsoever arising will be without
prejudice to the rights and duties of either party accrued prior to
termination. The clauses in this Agreement which expressly or
impliedly have effect after termination will continue to be
enforceable notwithstanding termination howsoever arising. Any
indemnity given in this Agreement will continue to apply
notwithstanding termination.
13.2 As from the date of termination howsoever arising the Distributor
will forthwith cease to hold himself out as a distributor for Lucas.
13.3 On the termination of this Agreement howsoever arising Lucas will
have the option (to be exercised by notice to be served within one
month after the date of termination) of buying all or any Products
owned by the Distributor at the date of exercising such option and
which the Distributor is not
13
<PAGE>
committed by contract at such date to sell to a third party. The
price for such Products will be agreed between the parties or
failing such agreement will be the price previously charged by Lucas
to the Distributor for the products in question (excluding the costs
of supply and sales taxes) and upon the exercise of such option the
Distributor will yield up such Products to Lucas or to such person
as Lucas may nominate.
13.4 On termination of this Agreement howsoever arising the Distributor
shall (at the Distributor's cost and expense) forthwith yield up to
Lucas or to such person as Lucas may nominate any Products in the
possession of the Distributor the property in which has not passed
to the Distributor.
13.5 On termination of this Agreement howsoever arising the Distributor
shall (at the Distributor's costs and expense) forthwith return to
Lucas or to such other person as Lucas may nominate all technical
data, commercial information, written documents and other things on
loan or free issue from Lucas and all copies thereof made by the
Distributor which are in the Distributor's possession, custody or
control at the date of such termination and shall destroy all
stationery, business literature, advertisement and similar materials
bearing any of the Trade Marks (unless permitted or authorised
pursuant to any other agreement in writing between Lucas or any
Lucas Associate Company and the Distributor) or which refers to the
Distributor as a distributor of Lucas products.
13.6 On the termination of this Agreement howsoever arising Lucas will
have the option (to be exercised by notice to be served on the
Distributor on or before the date of termination) of taking an
assignment of the benefit and burden of the Sub-Agreements, or any
of them insofar as they relate to Products, with effect from the
date of termination, without being required to pay any consideration
or compensation to the Distributor in relation thereto other than as
may be required by applicable law and cannot be contracted out of
under such applicable law.
13.7 The Distributor shall not be entitled to any compensation, indemnity
or damages on the termination of this Agreement howsoever arising
for the
14
<PAGE>
loss of its rights under this Agreement provided always that this
clause shall (a) not exempt Lucas from liability for any breach of
this Agreement by Lucas which occurred prior to termination and (b)
only apply to the extent permitted by applicable law.
14. FORCE MAJEURE
-------------
Neither party shall be liable to the other for any failure or delay in
performing its obligations under this Agreement due to Force Majeure
provided always that:
14.1 The Distributor shall not be excused by reason of Force Majeure from
its obligations to pay Lucas for Products as required by this
Agreement.
14.2 Subject to the provisions of clause 14.4 the date for performance of
the contractual obligation which has been delayed by Force Majeure
shall be deemed suspended for a period equal to the delay thereby
caused.
14.3 The party seeking to exempt itself from liability by virtue of the
provisions of this clause 14 shall give notice to the other party
within 7 days of becoming aware of the Force Majeure event or
circumstance and shall at all times use all reasonable endeavours to
mitigate the severity of the same.
14.4 If the failure or delay caused by the Force Majeure event or
circumstance shall extend for a continuous period of 180 days in any
365 day period, either party shall have the right to terminate this
Agreement by notice to the other at any time after the expiry of
such period while such Force Majeure event or circumstance continues
to be operative, without thereby incurring any liability to the
other party.
14.5 The party seeking to exempt itself from liability by virtue of the
provisions of this clause 14 shall not be entitled to payment from
the other party in respect of extra costs and expenses incurred by
virtue of the Force Majeure event or circumstance.
14.6 If the Distributor is unable to distribute Products in the Territory
in accordance with the provisions of this Agreement by reason of
Force
15
<PAGE>
Majeure for a continuous period of one month then Lucas shall be
entitled to distribute the Products in the Territory either itself
or through another distributor but only while such Force Majeure
event or circumstance continues to be operative.
15. ASSIGNMENT
----------
Neither party shall be entitled to assign the benefit or delegate the
burden of this Agreement without the prior written consent of the other
party save that Lucas shall be entitled to do so to any Lucas Associate
Company without such consent.
16. SEVERABILITY
------------
The illegality, invalidity or unenforceability of any clause or part of
this Agreement will not affect the legality, validity or enforceability of
the remainder. If any such clause or part is found by any competent court
or competent authority to be illegal, invalid or unenforceable the parties
agree that they will substitute provisions whose effect is as similar to
the offending provisions as is possible without thereby rendering them
illegal, invalid or unenforceable.
17. ENTIRE AGREEMENT
----------------
17.1 This Agreement and the documents referred to in it, contain the
whole agreement between the parties relating to the transactions
contemplated by this Agreement and supersede all previous agreements
between the parties relating to such transactions.
17.2 Each of the parties acknowledges that in agreeing to enter into this
Agreement it has not relied on any pre-contractual representations,
warranties or other assurances in relation to the subject matter of
this Agreement except those set out in this Agreement but without
prejudice to any representations, warranties or other assurances
given in any other
16
<PAGE>
agreement between the parties or between any Lucas Associate Company
and the Distributor or any other company in the Prestolite Group.
17.3 Each party hereby agrees that it shall have no remedy against the
other party for any innocent or negligent misrepresentation made by
such other party in relation to such transactions prior to this
Agreement being entered into except to the extent that the same
shall have been incorporated in this Agreement as a warranty
representation or indemnity in which case any claim in relation to
the same shall lie only on the basis of a breach of this Agreement
or under the relevant indemnity provision.
18. VARIATIONS
----------
No variations to this Agreement shall be effective unless in writing signed
by a duly authorised representative of each of the parties hereto.
19. WAIVER
------
19.1 Failure to exercise or delay in exercising on the part of either
party any right, power or privilege of that party under this
Agreement shall not in any circumstances operate as a waiver thereof
nor shall any single or partial exercise of any right, power or
privilege in any circumstances preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
19.2 Any waiver of a breach of any of the terms hereof or of any default
hereunder shall not be deemed a waiver of any subsequent breach or
default and shall in no way affect the other terms of this
Agreement.
20. NOTICES
-------
Any demand, notice or communication shall be made in writing and served by
hand, by registered airmail post or by facsimile transmission addressed to
the recipient at its registered office or its address stated in this
Agreement (or such other address or facsimile number as the recipient may
nominate in writing from time to time). Lucas hereby nominates:
17
<PAGE>
Lucas Limited
Stratford Road
Solihull
West Midlands
B90 4LA
England
Attn: Sales and Distribution Director
Facsimile No: 0121 697 5003
with a copy of the notice to be sent to the Company Secretary of Lucas
Limited at the above address.
The Distributor hereby nominates:
Lucas Indiel Argentina S.A.
Calle 111 entre 3 y 1 bis
Parque Industrial Zona Norte
3700 San Luis (Pcia. San Luis)
C. Correo 572
Argentina
Attn: Managing Director
Facsimile No: 00 54 1 454 5500
With a copy of the notice to be addressed to "Managing Director and the
Finance Director" Prestolite Electric Limited Cleveland Road, Leyland,
Preston, Lancashire, PR5 1XB, England.
21. HEADINGS
--------
The headings to the clauses of this Agreement shall not affect its
construction.
18
<PAGE>
22. LANGUAGE
--------
22.1 The English language version of this Agreement shall be the
authoritative version even though it may have been translated into
some other language.
22.2 All communications between the parties shall unless otherwise agreed
in writing be in the English language.
23. EXPENSES
--------
Except where otherwise expressly provided herein each party will bear its
own costs and expenses in relation to the preparation completion and
operation of this Agreement.
24. ENGLISH LAW
-----------
The formation, construction, performance, validity and all aspects
whatsoever of this Agreement shall be governed by English law. If any party
wishes to take legal action arising out of this Agreement it shall have the
option of either proceeding in the English Courts or (if different) in the
Courts having jurisdiction in the place of residence or business of the
proposed defendant.
19
<PAGE>
FIRST SCHEDULE
--------------
(DEFINITIONS)
-------------
Column 1 Column 2
- - - - - - - - - - - -------- --------
"the Aftermarket" means the market for (a) spare and
replacement parts for components and
sub-assemblies comprised within
products of Original Equipment
Manufacturers and (b) automotive
accessories and test equipment.
"Agreement Year" means (i) the period from the
Commencement Date until 31st December
1998; (ii) a period of twelve (12)
months beginning thereafter on each
1st January during the life of this
Agreement except that should this
Agreement terminate on a day other
than 31st December in any year the
final "Agreement Year" shall be the
period from the last 1st January
preceding the date of termination to
the date of termination
"the Commencement Date" means the date hereof.
"Competitive Goods" means those goods which are similar
to and/or competitive with those
Products listed in the Second
Schedule which are marked with an
asterisk including but not limited to
Lucas KK Products.
"Conditions of Sale" means the terms and conditions of
sale set out in Annex "A" or any
modification thereof from time to
time agreed between the Distributor
and Lucas.
20
<PAGE>
"Controllers" means persons able to decide or
influence the management or policies
of the relevant company in any
material respect including (without
prejudice to the generality of the
foregoing), its owners, its
directors, any of its partners or any
majority of its shareholders.
"Distribution Outlets" means wholesalers, retailers,
sub-distributors, dealers, stockists,
service outlets, garages, workshops
and other persons who buy or acquire
or are to buy or acquire Products
from the Distributor otherwise than
as the ultimate end user of those
Products and includes Lucas
Authorised Distribution Outlets.
"Documentation" means designs and literature
including, without prejudice to the
generality of the foregoing,
catalogues and leaflets, produced by
or at the direction of Lucas for the
purpose of promoting Products.
"FOB" has the meaning given to such
expression in Incoterms 1990 provided
that where there is any conflict
between the rights, duties and
obligations of the parties as set out
in Incoterms and those set out in
this Agreement, those set out in this
Agreement shall prevail.
"Force Majeure" means any event or circumstance of
the following kinds which is beyond
the reasonable control of the party
in question:
21
<PAGE>
governmental actions, war, riots, civil
commotion, fire, flood, tempests or
other extreme weather conditions,
epidemics, acts of terrorism, bombings,
explosion, acts of God, other natural
disasters or any event or circumstance
similar in nature to the foregoing.
"Lucas Associate Company" means LucasVarity plc or any company
or entity which is ultimately
controlled by or under the same
control direct or indirect as
LucasVarity plc from time to time and
at the time that the relevant clause
in which such expression appears has
application, which where a claim is
to be made under the relevant clause
shall mean when the cause of action
accrued under such clause.
"Lucas Authorised means Distribution Outlets which, by
Distribution Outlets" virtue of the specialist activities
they undertake, need to be associated
with the Lucas name, including by way
of example only, Diesel Diagnostic
Centres.
"Lucas Competitor" means any of the following companies
or entities and any company or entity
which from time to time and at the
time that the relevant clause in
which such expression appears has
application is ultimately controlled
by or under the same control direct
or indirect as any of the following:
Bosch, Magneti Marelli and Valeo.
22
<PAGE>
"Lucas KK Products" means (a) those starter motors and
alternators which are at the
Commencement Date in the product
range of Lucas Aftermarket KK (a
Japanese corporation) namely starter
motors and alternators which are for
vehicles whose country of origin is
in Asia or whose original electrics
equipment is of Asian origin ("Asian
Vehicles") as such starter motors and
alternators may be improved or
modified from time to time and (b)
those starter motors and alternators
which are sold by Lucas Aftermarket
KK after the Commencement Date for
Asian Vehicles ("New KK Products")
provided that products will only be
Competitive Goods in relation to New
KK Products for the purposes of this
Agreement if the Distributor so
consents such consent not to be
unreasonably withheld or delayed and
it shall not be reasonable for the
Distributor to withhold its consent
if neither the Distributor nor any
other company in the Prestolite Group
at the time such consent is sought
manufactures, sells or distributes a
product or has a product in actual
development which in either case is
interchangeable with such New KK
Product.
"Minimum Period" means the period of 5 years
commencing on the Commencement Date.
"Minimum Purchase Target" means in respect of the first
Agreement Year sales of Products by
Lucas to the Distributor having a Net
Invoice Value of
23
<PAGE>
US $2,077,350 and in respect of each
subsequent Agreement Year such sales
having a Net Invoice Value of the
amount agreed between the parties or
determined pursuant to clause 6.3.
"Net Invoice Value" means the invoiced value of Products
after deduction of (a) discounts
(other than discounts for prompt
payment); (b) VAT or similar taxes;
and (c) any freight or insurance
charges shown separately on the
relevant invoice.
"Non-Exclusive Right" means a right enjoyed by the
Distributor in common with Lucas and
all other persons to whom Lucas shall
grant a like right.
"Original Equipment means any manufacturer or assembler
Manufacturer" of transport vehicles, engines or
similar equipment including, but not
limited to, a manufacturer or
assembler of motor cars, vans, buses,
coaches, forklifts, industrial
vehicles, trucks, tractors, or
marine, motive power or stationary
engines or a manufacturer of
components or sub-assemblies to be
fitted as original equipment to such
vehicles, engines or similar
equipment.
"Original Equipment Service" means the market for supplies of spare
and replacement parts to any Original
Equipment Manufacturer other than for
fitting as original equipment or to any
dealer of any Original
24
<PAGE>
Equipment Manufacturer in its capacity
as a dealer for such Original Equipment
Manufacturer.
"Prestolite Group" means PEI Holding Incorporated and
any company or entity which is
ultimately controlled by or under the
same control direct or indirect as
PEI Holding Incorporated from time to
time and at the time that the
relevant clause in which such
expression appears has application,
which where a claim is to be made
under the relevant clause shall mean
when the cause of action accrued
under such clause.
"Products" means the range of products set out
in the Second Schedule hereto
available from the Lucas Aftermarket
Operations division of Lucas and such
other product as may be agreed
between Lucas and the Distributor
from time to time subject to the
provisions of clause 11.
"Second Tier Products" means a starter motor or alternator
which is clearly aimed at a different
market sector than a Lucas branded
starter motor or alternator being a
market which does not require a
premium branded product but requires
a product which is markedly cheaper
than a premium branded product and
which is prepared to accept a product
which is of inferior quality and/or
is sold with a less favourable
warranty or other less favourable
25
<PAGE>
conditions that that or those
applicable to premium branded
products, "Second Tier Products"
being best illustrated by the starter
motors and alternators which are
manufactured or sourced at the date
hereof by Lucas Automotive (Pty)
Limited in South Africa and marketed
under the brand name "Electrotech".
"Sub-Agreement" means any agreement between the
Distributor and a Lucas Authorised
Distribution Outlet of the
Distributor.
"The Territory" means Argentina.
"Trade Marks" means the trade and service marks
"Lucas" and or the diagonal device
and or such other trade, service and
other marks and names as Lucas may
from time to time use in relation to
the Products.
"Varga" means Freios Varga S.A. of Via
Anhanguera, kilometre 147, Caixa
Postal 155 CAP; 13486-915 Limara SP
Brasil and any company or entity
which is ultimately controlled by or
under the same control direct or
indirect as Freios Varga S.A. from
time to time and at the time that the
relevant clause in which such
expression appears has application.
"Warranty Replacement" means a repair and/or replacement to a
Product sold by the Distributor in the
26
<PAGE>
Aftermarket in the Territory that
is also sold by Lucas to the
Distributor after the Commencement
Date and which a customer is entitled
to have carried out under the terms
of the Product Warranty given to such
customer and includes a repair or
replacement carried out after this
Agreement has been terminated.
27
<PAGE>
SIGNED by CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
- - - - - - - - - - - -------------------------------------- ----------------------
as duly authorised attorney for and ) Chris Long-Leather as
----------------------------
on behalf of LUCAS LIMITED ) attorney of Lucas Limited
SIGNED by P. KIM PACKARD )
- - - - - - - - - - - ------ --------------
as attorney in fact for and on behalf of ) /s/ P. Kim Packard
--------------------
LUCAS INDIEL ARGENTINA S.A. ) ____________________
- - - - - - - - - - - ---------------------------
28
<PAGE>
EXHIBIT 10.13
DATE January 22, 1998
---------------------
(1) LUCAS LIMITED
(2) LUCAS AUTOMOTIVE (PTY) LTD
__________________________________
SOUTH AFRICAN
SUPPLY AGREEMENT
__________________________________
<PAGE>
THIS AGREEMENT is made on 22nd day of January 1998
- - - - - - - - - - - --------------
BETWEEN:
- - - - - - - - - - - --------
(1) LUCAS LIMITED trading as Lucas Aftermarket Operations whose registered
-------------
office is at Stratford Road, Solihull, West Midlands B90 4LA ("Lucas");
(2) LUCAS AUTOMOTIVE (PTY) LTD whose registered office is at 5 Yaron Avenue,
--------------------------
Lea Glen, Florida, 1709 South Africa ("the Company")
RECITALS
- - - - - - - - - - - --------
(A) Pursuant to a Share Sale and Purchase Agreement (as defined below) Lucas
Industries plc is selling all of its shares in the holding company of the
Company to Prestolite Electric Incorporated ("the Purchaser").
(B) On completion of the sale of such Shares to the Purchaser Lucas wishes to
continue to be supplied with Lucas Branded Products (as defined below).
The Company is willing to sell and Lucas is willing to purchase such Lucas
Branded Products on the terms set out in this Agreement.
NOW IT IS AGREED as follows:
- - - - - - - - - - - ----------------
1. DEFINITIONS
-----------
In this Agreement:
1.1 the following words and expressions
shall have the following meanings
except where inconsistent with the
subject matter or context:
1
<PAGE>
"Aftermarket" means the market for (a) spare and
replacement parts for components or
sub-assemblies comprised within the
products of Original Equipment
Manufacturers and (b) automotive
accessories and includes Original
Equipment Service
"Agreement Year" means (i) the period from the
Commencement Date until 31st December
1998; (ii) every period of twelve
(12) months beginning thereafter on
each 1st January during the Term
except that should this Agreement
terminate on a day other than 31st
December in any year the final
"Agreement Year" shall be the period
from the 1st January last preceding
the date of termination to the date
of termination
2
<PAGE>
"Associated Company" means any person which is either a
holding company (whether direct or
indirect) or a subsidiary company of
the relevant party or a subsidiary
company of any such holding company
or is otherwise directly or
indirectly controlled by, or is under
the same control, direct or indirect,
as the relevant party from time to
time and at the time that the
relevant clause in which such
expression appears has application,
which where a claim is to be made
under the relevant clause shall mean
when the cause of action accrued
under such clause
"Base Currency Exchange means the exchange rate of the South
Rate" African rand against the pound
sterling as specified in Schedule 1
as such currency exchange rate may
vary pursuant to clause 8.4
"Commencement Date" means the date hereof
3
<PAGE>
"Competing Product" means any product which is
interchangeable in its application
and/or function with a Lucas Branded
Product but excludes a product which
is so interchangeable but is a
"second tier product". For the
purposes of this definition a "second
tier product" is a product which is
clearly aimed at a different market
sector than Lucas Branded Products,
being a market which does not require
a premium branded product but
requires a product which is markedly
cheaper than a premium branded
product and which is prepared to
accept a product which is of inferior
quality and/or is sold with a less
favourable warranty or other less
favourable conditions than that or
those applicable to premium branded
products, "second tier products"
being best illustrated by the
products which are manufactured or
sourced at the date hereof by the
Company in South Africa and marketed
under the brand name "Electrotech"
4
<PAGE>
"Conditions of Sale" means the Company's conditions of
sale in force at the Commencement
Date a copy of which is attached at
Schedule 4
"control" means in relation to any person the
power of any other person or persons
to secure by law or by corporate
structure that the affairs of the
first person are conducted in
accordance with the wishes of that
other person or persons, and any
cognate word shall be construed
accordingly
"Controllers" means persons able to decide or
influence the management or policies
of the relevant company in any
material respect including (without
prejudice to the generality of the
foregoing) any of the following from
time to time: its owners, its
directors, any of its partners, or
any majority of its shareholders
"Country" means any country, state or
principality and includes any area or
part of any of the same
"customer" means a buyer whether such buyer is
an end user, retailer, wholesaler,
distributor, dealer or otherwise
5
<PAGE>
"Distribution Outlet" means a wholesaler, retailer,
sub-distributor, dealer, stockist,
service outlet, garage, workshop
and/or other person who buys or
acquires products from the relevant
party thereto otherwise than as the
ultimate end user of those products
"FOB" has the meaning given to such
expression in Incoterms 1990 provided
that where there is any conflict
between the rights, duties and
obligations of the parties as set out
in Incoterms and those set out in
this Agreement, those set out in this
Agreement shall prevail
"Force Majeure" means any event or circumstance of
the following kinds which is beyond
the reasonable control of the party
in question: governmental actions,
war, riots, civil commotion, fire,
flood, tempests or other extreme
weather conditions, epidemics, acts
of terrorism, bombings, explosions,
acts of God, other natural disasters
or any event or circumstance similar
in nature to the foregoing
"Freely Distributable means Other Products which are not
Products" Competing Products
6
<PAGE>
"holding company" means a company which either (a)
holds the majority of the voting
rights in another company or (b) is a
member of another company and has the
right to appoint or remove a majority
of its board of directors or other
corporate officers or (c) is a member
of another company and controls alone
pursuant to an agreement with other
shareholders or members, a majority
of the voting rights in it.
Reference to "company" includes any
body corporate
"Improvement" means any invention, discovery or
design comprised within any change
made at any time during the Term to
Products or their method of
manufacture or use which makes them
of better quality or more efficient
or adaptable or enables them to be
manufactured more cheaply or more
efficiently
"Intellectual Property means any patent, copyright,
Rights" registered design, design right,
trade mark, topography, know-how or
similar property or right by whatever
name it is called and in whatever
Country it is registered or subsists
7
<PAGE>
"Lucas Competitor" means any person, or an Associated
Company of any such person, listed in
Schedule 3
"Lucas Branded Products" means Products (including the
packaging for the same) to which the
Trade Marks have been or are to be
applied in accordance with this
Agreement
"Lucas Distribution Outlet" means a wholesaler, retailer,
sub-distributor, dealer, stockist,
service outlet, garage, workshop
and/or other person who buys or
acquires products otherwise than as
the ultimate end user of those
products and who was appointed prior
to the date hereof or who is
hereafter appointed by Lucas or any
Lucas Group Company in any Country in
the world
"Lucas Group Company" means LucasVarity plc and any company
which is a subsidiary of LucasVarity
plc or over which LucasVarity plc has
control from time to time and at the
time that the relevant clause in
which such expression appears has
application, which where a claim is
to be made under the relevant clause
shall mean when the cause of action
accrued under such clause
8
<PAGE>
"Minimum Period" means the period of 5 years
commencing on the Commencement Date,
subject to the provisions of clause
8.3.2
"New Products" means products of the same generic
kind as those specified in Schedule 2
Parts 1 and 2 which the Company may
after the date hereof add to its
range of products, but for the
avoidance of doubt, the expression
excludes Products currently offered
by the Company set out in Schedule 2
Part 1 and Products specified in
Schedule 2 Part 2 to which in either
case Improvements are made
"Original Equipment means any manufacturer or assembler
Manufacturer" of transport vehicles, engines or
similar equipment including, but not
limited to, a manufacturer or
assembler of motor cars, vans, buses,
coaches, forklifts, industrial
vehicles, trucks, tractors or marine,
motive power or stationary engines or
a manufacturer of components or
sub-assemblies to be fitted as
original equipment to such vehicles,
engines or similar equipment
9
<PAGE>
"Original Equipment Service" means the market for supplies of
spare and replacement parts to any
Original Equipment Manufacturer other
than for fitting as original
equipment or to any dealer of any
Original Equipment Manufacturer in
its capacity as a dealer for such
Original Equipment Manufacturer
"Other Products" means Products or New Products
(including the packaging for the
same) which are either unbranded or
are branded with a trade mark, name
or logo other than any of the Trade
Marks
"person" means any person, firm, association,
company or body corporate or
unincorporate
"Products" means those products currently
offered by the Company set out in
Schedule 2 Part 1 including any
Improvements to the same and from the
date they shall start to be
manufactured by the Company those
products in development at the
Commencement Date set out in Schedule
2 Part 2 including any Improvements
to the same
10
<PAGE>
"Product Warranty" means the warranty the terms of which
are set out in Schedule 5
"Promotional Material" means catalogues, brochures and other
literature and material describing
Lucas Branded Products or their
technical characteristics for the
purposes of promoting the sale or use
thereof
"Purchaser Group means the Company and any company
Company" which:
(i) is a subsidiary of the Company;
(ii) is the direct or indirect holding
company of the Company or any
subsidiary of such holding
company; or
(iii) the Company or any such
holding company has control over
from time to time and at the time
that the relevant clause in which
such expression appears has
application, which where a claim is
to be made under the relevant clause
shall mean where the cause of action
accrued under such clause
11
<PAGE>
"Quarterly Period" means a period of 3 months commencing
on 1st January, 1st April, 1st July
and 1st October in each Agreement
Year provided that the first
Quarterly Period shall in any event
commence or be deemed to have
commenced on 1st January 1998
"Relevant Country" means any Country from which it is
from time to time commercially viable
to export Products to the United
Kingdom and for those Products to be
competitive in terms of price and
delivery with Lucas Branded Products
being sold in the United Kingdom
"Reserved Territory" means the Republic of South Africa,
Namibia, Botswana, Swaziland and
Lesotho and includes any one or more
of such Countries
"sale" means any form of supply whether by
way of sale, lease, hire or exchange
and any cognate word shall be
construed accordingly
12
<PAGE>
"Share Sale and Purchase means the Agreement made between
Agreement" Lucas Industries plc and the
Purchaser of even date herewith for
the sale of the shares of the holding
company of the Company and all
documents referred to therein
"subsidiary" means a company in which another
company (a) holds a majority of the
voting rights; (b) is a member of it
and has the right to appoint or
remove a majority of its board of
directors or other corporate
officers; or (c) is a member of it
and controls alone pursuant to an
agreement with other shareholders or
members, a majority of the voting
rights in it and includes a
subsidiary of a company which is
itself a subsidiary of another
company. Reference to "company"
includes any body corporate
"the Term" means the period between the
Commencement Date and the termination
of this Agreement howsoever arising
"Territory" means any Country other than the
Reserved Territory and Argentina
13
<PAGE>
"the Trade Marks" means the trade mark, name and logo
"Lucas" and/or the Lucas diagonal
device and/or such other trade mark,
name or logo as Lucas may from time
to time decide in its absolute
discretion and notify in writing to
the Company shall be used in relation
to Lucas Branded Products to be
supplied by the Company to Lucas
pursuant to this Agreement
"Trade Mark Licence" means the licence dated 1st August
1993 between Lucas Industries plc and
the Company or such other trade mark
licence which is hereafter during the
Term granted by Lucas Industries plc
to the Company in relation to Trade
Marks registered in the Reserved
Territory enabling the Company to
apply such Trade Marks to the Products
"Trade Mark Licence Period" means the period during which the
Company has subsisting trade mark
rights in relation to Products in the
Reserved Territory pursuant to a
written agreement from Lucas or an
Associated Company of Lucas
14
<PAGE>
"Warranty Replacement" means a repair and/or replacement to
a Lucas Branded Product sold by Lucas
in the Aftermarket that is also
during the Term sold by the Company
to Lucas and which a customer is
entitled to have carried out under
the terms of the Product Warranty
given to such customer and includes a
repair or replacement carried out
after the end of the Term
1.2 words used in this Agreement which denote the singular shall be deemed to
include the plural and vice versa. References to a particular gender
include all other genders;
1.3 references to clauses and Schedules are to clauses of and Schedules
to this Agreement, and references to paragraphs are to paragraphs in
the Schedule in which such references appear;
1.4 the Schedules form part of this Agreement and will have the same
force and effect as if expressly set out in the body of this
Agreement;
1.5 the headings to the clauses of this Agreement and to the paragraphs
of any Schedule will not affect its construction;
1.6 the word "including" or any cognate word shall be construed as
though the words "without limitation" immediately followed such word;
1.7 references in this Agreement to any instrument or agreement shall
include such instrument or agreement as may have been or may hereafter
be varied.
15
<PAGE>
2. TERM
----
Subject to clauses 13 and 8.3.2, this Agreement shall continue in force for
the Minimum Period and shall thereafter continue in force unless and until
terminated by either party giving to the other at least 12 months' prior
written notice expiring on or at any time after the expiry of the Minimum
Period.
3. SUPPLY OF PRODUCTS
------------------
3.1 Orders
------
The Company shall manufacture and/or sell and Lucas shall purchase
such quantities of Lucas Branded Products as Lucas orders from the
Company from time to time in accordance with the terms of this
Agreement. Such Lucas Branded Products shall be for sale by Lucas
only in the Aftermarket (a) in the Territory during the Term
(subject to sub-clause (b) below); and (b) in the Territory and the
Reserved Territory and Argentina after the end of the Trade Mark
Licence Period, but then not through any Distribution Outlet
formally appointed by the Company as an authorised Distribution
Outlet of the Company unless it is also authorised by the Company to
sell Lucas products at the relevant time. Lucas shall not during
the Trade Mark Licence Period supply customers for Lucas Branded
Products in or for delivery in or who Lucas knows or has good reason
to believe intend to sell Lucas Branded Products in the Reserved
Territory or Argentina. Lucas shall during the Trade Mark Licence
Period refer to the Company any enquiries for Lucas Branded Products
received from any customer for supply to the Reserved Territory.
3.2 Orders and Delivery
-------------------
Minimum offtake quantities ("MOQ") and the multiples in which
products must be taken over and above the MOQ ("Batch" or
16
<PAGE>
"Multiple") and lead times ("L/T") in relation to delivery of Lucas
Branded Products are shown in Schedule 2 and subject thereto the
Company shall deliver Lucas Branded Products at the times required
by Lucas. Delivery will be made by the Company FOB Johannesburg.
3.3 Branding
--------
Subject to clause 3.6, all Products supplied by the Company to Lucas
and the packaging in which they are supplied shall be labelled with
the Trade Marks according to the specifications for such labelling
from time to time reasonably stipulated by Lucas and the prices for
Lucas Branded Products shall include for this. All Product labelling
must unless and until otherwise stipulated by Lucas by giving not
less than 90 days notice in writing be in accordance with Lucas
specification 06021188. The Company shall not be required to cast,
emboss, etch or otherwise permanently incorporate any Trade Mark on
to Products to be supplied to Lucas pursuant to this Agreement.
3.4 EDI
---
The Company will work with Lucas with a view to enabling all orders,
forecasts, invoices and despatch advice notes to be communicated
between them by Electronic Data Interchange (EDI). Where this
capability is not yet in place the Company shall make all reasonable
commercial efforts to put it in place as soon as reasonably
practicable. An EDI communication shall be regarded for the purposes
of this Agreement as a written communication.
17
<PAGE>
3.5 Amended Requirements
--------------------
The Company agrees to use all reasonable efforts to meet any amended
requirements for Lucas Branded Products notified to it in writing by
Lucas after an order has been placed.
3.6 Other items
-----------
Other items from the Company's product range from time to time
(including Other Products which are not New Products) may be
supplied to Lucas by the Company with product and packaging
specification, prices, warranty cover and terms and conditions as
the Company and Lucas may agree from time to time. Lucas
acknowledges that such other items will be offered and marketed by
Lucas only in the Aftermarket in the Territory.
3.7 New Products
------------
The Company and Lucas shall work together where it is commercially
viable to do so to develop (by addition of new items and/or
modification of existing items other than by way of an Improvement)
the Company's range of products of the same generic kind as those
specified in Schedule 2 Parts 1 and 2 and the Company will consider
new products recommended by Lucas with the intention that key
original equipment units introduced into the vehicle parc will be
available 12 months following vehicle launch. If the Company
develops such range whether with or without the assistance of Lucas,
and whether or not at Lucas' instigation, or manufactures or factors
new products recommended by Lucas it will make the relevant products
available to Lucas as New Products on such terms as the parties
shall agree. In appropriate cases and by agreement any products so
developed or added may be designated
18
<PAGE>
Lucas Branded Products and from the date of agreement be added as
such to this Agreement.
3.8 Country of Origin
-----------------
The country of origin for each Product is detailed in Schedule 2. It
shall be the responsibility of the Company to advise any changes
when they occur.
3.9 Packaging and Documentation
---------------------------
All Lucas Branded Products will be supplied boxed in accordance with
Lucas' packaging standards manual XXB201A current and in force at
the Commencement Date. Lucas Branded Product documentation and
packaging will be in line with Lucas' supplier guide for load
presentation and documentation XKB425 current and in force at the
Commencement Date. Where Lucas requires any change hereafter in such
standard specifications the Company will subject to agreement on any
reasonable cost adjustments comply with any revised specifications.
3.10 No restriction relating to Freely Distributable Products
--------------------------------------------------------
3.10.1 Notwithstanding anything impliedly to the contrary in
this Agreement, but subject to its express terms, the
Company shall be free to manufacture, sell, market,
distribute and otherwise deal in Freely Distributable
Products without restriction in any part of the world,
for any purpose.
3.10.2 Lucas shall not restrict or purport to restrict whether
by any contractual provision or in any other way any
Lucas Distribution Outlets from dealing with the Company
or any corporate body or entity which in
19
<PAGE>
relation to the Company is an Associated Company as its
or their Distribution Outlet in relation to Freely
Distributable Products nor take legal or commercial
action against any Lucas Distribution Outlet if it
hereafter sells Freely Distributable Products by reason
of that fact alone but not so to prevent Lucas from
taking action in relation to any contractual provision
relating to any other matter.
4. MOST FAVOURED CUSTOMER
----------------------
4.1 The provisions of this clause 4 shall not apply for the benefit of
Lucas in relation to Other Products supplied to Lucas by the Company
unless they are New Products which have been designated as Lucas
Branded Products pursuant to clause 3.7. The Company shall in
supplying Lucas Branded Products to Lucas treat Lucas with most
favoured customer status by which is meant, that:
4.1.1 the Company will not supply, or offer to supply, Other
Products to any of its other customers in the
Aftermarket on shorter lead times than those from time
to time applicable to equivalent Lucas Branded Products
supplied to Lucas;
4.1.2 where the Company's production capacity for Products and
Other Products for whatever reason, and whether
temporarily or permanently, is unable to satisfy in
terms of time and number all the orders outstanding and
unfulfilled at any one time for the same from Lucas and
the Company's other customers (including those required
for sale by Purchaser Group Companies), the Company
shall in seeking to satisfy such orders or requirement
allocate the available Products and Other
20
<PAGE>
Products between all those persons, including Lucas and
Purchaser Group Companies, who have ordered or require
supplies of the same which cannot be satisfied, pro rata
to their respective orders or requirement. In the
operation of this clause 4.1.2 orders from Original
Equipment Manufacturers to the Company requiring
Products or Other Products in any Country for inclusion
in new vehicles shall at all times take precedence and
shall accordingly not be taken into account;
4.1.3 if at any time the prices (on an equivalent basis having
regard to the place and method of delivery, payment and
other terms of sale) charged or offered by the Company
to any of its customers (other than Lucas and Original
Equipment Manufacturers) buying Products or Other
Products for inclusion in new vehicles in whichever
Relevant Country such customers are carrying on business
or are located, for Products or Other Products on the
basis of broadly equivalent quantities to be delivered
within a broadly equivalent time frame and having regard
to market structures, are less than the prices then
being charged by the Company to Lucas for Lucas Branded
Products then the Company shall charge those more
favourable prices to Lucas with immediate effect for as
long as those more favourable prices shall continue to
be charged or offered.
4.2 The Company will not be in breach of clauses 4.1.2 or 4.1.3 if on
infrequent occasions in relation to the supply of a particular
Product or Other Product to Original Equipment Service and in order
to meet
21
<PAGE>
the requirements of an Original Equipment Manufacturer the Company
either gives preference over Lucas in the allocation of such Product
or Other Product or in the price it charges for such Product or
Other Products to Original Equipment Service provided that in
general the Company maintains a fair overall allocation judged over
a reasonable period of time on the basis laid down in clause 4.1.2
or as the case may be the weighted average of the prices charged by
the Company to Lucas shall not on the basis laid down in clause
4.1.3 be less favourable than those charged to Original Equipment
Service.
5. AVAILABILITY
------------
The Company agrees to use reasonable endeavours to achieve a 90%
performance level and once that has been achieved continuously to seek to
improve such performance level (as defined by Lucas' performance
measurement publication coded XKB427 current and in force at the
Commencement Date) for Lucas Branded Products in respect of orders placed
by Lucas under and in accordance with the terms of this Agreement, this
being without prejudice to the Company's obligations to deliver Lucas
Branded Products by other specific delivery dates agreed between the
Company and Lucas from time to time in respect of specific orders.
6. SPECIFICATION AND QUALITY
-------------------------
6.1 The Company will supply Lucas Branded Products to a functional
specification which is not inferior to the functional specification
of the equivalent original equipment and whose appearance is
comparable to the appearance of original equipment of the type in
question commonplace in the industry from time to time. Without
limiting the generality of the foregoing the Company must as from
the Commencement Date supply each type of Lucas Branded Product in
accordance with the technical specification as defined in
22
<PAGE>
the Lucas Parts Acceptance Specification (PAS) current and in force
at the Commencement Date. Any amendments to specifications together
with any consequential price alterations will be agreed with Lucas
prior to any Product being delivered to the revised specification.
6.2 The Company will use its best endeavours to ensure that all Lucas
Branded Products supplied to Lucas under this Agreement comply with
all requirements imposed by law in Countries where they are intended
to be sold by Lucas relating to their manufacture, composition and
packaging provided such requirements in relation to each relevant
country have been made known in writing by Lucas to the Company, and
the Company is given a reasonable time after the Company receives
such written notification from Lucas in which to make any necessary
changes to Lucas Branded Products. The Company shall be entitled to
reflect any additional costs in relation to such compliance in the
prices for the relevant Lucas Branded Products.
6.3 The Company acknowledges that Lucas will not, and shall not be
required to, carry out inspection of Lucas Branded Products before
delivery of the same to Lucas' customers and that accordingly the
rights of Lucas under this Agreement in relation to Lucas Branded
Products shall not thereby be prejudiced.
6.4 The Company shall incorporate into Lucas Branded Products any
Improvement which is incorporated by the Company into equivalent
Other Products.
23
<PAGE>
7. OBLIGATIONS ON COMPANY
----------------------
7.1 Warranty Replacement
--------------------
The Company will in relation to Warranty Replacement (a) supply free
of charge such replacement parts as are necessary and (b) reimburse
Lucas the costs and expenses incurred by Lucas in honouring the
Product Warranty (including only in those Countries where this is
applicable, the costs of removal and fitting or refitting any
relevant part from or to the product in question).
7.2 Point of Contact
----------------
The Company will appoint a person whose responsibility it will be to
ensure that Lucas has a ready point of contact at all reasonable
times for all operational matters concerning this Agreement. The
Company will notify Lucas of the name, business address, telephone
and fax numbers of such person within 14 days of the Commencement
Date. The Company may change its appointee from time to time by
written notice to Lucas.
7.3 Inspection
----------
The Company shall permit Lucas from time to time during the Term to
inspect at any time during normal working hours on reasonable prior
notice (a) any premises where Lucas Branded Products are being
manufactured or stored and (b) the relevant documentation relating
to the sale by the Company of Products and Other Products, to verify
that the Company has been and is complying with its duties and
obligations under this Agreement.
7.4 Product Liability
-----------------
The Company will indemnify and hold Lucas harmless against all
24
<PAGE>
actions, claims, costs, demands, expenses and liabilities in respect
of any death, personal injury and loss or damage to property made
against, incurred or suffered by Lucas arising from any defective
product (whether a Lucas Branded Product, Other Product or other
item supplied pursuant to clause 3.6), other than where such defect
is a defect in a design made by Lucas or by a third party at Lucas'
instigation, supplied by the Company pursuant to this Agreement
provided that the limit of the Company's liability under this clause
shall be an amount equal to US $10,000,000 for each and every event
and in the aggregate in any one year of insurance pursuant to the
policy of insurance effected under clause 10.
7.5 Intellectual Property
---------------------
The Company will indemnify and hold Lucas harmless against all
actions, claims, costs, demands, expenses and liabilities in respect
of any infringement of the Intellectual Property Rights of any
person (other than any Lucas Group Company) made against, incurred
or suffered by Lucas resulting from the sale of any Lucas Branded
Products supplied by the Company during the Term or pursuant to
clause 14.2.1 by Lucas in the Aftermarket (a) in the Territory
during the Trade Mark Licence Period and (b) in the Territory or the
Reserved Territory after the end of the Trade Mark Licence Period
provided that such indemnity shall not apply to any such actions,
claims, costs, demands, expenses and liabilities (i) arising from
the application and/or use of the Trade Marks on Lucas Branded
Products in accordance with the relevant provisions of this
Agreement or (ii) to the extent that the same arise in relation to
the design of any Lucas Branded Product in circumstances where the
Company has not after the Commencement Date made any change to such
design or other aspect (including the re-sourcing of the
25
<PAGE>
same) of the relevant Lucas Branded Product or in a design made by
Lucas or by a third party as Lucas' instigation.
7.6 Technical Information
---------------------
The Company shall, at the request of Lucas within a reasonable time
following the request, provide Lucas without charge, with such
technical information regarding Lucas Branded Products as Lucas may
reasonably require.
7.7 Millennium
----------
The Company confirms that its systems will be fully millennium
compliant by the end of 1998 and will not cease to be so at any time
thereafter. For the purposes of this warranty "millennium compliant"
means that neither performance nor functionality is or will be
affected by dates prior to during or after the year 2000.
7.8 Vendor Managed Inventory
------------------------
The Company will work with Lucas towards establishing as soon as
reasonably practicable a vendor managed inventory capability which
will involve the Company in providing Lucas Branded Products on a
periodic basis to bring Lucas' inventory up to an agreed minimum
level or above but not exceeding an agreed maximum level.
7.9 Exchange of Stock
-----------------
The Company may from time to time agree with Lucas that Lucas may
once per year, return (at its own cost) products (whether Lucas
Branded Products or Other Products) purchased from the Company that
are surplus to inventory requirements, subject to such terms and
conditions as the parties shall mutually determine.
26
<PAGE>
7.10 Service Response VOR's
----------------------
Where there is a need for Lucas to respond quickly and positively to
customers vehicle off the road requirements the Company will having
regard to the geographic location of the Company and the customer
make commercially reasonable endeavours to support this requirement
notwithstanding any prior agreements in terms of lead time or other
operational parameters provided that where relevant having advised
Lucas of any cost implications Lucas agrees to cover the Company's
costs unless such off the road requirements result from the Company
having failed to supply Products to Lucas in accordance with this
Agreement in which event the cost shall be borne by the Company.
8. PRICE AND PAYMENT
-----------------
8.1 Subject to clauses 4.1.3 and 8.5, the prices for Lucas Branded
Products shall be as set out in Schedule 2 until such time as they
are varied pursuant to clauses 8.2, 8.3 or 8.4. Such prices are in
pounds sterling and are exclusive of VAT or other similar sales
taxes which, if applicable, shall be an addition to such prices.
8.2 Subject to clauses 4.1.3 and 8.3 the Company will be entitled,
having first consulted with Lucas on giving Lucas not less than 90
days' prior written notice, to increase the prices for Lucas Branded
Products provided always that:
8.2.1 there shall not be more than one price increase for any
Lucas Branded Product in any Agreement Year save that
any price increase which on the basis of past practice
between the Company and Lucas would take place, after
the date hereof but on or before 31st March
27
<PAGE>
1998 and which takes effect on the basis of prices laid
down by Lucas and not agreed between the Company and
Lucas shall be disregarded for the purposes of this
clause 8.2.1 in the first Agreement Year but if prices
are so agreed between the Company and Lucas such prices
shall remain fixed for a period of 12 months
notwithstanding the provisions of this clause 8.2;
8.2.2 each such increase shall be shown fairly and reasonably
to reflect any increase in the cost to the Company of
producing Lucas Branded Products and supplying them to
Lucas;
8.2.3 no increase shall affect any order placed by Lucas prior
to notice of such increase having been given;
8.2.4 no increase shall affect any orders placed by Lucas
during such 90 day period insofar as the aggregate
number of units of the Lucas Branded Products affected
by the price increase does not exceed the aggregate
number of units of the same Lucas Branded Products
ordered in the 90 day period prior to the Company
beginning to consult with Lucas about the price
increase;
8.2.5 no consultation or notice shall be required for an
increase or reduction in price resulting from the
operation of clause 8.4 and such clause shall operate
independently of the provisions of this clause 8.2.
8.3 Notwithstanding the provisions of clause 8.2:
8.3.1 where in respect of any Quarterly Period in any
Agreement Year an Exchange Rate Notice (as defined
28
<PAGE>
in clause 8.4) has been given by either party pursuant
to the provisions of clause 8.4 by reason of the South
African rand having weakened against the pound sterling
by more than 5% in any such Quarterly Period the Company
shall be entitled at any time thereafter to give a
notice to Lucas under and in accordance with the
provisions of clause 8.2 provided always that not more
than two notices shall be given by the Company under
clause 8.2 in any Agreement Year (whether given under
that clause in its own right or pursuant to this clause
8.3.1);
8.3.2 the Company shall be entitled not earlier than 1st
October 1999 and not later than 31st December 1999 to
give written notice to Lucas (referring in such notice
to this clause 8.3.2) that in order to provide the
Company with a commercially viable profit margin on
Lucas Branded Products the prices for the same will be
increased with effect from 1st January 2001 by the
amounts stated in such notice. If Lucas is unwilling to
pay such increased prices or, after negotiations in good
faith between the parties any alternative increased
prices proposed by the Company, Lucas shall, unless the
Company and Lucas shall by then have determined that
there shall not be any increase in prices, be entitled
to give written notice to the Company not later than
31st March 2000 terminating this Agreement on 31st
December 2000. If Lucas shall not give such notice then
the prices specified by the Company in its notice given
to Lucas pursuant to this clause 8.3.2 shall become
effective from January 1st 2001, and such
29
<PAGE>
prices, subject to clause 8.4, shall be fixed until 31st
December 2001 and thereafter may only be increased by
the Company in accordance with the provisions, subject
to clause 8.4, of clause 8.2 or clause 8.3.1.
8.4 The prices for Lucas Branded Products set out in Schedule 2 have
been agreed on the basis of the Base Currency Exchange Rate
specified in Schedule 1. If during any Quarterly Period during the
Term such Base Currency Exchange Rate moves so that its average
movement over such Quarterly Period, taking into account
fluctuations upwards and downwards on a daily basis, is such that
the Base Currency Exchange Rate has either strengthened or weakened
against the pound sterling by more than 5% (determined by reference
to currency exchange rates closing midpoint (Pounds)spot as shown in
the Financial Times published in London) then either Lucas or the
Company may give written notice (an "Exchange Rate Notice") to the
other of them stating that such movement has occurred and that the
prices for Lucas Branded Products should with effect from the first
day of the month following the month in which the Exchange Rate
Notice is given (the "Effective Date"), be increased where the South
African rand has so strengthened against the pound sterling and be
reduced where the South African rand has so weakened against the
pound sterling, in each case by 50% only of the average movement in
currency exchange rates measured over the relevant Quarterly Period
provided always that such varied prices shall not apply to firm
orders already placed by Lucas prior to the date of service of the
Exchange Rate Notice. The new Base Currency Exchange Rate for the
purposes of this Agreement shall as from the Effective Date be the
currency exchange rate to which the Base Currency Exchange Rate has
moved as shown in the Exchange
30
<PAGE>
Rate Notice and the provisions of this clause shall apply to any
such new Base Currency Exchange Rate.
8.5
8.5.1 For the purposes of this clause 8.5 the following
expressions have the following meanings except where
inconsistent with the subject matter or context:
"delivered" means delivered by the Company to
Lucas pursuant to orders given by
Lucas in accordance with this
Agreement or which should have been
so delivered by the Company pursuant
to such orders having regard to the
relevant lead times for the Products
in question but have not been by
reason of any breach of this
Agreement by the Company.
"Excluded Product" means (a) in respect of Lucas Branded
Products the production of which is
commenced in an Agreement Year any
such Lucas Branded Product of which
less than 100 units are delivered to
Lucas by the Company in that
Agreement Year; and (b) any other
Lucas Branded Product of which less
than 250 units are delivered to Lucas
by the Company in the Agreement Year
and in each case excluding any Lucas
Branded Product which is not a
complete starter motor or alternator
31
<PAGE>
"net invoice value" means the amount invoiced by the
Company to Lucas in respect of
Relevant Products excluding (a) VAT
or other similar sales taxes, (b)
carriage and freight charges shown
separately on such invoices and (c)
discounts for prompt payment, but
before deduction of any rebate
payable to Lucas pursuant to the
provisions of clause 8.5.2
"Relevant Products" means the aggregate number of all
Lucas Branded Products, other than
Excluded Products, delivered to Lucas
by the Company during the relevant
Agreement Year
8.5.2 Lucas shall be entitled to a volume rebate on the
aggregate net invoice value of Relevant Products
delivered in any Agreement Year as follows:
<TABLE>
<CAPTION>
Volume of Relevant Products delivered
in the relevant Agreement Year Percentage rebate
- - - - - - - - - - - -------------------------------------- --------------------------------------
<S> <C>
In respect of the number of Relevant 5% of the net invoice value of such
Products delivered in excess of excess
42,250 but not exceeding 45,000
In respect of the number of Relevant 6% of the net invoice value of such
Products delivered in excess of excess
45,000 but not exceeding 47,500
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
In respect of the number of Relevant 7% of the net invoice value of such
Products delivered in excess of excess
47,500 but not exceeding 50,000
In respect of the number of Relevant 8% of the net invoice value of such
Products delivered in excess of excess
50,000 but not exceeding 52,500
In respect of the number of Relevant 9% of the net invoice value of such
Products delivered in excess of excess
52,500 but not exceeding 55,000
In respect of the number of Relevant 10% of the net invoice value of such
Products delivered in excess of excess
55,000
</TABLE>
The specific Relevant Products which are to be taken for the purposes of
ascertaining the net invoice value to which the percentage rebate is to be
applied shall be on the basis of the dates the Relevant Products were delivered.
The sum due to Lucas in respect of each volume band in the left-hand column
above in the relevant Agreement Year shall be aggregated and the aggregate
rebate due to Lucas will be paid by the Company to Lucas in sterling within 60
days of the end of the relevant Agreement Year.
8.6 Lucas shall pay for Lucas Branded Products in sterling within 60
days from the end of the month in which delivery is made.
9. TRADE MARK PROVISIONS
---------------------
9.1 Without prejudice to the provisions of the Trade Mark Licence, the
Company shall not (whether during the Term or after the termination
of this Agreement) have any rights pursuant to or deriving from this
33
<PAGE>
Agreement to sell or offer for sale any Lucas Branded Products other
than to Lucas.
9.2 The Company shall not use any of the Trade Marks for any purpose in
relation to the Products other than for labelling the same in
accordance with clause 3.3 and in particular but without limiting
the generality of the foregoing shall not use any of the Trade Marks
as the whole or part of a corporate or other business name.
9.3 The Company agrees that the ownership of the Trade Marks and the
goodwill relating thereto shall always remain vested in Lucas, or a
Lucas Group Company, both during the period of this Agreement and
thereafter and that nothing in this Agreement shall give the Company
any right, title or interest in the Trade Marks.
9.4 The Company undertakes not knowingly to do any act in relation to
the use of the Trade Marks pursuant to this Agreement which will
invalidate or jeopardise in any way the rights of any Lucas Group
Company in the Trade Marks.
9.5 Issues associated with marketing and distribution of Products in
both Lucas' branding and that of the Company will be sought
initially to be resolved by the marketing/sales managers of both
parties maintaining a continuing dialogue in relation to marketing
and distribution matters with a view to avoidance of issues. Where
the marketing/sales managers of the parties, having tried, are
unable to resolve any particular issue such issue shall be referred
by either of them to the managing directors of each of the parties
for resolution.
10. INSURANCE
---------
Without prejudice to the provisions of clause 7.4, the Company will effect
and maintain or cause another Purchaser Group Company to effect and
maintain for its and the Purchaser Group Company's benefit insurance in
respect of
34
<PAGE>
product liability for Lucas Branded Products manufactured and sold by the
Company to Lucas in an amount equal to not less than US$10,000,000 for each
and every event and in the aggregate in any one year of insurance under
such policy and will at the request of Lucas from time to time during the
Term produce written evidence that such insurance is in force. Insofar as
and to the extent that the Company or any such other Purchaser Group
Company receives any proceeds of insurance in respect of a claim made by
Lucas in respect of Products supplied to Lucas pursuant to this Agreement
such proceeds shall be held on trust by the Company or any such other
Purchaser Group Company for Lucas, pro rata where the insurance proceeds
recovered include monies in respect of claim(s) other than Lucas' claim.
11. PRODUCTION AND SUPPLY PLAN
--------------------------
Prior to the commencement of each Agreement Year other than the first
Agreement Year the Company and Lucas shall after discussion with each other
and exchange of relevant market information prepare and agree a production
and supply plan ("the Annual Plan") in respect of Lucas Branded Products
for such Agreement Year. Each such Annual Plan shall include estimates of
purchases in the relevant Agreement Year by Lucas from the Company of Lucas
Branded Products and estimates by the Company of planned dates for the
introduction of New Products and/or Improvements as well as additional
products intended to be added as additional Lucas Branded Products by
agreement.
12. CONFIDENTIALITY
---------------
Each party undertakes that it shall not, and shall ensure that its
employees and agents shall not, disclose, use or permit the use of any
confidential information disclosed to it by the other party except as may
be necessary for complying with its obligations under this Agreement and
then only in such a manner as to protect fully the confidentiality of such
confidential information. The obligations of non-disclosure by each party
shall continue to apply
35
<PAGE>
notwithstanding the termination of this Agreement but shall not apply to
any information which falls into the public domain other than by breach of
such obligation of non-disclosure. Registration or notification of this
Agreement with or to any regulatory authority shall not be a breach of
confidence for the purposes of this clause.
13. TERMINATION
-----------
13.1 A party shall be entitled to terminate this Agreement summarily by
written notice to the other party if the other party is:
13.1.1 in material breach of this Agreement and shall have
failed to remedy the breach, within 3 (three) months
after receipt of a request in writing from the party not
in breach to remedy the breach, such request indicating
that failure to remedy the breach may result in
termination of this Agreement;
13.1.2 insolvent or has a receiver, manager, administrator,
administrative receiver, liquidator (other than for the
purposes of a solvent reconstruction or amalgamation)
(or a person of similar status in a Country which has
jurisdiction over such other party) appointed over it or
its undertaking assets or income or any part thereof.
13.2 In the event that any Force Majeure event or circumstance subsists
for an aggregate period of 180 days in any period of 365 days during
the Term and during the whole of such aggregate period supplies of
Lucas Branded Products are seriously affected (whether because the
Company is unable to deliver or Lucas is unable to take delivery of
the same) either the Company or Lucas shall be entitled to terminate
this Agreement summarily by giving written notice to the other
36
<PAGE>
provided that such notice may only be given at a time when such
Force Majeure event or circumstance subsists.
13.3 Lucas shall be entitled to terminate this Agreement summarily within
3 months of becoming aware of any change in the Controllers of:
(a) the Company
(b) any direct or indirect holding company of the Company or
(c) any subsidiary of any such holding company to which
there has been a Business Transfer pursuant to clause
16.1 without there being a Business Transfer back in
accordance with the provisions of such clause
resulting in the new Controllers being a Lucas Competitor. The
Company undertakes to notify Lucas in writing of any such change
within 7 days of the same occurring.
14. EFFECTS OF TERMINATION
----------------------
14.1 The termination of this Agreement will be without prejudice to the
rights and duties of any party accrued prior to termination. The
clauses in this Agreement which expressly or impliedly have effect
after termination will continue to be enforceable notwithstanding
termination. The Company will honour any orders placed by Lucas
prior to termination which have not been performed at termination
save where termination is effected by the Company pursuant to clause
13.1 or by either party pursuant to clause 13.2. Any indemnities
given in this Agreement will continue to apply notwithstanding
termination.
14.2 As from the date of termination:
37
<PAGE>
14.2.1 Lucas will be entitled to sell Lucas Branded Products
held by it in stock at termination or which are
delivered thereafter by the Company pursuant to orders
placed by Lucas prior to termination;
14.2.2 the Company will not hold itself out as a manufacturer
for Lucas in respect of Lucas Branded Products, provided
always that following the termination of this Agreement
if Lucas shall not have agreed to buy the same the
Company will be entitled to sell
(a) Lucas Branded Products held by it in stock at
termination;
(b) in relation to factored Lucas Branded Products
where those Lucas Branded Products are not also
sold by the Company as Other Products or to which
the Trade Marks have been or inevitably will be
applied by such supplier and which have been
contracted from the supplier not delivered and
which cannot be cancelled; or
(c) any Lucas Branded Products which are in the course
of manufacture, and which are completed thereafter
provided in each case such sales of Lucas Branded
Products shall be to any Lucas authorised distributor or
dealer in the Reserved Territory or elsewhere if so
permitted under the Trade Mark Licence and provided such
sales are on normal terms and conditions
38
<PAGE>
(including as to price) and are released on to the
market in an orderly way so as not to disrupt the same.
14.3 References in this clause 14 to "termination" mean termination
howsoever arising.
15. FORCE MAJEURE
-------------
Neither Lucas nor the Company shall be liable to the other for any failure
or delay in performing its obligations under this Agreement due to Force
Majeure provided always that:
15.1 the date for performance of the contractual obligation which has
been delayed by Force Majeure shall be deemed suspended only for a
period equal to the delay thereby caused;
15.2 the party seeking to exempt itself from liability by virtue of the
provisions of this clause 15 shall give notice to the other party
within 7 (seven) days of becoming aware of the Force Majeure event
or circumstance and of its consequences and shall at all times use
all reasonable endeavours to mitigate the severity of the same;
15.3 the party seeking to exempt itself from liability by virtue of the
provisions of this clause 15 shall not be entitled to payment from
the other party in respect of extra costs and expenses incurred by
virtue of the Force Majeure event or circumstance.
16. ASSIGNMENT
----------
16.1 Neither Lucas nor the Company will be entitled to assign the benefit
or delegate the burden of this Agreement without the prior written
consent of the other party. Each party hereby consents to a Business
Transfer by the other under clause 16.2 where the transferee in
question is a 100% subsidiary of or, a holding company holding
39
<PAGE>
100% of the shares in the party concerned or another 100% subsidiary
of such holding company, and the remainder of clause 16.2 is
complied with. If any such Business Transfer occurs and
subsequently, the holding company of any subsidiary to whom there
has been such Business Transfer proposes to enter into any
transaction whereby such holding company no longer has control over
such subsidiary Lucas or the Company (as the case may be) or the
relevant holding company shall procure that (unless otherwise agreed
by the other party hereto) there shall prior to the proposed change
of control of such subsidiary be a Business Transfer of the whole of
the business and assets of such subsidiary back to a company in the
same group of companies as such subsidiary prior to such proposed
change of control and the provisions of clause 16.2 shall apply
mutatis mutandis to such Business Transfer.
16.2 If either party shall during the Term sell or otherwise dispose of
its business and assets, or substantially the whole of its business
and assets ("Business Transfer") and the other party shall consent
to the assignment to the transferee of the benefit of this Agreement
pursuant to clause 16.1, the party selling or disposing of its
business and assets shall require that the transferee of the same
shall as a condition of such sale or other disposal enter into a
novation of this Agreement with the other party, the form of such
novation agreement to be in terms reasonably stipulated by the other
party and which shall require such transferee to covenant with the
other party to be bound by the terms of this Agreement.
16.3 The Company shall not sub-contract or sub-license the manufacture of
Lucas Branded Products without the prior written consent of Lucas.
If and to the extent that such consent is given the Company shall be
liable for all acts and omissions of any such sub-contractor or sub-
licensee as though such acts or omissions were acts and
40
<PAGE>
omissions of the Company. This clause 16.3 shall not prevent the
Company from sub-contracting the manufacture of individual
components or sub-assemblies without consent.
16.4 This Agreement shall be binding on the successors and permitted
assigns of each of the respective parties.
16.5 Lucas shall have power to perform its covenants, to exercise its
rights and to accept benefits accruing to it under this Agreement
through the agency of any other Lucas Group Company. Lucas
nonetheless shall remain liable for acts and omissions of any Lucas
Group Company who acts as agent for Lucas pursuant to the foregoing
provisions of this clause 16.5 as though they were acts and
omissions of Lucas. In relation to the indemnities given in favour
of Lucas in clauses 7.4 and 7.5 Lucas enters into this Agreement not
only for itself but also as trustee for all other Lucas Group
Companies. Each such Lucas Group Company shall have the benefit of
such indemnities as if it was named in such clauses in addition to
Lucas.
17. SEVERABILITY
------------
The illegality, invalidity or unenforceability of any clause or part of
this Agreement will not affect the legality, validity or enforceability of
the remainder. If any such clause or part is found by any competent court
or competent authority to be illegal, invalid or unenforceable the parties
agree that they will substitute provisions whose effect is as similar to
the offending provisions as is possible without thereby rendering them
illegal, invalid or unenforceable.
18. ENTIRE AGREEMENT
----------------
18.1 This Agreement, and the documents referred to in it, contain the
whole agreement between the parties relating to the transactions
41
<PAGE>
contemplated by this Agreement and supersede all previous agreements
between the parties relating to such transactions.
18.2 Each of the parties acknowledges that in agreeing to enter into this
Agreement it has not relied on any pre-contractual representations
warranties or other assurances in relation to the subject matter of
this Agreement except those set out in this Agreement but without
prejudice to any representations, warranties or other assurances
given in any other agreement between the parties or between any
Lucas Group Company and the Company or any Purchaser Group Company.
18.3 Each party hereby agrees that it shall have no remedy against the
other party for any innocent or negligent misrepresentations made by
such other party in relation to such transactions prior to this
Agreement being entered into except to the extent that the same
shall have been incorporated in this Agreement as a warranty
representation or indemnity in which case any claim in relation to
the same shall lie only on the basis of a breach of this Agreement
or under the relevant indemnity provision.
19. VARIATIONS
----------
No variation to this Agreement shall be effective unless in writing signed
by a duly authorised representative of each of the parties hereto.
20. WAIVER
------
20.1 Failure to exercise or delay in exercising on the part of any party
any right, power or privilege of that party under this Agreement
shall not in any circumstances operate as a waiver thereof nor shall
any single or partial exercise of any right, power or privilege in
any
42
<PAGE>
circumstances preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
20.2 Any waiver of a breach of any of the terms hereof or of any default
hereunder shall not be deemed a waiver of any subsequent breach or
default and shall in no way affect the other terms of this
Agreement.
21. NOTICES
-------
Any demand, notice or communication in relation to this Agreement shall be
made in writing and served by hand, by registered airmail post, or by
facsimile transmission addressed to the recipient at its registered office
or its address stated below (or such other address or facsimile number as a
party may nominate in writing from time to time).
Lucas
-----
Lucas Aftermarket Operations
Stratford Road
Solihull
West Midlands
B90 4AX
England
Attn: Legal Director
Facsimile: 0121 697 5026
With a copy of the notice to be sent to the Company Secretary of Lucas
Limited at Stratford Road, Solihull, West Midlands, B90 4LA, England.
The Company
-----------
Lucas Automotive (Pty) Limited
5 Yaron Avenue
43
<PAGE>
Lea Glen
Florida
1709
South Africa
Attn: Managing Director
Facsimile: +27 011 472 4326
With a copy of the notice to be addressed to "Managing Director and Finance
Director" Prestolite Electric Limited, Cleveland Road, Leyland, Preston,
Lancashire, PR5 1XB, England.
22. LANGUAGE
--------
22.1 The English language version of this Agreement shall be the
authoritative version even though it may have been translated into
some other language.
22.2 All communications between the parties shall unless otherwise agreed
in writing be in the English language.
23. ASSOCIATED COMPANY
------------------
Any act or omission of any Associated Company of Lucas or the Company (as
the case may be) which if committed or omitted by Lucas or the Company (as
the case may be) would have been a breach of this Agreement by Lucas or the
Company (as the case may be) will be deemed to be a breach of this
Agreement by Lucas or the Company (as the case may be) who will be liable
to the other party accordingly.
24. TERMS AND CONDITIONS OF SALE
----------------------------
44
<PAGE>
24.1 The Conditions of Sale and the terms of this Agreement shall apply
in relation to the sale of any products by the Company to Lucas
pursuant to this Agreement, which Conditions of Sale and the other
provisions of this Agreement shall apply to the exclusion of any
terms and conditions of purchase from time to time used by Lucas and
to the exclusion of any terms and conditions of sale from time to
time used by the Company, whether or not such terms and conditions
are endorsed upon or delivered with any document sent by either
party to the other from time to time. In the event of any conflict
between the terms of this Agreement and the Conditions of Sale, the
terms of this Agreement including clause 7.4 shall prevail.
24.2 Lucas acknowledges and agrees that to the extent that Lucas provides
to its customers product warranty commitments or other contractual
promises or terms which are more generous than those set out in the
Product Warranty Lucas does so at its own risk and cost and the
Company's obligations to Lucas under this Agreement and the
Conditions of Sale are not thereby affected or extended.
25. EXPENSES
--------
Except where otherwise expressly provided herein each party will bear its
own costs and expenses in relation to the preparation, completion and
operation of this Agreement.
26. APPLICABLE LAW
--------------
The formation, construction, performance, validity and all aspects
whatsoever of this Agreement shall be governed by the law of England and
Wales and the parties submit to the non-exclusive jurisdiction of the
English Courts.
45
<PAGE>
SCHEDULE 1
----------
CURRENCY EXCHANGE RATE PROVISIONS
---------------------------------
The Base Currency Exchange Rate applicable for the purposes of this
Agreement is:
South African rands to (Pounds)1 sterling.
46
<PAGE>
SCHEDULE 5
----------
PRODUCT WARRANTY
----------------
1. Products found to be defective upon receipt at Lucas will be, at the
Company's discretion, either:
(a) rejected and returned to the Company as a complete batch, or
alternatively, scrapped off at the discretion of the Company, for a full
credit of the products plus a handling charge of (Pounds)25.00*; or
(b) sorted by Lucas, the cost of sorting being agreed in advance with and
charged to the Company. Items found to be defective will then be
returned for full credit plus a handling charge of (Pounds)25.00*. This
is subject to final approval by a Lucas appointed engineer.
2. If the product is used in Lucas' re-manufacturing operation and is found to
be defective during assembly it will be returned for full credit. In
addition, a charge of (Pounds)3.00* will be made for each defective item to
offset some of the costs of rework. A quotation for rework is to be
submitted by Lucas and an official order raised to cover the expenditure.
No costs are to be incurred until these documents have been processed.
3. All products supplied must be guaranteed for 12 months from date of sale of
final product to the end user.
Genuine claims within this period, relating to products supplied within 3 years
of the date of receipt by Lucas will be charged back to the Company for credit
as follows:
(a) cost of the failed part at the current purchase price;
plus
(b) handling and examination charge of 10% of the purchase price;
47
<PAGE>
(c) on/off charges of approximately (Pounds)20.00 in certain territories where
they apply. A schedule of territories can be provided;
(d) consequential losses and/or contingency claims are not acceptable; and
(e) warranty returns - documents to be checked by a Lucas representative prior
to claim being submitted to the Company.
(N.B. Items marked "*" are subject to Annual Review)
48
<PAGE>
<TABLE>
<CAPTION>
SIGNED by CHRIS LONG-LEATHER /s/ Chris Long-Leather
- - - - - - - - - - - ---------------------------- -------------------------
<S> <C>
as duly authorised attorney for and Chris Long-Leather as
-------------------------
on behalf of LUCAS LIMITED attorney of Lucas Limited
SIGNED by P. KIM PACKARD
- - - - - - - - - - - --------- --------------
duly authorised for and on behalf of /s/ P. Kim Packard
-------------------
LUCAS AUTOMOTIVE (PTY) LTD
- - - - - - - - - - - -------------------------- _________________________
</TABLE>
49
<PAGE>
EXHIBIT 10.14
DATED JANUARY 22, 1998
----------------------
(1) LUCAS INDIEL ARGENTINA S.A.
(2) LUCAS DIESEL DO BRASIL LTDA
SUPPLY AND DISTRIBUTION AGREEMENT
FOR SOUTH AMERICA (EXCLUDING ARGENTINA)
<PAGE>
THIS AGREEMENT is made on 22nd day of January 1998
- - - - - - - - - - - --------------
BETWEEN:
- - - - - - - - - - - -------
(1) LUCAS INDIEL ARGENTINA S.A. of Calle 111 entre 3y 1 bis - Parque Industriel
---------------------------
Zona Norte 5700 San Luis (Pcia. San Luis) - C. Correo 572 Argentina
("Indiel")
(2) LUCAS DIESEL DO BRASIL LTDA of Rodovia Raposo Tavares, KM 30, Caixa Postal
---------------------------
14, 06700-000 Cotia, Sao Paulo, Brasil ("Lucas")
RECITALS
- - - - - - - - - - - --------
(A) Pursuant to a Share Sale and Purchase Agreement (as defined below) certain
Associated Companies of Lucas ("the Vendors") are selling and/or granting
options over all of their shares in Indiel to Prestolite Electric
Incorporated and Prestolite Newco Incorporated ("the Purchasers").
(B) On completion of the sale of such shares to the Purchasers Lucas wishes to
continue to be supplied with Lucas Branded Products (as defined below).
Indiel is willing to sell and Lucas is willing to purchase such Lucas
Branded Products on the terms set out in this Agreement.
WHEREBY IT IS AGREED as follows:
- - - - - - - - - - - --------------------
1. DEFINITIONS AND INTERPRETATION
------------------------------
1.1 In this Agreement the expressions set out in Column 1 below shall (unless
inconsistent with the context) have the meanings set out opposite them in
Column 2 below:-
2
<PAGE>
COLUMN 1 COLUMN 2
- - - - - - - - - - - -------- --------
"the Aftermarket" Means the market for (a) spare and
replacement parts for components or
sub-assemblies comprised within the products
of Original Equipment Manufacturers and (b)
automotive accessories and includes Original
Equipment Service
"Agreement Year" means (i) the period from the Commencement
Date until the 31st December 1998; (ii)
every period of twelve (12) months beginning
thereafter on each 1st January during the
Term except that should this Agreement
terminate on a day other than 31st December
in any year the final "Agreement Year" shall
be the period from the 1st January last
preceding the date of termination to the
date of termination
3
<PAGE>
"Associated Company" means any person which is either a holding
company (whether direct or indirect) or a
subsidiary company of the relevant party or
a subsidiary company of any such holding
company or is otherwise directly or
indirectly controlled by, or is under the
same control, direct or indirect, as the
relevant party from time to time and at the
time that the relevant clause in which such
expression appears has application, which
where a claim is to be made under the
relevant clause shall mean when the cause of
action accrued under such clause
"the Commencement Date" means the date of this Agreement
4
<PAGE>
"Competing Product" means any product which is interchangeable
in its application and/or function with a
Lucas Branded Product but excludes a product
which is so interchangeable but is a "second
tier product". For the purposes of this
definition a "second tier product" is a
product which is clearly aimed at a
different market sector than Lucas Branded
Products, being a market which does not
require a premium branded product but
requires a product which is markedly cheaper
than a premium branded product and which is
prepared to accept a product which is of
inferior quality and/or is sold with a less
favourable warranty or other less favourable
conditions than that or those applicable to
premium branded products, "second tier
products" being best illustrated by the
products which are manufactured or sourced
at the date hereof by Lucas Automotive (Pty)
Ltd in South Africa and marketed under the
brand name "Electrotech"
"Conditions of Sale" means the conditions of sale in Schedule 3
5
<PAGE>
"control" means in relation to a body corporate or
other entity the power of any person to
secure by law or by corporate structure that
the affairs of that body corporate or other
entity are conducted in accordance with the
wishes of that person, and any cognate word
shall be construed accordingly
"Controllers" means persons able to decide or influence
the management or policies of the relevant
company in any material respect including
(without prejudice to the generality of the
foregoing) any of the following from time to
time: its owners, its directors, any of its
partners, or any majority of its shareholders
"Country" means any country, state or principality and
includes any area or part of any of the same
"customer" means a buyer whether such buyer is an end
user, retailer, wholesaler, distributor,
dealer or otherwise
"Distribution Outlet" means a wholesaler, retailer,
sub-distributor, dealer, stockist, service
outlet, garage, workshop or other person who
buys or acquires products from the relevant
party hereto otherwise than as the ultimate
end user of those products
6
<PAGE>
"Free Carrier" has the meaning given to such expression in
Incoterms 1990 provided that where there is
any conflict between the rights, duties and
obligations of the parties as set out in
Incoterms and those set out in this
Agreement, those set out in this Agreement
shall prevail
"First Pick Rate" means the percentage of the order quantity
supplied on the due delivery date subject to
the order having been placed in accordance
with the provisions of this Agreement
"Force Majeure" means any event or circumstance of the
following kinds which is beyond the
reasonable control of the party in question:
governmental actions, war, riots, civil
commotion, fire, flood, tempests or other
extreme weather conditions, epidemics, acts
of terrorism, bombings, explosions, acts of
God, other natural disasters or any event or
circumstance similar in nature to the
foregoing
"Freely Distributable Products" means Other Products which are not Competing
Products
7
<PAGE>
"holding company" means a company which either (a) holds the
majority of the voting rights in another
company or (b) is a member of another
company and has the right to appoint or
remove a majority of its board of directors
or other corporate officers or (c) is a
member of another company and controls alone
pursuant to an agreement with other
shareholders or members, a majority of the
voting rights in it. Reference to "company"
includes any body corporate
"Improvement" means any invention, discovery or design
comprised within any change made at any time
during the Term to Products or their method
of manufacture or use which makes them of
better quality or more efficient or
adaptable or enables them to be manufactured
more cheaply or more efficiently
"Intellectual Property means any patent, copyright, registered
Rights" design, design right, trade mark,
topography, know-how or similar property or
right by whatever name it is called and in
whatever Country it is registered or subsists
"Lucas Competitor" means any person, or an Associated Company
of any such person, listed in Schedule 2
8
<PAGE>
"Lucas Branded means Products (including the packaging for
Products" the same) to which the Trade Marks have been
or are to be applied in accordance with this
Agreement
"Lucas Distribution Outlet" means a wholesaler, retailer,
sub-distributor, dealer, stockist, service
outlet, garage, workshop or other person who
buys or acquires products otherwise than as
the ultimate end user of those products and
who was appointed prior to the date hereof
or is hereafter appointed by Lucas or any
Associated Company of Lucas in any Country
in the world.
"Minimum Period" means the period of 5 years commencing on
the Commencement Date, subject to the
provisions of clause 12.3
9
<PAGE>
"New Products" means products which Indiel may after the
date hereof add to its range of products
being of the same generic kind as those
specified in Schedule 1 but, for the
avoidance of doubt, the expression excludes
Products currently offered by Indiel to
which Improvements are made and also
excludes any products which are introduced
hereafter to Indiel's range of Products but
which Indiel is not able to allow Lucas to
distribute in the Territory by reason of
exclusive rights existing at the date of
this Agreement which have been granted by
Indiel, or any Associated Company of Indiel,
in respect of the Territory in relation to
products of the same generic kind as those
specified in Schedule 1
"Original Equipment means any manufacturer or assembler of
Manufacturer" transport vehicles, engines or similar
equipment including, but not limited to, a
manufacturer or assembler of motor cars,
vans, buses, coaches, forklifts, industrial
vehicles, trucks, tractors or marine, motive
power or stationary engines or a
manufacturer of components or sub-assemblies
to be fitted as original equipment to such
vehicles, engines or similar equipment
10
<PAGE>
"Original Equipment Service" means the market for supplies of spare and
replacement parts to any Original Equipment
Manufacturer other than for fitting as
original equipment or to any dealer of any
Original Equipment Manufacturer in its
capacity as a dealer for such Original
Equipment Manufacturer
"Other Products" means Products or New Products (including
the packaging for the same) which are either
unbranded or are branded with a trade mark,
name or logo other than any of the Trade
Marks
"person" means any person, firm, company or similar
entity whether corporate or unincorporate
"Products" means those alternators, starter motors,
ignition distributors and various other
products and parts thereof for cars and
commercial and agricultural vehicles
currently manufactured by Indiel which are
supplied to Lucas as part of Indiel's
Aftermarket product programme, the products
supplied to Lucas which are currently
manufactured by Indiel being listed in
Schedule 1 hereto and includes any New
Products and any Improvements to Products or
New Products but excludes any of the
Products which Indiel removes from the ambit
of this Agreement in accordance with clause
8.6
11
<PAGE>
"Product Warranty" means the warranty contained in clause 7 of
the Conditions of Sale;
"Relevant Country" means any Country on the South American
continent and in Central America and any
other Country from which it is from time to
time commercially viable to export Products
to any Country in the Territory and for
those Products to be competitive in terms of
price and delivery with Lucas Branded
Products being sold in such Country in the
Territory
"Reserved Territory" means the Country named Argentina
"sale" means any form of supply whether by way of
sale, lease, hire or exchange and any
cognate word shall be construed accordingly
"Share Sale and Purchase means the agreement made between the Vendors
Agreement" and the Purchasers (as defined therein) of
even date herewith for the sale of and/or
grant of options over certain shares of
Indiel and all documents referred to therein
"South African States" means the Republic of South Africa, Namibia,
Botswana, Swaziland and Lesotho and includes
any one or more of such Countries
12
<PAGE>
"subsidiary" means a company in which another company (a)
holds a majority of the voting rights; (b)
is a member of it and has the right to
appoint or remove a majority of its board of
directors or other corporate officers; or
(c) is a member of it and controls alone
pursuant to an agreement with other
shareholders or members, a majority of the
voting rights in it and includes a
subsidiary of a company which is itself a
subsidiary of another company. Reference to
"company" includes any body corporate
"the Term" means the period between the Commencement
Date and the termination of this Agreement
howsoever arising
"the Territory" means the continent of South America but
excluding the Reserved Territory and
includes any one or more of such Countries
"Trade Marks" means the trade mark, name and logo (whether
or not registered as a trade mark in any
part of the Territory) "Lucas" and/or the
Lucas diagonal device and/or such other
trade mark, name or logo as Lucas may from
time to time decide in its absolute
discretion and notify in writing to Indiel
shall be used in relation to Lucas Branded
Products to be supplied by Indiel to Lucas
pursuant to this Agreement
13
<PAGE>
"Trade Mark Licence" means the licence in relation to the Trade
Marks specified therein granted by Lucas
Industries plc to Indiel and which has the
same date as this Agreement
"Trade Mark Licence Period" means the period during which the Trade Mark
Licence subsists in fact
"Vehicle Parc" means all automotive vehicles in use at any
given time
"Warranty Replacement" means a repair and/or replacement to a Lucas
Branded Product sold by Lucas in the
Aftermarket in the Territory that is also
during the Term sold by Indiel to Lucas and
which a customer is entitled to have carried
out under the terms of the Product Warranty
given to such customer and includes a repair
or replacement carried out after the end of
the Term
1.2 words used in this Agreement which denote the singular shall be deemed to
include the plural and vice versa. References to a particular gender
include all other genders;
1.3 references to clauses and Schedules are to clauses of and Schedules to
this Agreement, and references to paragraphs are to paragraphs in the
Schedule in which such references appear;
1.4 the Schedules form part of this Agreement and will have the same force and
effect as if expressly set out in the body of this Agreement;
1.5 the headings to the clauses of this Agreement and to the paragraphs of any
Schedule will not affect its construction;
14
<PAGE>
1.6 the word "including" or any cognate word shall be construed as though the
words "without limitation" immediately followed such word;
1.7 references in this Agreement to any instrument or agreement shall include
such instrument or agreement as may have been or may hereafter be varied.
2. APPOINTMENT
- - - - - - - - - - - -- -----------
2.1 With effect on and from the Commencement Date Indiel hereby grants Lucas
the right to be the exclusive distributor of Lucas Branded Products in the
Aftermarket in the Territory, and Lucas agrees to act as such exclusive
distributor, in accordance with and subject to the terms set out in this
Agreement. Accordingly Indiel shall not grant any distributor, agent or
person, whether within or outside the Territory other than Lucas, the
right to sell, offer for sale or negotiate the sale of Lucas Branded
Products in the Aftermarket within, or for delivery in, the Territory nor
shall Indiel itself directly or indirectly sell or offer for sale any
Lucas Branded Products in the Aftermarket to customers in, or who require
delivery in, the Territory or who Indiel knows or has good reason to
believe intend to sell Lucas Branded Products in the Aftermarket in the
Territory.
2.2 Lucas shall have the right, in its discretion, to appoint Distribution
Outlets in the Territory for the purposes of distributing Lucas Branded
Products in the Aftermarket.
2.3 Lucas shall have the right, to the exclusion of Indiel or any other person
appointed by Indiel, to provide after sales service in the Aftermarket in
the Territory in relation to Lucas Branded Products purchased by Lucas
pursuant to this Agreement, but without prejudice to Indiel's obligations
under this Agreement in relation to Warranty Replacement.
3. TERM
----
Subject to clauses 12.3 and 18, this Agreement shall continue in force for
the Minimum Period and shall thereafter continue in force unless and until
terminated by
15
<PAGE>
either party giving to the other at least 12 months' prior written notice
expiring on or at any time after the expiry of the Minimum Period.
4. SUPPLY OF PRODUCTS
------------------
4.1 Indiel shall manufacture and/or sell to Lucas and Lucas shall purchase such
quantities of Lucas Branded Products as Lucas orders from Indiel from time
to time in accordance with the terms of this Agreement. Lucas shall (a)
during the Term sell Lucas Branded Products only in the Aftermarket in the
Territory (subject to sub-clause (b) below) and (b) after the end of the
Trade Mark Licence Period be entitled to sell Lucas Branded Products only
in the Aftermarket in the Territory the Reserved Territory and the South
African States, but then not through any Distribution Outlet formally
appointed by Indiel as an authorised Distribution Outlet of Indiel unless
it is also authorised by Indiel to sell Lucas products at the relevant
time.
4.2 Minimum batch quantities and multiples thereof and lead times in relation
to delivery of Lucas Branded Products shall be agreed between the parties
from time to time and subject thereto Indiel shall deliver Lucas Branded
Products at the times required by Lucas.
4.3 Lucas shall from time to time instruct Indiel in writing which of the
Products to be supplied to Lucas pursuant to this Agreement shall have the
Trade Marks applied to them and Indiel shall comply with such instructions.
All Lucas Branded Products supplied by Indiel and the packaging in which
they are supplied shall be labelled with the Trade Marks according to the
specifications for such labelling from time to time reasonably stipulated
by Lucas by giving not less than 90 days notice in writing and the prices
for Lucas Branded Products shall include for this. Indiel shall not be
required to cast, emboss, etch or otherwise permanently incorporate any
Trade Mark on to Products to be supplied to Lucas pursuant to this
Agreement.
4.4 Indiel shall deliver the Lucas Branded Products ordered by Lucas Free
Carrier at Indiel's factory in Argentina or as Lucas may otherwise
reasonably direct in which case additional transport costs shall be for
Lucas' account.
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4.5 Indiel and Lucas respectively agree to co-operate with each other to ensure
that best practice supply chain procedures are used and to use reasonable
endeavours continuously to improve such procedures.
5. MOST FAVOURED CUSTOMER
----------------------
5.1 Indiel shall in supplying Lucas Branded Products to Lucas treat Lucas with
most favoured customer status by which is meant, that:
5.1.1 Indiel will not supply, or offer to supply, Other Products to its
other customers in the Aftermarket on shorter lead times than those
from time to time applicable to equivalent Lucas Branded Products
supplied to Lucas;
5.1.2 where Indiel's production capacity for Products and Other Products
for whatever reason, and whether temporarily or permanently, is
unable to satisfy in terms of time and number all the orders
outstanding and unfulfilled at any one time for the same from Lucas
and Indiel's other customers (including those required for sale by
Indiel itself and any Indiel Associated Company), Indiel shall in
seeking to satisfy such orders or requirement allocate the available
Products and Other Products between all those persons, including
Lucas and Indiel itself and any Indiel Associated Company, who have
ordered or require supplies of Products or Other Products which
cannot be satisfied, pro rata to their respective orders or
requirement. In the operation of this clause 5.1.2 orders from
Original Equipment Manufacturers to Indiel requiring Products or
Other Products in any Country for inclusion in new vehicles shall at
all times take precedence and shall accordingly not be taken into
account provided that nothing herein contained shall be deemed
authority to Indiel to apply the Trade Marks to any products
otherwise than pursuant to the Trade Mark Licence or clause 4.3 of
this Agreement;
17
<PAGE>
5.1.3 if at any time the prices (on an equivalent basis having regard to
the place and method of delivery payment and other terms of sale)
charged or offered by Indiel to any of its customers (other than
Lucas and Original Equipment Manufacturers) buying Products or Other
Products for inclusion in new vehicles, in whichever Relevant
Country such customers are carrying on business or are located, for
Products or Other Products of broadly equivalent specification to
that of Lucas Branded Products being supplied to Lucas under this
Agreement, on the basis of broadly equivalent quantities to be
delivered within a broadly equivalent timeframe and having regard to
market structures, are less than the prices then being charged by
Indiel to Lucas for Lucas Branded Products then Indiel shall charge
those more favourable prices to Lucas with immediate effect for as
long as those more favourable prices shall continue to be charged or
offered.
5.2 Indiel will not be in breach of clauses 5.1.2 or 5.1.3 if on infrequent
occasions in relation to the supply of a particular Product or Other
Product to Original Equipment Service and in order to meet the requirements
of an Original Equipment Manufacturer Indiel either gives preference over
Lucas in the allocation of such Product or Other Product or in the price it
charges for such Product or Other Product to Original Equipment Service
provided that in general Indiel maintains a fair overall allocation judged
over a reasonable period of time on the basis laid down in clause 5.1.2 or,
as the case may be, the weighted average of the prices charged by Indiel to
Original Equipment Service shall not on the basis laid down in clause 5.1.3
be more favourable than those charged to Lucas.
6. AVAILABILITY AND VEHICLE PARC
-----------------------------
6.1 Indiel agrees to use reasonable endeavours to achieve a 90% First Pick Rate
for Lucas Branded Products in respect of orders placed by Lucas under and
in accordance with the terms of this Agreement and once such percentage has
been achieved continuously to seek to increase such percentage rate, this
being without prejudice to Indiel's
18
<PAGE>
obligations to deliver Lucas Branded Products by other specific delivery
dates agreed between Indiel and Lucas from time to time in respect of
specific orders.
6.2 Indiel agrees that it will from time to time during the Term make available
for purchase by Lucas pursuant to the terms of this Agreement Lucas Branded
Products to cover not less than such proportion of the Vehicle Parc within
that part of the Territory comprising Brazil, Paraguay, Uruguay and Bolivia
as is at the Commencement Date covered by Indiel in the supply of Lucas
Branded Products to Lucas.
7. SPECIFICATION AND QUALITY
-------------------------
7.1 Indiel will supply Lucas Branded Products to a functional specification
which is not inferior to the functional specification of the equivalent
original equipment and whose appearance is comparable to the appearance of
original equipment of the type in question commonplace in the industry from
time to time. Without limiting the generality of the foregoing Indiel will,
subject to clause 7.2, as from the Commencement Date supply each type of
Lucas Branded Product to no lesser specification than is current at such
date for such type of Lucas Branded Product then being supplied to Lucas.
7.2 Indiel shall not change the specification of Lucas Branded Products
manufactured by it without giving Lucas at least 45 days' written
notification of the intention to change such specification.
7.3 Indiel will use its best endeavours to ensure that all Lucas Branded
Products supplied to Lucas under this Agreement comply with all
requirements imposed by law in the Territory relating to their manufacture,
composition and packaging provided such requirements in relation to each
Country in the Territory have been made known in writing by Lucas to
Indiel, and Indiel is given a reasonable time after Indiel receives such
written notification from Lucas in which to make any necessary changes to
Lucas Branded Products. Indiel shall be entitled to reflect any additional
costs in relation to such compliance in the prices for the relevant Lucas
Branded Products.
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<PAGE>
7.4 Indiel acknowledges that Lucas will not, and shall not be required to,
carry out inspection of Lucas Branded Products before delivery of the same
to Lucas' customers and that accordingly the rights of Lucas under this
Agreement in relation to Lucas Branded Products shall not thereby be
prejudiced.
7.5 Indiel shall incorporate into Lucas Branded Products any Improvement which
is incorporated by Indiel into equivalent Other Products.
8. INDIEL OBLIGATIONS
------------------
8.1 Indiel shall, at the request of Lucas within a reasonable time following
the request, provide Lucas without charge, with such technical information
regarding Lucas Branded Products as Lucas may reasonably require.
8.2 Indiel shall in relation to Warranty Replacement (a) supply free of charge
such replacement parts as are necessary and (b) reimburse Lucas the costs
and expenses incurred by Lucas in honouring the Product Warranty.
8.3 Indiel will appoint a person whose responsibility it will be to ensure that
Lucas has a ready point of contact at all reasonable times for all
operational matters concerning this Agreement. Indiel will notify Lucas of
the name, business address, telephone and fax numbers of such person within
14 days of the Commencement Date. Indiel may change its appointee from time
to time by written notice to Lucas.
8.4 Indiel shall permit Lucas from time to time during the Term to inspect at
any time during normal working hours on reasonable prior notice (a) any
premises where Lucas Branded Products are being manufactured or stored and
(b) the relevant documentation relating to the sale by Indiel of Products,
to verify that Indiel has been and is complying with its duties and
obligations under this Agreement.
8.5 Indiel shall not sell or offer for sale (other than to Lucas) in the
Territory any Products branded, or whose packaging is branded, with any of
the Trade Marks or any
20
<PAGE>
confusingly similar trade mark, name or logo whether during the Term or
after the termination of this Agreement.
8.6 Indiel shall have responsibility for Product programme creation and
maintenance. Products may be removed from the ambit of this Agreement by
agreement between the parties or by Indiel giving Lucas at least 6 months'
prior written notice but only where Indiel at the time that it ceases to
supply such Products to Lucas as Lucas Branded Products will also be
ceasing supply of such Products or equivalent Other Products to its other
customers.
9. PRODUCT LIABILITY
-----------------
Indiel will indemnify and hold Lucas harmless against all actions, claims,
costs, demands, expenses and liabilities in respect of any death, personal
injury, loss or damage to property made against, incurred or suffered by
Lucas arising from any defective product (whether a Lucas Branded Product
or Other Product), other than where such defect is a defect in a design
made by Lucas or by a third party at Lucas' instigation , supplied by
Indiel pursuant to this Agreement and provided that the limit of Indiel's
liability under this clause shall be an amount equal to US $10,000,000 for
each and every event and in the aggregate in any one year of insurance
pursuant to the policy of insurance effected under clause 15.
10. EXCLUSIVITY OF PURCHASE
-----------------------
10.1 Lucas shall during the Term purchase all of its requirements for Lucas
Branded Products for sale in the Territory from Indiel provided always that
such obligation on Lucas shall not apply:-
10.1.1 in respect of any particular Lucas Branded Product manufactured and
sold by Indiel to Lucas which is not competitive in the Aftermarket
in any relevant Country in the Territory at the relevant time in
terms of delivery, lead times, price, quality and specification
when compared with an equivalent Other
21
<PAGE>
Product being sold by Indiel in the Territory, or in a Relevant
Country for sale and/or delivery to the Territory, at such time;
10.1.2 if Indiel at the relevant time shall be in continuing breach
(meaning having failed to remedy within the time stated in clause
18.1.1) of this Agreement;
10.1.3 in respect of any particular Lucas Branded Product, if Indiel at
the relevant time is incapable of supplying Lucas' requirements for
such Lucas Branded Product for any reason whatsoever, including by
virtue of Force Majeure.
10.2 In circumstances where pursuant to the foregoing provisions Lucas is not
under an obligation to purchase its requirements for any Lucas Branded
Product exclusively from Indiel, or if Lucas requires a Product which is
for part of the Vehicle Parc not covered by Indiel, Lucas may purchase the
same from any other source but only so long as the reason or circumstances
excusing Lucas from such obligation continues to subsist.
11. OBLIGATIONS OF LUCAS
--------------------
11.1 Lucas will use its reasonable endeavours to achieve the maximum possible
sales of Lucas Branded Products throughout the Territory.
11.2 Lucas shall provide such technical facilities and suitably trained staff as
are necessary to enable Lucas to repair and service Lucas Branded Products
and to provide warranty support (without prejudice to the provisions of
clause 8.2) throughout the Territory.
11.3 Lucas shall not during the Trade Mark Licence Period supply customers for
Lucas Branded Products in or for delivery in or who Lucas knows or has good
reason to believe intend to sell Lucas Branded Products in the Reserved
Territory or the South African States.
11.4
11.4.1 Notwithstanding anything implied to the contrary in this
Agreement but subject to its express terms Indiel shall be
free to manufacture, sell, market, distribute and otherwise
deal in
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<PAGE>
Freely Distributable Products without restriction in any
part of the world for any purpose.
11.4.2 Lucas shall not restrict or purport to restrict whether by
any contractual provision or in any other way any Lucas
Distribution Outlets from dealing with Indiel or any
corporate body or entity which in relation to Indiel is an
Associated Company as its or their Distribution Outlet in
relation to Freely Distributable Products nor take legal or
commercial action against any Lucas Distribution Outlet if
it hereafter sells Freely Distributable Products by reason
of that fact alone but not so to prevent Lucas from taking
action in relation to any contractual provision relating to
any other matter.
11.5 Lucas shall during the Trade Mark Licence Period refer to Indiel any
enquiries for Lucas Branded Products received from any customer for supply
to the Reserved Territory.
12. PRICE AND PAYMENT
-----------------
12.1 Subject to clause 5.1.3 the prices for Lucas Branded Products
currently supplied by Indiel shall be as set out in Schedule 1 until
such time as they are varied pursuant to clause 12.2 or clause 12.3.
Such prices are in US dollars Free Carrier Indiel's factory Argentina
and are exclusive of VAT or other similar sales taxes which, if
applicable, shall be an addition to such prices.
12.2 Subject to clause 5.1.3, Indiel will be entitled, having first
consulted with Lucas on giving Lucas not less than 90 days' prior
written notice, to increase the prices for Lucas Branded Products
provided always that:-
12.2.1 there shall not be more than one price increase for any Lucas
Branded Product in any Agreement Year save that any price
increase which on the basis of past practice between Indiel
and Lucas would take place after the date hereof but on or
before 31st March 1998 and which takes effect on the basis of
prices laid
23
<PAGE>
down by Lucas and not agreed between Indiel and Lucas shall be
disregarded for the purposes of this clause 12.2.1 in the
first Agreement Year but if prices are so agreed between
Indiel and Lucas such prices shall remain fixed for a period
of 12 months notwithstanding the provisions of this clause
12.2;
12.2.2 each such increase shall be shown fairly and reasonably to
reflect any increase in the costs to Indiel of producing Lucas
Branded Products and supplying them to Lucas;
12.2.3 no increase shall affect any order placed by Lucas prior to
notice of such increase having been given;
12.2.4 no increase shall affect any orders placed by Lucas during
such 90 day period insofar as the aggregate number of units of
the Lucas Branded Products affected by the price increase does
not exceed the aggregate number of units of the same Lucas
Branded Products ordered in the 90 day period prior to Indiel
beginning to consult with Lucas about the price increase.
12.3 Notwithstanding the provisions of clause 12.2 Indiel shall be entitled
not earlier than 1st October 1999 and not later than 31st December
1999 to give written notice to Lucas (referring in such notice to this
clause 12.3) that in order to provide Indiel with a commercially
viable profit margin on Lucas Branded Products the prices for the same
will be increased with effect from 1st January 2001 by the amounts
stated in such notice. If Lucas is unwilling to pay such increased
prices or after negotiations in good faith between the parties any
alternative increased prices proposed by Indiel Lucas shall unless
Indiel and Lucas shall by then have determined that there shall not be
any increase in prices be entitled to give written notice to Indiel
not later than 31st March 2000 terminating this Agreement on 31st
December 2000. If Lucas shall not give such notice then the prices
specified by Indiel in its notice given to Lucas pursuant to this
clause 12.3 shall become effective from January 1st 2001, and such
prices shall be fixed until 31st December 2001 and thereafter may only
be increased by Indiel in accordance with the provisions of clause
12.2
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<PAGE>
12.4 Lucas shall pay for Lucas Branded Products in US Dollars within 120 days
from date of invoice which shall not be rendered prior to delivery of Lucas
Branded Products covered by the relevant invoice.
13. INDEMNITY
---------
Indiel will indemnify and hold Lucas harmless against all actions, claims,
costs, demands, expenses and liabilities in respect of any infringement of
the Intellectual Property Rights of any person (other than any Associated
Company of Lucas) made against incurred or suffered by Lucas resulting from
the sale by Lucas (a) of any Lucas Branded Products supplied by Indiel
during the Term or pursuant to clause 19.2.2 in the Aftermarket in the
Territory and (b) in the Reserved Territory after the end of the Trade Mark
Licence Period provided that such indemnity shall not apply to any such
actions, claims, costs, demands, expenses and liabilities (i) arising from
the use of the Trade Marks on Lucas Branded Products in accordance with the
relevant provisions of this Agreement and (ii) to the extent that the same
arise in relation to the design of any Lucas Branded Product in
circumstances where Indiel has not after the Commencement Date made any
change to such design or other aspect (including the re-sourcing of the
same) of the relevant Lucas Branded Product or any design made by Lucas or
by a third party at Lucas' instigation.
14. TRADE MARK PROVISIONS
---------------------
14.1 On the date of this Agreement Lucas will enter into the Trade Mark Licence
with Indiel for Indiel's use of the Trade Marks on Products other than
pursuant to the provisions of this Agreement.
14.2 Without prejudice to the provisions of the Trade Mark Licence, Indiel shall
not (whether during the Term or after the termination of this Agreement)
have any rights pursuant to or deriving from this Agreement to sell or
offer for sale any Lucas Branded Products other than to Lucas.
14.3 Indiel shall not use any of the Trade Marks for any purpose in relation to
the Products other than for labelling the same in accordance with clause
4.3 and in particular but
25
<PAGE>
without limiting the generality of the foregoing shall not use any of the
Trade Marks as the whole or part of a corporate or other business name.
14.4 Indiel agrees that the ownership of the Trade Marks and the goodwill
relating thereto shall always remain vested in Lucas, or a Lucas Associated
Company, both during the period of this Agreement and thereafter and that
nothing in this Agreement shall give Indiel any right, title or interest in
the Trade Marks.
14.5 Indiel undertakes not knowingly to do any act in relation to the use of the
Trade Marks pursuant to this Agreement which will invalidate or jeopardise
in any way the rights of any Lucas Associated Company in the Trade Marks.
14.6 Issues associated with marketing and distribution of Products in both
Lucas' branding and that of Indiel will be sought initially to be resolved
by the marketing/sales managers of both parties maintaining a continuing
dialogue in relation to marketing and distribution matters with a view to
avoidance of issues. Where the marketing/sales managers of the parties,
having tried, are unable to resolve any particular issue such issue shall
be referred by either of them to the managing directors of each of the
parties for resolution.
15. INSURANCE
---------
Without prejudice to the provisions of clause 9 Indiel will effect and
maintain or cause another Associated Company of Indiel to effect and
maintain for its and the Associated Company's benefit insurance in respect
of product liability for Lucas Branded Products manufactured and sold by
Indiel to Lucas in an amount equal to not less than US $10,000,000 for each
and every event and in the aggregate in any one year of insurance under
such policy and will at the request of Lucas from time to time during the
Term produce written evidence that such insurance is in force. Insofar as
and to the extent that Indiel or any such other Associated Company of
Indiel receives any proceeds of insurance in respect of a claim made by
Lucas in respect of Products supplied to Lucas pursuant to this Agreement
such proceeds shall be held on trust by Indiel or any such other Associated
Company of Indiel for Lucas, pro rata where the
26
<PAGE>
insurance proceeds recovered include monies in respect of claim(s) other
than Lucas' claim.
16. PRODUCTION AND SUPPLY PLAN
--------------------------
Prior to the commencement of each Agreement Year other than the first
Agreement Year Indiel and Lucas shall after discussion with each other and
exchange of relevant market information prepare and agree a production and
supply plan ("the Annual Plan") in respect of Lucas Branded Products for
such Agreement Year. Each such Annual Plan shall include estimates of
purchases in the relevant Agreement Year by Lucas from Indiel of Lucas
Branded Products and estimates by Indiel of planned dates for the
introduction of New Products and/or Improvements as well as additional
products intended to be added as additional Lucas Branded Products by
agreement.
17. CONFIDENTIALITY
---------------
Each party undertakes that it shall not, and shall ensure that its
employees and agents shall not, disclose, use or permit the use of any
confidential information disclosed to it by the other party except as may
be necessary for complying with its obligations under this Agreement and
then only in such a manner as to protect fully the confidentiality of such
confidential information. The obligations of non-disclosure by each party
shall continue to apply notwithstanding the termination of this Agreement
but shall not apply to any information which falls into the public domain
other than by breach of such obligation of non-disclosure. Registration
or notification of this Agreement with or to any regulatory authority shall
not be a breach of confidence for the purposes of this clause.
18. TERMINATION
-----------
18.1 A party shall be entitled to terminate this Agreement summarily by written
notice to the other party if the other party is:
18.1.1 in material breach of this Agreement and shall have failed to
remedy the breach within 3 (three) months after receipt of a
request in writing from the
27
<PAGE>
party not in breach to remedy the breach, such request indicating
that failure to remedy the breach may result in termination of this
Agreement;
18.1.2 insolvent or has a receiver, manager, administrator, administrative
receiver, liquidator (other than for the purposes of a solvent
reconstruction or amalgamation) (or a person of similar status in a
Country which has jurisdiction over such other party) appointed
over it or its undertaking assets or income or any part thereof.
18.2 In the event that any Force Majeure event or circumstance subsists for an
aggregate period of 180 days in any period of 365 days during the Term and
during the whole of such aggregate period supplies of Lucas Branded
Products are seriously affected (whether because Indiel is unable to
deliver or Lucas is unable to take delivery of the same) either Indiel or
Lucas shall be entitled to terminate this Agreement summarily by giving
written notice to the other provided that such notice may only be given at
a time when such Force Majeure event or circumstance subsists.
18.3 Lucas shall be entitled to terminate this Agreement summarily within 3
months of becoming aware of any change in the Controllers of:
(a) Indiel
(b) any direct or indirect holding company of Indiel or
(c) any subsidiary of any such holding company to which there has been a
Business Transfer pursuant to clause 21.1 without there being a
Business Transfer back in accordance with the provisions of such
clause
resulting in the new Controllers being a Lucas Competitor. Indiel
undertakes to notify Lucas in writing of any such change within 7 days of
the same occurring.
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<PAGE>
19. EFFECTS OF TERMINATION
----------------------
19.1 The termination of this Agreement will be without prejudice to the rights
and duties of either party accrued prior to termination. The clauses in
this Agreement which expressly or impliedly have effect after termination
will continue to be enforceable notwithstanding termination. Indiel will
honour any orders placed by Lucas prior to termination which have not been
performed at termination save where termination is effected by Indiel
pursuant to clause 18.1 or by either party pursuant to clause 18.2. Any
indemnities given in this Agreement will continue to apply notwithstanding
termination.
19.2 As from the date of termination Lucas will forthwith cease to hold itself
out as distributor for Indiel and Indiel will forthwith cease to hold
itself out as a manufacturer for Lucas in each case in respect of Lucas
Branded Products, provided always that following the termination of this
Agreement:
19.2.1 Lucas will be entitled to sell Lucas Branded Products held by it in
stock at termination or which are delivered thereafter by Indiel
pursuant to orders placed by Lucas prior to termination or which are
thereafter obtained by Lucas from any other source.
19.2.2 Indiel will be entitled to sell
(a) all Lucas Branded Products held by it in stock at termination;
or
(b) any Lucas Branded Products which are in the course of
manufacture and which are completed thereafter
provided in each case such sales of Lucas Branded Products shall be
to any Lucas authorised distributor or dealer in the Reserved
Territory and provided such sales are on normal terms and conditions
(including as to price) and are released on to the market in an
orderly way so as not to disrupt the same.
29
<PAGE>
19.3 Immediately following termination of this Agreement Indiel shall at its own
cost return to Lucas, unless the Trade Marks have been removed or
obliterated therefrom, all tools, dies, artwork and other similar equipment
and items which have prior to such termination been used by Indiel
exclusively for the purposes of branding the Lucas Branded Products, or
packaging relating thereto, with the Trade Marks.
19.4 Neither party shall be entitled to any compensation, indemnity or damages
on the termination of this Agreement for the loss of its rights under this
Agreement provided always that this clause shall (a) not exempt any party
from liability for a breach of this Agreement by that party which occurred
prior to termination; and (b) only apply to the extent permitted by
applicable law and which cannot be contracted out of under such applicable
law.
19.5 References in this clause 19 to "termination" mean termination howsoever
arising.
20. FORCE MAJEURE
-------------
Neither party shall be liable to the other for any failure or delay in
performing its obligations under this Agreement due to Force Majeure
provided always that:-
20.1 the date for performance of the contractual obligation which has been
delayed by Force Majeure shall be deemed suspended only for a period equal
to the delay thereby caused;
20.2 the party seeking to exempt itself from liability by virtue of the
provisions of this clause 20 shall give notice to the other party within 7
(seven) days of becoming aware of the Force Majeure event or circumstance
and of its consequences and shall at all times use all reasonable
endeavours to mitigate the severity of the same;
20.3 the party seeking to exempt itself from liability by virtue of the
provisions of this clause 20 shall not be entitled to payment from the
other party in respect of extra costs and expenses incurred by virtue of
the Force Majeure event or circumstance.
30
<PAGE>
21. ASSIGNMENT
----------
21.1 Neither Lucas nor Indiel will be entitled to assign the benefit or delegate
the burden of this Agreement without the prior written consent of the other
party. Each party hereby consents to a Business Transfer by the other under
clause 21.2 where the transferee in question is a 100% subsidiary of, or a
holding company holding 100% of the shares in, the party concerned or
another 100% subsidiary of such holding company, and the remainder of
clause 21.2 is complied with. If any such Business Transfer occurs and
subsequently, the holding company of any subsidiary to whom there has been
such Business Transfer proposes to enter into any transaction whereby such
holding company no longer has control over such subsidiary Indiel or Lucas
(as the case may be) or the relevant holding company shall procure that
(unless otherwise agreed by the other party hereto) there shall prior to
the proposed change of control of such subsidiary be a Business Transfer of
the whole of the business and assets of such subsidiary back to a company
in the same group of companies as such subsidiary prior to such proposed
change of control and the provisions of clause 21.2 shall apply mutatis
mutandis to such Business Transfer.
21.2 If either party shall during the Term sell or otherwise dispose of its
business and assets, or substantially the whole of its business and assets
(a "Business Transfer") and the other party shall consent to the assignment
to the transferee of the benefit of this Agreement pursuant to clause 21.1,
the party selling or disposing of its business and assets shall require
that the transferee of the same shall as a condition of such sale or other
disposal enter into a novation of this Agreement with the other party, the
form of such novation agreement to be in terms reasonably stipulated by the
other party and which shall require such transferee to covenant with the
other party to be bound by the terms of this Agreement.
21.3 Indiel shall not sub-contract or sub-license the manufacture of Lucas
Branded Products without the prior written consent of Lucas. If and to the
extent that such consent is given Indiel shall be liable for all acts and
omissions of any such sub-contractor or sub-licensee as though such acts or
omissions were acts and
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<PAGE>
omissions of Indiel. This clause 21.3 shall not prevent Indiel from sub-
contracting the manufacture of individual components or sub-assemblies
without consent.
21.4 This Agreement shall be binding on the successors and permitted assigns of
each of the respective parties.
21.5 Lucas shall have power to perform its covenants, to exercise its rights and
to accept benefits accruing to it under this Agreement through the agency
of any other Lucas Associated Company. Lucas nonetheless shall remain
liable for acts and omissions of any Lucas Associated Company who acts as
agent for Lucas pursuant to the foregoing provisions of this clause 21.5 as
though they were acts and omissions of Lucas. In relation to the
indemnities given in favour of Lucas in clauses 9 and 13 Lucas enters into
this Agreement not only for itself but also as trustee for all Associated
Companies of Lucas to the intent that each such Associated Company shall
have the benefit of such indemnities as if it was named in such clauses in
addition to Lucas.
22. SEVERABILITY
------------
The illegality, invalidity or unenforceability of any clause or part of
this Agreement will not affect the legality, validity or enforceability of
the remainder. If any such clause or part is found by any competent court
or competent authority to be illegal, invalid or unenforceable the parties
agree that they will substitute provisions whose effect is as similar to
the offending provisions as is possible without thereby rendering them
illegal, invalid or unenforceable.
23. ENTIRE AGREEMENT
----------------
23.1 This Agreement, and the documents referred to in it, contain the whole
agreement between the parties relating to the transactions contemplated by
this Agreement and supersede all previous agreements between the parties
relating to such transactions.
23.2 Each of the parties acknowledges that in agreeing to enter into this
Agreement it has not relied on any pre-contractual representations
warranties or other assurances in relation to the subject matter of this
Agreement except those set out in this Agreement
32
<PAGE>
but without prejudice to any representations, warranties or other
assurances given in any other agreement between the parties or between any
Associated Company of Lucas and Indiel or any Associated Company of the
Purchaser (as specified in the Share Sale and Purchase Agreement).
23.3 Each party hereby agrees that it shall have no remedy against the other
party for any innocent or negligent misrepresentations made by such other
party in relation to such transactions prior to this Agreement being
entered into except to the extent that the same shall have been
incorporated in this Agreement as a warranty representation or indemnity in
which case any claim in relation to the same shall lie only on the basis of
a breach of this Agreement or under the relevant indemnity provision.
24. VARIATIONS
----------
No variation to this Agreement shall be effective unless in writing signed
by a duly authorised representative of each of the parties hereto.
25. WAIVER
------
25.1 Failure to exercise or delay in exercising on the part of either party any
right, power or privilege of that party under this Agreement shall not in
any circumstances operate as a waiver thereof nor shall any single or
partial exercise of any right, power or privilege in any circumstances
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
25.2 Any waiver of a breach of any of the terms hereof or of any default
hereunder shall not be deemed a waiver of any subsequent breach or default
and shall in no way affect the other terms of this Agreement.
26. NOTICES
-------
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<PAGE>
Any demand, notice or communication in relation to this Agreement shall be
made in writing and served by hand, by registered airmail post, or by
facsimile transmission addressed to the recipient at its registered office
or its address stated below (or such other address or facsimile number as a
party may nominate in writing from time to time).
Indiel
------
Lucas Indiel Argentina S.A.
Calle 111 entre 3 y 1 bis
Parque Industrial Zona Norte 5700
San Luis (Pcia. San Luis) - C. Correo
572 Argentina
Attn: Managing Director
Facsimile: 0054 1454 5500
With a copy of the notice to be addressed to: "Managing Director and
Finance Director" Prestolite Electric Limited, Cleveland Road, Leyland,
Preston, Lancashire, PR5 1XB, England
Lucas
-----
Lucas Diesel do Brasil LTDA
Rodoria Raposo Tavares
KM30
Caixa Postal 14
06700-000 Cotia
Sao Paulo
Brasil
Attn: Managing Director
34
<PAGE>
Facsimile: 0055 11493 2026
With a copy of the notice to be sent to the Company Secretary of Lucas
Limited at Stratford Road, Solihull, West Midlands, B90 4LA, England.
27. LANGUAGE
--------
27.1 The English language version of this Agreement shall be the authoritative
version even though it may have been translated into some other language.
27.2 All communications between the parties shall unless otherwise agreed in
writing be in the English language.
28. ASSOCIATED COMPANY
------------------
Any act or omission of any Associated Company of Indiel or Lucas (as the
case may be) which if committed or omitted by Indiel or Lucas (as the case
may be) would have been a breach of this Agreement by Indiel or Lucas (as
the case may be) will be deemed to be a breach of this Agreement by Indiel
or Lucas (as the case may be) who will be liable to the other party
accordingly.
29. TERMS AND CONDITIONS OF SALE
----------------------------
29.1 The Conditions of Sale and the terms of this Agreement shall apply in
relation to the sale of Lucas Branded Products by Indiel to Lucas pursuant
to this Agreement which Conditions of Sale and the other provisions of this
Agreement shall apply to the exclusion of any terms and conditions of
purchase from time to time used by Lucas and to the exclusion of any terms
and conditions of sale from time to time used by Indiel, whether or not
such terms and conditions are endorsed upon or delivered with any document
sent by either party to the other from time to time. In the event of any
conflict between the terms of this Agreement and the Conditions of Sale,
the terms of this Agreement including clause 9, shall prevail.
29.2 Lucas acknowledges and agrees that to the extent that Lucas provides to its
customers product warranty commitments or other contractual promises or
terms which are more
35
<PAGE>
generous than those set out in the Product Warranty Lucas does so at its
own risk and cost and Indiel's obligations to Lucas under this Agreement
and the Conditions of Sale are not thereby affected or extended.
30. EXPENSES
--------
Except where otherwise expressly provided herein each party will bear its
own costs and expenses in relation to the preparation, completion and
operation of this Agreement.
31. APPLICABLE LAW
--------------
The formation, construction, performance, validity and all aspects
whatsoever of this Agreement shall be governed by the law of Argentina
without regard to the rules of such law relating to conflict of laws and
the parties submit to the non-exclusive jurisdiction of the Argentinian
Courts. Further, the parties agree that the United Nations Vienna
Convention on International Purchases and Sales shall not be applicable to
this Agreement.
36
<PAGE>
SIGNED by P. KIM PACKARD )
--------------
as attorney in fact for and on behalf of ) /s/ P. Kim Packard
------------------
LUCAS INDIEL ARGENTINA S.A. ) P. Kim Packard
- - - - - - - - - - - --------------------------- --------------
SIGNED by CHRIS LONG-LEATHER )
------------------
as attorney in fact for and on behalf of ) /s/ Chris Long-Leather
----------------------
LUCAS DIESEL DO BRASIL LTDA ) Chris Long-Leather
- - - - - - - - - - - --------------------------- ------------------
37
<PAGE>
EXHIBIT 10.15
DATED JANUARY 22, 1998
----------------------
(1) LUCAS INDUSTRIES PLC
(2) PRESTOLITE ELECTRIC LIMITED
________________________________
ACTON TRADE MARK LICENCE
________________________________
<PAGE>
THIS AGREEMENT is made the 22nd day of January 1998
BETWEEN:
(1) LUCAS INDUSTRIES PLC, an English Company whose registered office is at
--------------------
Stratford Road Solihull B90 4LA (Registered No 54802) ("the Grantor")
(2) PRESTOLITE ELECTRIC LIMITED whose registered office is at Cleveland Road
---------------------------
Leyland Preston Lancashire PR5 1XB ("the Licensee")
WHEREAS:
A. The Grantor owns certain registered trade marks in the Territory (as
defined below).
B. The Licensee wishes to use such registered trade marks in connection with
the business which it intends to carry on in succession to the Activity (as
defined in the Sale and Purchase Agreement (as defined below)).
NOW IT IS HEREBY AGREED as follows:
1. GENERAL
-------
1.1 Punctuation and headings used in this Agreement are for the purpose
of easy reference or reading only and shall not affect its
interpretation.
1.2 The Schedules form part of this Agreement and shall have the same
force and effect as if expressly set out in the body of this
Agreement.
1.3 Words used herein importing the singular number shall, where the
context so admits or requires, be deemed to include the plural and
vice versa.
1.4 References to "persons" shall include any person, firm, company,
association or body whether corporate or unincorporate.
1
<PAGE>
2. DEFINITIONS
-----------
In this Agreement the following words and phrases shall have the following
meanings unless the context clearly requires otherwise:
2.1 Aftermarket
-----------
"Aftermarket" shall mean the market for (a) spare and replacement
parts for components and sub-assemblies comprised within the
products of Original Equipment Manufacturers and (b) automotive
accessories, but excludes Original Equipment Service;
2.2 Agreement Year
--------------
"Agreement Year" shall mean:
2.2.1 the period from the Effective Date until 31st December 1998;
2.2.2 a period of twelve (12) months beginning on 1st January 1999
or on any 1st January in any year thereafter during the life
of this Agreement,
EXCEPT THAT should this Agreement terminate or expire on a day other
than 31st December in any year, the final 'Agreement Year' shall be
the period from the 1st January last preceding the day of
termination or expiry to the day of termination or expiry;
2.3 Associated Companies
--------------------
"Associated Company" shall mean any person which is either a direct
or indirect holding company or subsidiary of the relevant party or a
subsidiary of any such holding company or is otherwise directly or
indirectly controlled by, or is under the same control, direct or
indirect, as the relevant party from time to time and at the time
that
2
<PAGE>
the relevant clause in which such expression appears has
application, which where a claim is to be made under the relevant
clause shall mean when the cause of action accrued under such
clause; "holding company" and "subsidiary" shall have the meanings
given to those expressions in Section 736 of the Companies Act 1985;
2.4 Calendar Quarter
----------------
"Calendar Quarter" shall mean a three monthly period commencing on
the first day of any of the months of January April July and October
in any calendar year;
2.5 Cast
----
"Cast" shall mean cast, emboss, etch or otherwise permanently
incorporate and any cognate word shall be construed accordingly;
2.6 Control
-------
"Control" shall mean in relation to any person the power of any
other person or persons to secure by law or by corporate structure
that the affairs of the first person are conducted in accordance
with the wishes of that other person or persons, and any cognate
word shall be construed accordingly;
2.7 Country
-------
"Country" shall mean any country, state or principality and includes
any area or part of any of the same;
2.8 Effective Date
--------------
"Effective Date" shall mean the date hereof;
3
<PAGE>
2.9 Electrical Products
-------------------
"Electrical Products" shall mean those electrical products set out
in Part 1 of Schedule 1 and to the extent not included in Part 1 of
Schedule 1 those electrical products which fall within the type
numbers listed in Part 2 of Schedule 1 together with any Improvement
to the same and together with any electrical product hereafter
introduced by the Licensee with the prior written consent of the
Grantor (such consent not to be unreasonably withheld) as an infill
to any range of products of which an electrical product in Part 1
and Part 2 of Schedule 1 forms part;
2.10 Get Up
------
"Get-Up" shall mean the appearance of goods and/or their packaging,
including inter alia the size and shape of such packaging, the
materials, colour and decoration of the goods and their wrappers,
instructions for fitment and use and arrangement of their labels;
2.11 Grantor's Standards of Quality
------------------------------
"Grantor's Standards of Quality" shall mean the standards of quality
applying as at the date hereof to the manufacture of Products and
any reasonable standards specified or approved by the Grantor at any
time hereafter in connection with the quality of Marked Products;
2.12 Half-Year
---------
"Half-Year" shall mean a six month period commencing on 1st January
and 1st July in each calendar year;
2.13 Improvements
------------
4
<PAGE>
"Improvement" shall mean any invention, discovery or design
comprised within any change made at any time during the life of this
Agreement to any Product or its method of manufacture or use which
makes it of better quality or more efficient or adaptable or enables
it to be manufactured more cheaply or more efficiently;
2.14 In-Line Diesel Pumps
--------------------
"In-Line Diesel Pumps" shall mean those in-line diesel pumps set out
in Schedule 2 and to the extent not included in Schedule 2 those in-
line diesel known as Majormec, Maximec and Minimec together with any
Improvement to the same;
2.15 LND
---
"LND" shall mean a national distributor of Lucas Group products in a
Restricted Country.
2.16 Lucas Group
-----------
"Lucas Group" shall mean the Grantor and/or LucasVarity plc and/or
any company or person which is under the Control of LucasVarity plc
from time to time and at the time that the relevant clause in which
such expression appears has application, which where a claim is to
be made under the relevant clause shall mean when the cause of
action accrued under such clause;
2.17 Lucas Trade Marks
-----------------
"Lucas Trade Marks" shall mean (a) in relation to Products any one
or more of those trade marks details of which are set out in
Schedule 3 which are registered in the name of the Grantor and such
other registrations by the Grantor of the marks LUCAS and/or the
DIAGONAL DEVICE and/or CAV and/or the CAV device as are
5
<PAGE>
granted in the Territory during the Term which cover the Products or
some of them and which the Grantor shall stipulate in writing to the
Licensee shall become the subject of this Agreement and (b) in
relation to In-Line Diesel Pumps shall also include the trade mark
"Simms";
2.18 Marked Diesel Pump Products
---------------------------
"Marked Diesel Pump Products" shall mean In-Line Diesel Pumps
manufactured, assembled or sourced by the Licensee to which, or to
the packaging of which, the Lucas Trade Marks have been or are to be
applied;
2.19 Marked Electrical Products
--------------------------
"Marked Electrical Products" shall mean Electrical Products
manufactured, assembled or sourced by the Licensee to which, or to
the packaging of which, the Lucas Trade Marks have been or are to be
applied;
2.20 Marked Products
---------------
"Marked Products" shall mean Marked Diesel Pump Products and/or
Marked Electrical Products;
2.21 Market
------
"Market" shall mean the Aftermarket, the OES Market and the OE
Market;
2.22 Non-Exclusive Right
-------------------
"Non-Exclusive Right" shall mean a right and licence enjoyed by the
Licensee in common with the Grantor and all other persons to
6
<PAGE>
whom the Grantor has granted or the Grantor shall hereafter grant
the like right;
2.23 OE Market
---------
"OE Market" shall mean Original Equipment Manufacturers in their
capacity as buyers of Products for fitting as original equipment;
2.24 Original Equipment Manufacturer
-------------------------------
"Original Equipment Manufacturer" shall mean any manufacturer or
assembler of transport vehicles, engines or similar equipment
including, but not limited to, a manufacturer or assembler of motor
cars, vans, buses, coaches, forklifts, industrial vehicles, trucks,
tractors or marine, motive power or stationary engines or a
manufacturer of components or sub-assemblies to be fitted as
original equipment to such vehicles, engines or similar equipment;
2.25 Original Equipment Service or OES Market
----------------------------------------
"Original Equipment Service" or "OES Market" shall mean the market
for supplies of spare and replacement parts to any Original
Equipment Manufacturer other than for fitting as original equipment
or to any dealer of any Original Equipment Manufacturer in its
capacity as a dealer of such Original Equipment Manufacturer;
2.26 Other Applications
------------------
"Other Applications" shall mean any use of the Lucas Trade Marks in
relation to the Activity immediately prior to completion of the Sale
and Purchase Agreement in respect of any application whatsoever
other than on Products and Promotional Material;
7
<PAGE>
2.27 Products
--------
"Products" shall mean Electrical Products and/or In-Line Diesel
Pumps;
2.28 Promotional Material
--------------------
"Promotional Material" shall mean packaging, wrappers, leaflets,
brochures and other advertising material and instructions for
fitment and use relating to Marked Products;
2.29 Restricted Countries
--------------------
"Restricted Countries" shall mean any Country in the world other
than the UK;
2.30 Sale
----
"Sale" shall mean a sale or any other transaction by which the owner
of goods parts with the property in them or possession of them and
"Sell" and "Sold" shall have cognate meanings;
2.31 Sale and Purchase Agreement
---------------------------
"Sale and Purchase Agreement" shall mean the sale and purchase
agreement entered into between (1) Lucas Limited (2) the Licensee
and (3) the Grantor for the sale and purchase of the Activity and
Assets (as therein defined) dated with the same date as this
Agreement;
2.32 Supply Agreement
----------------
"Supply Agreement" shall mean an agreement between Lucas Limited and
the Licensee entered into on the same date as this Agreement for the
supply by the Licensee to Lucas Limited of In-
8
<PAGE>
Line Diesel Pumps;
2.33 Supply Agreement Term
---------------------
"Supply Agreement Term" shall mean the Term of the Supply Agreement
as defined therein;
2.34 Territory
---------
"Territory shall mean the UK and the Restricted Countries;
2.35 Transition Agreement
--------------------
"Transition Agreement" shall mean the agreement entered into on the
same date as this Agreement between Lucas Limited and the Licensee
entitled "LAO Sale and Transition Agreement";
2.36 Turnover
--------
"Turnover" shall mean the gross amount invoiced by the Licensee or
its Associated Companies in respect of Sales of Marked Products in
the Territory reduced only by (a) VAT and any other taxes and duties
for which the Licensee or any such Associated Company acts only as a
collecting agency and which are levied by the Government or other
competent taxing authorities in the Territory on the amount of such
Marked Products invoiced (b) carriage and freight charges shown
separately on such invoices and (c) discounts shown on such invoices
other than discounts for prompt payment;
2.37 UK
--
"UK" shall mean the United Kingdom of Great Britain and Northern
Ireland.
2.38 Umbrella Agreement
------------------
9
<PAGE>
"Umbrella Agreement" shall mean the agreement entered into between
(1) Lucas Limited (2) Lucas Industries plc (3) Lucas Diesel Do
Brasil Ltda (4) Prestolite Electric Limited (5) Prestolite Electric
Incorporated (6) PEI Holding Incorporated (7) Lucas Indiel Argentina
S.A. (8) Lucas Automotive (Pty) Limited and (9) Prestolite Newco
Incorporated having the same date as this Agreement.
3. GRANT AND DURATION
------------------
3.1 The Grantor with effect from the Effective Date grants to the
Licensee a Non-Exclusive Right to use the Lucas Trade Marks only on
Products manufactured and assembled in or, to the extent done at the
Commencement Date by the Activity, sourced from the UK for sale only
to (i) the OE Market in the Territory (ii) LNDs for the OES Market
and the Aftermarket in all Restricted Countries, or (iii) any
customer in the Market in the UK but limited to the respective
Products, markets and purposes set out in column 1 below for the
respective periods set opposite such respective Products, markets
and purposes in column 2 below:
Column 1 Column 2
(a) On labelling, Castings and From the Effective Date
Promotional Material for to 31st December
Electrical Products for the 1998
OE Market
(b) On labelling, Castings and From the Effective Date
Promotional Material for to 31st December
Electrical Products for the 1999
OES Market and the
10
<PAGE>
Aftermarket
(c) On In-Line Diesel Pumps During the Supply
for the OE Market and for Agreement Term, and,
supply to Lucas Limited in respect of any
pursuant to the Supply In-Line Diesel Pump
Agreement continued to be
manufactured by or on
behalf of the Licensee
and supplied to Lucas
Limited after the end
of the Supply Agreement
Term pursuant to the
Supply Agreement, for
the period of such
manufacture and supply
(d) In respect of Other 6 months from the
Applications Effective Date
The Grantor shall not derogate from the grant of the rights to the
Licensee under this clause 3.1 by exercising its trade mark rights
in any Country in the world.
3.2 The Licensee shall forthwith (1) on 31st December 1998 cease using
the Lucas Trade Marks on labelling, Castings and Promotional
Material for Electrical Products for the OE Market, (2) on 31st
December 1999 cease using the Lucas Trade Marks on labelling,
Castings and Promotional Material for Electrical Products for the
OES Market and the Aftermarket, (3) when the Licensee has ceased
11
<PAGE>
to supply Lucas Limited with In-Line Diesel Pumps pursuant to the
Supply Agreement, cease using the Lucas Trade Marks for In-Line
Diesel Pumps if so required by the Grantor and (4) on the expiration
of six months from the Effective Date cease using the Lucas Trade
Marks for Other Applications. The Licensee shall ensure that on the
respective date(s) or on the expiration of the respective periods
the Lucas Trade Marks are removed or obliterated in relation to the
relevant part of the Market from the Products and Promotional
Material and in the case of Other Applications from all buildings,
vehicles and other things (other than Products and Promotional
Material). The provisions of clause 11.2 shall apply when all rights
granted to the Licensee under this Agreement are exhausted.
3.3 Subject to compliance by the Licensee with the terms of this
Agreement the Grantor shall not hereafter grant to a third party any
right in relation to the Lucas Trade Marks:
3.3.1 during the Supply Agreement Term for In-Line Diesel Pumps
save as may be required to source In-Line Diesel Pumps from
a third party as permitted by the Supply Agreement;
3.3.2 during the period from the Effective Date until 31st
December 1999 for Electrical Products
in either case that corresponds with a right granted to the Licensee
hereunder provided that notwithstanding the foregoing provisions of
this clause 3.3 the Grantor shall for the purpose of this Agreement
but not so as to vary in any way any provision of the Umbrella
Agreement be entitled to grant the Non-Exclusive Right to the use of
the Trade Marks on goods equivalent to Products and/or Promotional
Material therefor (a) to a purchaser hereafter of any
12
<PAGE>
business within the Lucas Group in respect of which business such
Trade Marks are currently so used or (b) for the purposes of
sourcing any new or remanufactured starter motors and alternators
from any third party to the extent to which Lucas and any company in
the Lucas Group are not prohibited from selling such starter motors
and alternators under the terms of the Umbrella Agreement.
3.4 Notwithstanding the rights granted to the Licensee under clause 3.1
the Licensee shall if it requires to produce or have produced
Promotional Material additional to that acquired by the Licensee
under the Sale and Purchase Agreement or the Transition Agreement
obtain the Grantor's prior written consent to the manner of
depiction of the Lucas Trade Marks thereon (such consent not to be
unreasonably withheld).
4. LICENSEE'S COVENANTS
--------------------
The Licensee covenants with the Grantor as provided in the following sub-
clauses of this clause 4:
4.1 Use of Marks
------------
4.1.1 The Licensee shall not use any of the Lucas Trade Marks for
any purpose or for any period beyond the scope of the
licence granted by clause 3 and in particular but without
limiting the generality of the foregoing shall not use any
of the Lucas Trade Marks as the whole or part of a corporate
or other business name or in relation to Products which do
not comply with the Grantor's Standards of Quality;
4.1.2 Without prejudice to clause 3.1, the Licensee shall not save
in relation to sales to the OE Market (i) actively
13
<PAGE>
seek to sell Marked Products to a customer other than an LND
in, or for delivery in those Restricted Countries which are
in the European Union or EFTA or (ii) sell Marked Products
in any other Restricted Country other than to an LND,
otherwise than in either case with the prior written consent
of the Grantor;
4.1.3 the Licensee shall not apply any trade mark, whether
registered or unregistered belonging or licensed to the
Licensee or any Associated Company of the Licensee, to In-
Line Diesel Pumps otherwise than with the prior written
consent of the Grantor provided that the provisions of this
clause 4.1.3 shall cease to apply:
4.1.3.1 if and to the extent that the Licensee becomes
entitled pursuant to clause 3.2.2 or 3.2.3 of the
Supply Agreement to access the Market (as therein
defined); or
4.1.3.2 where the benefit of the Supply Agreement is
assigned to a third party (not being a 100%
subsidiary of the Licensee or a holding company
holding 100% of the shares in the Licensee or
another 100% subsidiary of such holding company) in
accordance with the terms of the Supply Agreement.
4.2 Observe Laws and Quality Standard
---------------------------------
14
<PAGE>
The Licensee shall observe any laws and regulations affecting
Products in the Territory and shall comply with the Grantor's
Standards of Quality and in particular:
4.2.1 shall use the Lucas Trade Marks only in the form and manner
directed or approved in writing by the Grantor and shall
ensure that all Get-Up and Promotional Material in respect
of Marked Products shall only be in forms approved in
writing by the Grantor and in connection therewith shall
permit inspection by the Grantor's authorised
representatives at any reasonable time by prior arrangement
of the operations, manufacture, storage, and transport of
the Products of or by the Licensee or any sub-contractor of
the Licensee;
4.2.2 in order to enable the Grantor to approve standards of
quality of Marked Products, shall deposit with the Grantor
at the Licensee's own expense and at the Grantor's request a
few samples of the Marked Products as the Grantor may
reasonably require from time to time;
4.2.3 in the event that there is any change in the characteristics
or quality of the Marked Products, shall, before commencing
commercial production of the changed Marked Products,
deposit with the Grantor at the Licensee's own expense and
at the Grantor's request a few samples of the changed Marked
Products as the Grantor may reasonably require from time to
time.
15
<PAGE>
4.3 Remedy Defects
--------------
If at any time any Marked Products or the Get-Up or Promotional
Material do not comply insofar as is material and recognising that
from time to time Marked Products may occasionally be made which are
defective, comply with the Grantor's Standards of Quality the
Grantor may give notice in writing of its dissatisfaction and
require the Licensee to take such remedial action as the Grantor may
reasonably direct. If within a period of thirty (30) days after
receipt of such notice the Licensee has not taken such remedial
action to the Grantor's reasonable satisfaction the Grantor shall
provide to the Licensee in writing full particulars of those matters
which the Grantor reasonably considers still do not comply with the
Grantor's Standards of Quality and stating that if by the expiration
of a further 30 days the Grantor shall not have issued a letter
confirming its satisfaction with the Licensee's remedial action then
the Licensee will cease to have the right to use the Lucas Trade
Marks pursuant to this Agreement on the Products in respect of which
the Grantor's is still not so satisfied and undertakes thereupon to
discontinue the Sale or offering for Sale of such Marked Products in
the Territory.
4.4 Confusing Marks
---------------
The Licensee shall not use in its business in relation to Products
or any other products any other trade marks or devices so resembling
the Lucas Trade Marks as to be likely to cause confusion or
deception.
4.5 Royalties
---------
In respect of the use of the Lucas Trade Marks on Marked Products
Sold by the Licensee or its Associated Companies to the markets or
for the purpose set out in column 1 below a royalty of the
percentage
16
<PAGE>
rate specified in column 2 below shall be paid by the Licensee to
the Grantor in respect of Products invoiced during the period
specified in column 3 below:
<TABLE>
<CAPTION>
Column 1 Column 2 Column 3
-------- -------- --------
Market/Purpose Royalty Period
-------------- ------- ------
Rate
----
<S> <C> <C>
(a) Electrical Products Nil From the Effective Date
for the OE Market, until 31st December
the OES Market 1998
and the Aftermarket
(b) Electrical Products 3% From 1st January 1999
for the OES to 31st December 1999
Market and the
Aftermarket
(c) In-Line Diesel Nil From the Effective Date
Pumps for the OE to 31st December 2002
Market
(d) In-Line Diesel 1% From 1st January 2003
Pumps for the OE until the Licensee
Market ceases to use the Lucas
Trade Marks for the OE
Market
(e) Other Applications Nil Six months from the
Effective Date
</TABLE>
17
<PAGE>
Where royalty is payable the amount to be paid will be such amounts
as after the deduction of all charges and taxes (other than
withholding tax lawfully imposed in the Territory) applicable
thereto in the Territory will leave in the hands of the Grantor the
relevant percentage of the Turnover of the relevant Products.
4.6 Records
-------
The Licensee shall keep at its usual place of business separate
records containing details of all Sales of Marked Products in each
Agreement Year and shall at the end of each Agreement Year and on
termination of this Agreement (howsoever arising) produce such
records to the duly authorised agents of the Grantor and permit them
to inspect the same and take copies thereof.
18
<PAGE>
4.7 Render Reports and Pay
----------------------
In respect of periods where no royalty is payable the Licensee shall
within 30 days of the end of each Half Year, and in respect of the
period where royalty is payable the Licensee shall within 30 days of
the end of each Calendar Quarter, deliver to the Grantor a complete
statement and account in writing of the Turnover during the
preceding Half Year or Calendar Quarter (as the case may be) and of
all royalties (where applicable) payable to the Grantor in respect
thereof and shall ensure that such statement is accompanied by
payment (if any) of the royalties shown thereon to be due.
4.8 Interest
--------
The Licensee shall pay interest to the Grantor on all overdue
amounts payable hereunder, such interest to be calculated and
compounded on a daily basis from the date when payment was due
(being the last day in the relevant month) at the annual rate of
four per centum (4%) above the base lending rate of Barclays Bank
plc until payment is made in full both before or after any
judgement.
4.9 Payment Disputes
----------------
In the event of any dispute between the Grantor and the Licensee as
to the amount of royalty due to the Grantor hereunder the Licensee
shall pay such sums as are not in dispute and shall pay the
remainder as soon as the amount has been agreed with the Grantor or
determined by judgement no longer subject to appeal together with
the interest calculated in accordance with the provisions of sub-
clause 4.8.
19
<PAGE>
4.10 Authority to Make Payment
-------------------------
4.10.1 If the Licensee is prohibited from making any of the
payments hereunder reserved without appropriate governmental
or other similar authority then the Licensee will within the
time for making the said payments commence and diligently
pursue all necessary steps to secure from the proper
authorities permission to make the said payments including
all and any interest due thereon and will make such payments
within seven (7) days of receiving such permission.
4.10.2 If however the Grantor shall have requested the Licensee so
to make the said payments notwithstanding the said
prohibition then the Licensee shall (so far as the same may
be lawful) pay the sums due into a bank account at a bank
nominated by the Grantor until such time as the said
prohibition is removed whereupon the Licensee shall
forthwith take all steps required of it by the Grantor so as
to facilitate the remittance of all such sums including all
and any interest due thereon to the Grantor.
4.11 Independent Contractor and Risk
-------------------------------
4.11.1 All aspects of the manufacture, use and Sale of Marked
Products by the Licensee shall be at the Licensee's risk and
for the Licensee's account and the Licensee shall act as an
independent contractor and the Licensee shall indemnify and
hold the Grantor harmless against all actions, claims,
demands, costs, charges, expenses and liability arising out
of or in connection with the
20
<PAGE>
manufacture use or Sale or offer of Sale of Marked Products
other than the Sale or offer of Sale of Products to any
member of the Lucas Group but without prejudice to the
rights of such member under any other agreement with the
Licensee or at law and save that such indemnity shall not
apply to the extent that any such action, claim, demand,
cost, charge, expense or liability arises out of a defect in
a Product design made by Lucas or made by a third party at
Lucas' instigation.
4.11.2 The Licensee shall effect and maintain or cause another
Associated Company to effect and maintain for its and any
Associated Company's benefit full product liability
insurance relating to Marked Products with a reputable
insurer in an amount equal to not less than US$10,000,000
for each and every event and in the aggregate in any one
year of insurance under such policy and shall provide to the
Grantor on request a copy of the policy and proof of the
payment of premiums.
21
<PAGE>
5. MAINTAIN REGISTRATION
---------------------
5.1 Nothing in this Agreement shall oblige the Grantor to defend any
proceedings for the revocation of registration of any of the Lucas
Trade Marks nor to bring any proceedings against an infringer of the
Lucas Trade Marks, but should the Grantor decide in its absolute
discretion to defend or take any such proceedings it shall do so at
its own cost. The Licensee shall in any case execute all documents
and do all things reasonably necessary at the Grantor's expense to
enable the Grantor to pursue any such proceedings provided that the
Licensee shall not be required to be joined as a party to any such
proceedings.
5.2 The Licensee shall comply with applicable laws of the Territory as
to the registration and usage of trade marks in order to maintain
the validity of the registration of the Lucas Trade Marks in the
Territory and to make the provisions of this Agreement valid between
the parties hereto and against third parties but nothing in this
clause 5.2 shall require the Licensee to pay any renewal fees in
relation to the Lucas Trade Marks.
5.3 The Grantor and the Licensee shall, if it is necessary to do so in
order to protect the registration of the same, if the Grantor so
requires, use all reasonable endeavours to have the Licensee
recorded as the licensee of the Lucas Trade Marks at the trade marks
registries where the Lucas Trade Marks are registered and the
Licensee shall, where it is so necessary, at the request of the
Grantor execute all documents, including a short form of this
Agreement. All costs incurred under the provisions of this clause
5.3 will be shared equally by the Grantor and the Licensee.
22
<PAGE>
5.4 The Licensee or the Grantor shall be entitled to notify the
registration or other applicable authorities in the Territory of the
expiry or termination of this Agreement when this occurs.
6. OWNERSHIP OF TRADE MARKS
------------------------
6.1 The Licensee agrees that the ownership of the Lucas Trade Marks and
the goodwill relating thereto shall as between the Grantor and the
Licensee always remain vested in the Grantor both during the period
of this Agreement and thereafter and that nothing herein shall give
to the Licensee any right, title or interest in the Lucas Trade
Marks except the Non Exclusive Right to use the Lucas Trade Marks in
accordance with the terms of this Agreement.
6.2 The Licensee undertakes not knowingly to do any act in relation to
the use of the Lucas Trade Marks pursuant to this Agreement which
will invalidate or jeopardise in any way the Grantor's rights in the
Lucas Trade Marks.
7. GRANTOR'S WARRANTY
------------------
The Grantor warrants that it does not know of any present or proposed
proceedings in the Territory concerning the Trade Marks but it does not
warrant that any Marked Products manufactured, used, Sold or offered for
Sale will not infringe the rights of others.
8. ASSIGNMENT
----------
8.1 The Licensee shall not have the power at any time to assign this
Agreement or to grant any sub-licence hereunder or in any way charge
mortgage or deal with all or any of the rights hereby granted.
8.2 The Grantor shall have power to perform its covenants, to exercise
its rights and to accept benefits accruing to it under this
Agreement
23
<PAGE>
through the agency of any other company in the Lucas Group.
References in this Agreement to the "Grantor" include its successors
and assigns.
9. SUPERVENING LAWS AND FORCE MAJEURE
----------------------------------
9.1 The rights and obligations of the parties under this Agreement shall
be subject to all applicable laws orders regulations directions
restrictions and limitations of governments or other bodies having
jurisdiction over the parties hereto.
9.2 If any such other law order regulation direction restriction or
limitation as aforesaid or any treaty or other international
agreement or the judicial construction of any of them shall after
the date of the execution hereof substantially alter the
relationship between the parties or the advantages derived from such
relationship then the parties shall on request from the adversely
affected party enter into bona fide negotiations directed towards
agreeing a modification to this Agreement to restore the situation
if practicable or to compensate for such alteration.
9.3 If there is any total or partial failure of performance hereunder by
either party occasioned by strikes, lockouts, combinations of
workmen or any cause whatsoever reasonably beyond the control of the
party thereby affected then once the cause has been notified by that
party to the other such failure shall not be deemed to be a breach
of this Agreement which shall continue in suspense or part
performance for the period during which such cause exists. If such
suspension or partial performance exists for a period of more than
six (6) months and substantially affects the operation of this
Agreement then the party not claiming relief under this clause shall
be at liberty to terminate this Agreement on giving to the other no
24
<PAGE>
less than forty-five (45) days written notice of its intention to do
so and this Agreement shall terminate on expiration of such notice.
10. TERMINATION
-----------
10.1 The Grantor may terminate this Agreement summarily by written notice
to the Licensee if:
10.1.1 the Licensee passes a resolution for its winding up, or an
order is made for its winding up, or if a receiver or
administrator is appointed over its assets undertaking or
income or any part thereof, or the Licensee is otherwise
unable to pay its debts as they fall due or calls a meeting
formal or informal of its creditors or anything similar or
analogous happens to the Licensee in the Territory; or
10.1.2 the Licensee fails to pay any sum due to the Grantor under
this Agreement within 7 days of written demand being made by
the Grantor; or
10.1.3 the Licensee assigns or sub-licences this Agreement or
purports so to do; or
10.1.4 Control of the Licensee or any holding company of the
Licensee is acquired by any person, or any Associated
Company of such person, named in Schedule 4 in which event
the Grantor shall be entitled to give notice of termination
within 3 months of becoming aware of such change of Control,
the Company undertaking to notify the Grantor in writing of
such change within 7 days of the same occurring; or
25
<PAGE>
10.1.5 the Licensee commits a material breach of this Agreement
(other than failure to pay any sum due to the Grantor
hereunder) and fails to remedy it or to pay adequate
compensation if the breach cannot be remedied in either case
within thirty (30) days of being required to do so by the
Grantor; or
10.1.6 the Licensee challenges, contests or calls in question the
ownership of the Lucas Trade Marks; or
10.1.7 the Licensee ceases permanently to use the Lucas Trade Marks
on any Electrical Product and the Licensee shall be deemed
to have so ceased if during any Agreement Year (other than
by reason of clause 9.3) no Electrical Products are Sold in
any Calendar Quarter, the Licensee undertaking to notify the
Grantor in writing of such circumstance within 14 days of
the end of the Calendar Quarter in question.
11. RESIDUAL RIGHTS AND OBLIGATIONS
-------------------------------
11.1 Termination of this Agreement shall be without prejudice to any
rights of either party against the other arising out of events
occurring on or before the date of such termination.
11.2 Upon termination or expiry of this Agreement the Licensee will
forthwith return to the Grantor at the Licensee's expense all loose
labels bearing the Lucas Trade Marks and, unless the Lucas Trade
Marks have been removed or obliterated therefrom, all stencils,
casts, dies, presses, screens and other tools and equipment in its
possession used for applying the Lucas Trade Marks so far as they
have been used exclusively for that purpose and will remove or
obliterate all such labels and other references to the Lucas Trade
26
<PAGE>
Marks already affixed to Products and shall cease to use the Lucas
Trade Marks in any way including without limitation in respect of
Promotional Material.
11.3 The obligation on the Licensee to indemnify the Grantor set out in
clause 4.11.1 shall continue indefinitely after termination or
expiry but except as set out in the preceding part of this clause
11, all rights and duties of the parties under this Agreement shall
cease on its termination unless expressly indicated to the contrary.
11.4 References in this clause 11 to "termination" mean termination
howsoever arising.
12. NOTICES
-------
All notices, reports, requests, consents and statements allowed or required
to be given hereunder must be in writing in the English language and be
delivered by hand or despatched by registered mail, or facsimile to the
addresses shown below (provided that in the case of despatch by facsimile
proof of correct transmission must be obtained at the time of despatch). A
party may change its address by giving notice in writing to the other of
such change. A notice served by hand, or by confirmed facsimile shall be
deemed to be received at the moment of transmission; a notice served by
mail shall be deemed to be received on the fifth day after it has been
despatched to the recipient party
Grantor: Lucas Industries plc
Stratford Road
Solihull
West Midlands B90 4LA
For the attention of the Company Secretary
Fax No: 0121 627 4003
27
<PAGE>
Licensee: Prestolite Electric Limited
Cleveland Road
Leyland
Preston
Lancashire PR5 1XB
Addressed "For the attention of Managing Director and Finance
Director"
Fax No: 0177 242 1663
13. PLACE OF PAYMENT
----------------
Any sums due and payable hereunder by the Licensee shall be remitted by the
Licensee and paid in pounds sterling into the Grantor's account named Lucas
Limited - Lucas Aftermarket Operations No 1 Account numbered 10990876
at Barclays Bank plc of 118 High Street, Newcastle Under Lyme,
Staffordshire, Sort Code 20-59-23 or to such other account of the Grantor
notified to the Licensee from time to time.
14. ACTIONS FOR INFRINGEMENT
------------------------
14.1 The parties shall notify each other of any infringement within the
Territory of any of the Lucas Trade Marks or any passing off coming
to their notice and shall consult with each other about what to do
to deal with such infringements or passing off.
14.2 The Grantor shall have the conduct of all proceedings relating to
the Lucas Trade Marks and the Licensee shall not be entitled to
bring any action for infringement of the Lucas Trade Marks without
the prior written consent of the Grantor.
14.3 The Licensee shall promptly report to the Grantor particulars of any
use by any other person of a trade name, trade mark or Get-Up of
28
<PAGE>
goods or mode of advertising which could deceive or could be
calculated to deceive members of the trade or public into thinking
that such goods are or could be associated with, or could harm trade
in Marked Products Sold in the Territory.
14.4 The Grantor shall have the right (at its own expense) to bring legal
proceedings to prevent any person using any of the Lucas Trade Marks
in the Territory other than the Licensee in accordance with this
Agreement. The Licensee will at the Grantor's request, cost and
expense do all things reasonably necessary to assist the Grantor in
such proceedings. Any monies received by the Grantor in any such
legal action instituted by it whether such monies be received by way
of damages or legal costs or otherwise shall belong solely to the
Grantor and the Licensee shall otherwise have no right to share in
any part of the same.
15. MISCELLANEOUS
-------------
15.1 This Agreement shall not be varied amended or supplemented except by
instrument in writing executed by the duly authorised
representatives of the parties.
15.2 The failure of any party hereto at any time to enforce the terms
provisions or conditions of this Agreement shall not be construed as
a waiver of the same or of the right of such party to enforce the
same.
15.3 Each undertaking in this Agreement shall be construed as a separate
undertaking and if one or more of the undertakings contained in this
Agreement is found to be unenforceable or in any way an unreasonable
restraint of trade the remaining undertakings shall continue to bind
the parties.
29
<PAGE>
16. LANGUAGE AND LAW
----------------
This Agreement shall be governed English law and each party agrees to
submit to the exclusive jurisdiction of the English Courts as regards any
claim or matter arising under this Agreement.
30
<PAGE>
SIGNED by CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
- - - - - - - - - - - ------ ------------------ ----------------------
as duly authorised attorney for and ) Chris Long-Leather as
---------------------
on behalf of LUCAS INDUSTRIES PLC ) attorney of Lucas Industries plc
-------------------- --------------------
SIGNED by P. KIM PACKARD ) /s/ P. Kim Packard
- - - - - - - - - - - ------ -------------- ------------------
duly authorised for and on behalf of) Director
--------
PRESTOLITE ELECTRIC LIMITED )
- - - - - - - - - - - ---------------------------
31
<PAGE>
EXHIBIT 10.16
DATED JANUARY 22, 1998
----------------------
(1) LUCAS INDUSTRIES PLC
(2) LUCAS INDIEL ARGENTINA S.A.
________________________________
TRADE MARK LICENCE
ARGENTINA
________________________________
<PAGE>
THIS AGREEMENT is made the 22nd day of January, 1998
BETWEEN LUCAS INDUSTRIES PLC, an English Company whose registered office is at
Stratford Road Solihull B90 4LA (Registered No 54802) ("the Grantor") of the
one part and LUCAS INDIEL ARGENTINA S.A. of Calle III entre 3y l bis - Parque
Industrial Zona Norte 5700 San Luis (Pcia San Luis) - C.Correro 572 Argentina
("the Licensee") of the other part.
WHEREAS:
A. The Grantor owns certain trade marks in the Territory (as defined below).
B. The Licensee wishes to use such trade marks in connection with the Products
(as defined below).
NOW IT IS HEREBY AGREED as follows:
1. GENERAL
- - - - - - - - - - - -- -------
1.1 Punctuation and headings used in this Agreement are for the
purpose of easy reference or reading only and shall not affect
its interpretation.
1.2 The Schedules form part of this Agreement and shall have the same
force and effect as if expressly set out in the body of this
Agreement.
1.3 Words used herein importing the singular number shall, where the
context so admits or requires, be deemed to include the plural
and vice versa.
1
<PAGE>
1.4 References to "persons" shall include any person, firm, company,
association or body whether corporate or unincorporate.
2. DEFINITIONS
-----------
In this Agreement the following words and phrases shall have the
following meanings unless the context clearly requires otherwise:
2.1 Aftermarket
-----------
"Aftermarket" shall mean the market for (a) spare and
replacement parts for components and sub-assemblies comprised
within products of Original Equipment Manufacturers and (b)
automotive accessories but excludes Original Equipment Service;
2.2 Agreement Year
--------------
"Agreement Year" shall mean:
2.2.1 the period from the Effective Date until 31st December
1998;
2.2.2 every period of twelve (12) months beginning on 1st
January 1999 or on any 1st January in any year
thereafter during the life of this Agreement,
EXCEPT THAT should this Agreement terminate or expire on a day
other than 31st December in any year the final "Agreement Year"
shall be the period from 1st January last preceding the day of
termination or expiry to the day of termination or expiry;
2
<PAGE>
2.3 Argentinean Distribution Agreement
----------------------------------
"Argentinean Distribution Agreement" shall mean the agreement
made between Lucas Limited and Lucas Indiel Argentina S.A. and
having the same date as this Agreement;
2.4 Argentinean Supply and Distribution Agreement
---------------------------------------------
"Argentinean Supply and Distribution Agreement" shall mean the
agreement made between Lucas Indiel Argentina S.A and Lucas do
Brasil Ltda and having the same date as this Agreement;
2.5 Associated Companies
--------------------
"Associated Companies" shall mean any person which is either a
direct or indirect parent company or a subsidiary of the relevant
party or a subsidiary company of any such parent company or is
otherwise directly or indirectly controlled by, or is under the
same control, direct or indirect, as the relevant party from time
to time and at the time that the relevant clause in which such
expression appears has application, which where a claim is to be
made under the relevant clause shall mean when the cause of action
accrued under such clause;
2.6 Calendar Quarter
----------------
"Calendar Quarter" shall mean a three monthly period commencing on
the first day of any of the months of January April July and
October in any calendar year;
3
<PAGE>
2.7 Control
-------
"Control" shall mean in relation to any person the power of any
other person or persons to secure by law or by corporate structure
that the affairs of the first person are conducted in accordance
with the wishes of that other person or persons, and any cognate
word shall be construed accordingly;
2.8 Effective Date
--------------
"Effective Date" shall mean the date hereof;
2.9 Get Up
------
"Get-Up" shall mean the appearance of goods and/or their
packaging, including inter alia the size and shape of such
packaging, the materials, colour and decoration of the goods and
their wrappers, instructions for fitment and use and arrangement
of their labels;
2.10 Grantor's Standards of Quality
------------------------------
"Grantor's Standards of Quality" shall mean the standards of
quality applying at the date hereof to the manufacture of Products
and any reasonable standards specified or approved by the Grantor
at any time hereafter in connection with the quality of Marked
Products;
2.11 Half-Year
---------
"Half-Year" shall mean a six month period commencing on 1st
January and 1st July in each calendar year;
4
<PAGE>
2.12 Lucas Group
-----------
"Lucas Group" shall mean the Grantor and LucasVarity plc and any
company or person which is under the Control of LucasVarity plc from
time to time and at the time that the relevant clause in which such
expression appears has application, which where a claim is to be
made under the relevant clause shall mean when the cause of action
accrued under such clause;
2.13 Marked Products
---------------
"Marked Products" shall mean Products manufactured or assembled or
sourced by the Licensee to which, or to the packaging of which, the
Trade Marks have been applied;
2.14 Non-Exclusive Right
-------------------
"Non-Exclusive Right" shall mean a right and licence enjoyed by the
Licensee in common with the Grantor and all other persons to whom
the Grantor has granted or the Grantor shall hereafter grant the
like right;
2.15 OE Market
---------
"OE Market" shall mean Original Equipment Manufacturers and Original
Equipment Service;
2.16 Original Equipment Manufacturer
-------------------------------
"Original Equipment Manufacturer" shall mean any manufacturer or
assembler of transport vehicles, engines or similar equipment
including, but not limited to, a manufacturer or assembler of motor
cars, vans, buses, coaches, forklifts, industrial vehicles, trucks,
tractors or marine, motive power or stationary engines or a
5
<PAGE>
manufacturer of components or sub-assemblies to be fitted as
original equipment to such vehicles, engines or similar equipment;
2.17 Original Equipment Service
--------------------------
"Original Equipment Service" shall mean the market for supplies of
spare and replacement parts to any Original Equipment Manufacturers
other than for fitting as original equipment or to any dealer of any
Original Equipment Manufacturer in its capacity as a dealer of such
Original Equipment Manufacturer;
2.18 Other Applications
------------------
"Other Applications" shall mean any use of the Trade Marks as at and
prior to the Effective Date by the Licensee in respect of any
application whatsoever other than on Products and Promotional
Material;
2.19 Products
--------
"Products" shall mean those products more particularly described and
set out in Schedule 1 together with any other product hereafter
introduced by the Licensee with the prior written consent of the
Grantor (such consent not to be unreasonably withheld) as an infill
to any range of products of which a Product in Schedule 1 forms
part;
6
<PAGE>
2.20 Promotional Material
--------------------
"Promotional Material" shall mean packaging, wrappers, leaflets,
brochures and other advertising material and instructions for
fitment and use relating to Marked Products;
2.21 Sale
----
"Sale" shall mean a sale or any other transaction by which the owner
of goods parts with the property in them or possession of them and
"Sell" and "Sold" shall have cognate meanings;
2.22 Sale and Purchase Agreement
---------------------------
"Sale and Purchase Agreement" shall mean the sale and purchase
agreement entered into between (1) the Grantor and (2) Prestolite
Electric Incorporated and (3) Prestolite Newco Incorporated for the
sale and purchase of the share capital of the Licensee dated with
the same date as this Agreement;
2.23 The Territory
-------------
"The Territory" shall mean Argentina;
2.24 The Trade Marks
---------------
"The Trade Marks" shall mean any one or more of the marks details of
which are set out in Schedule 2 and such other registrations by the
Grantor of the mark LUCAS and the DIAGONAL DEVICE as are granted in
the Territory during the continuance of this Agreement which cover
the Products or some of them and which the Grantor shall stipulate
in writing to the Licensee shall become the subject of this
Agreement;
7
<PAGE>
2.25 Turnover
--------
"Turnover" shall mean the gross amount invoiced by the Licensee or
its Associated Companies for Marked Products reduced only by (a)
those taxes and duties for which the Licensee or such Associated
Companies act only as a collecting agency and which are levied by
the Government or other competent taxing authorities in the
Territory on the amount of such Marked Products invoiced and (b)
carriage and freight charges shown separately on such invoices and
(c) discounts shown on such invoice other than any discount for
prompt payment.
3. GRANT AND DURATION
3.1 The Grantor with effect from theEffective Date grants to the Licensee
a Non-Exclusive Right to use the Trade Marks in the Territory for the
markets and purposes set out in column 1 below for the period set
opposite such markets and purposes in column 2 below:
<TABLE>
<CAPTION>
<S> <C>
Column 1 Column 2
--------- -------------
On Products and Promotional Material From the Effective Date
for Products for the OE Market in the until 31st December 1998
Territory
On Products and Promotional From the Effective Date until 31st
Material for Products December 2001
for the Aftermarket in the Territory
In respect of Other Applications 6 months from the Effective Date
</TABLE>
8
<PAGE>
3.2 Subject to earlier termination under clause 10 this Agreement shall
expire on 31st December 2001.
3.3 The Licensee shall forthwith (1) on 31st December 1998 cease using
the Trade Marks on Products and Promotional Material for Products
for the OE Market in the Territory, (2) on 31st December 2001 cease
using the Trade Marks on Products and Promotional Material for
Products for the Aftermarket in the Territory (3) on the expiration
of six months from the Effective Date ensure that the Trade Marks
cease to be used for Other Applications. The Licensee shall ensure
that on the expiration of the respective periods the Trade Marks are
removed or obliterated in the case of the OE Market and the
Aftermarket from the Products and Promotional Material, and in the
case of Other Applications from all buildings, vehicles and other
things (other than Products and Promotional Material). The
provisions of clause 11.2 shall apply on the expiry or earlier
termination of this Agreement.
3.4 The Grantor confirms to the Licensee that the Grantor has not prior
to the date hereof granted to any other person any Non-Exclusive
Right to use the Trade Marks in the Territory in relation to any
goods which are equivalent to the Products and the Grantor will not
do so for as long as the Licensee shall not be in breach of the
provisions of this Agreement and in that event will not do so
without first discussing its intention to do so with the Licensee
provided that notwithstanding the foregoing provisions of this
clause 3.4 the Grantor shall be entitled to grant a Non-Exclusive
Right to the use of the Trade Marks to
3.4.1 a third party in the event that (i) the Grantor terminates
the Argentinean Distribution Agreement in accordance
9
<PAGE>
with its terms, or (ii) the Licensee no longer has the right
to be the exclusive distributor in the Territory of the
Grantor's products (as defined in this Argentinean
Distribution Agreement) pursuant to clause 6.3 of the
Argentinean Distribution Agreement and the Grantor wishes to
appoint such third party as a new or additional distributor
in the Territory provided that in either of these
circumstances the rights to be granted to such third party in
respect of the Trade Marks shall only be in relation to the
products as defined in the Argentinean Distribution
Agreement; or
3.4.2 a third party in the Territory from whom Lucas sources
products as defined in and the subject of the Argentinean
Supply and Distribution Agreement in circumstances where
under the terms of the Argentinean Supply and Distribution
Agreement Lucas has the express right to source such products
other than from the Licensee provided that in such
circumstances the rights granted to such third party in
respect of the Trade Marks shall be in relation to such
products only and such rights granted shall only subsist
while Lucas is entitled so to source from such third party;
or
3.4.3 a purchaser hereafter of any business within the Lucas Group
in respect of which business such Trade Marks are currently
so used.
3.5 If the Licensee at any time during the life of this Agreement wishes
to acquire and distribute in the Territory any alternator or starter
motor manufactured by Lucas Automotive (Pty) Limited ("Pty")
10
<PAGE>
which, or the promotional material relating to which, bear the trade
marks LUCAS and/or the Lucas Diagonal Device and which Pty is at the
relevant time licensed by the Grantor to use in relation to any such
alternator or starter motor the Licensee shall apply to the Grantor
for its prior written consent to such acquisition and distribution
which shall not be unreasonably withheld. The Grantor shall be
entitled to withhold such consent if at the time of seeking such
consent (a) Pty shall not be an Associated Company of the Licensee
or (b) both Pty and the Licensee shall not be under the Control
direct or indirect of PEI Holding Incorporated. If such consent is
given it shall be deemed withdrawn forthwith if (a) Pty shall at any
time cease to be an Associated Company of the Licensee or (b) at any
time both the Licensee and Pty are not under the Control direct or
indirect of PEI Holding Incorporated. Any such alternator or starter
motor or promotional material relating to the same shall on such
acquisition by the Licensee be deemed to be Products, Marked
Products and Promotional Material for the purposes of this Agreement
and dealt with as such and the earlier provisions of this clause 3
shall apply to them.
3.6 For the purposes of clause 4.1.2 but only while any consent given by
the Grantor pursuant to clause 3.5 remains in effect, the Grantor
agrees that the Licensee may Sell or offer for Sale Marked Products
to Pty and ship the same and any Promotional Material to Pty so that
Pty may sell and distribute the same pursuant to and in accordance
with any subsisting trade mark licence rights granted to it by the
Grantor.
11
<PAGE>
4. LICENSEE'S COVENANTS
--------------------
The Licensee covenants with the Grantor as provided in the following
sub-clauses of this clause 4:
4.1 Use of Marks
------------
The Licensee shall not use any of the Trade Marks for any
purpose or for any period beyond the scope of the licence
granted by clause 3 and in particular but without limiting the
generality of the foregoing:
4.1.1 shall not use any of the Trade Marks as the whole or
part of a corporate or other business name or in
relation to Products which do not comply with the
Grantor's Standards of Quality;
4.1.2 shall not Sell or offer for Sale Marked Products to a
customer or for delivery outside the Territory or to any
person within the Territory who the Licensee knows or
has good reason to believe intends to Sell Marked
Products to a customer or for delivery outside of the
Territory, otherwise than with the prior written consent
of the Grantor.
4.2 Observe Laws and Quality Standard
---------------------------------
The Licensee shall observe any laws and regulations affecting
Products in the Territory and shall comply with the Grantor's
Standards of Quality and in particular:
12
<PAGE>
4.2.1 shall use the Trade Marks only in the form and manner
directed or approved in writing by the Grantor and shall
ensure that all Get-Up and Promotional Material in
respect of Marked Products shall only be in forms
approved in writing by the Grantor and in connection
therewith shall permit inspection by the Grantor's
authorised representatives at any reasonable time by
prior arrangement of the operations, manufacture,
storage, and transport of the Products of or by the
Licensee or any sub-contractor of the Licensee;
4.2.2 in order to enable the Grantor to approve standards of
quality of Marked Products, shall deposit with the
Grantor at the Licensee's own expense and at the
Grantor's request a few samples of the Marked Products
as the Grantor may reasonably require from time to time;
4.2.3 in the event that there is any change in the
characteristics or quality of the Marked Products,
shall, before commencing commercial production of the
changed Marked Products, deposit with the Grantor at the
Licensee's own expense and at the Grantor's request a
few samples of the changed Marked Products as the
Grantor may reasonably require from time to time.
4.3 Remedy Defects
--------------
If at any time any Marked Products or the Get-Up or Promotional
Material do not, insofar as is material and recognising that
from time to time Marked Products may occasionally be made
which are
13
<PAGE>
defective, comply with the Grantor's Standards of
Quality the Grantor may give notice in writing of its
dissatisfaction and require the Licensee to take such remedial
action as the Grantor may reasonably direct. If within a period
of thirty (30) days after receipt of such notice the Licensee
has not taken such remedial action to the Grantor's reasonable
satisfaction the Grantor shall provide to the Licensee in
writing full particulars of those matters which the Grantor
reasonably considers still do not comply with the Grantor's
Standards of Quality and stating that if by the expiration of a
further 30 days the Grantor shall not have issued a letter
confirming its satisfaction with the Licensee's remedial action
then the Licensee will be in material breach of this Agreement;
4.4 Confusing Marks
----------------
The Licensee shall not use in its business in relation to
Products or any other products any other trade marks or
devices so resembling the Trade Marks as to be likely to cause
confusion or deception;
4.5 Royalties
---------
In respect of the use of the Trade Marks on Marked Products
(including those deemed to be Marked Products under clause 3.5
but so that Pty shall not be liable for royalty in respect of
the self same Products under Pty's trade mark licence rights)
Sold by the Licensee or its Associated Companies to the
markets or for the purpose set out in column 1 below a royalty
of the percentage rate specified in column 2 below shall be
paid by the Licensee in respect of Products invoiced during
the period specified in column 3 below:
Column 1 Column 2 Column 3
Market/Purpose Royalty Rate Period
-------------- ------------ ------
14
<PAGE>
<TABLE>
<S> <C> <C> <C>
OE Market in the Nil From the
Territory Effective Date
until 31st
December 1998
Aftermarket in the Nil From the
Territory Effective Date
until 31st
December 2000
Aftermarket in the 3% From 1st January
Territory 2001 to 31st
December 2001
Other Applications Nil Six months from
the Effective
Date
</TABLE>
No royalty shall be payable by the Licensee (a) in respect of the
Sale of Marked Products which are sourced by the Licensee from the
Lucas Group and (b) in respect of any Sale to Pty of alternators or
starter motors to which, or to the packaging of which, the Trade
Marks have been applied lawfully pursuant to this Agreement but so
that Pty shall be liable for any royalty in respect of the self same
Products under Pty's trade mark licence rights.
Where royalty is payable the amount to be paid will be such amounts
as after the deduction of all charges and taxes (other than
withholding tax lawfully imposed in the Territory) applicable
thereto in the Territory leave in the hands of the Grantor 3% of the
Turnover of such Products.
4.6 Records
-------
The Licensee shall keep at its usual place of business separate
records containing details of all Sales of Marked Products in each
Agreement Year and shall at the end of each Agreement Year and on
termination of this Agreement (howsoever arising) produce such
records to the duly authorised agents of the Grantor and permit them
to inspect the same and take copies thereof;
15
<PAGE>
4.7 Render Reports and Pay
----------------------
In respect of periods where no royalty is payable the Licensee shall
within 30 days of the end of each Half Year, and in respect of the
period where royalty is payable the Licensee shall within 30 days of
the end of each Calendar Quarter, deliver to the Grantor a complete
statement and account in writing of the Turnover during the
preceding Half Year or Calendar Quarter (as the case may be) and of
all royalties (where applicable) payable to the Grantor in respect
thereof and shall ensure that such statement is accompanied by
payment of the royalties shown (if any) thereon to be due;
4.8 Interest
--------
The Licensee shall pay interest to the Grantor on all overdue
amounts payable hereunder, such interest to be calculated and
compounded on a daily basis from the date when payment was due
(being the last day in the relevant month) at the annual rate of
four per centum (4%) above the base lending rate of Barclays Bank
plc in England until payment is made in full both before or after
any award or judgement;
4.9 Payment Disputes
----------------
In the event of any dispute between the Grantor and the Licensee as
to the amount of royalty due to the Grantor hereunder the Licensee
shall pay such sums as are not in dispute and shall pay the
remainder as soon as the amount has been agreed with the Grantor or
determined by award or judgement no longer subject to appeal
together with the interest calculated in accordance with the
provisions of sub-clause 4.8;
16
<PAGE>
4.10 Authority to Make Payment
-------------------------
4.10.1 If the Licensee is prohibited from making any of the
payments hereunder reserved without appropriate authority
then the Licensee will within the time for making the said
payments commence and diligently pursue all necessary steps
to secure from the proper authorities in the Territory
permission to make the said payments including all and any
interest due thereon and will make such payments within
seven (7) days of receiving such permission;
4.10.2 If however the Grantor shall have requested the Licensee so
to make the said payments notwithstanding the said
prohibition then the Licensee shall so far as the same may
be lawful pay the sums due into a bank account at a bank in
the Territory nominated by the Grantor until such time as
the said prohibition is removed whereupon the Licensee shall
forthwith take all steps required of it by the Grantor so as
to facilitate the remittance of all such sums including all
and any interest due thereon to the Grantor;
4.10.3 If the Licensee is prohibited from making any of the
payments due to the Grantor hereunder for two consecutive
Calendar Quarters the Grantor shall be entitled to terminate
this Agreement at any time after the end of the second
Calendar Quarter while any part of such payments remain
unpaid.
17
<PAGE>
4.11 Independent Contractor and Risk
-------------------------------
4.11.1 All aspects of the manufacture use and Sale of Marked
Products by the Licensee shall be at the Licensee's risk
and for the Licensee's account and the Licensee shall act
as an independent contractor and the Licensee shall
indemnify and hold the Grantor harmless against all actions
claims demands costs charges expenses and liability arising
out of or in connection with the manufacture use or Sale or
offer of Sale of Marked Products other than the Sale or
offer of Sale of Products to any member of the Lucas Group
but without prejudice to the rights of any such member
under any other agreement with the Licensee or at law and
save that such indemnity shall not apply to the extent that
any such action claim demand cost charge expense or
liability arises out of a defect in a Product design made
by Lucas or made by a third party at Lucas' instigation.
4.11.2 The Licensee shall effect and maintain or cause another
Associated Company of the Licensee to effect and maintain
for its and the Associated Company's benefit full product
liability insurance relating to Marked Products with a
reputable insurer in an amount equal to not less than
US$10,000,000 for each and every event and in the aggregate
in any one year of insurance under such policy and shall
provide to the Grantor on request a copy of the policy and
proof of the payment of premiums.
18
<PAGE>
4.12 Local Laws
----------
The Licensee shall keep the Grantor informed of all laws,
orders or regulations made at any time by the Government or
any public or local authority within the Territory in any
way adversely affecting or in the Licensee's opinion likely
to adversely affect the terms of this Agreement or the
manufacture or Sale of Marked Products in the Territory.
5. MAINTAIN REGISTRATION
---------------------
5.1 Nothing in this Agreement shall oblige the Grantor to defend any
proceedings for the revocation of registration any of the Trade
Marks nor to bring any proceedings against an infringer of the
Trade Marks but should the Grantor decide that in order that
this Agreement may remain valid under the law of Argentina, or
otherwise in its absolute discretion, to defend or take any such
proceedings it shall do so at its own cost. The Licensee shall
in any case execute all documents and do all things reasonably
necessary at the Grantor's expense to enable the Grantor to
pursue any such proceedings provided that the Licensee shall not
be required to be joined as a party to any such proceedings.
5.2 The Licensee shall comply with applicable laws of the Territory
as to the registration and usage of trade marks which is
required in order to maintain the validity of the same and to
make the provisions of this Agreement valid between the parties
hereto and against third parties but nothing in this clause 5.2
shall require the Licensee to pay any renewal fees in relation
to the Trade Marks.
5.3 The Grantor and the Licensee shall if it is necessary to do so
in order to protect the registration of the Trade Marks use all
reasonable
19
<PAGE>
endeavours to have the Licensee recorded as the licensee
of the Trade Marks at the trade marks registry in the
Territory where the Trade Marks are registered and the Licensee
will, at the request of the Grantor execute all documents,
including a short form of this Agreement. All costs incurred
under the provisions of this clause 5.3 will be shared equally
by the Grantor and the Licensee.
5.4 The Licensee or the Grantor shall be entitled to notify the
registration or other authorities in the Territory of the expiry
or termination of this Agreement when this occurs.
6. OWNERSHIP OF TRADE MARKS
------------------------
6.1 The Licensee agrees that the ownership of the Trade Marks and
the goodwill relating thereto shall always remain vested in the
Grantor both during the period of this Agreement and thereafter
and that nothing herein shall give to the Licensee any right,
title or interest in the Trade Marks except the Non Exclusive
Right to use the Trade Marks in accordance with the terms of
this Agreement.
6.2 The Licensee undertakes not knowingly to do any act in relation
to the use of the Trade Marks pursuant to this Agreement which
will invalidate or jeopardise in any way the Grantor's rights in
the Trade Marks.
7. GRANTOR'S WARRANTY
------------------
The Grantor warrants that it does not know of any present or proposed
proceedings in the Territory concerning the Trade Marks but it does not
warrant that any Marked Products Sold or offered for Sale will not
infringe the rights of others.
20
<PAGE>
8. ASSIGNMENT
----------
8.1 The Licensee shall not have the power at any time to assign this
Agreement or to grant any sub-licence hereunder or in any way
charge mortgage or deal with all or any of the rights hereby
granted.
8.2 The Grantor shall have power to perform its covenants, to exercise
its rights and to accept benefits accruing to it under this
Agreement through the agency of any other company in the Lucas
Group. References in this Agreement to the "Grantor" include its
successors and assigns.
9. SUPERVENING LAWS AND FORCE MAJEURE
----------------------------------
9.1 The rights and obligations of the parties under this Agreement
shall be subject to all applicable laws orders regulations
directions restrictions and limitations of governments or other
bodies having jurisdiction over the parties hereto.
9.2 If any such other law order regulation direction restriction or
limitation as aforesaid or any treaty or other international
agreement or the judicial construction of any of them shall after
the date of the execution hereof substantially alter the
relationship between the parties or the advantages derived from
such relationship then the parties shall on request from the
adversely affected party enter into bona fide negotiations directed
towards agreeing a modification to this Agreement to restore the
situation if practicable or to compensate for such alteration.
9.3 If there is any total or partial failure of performance hereunder
by either party occasioned by strikes, lockouts, combinations of
workmen or any cause whatsoever reasonably beyond the control of
the party thereby affected then once the cause has been notified by
21
<PAGE>
that party to the other such failure shall not be deemed to be a
breach of this Agreement which shall continue in suspense or part
performance for the period during which such cause exists. If such
suspension or partial performance exists for a period of more than
six (6) months and substantially affects the operation of this
Agreement then the party not claiming relief under this clause
shall be at liberty to terminate this Agreement on giving to the
other no less than forty-five (45) days written notice of its
intention to do so and this Agreement shall terminate on expiration
of such notice.
10. TERMINATION
-----------
10.1 The Grantor may terminate this Agreement summarily by written
notice to the Licensee if:
10.1.1 the Licensee passes a resolution for its winding up, or
an order is made for its winding up, or if a receiver or
administrator is appointed over its assets undertaking or
income or any part thereof, or the Licensee is otherwise
unable to pay its debts as they fall due or calls a
meeting formal or informal of its creditors or anything
similar or analogous happens to the Licensee in the
Territory; or
10.1.2 the Licensee fails to pay any sum due to the Grantor
under this Agreement within 7 days of written demand
being made by the Grantor; or
10.1.3 the Licensee assigns or sub-licences this Agreement or
purports so to do; or
10.1.4 Control of the Licensee or any direct or indirect parent
company of the Licensee is acquired by any person, or
22
<PAGE>
any Associated Company of such person, named in Schedule
3 in which event the Grantor shall be entitled to give
notice of termination within 3 months of becoming aware
of such change of Control, the Licensee undertaking to
notify the Grantor in writing of such change within 7
days of the same occurring; or
10.1.5 the Licensee commits a material breach of this Agreement
and fails to remedy it or to pay adequate compensation if
the breach cannot be remedied in either case within
thirty (30) days of being required to do so by the
Grantor; or
10.1.6 the Licensee challenges, contests or calls in question
the ownership of the Trade Marks; or
10.1.7 the Licensee ceases permanently to use the Trade Marks on
any Product and the Licensee shall be deemed to have so
ceased if during any Agreement Year (other than by reason
of clause 9.3) no Marked Products are Sold in any
Calendar Quarter, the Licensee undertaking to notify the
Grantor in writing of such circumstance within 14 days of
the end of the Calendar Quarter in question.
11. RESIDUAL RIGHTS AND OBLIGATIONS
-------------------------------
11.1 Termination of this Agreement shall be without prejudice to any
rights of either party against the other arising out of events
occurring on or before the date of such termination.
11.2 Upon termination or expiry of this Agreement the Licensee will
forthwith return to the Grantor at the Licensee's expense all
loose
23
<PAGE>
labels bearing the Trade Marks and, unless the Trade Marks
have been removed or obliterated therefrom, all stencils, casts,
dies, presses, screens and other tools and equipment in its
possession used for applying the Trade Marks so far as they have
been used exclusively for that purpose and will remove or
obliterate all such labels and other references to the Trade
Marks already affixed to Products and shall cease to use the
Trade Marks in any way including without limitation in respect of
Promotional Material.
11.3 The obligation on the Licensee to indemnify the Grantor set out
in sub-clause 4.11.1 shall continue indefinitely after
termination or expiry but except as set out in the preceding part
of this clause 11, all rights and duties of the parties under
this Agreement shall cease on its termination.
11.4 References in this clause 11 to "termination" mean termination
howsoever arising.
12. NOTICES
-------
All notices, reports, request, consents and statements allowed or
required to be given hereunder must be in writing in the English
language and be delivered by hand or despatched by registered mail, or
facsimile to the addresses shown below (provided that in the case of
despatch by facsimile proof of correct transmission must be obtained at
the time of despatch). A party may change its address by giving notice
in writing to the other of such change. A notice served by hand, or by
confirmed facsimile shall be deemed to be received at the moment of
transmission; a notice served by mail shall be deemed to be received on
the fifth day after it has been despatched to the recipient party
24
<PAGE>
Grantor: Lucas Industries plc
Stratford Road
Solihull
West Midlands B90 4LA
England
For the attention of: the Company Secretary
Fax No: 0121 627 4003
Licensee: Lucas Indiel Argentina S.A.
Calle 111 entre 3 y 1 bis
Parque Industrial Zone Norte
5700 San Luis
(Pcia. San Luis)
C. Correro 572
Argentina
Fax No: 0054 1454 5500
with a copy of the notice to be addressed to Managing Director
and Finance Director Prestolite Electric Limited Cleveland Road
Leyland Preston Lancashire PR5 1XB England
13. CURRENCY
--------
13.1 Any sums due and payable hereunder by a Licensee shall be
remitted by an authorised bank in the territory of the Licensee
and paid in US Dollars into the Grantor's account named Lucas
Limited - Lucas Aftermarket Operation No. 1 Account 10990876 at
Barclays Bank plc of 118 High Street, Newcastle Under Lyme,
Staffordshire
25
<PAGE>
Branch Sort Code 20-59-23 or to such other account of the
Grantor notified to the Licensee.
13.2 The conversion rate of one currency to any other currency shall
be at the official rate of the Central Bank in the Territory at
the close of business on, or (if such day shall not be a
business day of such Central Bank) on the business day last
preceding:
13.2.1 the date of authorisation in the case of any payment
which requires individual government authorisation, or
13.2.2 the date upon which payment becomes due in the case of
any royalty payment or interest thereon which does not
require individual government authorisation, or
13.2.3 the last day of the period in the case of any other
payment becoming due under this Agreement which does
not require individual government authorisation
14. ACTIONS FOR INFRINGEMENT
------------------------
14.1 The parties shall notify each other of any infringement within
the Territory of any of the Trade Marks or any passing off
coming to their notice and shall consult with each other about
what to do to deal with such infringements or passing off.
14.2 The Grantor shall have the conduct of all proceedings relating
to the Trade Marks and the Licensee shall not be entitled to
bring any action for infringement of the Trade Marks without
the prior written consent of the Grantor.
14.3 The Licensee shall promptly report to the Grantor particulars
of any use by any other person of a trade name, trade mark or
Get-Up of goods or mode of advertising which could deceive or
could be
26
<PAGE>
calculated to deceive members of the trade or public into
thinking that such goods are or could be associated with, or
could harm trade in Marked Products Sold in the Territory.
14.4 The Grantor shall have the right (at its own expense) to bring
legal proceedings to prevent any person using any of the Trade
Marks in the Territory other than the Licensee in accordance
with this Agreement. The Licensee will at the Grantor's request
cost and expense do all things reasonably necessary to assist
the Grantor in such proceedings. Any monies received by the
Grantor in any such legal action instituted by it whether such
monies be received by way of damages or legal costs or
otherwise shall belong solely to the Grantor and the Licensee
shall otherwise have no right to share in any part of the same.
15. MISCELLANEOUS
-------------
15.1 This Agreement shall not be varied amended or supplemented
except by instrument in writing executed by the duly authorised
representatives of the parties.
15.2 The failure of any party hereto at any time to enforce the terms
provisions or conditions of this Agreement shall not be
construed as a waiver of the same or of the right of such party
to enforce the same.
15.3 Each undertaking in this Agreement shall be construed as a
separate undertaking and if one or more of the undertakings
contained in this Agreement is found to be unenforceable or in
any way an unreasonable restraint of trade the remaining
undertakings shall continue to bind the parties.
27
<PAGE>
16. LANGUAGE AND LAW
----------------
This Agreement is written in the English language and any differences as to
the construction and interpretation thereof shall be resolved in accordance
with English law and each party agrees to submit to the non-exclusive
jurisdiction of the English Courts as regards any claim or matter arising
under this Agreement.
28
<PAGE>
SIGNED by CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
- - - - - - - - - - - ------ ------------------ ----------------------
as duly authorised attorney for and ) Chris Long-Leather as
----------------------
on behalf of LUCAS INDUSTRIES PLC ) attorney of Lucas Industries plc
-------------------- --------------------------------
SIGNED by P. KIM PACKARD )
- - - - - - - - - - - ------ --------------
as attorney in fact for and on behalf of ) /s/ P. Kim Packard
------------------
LUCAS INDIEL ARGENTINA S.A. )
- - - - - - - - - - - ---------------------------
29
<PAGE>
EXHIBIT 10.17
DATE January 22, 1998
----------------------
(1) LUCAS LIMITED
(2) PRESTOLITE ELECTRIC LIMITED
_________________________________
LAO SALE AND TRANSITION AGREEMENT
_________________________________
relating to Acton
<PAGE>
THIS AGREEMENT is made on 22/nd/ day of January 1998
- - - - - - - - - - - --------------
BETWEEN:-
- - - - - - - - - - - -------
(1) LUCAS LIMITED ("Lucas") trading as Lucas Aftermarket Operations ("LAO")
-------------
whose registered office is at Stratford Road, Solihull, West Midlands
B90 4LA;
(2) PRESTOLITE ELECTRIC LIMITED whose registered office is at Cleveland
---------------------------
Road, Leyland, Preston, Lancashire PR5 1XB ("the Company")
RECITALS
- - - - - - - - - - - --------
(A) The Company has acquired from Lucas, inter alia, the business of the
development design manufacture and assembly of the Products (defined in
Clause 1) which have hitherto been distributed in the Market (defined in
Clause 1) by LAO, a division of Lucas.
(B) Lucas is in possession of the LAO Stock (defined in clause 1) for
distribution to the Market and has agreed to sell the same together with
the LAO Assets (defined in clause 1) to the Company on the terms and
conditions set out in this Agreement.
(C) The Company intends to take over distribution of the Products to the
Market in place of LAO but is not in a position to do so at the date
hereof without the risk that such distribution would be disrupted and
accordingly the Company has agreed to appoint Lucas as its agent for the
sale of the Products during a transitional period, and Lucas has agreed
to act as the Company's agent, on the terms set out in this Agreement.
(D) The provisions of Part I of this Agreement apply to the sale and
purchase of the LAO Activity and the LAO Assets, the provisions of Part
II apply to the Transitional Arrangements (defined in clause 1) and the
provisions of clause 1 and Part III apply to the whole of this
Agreement.
NOW IT IS AGREED as follows:
- - - - - - - - - - - ----------------
1
<PAGE>
1. DEFINITIONS
-----------
In this Agreement:-
1.1 the following words and expressions shall have the following meanings
except where inconsistent with the subject matter or context:-
"Accounting Policies" means the accounting policies and
principles relating to the LAO Stock
set out in Schedule 1
"Acton Sale and Purchase means an agreement made on the date
Agreement" hereof between the parties hereto and
Lucas Industries plc entitled the
"Acton Sale and Purchase Agreement"
"Aftermarket" means the market for (a) spare and
replacement parts for components or
sub-assemblies comprised within the
products of Original Equipment
Manufacturers and (b) automotive
accessories but excludes Original
Equipment Service
"Aftermarket Stock" means that part of the LAO Stock as
consists of Products for the
Aftermarket
"Aftermarket Transfer Date" means 27th November 1998
"Ancillary Agreements" means those agreements details of
which are listed in Schedule 2
"Associated Company" means any person which is either a
holding company (whether direct or
2
<PAGE>
indirect) or a subsidiary company of
the relevant party or a subsidiary
company of any such holding company
or is otherwise directly or
indirectly controlled by, or is under
the same control, direct or indirect,
as the relevant party from time to
time and at the time that the
relevant clause in which such
expression appears has application
"Commencement Date" means the date hereof
"Completed Contracts" means any contract, order, call off
or other arrangement for the supply
of goods by Lucas (or by any other
Lucas Group Company as agent or
trustee for Lucas) in relation to the
LAO Activity, whether or not made
pursuant to an Excluded Contract (but
excluding the Excluded Contract
itself)
i) pursuant to which the supply of
the relevant goods was completed
prior to the date hereof and in
respect of which any warranty
guarantee maintenance or similar
obligation liability or commitment (a
"Product Warranty") given by Lucas
remains outstanding and has
3
<PAGE>
not expired; or
ii) pursuant to which the supply of
the relevant goods has been completed
and under which the customer has
prior to the date hereof made a claim
against Lucas under any Product
Warranty relating to such goods
"Contracts" means any or all of the Completed
Contracts, the Customer Contracts and
the Supplier Contracts but excludes
all other contracts and arrangements
relating to the LAO Activity
including:-
i) the Excluded Contracts; and
ii) contracts of employment of any
employees of Lucas or of any Lucas
Group Company
"control" means in relation to any person the
power of any other person or persons
to secure by law or by corporate
structure that the affairs of the
first person are conducted in
accordance with the wishes of that
other person or persons, and any
cognate word shall be construed
accordingly
4
<PAGE>
"Controllers" means persons able to decide or
influence the management or policies
of the relevant company in any
material respect including (without
prejudice to the generality of the
foregoing) any of the following from
time to time: its owners, its
directors, any of its partners or any
majority of its shareholders
"customer" means a buyer whether such buyer is
an end user, retailer, wholesaler,
distributor, dealer or otherwise
including the MOD, persons buying as
Original Equipment Service and the
Lucas Network
"the Customer Contracts" means all current contracts, orders,
calls off and other arrangements
entered into or taken by Lucas or by
any other Lucas Group Company as
agent or trustee for Lucas relating
to the sale of Products as part of
the LAO Activity (or where any such
current contracts, orders, calls off
and arrangements relate in part only
to such Products then such part shall
be deemed to be included within the
definition) entered into before the
close of business on the date hereof
and
5
<PAGE>
which at such close remain (in
whole or in part) to be performed by
Lucas or any other Lucas Group
Company, including those entered into
with the MOD and with customers in
Original Equipment Service
"Encumbrance" means any interest, equity or claim
of any person (including, without
prejudice to the generality of the
foregoing, any right to acquire,
option or right of pre-emption) or
any mortgage, charge, pledge, lien,
assignment, hypothecation, security
interest (including any created by
law) or any other security agreement
or arrangement
"Excluded Contracts" means:
(a) any distribution, agency,
marketing, sales representation,
franchise or similar agreement
relating to Products sold by LAO
which has been made by Lucas, or by
any other Lucas Group Company as
agent or trustee for Lucas, with
another person including any member
of the Lucas
6
<PAGE>
Network; and
(b) any contract, order, call off or
other arrangement primarily for
the supply of services by or to
Lucas (or by or to any other
Lucas Group Company as agent or
trustee for Lucas) in relation
to the LAO Activity
"Force Majeure" means any event or circumstance of
the following kinds which is beyond
the reasonable control of the party
in question: governmental actions,
war, riots, civil commotion, fire,
flood, tempests or other extreme
weather conditions, epidemics, acts
of terrorism, bombings, explosions,
acts of God, other natural disasters
or any event or circumstance similar
in nature to the foregoing
"Fradley Warehouse" means Lucas' warehouse premises at
Fradley, Staffordshire
"the Goodwill" means the goodwill (subject to clause
2.2) of Lucas in connection with the
LAO Activity
"holding company" has the meaning given in Section 736
of the Companies Act 1985 as
7
<PAGE>
amended
"Incremental Cost" means in relation to any repair or
replacement product or (as the case
may be) packaging of a product, the
cost of performing such repair or
replacing such product or (as the
case may be) packaging of such
product which shall not for the
avoidance of doubt include an
apportionment of any fixed cost or
overhead for which the Company would
have been liable or incurred had it
not been obliged to carry out such
repair or replacement (less the net
scrap or core value (as appropriate)
of the replaced product or as the
case may be materials actually
recovered by the Company after
allowing for all costs of recovery)
or (as the case may be) packaging of
the product
"Intellectual Property Rights" means any patent, copyright,
registered design, design right,
trade mark, topography, know-how or
similar property or right by whatever
name it is called and in whatever
country it is registered or subsists
"LAO Activity" means the operations carried on
8
<PAGE>
now and prior to the date hereof by LAO
in relation to the distribution to the
Market of (a) the Products which are
now and were prior to the date hereof
manufactured or assembled or sourced at
or from Lucas' premises at Acton,
London ("Acton"); and (b) Third Party
Products
"the LAO Assets" means the assets specified in clause
2.1 and the benefits and advantages
acquired by the Company from Lucas
under this Agreement
"LAO Stock" means stocks of finished Products and
certain components thereof and repair
parts therefor owned by Lucas at the
close of business on the date hereof
and held at or in the course of
transit to the Fradley Warehouse for
sale in connection with the LAO
Activity and/or recorded as an asset
in the books and ledgers of Lucas
relating to the LAO Activity (and
includes Third Party Products
supplied subject to reservation of
title or which have been supplied on
a consignment stock or sale or return
basis)
"Lucas Employee" means any employee employed at
9
<PAGE>
the date hereof by Lucas or any Lucas
Group Company in LAO or employed by
Lucas or any Lucas Group Company in LAO
at any time after the date hereof and
who is so employed at the MOD and OES
Transfer Date and/or the Aftermarket
Transfer Date
"Lucas Group Company" means LucasVarity plc and any company
which is a subsidiary of LucasVarity
plc or over which LucasVarity plc has
control from time to time and at the
time that the relevant clause in
which such expression appears has
application, which where a claim is
to be made under the relevant clause
shall mean when the cause of action
accrued under such clause
"Lucas Network" means Lucas Group Companies acting as
distributors (whether national or
regional, independent Lucas or Lucas
Group Company appointed or authorised
national or regional distributors,
and all other persons from time to
time or for the time being appointed
by Lucas or by any Lucas Group
Company (excluding Freios Varga S.A.
in Brazil) to act as distributors,
distribution outlets, export houses
10
<PAGE>
or selling agents of the Products in
the Market in any country in the world
"Market" means the Aftermarket, Original
Equipment Service and supplies of
spare and replacement parts to the
MOD but excludes the OE Market
"MOD" means the Ministry of Defence in the
United Kingdom of Great Britain and
Northern Ireland
"MOD and OES Transfer means 27th March 1998
Date"
"the MOD Contracts" means those Customer Contracts in
respect of which the customer is the
MOD
"MOD and OES Stock" means that part of the LAO Stock as
consists of Products for the MOD and
Original Equipment Service
"Net Sale Value" means the gross amount invoiced by
Lucas on behalf of the Company to the
Company's customers less (i) any VAT
and (ii) Sales Provisions whether or
not such Sales Provisions are shown
as deductions on the invoices issued
to customers or are credited or
otherwise allowed to customers in
some other way
11
<PAGE>
"Original Equipment means any manufacturer or assembler
Manufacturer" of transport vehicles, engines or
similar equipment including, but not
limited to, a manufacturer or
assembler of motor cars, vans, buses,
coaches, forklifts, industrial
vehicles, trucks, tractors or marine,
motive power or stationary engines or
a manufacturer of components or
sub-assemblies to be fitted as
original equipment to such vehicles,
engines or similar equipment
"OE Market" means Original Equipment
Manufacturers in their capacity as
buyers of Products for fitting as
original equipment
"Original Equipment means the market for supplies of
Service" spare and replacement parts to any
Original Equipment Manufacturers
other than for fitting as original
equipment or to any dealer of any
Original Equipment Manufacturer in
its capacity as a dealer of such
Original Equipment Manufacturer
"person" means any person, firm, association,
company or body corporate or
unincorporate
"Products" means those products listed in Part
12
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1 of Schedule 2 to the Acton Sale and
Purchase Agreement and/or Third Party
Products and for the avoidance of any
doubt excludes in-line diesel pumps or
any parts or components therefor
"Product Liability" means liability in respect of death,
personal injury, physical damage to
property (other than to the products
themselves) caused by a defect in any
product manufactured, assembled,
repaired, refurbished, serviced, sold
or supplied (or caused by a failure
to carry out servicing properly)
prior to the Completion Date by Lucas
in relation to the LAO Activity
"Product Prices" means the prices for the Products as
set out in LAO's price list to become
effective from February 1998
"Purchaser Group Company" means PEI Holding Incorporated or any
subsidiary or holding company of that
corporation from time to time and at
the time that the relevant clause in
which such expression appears has
application, which where a claim is
to be made under the relevant
13
<PAGE>
clause shall mean when the cause of
action accrued under such clause
"Records" means all such lists of customers and
suppliers and written material
recording Contracts, in each case in
whatever medium held relating
exclusively to the LAO Activity or
the LAO Stock and also the following
in relation to Products:- all
promotional material, sales
publications, catalogues, price
lists, advertising materials, and
sales matter and the like or to the
extent the same relate partly but not
exclusively to the LAO Activity or
the LAO Stock copies of the same but
in any case excluding any of the same
which Lucas or any other Lucas Group
Company is required by law to retain
"Regulations" means the Transfer of Undertakings
(Protection of Employment)
Regulations 1981 as amended
"sale" means any form of supply whether by
way of sale, lease, hire or exchange
and any cognate word shall be
construed accordingly
14
<PAGE>
"Sales Provisions" means insofar as the same shall have
been given or allowed, and then only
to the extent done in a manner and to
a level consistent with past practice
(a) volume or performance related and
other rebates, (b) warranty liability
on Third Party Products not charged
back to the suppliers of the same,
(c) the net cost to Lucas of
distributors' cleanse stocks taken
back by Lucas with the Company's
prior written consent (d) price
support mechanisms and price
discounting or reducing arrangements
of varying kinds given or allowed by
Lucas to customers and (e)
commissions payable to export agents
"the Supplier Contracts" means contracts, orders, calls off
and other arrangements which were
entered into before the date hereof
by LAO with suppliers for the supply
to Lucas of Third Party Products
which then remain to be performed in
whole or in part
"Third Party Products" means Products purchased by LAO from
third party suppliers which are for
the purposes of supplementing the
range of Products set out in Part 1
of
15
<PAGE>
Schedule 2 of the Acton Sale and
Purchase Agreement
"Third Party Rights" means all rights of Lucas against
third parties arising out of or in
connection with the supply to LAO of
the LAO Stock or Products or the
conduct of the LAO Activity (other
than any such rights arising from a
liability which is not or will not be
assumed by the Company) prior to the
date hereof including but not limited
to (i) all rights under or in respect
of manufacturer's or supplier's
representations, warranties,
guarantees and other contractual
obligations and assurances (express
or implied), (ii) all rights against
sub-contractors, but excluding any
claim by or right of Lucas in respect
of (a) any taxation of whatsoever
nature or (b) insurance
"Trade Mark Licence" means a licence having the same date
as this Agreement and made between
(1) Lucas Industries plc and (2) the
Company and entitled "Acton Trade
Mark Licence"
"Transitional Arrangements" means the provisions of Part II of
this Agreement which apply to the
16
<PAGE>
Transition Period
"Transition Period" means the period between the date
hereof and the Aftermarket Transfer
Date
"the Warranties" means the warranties of Lucas
contained in clause 7 and Schedule 3
1.2 words used in this Agreement which denote the singular shall be deemed
to include the plural and vice versa. References to a particular
gender include all other genders;
1.3 references to clauses and Schedules are to clauses of and Schedules to
this Agreement, and references to paragraphs are to paragraphs in the
Schedule in which such references appear;
1.4 the Schedules form part of this Agreement and will have the same force
and effect as if expressly set out in the body of this Agreement;
1.5 the headings to the clauses of this Agreement and to the paragraphs of
any Schedule will not affect its construction;
1.6 the word "including" or any cognate word shall be construed as though
the words "without limitation" immediately followed such word;
1.7 references in this Agreement to any instrument or agreement shall
include such instrument or agreement as may have been or may hereafter
be varied;
1.8 references in this Agreement to statutes or any statutory provision
shall include any statutory modification, re-enactment or extension
thereof for the time being in force and any orders, regulations,
instruments or other subordinate legislation made thereunder provided
always that this shall not operate to increase the liability of the
parties hereunder; and
17
<PAGE>
1.9 references to any agreements, assets, contracts, property, rights,
benefits, obligations or liabilities of Lucas in relation to the LAO
Activity or LAO Assets, or to products or services sold or supplied by
or to Lucas, shall include the same where they have been entered into,
acquired, incurred, sold or supplied by or to another Lucas Group
Company as agent for Lucas whether or not Lucas was a disclosed or
undisclosed principal.
PART I
------
PROVISIONS RELATING TO SALE AND PURCHASE OF LAO ASSETS
------------------------------------------------------
2. SALE AND PURCHASE OF THE LAO ASSETS
-----------------------------------
2.1 Lucas shall sell and the Company shall purchase as at and with effect
from the date hereof free from Encumbrances:-
2.1.1 the benefit of the Contracts (subject to the burden attaching
thereto and subject to the provisions of clause 5.3 excluding
the MOD Contracts);
2.1.2 the Goodwill;
2.1.3 the Records;
2.1.4 the LAO Stock;
2.1.5 the Third Party Rights.
2.2 There shall be expressly excluded and excepted from the sale and
purchase hereunder (and nothing in this Agreement shall operate to
transfer) any assets or right relating to the LAO Activity other than
those assets or rights set out in clause 2.1 provided always that
notwithstanding the provisions of clause 2.1 the following shall be so
excluded and excepted:-
2.2.1 the ownership of or the right to use the names or trade marks
"Lucas", "LucasVarity" or "CAV" or the Lucas diagonal flash or
the CAV device or any other similar trade mark or name or other
distinctive get-up used by any Lucas Group Company save as
provided herein or in the Ancillary Agreements;
18
<PAGE>
2.2.2 any right or legal interest deriving from the relationship
between Lucas, or any Lucas Group Company, and any member of
the Lucas Network save as provided herein or in the Ancillary
Agreements;
2.2.3 all cheques and negotiable instruments issued in favour of any
Lucas Group Company prior to the date hereof in relation to the
LAO Activity ;
2.2.4 any insurance claim made by or available to any Lucas Group
Company in respect of the LAO Activity in respect of events or
occurrences prior to the date hereof and all unearned premiums
under insurance policies or other rights to refunds thereunder
attributable to any period of time after the date hereof;
2.2.5 any claim made by or available to any Lucas Group Company in
respect of an event relating to the LAO Activity occurring
prior to the date hereof other than the Third Party Rights;
2.2.6 any asset, benefit or right sold, transferred or granted under
or pursuant to any of the Ancillary Agreements;
2.2.7 all debtors of the LAO Activity as at the date hereof save to
the extent expressly provided otherwise in this Agreement.
2.3 If any of the LAO Assets sold hereunder by Lucas is owned by any other
Lucas Group Company or there is any other obligation of Lucas
hereunder which is only capable of being satisfied by or with the
assistance of any such other Lucas Group Company, Lucas shall not be
deemed to be in breach of this Agreement so long as Lucas procures, to
the extent necessary, compliance by such other Lucas Group Company
with the terms and conditions of this Agreement which Lucas hereby
undertakes to do. Such other Lucas Group Company and, where
appropriate, its employees, shall have the benefit of any exclusions
of liability contained herein in relation to the LAO Assets and any
indemnity given by the Company herein to Lucas in relation to the LAO
Assets or the LAO Activity. If any Lucas Group Company other than
Lucas is
19
<PAGE>
or was a party to any of the Contracts or the Completed Contracts the
relevant provisions of clause 5 shall apply to such Contract or
Completed Contract (as the case may be) as if Lucas was party thereto
and references in those clauses to Lucas, shall, where appropriate, be
construed as references to the relevant Lucas Group Company.
Accordingly the relevant Lucas Group Company shall be entitled to
benefit from the obligations undertaken and indemnities given by the
Company in relation to that Contract or Completed Contract under those
clauses.
3. THE CONSIDERATION
-----------------
3.1 The purchase price for the LAO Assets other than LAO Stock shall be
(Pounds)1 to be paid by the Company on the date hereof. The price for
the LAO Stock shall be the value calculated as follows:-
3.1.1 The quantity of LAO Stock as at the date hereof shall be
determined by Lucas:-
(a) taking those quantities shown in, or by reference to the
books and accounts of LAO as being the quantity of LAO
Stock at the date hereof (the "Opening Quantity");
(b) recording, on the perpetual inventory basis currently
applied by Lucas, all LAO Stock movements by part numbers
description and cost both inwards and outwards between the
date hereof and the Aftermarket Transfer Date;
(c) carrying out a physical stocktake of (i) the MOD and OES
Stock as at the MOD and OES Transfer Date and (ii) the
Aftermarket Stock as at the Aftermarket Transfer Date, in
each case at the Fradley Warehouse within three days
immediately following each such Transfer Date. Written
inventories of that part of the LAO Stock to be delivered
to the Company on those respective dates shall be produced
by Lucas as at each of such respective dates, identifying
the type and quantity of each
20
<PAGE>
item then held by Lucas. It is acknowledged and agreed that
in respect of certain items of the LAO Stock it may be
difficult to distinguish between MOD and OES Stock on the
one hand and Aftermarket Stock on the other hand and
accordingly if any dispute or uncertainty arises in this
connection such items will be allocated in such manner as,
having taken into account any expressed and reasoned
representations of LAO as to any items of the LAO stock in
relation to which there is uncertainty or dispute, the
Company shall determine. Any LAO Stock not allocated as
being MOD and OES Stock as at the MOD and OES Transfer Date
shall thereafter for the purposes of this Agreement be
treated as Aftermarket Stock;
(d) reconciling as soon as practicable after the Aftermarket
Transfer Date the Aftermarket Stock shown by the physical
stocktake carried out as at the Aftermarket Transfer Date
against the Opening Quantity, having regard to stock
movements in the interim including the transfer of MOD and
OES Stock to the Company as at the MOD and OES Transfer
Date.
Any LAO Stock losses or gains shall be for the account of
Lucas.
3.1.2 In relation to the operation of clause 3.1.1 Lucas shall:-
3.1.2.1 provide the Company with information concerning the
Opening Quantity as soon as reasonably practicable;
3.1.2.2 provide the Company with information regarding LAO
Stock Movements on a regular basis; and
3.1.2.3 give the Company at least 7 days' advance notice of
when each stocktake under clause 3.1.1(c) is to take
place. Each of Lucas and the Company shall be entitled
to have several representatives present at each such
stock-take; a party shall
21
<PAGE>
not be entitled, in the absence of manifest error, to
raise any objection as to the correctness of any data
relating to the quantities and descriptions of the
items the subject of such stocktake if no
representative of that party attends such stocktake.
3.1.3 Lucas will allow the Company full access to the Fradley
Warehouse, all relevant employees and all records, information
and other documentation (of all of which the Company shall be
entitled to take copies) to enable the Company to participate in
and verify stocktakes and the quantity including but not limited
to the Opening Quantity of LAO Stock determined in accordance
with the foregoing provisions of this clause 3.
3.1.4 The value of the LAO Stock as at the date hereof shall be
determined in accordance with the Accounting Principles. Such
valuation shall be carried out as soon as practicable and in any
event within 14 days following the determination of the quantity
of LAO Stock by Lucas in accordance with the foregoing provisions
of this clause 3.
3.1.5 Promptly following such valuation Lucas shall serve on the
Company a draft copy of the stock valuation (the "LAO Stock
Valuation") together with a copy of Lucas' working papers
including insofar as the Company does not have them already
copies of Lucas' workings and papers relating to the
determination of the Opening Quantity. Unless the Company shall
notify Lucas in writing within 21 days after its receipt that it
does not accept and agree the LAO Stock Valuation then the
Company shall be deemed to have accepted and agreed the LAO Stock
Valuation for the purposes of this Agreement. Unless Lucas shall
otherwise agree, any such notification on the part of the Company
shall specify in such reasonable detail as the Company is able to
provide the matters in dispute. Any matters not objected to in
any such
22
<PAGE>
notice served by the Company pursuant to this clause 3.1.5 within
such period of 21 days shall be deemed agreed by the Company.
3.1.6 If Lucas and the Company are unable to reach agreement pursuant
to clause 3.1.5 within 14 days of the Company giving to Lucas
written notification pursuant to such clause, or within such
later time as Lucas and the Company may agree, then the sums not
in dispute shall forthwith be paid by the Company to Lucas and
any matters not so resolved shall be submitted to an independent
accounting firm of international reputation (the "Independent
Accountant") agreed to by Lucas and the Company or in default of
agreement between them within 7 days to be selected at the
instance of either of them by the President for the time being of
the Institute of Chartered Accountants in England and Wales for
final resolution in accordance solely and exclusively with this
Agreement and the Accounting Principles. Submissions to the
Independent Accountant shall be in the form of written statements
of position by Lucas and the Company, and each party shall be
given the opportunity to respond in writing to such written
statements and shall respond to any request for statements or
information from the Independent Accountant. Lucas, any other
Lucas Group Company and the Company shall allow the Independent
Accountant full access to all relevant accounting and other
records of or in relation to the LAO Stock, the Fradley Warehouse
and all relevant employees as it shall require for the purpose of
giving its determination hereunder. Lucas and the Company shall
co-operate to procure that the Independent Accountant is able to
reach its decision as to any matter referred to it as
expeditiously as possible. If the Independent Accountant
determines that the resolution of a disputed item requires an
interpretation of law then the Independent Accountant may request
an independent law firm of national standing in England chosen by
it to render a legal opinion as to such matter. The Independent
Accountant shall act as an expert and not as an arbitrator and
shall be directed by Lucas and the Company to make its
23
<PAGE>
determination as to the quantity and/or value of the LAO Stock as
soon as possible after the matter in dispute is submitted to it
and such determination shall be final and binding upon the
parties hereto. The cost of such Independent Accountant's review
(including reasonable lawyer's fees incurred by it, if any) shall
be borne by the party or parties as determined by the Independent
Accountant;
3.1.7 Any costs incurred by each of the Company and Lucas in relation
to the operation of this clause 3 including, without limitation,
any professional costs and expenses, shall be borne by the party
incurring the same save as contemplated by clause 3.1.6 if that
clause applies.
3.2 The Company shall pay Lucas for the value of the LAO Stock agreed or
determined pursuant to the foregoing provisions of this clause 3 as
follows:-
3.2.1 as to (Pounds)480,000 of such value on the MOD and OES Transfer
Date;
3.2.2 as to the balance of such value, to the extent that the same is
not disputed, within 21 days of Lucas submitting the LAO Stock
Valuation (such 21st day being the "Balance Payment Date" if
there is no dispute as to such value) provided that if there is a
dispute as to the LAO Stock Valuation the provisions of clause
3.1.6 shall apply and the parties shall account to each other in
respect of the disputed items in accordance with the Independent
Accountant's determination within 7 days of receipt of the same
(in which case the "Balance Payment Date" is the day which falls
7 days from such receipt).
Provided always that if the Transitional Arrangements are terminated for
any reason whatsoever prior to the Aftermarket Transfer Date any
outstanding physical stocktake shall be accelerated and be carried out
as at the date of termination in the same manner and on the same
timescales and otherwise as set out in clause 3.1 mutatis mutandis and
on determination of the value of the LAO Stock pursuant thereto the
Company shall pay to Lucas the full
24
<PAGE>
outstanding balance of such value after deduction of any sum
previously paid in relation thereto.
3.3 The Company shall pay Lucas interest on any unpaid balance of the
value of the LAO Stock as of the 21st day after Lucas submits the LAO
Stock Valuation to the Company at the rate per annum of 1% over
Barclays Bank plc's base lending rate from time to time such interest
to accrue on a daily basis from the date which falls 14 days after the
submission by Lucas to the Company of the LAO Stock Valuation until
the Balance Payment Date and if not paid by the Balance Payment Date
the provisions of clause 3.4 shall apply as from the Balance Payment
Date.
3.4 Each party shall pay to the other interest on any sum not paid on the
due date under any provision in this Agreement at the rate per annum
which is 4% above Barclays Bank plc's base lending rate from time to
time, such interest to accrue from day to day from the due date until
the actual date of payment and to be payable after as well as before
any judgement.
3.5 The following provisions shall apply regarding the payments to be made
under this Agreement:-
3.5.1 all sums due from the Company to Lucas under this Agreement
shall be paid in (Pounds) pounds sterling to Lucas by way of
telegraphic transfer to the following account:-
Name: Lucas Limited
Bank: Barclays Bank Plc
Branch: 118, High Street,
Newcastle under Lyme,
Staffordshire
Sort Code: 20-59-23
Account No: 90436089
25
<PAGE>
or to such other account as Lucas may hereafter nominate in
writing to the Company.
3.5.2 all sums due from Lucas to the Company under this Agreement
shall be paid in (Pounds) pounds sterling to the Company by
way of telegraphic transfer to the following account:-
Name: Prestolite Electric Limited
Bank: National Westminster Bank Plc
Branch: PO Box 9, 31 Promenade, Cheltenham,
Gloucestershire GL5 1LH
Sort Code: 60-05-16
Account No: 04233204
or to such other account as the Company may hereafter
nominate in writing to Lucas.
3.6 All payments to be made pursuant to this Agreement shall (save where
otherwise specifically stated) be taken to be exclusive of VAT (if
applicable) and any VAT chargeable in respect of the matters giving
rise to such payments shall be added to the amount thereof and paid in
addition thereto on submission of a tax invoice in relation thereto.
4. DELIVERY OF LAO ASSETS
----------------------
Lucas shall deliver to the Company:
4.1 on the MOD and OES Transfer Date such part of the Records and the LAO
Stock as relates to the MOD and Original Equipment Service, delivery
of such part of the LAO Stock to be effected ex works Fradley
Warehouse;
4.2 on the Aftermarket Transfer Date the remainder of the Records and the
LAO Stock, delivery of such LAO Stock to be effected ex works Fradley
Warehouse.
26
<PAGE>
5. CONSENTS THE SPECIFIED CONTRACTS AND THE CONTRACTS
--------------------------------------------------
5.1 Lucas hereby agrees and declares that it will after the date hereof
execute and deliver any other documents and take any other steps as
shall reasonably be required from time to time by the Company, at the
Company's expense, to vest in the Company, or as it may direct, the
benefit of the Contracts.
5.2 The Company will at and from the date hereof at its own expense adopt
perform fulfil observe and be bound by all the terms conditions
obligations and liabilities under or in respect of the Contracts
(except for any obligations or liabilities attributable to a breach
prior to the date hereof on the part of Lucas or its employees, agents
or sub-contractors (other than a breach, the liability for which is
expressly assumed by the Company in this Agreement including clause
9)) and shall without prejudice to the right (to the extent that the
Company has such right) of the Company to claim for breach of any of
the Warranties in relation to the Contracts keep Lucas indemnified
against all expenses, costs, loss, damage, and liability arising
therefrom. Lucas shall with effect from the date hereof assign or
hold to the order of the Company or procure the assignment to the
order of the Company of all the Contracts which are capable of
assignment without the consent of the relevant other contracting party
or parties.
5.3 For the purposes of the following provisions of this clause 5
references to "Contracts" shall exclude the MOD Contracts the benefit
and burden of which it is intended in due course shall pass to the
Company once the Company has obtained the consent of the MOD thereto.
Until such time as such consent has been obtained Lucas shall continue
to hold the MOD Contracts in its name and, subject to the provisions
of Part II of this Agreement, shall as a contractual obligation only
as between the parties pass the benefit of sums received under the MOD
Contracts to the Company. Lucas shall at the Company's expense take
such reasonable action in relation to the MOD Contracts as the Company
may from time to time reasonably request. Provided always that if
such consent has not been obtained by the MOD and
27
<PAGE>
OES Transfer Date the provisions of clause 5.4 shall on such date
apply to the MOD Contracts and any references therein to "the date
hereof" shall in that circumstance read "the MOD and OES Transfer
Date".
5.4 Insofar as the benefit (subject to the burden) of the Contracts cannot
effectively be transferred by Lucas or any relevant Lucas Group
Company to the Company except by way of an agreement of novation with
or consent to the assignment from the person, firm or company
concerned:
5.4.1 Lucas and the Company shall co-operate each at its own cost to
do everything they reasonably can to procure that the Contracts
be novated or assigned as aforesaid as soon as reasonably
practicable;
5.4.2 in every novation or assignment as aforesaid the Company shall
undertake to indemnify Lucas or the relevant Lucas Group
Company against all expenses, costs, loss, damage and liability
arising by reason of or in connection with the non-performance
or the defective or negligent performance by the Company of the
Contracts;
5.4.3 unless and until all such Contracts shall be novated or
assigned as aforesaid:
5.4.3.1 Lucas and any relevant Lucas Group Company shall
continue its corporate existence and shall hold the
benefit of every such Contract which requires to be
novated or assigned but which has not been novated or
assigned, in trust for the Company as from the date
hereof and shall account to the Company accordingly
(whether in respect of any sums or other benefits
received by it in respect thereof) and otherwise act
at the reasonable direction of the Company and as its
agent in all matters relating thereto subject to the
Company indemnifying and holding Lucas (either for
itself or as trustee of the relevant Lucas Group
Company) harmless against, any expenses, costs, loss,
damage, or
27
<PAGE>
liability, which it may have brought against it or
suffer or incur as a consequence; and
5.4.3.2 the Company shall at its own cost and expense with
effect from the date hereof carry out perform and
complete every such Contract which has not been
novated or assigned as a subcontractor of Lucas and
where sub contracting is not possible the Company
shall perform the contracts in accordance with their
terms and conditions as agent for Lucas.
5.5 If Lucas has before the date hereof sub-contracted the performance of
any Contracts to any person, the Company shall on the date hereof
assume responsibility for the relevant sub-contract and on behalf of
the relevant customer seek or accept delivery or performance from such
person of the goods or other products or services in respect of which
such contract was made and shall make the same available for
collection by such customer.
5.6 Any fee or charge or financial penalty in either case in the nature of
a fee levied by a third party in respect of a novation or assignment
of any Contract or in connection with the termination of any existing
Contract to permit novation or assignment to take place will be borne
by the Company and Lucas in equal proportions and the Company shall
procure the execution of any guarantees required by such third party
as a condition of such novation or assignment.
6. LUCAS EMPLOYEES
---------------
6.1 The parties acknowledge and agree that it is not their intention that
any Lucas Employees engaged in relation to the LAO Activity shall
transfer from the employment of Lucas to the employment of the Company
under or by virtue of this Agreement and/or the Regulations and
neither Lucas or the Company shall without the written consent of the
other contend or assist or encourage any other person to contend that
the contracts of employment of any Lucas
28
<PAGE>
Employee will have or be deemed to have had effect after the date
hereof, the MOD and OES Transfer Date or the Aftermarket Transfer Date
as if originally made between the Company and such Lucas Employee
pursuant to the Regulations.
6.2 Lucas covenants with the Company that Lucas will indemnify the Company
and hold the Company harmless and shall keep the Company indemnified
against all costs, claims, expenses and liabilities whatsoever
(including but not limited to claims for personal injury) and however
arising from the Regulations operating so as to transfer the
employment of any Lucas Employees from the employment of Lucas to the
employment of the Company or otherwise pursuant to the Regulations or
which otherwise leads to a liability of the Company after the date
hereof in relation to any Lucas Employees or their employment or the
termination by the Company of their employment hereafter and any
costs, claims, expenses and liabilities of any nature arising from
such termination by the Company subject to the provisions of clause
8.3. This indemnity shall not apply to any Lucas Employee who without
the prior written consent of Lucas and as a result of the Company
having offered employment to such Lucas Employee becomes an employee
of or consultant to the Company or any Purchaser Group Company at any
time prior to the expiration of 12 months from the Aftermarket
Transfer Date and if any payment shall have been paid to the Company
by Lucas pursuant to this clause 6 prior to such expiration such
payment shall be forthwith repaid by the Company to Lucas on the date
on which such Lucas Employee so becomes an employee of or consultant
to the Company or any Purchaser Group Company, this being without
prejudice to the provisions of clause 6.4.
6.3 In the event that any Lucas Employee brings a claim against Lucas or
the Company arising out of or in connection with the purported
transfer of employment of such Lucas Employee to the Company by virtue
of this Agreement, Lucas and the Company shall at the expense of Lucas
give to the other as soon as practicable after any request therefor
all co-operation, assistance and information which may be reasonably
relevant to the claim.
29
<PAGE>
6.4 The Company hereby undertakes that it will not, and will procure that
no other Purchaser Group Company will, for a period of 2 years from
the date hereof either on its own or any account or in conjunction
with or on behalf of any person without the prior written consent of
Lucas solicit or endeavour to entice away any person who at the date
hereof, or at the MOD and OES Transfer Date or at the Aftermarket
Transfer Date is a director or officer or who holds or will hold a
managerial or senior sales, technical or financial post relating to
the LAO Activity or the operation of this Agreement and whether or not
such person would commit a breach of contract by leaving such service.
7. WARRANTIES
----------
7.1 Lucas hereby warrants to the Company with regard to the LAO Activity
and the LAO Assets in the terms of the Warranties set out in Schedule
3.
7.2 Each of the Warranties shall be separate and independent and, save as
expressly provided, shall not be limited by reference to any other
warranty or anything in this Agreement.
7.3 Lucas shall be released from the effect of the Warranties to the
extent of the disclosures fairly disclosed in Schedule 4.
7.4 The limitations of liability set out in Schedule 5 will apply in
respect of the Warranties.
7.5 Where any of the Warranties is qualified by words such as "Lucas is
not aware" or "Lucas believes" or "to the best of Lucas' knowledge" or
any similar qualification, awareness or belief or knowledge of Lucas
shall be determined by reference only to the awareness or belief or
knowledge of the persons whose names are listed in the left hand
column below and whose position is stated opposite his name in the
right hand column below of whom enquiry has been made by Lucas and
subject to the foregoing Lucas shall not be liable for breach of
warranty should the fact or circumstance which would otherwise be a
breach of the Warranties be known to any other employee or officer of
any Lucas Group Company.
30
<PAGE>
<TABLE>
<S> <C>
Name of Person Position Held
C Long-Leather Programme Director-Business Development
A Lord Divestment Project Manager
J Anthony Managing Director - LAO
G Wyatt Finance Director - LAO
D McFall Finance Manager Electrical Products Division - LAO
M Littlejohns Sales and Distribution - LAO
R Nott General Manager Electrical Products - LAO
R Peachey Legal Director - LAO
</TABLE>
8. INDEMNITY AND LIABILITIES
-------------------------
8.1 Save as expressly provided in this Agreement or in the Ancillary
Agreements, Lucas and the Company agree that the Company shall not
assume, and Lucas shall remain responsible for all liabilities arising
out of the conduct of the LAO Activity by Lucas or any other Lucas
Group Company before the date hereof and in particular but without
limiting the generality of the foregoing the Company shall not be
liable for:
8.1.1 any liability of Lucas or any other Lucas Group Company in
relation to the LAO Activity for borrowed money or other
indebtedness in the nature of borrowings and whether as
principal obligor or in any other capacity;
8.1.2 any liability of Lucas or any other Lucas Group Company to
taxation of any kind whatsoever arising from its conduct of the
LAO Activity or ownership of the LAO Assets prior to the date
hereof;
8.1.3 any liability expressed elsewhere in this Agreement or the
Ancillary Agreements to be that of Lucas or any other Lucas
Group Company;
8.1.4 any criminal liability of Lucas arising out of a breach of
statutory duty or laws applicable to the LAO Activity or any of
the LAO Assets by Lucas;
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8.1.5 any liability arising from any litigation (meaning proceedings
having been issued and served on Lucas) against Lucas in
relation to the LAO Activity or the LAO Assets subsisting on
the Completion Date;
8.1.6 any liability to creditors of the LAO Activity as at the date
hereof save to the extent expressly provided otherwise in this
Agreement; and
8.1.7 any liability for breach of the Contracts by Lucas or any Lucas
Group Company prior to the date hereof other than where such
liability relates to product warranty, product liability or
other claims relating to the quality of products;
and Lucas hereby indemnifies the Company and holds the Company
harmless from and against all liabilities, losses, damages, costs and
expenses, interest, awards, judgements and penalties (including
without limitation attorneys and consultants fees and expenses)
suffered or incurred by the Company arising out of or resulting from
any liability referred to in clause 8.1.
8.2 The Company hereby undertakes to indemnify and hold harmless Lucas
from and against any and all expenses, costs, loss, damage and
liability suffered or incurred by Lucas after the date hereof arising
out of or in connection with any matter the liability for which is
expressly assumed by the Company under the provisions of this
Agreement.
8.3 Before Lucas or (as the case may be) the Company ("the Indemnified
Party") makes any payment or offers any other remedy to a third party
in respect of matters for which the Indemnified Party is entitled to
an indemnity from the other of them ("the Indemnifier") under the
terms of any indemnity contained in this Agreement the Indemnified
Party shall give a reasonable opportunity to the Indemnifier, to
verify and, if appropriate, at the Indemnifier's sole cost, remedy the
default, defect, omission or other matter giving rise to the claim in
question subject always to such third party allowing the same.
32
<PAGE>
9. PRODUCT LIABILITY AND PRODUCT WARRANTY AND OTHER SPECIFIC ISSUES
----------------------------------------------------------------
9.1 Except for claims falling within clause 9.4 and except in relation to
Third Party Products (but without prejudice to the Company's liability
to contribute to Sales Provisions pursuant to clause 19.3.1) and
without prejudice to the generality of any other provision of this
Agreement, the Company shall be liable:
9.1.1 to meet any claims for breach of a condition or warranty under
terms implied by the Sale of Goods Act 1979 (as amended) or the
Supply of Goods and Services Act 1982 (as amended) or the
Supply of Goods (Implied Terms) Act 1973 (as amended) and to
carry out in accordance with its terms any warranty, guarantee
or other similar obligation or commitment ("Warranty Work"
which expression includes any materials supplied as well as
labour involved) given or undertaken by Lucas or any Lucas
Group Company before the date hereof in respect of any goods
sold, or in respect of any services performed, under any of the
Completed Contracts; and
9.1.2 for all Product Liability save only in relation to Third Party
Products whether or not the claim in respect thereof is made
against any Lucas Group Company or the Company provided both a
written assertion that a claim may be made and such claim is
first made after the date hereof.
9.2 The Company shall indemnify Lucas and each Lucas Group Company against
all costs, expenses, loss, damage or liability arising in respect of
matters for which the Company is liable under the provisions of clause
9.1.
9.3 In this Agreement:
9.3.1 "Warranty Liability Claim" means a claim (other than a claim in
respect of Product Liability) asserting in relation to a
product manufactured, assembled, repaired, refurbished,
serviced, sold or supplied prior to the date hereof by Lucas or
any other Lucas Group Company in relation to the LAO Activity,
that it is or was or will
33
<PAGE>
become faulty or defective or does not or did not or will not
comply with any warranty or representation expressly or
impliedly made, or with any applicable regulations, standards
or requirements in respect thereof, and in respect of which the
following conditions are also satisfied namely:
9.3.1.1 the claim is made within the contractual warranty
period applicable to the supply (or repair, service or
refurbishment) of the product in question and prior to
31st March 1999, and the Company bona-fide and
reasonably believes it to be a claim which the Company
(by reason of clause 9.1.1) is legally liable to meet;
or
9.3.1.2 the claim is made either before or after the expiry of
the contractual warranty period applicable to the
supply (or repair, service or refurbishment) of the
product in question and prior to 31st March 1999 and
the Company (having consulted with Lucas) bona-fide
and reasonably believes applying the same or
substantially the same investigatory routines and
judgmental criteria as were applied by Lucas in
relation to the LAO Activity during the period of one
year before the date hereof:
(a) that it is a claim which, because of the size of
the particular order, the importance of the
customer to the LAO Activity, or otherwise, it is
necessary for the Company to meet in whole or in
part in order to preserve the goodwill of the LAO
Activity; and
(b) that in the case where the particular customer or
a similar customer had previously made a similar
claim of comparable size against any Lucas Group
Company, that Lucas Group Company would have dealt
with the claim in substantially the same way.
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<PAGE>
9.3.2 "Notifiable Claim" means:
(i) a series of Warranty Liability Claims (whether made before
or after or partly before and partly after the date
hereof) resulting from substantially the same fault
(whether of design, manufacturing technique or process,
workmanship or materials) in relation to one or more
products (so that all such products are affected by
substantially the same fault) ("the affected products");
or
(ii) the existence of a state of affairs (whether before or
after the date hereof) which is likely to lead to a series
of Warranty Liability Claims within (i) above, whether or
not a Warranty Liability Claim or Claims are actually
made;
where, in either case, in relation to the affected products,
the Warranty Cost in respect of the Warranty Liability Claims
met and to be met becomes and/or exceeds (Pounds)20,000;
9.3.3 "Warranty Cost" means:
(i) in the case of the affected products which are repaired
the Incremental Cost of performing the repairs;
(ii) in the case of affected products which are replaced the
Incremental Cost to the LAO Activity of the replacement
products and the installation thereof; and
(iii) all other customer costs which the Company, manufacturer
or supplier (as the case may be) is contractually obliged
to meet under the warranty in question.
9.4 In the event that after the date hereof but prior to 31st March 1999
the Company shall be notified in writing by a customer of a new
Warranty Liability Claim which when aggregated with all Warranty
Liability Claims previously made in respect of the affected products
(to the intent and effect
35
<PAGE>
that the product in respect of which the new Warranty Liability Claim
is made and the products in respect of which all other Warranty
Liability Claims are or have been made all suffer from substantially
the same fault) is also a Notifiable Claim, the Company shall promptly
notify Lucas in writing of the relevant circumstances insofar as these
are known to the Company and, prior to accepting any such new Warranty
Liability Claim, allow Lucas to investigate the facts surrounding the
Warranty Liability Claims met and to be met by the Company, the cause
thereof, the Warranty Cost incurred or likely to be incurred in
relation thereto and to make representations to the Company thereon,
all of which Lucas will do promptly. The Company shall take into
account such representations in making its decision whether or not to
accept such Warranty Liability Claim, which decision shall be
reasonable.
9.5 The Company shall notify Lucas on receipt of any Warranty Liability
Claim(s) which it reasonably believes may become Notifiable Claims.
In respect of such Claims so notified, the Company shall before
accepting the Warranty Liability Claim allow Lucas to investigate the
Warranty Liability Claim in question the cause thereof the likely
Warranty Cost in relation thereto and to make representations to the
Company thereon. The Company shall take into account such
representations in making its decision whether or not to accept such
Warranty Liability Claim, which decision shall be reasonable.
9.6 Lucas shall from time to time, subject to the Company having provided
Lucas with a fully detailed breakdown of its warranty cost and
allowing Lucas to verify the same by all reasonable means, pay
promptly to the Company an amount equal to the Warranty Cost incurred
by the Company of meeting Notifiable Claims, each such payment to be
made within twenty one days.
9.7 For the purpose of the application of this clause any Warranty Cost
shall be calculated in pounds sterling.
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<PAGE>
10. ACCRUALS, PREPAYMENTS AND APPORTIONMENTS
----------------------------------------
10.1 Prepayments and volume rebates (allowed or allowable to customers or
received or receivable from suppliers) which are payable
retrospectively which relate to a period both up to and after the date
hereof in either case in respect of any Contract will be apportioned
in accordance with clause 10.2 and will belong to or be due from the
parties accordingly and will be paid in accordance with clause 10.3.
10.2 Any amount to be apportioned pursuant to clause 10.1 will, save in
relation to any retrospective rebate or similar scheme based on
purchases made, be apportioned as at the date hereof rateably on a
time basis over the period to which it relates and in relation to any
such retrospective rebate or similar scheme will be apportioned in the
proportion that the net invoice value of purchases made over that part
of the relevant rebate period falling prior to the date hereof bears
to the net invoice value of purchases made over that part of the
relevant rebate period falling after the date hereof. Any such
amounts (or apportioned parts) as are attributable to any period up to
the date hereof will be due to or from (as the case may be) Lucas and
those attributable to periods after the date hereof will be due to or
from (as the case may be) the Company.
10.3 The amount due from Lucas to the Company or vice versa in respect of
such apportionments shall be calculated within 14 days after the end
of the last of the periods to expire in respect of which a
retrospective rebate or similar scheme is to be paid either by Lucas
to a customer or by a Supplier to Lucas and the sum due from Lucas to
the Company or vice versa shall be paid within 14 days of the
calculation being produced.
11. RISK PROPERTY AND TITLE
-----------------------
The risk in the LAO Stock shall pass to the Company on delivery of the same
pursuant to clause 4 and accordingly Lucas shall continue to insure the
same in the same manner as prior to the date hereof at its own cost until
such risk passes to the
37
<PAGE>
Company. The property in and title to the LAO Stock shall pass to the
Company on the date hereof.
12. PROVISIONS RELATING TO LUCAS NETWORK
------------------------------------
12.1 Within three 3 days from the date hereof Lucas will send a notice to
all Lucas' wholesale distribution outlets in the UK and all of the
national distributors or other importers in each country outside the
UK comprised within the Lucas Network in the terms set out in Schedule
6 ("the Circular") relating to the completion of the transactions,
ongoing relationship between Purchaser Group Companies and Lucas Group
Companies and the ability of the Lucas Network to do business with
Prestolite Group Companies in relation to products which are not
direct replacements for Lucas products.
Each of such national distributors or other importers in each country
outside the UK shall be mandated and instructed by Lucas to inform all
authorised Lucas dealers and sub-distributors in each of the networks
in their respective countries to the same effect as set out in the
Circular.
12.2 Lucas will on or about each of the MOD and OES Transfer Date and the
Aftermarket Transfer Date send out to the relevant part of the Lucas
Network affected by the transfers to be made on such respective dates
an appropriate notice about such transfers in terms to be agreed with
the Company not to be unreasonably withheld repeating in substance
certain of the points set out in the Circular including the ability of
the Lucas Network to do business with Prestolite Group Companies in
relation to products which are not direct replacements for Lucas
products.
12.3 The Company shall, subject to obtaining Lucas' prior approval in
writing to the terms thereof such approval not to be unreasonably
withheld or delayed, be entitled occasionally to send a circular to
the Lucas Network in such terms as shall have the approval of the
project team referred to in clause 20.
13. EXCLUSIONS
----------
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<PAGE>
Save as otherwise expressly provided in this Agreement Lucas shall not be
liable by reason of the sale of the LAO Assets under this Agreement for any
personal injury, death, loss or damage of any kind whatsoever (other than
death or personal injury resulting from its negligence) whether
consequential or otherwise (including but not limited to loss of profits)
arising from any defect in the LAO Assets and save as provided in clauses 2
and 7 Lucas hereby excludes in relation to the LAO Assets and the LAO
Activity all conditions, warranties, representations, guarantees and
stipulations express or implied, statutory, customary or otherwise which
but for such exclusion would or might subsist in favour of the Company
except that such exclusion will not apply to any statements made
fraudulently nor to any condition or warranty implied by law which cannot
lawfully be excluded.
14. INSPECTION OF DOCUMENTS
-----------------------
Lucas shall for a period of 12 months after the Aftermarket Transfer Date
afford to the authorised representatives of the Company all reasonable
facilities to inspect records held or retained by Lucas or its professional
advisers (which are not privileged) relating exclusively to the LAO
Activity and/or the LAO Assets (which records Lucas agrees to maintain for
such period) and to make copies or extracts therefrom. If within such
period Lucas shall desire to cease holding and maintaining any such records
it shall before taking any action in relation thereto give the Company a
reasonable opportunity to inspect the same and at the Company's request and
cost and take delivery of the same. The Company agrees to maintain at the
registered office of the Company, and allow Lucas at all reasonable times
access to and to take copies of, the Records insofar as they relate to the
period prior to the Aftermarket Transfer Date, wherever held, for a period
of 12 months from the Aftermarket Transfer Date.
PART II
-------
PROVISIONS RELATING TO TRANSITIONAL ARRANGEMENTS
------------------------------------------------
15. APPOINTMENT
-----------
15.1 With effect on and from the Commencement Date the Company hereby
irrevocably appoints Lucas as its exclusive agent for the sale of the
Products
39
<PAGE>
to the MOD, Original Equipment Service and the Aftermarket and Lucas
agrees to act as the Company's agent upon and subject to the terms and
conditions of the Transitional Arrangements.
15.2 Except with the prior written consent of Lucas, the Company shall
not:
15.2.1 until after the MOD and OES Transfer Date sell Products to the
MOD or Original Equipment Service directly or indirectly
otherwise than through Lucas;
15.2.2 until after the Aftermarket Transfer Date sell Products to the
Aftermarket directly or indirectly otherwise than through
Lucas;
and even where such consent is given the provisions of clause 19.3
shall apply to such direct or indirect sales.
16. SUPPLY OF PRODUCTS
------------------
16.1 The authorities and rights given to Lucas and the obligations on the
Company in this clause 16 shall apply from the date hereof (a) in
relation to the MOD and Original Equipment Service only in respect of
orders given or taken by Lucas for Products prior to the MOD and OES
Transfer Date and (b) in relation to the Aftermarket in respect of
orders given or taken by Lucas prior to the Aftermarket Transfer Date.
16.2 All orders taken from customers in the Market by Lucas for Products
may be taken by Lucas as agent of the Company as a disclosed or
undisclosed principal at Lucas' absolute discretion.
16.3 In order to supply Products to customers Lucas shall take the same
from stock held at the Fradley Warehouse and shall replenish such
stock by ordering them from the Company and third party suppliers in
the same way as LAO prior to the Commencement Date ordered Products
from the business carried on at and from Acton and from third party
suppliers save that Lucas shall obtain and the Company shall supply
Products, other than Third Party Products, on a free
40
<PAGE>
issue basis and Lucas shall obtain Third Party Products from third
party suppliers as agent for the Company.
16.4 So as to protect Lucas' good name in the Market and generally enable
LAO to continue (but as agent for the Company) to service the Market
in the same way as prior to the date hereof:
16.4.1 the Company shall manufacture and shall supply Lucas with such
quantities of Products as Lucas requires in order to meet
orders for the Products received from customers within the
timescales but subject to applicable minimum order quantities,
lead times and product scheduling arrangements generally
achieved by the LAO Activity prior to the date hereof. The
Company shall deliver Products to LAO at the Fradley Warehouse
free of charge in accordance with delivery schedules agreed
with Lucas;
16.4.2 the Company shall conform to the planning and supply
arrangements that were in place between LAO and the business
carried on at and from Acton immediately prior to the
Commencement Date. The Company agrees to use its best
endeavours to produce the same quality of Product which was
supplied to LAO immediately before the Commencement Date and in
sufficient quantities to meet the demand for Products for
delivery in the Market.
16.5 Lucas is authorised on behalf of the Company (either as disclosed or
undisclosed principal) to enter into contracts with suppliers for
Third Party Products in the manner and on a scale hitherto applying to
the LAO Activity without reference back to the Company provided that
LAO shall consult with the Company prior to dealing with any new or
alternative supplier of Third Party Products or agreeing to change any
terms and conditions applying to the supply of Third Party Products
which are material and to the detriment of the Company. Where Third
Party Products are purchased by Lucas Lucas shall invoice the Company
at the same price as that paid by Lucas to the supplier.
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<PAGE>
16.6 Lucas is authorised on behalf of the Company (either as disclosed or
undisclosed principal) to enter into contracts with customers for the
sale of the Products at the Product Prices without reference back to
the Company. The Company will honour any contracts for the sale of
the Products entered into by Lucas on behalf of the Company in
accordance with its authority to do so herein contained.
16.7 Lucas will use reasonable endeavours to ensure that all sales of the
Products by Lucas to customers shall be made on Lucas' terms and
conditions of sale for the time being.
17. LUCAS' DUTIES AND OBLIGATIONS
-----------------------------
17.1 Lucas agrees with the Company that throughout the Transition Period
but subject to the other provisions of the Transitional Arrangements:
17.1.1 in performing its activities under the Transitional
Arrangements Lucas will look after the interests of the Company
and act dutifully and in good faith;
17.1.2 not to make any hidden profit other than by means of the
operation of this Agreement as envisaged by its terms.
17.1.3 to be solely liable for any representations or warranties given
to customers other than those contained in Lucas' terms and
conditions of sale for the time being or as otherwise expressly
authorised in writing by the Company from time to time;
17.1.4 at all times diligently to promote and procure sales of the
Products by such means consistent with past practice as LAO
shall have done prior to the date hereof when carrying on the
LAO Activity for its own account;
17.1.5 to have regard to the Company's reasonable and lawful requests
in relation to the conduct of the LAO Activity but so that
nothing contained in this clause 17 or in the Transitional
Arrangements shall
42
<PAGE>
require LAO to make any change from the way the LAO Activity
was conducted by it prior to the date hereof or incur any
expense in so doing, it being the intention that save in
relation to unusual circumstances Lucas shall carry out its
duties with the minimum of interference from the Company;
17.1.6 to conduct the LAO Activity in an orderly and businesslike
manner;
17.1.7 to comply in the conduct of the LAO Activity with all
applicable laws, byelaws and requirements of any governmental
or regulatory authority applicable to the LAO Activity;
17.1.8 to supply to the Company (i) weekly the amount of invoiced
sales and orders received in relation to the LAO Activity for
the immediately preceding week (ii) information reasonably
requested by the Company to complete its monthly management
accounts by the third day of each month; and (iii) from time to
time upon reasonable request, sales reports, returns and other
information relating to the LAO Activity in such detail as the
Company may reasonably request provided that any information to
be provided by Lucas pursuant to this clause shall be
consistent with the type and extent of information historically
provided prior to the date hereof by LAO to Acton;
17.1.9 not without prior consultation with and consent from the
Company to offer in relation to the sale of any products any
exceptional special discounts, rebates, price reductions, or
other incentive schemes or arrangements which would result in
abnormal sales provisions being required to be made as a
consequence, unless pursuant to contractual arrangements
already in force prior to the date hereof or unless in the
ordinary course of business having regard to the historical
operation of the LAO Activity.
17.2 Save as and if specifically provided elsewhere in this Agreement or
otherwise expressly authorised by the Company, Lucas shall not without
the Company's
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<PAGE>
prior express approval incur any liabilities on behalf of the Company
nor pledge the credit of the Company. Lucas has no authority to and
shall not take institute or defend any proceedings on behalf of the
Company (but Lucas may do so on its own behalf where it has been made
a party to any proceedings) or settle or attempt to settle or make any
admission concerning any such proceedings against the Company relating
to the Products or any contract concerning the Products or relating to
the affairs of the Company generally. Lucas will immediately inform
the Company of any proceedings in which it becomes involved as a party
relating to the LAO Activity. For the avoidance of doubt, Lucas shall
be entitled to take any proceedings or other action to recover any
debt due from a customer in circumstances where the debt is bad or
Lucas has good reason to believe that such debt might become bad.
17.3 Lucas shall permit the Company from time to time during the Transition
Period to inspect during normal working hours on reasonable prior
notice (a) the Fradley Warehouse where Products are being stored and
(b) the relevant documentation relating to the sale by Lucas of
Products on behalf of the Company or the purchase of Products on
behalf of the Company, to verify that Lucas has been and is complying
with its duties and obligations under this Agreement.
18. OBLIGATIONS ON COMPANY
----------------------
18.1 The Company will be responsible for dealing with all warranty claims
made by customers in respect of Products supplied by Lucas during the
Transition Period on a basis consistent with that applicable as
between the LAO Activity and Acton prior to the date hereof and shall
reimburse Lucas, against Lucas' invoices, for any costs, expenses or
liabilities properly incurred or suffered by Lucas in respect of any
such warranty claims provided that Lucas shall not be entitled to
claim any such costs, expenses or liabilities if and to the extent
that they were voluntarily incurred or suffered by Lucas and the
customer was not contractually entitled to any relief or remedy under
the relevant warranty. The Company acknowledges that Lucas will not,
and shall not be required to, carry
44
<PAGE>
out inspection of Products before delivery of the same to the
Company's customers.
18.2 Without prejudice and in addition to any of Lucas' rights under
applicable law the Company shall indemnify and hold Lucas harmless
against all actions, claims, costs, demands, expenses and liability of
whatsoever nature suffered or incurred by Lucas as a result of (a) any
act carried out by Lucas as authorised or permitted under the terms of
the Transitional Arrangements, (b) any omission on the part of Lucas
by virtue of any restriction placed on Lucas under the terms of the
Transitional Arrangements, (c) any claim made against Lucas in respect
of any Products supplied after the date hereof under the Transitional
Arrangements which were or become defective (d) any claim made against
or suffered by Lucas in respect of any infringement of the
Intellectual Property Rights of any person resulting from the sale by
Lucas of any Products under the Transitional Arrangements provided
that such indemnity under this sub-clause (d) shall not apply to any
such actions, claims, costs, demands, expenses and liabilities to the
extent that they arise from the application and/or use of the Trade
Marks on Products in accordance with the Trade Mark Licence. The
indemnity in this clause 18.2 shall not apply to the extent Lucas
shall have acted outside the scope of its authority under this
Agreement.
18.3 The Company shall, at the reasonable request of Lucas, provide Lucas
without charge, with all technical information and promotional
material regarding the Products as Lucas may reasonably require in
carrying out its services under this Agreement.
18.4 The Company shall bear and reimburse Lucas (against Lucas' invoices to
be submitted on a monthly basis) for 50% of the Incremental Cost
incurred by LAO in carrying out at the Fradley Warehouse the packaging
of those Products which have prior to the date hereof been packaged by
LAO.
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<PAGE>
19. PRICE, PAYMENT AND COMMISSION
-----------------------------
19.1 The Product Prices are in pounds sterling and are exclusive of VAT or
other similar sales taxes or other duties which, if applicable, shall
be an addition to such prices.
19.2 Lucas shall issue VAT invoices to customers for Products sold to
customers by Lucas on behalf of the Company and shall hold payments
received from customers (excluding the VAT element thereof where Lucas
has issued invoices where the Company is undisclosed principal) on
trust for the Company subject to the provisions of clauses 19.3, 19.4
and 19.5. Lucas shall have sole responsibility for collecting payment
from customers and shall be liable to pay the Company the amount of
any bad debts which arise. Whether a debt is bad shall be determined
by reference to the criteria historically and consistently applied by
Lucas in relation to bad debts. The Company shall if requested by
Lucas give reasonable assistance in the collection of debts at Lucas'
expense.
19.3 In consideration of the services to be provided by Lucas pursuant to
the Transitional Arrangements Lucas shall be paid a fee of
(Pounds)400,000 plus VAT to be paid by the Company as to
(Pounds)160,000 plus VAT on the MOD and OES Transfer Date and as to
(Pounds)240,000 plus VAT on the Aftermarket Transfer Date in each case
against delivery on such dates by Lucas to the Company of VAT invoices
dated as to tax point as of such dates, and in addition shall be paid
a commission equal to 30% plus VAT of the Net Sale Value of Products
invoiced by Lucas on behalf of the Company or by the Company direct to
customers in the Market (this being without prejudice to clause 15.2)
provided always that:
19.3.1 the cost (excluding (where relevant) any charges or recoveries
for overheads or other overhead allocations) of Sales
Provisions shall be borne as to 70% by the Company and as to
30% by Lucas and the Company shall reimburse Lucas for its 70%
contribution to such cost against LAO's invoices in relation
thereto. An invoice will each
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<PAGE>
month be submitted by Lucas to the Company on the basis of a
notional Sales Provision of 1.7% of the Net Sale Value of
Products invoiced by Lucas in the immediately preceding month.
On or about each of the MOD and OES Transfer Date, 30th June
1998 and 31st March 1999 the notional Sales Provisions invoiced
to the Company respectively in the periods to the MOD and OES
Transfer Date, the 30th June 1998 and the Aftermarket Transfer
Date will be reconciled against the actual Sales Provisions
over the same respective periods and an invoice or a credit
note (as the case may be) will be issued by Lucas to the
Company in relation to the reconciled liability of the Company
over the relevant period provided always that the maximum
liability of the Company under this clause 19.3.1 shall be 70%
of 1.7% of the Net Sale Value of Products invoiced by Lucas
during the Transition Period;
19.3.2 the commission payable to Lucas shall in respect of the MOD and
Original Equipment Service only be payable in respect of
Products invoiced or in transit to the MOD or Original
Equipment Service before the MOD and OES Transfer Date and in
respect of the Aftermarket only be payable in respect of
Products invoiced or in transit on or before the Aftermarket
Transfer Date.
19.4 Lucas shall on the 10th of each month after the date hereof (including
on the 10th of each month after the end of the Transitional Period
until all statements of account between Lucas and the Company pursuant
to the Transitional Arrangements have been settled) send to the
Company a statement showing the following:
19.4.1 the aggregate Net Sale Value of Products invoiced by Lucas on
behalf of the Company during the immediately preceding month
(the "previous month");
19.4.2 the net receipts (excluding VAT) of cash received from
customers in respect of Products in the previous month;
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<PAGE>
19.4.3 the amount of Sales Provisions payable by the Company pursuant
to clause 19.3.1 in respect of the previous month;
19.4.4 the amounts paid by Lucas to third party suppliers for Third
Party Products in the previous month;
19.4.5 the amount of commission due to Lucas in respect of sales of
Products invoiced in the previous month;
19.4.6 the amount due from the Company in respect of any warranty
claims settled in the previous month for which the Company is
liable under this Agreement;
19.4.7 the amount due from the Company in respect of its 50% share of
the cost to LAO of carrying out packaging of Products in
accordance with clause 18.4 in the previous month;
19.4.8 any other sum which has become due and is outstanding from one
party to the other in the previous month under the Transitional
Arrangements.
Such statement shall identify the sum due to the Company from Lucas or
vice versa in respect of the previous month and where the Company is
due to be paid Lucas shall account to the Company for all sums due to
it less any amounts due from the Company to Lucas by effecting payment
to the Company and Lucas shall issue an invoice or invoices in respect
of the sum or sums due to Lucas and where Lucas is due to be paid the
Company shall pay such invoice or invoices issued by Lucas within 7
days of receipt. All payments due from one party to the other under
this clause 19.4 shall be paid without any deduction or withholding
whether by way of set off, counterclaim or otherwise save to the
extent specifically provided above and save to the extent that any sum
is required to be withheld by law.
19.5 In consideration of Lucas inputting data in respect of Products and
customers in the Aftermarket into its proposed new computer system for
the whole of
48
<PAGE>
LAO's business the Company shall pay to Lucas an additional charge of
(Pounds)25,000 (plus VAT) which shall be paid on whichever is the
later of 27th March 1998 or the date on which such data has been fully
input into such new computer system. Lucas shall issue the Company
with a VAT invoice in respect of such charge.
19.6 Lucas shall be entitled to suspend its services under Part II of this
Agreement as the Company's agent for the sale of Products to the
Market by giving written notice to the Company if Lucas has not
received any payment due to it under the Transitional Arrangements
within 10 days of written demand for payment being made to the Company
after the due date for payment and such suspension may continue until
such time as such outstanding payments have been made.
19.7 Notwithstanding any other provision of this Agreement Lucas shall not
be required to act as the Company's agent for the sale of the Products
to the MOD and Original Equipment Service after the MOD and OES
Transfer Date nor to the Aftermarket after the Aftermarket Transfer
Date.
20. PROJECT TEAM
------------
On the Commencement Date each party shall nominate two persons who will
make up a project team which will be responsible for procuring the timely
and effective transfer of the marketing and distribution of the Products to
the Company in accordance with the terms of this Agreement. In particular
such project team will in respect of the MOD and Original Equipment Service
a reasonable time before the MOD and OES Transfer Date and in respect of
the Aftermarket a reasonable time before the Aftermarket Transfer Date:
20.1 determine the precise time scales and steps required to be taken to
achieve the transfer of Product marketing and distribution to the
Company;
20.2 report to the Company and Lucas with firm proposals for the
implementation and timing of Product marketing and distribution to the
Company;
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20.3 agree the content of and timing of any announcements agreed to be made
to the Lucas Network additional to the circular to be sent out
pursuant to clause 12;
20.4 resolve any problems or issues which relate to the transfer of Product
marketing and distribution to the Company.
21. TRADE MARK PROVISIONS
---------------------
On the date of this Agreement Lucas will enter into the Trade Mark Licence
with the Company for the Company's use of the Trade Marks (as defined in
the Trade Mark Licence) on Products and Promotional Material (as defined in
the Trade Mark Licence) and the Company shall comply with the provisions of
such Trade Mark Licence in relation to the labelling and marking of
Products and such Promotional Material. Lucas shall be entitled to suspend
its services under Part II of this Agreement in relation to any Product
and/or the Promotional Material relating to the same which is supplied by
the Company in breach of the terms of the Trade Mark Licence by giving
written notice to the Company. Nothing in this Agreement shall give the
Company the right to sell or distribute Marked Products (as defined in the
Trade Mark Licence) in any manner which would contravene the provisions of
the Trade Mark Licence and if there shall be any conflict between the Trade
Mark Licence and this Agreement the Trade Mark Licence shall prevail.
22. LIABILITY
---------
In relation to the services to be provided by Lucas under Part II of this
Agreement all warranties, representations, conditions or other terms
implied in or by contract, tort, statute, common law or otherwise are
hereby expressly excluded save to the extent that it is unlawful so to do.
Lucas shall not under any circumstance be liable in contract, tort, statute
or otherwise for any loss, damage or liability of any nature whatsoever
incurred or suffered by the Company whether direct, indirect, economic,
consequential or otherwise arising out of or in connection with any
services carried out or omitted to be carried out by Lucas pursuant to this
Agreement whether negligently or otherwise save only:
50
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22.1 any loss or damage arising from any fraudulent act or omission of
Lucas;
22.2 any death or personal injury arising from Lucas' negligence;
22.3 any physical loss or damage to property arising from the gross
negligence or wilful default of Lucas.
23. CONFIDENTIALITY
---------------
Each party undertakes that it shall not, and shall ensure that its
employees and agents shall not, disclose, use or permit the use of any
confidential information disclosed to it by the other party except as may
be necessary for complying with its obligations under this Agreement and
then only in such a manner as to protect fully the confidentiality of such
confidential information. The obligations of non-disclosure by each party
shall continue to apply notwithstanding the termination of this Agreement
but shall not apply to any information which falls into the public domain
other than by breach of such obligation of non-disclosure by such party.
Registration or notification of this Agreement with or to any regulatory
authority shall not be a breach of confidence for the purposes of this
clause.
24. TERM AND TERMINATION
--------------------
24.1 The provisions of Part II of this Agreement shall come into force on
the Commencement Date and subject to earlier termination under clause
24.2, shall, in respect of sales of Products to the MOD and Original
Equipment Service continue in force until the MOD and OES Transfer
Date and in respect of sales to the Aftermarket until the Aftermarket
Transfer Date.
24.2 A party shall be entitled to terminate the Transitional Arrangements
set out in Part II of this Agreement summarily by written notice to
the other party if the other party is:
24.2.1 in material breach of such Transitional Arrangements and shall
have failed to remedy the breach within 30 days after receipt
of a request in writing from the party not in breach to remedy
the breach, such request
51
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indicating that failure to remedy the breach may result in
termination of the Transitional Arrangements;
24.2.2 insolvent or has a receiver, manager, administrator,
administrative receiver, liquidator (other than for the
purposes of a solvent reconstruction or amalgamation) appointed
over it or its undertaking assets or income or any part
thereof.
24.3 Lucas shall be entitled to terminate the Transitional Arrangements
summarily within 3 months of becoming aware of any change in the
Controllers of:
24.3.1 the Company; or
24.3.2 any direct or indirect holding company of the Company;
resulting in the new Controllers being a Lucas competitor named
in Schedule 7. The Company undertakes to notify Lucas in
writing of any such change within 7 days of the same occurring.
25. EFFECTS OF TERMINATION
----------------------
25.1 MOD and OES Transfer Date
-------------------------
25.1.1 As from the MOD and OES Transfer Date Lucas will cease to hold
itself out as agent for the Company for the purchase and/or
sale of Products for or to the MOD and Original Equipment
Service and shall hand over on such date its order files in
relation to purchases of Third Party Products and sales to the
MOD and customers in Original Equipment Service who will then
be the responsibility of the Company in relation to all matters
concerning the Products to the exclusion of Lucas.
25.1.2 On the MOD and OES Transfer Date the Company shall collect from
Lucas from its Fradley Warehouse at the Company's own cost and
expense all stock held there which is intended for sale
exclusively to
52
<PAGE>
the MOD and Original Equipment Service (and not to the
Aftermarket).
25.2 Aftermarket Transfer Date
-------------------------
25.2.1 As from the Aftermarket Transfer Date Lucas will cease to hold
itself out as agent for the Company for the purchase and/or
sale of the Products for or to the Aftermarket or otherwise in
relation to the LAO Activity and shall hand over on such date
its order files in relation to purchases of Third Party
Products and sales to customers in the Aftermarket who will
then be the sole responsibility of the Company in relation to
all matters concerning the Products and the LAO Activity to the
exclusion of Lucas and with effect from the Aftermarket
Transfer Date the Company shall take over and operate for its
own account the LAO Activity and all those duties, obligations
and responsibilities which prior thereto had been carried out
by Lucas as agent for the Company under the Transitional
Arrangements.
25.2.2 On the Aftermarket Transfer Date the Company shall collect from
Lucas from its Fradley Warehouse at the Company's own cost and
expense all stock of the Products held there.
25.3 No Compensation
---------------
Termination howsoever arising or expiry of the Transitional
Arrangements on the Aftermarket Transfer Date shall not entitle LAO to
any compensation or indemnity in respect of such termination or expiry
except in relation to any prior breach by the Company of the
Transitional Arrangements. If under the governing law of this
Agreement or the law of any country in which LAO shall perform any of
its duties and obligations under this Agreement such compensation or
indemnity shall be payable:
25.3.1 if such law permits the parties to contract-out of payment of
or liability for the same this clause shall be deemed to
operate in such way as to
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have effect as a contracting-out of any such liability
under such law; and
25.3.2 if such law shall prohibit the parties from contracting-out of
payment of or liability for the same and LAO shall make any
claim for such compensation or indemnity then to the extent
that the Company shall be required to pay any such indemnity
or compensation and shall pay it the rate of commission
specified in clause 19.3 shall be deemed to be retrospectively
adjusted to such lower rate as when applied to the aggregate
Net Sale Value during the period of the Transitional
Arrangements shall result in the aggregate commission earned
by LAO being lower than the aggregate commission actually
earned by LAO and paid by the Company by an amount ("the
Corresponding Debt") which is equal to the indemnity or
compensation payable. LAO shall forthwith on payment by the
Company of any indemnity or compensation account to the
Company for the amount of the commission which has been
overpaid by the Company as a result of the operation of this
clause. The Company shall be entitled to set off against and
deduct from any indemnity or compensation payable the
Corresponding Debt.
25.4 General
-------
25.4.1 In the event that the Transitional Arrangements are terminated
under clause 24.2 or 24.3, Lucas shall as from the date of
termination cease to hold itself out as agent for the Company
for the purchase or sale of the Products and the Company shall
immediately collect from Lucas at its Fradley Warehouse at the
Company's own cost and expense any stock held there which
belongs to the Company.
25.4.2 The termination of the Transitional Arrangements howsoever
arising will be without prejudice to the rights and duties of
either party accrued prior to termination. The clauses in this
Agreement which expressly or impliedly have effect after such
termination will continue
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<PAGE>
to be enforceable notwithstanding termination. Any indemnities
given in this Agreement will continue to apply notwithstanding
termination of the Transitional Arrangements.
26. FORCE MAJEURE
-------------
Neither Lucas nor the Company shall be liable to the other for any failure
or delay in performing its obligations in relation to the Transitional
Arrangements under this Agreement due to Force Majeure provided always
that:-
26.1 the date for performance of the contractual obligation which has been
delayed by Force Majeure shall be deemed suspended only for a period
equal to the delay thereby caused;
26.2 the party seeking to exempt itself from liability by virtue of the
provisions of this clause 24 shall give notice to the other party
within 7 (seven) days of becoming aware of the Force Majeure event or
circumstance and of its consequences and shall at all times use all
reasonable endeavours to mitigate the severity of the same.
PART III
--------
GENERAL
-------
27. ASSIGNMENT PROHIBITED
---------------------
The benefit and/or burden of this Agreement shall not be assignable or
assigned by either Lucas or the Company without the prior written consent
of the other (which consent shall not be unreasonably withheld in the case
of an internal group reorganisation (without insolvency) intended to be
made by either Lucas or the Company provided always that any assignee shall
be a person of similar substance and standing as the assignor or a suitable
guarantee shall be provided) save that Lucas or the Company shall be
entitled without the consent of the other to accept the benefits accruing
under this Agreement or to exercise its rights covenants and obligations
hereunder through the agency of (in the case of Lucas) any other Lucas
Group Company and (in the case of the Company) any other Purchaser Group
55
<PAGE>
Company. In cases where the assignee of this Agreement is a Lucas Group
Company, then, upon ceasing to be a Lucas Group Company, Lucas shall
procure that such assignee shall, and such assignee shall be obliged to,
re-assign this Agreement to Lucas. In cases where the assignee of this
Agreement is a Purchaser Group Company then, upon ceasing to be a Purchaser
Group Company, the Company shall procure that such assignee shall, and such
assignee shall be obliged to, re-assign this Agreement to the Company.
28. SEVERABILITY
------------
The illegality, invalidity or unenforceability of any clause or part of
this Agreement will not affect the legality, validity or enforceability of
the remainder. If any such clause or part is found by any competent court
or competent authority to be illegal, invalid or unenforceable the parties
agree that they will substitute provisions whose effect is as similar to
the offending provisions as is possible without thereby rendering them
illegal, invalid or unenforceable.
29. ENTIRE AGREEMENT
----------------
29.1 This Agreement, and the documents referred to in it, contain the whole
agreement between the parties relating to the transactions concerning
the LAO Activity, the LAO Assets and the Transitional Arrangements
contemplated by this Agreement and supersede all previous agreements
between the parties relating to such transactions.
29.2 Each of the parties acknowledges that in agreeing to enter into this
Agreement it has not relied on any pre-contractual representations
warranties or other assurances except those set out in this Agreement.
29.3 Each party hereby agrees that it shall have no remedy against the
other party for any innocent or negligent misrepresentation made by
such other party in relation to such transactions prior to this
Agreement being entered into except to the extent that the same shall
have been incorporated in this Agreement as a warranty representation
or indemnity in which case any claim in relation to the
56
<PAGE>
same shall lie only on the basis of a breach of this Agreement or
under the relevant indemnity provision.
30. VARIATIONS
----------
No variation to this Agreement shall be effective unless in writing signed
by a duly authorised representative of each of the parties hereto.
31. WAIVER
------
31.1 Failure to exercise or delay in exercising on the part of any party
any right, power or privilege of that party under this Agreement shall
not in any circumstances operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege in any
circumstances preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
31.2 Any waiver of a breach of any of the terms hereof or of any default
hereunder shall not be deemed a waiver of any subsequent breach or
default and shall in no way affect the other terms of this Agreement.
32. NOTICES
-------
Any demand, notice or communication in relation to this Agreement shall be
made in writing and served by hand, by registered or recorded delivery
post, or by facsimile transmission addressed to the recipient at its
registered office or its address stated below (or such other address or
facsimile number as a party may nominate in writing from time to time).
Lucas Lucas Aftermarket Operations
-----
Stratford Road
Solihull
West Midlands
B90 4LA
For the attention of: Legal Director
Fax No: 0121 697 5026
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<PAGE>
The Company Prestolite Electric Limited
-----------
Cleveland Road
Leyland
Preston
Lancashire
PR5 1XB
For the attention of: The Managing Director and Finance
Director
Fax No: 0177 242 1663
33. LANGUAGE
--------
33.1 The English language version of this Agreement shall be the
authoritative version even though it may have been translated into
some other language.
33.2 All communications between the parties shall unless otherwise agreed
in writing be in the English language.
34. ASSOCIATED COMPANY
------------------
Any act or omission of any Associated Company of Lucas or the Company (as
the case may be) which if committed or omitted by Lucas or the Company (as
the case may be) would have been a breach of this Agreement by Lucas or the
Company (as the case may be) will be deemed to be a breach of this
Agreement by Lucas or the Company (as the case may be) who will be liable
to the other party accordingly.
35. RELATIONSHIP OF THE PARTIES
---------------------------
Nothing contained in this Agreement shall be construed to imply that there
is any relationship between the parties of partnership or of employer/
employee nor are the parties hereby engaging in a joint venture and
accordingly neither of the parties shall have any right or authority to act
on behalf of the other nor to bind the other by contract or otherwise,
unless expressly permitted by the terms of this Agreement.
36. EXPENSES
--------
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<PAGE>
Except whether otherwise expressly provided herein each party will bear its
own costs and expenses in relation to the preparation, completion and
operation of this Agreement.
37. FURTHER ASSURANCE
-----------------
Lucas hereby agrees and declares that it will after the date hereof and
notwithstanding the sale and purchase hereunder of the LAO Assets execute
and deliver any other documents and take any other steps as shall
reasonably be required from time to time by the Company, at Lucas' expense,
to vest in the Company, or as it may direct, the LAO Assets (other than the
Contracts which are governed by clause 5) and otherwise give the Company
the full benefit of all the provisions of this Agreement.
38. TRUSTS
------
The perpetuity period applicable to any trusts created by this Agreement
shall be ten years commencing on the date of this Agreement.
39. COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts and by the
several parties hereto on separate counterparts each of which when so
executed and delivered shall be an original but all the counterparts shall
together constitute one document.
40. APPLICABLE LAW
--------------
The formation, construction, performance, validity and all aspects
whatsoever of this Agreement shall be governed by the law of England and
Wales and the parties submit to the exclusive jurisdiction of the English
Courts.
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SCHEDULE 1
----------
ACCOUNTING POLICIES RELATING TO THE STOCK
-----------------------------------------
Definition
- - - - - - - - - - - ----------
LAO Stock comprises the stock within the meaning given in clause 1.1 to that
expression.
Valuation
- - - - - - - - - - - ---------
Policy
------
. Stocks are valued at the lower of cost and net realisable value of separate
items of stock or of groups of similar items.
Definition
----------
. Cost - LAO Stock other than stock of Third Party Products - the SSAP9
transfer price at which the stock was originally transferred from the Acton
business to LAO.
In the case of Third Party Products comprised within the Stock - Cost - the
expenditure incurred in bringing them to their present location including
import duties, transport and handling costs and any other directly
attributable costs, less trade discounts, rebates and subsidies and without
the addition of any overhead allocation.
. Net Realisable Value - the actual or estimated selling price net of trade
but before settlement discounts.
Determination of Cost
---------------------
. The gross valuation must include all goods in stock and will be based on
cost, any diminution due to obsolescence and other causes being dealt with
separately by way of provisions. Gross cost will be arrived at by using
standard costing methods. Standard costs will be brought up-to-date shortly
before the valuation date. The valuation must be modified to recognise the
true cost of stock as required by SSAP9, adjustments would be made for
normal scrap, price variations etc.
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Provisions
----------
. The purpose of provisions is to reduce the stock valuation to the lower of
cost and net realisable value.
. Inactive stock - all stock where no sales have been recorded during the
previous twelve months are inactive stocks, these will be provided for in
full. The only exception being where stock has been deliberately accumulated
in anticipation of a new sales campaign, the introduction of a new product
or model, or new legislation. In this case the stock will be measured
against the expected future demand and any excess provided for.
. Excess stock - a provision will be made for stocks which have moved during
the preceding year but which are excessive in relation to the expected
demand for the coming year such that any stocks in excess of one year's
supply will be fully written off.
. Defective stock - where goods are accepted from suppliers on partial
inspection only, a provision will be made for defective and perishable items
not revealed by the initial check. The amount should be recalculated at the
valuation date.
. Overvaluation - in any case where the net stock value exceeds the net
realisable value the difference must be provided for.
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SCHEDULE 2
----------
ANCILLARY AGREEMENTS
--------------------
Distribution Agreement for South Africa between (1) Lucas Limited and (2)
Lucas Automotive (Pty) Limited
Distribution Agreement for Argentina between (1) Lucas Limited and (2)
Lucas Indiel Argentina S.A.
South African Supply Agreement between (1) Lucas Limited and (2) Lucas
Automotive (Pty) Limited
Supply and Distribution Agreement for South America (excluding Argentina)
between (1) Lucas Indiel Argentina S.A. and (2) Lucas Diesel do Brasil Ltda
Acton Trade Mark Licence between (1) Lucas Industries plc and (2)
Prestolite Electric Limited
Argentina Trade Mark Licence between (1) Lucas Industries plc and (2) Lucas
Indiel Argentina S.A.
Marketing Services Agreement between (1) Lucas Limited and (2) Prestolite
Electric Limited
Overarching Agreement between (1) PEI Holding Incorporated (2) Lucas
Industries plc (3) Lucas Limited and (4) Prestolite Electric Limited
Licence of Intellectual Property relating to In-Line Diesel Pumps between
(1) Lucas Limited and (2) Prestolite Electric Limited
In-Line Diesel Pumps Supply Agreement between (1) Lucas Limited and (2)
Prestolite Electric Limited.
Umbrella Agreement between (1) Lucas Limited (2) Lucas Industries plc (3)
Lucas Diesel Do Brasil Ltda (4) Prestolite Electric Incorporated (5)
Prestolite Electric Limited(6) Lucas Indiel Argentina SA (7) Lucas
Automotive (Pty) Limited (8) Prestolite Newco Incorporated (9) PEI Holding
Incorporated
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Argentina Sale and Purchase Agreement between (1) Lucas Industries plc (2)
Prestolite Electric Incorporated (3) Prestolite Newco Incorporated.
South Africa Sale and Purchase Agreement between (1) Lucas Industries plc
(2) Prestolite Electric Incorporated
Side Letter from Lucas Industries plc to Lucas Automotive (Pty) Ltd
concerning use of Trade Marks under the Supply Agreement
Side Letter from Lucas Industries plc to Lucas Indiel Argentina SA
concerning use of Trade Marks under the Supply Agreement.
Side Letter from Lucas Aftermarket Operations to Prestolite Electric
Limited concerning H.D.E units required for Lucas Exchange Unit Programme.
Side Letter from Lucas Industries plc to Lucas Automotive (Pty) Limited
concerning sales to Lucas Ricambi
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<PAGE>
SCHEDULE 3
----------
WARRANTIES
----------
Employees
- - - - - - - - - - - ---------
None of the employees employed by LAO for the purposes of the LAO Activity are
exclusively employed in the LAO Activity.
Litigation and Disputes
- - - - - - - - - - - -----------------------
LAO is not at the date hereof in relation to the LAO Activity or the Contracts
engaged in any litigation, arbitration, administrative or criminal proceedings,
whether as plaintiff, defendant or otherwise, which materially and adversely
affects or is reasonably likely to have an adverse effect on the LAO Activity
and/or the LAO Assets.
Product Liability
- - - - - - - - - - - -----------------
There is no claim in respect of Product Liability outstanding or threatened
against or so far as LAO is aware accepted by LAO in relation to the LAO
Activity.
Contracts and Contractual Arrangements
- - - - - - - - - - - --------------------------------------
So far as LAO is aware no notice of termination of any such Contract has been
received or served by LAO.
Other than as a result of the arrangements contemplated herein LAO is not aware
of the invalidity of, or of any grounds for determination, rescission, avoidance
or repudiation, of any of the Contracts.
None of the Contracts:
(a) is an agency or distributorship agreement;
(b) is a contract in respect of which the primary supply is for services;
(c) requires LAO to pay any commission, finder's fee, royalty or the like;
(d) is in any way otherwise than in the ordinary course of business;
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<PAGE>
(e) in the reasonable opinion of LAO cannot readily be fulfilled or performed
by LAO on time without undue or unusual expenditure of money or effort.
Defaults
- - - - - - - - - - - --------
So far as LAO is aware, neither LAO nor the LAO Activity nor any other party to
any agreement with LAO or the LAO Activity is in default under any of the
Contracts where such default has a material adverse effect on the continuance of
the LAO Activity.
Forward Currency Exchange
- - - - - - - - - - - -------------------------
There are no forward currency exchange contracts which the Lucas Group has prior
to the date hereof entered into for the benefit of the LAO Activity and which
are current at the date hereof.
Sales Of Products
- - - - - - - - - - - -----------------
Sales of Products in connection with the LAO Activity for the ten months to
November 1997 indicate that overall positive gross margins were achieved at each
of the Aftermarket, Original Equipment Service and MOD customer group levels.
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SCHEDULE 5
----------
LIMITATIONS ON WARRANTIES AND INDEMNITIES
-----------------------------------------
1. Lucas shall be released from the effect of the Warranties but not the
Indemnities (as defined in paragraph 3.4 of this Schedule 5) to the extent
that the Company is aware at the date of this Agreement of any matters,
events or circumstances (whether the same are learned by any investigation
or enquiry made by or on behalf of the Company into the LAO Activity) and
which matters, events or circumstances would but for this paragraph 1
constitute a breach of any of the Warranties. For the purpose of this
paragraph the Company's awareness shall be determined by reference only to
the actual knowledge of Mr Kim Packard and Mr Ken Cornelius of Prestolite
Electric Incorporated, Dr Mike Lea and Mr John Wilkinson of the Company and
of the Company's professional advisers (including the Company's Lawyers and
Coopers & Lybrand), in respect of the matters the subject of this Agreement
2. Any claim the Company may have in respect of the Warranties shall sound in
damages only, subject to the provisions of this Schedule 5, and accordingly
the Company shall not have the right to rescind this Agreement or treat it
as having been repudiated by Lucas by reason of there having been any
breach of the Warranties.
3. The Company hereby agrees and acknowledges that notwithstanding anything to
the contrary contained in this Agreement the Warranties are subject to the
following:
3.1 no claim shall be capable of being made unless it shall be notified in
writing to Lucas on or before 31 March 1999 and any such claim which
has been made shall (if it has not been previously satisfied settled
or withdrawn) be deemed to have been withdrawn at the expiration of 6
months from the date on which the claim so notified when aggregated
with all other claims under this Agreement and under the Other Sale
Agreements exceeding (Pounds)5,000 exceeds (Pounds)150,000 unless
prior to such expiration legal proceedings in respect thereof shall
have already commenced by the delivery of a summons on Lucas;
3.2 the aggregate liability of Lucas under this Agreement and the Other
Sale Agreements in respect of all breaches of the Warranties shall not
when
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<PAGE>
aggregated with the liability of the person or persons defined as
the Vendor in each of the Other Sale Agreements in respect of all
breaches of the Other Warranties and Other Capped Indemnities exceed a
sum equal to (Pounds)12,000,000;
3.3 Lucas shall not be liable in respect of any single claim brought by
the Company for a breach of the Warranties, arising out of a single
event (provided that for the purposes of this paragraph 3.3 liability
in respect of a series of claims arising out of the same subject
matter shall be aggregated together as if such claims were one claim)
if the liability in respect of such claim would not exceed
(Pounds)5,000 (five thousand pounds). Lucas shall be liable in respect
of each and any claim for a breach of the Warranties in respect of
which the liability of Lucas exceeds (Pounds)5,000 (five thousand
pounds) only if the liability of Lucas for that claim, all other such
claims exceeding (Pounds)5,000 and all other such claims made under
the Other Sale Agreements in respect of all breaches of the Other
Warranties and Other Capped Indemnities would in aggregate exceed
(Pounds)150,000 and in that event Lucas shall only be liable for the
excess;
3.4 if any matter arises or gives rise to any claim under the Warranties
or any indemnities given by Lucas under this Agreement ("the
Indemnities") the Company shall as soon as reasonably practicable give
notice in writing to Lucas giving such details of the matter in
respect of which the claim is made as are at that time known to the
Company and (on the basis of the facts then known to the Company) the
bona fide estimated liability in respect thereof and where the claim
arises by reason of a claim made against the Company and/or Lucas
and/or any Purchaser Group Company and/or any Lucas Group Company by a
third party the Company shall not seek to settle or compromise the
matter and shall (if relevant) procure that the relevant company does
not seek to settle or compromise the same without the written consent
of Lucas (which consent shall not be unreasonably withheld or delayed)
and shall take such reasonable action as Lucas may require to avoid,
resist, contest and/or compromise any such claim on the basis that
Lucas shall be responsible for and shall bear all the reasonable costs
and expenses of the Company or the
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<PAGE>
relevant Purchaser Group Company in taking such action and in addition
shall to the extent that the same shall not have been borne by Lucas
directly indemnify the Company against the same and against all legal
costs incurred by or awarded against the Company as a direct result
thereof;
3.5 Lucas shall not be liable for any claim arising as a result of a
breach of Warranties:
3.5.1 or under the Indemnities if such claim would not have arisen
but for anything voluntarily done or omitted to be done by the
Company, or any Purchaser Group Company or any of its or their
employees, agents or successors in title after the date hereof
outside the ordinary course of business and which the Company,
any Purchaser Group Company or its or their employees agents or
successors in title were aware or ought reasonably to have been
aware could give rise to a claim; or
3.5.2 or the Indemnities to the extent that such claim relates to any
loss for which the Company or any Purchaser Group Company is
indemnified by insurance (but only to the extent of the amount
of the proceeds actually received from any applicable insurance
policy) and the Company agrees to pursue and to procure that
there is pursued all and any claims which there may be under or
in respect of any policy of insurance which relates or may
relate to the subject matter of the claim in question and to
provide to Lucas such evidence as Lucas may reasonably require
of having done so;
3.6 where the Company or any Purchaser Group Company is at any time
entitled to recover from a third party (other than as contemplated in
paragraph 3.5 above) any amount in respect of any matter giving rise
to a claim under the Warranties or the Indemnities or under any other
provisions of this Agreement the Company shall take and shall procure
that there is taken all reasonable steps to enforce any rights of
recovery that the Company or any Purchaser Group Company may have
against any third party in respect of the subject matter of the claim
and the Company or the relevant Purchaser Group
68
<PAGE>
Company shall be indemnified by Lucas against all reasonable costs and
expenses including all legal costs incurred by it or them in doing so.
In the event that the Company or any Purchaser Group Company shall
receive any amount from such third party, the amount of the claim
against Lucas shall be reduced by the amount recovered less where not
already paid all such reasonable costs and expenses incurred by the
Company or any Purchaser Group Company Provided always that:
3.6.1 any failure by the Company to comply with such undertaking in
respect of any matter giving rise to a claim under the
Warranties or the Indemnities or otherwise under this Agreement
shall not affect in any way any liability of Lucas which
liability shall not be conditional upon the Company's
compliance with this undertaking save that Lucas shall be
entitled to say that the Company has not mitigated its loss or
that Lucas has a right of action or other claim against the
Company for breach of the provisions of this paragraph 3.6; and
3.6.2 in respect of any matter giving rise to a claim under the
Warranties or the Indemnities or otherwise under this Agreement
if the Company alleges that any steps which Lucas requires it
to take are unreasonable then the Company shall seek the
opinion of Queen's Counsel (such counsel to be of at least five
years' standing), the identity of whom shall be agreed upon by
Lucas and the Company and, failing such agreement within three
days after the date on which the arbitration is demanded, shall
be determined by the President of the Law Society (who may be
instructed by either Lucas or the Company to make the
nomination at any time after the expiry of that three day
period). In respect thereof the Company shall instruct counsel
in writing (or if such instructions are to be given orally then
Lucas shall be entitled to be present at and to contribute to
the giving of such instructions) and provide a copy of a draft
of such instructions before submission to counsel and
incorporate Lucas's comments thereon. Counsel shall be asked to
advise whether, on the basis of the instructions given to him
69
<PAGE>
and the information then made available to him, the action
sought by Lucas should be taken on the basis that, on the
balance of probabilities, the relevant claim against the third
party stands a reasonable prospect of success and the parties
shall follow the advice given in such opinion save that nothing
herein shall prevent or otherwise restrict the ability of Lucas
to argue (if such an argument is as a matter of law open to it)
that the Company has failed to mitigate its loss;
3.7 if Lucas pays at any time an amount pursuant to a claim in respect of
any Warranty or under any Indemnity or under any of the other
provisions of this Agreement and the Company and/or any Purchaser
Group Company subsequently becomes entitled to recover from some other
person any sum in respect of any matter giving rise to such claim the
Company shall take and shall procure that there is taken all
reasonable steps to enforce such recovery subject to being indemnified
by Lucas against all reasonable costs and expenses including all legal
costs incurred by any of them in doing so. The Company and/or any
Purchaser Group Company shall forthwith upon making any such recovery
(after deducting the costs incurred by the Company and/or any
Purchaser Group Company as contemplated by this clause to the extent
that Lucas has not indemnified the Company or the relevant Purchaser
Group Company for such costs) repay to Lucas so much of the amount
paid by Lucas to the Company in respect of the claim in question as
does not exceed the sum recovered from such other person;
3.8 without prejudice to the foregoing provisions of this Schedule 5
before the Company makes any payment or offers any other remedy or
takes any other remedial or corrective action in respect of any matter
for which it is entitled to an indemnity or to otherwise make a claim
against Lucas under the provisions of this Agreement, it shall and
shall procure that the relevant Purchaser Group Company gives a
reasonable opportunity and reasonable assistance to Lucas to verify
and, if appropriate, remedy the defect, default or omission or other
matter giving rise to the claim for indemnity or other remedy in
question;
70
<PAGE>
3.9 payment or satisfaction by Lucas of any claim under any one particular
paragraph of the Warranties and/or under any Indemnity shall to the
extent of such payment or satisfaction satisfy and preclude any other
claim which is capable of being made in respect of the same subject
under another particular paragraph of the Warranties or under another
particular Indemnity. If and to the extent that the Company and/or
any Purchaser's Group Company recovers any sum under any provision of
this Agreement, including under the Indemnities, the amount of any
claim which the Company, or any Purchaser's Group Company may have in
respect of the same subject matter shall be reduced or eliminated
accordingly;
3.10 if any potential claim shall arise by reason of a liability of the
Company or relevant Purchaser Group Company being contingent only or
is otherwise not capable of being quantified then Lucas shall not be
under any obligation to make any payment pursuant to such claim until
such time as the contingent liability ceases to be contingent and
becomes capable of being quantified as the case may be;
3.11 any amount payable in respect of breach of any of the Warranties shall
be treated as a reduction in the consideration payable under clause 3
of this Agreement;
3.12 in this Schedule 5 the expressions "Other Sale Agreements" and "Other
Warranties" and "Other Capped Indemnities" shall have the same
meanings as in the Acton Sale and Purchase Agreement.
71
<PAGE>
SIGNED by CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
- - - - - - - - - - - ------ ------------------ --------------------------------
as duly authorised attorney for ) Chris Long-Leather as attorney
and on behalf of LUCAS LIMITED ) ------------------
------------- of Lucas Limited
-------------
SIGNED by P. KIM PACKARD )
- - - - - - - - - - - ------ --------------
duly authorised for and on /s/ P. Kim Packard
behalf of PRESTOLITE ELECTRIC ) -------------------------------
------------------- Director
LIMITED ) --------
- - - - - - - - - - - -------
72
<PAGE>
EXHIBIT 10.18
DATED JANUARY 22, 1998
----------------------
(1) LUCAS LIMITED
(2) PRESTOLITE ELECTRIC LIMITED
______________________________
LICENCE OF INTELLECTUAL PROPERTY
RELATING TO IN-LINE DIESEL PUMPS
________________________________
<PAGE>
THIS LICENCE is made on 22nd day of January 1998
BETWEEN:
-------
(1) LUCAS LIMITED whose registered office is at Stratford Road, Solihull,
-------------
West Midlands, B90 4LA ("Lucas")
(2) PRESTOLITE ELECTRIC LIMITED whose registered office is at Cleveland Road,
---------------------------
Leyland, Preston, Lancashire PR5 1XB ("the Company")
RECITALS
--------
(A) Pursuant to a Sale and Purchase Agreement (as defined below) Lucas is
selling the Activity and Assets (as therein defined) to the Company.
Notwithstanding the sale of the Activity and Assets to the Company any
existing Intellectual Property Rights (defined later) which relate to in-line
diesel pumps (the manufacture of which is part of the Activity) are to remain
vested in Lucas.
(B) The Company requires a licence of such Intellectual Property Rights in
order to manufacture and supply such in-line diesel pumps to the OE Market
(defined later) and to Lucas for the Aftermarket (defined later) and Lucas
agrees to grant such licence on the terms set out in this Licence.
NOW IT IS AGREED as follows:-
----------------
1. DEFINITIONS
-----------
In this Licence:
1.1 the following words and expressions shall have the following meanings
except where inconsistent with the subject matter or context:-
"Aftermarket" means the market for (a) spare and
replacement parts for components or
sub-assemblies comprised within the
products of Original Equipment
Manufacturers and (b) automotive
accessories and includes (i) supplies
of such spare replacement parts and
accessories to the MOD and (ii)
Original Equipment Service
"Associated Company" means any person which is either a
holding company (whether direct or
indirect) or a subsidiary company of
the relevant party or a subsidiary
company of any such holding company or
is otherwise directly or indirectly
controlled by, or is under the same
control, direct or indirect, as the
relevant party from time to time and at
the time that the relevant clause in
which such expression appears has
application, which where a claim is to
be made under the relevant clause shall
mean when the cause of action accrued
under such clause
"Competitor of Lucas" means Bosch, Denso, Zexel and
Stanadyne or any of their Associated
1.
<PAGE>
Companies
"control" means in relation to any person the
power of any other person or persons to
secure by law or by corporate structure
that the affairs of the first person
are conducted in accordance with the
wishes of that other person or persons,
and any cognate word shall be construed
accordingly
"holding company" has the meaning given in Section 736 of
the Companies Act 1985 as amended
"Improvement" means any invention, discovery or
design comprised within any change
hereafter made to Products or their
method of manufacture or use which
makes them of better quality or more
efficient or adaptable or enables them
to be manufactured more cheaply or more
efficiently provided that such
expression shall not for the purposes
of any non-exclusive licence granted
pursuant to clause 3 include any novel
feature which is patentable in its own
right or which will materially extend
the life of any Product
"In-Line Diesel Pump Marks" means the Registered Trade Marks and
the Unregistered Trade Mark and
includes any one or more of such trade
marks
"Intellectual Property Rights" means all the registered and
unregistered intellectual property
subsisting at the date hereof owned by
Lucas or any Associated Company of
Lucas in or relating to the Products
including any patent, registered
design, design right, copyright and
know-how or similar property or right
by whatever name it is called and in
whatever country it subsists and which
has hitherto been used by the Activity
in relation to the manufacture,
sourcing and/or sale of Products
including the In-Line Diesel Pump Marks
but excluding any other trade marks
registered or unregistered
"Lucas Standards of Quality" means the standards of quality applying
at the date hereof to the
2.
<PAGE>
manufacture of Products and any reasonable
standards specified or approved by Lucas at
any time hereafter in connection with the
quality of Products
"MOD" means the Ministry of Defence in the
United Kingdom of Great Britain and
Northern Ireland
"Original Equipment means any manufacturer or assembler of
Manufacturer" transport vehicles, engines or similar
equipment including, but not limited
to, a manufacturer or assembler of
motor cars, vans, buses, coaches,
forklifts, industrial vehicles, trucks,
tractors or marine, motive power or
stationary engines or a manufacturer of
components or sub-assemblies to be
fitted as original equipment to such
vehicles, engines or similar equipment
"O E Market" means Original Equipment Manufacturers
in their capacity as buyers of Products
for fitting as original equipment
"Original Equipment means the market for supplies of spare
Service" and replacement parts to any Original
Equipment Manufacturer or to any dealer
of any Original Equipment Manufacturer
in its capacity as a dealer of such
Original Equipment Manufacturer
"person" means any person, firm, association,
company or body corporate or
unincorporate
"Products" means those products set out in
Schedule 1
"Registered Trade means the registered trade marks
Marks" details of which are set out in
Schedule 2
"Sale and Purchase Agreement" means the agreement made between Lucas
and the Company of even date herewith
for the sale of the Activity and Assets
(as defined therein)
"Supply Agreement" means an agreement having the same date
as this Licence and made between (1)
Lucas Limited and (2) the Company and
entitled "In-Line Diesel Pumps Supply
Agreement"
"subsidiary" has the meaning given in Section 736
3.
<PAGE>
of the Companies Act 1985 as amended
"Unregistered Trade means the mark "Maximec"
Mark"
1.2 words which denote the singular shall be deemed to include the plural
and vice versa. References to a particular gender include all other
genders;
1.3 references to clauses and Schedules are to clauses and Schedules of
this Licence;
1.4 the headings to the clauses will not affect its construction;
1.5 the word "including" or any cognate word shall be construed as though
the words "without limitation" immediately followed such word;
1.6 references to any instrument or agreement shall include such
instrument or agreement as may have been or may hereafter be varied.
2. GRANT
-----
2.1 Lucas hereby grants to the Company a royalty free non-exclusive
world-wide perpetual (subject to clause 8) transferable (in accordance with
clause 10) licence, together with the right to grant sub licences to use
the Intellectual Property Rights to a person who is not a Competitor of
Lucas, but only for the purposes of manufacturing, having manufactured and
supplying Products to (a) the OE Market, (b) Lucas or any Associated
Company of Lucas for supply to the Aftermarket and (c) the Aftermarket if
under either clause 3.2.2 or clause 3.2.3 of the Supply Agreement the
Company's rights shall arise but then only to the extent therein provided.
2.2 The Company acknowledges that the Intellectual Property Rights shall
belong absolutely to Lucas. Save as provided in clause 2.1 the Company
shall have no rights in respect of the Intellectual Property Rights and
shall not use the Intellectual Property Rights except for the purposes
specified in clause 2.1 and in particular shall not use any of the In-Line
Diesel Pump Marks as the whole or part of a corporate or other business
name.
3. IMPROVEMENTS
------------
Each of the parties shall promptly notify the other in writing of any
Improvements to the Products which it develops or acquires, giving full
details thereof, and shall, so far as lies within its powers, grant the other
a world-wide non-exclusive licence to use any intellectual property rights in
relation to such Improvements royalty free during the subsistence of such
rights (subject to clause 8) Provided always that such licence shall in
relation to Improvements (a) developed or acquired by Lucas be granted only
for the purposes of the Company exploiting the rights granted to it pursuant
to clause 2.1; (b) developed or acquired by the Company be granted only for
the purposes of Lucas or any Associated Company of Lucas manufacturing for,
and/or supplying Products to, the Aftermarket.
4. INFRINGEMENTS
-------------
4.1 Each of the parties will promptly notify the other in writing if they
become aware that any third party may be infringing the Intellectual
Property Rights or any intellectual property rights in relation to any
Improvements or that the use of the Intellectual Property Rights or any
4.
<PAGE>
such intellectual property rights in relation to any Improvements may be
infringing the rights of any third party.
4.2 Lucas shall have the sole right to bring or defend and to have conduct
of any proceedings to which a third party is party relating to the
Intellectual Property Rights and the Company will at the request of Lucas
give reasonable co-operation to Lucas at Lucas' cost and expense in any
action, claim or proceedings brought or threatened in respect of the
Intellectual Property Rights by or against a third party.
4.3 The party (the "Owner Party") who owns the intellectual property
rights in any Improvements shall have the sole right to bring or defend and
to have conduct of any proceedings relating to such intellectual property
rights and the other party will give reasonable co-operation to the Owner
Party at the Owner Party's expense in any action, claim or proceedings
brought or threatened in respect of such intellectual property rights by or
against a third party.
5. COVENANTS BY THE COMPANY
------------------------
5.1 The Company shall comply with the Lucas Standards of Quality and in
particular shall use the In-Line Diesel Pump Marks only in the form and
manner directed or approved in writing by Lucas and in connection therewith
shall permit inspection by Lucas' authorised representatives at any
reasonable time by prior arrangement of the manufacture, storage and
transport of the Products of or by the Company or any sub-contractor of the
Company.
5.2 If at any time any Products bearing the In-Line Diesel Pump Marks do
not, insofar as is material and recognising that from time to time Products
may occasionally be made which are defective, comply with Lucas' Standards
of Quality Lucas may give notice in writing of its dissatisfaction and
require the Company to take such remedial action as Lucas may reasonably
direct. If within a period of thirty (30) days after receipt of such notice
the Company has not taken such remedial action to Lucas' reasonable
satisfaction Lucas shall provide to the Company in writing full particulars
of those matters Lucas reasonably considers still do not comply with Lucas'
Standards of Quality and stating that if by the expiration of a further 30
days Lucas shall not have issued a letter confirming its satisfaction with
the Company's remedial action then the Company will be in material breach
of this Licence.
5.3 The Company shall not use in its business in relation to Products or
any other products any other trade marks or devices so resembling the In-
Line Diesel Pump Marks as to be likely to cause confusion or deception.
5.4 All aspects of the manufacture, use and sale of Products by the
Company shall be at the Company's risk and for the Company's account and
the Company shall act as an independent contractor and the Company shall
indemnify and hold Lucas harmless against all actions, claims, demands,
costs, charges and expenses arising out of or in connection with the
manufacture, use or sale or offer of sale of Products in relation to which
any Intellectual Property Right has been used, other than the sale or offer
of sale of Products to Lucas or any Associated Company of Lucas but
5.
<PAGE>
without prejudice to the rights of Lucas, any Associated Company of Lucas
or the Company under any other agreement or at law.
5.5 The Company shall effect and maintain or cause another Associated
Company of the Company to effect and maintain for its and the Associated
Company's benefit full product liability insurance relating to Products in
relation to which any Intellectual Property Right has been used, with a
reputable insurer in an amount equal to not less than US$10,000,000 for
each and every event and in the aggregate in any one year of insurance
under such policy and shall provide to Lucas on request a copy of the
policy and proof of the payment of premiums.
6. REGISTRATION
------------
6.1 Nothing in this Licence shall oblige Lucas to defend any proceedings
for the revocation of registration of any of the Registered Trade Marks or
other registered Intellectual Property Rights nor to bring any proceedings
against an infringer of the Registered Trade Marks or other registered
Intellectual Property Rights, or in relation to any passing off, or other
action in connection with the Unregistered Trade Mark or other unregistered
Intellectual Property Rights, but should Lucas decide in its absolute
discretion to defend or take any such proceedings it shall do so at its own
cost. The Company shall in any case execute all documents and do all things
reasonably necessary at Lucas' expense to enable Lucas to pursue any such
proceedings provided that the Company shall not be required to be joined as
a party to any such proceedings.
6.2 The Company shall comply with applicable laws of any country as to the
registration and usage of any registered Intellectual Property Rights which
are required in order to maintain the validity of the same in such country
and to make the provisions of this Licence valid between the parties hereto
and against third parties but nothing in this clause 6.2 shall require the
Company to pay any renewal fees in relation to any such registered
Intellectual Property Rights.
6.3 Lucas and the Company shall if it is necessary to do so in order to
protect the registration of the same use all reasonable endeavours to have
the Company recorded as the licensee of any registered Intellectual
Property Rights in any relevant registry and the Company will where it is
so necessary at the request of Lucas execute all documents, including a
short form of this Licence. All costs incurred under the provisions of this
clause will be shared equally by Lucas and the Company.
7. WARRANTY
--------
7.1 Lucas warrants that it does not know of any present or proposed
proceedings concerning the Intellectual Property Rights but does not
warrant that any Products manufactured, used, sold or offered for sale will
not infringe the rights of others.
7.2 The Activity's manufacture and supply of Products immediately prior to
the date hereof complied in all respects with Lucas' Standards of Quality
and Lucas has not during the 12 months prior to the date of this Licence
had cause to be dissatisfied with the Activity's level of compliance with
Lucas' Standards of Quality recognising that from time to
6.
<PAGE>
time during that period Products may occasionally have been made which were
or are defective.
8. TERMINATION
-----------
8.1 Lucas or the Company may terminate this Licence summarily by written
notice to the other if the other is:-
8.1.1 in material breach of this Licence and shall have failed to
remedy the breach within 30 days of the receipt of a request in
writing from the party not in breach to remedy the breach, such
request indicating that failure to remedy the breach may result in
termination of this Licence;
8.1.2 insolvent or has a receiver, manager, administrator,
administrative receiver, liquidator (other than for the purposes of a
solvent reconstruction or amalgamation) appointed over it or its
undertaking, assets or income or any part thereof.
8.2 Lucas shall be entitled to terminate this Licence summarily in the
event of there being any change in the control of the Company or of any
direct or indirect holding company of the Company resulting in a Competitor
of Lucas having control.
8.3 Upon the termination of this Licence howsoever occasioned the Company
shall cease to be authorised to use the Intellectual Property Rights and
any intellectual property rights in relation to any Improvements owned by
Lucas and shall forthwith return to Lucas all originals and copies of all
documents and other information (in whatever form) comprising, relating to
or recording such Intellectual Property Rights and intellectual property
rights in relation to any Improvements owned by Lucas provided that to the
extent that the Company would be entitled on such termination to use the
then unregistered Intellectual Property Rights but for this clause because
they are in the public domain otherwise than by reason of a breach of this
Licence by the Company then the restriction in this clause 8.3 on the
Company not to use such unregistered Intellectual Property Rights shall not
apply.
8.4 The obligation on the Company to indemnify Lucas in clause 5.4 shall
continue indefinitely on the termination of this Licence.
9. CONFIDENTIALITY
---------------
Each party undertakes that it shall not, and shall ensure that its employees
and agents shall not, disclose, use or permit the use of any confidential
information disclosed to it by the other party except as may be necessary for
complying with its obligations under this Licence and then only in such a
manner as to protect fully the confidentiality of such confidential
information. The obligations of non-disclosure by each party shall continue
to apply notwithstanding the termination of this Licence but shall not apply
to any information which falls into the public domain other than by breach of
such obligation of non-disclosure. Registration or notification of this
Licence with or to any regulatory authority shall not be a breach of
confidence for the purposes of this clause.
10. ASSIGNMENT AND SUB-LICENSING
----------------------------
10.1 Neither party shall be entitled to assign the benefit or delegate the
burden of any rights or obligations under this Licence without the prior
7.
<PAGE>
written consent of the other party save that Lucas shall be entitled to
assign the benefit and burden of this Licence without such consent to an
Associated Company of Lucas and the Company shall be entitled to assign the
benefit of this Licence at the same time as the Company assigns the benefit
of the Supply Agreement to any person to whom it becomes entitled to assign
the Supply Agreement pursuant to the terms thereof provided that it shall
be a condition of the assignment of this Licence that the assignee enters
into a novation agreement with Lucas, the form of such novation agreement
to be in terms reasonably stipulated by Lucas and which shall require the
assignee to covenant with Lucas to be bound by the terms of this Licence.
10.2 The Company is not permitted to sub-licence the rights granted
hereunder save only for the purposes and to the persons specified in clause
2.1 and if any sub-licence is granted by the Company for any of such
purposes the Company shall be liable for any act or omission of the sub
licensee which if it had been committed or omitted by the Company would
have been a breach of this Licence.
11. LAW
---
The formation, construction, performance, validity and all aspects whatsoever
of this Licence shall be governed by the law of England and Wales and the
parties submit to the exclusive jurisdiction of the English Courts.
8.
<PAGE>
SIGNED by CHRIS LONG-LEATHER ) /s/ Chris Long-Leather
- - - - - - - - - - - ------ ------------------ ----------------------
as duly authorised attorney for and ) Chris Long-Leather as
------------------
on behalf of LUCAS LIMITED ) attorney of Lucas Limited
------------- -------------
SIGNED by P. Kim Packard ) /s/ P. Kim Packard
- - - - - - - - - - - ------ -------------- ------------------
duly authorised for and on behalf of ) Director
--------
PRESTOLITE ELECTRIC LIMITED )
- - - - - - - - - - - ---------------------------
9.
<PAGE>
EXHIBIT 10.20
PEI HOLDING, INC.
MANAGEMENT STOCK OPTION PLAN
----------------------------
1. Purpose. The PEI Holding, Inc. Management Stock Option Plan (the "Plan")
-------
is for designated employees of the Company (as defined below) or any of its
subsidiaries. PEI Holding, Inc. was originally known as PEI 1991 Holding, Inc.,
and is a Delaware corporation (the "Company," which term shall include any
-------
subsidiary of the Company unless the context indicates otherwise). The Plan is
to provide an incentive to these designated employees to continue in their
employment and to increase their efforts for the success of the Company by
offering them an opportunity to increase their proprietary interest in the
Company, through the grant of stock options (the "Options") to purchase shares
-------
of Class A Common Stock of the Company, par value $0.01 per share (the "Common
------
Stock"). Consistent with these objectives, the Plan authorizes the granting of
- - - - - - - - - - - -----
nonqualified stock options to acquire shares of the Company's Common Stock
pursuant to the terms and conditions hereinafter set forth. The term "Options"
refers to nonqualified stock options. The Options are not intended to qualify
as "Incentive Stock Options" within the meaning of Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code").
----
2. Administration of the Plan.
--------------------------
(a) Members of the Committee. The Plan shall be administered by the
------------------------
Compensation Committee of the Board of Directors of the Company (the
"Committee"). During such time as a class of securities of the Company is
---------
registered under the Securities Exchange Act of 1934, no member of the
Committee shall be a Participant, as defined in Section 4 hereof.
(b) Authority of the Committee. The Committee shall adopt such rules as
--------------------------
it may deem appropriate in order to carry out the purposes of the Plan. All
questions of interpretation, administration and application of the Plan shall
be determined by a majority of the members of the Committee then in office,
except that the Committee may authorize any one or more of its members to
execute and deliver documents on behalf of the Committee. Determination of
such majority shall be final and binding in all matters relating to the Plan.
No member of the Committee shall be liable for any act done or omitted to be
done by such member or by any other member of the Committee in connection with
the Plan, except for such member's own willful misconduct or as expressly
provided by statute.
3. Stock Reserved for the Plan. The shares subject to the Plan shall
---------------------------
consist of 160,000 shares of Common Stock which may be either authorized but
unissued shares or previously issued shares reacquired and held by the
Company. Any of such shares which may remain unsold at the termination of the
Plan shall cease to be reserved for purposes of the Plan. Should any Option be
cancelled pursuant to Section 6(f) hereof prior to
<PAGE>
its exercise in full, the shares theretofore subject to such Option shall be
reserved for future Options under the Plan unless otherwise determined by the
Board of Directors.
4. Grant of Options. The Options may be granted only to designated employees
----------------
of the Company. The Committee shall have the sole authority to select those
individuals (the "Participants") to whom the Options may be granted, and to
------------
determine the number of shares of Common Stock to be subject to the Options
granted to each such Participant. All Participants agree to be bound by the
terms of the Plan.
5. Agreement to Reflect Terms of Grant. The terms and conditions of each
-----------------------------------
grant of Options shall be embodied in a written agreement between the Company
and the Participant substantially in the form of Exhibit A attached hereto (the
"Stock Option Agreement"), which shall contain the terms and conditions set
----------------------
forth in Section 6 hereof and which shall state the date of grant of the Option
and the number of shares covered by the Option.
6. Terms of Options.
----------------
(a) Option Price. The purchase price of each share of Common Stock subject to
------------
the Options ("Option Price") shall be the Fair Market Price of the Common
------------
Stock on the date of grant. "Fair Market Price" as of any date means the fair
market value as determined by the Board of Directors of the Company.
(b) Initial Options. The Company intends to grant Options to be effective
---------------
upon the closing (the "Closing") of the transactions contemplated by the Asset
-------
Purchase Agreement, dated as of June 24, 1991, as amended, (the "Purchase
--------
Agreement") between the Company and the Sellers described therein (the
- - - - - - - - - - - ---------
"Initial Options"). The Initial Options shall have the terms and conditions
---------------
reflected in the Stock Option Agreement.
(c) Subsequent Options. In addition to the Initial Options, the Company may
------------------
grant other Options (the "Subsequent Options") which shall contain such
------------------
additional terms and conditions (including without limitation, vesting
provisions) not inconsistent with this Plan as may be prescribed by the
Committee and set forth in the applicable Stock Option Agreement.
(d) Restriction on Transfer. Each Option granted hereunder shall not be
-----------------------
transferable by the Participant otherwise than by will or the laws of descent
and distribution, and shall be exercisable during the Participant's lifetime
only by the Participant.
(e) Additional Restrictions. Each Option granted hereunder shall be subject
-----------------------
to such additional terms and conditions not inconsistent with this Plan as may
be prescribed by the Committee and set forth in the applicable Stock Option
Agreement.
(f) Termination of Employment.
-------------------------
<PAGE>
(i) With respect to the Initial Options, if prior to the first
anniversary of the date of the Closing (A) the Participant's employment with
the Company shall be terminated by the Company or any of its subsidiaries
without Cause (as defined below) or by reason of the Participant's Permanent
Disability (as defined below) or death or (B) the Participant's employment is
terminated either by the Company with Cause or by reason of the Participant's
voluntary termination and the Company has elected to pay the Deferred Amount
(as defined in the Deferred Compensation Agreement with such Participant dated
as of October 4, 1991 (the "Deferred Compensation Agreement")) and any accrued
-------------------------------
but unpaid interest thereon within 30 days of such termination, then in either
case (A) or (B) the Participant's Initial Options shall terminate and be
cancelled on the date of payment of the Deferred Amount and all rights under
the Plan shall cease.
(ii) With respect to Initial Options, if the Participant's employment
with the Company shall be terminated for any reason and if such Initial
Options have not been terminated pursuant to (i) above, then the Company shall
be entitled (but not required), not later than 30 days after the date of any
such termination of employment, to make a cash payment to the Participant of
the excess, if any, of the Fair Market Price as of the date of such
termination of the total number of shares of Common Stock subject to Options
held by such Participant that are exercisable at less than the Fair Market
Price of such shares over the product of the number of such shares and the
Option Price for such shares, less an amount equal to the federal, state and
local taxes, if any, required to be withheld as a result of such payment. Upon
the making of such payment, the related Options and the Participant's rights
under the Plan shall terminate.
(iii) With respect to Subsequent Options, if the Participant's employment
with the Company shall be terminated by the Company for Cause, any right such
Participant may have to exercise any Option shall be cancelled on the last day
of his employment and all rights under the Plan shall cease.
(iv) "Cause" for the termination by the Company of the Participant's
employment shall mean (A) a Participant's conviction of a felony, (B) an act
of personal dishonesty or breach of duty by the Participant in connection with
such Participant's employment with the Company, (C) a Participant's commission
of an act involving gross negligence in the conduct of his duties for the
Company or (D) a Participant's willful and repeated failure to execute the
policies of the Company as established by the Board of Directors.
(v) "Permanent Disability" shall be defined in the same manner as such
term or a similar term is defined in the long-term disability policy
maintained by the Company and applicable to the Participant in effect on the
date of the Participant's termination of employment with the Company.
7. Purchase of Common Stock.
------------------------
3
<PAGE>
(a) Notice. Subject to the conditions set forth in Section 6 and 7(b) hereof,
------
a Participant may exercise all or any portion of an Option by giving written
notice to the Company. The date of exercise of the Option with respect to the
shares of Common Stock specified in the notice shall be the later of (i) the
date on which the Company receives the notice or (ii) the date on which the
conditions provided in Section 7(b) hereof are satisfied.
(b) Payment and Other Conditions. Prior to the delivery to the Participant of
----------------------------
any stock certificates evidencing shares of Common Stock in respect of which
an Option shall have been exercised, (i) the Participant shall have paid to
the Company (or shall have directed the Company to credit pursuant to the
Participant's Deferred Compensation Agreement with the Company all or a
portion of the Deferred Amount to the payment of) the Option Price of all
shares of Common Stock purchased pursuant to such exercise of the Option and
an amount equal to the federal, state and local taxes, if any, required to be
withheld as a result of such exercise, (ii) the conditions set forth in
Section 9 hereof shall have been satisfied, (iii) the Participant shall have
satisfied such other conditions as may be set forth in the Stock Option
Agreement and (iv) the Participant has agreed in writing to be bound by the
terms and conditions of any stockholders agreement of the Company as then in
effect (the "Stockholders Agreement"), which shall contain customary
----------------------
provisions for agreements of such kind, including rights of first refusal,
rights of co-sale, "drag-along" provisions and voting provisions.
(c) Issuance of Stock Certificates. Upon receipt of payment and satisfaction
------------------------------
of the conditions of Section 7(b) hereof, the Company shall deliver to the
Participant a certificate or certificates for the number of shares of Common
Stock in respect of which the Option shall have been exercised, legended to
reflect the agreements and conditions applicable to such shares as set forth in
the Stockholders Agreement and such other restrictions as the Committee shall
determine are required by applicable law.
8. Restrictions Applicable to Common Stock. Shares of Common Stock issued
---------------------------------------
upon exercise of an Option granted under the Plan shall be held subject to, and
comply with and shall have the benefits of, the terms, conditions, rights and
restrictions which are set forth in the Stockholders Agreement.
9. Registration of Shares: Limitations on Exercisability. No Option shall be
-----------------------------------------------------
exercisable and no transfer of shares of Common Stock may be made to any
Participant, and any attempt to exercise any Option or to transfer any shares of
Common Stock to any Participant shall be void and of no effect, unless and until
(a) 90 days after a registration statement under the Securities Act of 1933, as
amended, has been declared effective pertaining to the shares of Common Stock of
the Company, or (b) the Committee, in its sole discretion, determines, or (c)
with respect to transfers, the Participant, upon the request of the Committee,
provides an opinion of counsel satisfactory to the Committee, that such
registration or qualification is not required as a result of the availability of
an exemption from registration or qualification under such laws.
4
<PAGE>
10. No Restriction on Right of the Company to Effect Corporate Changes. The
------------------------------------------------------------------
Plan, and the Options granted hereunder, shall not affect in any way the right
or power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of stock or of options, warrants or rights to purchase
stock or of bonds, debentures, preferred or prior preference stocks whose rights
are superior to or affect the Common Stock or the rights thereof or which are
convertible into or exchangeable for Common Stock, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
11. Changes in Control.
------------------
(a) Effect of Changes in Control. In the event that (i) the Company is merged
----------------------------
or consolidated with another corporation and the stockholders of the Company and
their affiliates immediately preceding the merger or consolidation own less than
50% of the voting stock of the corporation surviving the merger or
consolidation, (ii) all or substantially all of the assets of the Company are
acquired by another corporation, person or entity not affiliated with Genstar
Capital Corporation, or (iii) the Company is dissolved or liquidated, then the
Company shall elect either (x) to allow the Participant to exercise the Option
in accordance with Section 7, or (y) to terminate the Option in consideration of
a cash payment equal to the fair market value of the consideration that a holder
of the number of shares of Common Stock represented by such Option would have
received as a result of such transaction, less the Option Price of such Option.
(b) Dilution and Other Adjustments. In the event of any stock dividend or
------------------------------
split involving the Common Stock, the Committee shall adjust the terms of the
Option to reflect such dividend or split. In the case of any other transaction
affecting the Common Stock, the Committee may make any equitable adjustments or
take such other equitable action as the Committee, in its sole discretion, shall
deem appropriate. Such adjustments or actions shall be conclusive and binding
for all purposes. In the event of a change in the Common Stock which is limited
to a change in the designation thereof to "Capital Stock" or other similar
designation, or to a change in the par value thereof, or from par value to no
par value, without increase or decrease in the number of issued shares, the
shares resulting from any such change shall be deemed to be Common Stock within
the meaning of the Plan.
12. Miscellaneous.
-------------
(a) No Rights to Continued Employment. Neither the Plan nor any action taken
---------------------------------
hereunder shall be construed as giving any employee any right to be retained in
the employ of the Company or any of its subsidiaries.
(b) Stockholder Rights. A Participant shall have no rights as a stockholder
------------------
with respect to any shares covered by an Option until a certificate or
certificates representing
5
<PAGE>
such shares shall have been issued to such Participant, and no adjustment shall
be made for dividends or distributions or other rights in respect of any share
for which the record date is prior to the date upon which the Participant shall
become the holder of record thereof.
(c) Construction of the Term "Participant". Whenever the word "Participant"
--------------------------------------
is used in this Plan under circumstances where the provision should logically be
construed to apply to the executors, the administrators, Designated Beneficiary
(as defined below) or any other person or persons to whom an Option may be
transferred by will or by the laws of descent and distribution or by reason of
the death of the Participant, the word "Participant" shall be deemed to include
such person or persons. As used herein, the term "Designated Beneficiary" shall
mean the person or persons last designated as such by the Participant as the
person who shall have the right to exercise such Option after the Participant's
death on a form filed by the Participant with the Committee in accordance with
such procedures as the Committee shall establish. If no such person is
designated, the Designated Beneficiary shall be the Participant's estate.
(d) Plan Shall Govern. With respect to any Options granted pursuant to the
-----------------
Plan, in the event of any conflict or inconsistency between the Plan and the
Stock Option Agreement, the Plan shall govern and the Stock Option Agreement
shall be interpreted to minimize or eliminate any conflict or inconsistency.
13. Amendment. The Board of Directors may at any time and from time to time
---------
alter, amend, suspend or terminate the Plan in whole or in part.
Notwithstanding the foregoing, no amendment shall alter or impair any of the
rights or obligations of any Participant, without such Participant's consent,
under any Option theretofore granted under the Plan.
14. Effective Date. The Plan shall become effective as of the date of the
--------------
Closing, subject to the receipt of approval of the Plan by the stockholders of
the Company entitled to vote thereon. No payments or distributions of shares of
Common Stock may be made to any Participant or any other person under the Plan
until such time as stockholder approval of the Plan is obtained pursuant to this
Section.
15. Termination. Unless previously terminated pursuant to Section 13 hereof,
-----------
the Plan shall terminate on the last to occur of the tenth anniversary of the
date of the Closing or the exercise or termination of all outstanding Options.
16. Term of Option. Initial Options shall terminate on the tenth anniversary
--------------
of the date of the Closing. All other Options shall terminate on the tenth
anniversary of the date of grant.
17. Headings. The headings of sections and subsections herein are included
--------
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Plan.
6
<PAGE>
18. No Waivers. No failure or delay on the part of the Company in exercising
----------
any right, power or privilege hereunder shall operate as a waiver hereof, nor
shall any single or partial exercise hereof preclude any other or further
exercise hereof or the exercise of any other right, power or privilege.
19. Entire Agreement. This Plan and the other related agreements expressly
----------------
referred to herein set forth the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings relating to
the subject matter hereof.
20. Governing Law. This Plan and all rights hereunder shall be construed in
-------------
accordance with and governed by the laws of the State of New York.
This Plan has been adopted by the Company's Board of Directors as of October
4, 1991.
<PAGE>
EXHIBIT 10.21
LEASE
-----
LEASE, entered into September 3, 1993 between PLYMOUTH SQUARE (hereinafter
referred to as "Host") (a Louisiana partnership in commendam) whose address is
c/o First Martin Corporation, 115 Depot Street, Ann Arbor, Michigan 48104 and
PRESTOLITE ELECTRIC, INC. (hereinafter referred to as "Guest") whose address is
Four Seagate, Toledo, Ohio 43691-0904 until commencement of the term hereof and
thereafter the Premises, by which the parties agree as follows:
1. Leased Premises. Host leases to Guest certain premises (hereinafter
---------------
referred to as the "Premises") located on the third Floor of the building at
2100 Commonwealth Boulevard, Ann Arbor, Michigan (hereinafter sometimes referred
to as the "Building"), as cross-hatched on Exhibit A attached hereto, containing
approximately 11,320 square feet. The rentable area of the Premises for
purposes of calculating the rent and other payments due hereunder is deemed to
be 11,320 square feet. Guest's pro rata share of the Building is deemed to be
33%, which was calculated by dividing the rentable area of the Premises by the
rentable area of the Building, which is deemed to be 33,864 square feet.
2. Term. The term of this Lease shall commence on October 15, 1993 or
----
occupancy by 5 people whichever is first to occur, and shall expire on December
31, 1998. As used herein, the term "Lease Year" shall mean a period of twelve
(12) consecutive months. The first Lease Year shall begin on January 1, 1994.
3. Construction of Initial Improvements. Guest shall lease the Premises
------------------------------------
in an as-is condition. In addition, Host shall provide an improvement allowance
of $60,000 for other improvements to the Premises. All plans and specifications
shall be approved by Host in writing before commencement of work. All costs for
such other improvements in excess of said improvement allowance shall be paid by
Guest within ten (10) days of receipt of invoices. All improvements to the
Premises shall be done by Host or Host's designated contractors, provided that
Guest and Host review the cost of said improvements prior to construction and
determine the costs are reasonable.
4. Rent. Guest shall pay to Host the amount of $5,000.00 per month as
----
rent for the Premises from October 15, 1993 or occupancy by 5 people whichever
is first to occur, through December 31, 1993. Guest shall pay to Host,
effective January 1, 1994 as annual rent for the Premises for the term hereof
the amount of Two Hundred and Three Thousand, Seven Hundred and Sixty ($203,760)
Dollars in equal monthly installments of Sixteen Thousand, Nine Hundred and
Eighty ($16,980) Dollars in advance on the first day of each month for the term
hereof. Partial months shall be prorated based on a 365-day year. The annual
rent payable under this Lease shall be adjusted annually at the beginning of the
second Lease Year and each succeeding Lease Year during the term of this Lease
and any renewals thereof to the amount equal to the annual rent for the first
Lease Year increased by the percentage increase, if any, in the Consumer Price
Index (as hereinafter defined) from the
1.
<PAGE>
third month preceding the month in which the first Lease Year commenced to the
third month preceding the month in which said rental increase is to take effect.
Notwithstanding the foregoing, in no event shall the rent to be paid by Guest
hereunder decrease from one Lease Year to the next. As used herein, "Consumer
Price Index" means the Consumer Price Index for All Urban Consumers, U.S. City
Average, All Items, 1982-84 = 100, as issued by the Bureau of Labor Statistics,
United States Department of Labor. If at any time during the term hereof the
United States Bureau of Labor Statistics shall discontinue the issuance of the
CPI, then the parties agree to use any other standard, nationally recognized
cost of living index then issued and available, which is published by the United
States Government, and if no governmental index is then published, then by any
generally recognized privately published index of the cost of living. By way of
illustrating the formula to be used in calculating the annual rent increase,
assume that a five-year lease commenced on July 15, 1980 and that the initial
annual rent was $1,000. The new rent effective at the beginning of the third
lease year would be calculated as follows. Since the hypothetical lease
commenced on July 15, 1980, the first lease year would commence on August 1,
1980 and the third lease year on August 1, 1982. Hence the CPI data to be used
would be for the months of May, 1980 and May, 1982. Assume that the CPI for
these months was 200.0 and 250.0, respectively. The new annual rent effective
August 1, 1982 would be determined as follows: [[(250.0 - 200.0) / 200.0] x
$1,000] + $1,000 = $1,250. If any rent payment due hereunder is more than seven
days late, Guest shall pay Host a service fee equal to two percent (2%) of said
rent payment. The payment of this late payment service fee will not constitute a
waiver by Host of any default by Guest under this Lease. The rent to be paid by
Guest hereunder shall not be diminished by the additional payments to be made by
Guest as provided in Paragraphs 5, 6, 7 and 8 hereof.
5. Utilities. Guest shall pay for the cost of all gas, electricity and
---------
other utilities used in or for the Premises, excepting water for domestic uses.
In the event a central system is used for heating or cooling the Building, then
Guest shall be invoiced from time to time for utilities used by said system
based on Guest's pro rata share, which is deemed to be 33%.
6. Janitorial Service. Host shall provide subject to the provisions of
------------------
Paragraph 7(iv) hereof, light bulb replacement for building standard lights
(fluorescent tubes), window washing twice a year and reasonable janitorial
service five (5) times per week.
7. Increase in Operating Expenses Pass-Through.
-------------------------------------------
(a) Definitions: for the purpose of this Paragraph the following
definitions shall apply:
(i) "Base Year" shall mean the full calendar year 1995.
2.
<PAGE>
(ii) "Host's Property" shall mean the Building and the land on
which the Building is located, including all easements and appurtenances
thereto and all personal property used in connection with such property.
(iii) "Real Estate Taxes" shall mean: (w) all real estate, ad
valorem or personal property taxes levied with respect to the Building, the
land on which the Building stands (hereinafter called the "Land") and the
improvements, fixtures and equipment and any other property, real or
personal, located in and about the Building or Land and used in connection
with the operation thereof; (x) any other tax, general or special
assessment or other governmental charge of any description imposed upon or
in respect to the Building or Land, including, without limitation, a tax
upon any rent therefrom, or any occupancy or use thereof; (y) any water and
sewer general or special assessments, charges, excises, levies, license and
permit fees, transfer taxes, and all other similar charges, if any, which
are levied, assessed, or imposed upon or become due and payable in
connection with, or liens upon, the Building, the Land or facilities used
in connection therewith, and rentals or receipts therefrom; and (z) all
taxes of whatsoever nature that are imposed in substitution for or in lieu
of any taxes, assessments or other charges included in this definition;
provided, however, such taxes shall not include any taxes or assessments
enumerated in Paragraph 8(a) hereof (for both Guest and other tenants of
the Building). Host shall have the right in its discretion to contest the
amount or validity of any such taxes by appropriate legal proceedings and
to include in Operating Expenses the cost of any such contest if Guest
approves of expenses in advance. Guest shall have the right to contest
amount or validity of any such taxes after consultation with Host at
Guest's expense.
(iv) "Maintenance Costs" shall mean any and all reasonable costs
and expenses paid or incurred by Host in maintaining, repairing, decorating
(excluding decorating for other tenants' premises) or servicing Host's
property. For purposes of this Paragraph 7, also included are the costs of
"Janitorial Service" described in Paragraph 6 of this Lease and "Host's
Repairs" described in Paragraph 14 of this Lease
(v) "Building Utilities" shall mean the costs and expenses paid or
incurred by Host in providing utilities (including water) to the common
areas of Host's property.
(vi) "Cleaning/Operating Expenses" shall mean any and all costs
and expenses [except as otherwise described in subparagraphs 7(a)(iii) to
7(a)(v)] paid or incurred by Host in connection with cleaning, operating,
servicing, insuring (casualty and liability) and protecting Host's Property
(excluding management costs).
(b) Guest agrees to pay to Host as additional rent Guest's
proportionate share of the amount, if any, by which the sum of the Real Estate
Taxes,
3.
<PAGE>
Maintenance Costs, Building Utilities, Janitorial Services and Host's
Repairs (hereinafter collectively called "Operating Expenses") for any calendar
year subsequent to the Base Year exceeds the Operating Expenses for the Base
Year. The annual CPI adjustment of rent shall not apply to the payment of
increases in Operating Expenses. Said proportionate share is deemed to be 33%.
If the average occupancy of the Building for any year for which Operating
Expenses are to be determined hereunder is less than 95%, the Operating Expenses
for that year shall be determined as if the Building was 95% occupied. Prior to
the beginning of each calendar year following the Base Year, Host shall have the
right to estimate Guest's proportionate share of such increase in Operating
Expenses for such calendar year and notify Guest of its estimated proportionate
share of such increase, which amount shall then be due and payable in accordance
with the provisions of Paragraph 4 hereof for the payment of rent. Host may
adjust the estimated monthly charge at the end of any calendar quarter on the
basis of Host's experience and anticipated costs. Within ninety (90) days
following the end of such calendar year, Host shall furnish Guest with a
statement covering the calendar year just expired showing the total Operating
Expenses for such calendar year, the increase thereof over the Base Year,
Guest's share of the increase thereof and payments made by Guest during such
year. If Guest's share of such increase exceeds Guest's payments for estimated
Operating Expenses during such year, then Guest shall pay Host the deficiency
within ten (10) days after receipt of such statement without the necessity of
additional demand or notice thereof. If Guest's payments exceed Guest's share,
Host shall pay Guest the overage within ten days of the determination of
overpayment, provided that Guest is not in default under the terms of this Lease
and provided further that Guest shall have the option to apply such overage
against payments next to come due under this Paragraph, and further provided,
that upon expiration or earlier termination of this Lease, Host shall refund to
Guest such excess payments so long as Guest is not in default hereunder. Guest
shall have the right to review the books and records of Host as they pertain to
these expenses.
8. Taxes.
-----
(a) Guest shall be liable for and shall pay thirty days prior to
delinquency the following:
(i) taxes, levies and assessments levied against or measured
by the cost or value of Guest's equipment, fixtures and other personal
property located in the Premises including the cost or value of any
leasehold improvements made in or to the Premises by Guest or for Guest,
regardless of whether Guest paid for such improvements. Guest shall report
annually all leasehold improvements for the Premises on the City of Ann
Arbor's personal property assessment form and send a copy to the Host
within five (5) days after the date the form is due to the City of Ann
Arbor. Failure to do so shall be a default under the Lease;
(ii) taxes, levies and assessments levied upon or measured
by the Rental or any other sum payable hereunder or on Host's business of
leasing the Premises excepting only net income taxes and that portion, if
any, of income and
4.
<PAGE>
franchise taxes which may hereafter be assessed in lieu of or substituted
in whole or in part for real estate and personal property taxes the
increases in which are payable by Guest and other tenants pursuant to
Paragraph 4 hereof.
(iii) taxes, levies and assessments levied against or with
respect to the possessions, leasing, operation, management, maintenance,
alteration, repair, use or occupancy by Guest of the Premises; or
(iv) taxes, levies and assessments levied against or upon
the transaction or any document to which Guest is a party creating or
transferring an interest in the Premises.
(v) Notwithstanding the preceding provisions of this
Paragraph 8, Guest shall not be liable for the payment of federal or state
income tax or state single business tax or any similar income tax or levy
upon income imposed upon Host by any governmental agency as a result of the
rental of these Premises to Guest pursuant to the terms of this Lease or
otherwise. At the time of the signing of this Lease, the State of Michigan
has reduced property taxes effective in 1994 without identifying those
alternative sources of revenue that may be required to fund schools. In the
event that new taxes are created or levied upon building or Premises or
upon the Host's business of rental of the building, the parties agree to
modify this Lease, if required, in order to effectuate the intention of
this Lease concerning taxes and to prevent either party from obtaining a
windfall as a result of the actions of the State of Michigan or the City of
Ann Arbor.
(b) If any of the taxes, levies and assessments mentioned in
subparagraph 8(a) above are levied against Host or Host's property, including
the Building, or if the assessed value of the Building is increased by a value
placed upon the property described in (i) above, and if Host pays such taxes,
levies and assessments or the portion of such taxes, levies and assessments
resulting from such increase in the assessment, such amounts shall be
immediately due and payable by Guest to Host upon Host's demand therefore.
9. Security Deposit. Guest shall deposit with Host upon execution
----------------
hereof the amount of Sixteen Thousand, Nine Hundred and Eighty ($16,980) Dollars
as security for Guest's faithful performance of its obligations hereunder. If
Guest fails to pay the rent or otherwise defaults with respect to any provision
of this Lease, Host may use, apply or retain all or any portion of said deposit
for the payment of any rent or other charge in default, or for the payment of
any other sum to which Host may become obligated by reason of Guest's default or
to compensate Host for any loss or damage which Host may suffer thereby. Said
deposit shall not be a limitation on Host's damages or other rights under this
Lease, or a payment of liquidated damages or an advance payment of the rent. If
Host so uses or applies all or any portion of said deposit, Guest shall, within
five (5) days after written demand thereof, deposit cash with Lessor in an
amount sufficient to restore said deposit to the full
5.
<PAGE>
amount hereinabove stated and Guest's failure to do so shall be a material
breach of this Lease. Host shall not be required to keep said deposit separate
from its general accounts. If Guest performs all of Guest's obligations
hereunder, said deposit, or so much thereof as has not theretofore been applied
by Host, shall be returned, without payment of interest or other increment for
its use, to Guest at the expiration of the term hereof and after Guest has
vacated the Premises. No trust relationship is created herein between Host and
Guest with respect to said security deposit. Host will apply the security
deposit to the thirteenth month's rent provided Guest has not been in default.
10. Place and Form for Payment of Rent. All payments of rent shall
----------------------------------
be delivered to Host at First Martin Corporation, 115 Depot Street, Ann Arbor,
Michigan 48104 or at such other place as Host shall designate from time to time
in writing. Rent payments shall be made payable to Plymouth Square, 115 Depot
Street, Ann Arbor, MI 48104.
11. Financing.
---------
(a) If in connection with obtaining by Host of any financing or
refinancing for the Building, the lender shall request reasonable modifications
in this Lease as a condition to such financing or refinancing, Guest will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Guest hereunder or in a
material manner adversely affect the leasehold interest hereby created.
(b) Guest agrees that this Lease shall be subordinate to any mortgages
that may hereafter be placed or made upon the Building, provided the mortgagee
named in any such mortgages shall agree to recognize the lease of Guest in the
event of foreclosure if Guest is not in default.
(c) Guest agrees within ten (10) days after request by Host to execute
in recordable form and deliver to Host a statement, in writing, certifying (a)
that this Lease is in full force and effect, (b) the date of commencement of the
term of this Lease, (c) that rent is paid currently without any off-set or
defense thereto, (d) the amount of rent, if any, paid in advance, and (e) that
there are no uncured defaults by Host or stating those claimed by Guest,
provided that, in fact, such facts are accurate and ascertainable.
(d) If proceedings are brought for the foreclosure of, or in the
event of exercise of the power of sale under, any mortgage made by Host covering
the leased Premises, Guest shall become the guest of, and attorn to, the
purchaser upon any such foreclosure or sale and recognize such purchaser as the
Host under this Lease. The obligation of Guest hereunder to attorn to the
purchaser shall be conditioned upon the agreement of such purchaser to recognize
the rights of Guest under this Lease.
6.
<PAGE>
12. Use of Premises.
---------------
(a) Guest shall use and occupy the Premises only for office use
consistent with the zoning of the Building.
(b) Guest will keep the Premises clean and shall not create any
nuisance, noises, vibrations, electrical discharges, radiation or other
disturbances that shall in any way unreasonably impair the peace, quietness,
comfort, or security of the building wherein the Premises are situated nor do
anything that will cause any extra hazard, impair the validity of any policy of
insurance now or hereafter placed on the Building, or any of its contents, or
that will increase the rate of premium on any such policy or that will violate
any prohibitions in any such policy.
(c) Guest, shall, at its own cost and expense, comply with all of
the requirements of all valid laws and regulations, municipal, state and
federal, now in force, or which may hereafter be in force, pertaining to the
Premises, and the use and occupancy thereof.
(d) Guest shall not sell, rent or keep drug paraphernalia,
pornographic materials or sexually explicit materials in or from the Premises;
Guest shall not use the Premises for any activity included in the definition of
"adult entertainment business" in the City of Ann Arbor Zoning Ordinance,
regardless of whether an activity is a "principal" activity.
13. Acceptance of Premises. Except as Host and Guest may otherwise
----------------------
agree in writing at such time, the taking of possession by Guest shall be
conclusive evidence that Guest has examined the Premises, has found them to be
in satisfactory condition and accepts the Premises "as-is", and that Host up to
such time had performed all of its obligations hereunder.
14. Host's Repairs.
--------------
(a) Host, at its sole cost and expense, shall maintain and repair
the Premises, the Common Areas and the structural and public areas of the
Building such as lobbies, stairs, corridors, common restrooms, roof, elevators,
escalators and structural elements; provided, however, Host shall not be
responsible for repair or replacement of damage or wear and tear to same which
is the result of omission, negligence or willful misconduct of Guest or Guest's
agents, employees, contractors, subcontractors, subtenants or invitees, such
damage or wear and tear being the sole responsibility of Guest and Guest shall
promptly accomplish repairs or replacements due to such damage or wear and tear
upon demand by Host. Capital expenditures by Host for equipment are not
considered to be "Host's Repairs," "Maintenance Costs" or "Building Utilities"
under the terms of this Lease. Such expenditures are the sole responsibility of
the Host and may not be passed through. For example, Host may pass through an
increase in the cost of maintaining a service contract for
7.
<PAGE>
any elevator or escalator in the Premises. However, any cost attributable to the
replacement of such a unit is the sole and exclusive responsibility of Host and
may not be passed through to Guest with reference to Paragraph 7.
(b) Except as otherwise provided in the Paragraph hereof relating
to Destruction and in the Paragraph hereof relating to Eminent Domain, there
shall be no allowance, abatement of rental, or liability to Guest for diminution
of rental value or interference with Guest's business and no claim by Guest for
eviction from said Premises by reason of inconvenience, annoyance or injury to
Guest arising from any repairs, alterations, replacements or improvements made
to said Premises, Building, Common Areas or any portion thereof by Host, its
agents, employees or contractors, or by Host's mortgagee, provided such repairs
do not interfere in an unreasonable manner or for an unreasonable time with
Guest's right to quiet enjoyment of the Premises. To the extent Host may be
responsible for repairs under this Lease, Host shall not be liable to Guest for
failure to make repairs to the Premises, Building, Common Areas or any portion
thereof, unless Host has received from Guest written notice of the need for such
repairs and has failed to commence and diligently complete such repairs within
thirty (30) days of such notice or such greater length of time as is reasonably
required by Host to make such repairs.
(c) The Guest covenants and agrees that if the demised Premises
consists of only a part of a structure owned or controlled by the Host, the Host
may enter the demised Premises at reasonable times and upon reasonable notice
and install or repair pipes, wires and other appliances or make any repairs
deemed by the Host essential to the use and occupancy of other parts of the
Host's building.
(d) Guest acknowledges that the Building cooling system is
designed for a maximum internally generated heat load per zone or room of 1
person per 100 square feet and 3 watts of lighting and equipment per square foot
in the aggregate. Should the heat load in the Premises exceed the aforesaid
maximum, Guest shall be responsible for the cost of any consequent modification
to the cooling system.
15. Alterations by Guest. Guest shall not make any alterations,
--------------------
additions and improvements to the Premises without the Host's written consent,
and all alterations, additions and improvements made by either of the parties
hereto upon the Premises, except movable office furniture and trade fixtures put
in at the expense of the Guest, shall be the property of the Host, and shall
remain upon and be surrendered with the Premises at the termination of this
Lease; provided, however, that the Guest shall have the option of removing
additions made by it if the Premises are restored to good condition following
such removal and any damages to the Premises resulting from such removal are
repaired. Host may, at its option, require Guest to remove, at Guest's sole
expense, improvements made for or by Guest and repair any damage resulting
therefrom, upon the expiration or earlier termination of this Lease. Should
Guest make any alterations to the Premises, Guest shall have the plans for the
Premises revised to reflect such alterations and shall provide Host with a set
of the revised plans.
8.
<PAGE>
16. Building Access. The main Building entrance shall be unlocked
---------------
from 8:00 a.m. to 6:00 p.m. Monday through Friday and locked at all other times.
Notwithstanding the foregoing, Guest may unlock the door as early as 7:00 a.m.
Guest may have access to the Building at all other times. In the event that a
high security lock is installed in the Building entry door, Guest shall pay Host
a deposit of $25.00 per key, refundable only upon return of said key.
17. Insurance. Host shall maintain fire and extended coverage
---------
insurance on the Building in which the Premises are located. Guest shall
maintain fire and extended coverage insurance on the contents of the Premises.
In addition, Guest shall maintain a policy of public liability and property
damage liability insurance with a combined single occurrence limit of not less
than $1,000,000.00 insuring Host and Guest against any liability arising out of
the ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be issued by an insurance company
acceptable to Host. Guest shall provide Host with a certificate of insurance
for said policy naming Host as an additional insured party; Host, although named
as an additional insured, shall nevertheless be entitled to recover under said
policy for any loss sustained by it as a result of the acts or omissions of
Guest. No such policy shall be cancelable or subject to reduction of coverage
or other modification except after thirty (30) days' prior written notice to
Lessor. Host and Guest and all other parties claiming under them hereby
mutually release and discharge each other from all claims and liabilities to the
extent covered by insurance, regardless of the cause of any damage, loss or
injury to person or property, to the extent such waiver of liability is
permitted by any applicable policies of insurance maintained by Host and/or
Guest, as the case may be. Provided other tenants of Host waive subrogation
against Guest, Guest waives any and all rights Guest may have against said other
tenants for damage to or destruction of the demised Premises due to any casualty
insurable by the customary form of fire and extended coverage insurance, whether
such damage or destruction be due to said tenants' negligence or otherwise. In
the event that this Lease is in effect for longer than five years, the single
limit of the aforesaid insurance which Guest is required to maintain shall be
adjusted at the beginning of the sixth Lease Year and every fifth year
thereafter to the amount then being required by new leases entered into by Host.
18. Guest's Personal Property. All personal property of Guest kept
-------------------------
on the Premises shall be at Guest's sole risk, and Guest hereby waives all right
of recovery which it might otherwise have against Host for any loss, theft or
damage to Guest's personal property other than loss, theft or damage due to acts
of Host or Host's employees.
19. Destruction -- Fire or Other Cause. If the Premises shall be
----------------------------------
rendered untenantable by fire or other casualty, then Host shall make the
Premises tenantable as speedily as possible, and the rent shall be abated in
whole or in part, according to the portion of the Premises which is rendered
untenantable, during the period of untenantability, except that there shall be
no such abatement if such fire or other casualty shall be caused by the
negligence of Guest or its agents, employees, invitees or licensees, and
further, there shall be no abatement for the time required for the replacement
or repair of any property of Guest, in
9.
<PAGE>
excess of the time required to make the Premises tenantable. In the event that
the Premises cannot be made tenantable within ninety (90) days, then either Host
or Guest may terminate this Lease by notification to the other of such
termination within ten (10) days after Host shall have notified Guest of the
time required to make them tenantable. Host shall, in its sole judgment,
reasonably exercised, determine the length of time required to make the Premises
tenantable, and shall notify Guest of such determination within ten (10) days
after the occurrence of the fire or other casualty. Notwithstanding the
foregoing, in the event that the Premises shall be so damaged by fire or other
casualty that demolition or substantial reconstruction is required, then Host
may terminate this Lease by notifying the Guest of such termination within
thirty (30) days after the date of such damage.
20. Eminent Domain. In the event that all or a substantial portion
--------------
of the Premises be lawfully condemned or taken in any manner for any public or
quasi-public use, this Lease shall terminate as of the date of actual taking.
In the event that any insubstantial part of the Premises be so condemned or
taken, Host shall have the right to terminate this Lease as of the date of
actual taking by giving Guest written notice of such termination; but should
Host not so terminate this Lease, this Lease shall cease as to the part taken
and the rent adjusted so that Guest shall pay a pro rata portion of the rent
determined by the amount of space (and rate therefore) remaining after the
taking. If any portion of the Premises is lawfully condemned or taken in any
manner for any public or quasi-public use, Guest shall have the right to
terminate the Lease. Host shall be entitled to receive the entire award from
any such condemnation or taking of the Premises or any part thereof, without
deduction therefrom for any estate or interest granted to Guest by this Lease,
provided, that nothing herein contained shall be deemed to prevent Guest from
claiming compensation for relocation costs or loss for interruption of business
in the event an award with respect thereto is provided for by law or is fixed in
the proceeding in which such taking shall occur. In the event of a partial
taking insufficient in size to cause termination of the Lease, Host shall build,
repair or replace any outer walls, floor or roof necessary to make the Premises
tenantable.
21. Assignment and Subletting. Guest shall not assign this Lease or
-------------------------
sublet the Premises or any part thereof without the written consent of Host,
which consent shall not be unreasonably withheld. Under no circumstances shall
Guest have the right to sublease the Premises to more than one sublessee. Any
other provision of this Paragraph to the contrary notwithstanding, Host shall
not be required to give its consent to an assignment or subletting of the leased
Premises, or any part thereof, if the effect of such assignment or subletting
would be to create a profit for the Guest. In such cases, any profit from the
assignment or subletting shall be paid to the Host. Guest agrees that it shall
not be unreasonable for Host to withhold its consent to a proposed assignment or
subletting if: (i) Host believes that the proposed assignee or sublessee is not
as financially responsible as Guest on the date hereof; (ii) Host believes that
the proposed assignee or sublessee will not conduct on the Premises a business
of a quality equal to that conducted by Guest; or (iii) Host believes that the
business of the proposed assignee or sublessee, conducted on the Premises, will
have an impact upon the common facilities dissimilar to that of Guest's business
or will require services of Host dissimilar to those required by Guest. Host's
consent to one assignment or sublease shall not
10.
<PAGE>
waive the requirement of its consent to any subsequent assignment or sublease.
In the event Host consents to Guest's subletting, Guest shall include in such
sublease all of the pertinent terms contained herein, and Guest shall furnish
Host with a certified copy of any and all subleases affecting the demised
Premises prior to such consent; and in case of default by Guest giving Host
right of entry for breach of condition subsequent, Guest, at Host's option,
shall assign all of Guest's right, title and interest in any subleases to Host,
and Guest shall incorporate such provision in any and all subleases made by
Guest. Host's consent to an assignment shall not be effective until Host has
received a written document in which the assignee has assumed and agreed to
perform all of Guest's obligations in the Lease. Host's consent to a sublease
shall not release the Guest from the payment and performance of its obligations
in the Lease, but rather the Guest and its assignee shall be jointly and
severally primarily liable for such payment and performance.
22. Default, Eviction, Termination and Damages. If Guest shall fail
------------------------------------------
to pay any rent or other charges due hereunder within ten (10) days of the date
said charges are due, or if Guest shall fail to comply with any details,
provisions, or covenants of this Lease other than the payment of rent and shall
not cure such failure within thirty (30) days after written notice thereof, or
if Guest shall be adjudged bankrupt by a court of competent jurisdiction, or if
a receiver or trustee shall be appointed for all or substantially all of the
assets of Guest, then in any such event, Guest shall be deemed in default. When
Guest is in default, Host, besides other rights or remedies it may have, shall
have the right to declare this Lease terminated and the term ended, shall have
the right to evict Guest under Summary Proceeding law. Should Host elect to
reenter, as herein provided, or should it take possession pursuant to legal
proceedings or pursuant to any notice provided for by law, it may either
terminate this Lease or it may from time to time, without terminating this
Lease, make such alterations and repairs as it may deem appropriate in order to
re-rent the Premises, and re-rent said Premises or any part thereof for such
term or terms (which may be for a term extending beyond the term of this Lease)
and at such rental or rentals and upon such other terms and conditions as Lessor
in its sole discretion may deem advisable. Upon each such re-renting, all
rentals and other sums received in any month by Host from such re-renting shall
be applied, first to the payment of any indebtedness other than rent due
hereunder from Guest to Host; second, to the payments of any costs and expenses
of such re-renting, including reasonable brokerage fees and reasonable
attorneys' fees and of costs of such alterations and repairs; third, to the
payment of rent and other charges due and unpaid hereunder; and the residue, if
any, shall be held by Host and applied in payment of future rent as the same may
become due and payable hereunder. If such rentals and other sums received from
such re-renting during any month be less than that to be paid during that month
by Guest hereunder, Guest shall pay such deficiency to Host. Such deficiency
shall be calculated and paid monthly. No such re-entry or taking possession of
said Premises by Host shall be construed as an election on its part to terminate
this Lease unless a written notice of such intention be given to Guest or unless
the termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such re-renting without termination, Host may at any time
hereafter elect to terminate this Lease for such previous default. Should Host
at any time terminate this Lease for any default, in addition to any other
remedies it may have, it may recover from Guest all damages
11.
<PAGE>
it may incur by reason of such default, including the cost of recovering the
leased Premises, reasonable attorneys' fees, and including the worth at the time
of such termination of the excess, if any, of the amount of rent and charges
equivalent to the rent reserved in this Lease for the remainder of the stated
term over the then reasonable rental value of the leased Premises for the
remainder of the stated term, all of which amounts shall be immediately due and
payable from Guest to Host. In case suit shall be brought for recovery of
possession of the leased Premises, for the recovery of rent or any other amount
due under the provisions of this Lease, or because of the failure by Guest to
abide by any other detail, provision or covenant herein contained, Guest shall
pay to Host all expenses incurred therefore, including reasonable attorneys'
fees.
23. Surrender of Premises. Upon the expiration or the termination of
---------------------
the term of this Lease, Guest shall quit and surrender the Premises to Host in
good order and condition, ordinary wear, damage by the elements, and damage
which is the responsibility of Host excepted; and Guest shall remove all of its
property and shall repair any damage to the Premises caused by such removal.
Any personal property of Guest or of anyone claiming under Guest which shall
remain on the Premises after the expiration or termination of the Lease term
shall be deemed to have been abandoned by Guest, and either may be removed by
Host as its property or may be disposed of in such manner as Host may see fit,
and Host shall not be responsible for the same.
24. Access to Premises. Host shall have the right to enter upon the
------------------
Premises at all reasonable hours upon reasonable notice for the purpose of
inspecting the same, preventing waste, loss, or destruction, removing
obstructions, making such repairs or alterations as it is obligated to make
under the terms of this Lease, or to enforce any of Host's rights or powers
under this instrument, and Host shall not be liable nor responsible for any loss
that may accrue to Guest's business by reason thereof. The Host may show the
Premises to prospective tenants at any time during the last six (6) months of
the term of this Lease.
25. Heirs and Assigns. The covenants, conditions and agreements
-----------------
contained in this Lease shall bind and inure to the benefit of Host and Guest
and their respective heirs, distributees, executors, administrators, successors
and, except as otherwise provided in this Lease, their assigns.
26. Confidentiality. Guest shall not disclose the terms and
---------------
conditions of this Lease to third parties without the advance written consent of
Host.
27. Quiet Enjoyment. So long as Guest pays the rent and performs all
---------------
of its obligations in this Lease, Guest's possession of the Premises will not be
disturbed by Host, its successors or assigns.
28. Signs. Guest shall not fasten to or paint upon any part of the
-----
Premises or Building any sign, advertisement, notice or handbill without the
prior written consent of the Host. Host may, without notice to Guest, remove
any such sign, advertisement, notice or
12.
<PAGE>
handbill painted or affixed in violation of this clause without any liability
whatsoever for damages or otherwise to Guest, and Guest shall be responsible for
the cost of such removal.
29. Holding Over. In the event that Guest shall hold over after the
------------
term of the Lease, it is agreed that thereafter the tenancy shall be from month
to month in the absence of a written agreement to the contrary on the same terms
and conditions contained herein, with the exception that the rent shall increase
to 150% of the rent in effect at the termination of the term of the Lease.
30. Parking. The Guest shall have a nonexclusive license for the use
-------
of its agents, employees, suppliers and customers over the driveways and parking
lots adjoining the Premises.
31. Notices. Whenever any notice is required hereunder it shall be
-------
made in writing and served personally or by certified mail, return receipt
requested, at the following addresses (or at such other addresses as the parties
may hereafter designate in writing):
Host: Plymouth Square
c/o First Martin Corporation
115 Depot Street
Ann Arbor, Michigan 48104
Guest: Prestolite Electric, Inc.
Four Seagate
Toledo, OH 43691-0904
until the commencement date of the Lease and thereafter the Premises. If served
personally, service shall be conclusively deemed made at the time of such
service. If served by certified mail, service shall be conclusively deemed made
forty-eight (48) hours after the deposit thereof in the United States Mail.
32. Host's Liability.
----------------
(a) Guest shall indemnify, defend and hold harmless Host and
Host's officers, employees, agents and invitees from all losses, damage, claims
or liability arising out of any and all injuries to or death of any person or
damage to any property arising out of any occurrence in or about the Premises,
or arising out of any occurrence in or about the Building arising from the act
or neglect of Guest or its agents or invitees. Notwithstanding the foregoing,
Guest shall have no obligation to indemnify Host against the sole negligence of
Host.
(b) The Host shall not be responsible or liable to the Guest for
any loss or damage that may be occasioned by or through the acts or omissions of
persons occupying adjoining premises or any part of the premises adjacent to or
connected with the
13.
<PAGE>
Premises hereby leased or any part of the Building of which the leased Premises
are a part or for any loss or damage resulting to the Guest or his property from
bursting, stoppage or leaking of water, gas, sewer or steam pipes.
33. Rules and Regulations. Guest and its employees and invitees,
---------------------
shall faithfully observe and comply with the Rules and Regulations attached to
this Lease, and all reasonable modifications of and additions thereto as may be
from time to time put into effect by Host. Host shall not be responsible to
Guest for the nonperformance of any of said Rules and Regulations by any other
Guest or occupant of the Building. In the event of a conflict between the terms
and provisions of this Lease and the referenced Rules and Regulations, this
Lease shall control. Prior to the effective date of any intended modifications
of or additions to the Rules and Regulations annexed hereto, Host shall furnish
Guest with a written copy of same.
34. Environmental Law Compliance. The parties acknowledge that there
----------------------------
are certain federal, state and local laws, regulations and guidelines now in
effect, and that additional laws, regulations and guidelines may hereafter be
enacted, concerning the impact of land use on the environment, the maintenance
and operation of structures, and the conduct of business. Guest will not cause,
or permit to be caused, any act or practice on or about the premises which would
adversely affect the environment or violate any of such laws, regulations or
guidelines. In particular, without limiting the generality of the foregoing,
Guest will not use the premises to produce, store, process or transport any
hazardous waste or hazardous substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or in the Resource Conservation Recovery Act of 1980, as
amended ("RCRA"). Any violation of this covenant shall be an event of default
under this Lease.
35. Miscellaneous.
-------------
(a) The failure of either party to enforce any covenant or
condition of this Lease shall not be deemed a waiver thereof or of the right of
either party to enforce each and every covenant and condition of this Lease. No
provision of this Lease shall be deemed to have been waived unless such waiver
be in writing.
(b) This Lease and the Exhibits attached hereto and forming a
part hereof, set forth the entire agreements between Host and Guest concerning
the leased Premises. Any amendment shall be in writing and signed by each party.
(c) Each party represents and warrants that there are no claims
for brokerage commissions or finder's fees in connection with the execution of
this Lease, and each party agrees to indemnify the other against, and hold it
harmless from, all liability arising from any such claim.
14.
<PAGE>
(d) Guest shall not record this Lease without the written consent
of Host. Upon the request of either party the other party shall join in the
execution of a memorandum of this Lease for recording which shall describe the
parties, the leased Premises, the term and any special provisions.
(e) Any amount due from Guest to Host which is not paid when due
shall bear interest at the highest legal rate from the date due until paid,
unless otherwise specifically provided herein, but the payment of such interest
shall not excuse or cure any default by Guest.
(f) No payment by Guest of a lesser amount than the monthly rent
shall be deemed to be other than on account of the earliest rent, nor shall any
endorsement or statement on any check or any letter accompanying any payment be
deemed an accord and satisfaction, and Host shall accept such payment without
prejudice to Host's right to recover the balance of such rent or pursue any
other remedy.
(g) This Lease shall be governed by, and construed in accordance
with, the laws of the State of Michigan. If any provision of this Lease shall,
to any extent, be invalid or unenforceable, the remainder of this Lease shall
not be affected and each provision shall be valid and enforceable to the fullest
extent permitted by law. The obligations of each party shall be performed in
good faith and this Lease shall be construed in a commercially reasonable
manner.
This agreement is hereby signed on behalf of the parties effective as
of the date first written above.
Host: PLYMOUTH SQUARE
By:/s/ W.C. Martin, President, First Martin Corporation
----------------------------------------------------
Its: Agent
-----
Guest: PRESTOLITE ELECTRIC, INC.
By:/s/ Roger A. Cutsinger
----------------------
Its: Vice President, Human Resources
--------------------------------
15.
<PAGE>
ACKNOWLEDGMENT OF CORPORATE GUEST
STATE OF MICHIGAN
ss.
COUNTY OF WASHTENAW
The foregoing instrument was acknowledged before me this 3rd day of September,
1993 by Roger A. Cutsinger, the Vice President of Prestolite Electric, Inc, a
Delaware corporation, on behalf of the corporation.
/s/ Pegeen A. Kettner
---------------------
Notary Public
County Livingston, MI acting in Washtenaw
My commission expires: September 30, 1996
16.
<PAGE>
RULES AND REGULATIONS
1. The sidewalks and grounds of the Building are not for the use of
the general public, and Host shall in all cases retain the right to control and
prevent access thereto of all persons whose presence in the judgment of Host
shall be prejudicial to the safety, character, reputation and interests of the
Building and its tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom any tenant normally deals
in the ordinary course of its business, unless such persons are engaged in
illegal activities. No Guests and no employee, agent or invitee of any tenant
shall go upon the roof of the Building.
2. No awnings or other projection shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens shall be attached
to or hung in, or used in connection with, any window or door of the Premises
other than Host's standard drapes without the prior written consent of Host.
All electric ceiling fixtures hung in offices or spaces along the perimeter of
the Building must be fluorescent, of a quality, type, design and bulb color
approved by Host. Neither the interior nor exterior of any windows shall be
coated or otherwise sunscreened without the written consent of the Host.
3. No bicycles, vehicles, birds or animals of any kind shall be
brought into or kept in or about the Premises. Any preparation of food or
beverages in the Premises shall be done only with equipment approved by Host
which does not overload the electrical wiring of the Premises. No Guest shall
cause or permit any unusual or objectionable odors to be produced or permeate
the Premises.
4. Except with the prior written consent of Host, no Guest shall
occupy or permit any portion of his Premises to be occupied as an office for a
public stenographer or typist, or for the manufacture or sale of liquor,
narcotics or tobacco in any form, or as a medical office or as a barber or
manicure shop, or as an employment bureau, in or on the Premises. No Guest
shall engage or pay any employees on the Premises, except those actually working
for Guest on the Premises, nor advertise for laborers giving an address at the
Premises. The Premises shall not be used for lodging or sleeping or for any
illegal purposes.
5. No Guest shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or neighboring
buildings or premises or those having business with them, whether by the use of
any musical instrument, radio, phonograph, unusual noise, or in any other way.
No Guest shall throw anything out of the door, windows or skylights or down the
passageways.
6. Guest shall provide Host with a key for any exterior doors
installed by Guest in the Premises. Each Guest must, upon the termination of
his tenancy, restore to the Host all keys of stores, offices and toilet rooms,
either furnished to, or otherwise procured by,
17.
<PAGE>
such Guest and in the event of the loss of any keys so furnished, such Guest
shall pay to the Host the cost of replacing the same or of changing the lock or
locks opened by such lost key if Host shall deem it necessary to make such
change.
7. Host shall have the right to prohibit any advertising by any
Guest which, in Host's opinion, tends to impair the reputation of the Building
or its desirability as an office/research building and upon written notice from
Host any Guest shall refrain from or discontinue such advertising.
8. Each guest shall see that the doors of its Premises are closed
and securely locked and must observe strict care and caution that all water
faucets, water apparatus and utilities are shut off before employees leave the
Premises, so as to prevent waste or damage, and for any default or carelessness
Guest shall make good all injuries sustained by other tenants or occupants of
the Building or Host. On multiple-tenancy floors, all Guests shall keep all
doors to the Building corridors closed at all times except for ingress and
egress.
9. The requirements of Guest will be attended to only upon
application to Host. Employees and agents of Host shall not perform any work or
do anything outside of their regular duties unless under special instruction
from Host.
10. Canvassing, soliciting and peddling in the Building are
prohibited and each Guest shall cooperate to prevent the same.
11. Guest shall not cause any noise, odor, vibration or light
disturbing or annoying to other tenants of the Building or to tenants of
neighboring buildings.
12. No air conditioning unit or other similar apparatus shall be
installed or used by any Guest without the written consent of Host.
13. No Guest shall install any radio or television antenna,
loudspeaker or other device on the roof or exterior walls of the Building.
14. Each Guest shall store all its trash and garbage within its
Premises. No material shall be placed in the trash boxes or receptacles if such
materials is of such nature that it may not be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage in the City of
Ann Arbor without being in violation of any law or ordinance governing such
disposal. All garbage and refuse disposal shall be made only through entryways
and elevators provided for such purposes and at such times as Host shall
designate. Should the amount of trash generated by Host exceed the amount
typically generated by users of office space, Guest shall be responsible for the
cost of disposing of such excess. All boxes shall be broken down before being
placed in the Building trash boxes or receptacles.
18.
<PAGE>
15. Host may waive any one or more of these Rules and Regulations for
the benefit of any particular Guest or Guests, but no such waiver by Host shall
be construed as a waiver of such Rules and Regulations in favor of any other
Guest or Guests, nor prevent Host from thereafter enforcing any such Rules and
Regulations against any or all of the Guests of the Building.
16. These Rules and Regulations are in addition to and shall not be
construed to in any way modify, alter or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of premises in the Building.
17. Guest shall not operate any equipment that sends out radio
frequencies or otherwise distorts electric power to the building.
18. Smoking is prohibited in the Building restrooms, hallways,
lobbies, lunchrooms and other common areas and on the Building grounds except in
those areas designated by Host. Host shall not be obligated to designate any
such areas.
19. Host reserves the right to make such other and reasonable rules
and regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Building, and for the preservation of good
order therein.
19.
<PAGE>
EXHIBIT 10.22
FIRST AMENDMENT TO LEASE
The Lease ("Lease") between Green Road Associates Limited Partnership ("Lessor")
and Prestolite Electric, Incorporated ("Lessee") dated March 8, 1994 for certain
premises in the Building at 2311 Green Road, Ann Arbor, Michigan ("Building") is
hereby amended as follows:
1. Paragraph 1 "Leased Premises" is hereby amended by increasing the area
of the Premises by an additional 3,278 square feet to a total 7,778
square feet, and Exhibit A to the Lease is hereby amended and attached
hereto to reflect the additional square feet.
2. Paragraph 6 "Rent" is hereby amended to increase the monthly rent
commencing October 1, 1994 to 5,509.42 per month. Upon execution of
this Amendment, Lessee may occupy the additional 3,278 square feet,
rent free, until October 1, 1994.
3. Paragraph 7 "Net Features" is hereby amended to increase the square
feet used to determine Lessee's pro rata share from 4,500 square feet
to 7,778 square feet commencing October 1, 1994.
4. Paragraph 10 "Taxes" (a) is hereby amended by increasing the
percentage used to determine Lessee's share of all Building real
estate taxes from 5.0 percent to 8.64 percent commencing October 1,
1994.
5. Paragraph 18 "Insurance" is hereby amended by increasing the
percentage used to determine Lessee's share of all Building insurance
from 5.0% to 8.64% commencing October 1, 1994.
Except as modified by the terms of this First Amendment, the Lease and all its
provisions are hereby confirmed and shall continue in full force and effect.
Dated: July 25, 1994
--------
Lessor: GREEN ROAD ASSOCIATES Lessee: PRESTOLITE ELECTRIC,
LIMITED PARTNERSHIP, a INCORPORATED, a
Michigan limited partnership Delaware corporation
By: FIRST MARTIN CORPORATION,
GENERAL PARTNER By: /s/ Rogar A. Cutsinger
----------------------------
/s/ William C. Martin
- - - - - - - - - - - ------------------------------- Its: Vice President
William C. Martin, President --------------
<PAGE>
PRESTOLITE ELECTRIC, INC.
First Amendment Rent Calculation Summary
June 22, 1994
<TABLE>
<CAPTION>
Annual
Rent
Square Feet Monthly Rent per Foot
----------- ------------ ----------
<S> <C> <C> <C>
Original Lease 4,500 $3,187.50 $8.50
First Amendment 3,278 $2,321.92 $8.50
----------- ------------
Total 7,778 $5,509.42
=========== ============
</TABLE>
<PAGE>
March 2, 1994
LEASE
-----
LEASE, entered into March 8, 1994 between Green Road Associates
Limited Partnership (hereinafter referred to as "Lessor"), whose address is c/o
First Martin Corporation, 115 Depot Street, Ann Arbor, Michigan 48104 and
Prestolite Electric, Incorporated, a Delaware corporation (hereinafter referred
to as "Lessee"), whose address is 2100 Commonwealth Boulevard, Ann Arbor,
Michigan 48105, by which the parties agree as follows:
1. Leased Premises. Lessor leases to Lessee certain premises at
---------------
2311 Green Road, Ann Arbor, Michigan as outlined in Exhibit A
attached hereto, including 4,500 leasable square feet,
hereinafter referred to as the "Premises." The building of which
the Premises is a part is hereinafter referred to as the
"Building."
2. Term. The term of this Lease shall commence on May 1, 1994 and
----
shall continue for a period of four (4) years and ten (10)
months, terminating on December 31, 1998. As used herein, the
term "Lease Year" shall mean a period of twelve consecutive
months, the first Lease Year commencing March 1, 1994.
3. Condition of Premises. Lessee shall take the Premises on an "as-
---------------------
is" basis. Lessor and Lessee shall mutually agree on the
selection of an architect and contractor. All improvements to
the Premises must be approved in writing in advance by Lessor,
which approval shall not be unreasonably withheld.
4. Lessor's Improvements. Lessor shall provide at its sole cost the
---------------------
improvements set forth in exhibit B attached hereto.
5. Lessee's Improvements. Other than the improvements by Lessor set
---------------------
forth in Exhibit B, Lessee shall do all its own improvements
including interior men's and women's handicap lavatories.
6. Rent. Lessee shall pay to Lessor as annual rent for the Premises
----
for the term hereof the amount of Thirty-Eight Thousand, Two
Hundred Fifty ($38,250) Dollars in equal monthly installments of
Three Thousand, One Hundred Eighty-Seven Dollars and Fifty Cents
($3,187.50) in advance on the first day of each month for the
term hereof. Partial months shall be prorated based on a 365 day
year. The annual rent payable under this Lease shall be adjusted
annually at the beginning of the second Lease Year and each
succeeding Lease Year during the term of this Lease and any
renewals thereof to the amount equal to the annual rent for the
first Lease Year increased by the percentage increase, if any, in
the Consumer Price Index (as hereinafter defined) from the third
month preceding the month in which the first Lease Year commenced
to the third month preceding the
<PAGE>
month in which said rental increase is to take effect.
Notwithstanding the foregoing, in no event shall the rent to be
paid by Lessee hereunder decrease from one Lease Year to the
next. As used herein, "Consumer Price Index" means the Consumer
Price Index for All Urban Consumers, U.S. City Average, All
Items, 1982-84 = 100, as issued by the Bureau of Labor
Statistics, United States Department of Labor. If at any time
during the term hereof the United States Bureau of Labor
Statistics shall discontinue the issuance of the CPI, then the
parties agree to use any other standard, nationally recognized
cost of living index then issued and available, which is
published by the United States Government, and if no governmental
index is then published, then by any generally recognized
privately published index of the cost of living. By way of
illustrating the formula to be used in calculating the annual
rent increase, assume that a five year lease commenced on July
15, 1980 and that the initial annual rent was $1,000. The new
rent effective at the beginning of the third lease year would be
calculated as follows. Since the hypothetical lease commenced on
July 15, 1980, the first lease year would commence on August 1,
1980 and the third lease year on August 1, 1982. Hence the CPI
data to be used would be for the months of May, 1980 and May,
1982. Assume that the CPI for these months was 200.0 and 250.0,
respectively. The new annual rent effective August 1, 1982 would
be determined as follows: [[(250.0 -200.0) / 200.0] x $1,000] +
$1,000 = $1,250. If any rent payment due hereunder is more than
four days late, Lessee shall pay Lessor a service fee equal to
two percent (2%) of said rent payment. The payment of this late
payment service fee will not constitute a waiver by Lessor of any
default by Lessee under this Lease. The rent to be paid by Lessee
hereunder shall not be diminished by the additional payments to
be made by Lessee as provided in Paragraphs 7, 8, 9 and 10
hereof.
7. Net Features. The rent during the term of this Lease shall be on
------------
a net-net-net basis. That is to say, the Lessee, and not the
Lessor, shall pay all costs connected with the Premises
including, but not limited to: real estate taxes as hereinafter
determined (or any other tax or charge imposed by any
governmental authority expressly designated and identifiable as a
substitute for such taxes), personal property taxes (all
improvements to the Premises by Lessee or on behalf of Lessee by
Lessor shall be taxed as personal property), special annual
assessments, utilities, service charges, janitorial, maintenance
[including the maintenance and repair of (a) all plumbing,
electrical, and mechanical systems serving the Premises whether
such systems be inside or outside the Building (except heating
and cooling units)]; (b) the grounds and parking lots of the
Premises (pro rata share); and (c) insurance and so forth. Such
items shall be paid before they become overdue or delinquent.
Failure to do so shall be a default of the Lease. There shall be
no deduction from the rent on account of the Lessee's payment of
such costs. Lessee's pro rata share is determined by
2
<PAGE>
dividing the 4,500 square feet of Premises by the gross area of
90,000 square feet in the Building.
8. Utilities. Lessee shall pay for the cost of all gas,
---------
electricity, water and other utilities used in or for the
Premises. Lessee shall pay its pro rata share based on estimated
usage where such utilities are not individually metered.
9. Janitorial Services. Lessee shall be responsible for janitorial
-------------------
services and window cleaning for the Premises.
10. Taxes. (a) Lessee shall pay to Lessor 5.0 percent of all
-----
Building real estate taxes during the term hereof.
(b) As used herein, "Building real estate taxes" shall mean:
(i) all real estate, ad valorem or personal property taxes
levied with respect to the Building, the land on which the
Building stands (hereinafter called the "Land") and the
improvements, fixtures and equipment and any other property,
real or personal, located in and about the Building or Land
and used in connection with the operation thereof (excluding
any personal property owned by any other tenant within the
Building);
(ii) any other tax, annual installments relating to a
general or special assessment, governmental charge imposed
upon or in respect to the Building or Land, including,
without limitation, a tax upon any rent therefrom, or any
occupancy or use thereof;
(iii) any annual installments relating to water and sewer
general or special assessments, charges, excises, levies,
license and permit fees, transfer taxes, and all other
similar charges, if any, which are levied, assessed, or
imposed upon or become due and payable in connection with,
or liens upon, the Building, the Land or facilities used in
connection therewith, and rentals or receipts therefrom; and
(iv) all taxes of whatsoever nature that are imposed in
substitution for or in lieu of any taxes, assessments or
other charges included in this definition.
(c) Lessor shall have the right in its discretion to contest the
amount or validity of the Building real estate taxes by
appropriate legal proceedings and to invoice Lessee for the cost
of any such contest with the advance written approval of Lessee.
Lessee shall have the right to contest Building taxes at its own
expense. Building real estate taxes shall be paid by Lessee to
Lessor no later than five days prior to the date payment of
3
<PAGE>
such taxes is due to the taxing authorities; provided, however
that in the event Lessor is required under any mortgage covering
the Building to escrow real estate taxes, Lessee shall pay such
taxes in monthly installments in advance on or before the first
day of each calendar month. Lessor shall use the amount required
to be so escrowed as a basis for determining said installments.
A late payment charge equal to 2% of the amount due shall be
added to any payments for real estate taxes not received within
15 days of invoice by Lessor. During the first and last years of
the term hereof, Building real estate taxes shall be prorated
based on the fiscal years of the taxing authorities.
(d) Lessee shall be liable for and shall pay thirty days prior to
delinquency the following:
(i) taxes, levies and assessments levied against or measured
by the cost or value of Lessee's equipment, fixtures and
other personal property located in the Premises including
the cost or value of any leasehold improvements made in or
to the Premises by Lessee or for Lessee, regardless of
whether Lessee paid for such improvements. Lessee shall
report annually all leasehold improvements for the Premises
on the City of Ann Arbor's personal property assessment form
and send a copy to the Lessor within five (5) days after the
date the form is due to the City of Ann Arbor. Failure to
do so within ten days of written notice from Lessor shall be
a default under the Lease;
(ii) taxes, levies and assessments levied upon or measured
by the Rental or any other sum payable hereunder or on
Lessor's business of Leasing the Premises excepting only net
income taxes (which is defined to mean federal and state
income taxes and the Michigan Single Business Tax) and that
portion, if any, of income and franchise taxes which may
hereafter be assessed in lieu of or substituted in whole or
in part for real estate and personal property taxes which
are payable by Lessee;
(iii) taxes, levies and assessments levied against or with
respect to the possessions, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Lessee
of the Premises; or
(iv) taxes, levies and assessments levied against or upon
the transaction or any document to which Lessee is a party
creating or transferring an interest in the Premises.
11. Security Deposit. Lessee shall deposit with Lessor upon
----------------
execution hereof the amount of Three Thousand One Hundred Eighty
Seven Dollars and Fifty Cents ($3,187.50) as security for
Lessee's faithful performance of its
4
<PAGE>
obligations hereunder. If Lessee fails to pay the rent or
otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said
deposit for the payment of any rent or other charge in default,
or for the payment of any other sum to which Lessor may become
obligated by reason of Lessee's default or to compensate Lessor
for any loss or damage which Lessor may suffer thereby. Said
deposit shall not be a limitation on Lessor's damages or other
rights under this Lease, or a payment of liquidated damages or an
advance payment of the rent. If Lessor so uses or applies all or
any portion of said deposit, Lessee shall, within five (5) days
after written demand thereof, deposit cash with Lessor in an
amount sufficient to restore said deposit to the full amount
hereinabove stated and Lessee's failure to do so shall be a
material breach of this Lease. Lessor shall not be required to
keep said deposit separate from its general accounts. If Lessee
has not been in default, said deposit, or so much thereof as has
not theretofore been applied by Lessor, shall be applied to the
thirteenth month's rent.
12. Place and Form for Payment of Rent. All payments of rent shall
----------------------------------
be delivered to Lessor at First Martin Corporation, 115 Depot
Street, Ann Arbor, Michigan 48104 or at such other place as
Lessor shall designate from time to time in writing. Rent
payments shall be made payable to Green Road Associates.
13. Financing. (a) If in connection with obtaining by Lessor of any
---------
financing or refinancing for the Building, the lender shall
request reasonable modifications in this Lease as a condition to
such financing or refinancing, Lessee will not unreasonably
withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Lessee hereunder
or in a material manner adversely affect the leasehold interest
hereby created.
(b) Lessee agrees that this Lease shall be subordinate to any
mortgages that may hereafter be placed or made upon the Building,
provided the mortgagee named in any such mortgages shall agree to
recognize the lease of Lessee in the event of foreclosure if
Lessee is not in default.
(c) Lessee agrees within ten (10) days after request by Lessor to
execute in recordable form and deliver to Lessor a statement, in
writing, certifying (a) that this Lease is in full force and
effect, (b) the date of commencement of the term of this Lease,
(c) that rent is paid currently without any off-set thereto, (d)
the amount of rent, if any, paid in advance, and (e) that there
are no uncured defaults by Lessor or stating those claimed by
Lessee, provided that, in fact, such facts are accurate and
ascertainable.
5
<PAGE>
(d) If proceedings are brought for the foreclosure of, or in the
event of exercise of the power of sale under, any mortgage made
by Lessor covering the leased Premises, Lessee shall become the
lessee of, and attorn to, the purchaser upon any such foreclosure
or sale and recognize such purchaser as the Lessor under this
Lease. The obligation of Lessee hereunder to attorn to the
purchaser shall be conditioned upon the agreement of such
purchaser to recognize the rights of Lessee under this Lease.
*
14. Use of Premises. (a) Lessee shall use and occupy the Premises
---------------
as a research center and for any other lawful purpose allowed
under the Ann Arbor Zoning Ordinance.
(b) Lessee will keep the Premises clean and shall not create any
nuisance, noises, vibrations, electrical discharges, radiation or
other disturbances that shall in any way unreasonably impair the
peace, quietness, comfort, or security of neighboring buildings
nor do anything that will cause any extra hazard, impair the
validity of any policy of insurance now or hereafter placed on
the Building, or that will violate any prohibitions in any such
policy. Lessee will not store or place any materials outside of
the Building.
(c) Lessee, shall, at its own cost and expense, comply with all
of the requirements of all valid laws and regulations, municipal,
state and federal, now in force, or which may hereafter be in
force, pertaining to the use and occupancy of the Premises.
15. Acceptance of Premises. Except as Lessor and Lessee may
----------------------
otherwise agree in writing at such time, and except for the
Lessor's representation and warranties set forth in this Lease,
the taking of possession by Lessee shall be conclusive evidence
that Lessee has examined the Premises, has found them to be in
satisfactory condition and accepts the Premises "as-is," and that
Lessor up to such time had performed all of its obligations
hereunder.
16. Alterations by Lessee. Lessee shall not make any alterations,
---------------------
additions and improvements to the Premises without the Lessor's
written consent, which consent shall not unreasonably withheld,
and all alterations, additions and improvements made by either of
the parties hereto upon the Premises, except movable office
furniture, machinery, research equipment, books and records, and
trade fixtures put in at the expense of the Lessee, shall be the
property of the Lessor, and shall remain upon and be surrendered
with the Premises at the termination of this Lease; provided,
however, that the Lessee shall have the option of removing
additions as specified made by it if the Premises are restored to
good condition following such removal and any damages to the
Premises resulting from such removal are repaired.
6
<PAGE>
Lessor may, at its option, at the time of its approval require
Lessee to remove, at Lessee's sole expense, certain improvements
as specified in writing by Lessor and repair any damage resulting
therefrom, upon the expiration or earlier termination of this
Lease. In the event a mechanic's or other liens are filed,
arising from any improvement or repair activities of Lessee,
Lessee shall at its expense within ten (10) days of notice from
Lessor cause such lien to be discharged or post a bond for the
benefit of Lessor in an amount satisfactory to Lessor.
17. Repairs by Lessee. Lessee covenants and agrees that it will, at
-----------------
its own expense, during the term of this Lease, keep the Premises
and every part thereof (including, but without limitation, the
exterior and interior portion of all doors, windows, mechanical
systems, floors, ceilings, walls and structural elements) in good
order and condition and at the expiration of the term, yield and
deliver up the same in like condition as when taken, normal wear
and tear, and damage covered by insurance excepted. As used
herein, "mechanical systems" shall include all plumbing,
electrical and sprinkler systems serving the Premises, whether
located inside or outside the Premises.
18. Insurance. Lessor shall maintain liability, fire and extended
---------
coverage insurance on the Building in which the Premises are
located, and Lessee shall pay 5.0% of the cost of such insurance
within ten (10) days of receipt of invoice from Lessor. Lessee
shall maintain fire and extended coverage insurance with respect
to its personal property located on the Premises. In addition,
Lessee shall maintain a policy of public liability and property
damage liability insurance with a combined single occurrence
limit of not less than $2,000,000.00 insuring Lessee against any
liability arising out of the use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall
be self-insured by Lessee or issued by an insurance company
acceptable to Lessor. Upon request Lessee shall provide Lessor
with a certificate of insurance for said policy. No such policy
shall be cancelable or subject to reduction of coverage or other
modification except after thirty (30) days' prior written notice
to Lessor. Lessor and Lessee and all other parties claiming
under them hereby mutually release and discharge each other from
all claims and liabilities to the extent covered by insurance,
regardless of the cause of any damage, loss or injury to person
or property, to the extent such waiver of liability is permitted
by any applicable policies of insurance maintained by Lessor
and/or Lessee, as the case may be. Provided other tenants of
Lessor waive subrogation against Lessee, Lessee waives any and
all rights Lessee may have against said other tenants for damage
to or destruction of the demised Premises due to any casualty
insurable by the customary form of fire and extended coverage
insurance, whether such damage or destruction be due to said
tenants' negligence or otherwise.
7
<PAGE>
19. Destruction - Fire or Other Cause. If the Premises shall be
---------------------------------
rendered untenantable by fire or other casualty, then Lessor
shall make the Premises tenantable as speedily as possible, and
the rent shall be abated in whole or in part, according to the
portion of the Premises which is rendered untenantable, during
the period of untenantability, except that there shall be no
abatement for the time required for the replacement or repair of
any property of Lessee, in excess of the time required to make
the Premises tenantable. In the event that the Premises cannot
be made tenantable within ninety (90) days after the occurrence
of the fire or other casualty, then either Lessor or Lessee may
terminate this Lease by notification to the other of such
termination within ten (10) days after (a) expiration of said 90-
day period or (b) Lessor shall have notified Lessee of the time
required to make them tenantable. Lessor shall, in its sole
judgment, reasonably exercised, determine the length of time
required to make the Premises tenantable, and shall notify Lessee
of such determination within ten (10) days after the occurrence
of the fire or other casualty.
20. Eminent Domain. In the event that all or a substantial portion
--------------
of the Premises be lawfully condemned or taken in any manner for
any public or quasipublic use to the extent of more than 50% of
its value, Lessor or Lessee, by written notice to the other, may
terminate this Lease. In the event that the Premises be so
condemned or taken to any extent and neither party terminates
this Lease, this Lease shall cease as to the part taken and the
rent adjusted so that Lessee shall pay a pro rata portion of the
rent determined by the amount of space (and rate therefor)
remaining after the taking. Lessor shall be entitled to receive
the entire award from any such condemnation or taking of the
Premises or any part thereof, without deduction therefrom for any
estate or interest granted to Lessee by this Lease, provided,
that nothing herein contained shall be deemed to prevent Lessee
from claiming compensation for relocation costs or loss for
interruption of business in the event an award with respect
thereto is provided for by law or is fixed in the proceeding in
which such taking shall occur. In the event of a partial taking
which does not result in a termination of the Lease, Lessor shall
build, repair or replace any outer walls, floor, or roof
necessary to make the Premises tenantable.
21. Assignment and Subletting. Lessee shall not assign this Lease or
-------------------------
sublet the Premises or any part thereof without the written
consent of Lessor, which consent shall not be unreasonably
withheld. Under no circumstances shall Lessee have the right to
sublease the Premises to more than one sublessee. Should Lessee
give Lessor notice of a proposed sublease or assignment, Lessor
shall have the right to terminate the Lease on the date said
sublease or assignment would otherwise take effect. Any other
provision of this Paragraph to the contrary notwithstanding,
Lessor shall not be required to give its consent to an assignment
or subletting of the leased Premises, or any part thereof, if the
effect of such assignment or subletting would be to
8
<PAGE>
create a profit for the Lessee. Lessee may include in its
calculation for determining its costs the amortization of the
improvements to determine whether the sublease or assignment
creates a profit. In such cases, any profit for the assignment
or subletting shall be paid to the Lessor. Lessee agrees that it
shall not be unreasonable for Lessor to withhold its consent to a
proposed assignment or subletting if: (i) Lessor believes that
the proposed assignee or sublessee is not as financially
responsible as Lessee on the date hereof; (ii) Lessor believes
that the proposed assignee or sublessee will not conduct on the
Premises a business of a quality equal to that conducted by
Lessee; or (iii) Lessor believes that the business of the
proposed assignee or sublessee, conducted on the Premises, will
have an impact upon the common facilities dissimilar to that of
Lessee's business or will require services of Lessor dissimilar
to those required by Lessee. Lessor's consent to one assignment
or sublease shall not waive the requirement of its consent to any
subsequent assignment or sublease. In the event Lessor consents
to Lessee's subletting, Lessee shall include in such sublease all
of the pertinent terms contained herein, and Lessee shall furnish
Lessor with a certified copy of any and all subleases affecting
the demised Premises prior to such consent; and in case of
default by Lessee giving Lessor right of entry for breach of
condition subsequent, Lessee, at Lessor's option shall assign all
of Lessee's right, title and interest in any subleases made by
Lessee. Lessor's consent to an assignment shall not be effective
until Lessor has received a written document in which the
assignee has assumed and agreed to perform all of Lessee's
obligations in the Lease. Lessor's consent to an assignment or
sublease shall not release the Lessee from the payment and
performance of its obligations in the Lease, but rather the
Lessee and its assignee shall be jointly and severally primarily
liable for such payment and performance.
22. Default, Eviction, Termination, and Damages. If Lessee shall
-------------------------------------------
fail to pay any rent or other undisputed charges due hereunder
within ten (10) days of the date said charges are due, or if
Lessee shall fail to comply with any material details,
provisions, or covenants of this Lease other than the payment of
rent and shall not cure such failure within thirty (30) days
after written notice thereof, or a reasonable period of time if
diligently pursuing a cure, or if Lessee shall be adjudged
bankrupt by a court of competent jurisdiction, or if a receiver
or trustee shall be appointed for all or substantially all of the
assets of Lessee, then in any such event, Lessee shall be deemed
in default. When Lessee is in default, Lessor, besides other
rights or remedies it may have, shall have the right to declare
this Lease terminated and the term ended, shall have the right to
evict Lessee under Summary Proceeding law. Should Lessor elect
to reenter, as herein provided, or should it take possession
pursuant to legal proceedings or pursuant to any notice provided
for by law, it may either terminate this Lease or it may from
time to time, without terminating this Lease, make such
alterations and repairs as it may deem appropriate in order to
re-rent
9
<PAGE>
the Premises, and re-rent said Premises or any part thereof for
such term or terms (which may be for a term extending beyond the
term of this Lease) and at such rental or rentals and upon such
other terms and conditions as Lessor in its sole discretion may
deem advisable. If Lessor has other unoccupied space similar to
the Premises, Lessor shall be under no duty to attempt to re-rent
these Premises (and Lessee shall be entitled to no reduction in
its indebtedness to Lessor as a result of any such failure by
Lessor) until such other space has been rented. Upon each such
re-renting, all rentals and other sums received in any month by
Lessor from such re-renting shall be applied, first to the
payment of any indebtedness other than rent due hereunder from
Lessee to Lessor; second, to the payments of any costs and
expenses of such rerenting, including reasonable brokerage fees
and attorneys' fees and of costs of such alterations and repairs;
third, to the payment of rent and other charges due and unpaid
hereunder; and the residue, if any, shall be held by Lessor and
applied in payment of future rent as the same may become due and
payable hereunder. If such rentals and other sums received from
such re-renting during any month be less than that to be paid
during that month by Lessee hereunder, Lessee shall pay such
deficiency to Lessor. Such deficiency shall be calculated and
paid monthly. No such re-entry or taking possession of said
Premises by Lessor shall be construed as an election on its part
to terminate this Lease unless a written notice of such intention
be given to Lessee or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any such
re-renting without termination, Lessor may at any time hereafter
elect to terminate this Lease for such previous default. Should
Lessor at any time terminate this Lease for any default, in
addition to any other remedies it may have, it may recover from
Lessee all damages it may incur by reason of such default,
including the cost of recovering the leased Premises, reasonable
attorneys' fees, and including the worth at the time of such
termination of the excess, if any, of the amount of rent and
charges equivalent to the rent reserved in this Lease for the
remainder of the stated term over the then reasonable rental
value of the leased Premises for the remainder of the stated
term, all of which amounts shall be immediately due and payable
from Lessee to Lessor. In case suit shall be brought for
recovery of possession of the leased Premises, for the recovery
of rent or any other amount due under the provisions of this
Lease, or because of the failure by Lessee to abide by any
material detail, provision, or covenant herein contained, the
non-prevailing shall pay to the prevailing party all expenses
incurred in connection with such suit, including reasonable
attorneys' fees.
23. Surrender of Premises. Upon the expiration or the earlier
---------------------
termination of the term of this Lease, Lessee shall quit and
surrender the Premises to Lessor in good order and condition,
ordinary wear, damage by the elements, and damage which is the
responsibility of Lessor excepted; and Lessee shall remove all of
its property and shall repair any damage to the
10
<PAGE>
Premises caused by such removal. Any personal property of Lessee
or of anyone claiming under Lessee which shall remain on the
Premises after the expiration or termination of the Lease term
shall be deemed to have been abandoned by Lessee, and either may
be removed by Lessor as its property or may be disposed of in
such manner as Lessor may see fit, and Lessor shall not be
responsible for the same.
24. Access to Premises. Lessor shall have the right to enter upon
------------------
the Premises at all reasonable hours upon reasonable notice for
the purpose of inspecting the same, preventing waste, loss, or
destruction, removing obstructions, making such repairs or
alterations as it is obligated to make under the terms of this
Lease, or to enforce any of Lessor's rights or powers under this
instrument. The Lessor may show the Premises to prospective
tenants at any time during the last six (6) months of the term of
this Lease.
25. Heirs and Assigns. The covenants, conditions, and agreements
-----------------
contained in this Lease shall bind and inure to the benefit of
Lessor and Lessee and their respective heirs, distributees,
executors, administrators, successors, and, except as otherwise
provided in this Lease, their assigns.
26. Quiet Enjoyment. So long as Lessee pays the rent and performs
---------------
all of its obligations in this Lease, Lessee's possession of the
Premises will not be disturbed by Lessor, its successors or
assigns.
27. Signs. Lessee shall not fasten to or paint upon any part of the
-----
Premises or Building any sign, advertisement, notice or handbill
without the prior written consent of the Lessor, which consent
shall not be unreasonably withheld. Lessor may, without notice
to Lessee, remove any such sign, advertisement, notice or
handbill painted or affixed in violation of this clause without
any liability whatsoever for damages or otherwise to Lessee, and
Lessee shall be responsible for the cost of such removal.
28. Holding Over. In the event that Lessee shall hold over after the
------------
term of the Lease, it is agreed that thereafter the tenancy shall
be from month to month in the absence of a written agreement to
the contrary on the same terms and conditions contained herein,
with the exception that the rent shall increase to 125% of the
last month's rent.
29. Notices. Whenever any notice is required hereunder it shall be
-------
made in writing and served personally or by certified mail,
return receipt requested, at the following addresses (or at such
other addresses as the parties may hereafter designate in
writing):
11
<PAGE>
Lessor: Green Road Associates Limited
Partnership
c/o First Martin Corporation
115 Depot Street
Ann Arbor, Michigan 48104
Lessee: Prestolite Electric, Incorporated
2100 Commonwealth Boulevard
Ann Arbor, Michigan 48105
Attn: Roger Cutsinger,
Vice President
30. Lessor's Liability. (a) Lessee shall indemnify, defend and hold
------------------
harmless Lessor and Lessor's employees, agents and invitees from
all losses, damage, claims or liability arising out of any and
all injuries to or death of any person or damage to any property
arising out of any occurrence in or about the Premises, or
arising out of any occurrence in or about the Building arising
from the act or neglect of Lessee or its agents or invitees.
Notwithstanding the foregoing, Lessee shall have no obligation to
indemnify Lessor against the negligence of Lessor or against any
loss, damages, claims or liabilities related to a breach of
Lessor's representation, warranties, covenants or agreements
under this Lease.
(b) The Lessor shall not be responsible or liable to the Lessee
for any loss or damage that may be occasioned by or through the
acts or omissions of persons occupying adjoining premises or any
part of the premises adjacent to or connected with the Premises
hereby leased or any part of the Building of which the leased
Premises are a part or for any loss or damage resulting to the
Lessee or his property from bursting, stoppage or leaking of
water, gas, sewer or steam pipes, unless such loss or damage
arises from Lessor's negligence or breach of this Lease.
31. Lessee's Environmental Law Compliance. The parties acknowledge
-------------------------------------
that there are certain federal, state and local laws, regulations
and guidelines now in effect, and that additional laws,
regulations and guidelines may hereafter be enacted, concerning
the impact on the environment of land use, the maintenance and
operation of structures, and the conduct of business. Lessee
will not cause, or permit to be caused, any act or practice on or
about the Premises which would adversely affect the environment
or violate any of such laws, regulations, or guidelines. In
particular, without limiting the generality of the foregoing,
Lessee will not, in violation of any laws, use the premises to
produce, store, process or transport any hazardous waste or
hazardous substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended ("CERCLA"), or in the Resource
Conservative Recovery Act of 1980, as amended ("RCRA"). Any
violation of this
12
<PAGE>
covenant shall be an event of default under this Lease. Lessee
agrees to indemnify and hold Lessor harmless against all losses,
costs, expense and liability whatsoever, including Lessor's costs
of defending against the foregoing, which will include reasonable
attorney's fees, and against any costs necessary in connection
with the cleanup or removal of any hazardous waste or hazardous
substance from the premises, caused, or permitted to be caused,
by any act, practice or neglect of Lessee with respect to the use
of the Premises in violation of any laws. Lessee shall have no
claim against Lessor by reason of any changes which Lessor may be
required to make to the Premises pursuant to such laws,
regulations, or guidelines. Lessor agrees to indemnify and hold
Lessee harmless against all losses costs, expense and liability
whatsoever and against any costs necessary in connection with the
cleanup or removal of any hazardous waste or hazardous substance
from the Premises, from any event which occurred prior to March
1, 1994.
32. Miscellaneous. (a) The failure of either party to enforce any
-------------
covenant or condition of this Lease shall not be deemed a waiver
thereof or of the right of either party to enforce each and every
covenant and condition of this Lease. No provision of this Lease
shall be deemed to have been waived unless such waiver be in
writing.
(b) This Lease and the Exhibits attached hereto and forming a
part hereof set forth the entire agreements between Lessor and
Lessee concerning the leased Premises. Any amendment shall be in
writing and signed by each party.
(c) Each party represents and warrants that there are no claims
for brokerage commissions or finder's fees in connection with the
execution of this Lease and each party agrees to indemnify the
other against, and hold it harmless from, all liability arising
from any such claim.
(d) Lessee shall not record this Lease without the written
consent of Lessor. Upon the request of either party the other
party shall join in the execution of a memorandum of this Lease
for recording which shall describe the parties, the leased
Premises, the term and any special provisions.
(e) In the event of any transfer of Lessor's interest in the
Premises, the transferror shall be automatically relieved of all
obligations and liabilities on the part of Lessor accruing from
and after the date of such transfer except for environmental
issues. The release of Lessor from such obligations and
liabilities shall be expressly conditioned upon an assumption by
any transferee of all of the unperformed terms, covenants and
conditions of this Lease arising after the date of such transfer,
13
<PAGE>
including the application of Lessee's security deposit in
accordance with the provisions of Paragraph 11 hereof.
(f) Any amount due under this Lease which is not paid when due
shall bear interest at the highest legal rate from the date due
until paid, unless otherwise specifically provided herein, but
the payment of such interest shall not excuse or cure any default
under this Lease.
(g) No payment by Lessee of a lesser amount than the monthly rent
shall be deemed to be other than on account of the earliest rent.
(h) This Lease shall be governed by, and construed in accordance
with, the laws of the State of Michigan. If any provision of
this Lease shall, to any extent, be invalid or unenforceable, the
remainder of this Lease shall not be affected and each provision
shall be valid and enforceable to the fullest extent permitted by
law.
33. Parking. Lessee shall have the right to use a pro rata share of
-------
the existing parking.
34. Termination. This Lease is subject to termination of the
-----------
existing lease on the Premises.
35. Repair of Heating and Cooling Unit. Lessor will maintain and
----------------------------------
repair the heating and cooling units for the Premises at its sole
cost and expense.
36. Access. Lessee shall be entitled to the exclusive use of the
-------
overhead door identified on Exhibit A attached hereto.
14
<PAGE>
This agreement is hereby signed on behalf of the parties, effective as of the
date first written above.
Lessor:
GREEN ROAD ASSOCIATES LIMITED
PARTNERSHIP, a Michigan partnership
By: FIRST MARTIN CORPORATION,
GENERAL PARTNER
/s/ William C. Martin
-----------------------------
William C. Martin, President
Lessee:
PRESTOLITE ELECTRIC, INCORPORATED,
a Delaware corporation
By: /s/ Rogar A. Cutsinger
---------------------------
Its: Vice President
--------------------------
15
<PAGE>
ACKNOWLEDGMENT OF CORPORATE LESSEE
STATE OF
ss.
COUNTY OF
The foregoing instrument was acknowledged before me this ____ day of
____________, 19__ by ________________________________________ the
_____________________ of ___________________________, a ______________________
corporation, on behalf of the corporation.
---------------------------
Notary Public
County
My commission expires:
16
<PAGE>
ACKNOWLEDGMENT OF CORPORATE LESSEE
STATE OF
ss.
COUNTY OF
The foregoing instrument was acknowledged before me this ____ day of
____________, 19__ by ________________________________________ the
_____________________ of ___________________________, a ______________________
partnership, on behalf of the partnership.
-------------------------
Notary Public
County
My commission expires:
17
<PAGE>
EXHIBIT A
2311 GREEN ROAD
ANN ARBOR, MICHIGAN
OFFERED BY: FIRST MARTIN CORPORATION (313) 994-5050
<PAGE>
EXHIBIT B
Lessor's Improvements to Premises
---------------------------------
. Updated Lobby (outside of Premises).
. Entry Door to Suite from Lobby.
. Perimeter Demising Wall, as necessary.
. Adequate heating and cooling units for normal office use.
(Ducting and controls by Lessee.)
<PAGE>
EXHIBIT 10.23
EXECUTION COPY
AMENDMENT AGREEMENT
-------------------
AMENDMENT AGREEMENT (this "Amendment") dated as of October 11, 1991
between LAWRENCE BOES AND RAYMOND BOES, as tenants-in-common (the "Landlord"),
and PEI 1991 ACQUISITION, INC., as Tenant (the "Tenant").
W I T N E S S E T H:
WHEREAS, the Beech Electric Corporation and Prestolite Electric
Incorporated, a Delaware corporation currently in bankruptcy in the Northern
District of Ohio ("Old Prestolite") have entered into a Lease Agreement relating
to 2801 Beech Daly Road, dated July 17, 1987 (the "Lease Agreement"; the terms
defined therein being used herein as therein defined unless otherwise defined
herein).
WHEREAS, Beech Electric Corporation subsequently changed its name to
BEC Liquidating Corporation - Michigan and deeded its interest in the leased
property to Lawrence and Raymond Boes.
WHEREAS, the Tenant has agreed to acquire substantially all of the
assets of Old Prestolite, including Old Prestolite's interest in the Lease
Agreement (the "Acquisition").
WHEREAS, the Tenant will change its name to Prestolite Electric
Incorporated on or promptly after the closing of the Acquisition.
WHEREAS, the Landlord has requested the Tenant to enter into this
Amendment, among other things, to provide for certain adjustments to the rent
and term of the Lease Agreement and to eliminate the Tenant's option to purchase
under the Lease Agreement.
WHEREAS, the Tenant is, on the terms and conditions stated below,
agreeable to granting such request of the Landlord and the Tenant and the
Landlord have agreed to amend the Lease Agreement and to certain other matters
in connection therewith as hereinafter set forth.
1
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the Tenant and the Landlord agree as follows,
intending to be legally bound:
SECTION 1. Amendment to Lease Agreement. The Lease Agreement shall
----------------------------
be, effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, amended as follows:
(a) Article 3 is hereby amended by (i) replacing the last
sentence of Section 1 thereof with "The term of this lease shall extend until
November 1, 1998; provided, however, that the Tenant may terminate the lease on
-------- -------
November 1 of any year by providing sixty days written notice of such
termination to the Landlord," (ii) replacing the phrase "Six Thousand Five
Hundred Thirty-eight ($6,538) Dollars" with the phrase "Six Thousand Six Dollars
and Seventy-Five Cents ($6,006.75) and (iii) deleting Section 3 thereof in its
entirety;
(b) Article 9 is hereby deleted in its entirety:
(c) Articles 10 through 32 are hereby renumbered to reflect the
deletion of Article 9; and
(d) In addition to being redesignated Article 18 pursuant to
subsection (c) above, Article 19 is hereby amended by (i) replacing the
following:
"To Landlord: Beech Electric Corporation
340 South Gulley Road
Dearborn Heights, MI 48125"
with:
"To Landlord: Lawrence A. Boes
340 South Gulley Road
Dearborn Heights, MI 48125
Raymond C. Boes
4664 Pare Lane
Trenton, MI 48183"; and
(ii) by replacing the phrase "John M. Goode, Chairman" with the phrase
"President".
SECTION 2. Conditions of Effectiveness. The amendments set forth in
---------------------------
Section 1 above shall become effective when, and only when, (a) the parties each
shall have received counterparts of this Amendment executed by the other party;
(b) the Closing (as defined in the Asset Purchase Agreement, dated as of June
24, 1991 (the "Agreement"), among PMI Holding Corp., Old Prestolite, Prestolite
Electric of New York, Inc., Prestolite
2
<PAGE>
Electric of Michigan, Inc. and Prestolite Technology Corp. (collectively, the
"Sellers") and the Tenant) shall have occurred; (c) the cure costs of $28,031.50
related to the assignment the Lease Agreement shall have been paid; (d) the
Landlord's objections to the transactions contemplated by the Agreement shall
have been withdrawn; and (e) Old Prestolite's motion to assume and assign the
Assigned Contracts (as defined in the Agreement) between any of the Sellers and
the Landlord or affiliates of the Landlord shall have been withdrawn.
SECTION 3. Reference to and Effect on the Lease Agreement.
-----------------------------------------------
(a) Upon the effectiveness of Section 1 hereof, on and after the
date hereof each reference in the Lease Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Lease Agreement as amended by Section 1 hereof.
(b) Except as specifically amended above, the Lease Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
SECTION 4. Costs and Expenses. All of the costs and expenses
------------------
incurred by the Tenant and the Landlord in connection with the preparation,
execution and delivery of this Amendment shall be borne by the party incurring
such cost or expense.
SECTION 5. Execution in Counterparts. This Amendment may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
SECTION 6. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws of the state of Michigan, except as
required by mandatory provisions of law.
3
<PAGE>
IN WITNESS WHEREOF, the Landlord and the Tenant have each caused this
Amendment to be duly executed as of the day and year first above written.
/s/ Lawrence A. Boes
--------------------
Lawrence A. Boes
/s/ Raymond C. Boes
-------------------
Raymond C. Boes
PEI 1991 ACQUISITION, INC.
(to be renamed Prestolite Electric
Incorporated after the Closing)
By: /s/ Richard Paterson
-------------------------------
Title: President
By: /s/ Mark Bandeen
-------------------------------
Title: Treasurer
4
<PAGE>
LEASE
-----
By and Between
BEECH ELECTRIC CORPORATION, AS LANDLORD,
And
PRESTOLITE ELECTRIC INCORPORATED, AS TENANT
(Manufacturing Facility Lease)
5
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 PREMISES........................................... 1
ARTICLE 2 ADDITION........................................... 1
ARTICLE 3 TERM AND RENT...................................... 1
ARTICLE 4 TAXES.............................................. 2
ARTICLE 5 USE................................................ 2
ARTICLE 6 INSURANCE.......................................... 2
ARTICLE 7 MAINTENANCE AND REPAIRS............................ 4
ARTICLE 8 OPTION TO RENEW.................................... 4
ARTICLE 9 PURCHASE OF PREMISES............................... 4
ARTICLE 10 PERMITTED SUBLEASE AND ASSIGNMENTS................. 5
ARTICLE 11 RIGHT TO MAKE ALTERATIONS.......................... 5
ARTICLE 12 EMINENT DOMAIN OR FIRE............................. 6
ARTICLE 13 RIGHT TO ERECT SIGNS............................... 7
ARTICLE 14 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT.......... 7
ARTICLE 15 NON-DISTURBANCE BY MORTGAGEE....................... 7
ARTICLE 16 DEFAULT............................................ 8
ARTICLE 17 UTILITIES.......................................... 9
ARTICLE 18 NON-LIABILITY...................................... 9
ARTICLE 19 NOTICES............................................10
ARTICLE 20 WAIVER OF SUBROGATION..............................10
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 21 WAIVER.............................................11
ARTICLE 22 NO PARTNERSHIP.....................................11
ARTICLE 23 PARTIAL INVALIDITY.................................11
ARTICLE 24 LIENS..............................................11
ARTICLE 25 COMPLIANCE WITH LAWS...............................12
ARTICLE 26 ENTIRE AGREEMENT...................................12
ARTICLE 27 CONSTRUCTION AND INTERPRETATION....................13
ARTICLE 28 ADDITIONAL DOCUMENTS...............................13
ARTICLE 29 QUIET ENJOYMENT....................................13
ARTICLE 30 FORCE MAJEURE......................................13
ARTICLE 31 SURRENDER AND HOLDING OVER.........................13
ARTICLE 32 TIME OF ESSENCE....................................14
</TABLE>
ii
<PAGE>
THIS LEASE DATED THIS 17TH DAY OF JULY, 1987,
BY AND BETWEEN BEECH ELECTRIC CORPORATION, AS LANDLORD,
AND PRESTOLITE ELECTRIC INCORPORATED, AS TENANT
- - - - - - - - - - - --------------------------------------------------------------------------------
ARTICLE 1
PREMISES
--------
The Landlord, in consideration of rent to be paid and the covenants
and agreements to be performed by the Tenant, leases to the Tenant the following
premises described on Exhibit A (the "Premises") and commonly known as 2801
Beech Daly Road, Dearborn Heights, Michigan.
ARTICLE 2
ADDITION
--------
Landlord agrees to construct and pay for a two thousand (2,000) square
foot office addition ("Addition") to the Premises. The plan, specifications and
costs shall be mutually agreed upon by Landlord and Tenant, however Landlord's
cost, which is subject to audit by Tenant and/or its representatives, shall not
exceed Seventy-Five Thousand ($75,000) Dollars. This cost shall include the
hourly rate (at mutually agreeable hourly rate) of Landlord's use of any of
Tenant's employees in the construction of the Addition.
ARTICLE 3
TERM AND RENT
-------------
Section 1. Tenant shall be entitled to use and occupancy of the
---------
Premises upon execution of this Lease (hereinafter "Commencement Date").
If the Commencement Date is other than the first day of the month, the
rent shall be prorated to the first day of the next succeeding month. The term
of this Lease shall extend from the Commencement Date until December 31, 1989.
Section 2. Tenant shall pay Landlord rent on the first day of each
---------
month during the term of this Lease (plus any daily rents for the fractional
initial month as set forth above ) at the rate of Six Thousand Five Hundred
Thirty-eight ($6,538) Dollars per month. The rent is payable at such place as
Landlord may give written notice to Tenant.
Section 3. At such time as the Addition is complete and ready for use
---------
by Tenant, Tenant's monthly rent shall increase by the amount necessary to
amortize the cost of
1
<PAGE>
the Addition over a period of eighty-four (84) months with interest at Nine and
One-Half (9-1/2%) Percent per annum. Said rent increase shall not exceed One
Thousand Two Hundred Twenty-six ($1,226) Dollars per month.
ARTICLE 4
TAXES
-----
Section 1. Tenant shall pay as additional rent all real estate and
---------
property taxes and other similar governmental charges which may be imposed upon
the Premises during the term of this Lease. Current taxes shall be prorated and
adjusted as of the Commencement Date (and the termination date, if necessary) in
accordance with the fiscal year method. Tenant shall forward paid tax receipts
to Landlord no later than sixty (60) days after the tax due date.
Section 2. Tenant, at its expense, may contest the amount or validity
---------
of any imposition of taxes and assessments upon the Premises by appropriate
legal proceedings. Upon the termination of such proceeding, Tenant shall
deliver to Landlord proof of the imposition as finally determined. Any such
contest may be made in the name of Landlord, and Landlord agrees to cooperate
with Tenant in any such contest, but without expense to Landlord.
ARTICLE 5
USE
---
The Tenant may use the Premises for the repair and remanufacture of
motors and related activities and for any other lawful use.
ARTICLE 6
INSURANCE
---------
Section 1. Tenant shall defend and hold Landlord harmless from and
---------
against any liability for damages to any person or any property upon or above
the Premises and for any liability to Tenant's employees and all persons in the
Premises at Tenant's invitation or with its consent, except out of or from
accidents arising from Landlord's negligence.
Section 2. Tenant, at its own expense, shall maintain for the mutual
---------
benefit of Landlord and Tenant, insurance of the following character:
(a) General public liability insurance against claims for bodily
injury, death or property damage occurring on, at or about the Premises. Such
insurance shall
2
<PAGE>
afford protection to Landlord and such other parties as Landlord shall then
designate, of not less than One Million ($1,000,000) Dollars with respect to
bodily injury or death to any one person, not less than One Million ($1,000,000)
Dollars with respect to any one accident or occurrence and not less than Fifty
Thousand ($50,000) Dollars with respect to property damage. After written
notice from Landlord, Tenant shall have thirty (30) days to add any party
designated by Landlord to its liability policies.
(b) Rent insurance against loss of or damage by fire (with extended
coverage) in an amount not less than the sum of one (1) year's minimum annual
rent payable by the Tenant hereunder.
(c) Fire, extended coverage, and vandalism coverage to fully protect
the Landlord using not less than the current replacement value. Said estimate
shall be revised at the expiration of the initial term of the insurance policy
and shall be revised by the Landlord at each renewal of said policy.
Landlord, along with any desired mortgagee, if required, is to be
named as insured under policies.
Section 3. All insurance policies required under this Article shall
---------
be issued by companies of recognized financial standing rated at least A - AAA
by Best's Insurance Guide and duly licensed to do business under the laws of the
State of Michigan. Every policy which Tenant is obligated to carry under the
provisions of this Section shall contain an agreement by the insurer that it
will not cancel or materially modify such policy without first giving twenty
(20) days' prior written notice to Landlord.
Tenant shall deliver to Landlord, prior to its occupancy of the
Premises, the original or duplicate policies or certificates of insurance,
evidencing all of the insurance which is required to be maintained by Tenant
hereunder. Tenant shall also, within thirty (30) days prior to the expiration
of any such insurance, deliver other original or duplicate policies or other
certificates of insurance evidencing the renewal of such insurance.
If Tenant fails to effect, maintain or renew any insurance provided
for in this Section, or to pay the premium therefor, or to deliver to Landlord
any of such policies or certificates then in any of said events, Landlord, at
its option, but without obligation so to do, may upon five (5) days' notice to
Tenant, procure such insurance. Any sums expended by Landlord to procure such
insurance shall be additional rent hereunder and shall be repaid by Tenant
within five (5) days following the date on which expenditures shall be made by
Landlord.
3
<PAGE>
ARTICLE 7
MAINTENANCE AND REPAIRS
-----------------------
Tenant shall maintain and keep in good repair and condition the
Premises including, but not limited to, the roof, walls, doors, windows, parking
lot, etc., reasonable wear and tear excepted. Tenant shall not be required to
replace any of the aforementioned items as long as repair of the same is
adequate to maintain the Premises.
Tenant shall, within seven (7) days after written notice from
Landlord, cause such maintenance or repairs to be performed. If Tenant shall
not perform such maintenance or repairs within the seven (7) day period,
Landlord shall have the right to have such maintenance or repairs done and may
add the cost thereof to any sums due under the provisions of this Paragraph
and/or from any rent due or to become due under the provisions of this Lease.
ARTICLE 8
OPTION TO RENEW
---------------
Tenant is granted two (2) consecutive options to extend this Lease,
the first for an additional term of thirty (30) months and the second option for
a period of twenty-four (24) months to commence immediately following the
expiration of the original Lease or the preceding option term, as the case may
be. The first of such options shall be auto matically exercised unless written
notice from Tenant to Landlord terminating this Lease is given prior to November
1, 1989. The second of such options shall be automatically exercised at the
completion of the first option term unless written notice from Tenant to
Landlord terminating this Lease is given prior to May 1, 1992. All terms of
this Lease shall continue during the option terms.
Tenant's written notices to Landlord shall be in accordance with
Article 19.
ARTICLE 9
PURCHASE OF PREMISES
--------------------
At the expiration of the original Lease term, Tenant shall have the
option to purchase the Premises for the sum of Four Hundred Thousand ($400,000)
Dollars plus the actual cost of the Addition (the cost of the Addition not to
exceed Seventy-five Thousand ($75,000) Dollars) less the sum of all monthly rent
set forth in Article 3 paid through December 31, 1989 (the "Purchase Price").
To exercise this option, Tenant must give written notice to Landlord of intent
to purchase no later than October 31, 1989 and complete the purchase, including
payment of all monies due, no later than December 31, 1989.
4
<PAGE>
Further, if Lease option is not automatically renewed beginning
January 1, 1990, and if Tenant does not exercise its option to purchase as set
forth above, Landlord shall have the power to cause Tenant to purchase the
Premises for the Purchase Price. Landlord must exercise its right under this
Section by giving written notice to Tenant between November 1, 1989 and November
30, 1989. Tenant shall complete the purchase, including the payment of all
monies due, no later than December 31, 1989. However, Landlord's power to cause
Tenant to purchase is contingent upon no environmental violations of federal,
state or local law existing with respect to the Premises.
At the expiration of the first option term, Tenant shall have the
option to purchase the Premises for the sum of Seventy-five Thousand ($75,000)
Dollars. To exercise this option, Tenant must give written notice to Landlord
of intent to purchase on or before April 30, 1992 and complete the purchase,
including payment of all monies due, no later than June 30, 1992.
Upon receiving payment in full, Landlord shall execute and deliver to
Tenant a good and sufficient Warranty Deed conveying title to the Premises
subject to all applicable building and use restrictions and easements, if any,
affecting the Premises and this Lease shall terminate. As evidence of title,
Landlord shall pay for and deliver to Tenant a commitment for and a policy of
title insurance for the full Purchase Price, showing a marketable title to be
vested in the Landlord. There shall be no proration of real estate taxes.
Tenant will take the Premises in an "as is" condition.
ARTICLE 10
PERMITTED SUBLEASE AND ASSIGNMENTS
----------------------------------
The Tenant shall not assign this Lease or sublet the Premises to any
party other than an affiliate of Tenant without Landlord's consent, which
consent shall not be unreasonably withheld. No assignment or subletting shall
diminish, affect or release the liability of Tenant hereunder. Landlord may
assign its rights under this Lease.
ARTICLE 11
RIGHT TO MAKE ALTERATIONS
-------------------------
Notwithstanding anything to the contrary contained in this Lease,
Tenant is granted the right to make reasonable alterations, decorations and
improvements to the Premises, provided the same are used in connection with
Tenant's operations at the Premises. All such alterations, decorations and
improvements shall be the property of Landlord.
5
<PAGE>
ARTICLE 12
EMINENT DOMAIN OR FIRE
----------------------
Section 1. If more than Fifty (50%) Percent of the Premises is taken
---------
by any public authority under the power of eminent domain, then the term of this
Lease shall cease on the part so taken, from the day possession of that part is
required for any public purpose and rent shall be paid up to that day and for
sixty (60) days from that day the Tenant shall have the right either to cancel
the Lease and declare the same null and void or to continue in the possession of
the remainder of the same under the terms herein except that the rent shall be
reduced in proportion to the amount of the Premises taken.
All damages awarded for such taking shall belong to and be the
property of the Landlord whether such damages shall be awarded as compensation
for diminution in value to the leasehold or the fee of the Premises; however,
the Landlord shall not be entitled to any portion of the award made to the
Tenant for loss of business, or for Tenant's cost of vacating all or that part
of the Premises so taken.
Section 2. It is understood and agreed that if the Premises are
---------
damaged or destroyed in whole or in part by fire or other casualty during the
term hereof, the Landlord will repair and restore the same to good tenantable
condition with reasonable dispatch, and that the rent herein provided for shall
abate entirely in case the entire Premises are untenantable and pro rata for the
portion rendered untenantable, in case a part only is untenantable, until the
same shall be restored to a tenantable condition.
However, if the Tenant fails to adjust its own insurance or to remove
its damaged goods, wares, equipment or property within a reasonable time, and as
a result thereof the repairing and restoration is delayed, there shall be no
abatement of rental during the period of such resulting delay.
Further, there shall be no abatement of rental if such fire or other
cause damaging or destroying the Premises results from the negligence or willful
act of the Tenant, its agents or employees. Further, if the Tenant uses any
part of the Premises for storage during the period of repair a reasonable charge
shall be made therefor against the Tenant.
Finally, in case the Premises are destroyed to the extent of more than
one-half (1/2) of the value thereof, the Landlord or Tenant may, at its option,
terminate this Lease forthwith by a written notice to the other party hereto.
6
<PAGE>
ARTICLE 13
RIGHT TO ERECT SIGNS
--------------------
Tenant is hereby granted the right to erect signs on the exterior of
the Premises which shall be constructed in conformity with all requirements of
local law. Tenant agrees to hold Landlord harmless from any liability arising
out of or in connection with the erection or maintenance of such signs.
ARTICLE 14
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
-----------------------------------------
Landlord may, without notice if in the opinion of Landlord an
emergency exists, perform any covenant or condition of this Lease for the
Tenant's account and at the Tenant's expense, in the event that the Tenant shall
default in the performance of any such covenant or condition. Landlord shall be
reimbursed by Tenant for any expense incurred by Landlord in instituting,
prosecuting, or defending any action or proceeding instituted because of any
default of Tenant. If Tenant becomes obligated to reimburse or otherwise pay
Landlord, under the terms of this Lease, any sum in addition to the rent as set
forth in Article 3 of this Lease, the said sum shall be considered additional
rent and may, at Landlord's option, be added to any subsequent installment of
said rent due and payable under this Lease.
ARTICLE 15
NON-DISTURBANCE BY MORTGAGEE
----------------------------
Landlord represents that any mortgage presently existing or hereafter
placed by Landlord against the Premises shall provide that if the mortgagee or
any successor in interest shall take over the rights of Landlord in the Premises
or shall become the owner of the Premises by reason of foreclosure or otherwise,
such mortgagee or successor shall not disturb the possession, use or enjoyment
of the Premises by the Tenant, and shall recognize the rights of Tenant
hereunder, and shall not disaffirm this Lease or Tenant's right of estate
hereunder, so long as all the obligations of the Tenant are fully performed in
accordance with the terms of this Lease. Landlord shall submit evidence to
Tenant within thirty (30) days of granting a mortgage that such a provision has
been inserted in any such mortgage or mortgages placed by Landlord against the
Premises.
7
<PAGE>
ARTICLE 16
DEFAULT
-------
Landlord, in addition to all other remedies given to Landlord by law,
may, by written notice to Tenant, terminate this Lease, or without terminating
this Lease, re-enter the Premises by summary proceedings or otherwise, and may
dispossess the Tenant in any of the following circumstances:
(a) In the event Tenant shall be in default in the payment of rent, or
in the payment of any other sums of money required to be paid by Tenant to
Landlord under this Lease, or as reimbursement to Landlord for sums paid by
Landlord on behalf of Tenant in the performance of the covenants of this Lease,
or if Tenant, or any of its employees, or agents, shall commit waste or create a
condition, or conditions, either by acts or failure to take appropriate action,
which are detrimental to the safety and welfare of any person or property on or
about the Premises, and said acts, default or omissions are not cured within
fifteen (15) days after receipt of notice thereof from Landlord.
(b) In the event Tenant shall be in default in the performance of any
covenants, terms, conditions, provisions, rules (excepting those items listed in
the above Sec tion (a)) and if such default is not cured within thirty (30) days
after written notice thereof given by the Landlord, excepting such defaults that
cannot be cured completely within such thirty (30) day period, provided that the
Tenant shall within such thirty (30) day period promptly commence and proceed
with reasonable diligence and in good faith to remedy such default.
(c) If the Tenant shall be adjudicated a bankrupt, make a general
assignment for the benefit of creditors, or take the benefit of any Insolvency
Act, or if a Receiver or Trustee in Bankruptcy shall be appointed for the
Tenant's property, or if the interest of the Tenant in the Premises shall be
offered for sale or sold under execution or other legal process.
In the event of such re-entry, Landlord shall have the right to remove
all persons therefrom, to recover the possession thereof by legal proceedings or
otherwise, and to use such force to enter and regain possession thereof as
Landlord shall deem proper without being liable to any civil action or criminal
prosecution therefor. No such re-entry by Landlord shall be deemed a
termination of this Lease or an acceptance of a surrender of this Lease.
In the event of default by Tenant, the balance of the rent and other
charges to become due during the term of this Lease shall be accelerated and
shall be immediately due and payable and Landlord shall have the right, but
shall not be obligated to, relet or subdivide the Premises for any period equal
to or greater or less than the remainder of the original term of this Lease, for
any rental which it may deem reasonable, to any other tenant which Landlord may
select, and for any use and purpose which Landlord may designate.
8
<PAGE>
In the event of a reletting, Landlord may apply the rent therefrom
first to the payment of Landlord's expenses, including, but not limited to
reasonable attorneys' fees incurred by reason of Tenant's default, the expense
of reletting, repairs, brokerage fees, subdividing, renovation or alteration of
the Premises and then to the payment of rent and all other sums due from Tenant
hereunder, Tenant remaining liable for any deficiency.
In the event of a default, or threatened default, by Tenant of any of
the terms, provisions, covenants, conditions, rules and regulations of this
Lease, Landlord shall have the right to an injunction by a court of competent
jurisdiction and the right to invoke any remedy permitted to Landlord by law.
All remedies available to Landlord are declared to be cumulative and concurrent.
No termination of this Lease, nor any taking or recovering of possession of the
Premises shall deprive Landlord of any of its remedies or actions against Tenant
for past or future rent, nor shall the bringing of any action for rent or other
default be construed as a waiver of the right to obtain possession of the
Premises.
ARTICLE 17
UTILITIES
---------
The Tenant shall pay for all utilities, including water, sewer, gas
and electricity supplied to the Premises for heating, air conditioning, power
and otherwise.
All utility bills shall be adjusted and prorated as of the
Commencement Date and the termination date.
ARTICLE 18
NON-LIABILITY
-------------
Landlord shall not be under any responsibility of liability in any way
whatsoever for the quality, impairment, interruption, quantity, stoppage or
other interference with service involving water, sewer, heat, air conditioning,
gas, electric current for light and power, telephone, or any other service of
whatsoever kind or nature to Premises.
Landlord shall not be liable for any damage to property of Tenant or
of others located on the Premises, nor for the loss or damage to any property of
Tenant or of others by them or otherwise. Landlord shall not be liable for any
injury or damage to persons or property resulting from, but not limited to fire,
explosion, falling plaster, steam, gas, electricity, water, rain, snow, or leaks
from any part of the Premises or from the pipes, appli ances or plumbing works
or from the roof, street, sub-surface or from any other place or by dampness or
by any other cause of whatsoever nature. Landlord shall not be liable for any
such damage caused by Tenant or persons in the Premises, occupant of adjacent
property or the public, or caused by operations, construction of any private,
public, or quasi-public work. Any property of Tenant kept or stored on the
Premises shall be so kept or stored at the risk of
9
<PAGE>
Tenant only and Tenant shall hold Landlord harmless from any claim arising out
of damage to the same including subrogation claims by Tenant's insurance
carriers.
ARTICLE 19
NOTICES
-------
All notices required herein shall be given in writing by certified or
registered mail, return receipt requested, postage prepaid, to the following
addresses:
To Landlord: Beech Electric Corporation
340 South Gulley Road
Dearborn Heights, MI 48125
With Copy to: Stuart M. Bordman, Esq.
Rubenstein, Isaacs, Lax and Bordman
Professional Corporation
172200 West Twelve Mile Road
Southfield, MI 48076
To Tenant: John M. Goode, Chairman
Prestolite Electric Incorporated
Four SeaGate
Toledo, OH 43691
With Copy to: Jon S. Kubink, Vice-President and
General Counsel
Prestolite Electric Incorporated
Four SeaGate
Toledo, OH 43691
or mailed to such other addresses as the parties respectively may designate by
notice given in like manner.
ARTICLE 20
WAIVER OF SUBROGATION
---------------------
Each party hereto does hereby remise, release and discharge the other
party hereto, and any officer, agent, employee, or representative of such party,
of and from any liability whatsoever hereafter arising from loss, damage or
injury caused by fire or other casualty for which insurance containing waiver of
subrogation is carried by, or for the benefit of, the injured party at the time
of such loss, to the extent of any recovery by, or for the benefit of, the
injured party under such insurance.
10
<PAGE>
ARTICLE 21
WAIVER
------
The failure of the Tenant or Landlord to insist, in any one or more
instances, upon a strict performance of any of the covenants of this Lease, or
to exercise any option herein contained, shall not be construed as a waiver or a
relinquishment for the future of such covenant or option, but the same shall
continue and remain in full force and effect. The receipt by the Landlord of
rent or the payment by the Tenant of rent, with knowledge of the breach of any
covenant hereof, shall not be deemed a waiver of such breach and no waiver by
the Landlord or the Tenant of any provision hereof shall be deemed to have been
made unless expressed in writing and signed by the Landlord and Tenant.
ARTICLE 22
NO PARTNERSHIP
--------------
Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partner or of joint venturer between the parties hereto, it being
understood and agreed that neither the method of computation of rent, nor any
other provision contained herein, nor any acts of the parties herein, shall be
deemed to create any relationship between the parties hereto other than the
relationship of Landlord and Tenant.
ARTICLE 23
PARTIAL INVALIDITY
------------------
If any term, covenant, or condition of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such terms,
covenant or condition to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
ARTICLE 24
LIENS
-----
The Tenant shall have no power to do any act or make any contract
which may create or be the foundation for any lien, mortgage or other
encumbrance upon the estate of the Landlord or of any interest of the Landlord
in the Premises, or upon or in the building or buildings or improvements thereon
or hereafter erected or placed hereon. All such laborers, materialmen,
contractors, and any others, are hereby charged with notice that they must look
11
<PAGE>
solely and wholly to the Tenant to secure the payment of any bills for work done
and materials furnished, and not to the Landlord.
In the event a mechanic's lien shall be filed against the Premises or
Tenant's interest therein as a result of any repairs or alterations made by
Tenant, Tenant shall, within ten (10) days after receiving notice of such lien,
discharge such lien either by payment of the indebtedness due the mechanic's
lien claimant or by filing a bond (as provided by statute) as security therefor.
In the event Tenant shall fail to discharge such lien Landlord shall, among its
remedies, have the right to procure such discharge by filing such bond and
Tenant shall pay the cost of such bond to Landlord as additional rent upon the
first day that rent shall be due thereafter.
ARTICLE 25
COMPLIANCE WITH LAWS
--------------------
(a) Landlord covenants that during the term of this Lease or any
extension thereof, it will comply with all statutes, ordinances, rules, orders,
regulations and/or requirements of all county, municipal, state, federal and
other applicable governmental authorities, now in force or which may hereinafter
be in force, as pertains to the Premises.
(b) Tenant covenants and warrants that during the term of this Lease
or any extension thereof, Tenant will comply with all statutes, ordinances,
rules, orders, regulations and/or requirements of all county, municipal, state,
federal and other applicable governmental authorities now in force or which may
hereinafter be in force as pertains to the conduct of Tenant's business. Tenant
agrees to indemnify, save and hold Landlord harmless from any fines or penalties
assessed against the Premises for a violation of any statutes, ordinances,
rules, orders, regulations, and/or requirements of all county, municipal, state,
federal and other governmental authorities as a result of Tenant's improper,
unusual or unlawful manner of using the Premises for the conduct of Tenant's
business.
(c) Tenant shall pay as additional rental any expenses of whatever
kind or nature, incurred by Landlord under this Article.
ARTICLE 26
ENTIRE AGREEMENT
----------------
This Lease and the Exhibits attached set forth the entire agreement
between the parties. Any prior conversations or writings are merged herein and
extinguished. No subse quent amendment to this Lease shall be binding upon
Landlord or Tenant unless it is reduced to writing and signed by both Landlord
and Tenant.
12
<PAGE>
ARTICLE 27
CONSTRUCTION AND INTERPRETATION
-------------------------------
This Lease shall be construed and interpreted in accordance with the
laws of the State of Michigan.
ARTICLE 28
ADDITIONAL DOCUMENTS
--------------------
The parties hereto, upon request, agree to execute any additional
documents required to carry out the intent and provisions of this Lease,
including but not limited to an instrument signed by Tenant confirming the
Commencement Date.
ARTICLE 29
QUIET ENJOYMENT
---------------
Landlord shall have the right to assign or transfer this Lease,
however Landlord covenants that the Tenant, on payment of all rent and
additional rent, as well as the performance of all the covenants contained in
this Lease, shall and may peacefully and quietly have, hold and enjoy the
Premises for the term of this Lease.
ARTICLE 30
FORCE MAJEURE
-------------
Whenever a period of time is provided in this Lease for Landlord or
Tenant to do or perform any act or thing, Landlord or Tenant shall not be liable
or responsible for any delays due to strikes, lockouts, casualties, acts of God,
war, governmental regulation or control, or other causes beyond the reasonable
control of Landlord or Tenant, and in any such event said time period shall be
extended for the amount of time Landlord or Tenant is so delayed. This
provision shall not apply to the payment of money.
ARTICLE 31
SURRENDER AND HOLDING OVER
--------------------------
Tenant shall deliver up and surrender to Landlord possession of the
Premises upon the expiration of the Lease, or its termination in any way, in as
good condition and repair as the same shall be at the Commencement Date (damage
by fire and other perils covered by standard fire and extended coverage
insurance and ordinary wear and decay only excepted). Should Tenant remain in
possession of the Premises after any termination of this Lease, no tenancy or
interest in the Premises shall result therefrom by such holding over shall
13
<PAGE>
be an unlawful detainer and Tenant shall be subject to immediate eviction and
removal, and Tenant shall upon demand pay to Landlord, as liquidated damages, a
sum equal to double the monthly rental as specified herein for each month period
during which Tenant shall hold the Premises after the stipulated term of this
Lease may have terminated.
ARTICLE 32
TIME OF ESSENCE
---------------
Time shall be deemed of the essence of the Lease.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals the day and year first above written.
BEECH ELECTRIC CORPORATION
By:/s/ Raymond C. Boes
-------------------
PRESTOLITE ELECTRIC INCORPORATED
By: /s/ Jons Kubiak
-----------------------------------------------
Jons Kubiak, President
14
<PAGE>
EXHIBIT A
---------
Premises in the City of Dearborn Heights, Wayne County, Michigan,
described as:
West 80.66 feet of North 215.50 feet of South 255.50 feet of Lot
140; also North 121.90 feet of South 255.500 feet of Lot 141;
also North 93.60 feet of South 133.60 feet of East 19.34 feet of
Lot 141, Assessor's Inkster Plat No. 5 of the West 1/2 of the
Northwest 1/4 of Section 29, Town 2 South, Range 10 East, Village
of Inkster, Wayne County, Michigan, as recorded in Liber 65 of
Plats, Page 54, Wayne County Records.
15
<PAGE>
EXHIBIT 10.24
MILLER-VALENTINE PARTNERS
WAREHOUSE/DISTRIBUTION/MANUFACTURING
------------------------------------
AGREEMENT OF LEASE
------------------
THIS LEASE made this 20 day of March, 1996, by and between MILLER-
VALENTINE PARTNERS LIMITED, hereinafter referred to as the Lessor, and
PRESTOLITE POWER CORPORATION, hereinafter referred to as Lessee. The Lessee's
business enterprise is organized as a Corporation and is admitted to do business
in the State of Ohio.
W I T N E S S E T H:
-------------------
The Lessor does hereby lease and let to the Lessee and the Lessee
accepts from the Lessor under the terms and conditions of this Lease, the
following described Premises:
120,000 square feet of a building which contains 160,000 square feet
more or less at Corporate Way, Troy, Ohio 45373 hereinafter referred to as the
Leased Premises.
ARTICLE 1. TERM.
----
TO HAVE AND TO HOLD unto the Lessee for a term of ten (10) years
commencing on the 1st day of September 1996, and ending on the 31st day of
August 2006, both dates inclusive. Provided however, the Lessee is granted a
right to reduce the Leased Premises in accordance with Article 36.
ARTICLE 2. LEASED PREMISES.
---------------
The Lessor agrees to construct and finish the Leased Premises and
shall have responsibility for completion of construction and finishing of the
Leased Premises in compliance with the plans and specifications approved by the
Lessee and attached hereto as Exhibit A and B.
The Lessee understands that Lessee will pay for any additional
improvements in excess of improvements amortized in Article 4, Section 2, in
cash, within ten (10) days of receipt of Lessor's invoice and upon occupancy of
the Leased Premises. Such overimprovements shall be in accordance with Exhibit
C. The Lessee agrees to provide information for the finish plan and to approve
the same on a timely basis and not to cause delays in the completion of the
Leased Premises.
ARTICLE 3. POSSESSION.
----------
If Lessor is unable to give occupancy of the Leased Premises on the
above date because construction has not been completed, the term shall commence
on the first of the month
1
<PAGE>
following completion and continue thereafter for the full term granted. Lessor
shall not be liable for damages because of such delay in occupancy. Provided,
however, if the Lessee's occupancy is delayed by fault of Lessor more than sixty
(60) days after the commencement date, the Lessee may after thirty (30) days'
written notice elect to terminate this Lease if Lessor is not able to deliver
occupancy before such termination date.
ARTICLE 4. RENT.
----
Section 1. Lessee shall pay to the Lessor as Annual Rent for the
---------
Leased Premises for the first five (5) Lease years the sum of FOUR HUNDRED FIFTY
THOUSAND AND NO/100 DOLLARS ($450,000.00) which shall be paid in equal monthly
installments of THIRTY-SEVEN THOUSAND FIVE HUNDRED AND NO/100 DOLLARS
($37,500.00), due and payable on the first day of each month, in advance,
without demand. Lessee shall pay to the Lessor as Annual Rent for the Leased
Premises for years 6 through 10 the sum of FOUR HUNDRED EIGHTY THOUSAND AND
NO/100 DOLLARS ($480,000.00 ) which shall be paid in equal monthly installments
of FORTY THOUSAND AND NO/100 DOLLARS ($40,000.00) due and payable on the first
day of each month, in advance, without demand. Checks should be made payable to
Miller-Valentine Partners Limited and sent to Miller-Valentine Partners Limited,
Post Office Box 744, Dayton, Ohio 45401-0744. Said rent shall be paid to the
Lessor, or to the duly authorized agent of the Lessor, at its office during
business hours. If the commencement date of this Lease is other than the first
day of the month, any rental adjustment or additional rents hereinafter provided
for shall be prorated accordingly. The Lessee will pay the rent as herein
provided, without deduction whatsoever, and without any obligation of the Lessor
to make demand for it. Any installment of rent accruing hereunder and any other
sum payable hereunder, if not paid when due, shall bear interest at the rate of
eighteen percent (18%) per annum until paid.
Section 2. In addition to the Annual Rent, the Lessee shall pay to
---------
the Lessor THREE HUNDRED FOUR THOUSAND AND NO/100 DOLLARS ($304,000.00) as the
cost of overimprovements in the Lessee's Leased Premises at the annual interest
rate of 10% for a period of sixty (60) months. The total payment to amortize
these improvements shall be THREE HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED
FORTY-SIX AND NO/100 DOLLARS ($387,546.00) payable in equal monthly installments
of SIX THOUSAND FOUR HUNDRED FIFTY-NINE AND 10/100 DOLLARS ($6,459.10).
Further, in addition to the Annual Rent, the Lessee shall pay to the Lessor ONE
HUNDRED EIGHTY THOUSAND AND NO/100 DOLLARS ($180,000.00), as the cost of
additional overimprovements in the Leased Premises at the annual interest rate
of 10% for a period of one hundred twenty (120) months. The total to amortize
these improvements shall be TWO HUNDRED EIGHTY-FIVE THOUSAND FOUR HUNDRED FORTY-
FIVE AND 20/100 DOLLARS ($285,445.20) payable in equal monthly installments of
TWO THOUSAND THREE HUNDRED SEVENTY-EIGHT AND 71/100 DOLLARS ($2,378.71).
Payment is due on the first day of each month, in advance, without demand, at
the office of the Lessor. Notwithstanding any provision herein to the contrary,
in the event of termination of this Lease for any reason prior to the expiration
of
2
<PAGE>
the term, the unamortized balance of such improvements shall become immediately
due and payable.
Section 3. The total obligation due from Lessee to Lessor shall
---------
be in accordance with the following schedule.
<TABLE>
<CAPTION>
Monthly Annual
---------- -----------
<S> <C> <C>
Rent for Years 1-5 $37,500.00 $450,000.00
Improvement Amortization #1 (5yrs) $ 6,459.10 $ 77,509.20
Improvement Amortization #2 (10yrs) $ 2,378.71 $ 28,544.52
---------- -----------
Total Obligation Years 1-5 $46,337.81 $556,053.72
Rent for Years 6-10 $40,000.00 $480,000.00
Improvement Amortization #2 (10yrs) $ 2,378.71 $ 28,544.52
---------- -----------
Total Obligation Years 6-10 $42,378.71 $508,544.52
</TABLE>
Section 4. The Lessor shall provide separate utility meters (gas,
---------
electric, water, sanitary sewer) for the Leased Premises at no additional cost
to the Lessee. Such utility cost shall be paid by the Lessee directly to the
utility services.
ARTICLE 5. SECURITY DEPOSIT.
----------------
To assure fulfillment of the covenants by Lessee hereinafter set
forth, Lessor hereby acknowledges receipt from the Lessee of THIRTY-SEVEN
THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($37,500.00) as a security deposit to
be held by the Lessor until such time as this Agreement has terminated, Lessee
has vacated the Leased Premises, and Lessor has inspected the same. Until such
time, Lessor shall have no obligation to apply the security deposit to any
unpaid amount due Lessor from Lessee. If Lessee has performed and observed all
terms, covenants and conditions of this Agreement, including without limitation,
the payment of all rentals thereunder, as and when same become due, Lessor shall
refund said security deposit to Lessee, less such amounts as may be reasonably
chargeable for any failure by Lessee to restore the Leased Premises to the
condition at time of occupancy, reasonable wear and tear excepted. Lessee's duty
to restore the Leased Premises shall include, but not be limited to, the repair
and painting of the walls, repair of floors, ceilings and woodwork and other
parts of the Leased Premises occasioned by the removal of nails, screws or other
fasteners that are now on the Leased Premises or may be placed there during the
term of this Lease. Under no circumstances shall this security deposit be
deducted from the last month's rent.
ARTICLE 6. COMMON AREA.
-----------
For the purpose of this Lease, common area shall be defined as all
of the property described herein that is not actually occupied by the building.
The Lessee shall have the use in
3
<PAGE>
common with other Lessees to the parking areas and driveways for ingress and
egress to the Leased Premises. The Lessee shall have no right to use the common
area for storage purposes and trash shall be stored only in approved containers
in the common area. The Lessor shall maintain the common area, and keep the
same in good order and repair, including landscaping, snow and ice removal,
parking/drive/sidewalk sweeping; maintenance and repairs, signage maintenance
and repairs and electric maintenance and repairs. Lessor and Lessee acknowledge
that the costs for the foregoing, together with exterior lighting and certain
other costs, are included in the Annual Rent and Lessee shall have no additional
obligation with respect thereto.
ARTICLE 7. USE OF LEASED PREMISES.
----------------------
Section 1. The Leased Premises shall be used and occupied only for
---------
office purposes and/or warehousing and distribution of materials of light or
ordinary hazard, for manufacturing operations and laboratory space and for no
other purpose or purposes without the written consent of the Lessor.
Section 2. The Lessee shall operate its business in a safe and
---------
proper manner as is normal, considering the uses of the Leased Premises above
provided; and shall not manufacture, store, display or maintain any products or
materials that will endanger the Leased Premises; shall do nothing that would
increase the cost of insurance on the building or invalidate existing policies;
shall not obstruct the sidewalks; shall not use the plumbing for any other
purpose than for which it was constructed; shall not make or permit any noise
and/or odor objectionable to the public or adjacent occupants; shall not create
a nuisance on the Leased Premises; and shall commit no waste.
Section 3. The Lessee shall abide by all police and fire
---------
regulations concerning the operation of its business; shall store all trash,
rubbish, and debris in closed containers; and shall practice all proper
procedures and methods that are common to its business enterprise. The Lessee
shall maintain a minimum temperature in the Leased Premises of 55 degrees F.
ARTICLE 8. REPAIRS.
-------
Section 1. Lessor shall keep the foundations, exterior walls
---------
(except plate glass or glass or other breakable materials used in structural
portions) and roof in good repair.
Section 2. Generally, the Lessee shall, at its expense, maintain
---------
the mechanical equipment servicing the Leased Premises. Lessee shall use a
mechanical contractor satisfactory to Lessor. The Lessee shall replace any hot
water heater as the need should arise with the same type and quality servicing
the Leased Premises. The Lessor shall replace, as needed, the heating and air
conditioning equipment, provided the unit has been serviced annually , and the
cost of replacement shall be prorated over the warranty period for such
equipment, and further prorated among the Lessee benefiting from such equipment;
the result of such proration to be an annual
4
<PAGE>
share of cost to Lessee, and the Lessee will pay one-twelfth thereof for each
month during the remaining term and renewals of this Lease.
Section 3. Lessor shall not be liable for any damage done or
---------
occasioned by or from the electrical system, the heating and/or air condition
system, the plumbing and sewer system in, above, upon or about the Leased
Premises nor for damage occasioned by water, snow or ice being upon or coming
through the roof, trapdoor, walls, windows, doors or otherwise, except as above
provided. The Lessee shall reimburse the Lessor the cost of all repairs to the
Leased Premises, fixtures and appurtenances necessitated by the fault of the
Lessee, its agents, employees or guests and shall reimburse the Lessor for the
cost of repair, at or before the end of the term or sooner if so requested by
Lessor, all injury done by the installation or removal of furniture or other
property.
Section 4. Except as provided in Sections 1, 2, and 3 of this
---------
Article, Lessor shall not be obligated to make repairs, replacements or
improvements of any kind upon said Leased Premises, or any equipment facilities
or fixtures therein contained, which shall at all times be kept in good order,
condition and repair by Lessee, and in a clean, sanitary and safe condition and
in accordance with all applicable laws, ordinances and regulations of any
governmental authority having jurisdiction. Lessee shall permit no waste,
damage, or injury to the Leased Premises.
Section 5. Lessee shall forthwith at its own cost and expense
---------
replace with glass of the same kind and quality any cracked or broken glass,
including plate glass or glass or other breakable materials used in structural
portions, and any interior and exterior windows and doors in the Leased
Premises.
ARTICLE 9. INSTALLATIONS AND ALTERATIONS.
-----------------------------
Section 1. Lessee shall not make any alterations or additions to
---------
the Leased Premises without first procuring Lessor's written consent and
delivering to Lessor the plans and specifications and copies of the proposed
contracts and necessary permits, and shall furnish indemnification against
liens, costs, damages and expenses as may be reasonably required by Lessor. All
alterations, additions, improvements and fixtures, other than trade fixtures,
which may be made or installed by either of the parties hereto upon the Leased
Premises and which in any manner are attached to the floors, walls or ceilings,
at the termination of this Lease shall become the property of Lessor, unless
Lessor requests their removal, and shall remain upon and be surrendered with the
Leased Premises as a part thereof, without damage or injury; any linoleum or
other floor covering of similar character which may be cemented or otherwise
adhesively affixed to the floor shall likewise become the property of Lessor,
all without compensation or credit to Lessee.
Section 2. The Lessee shall not erect or install any signage
---------
without first procuring Lessor's written consent.
5
<PAGE>
Section 3. The Lessee shall have no rights to use and shall not use
---------
the roof of the Leased Premises for any purpose without the written consent of
the Lessor. The Lessee shall not use the roof for storage, for any activity
that will result in traffic on the roof, for anything that will penetrate the
roof, use the roof as an anchor or otherwise damage the roof. The consent of
the Lessor must be in writing for each specific use and must also approve the
method of installation of the permitted use. Should the Lessee break this
covenant, the Lessee shall be responsible for any damages caused to the roof or
other parts of the building and shall assume the cost of maintaining and
repairing the roof during the term of the Lease, including any renewals.
ARTICLE 10. INDEMNIFICATION.
---------------
Except to the extent of the negligence or misconduct of Lessor,
Lessee agrees to indemnify and hold Lessor harmless against and from any and all
claims, damages, costs, and expenses, including reasonable attorney's fees,
arising out of Lessee's use or occupancy of the Leased Premises. Except to the
extent of Lessee's negligence or misconduct, Lessor agrees to indemnify and hold
Lessee harmless against and from any and all claims, damages, costs, and
expenses, including reasonable attorney's fees, arising out of Lessor's failure
to perform its duties and obligations as owner or agent of the owner of the
property of which the Leased Premises is a part.
ARTICLE 11. INSURANCE.
---------
Section 1. Lessee shall not carry any stock of goods or do
---------
anything in or about said Leased Premises which will in any way tend to increase
insurance rates on said Leased Premises or the building in which the same are
located. If Lessor shall consent to such use, Lessee agrees to reimburse Lessor
on a pro rata basis for any increase in premiums for insurance against loss by
fire or extended coverage risks resulting from the business carried on in the
Leased Premises by Lessee. If Lessee installs any electrical equipment that
overloads the power lines to the building, Lessee shall at its own expense make
whatever changes are necessary to comply with the requirements of insurance
underwriters and insurance rating bureaus and governmental authorities having
jurisdiction.
Section 2. Lessee agrees to procure and maintain a policy or
---------
policies of insurance, at its own costs and expense, insuring from all claims,
demands or actions for injury to or death of one or more persons in any one
accident and for damages to property in an aggregate amount of not less than
$2,000,000.00 made by or on behalf of any person or persons, firm or
corporation, arising from, related to, or connected with the conduct and
operation of Lessee's business in the Leased Premises. Lessor shall be named an
Additional Insured Party in said policy. Such insurance shall be primary
relative to any other valid and collectible insurance. Said insurance shall not
be subject to cancellation except after at least thirty (30) days' prior written
notice to Lessor, and the policy or policies, or duly executed certificate or
certificates for the same, together with satisfactory evidence of the payment of
the premium thereon, shall be
6
<PAGE>
deposited with Lessor at the commencement of the term and renewals of such
coverage. If Lessee fails to comply with such requirement, Lessor may obtain
such insurance and keep the same in effect, and Lessee shall pay Lessor the
premium cost thereof upon demand.
Section 3. All property which may be upon said Leased Premises
---------
during the term hereof or any renewal thereof shall be at and upon the sole risk
and responsibility of Lessee except Lessor shall maintain adequate casualty
coverage with respect to the building.
ARTICLE 12. DAMAGE BY FIRE OR OTHER CASUALTY.
--------------------------------
Section 1. If the Leased Premises shall be destroyed or so
---------
injured by any cause as to be unfit, in whole or in part, for occupancy and such
destruction or injury could reasonably be repaired within three (3) months from
the happening of such destruction or injury, then Lessee shall not be entitled
to surrender possession of the Leased Premises nor shall Lessee's liability to
pay rent under this Lease cease without mutual consent of the parties hereto,
but in case of any such destruction or injury Lessor shall repair the same with
all reasonable speed and shall complete such repairs within three (3) months
from the happening of such injury, and if during such period Lessee shall be
unable to use all or any portion of the Leased Premises, a proportionate
allowance shall be made to Lessee from the rent corresponding to the time during
which and to the portion of the Leased Premises of which Lessee shall be so
deprived of the use on account thereof.
Section 2. If such destruction or injury cannot reasonably be
---------
repaired within three (3) months from the happening thereof, Lessor shall notify
Lessee within ten (10) days after the happening of such destruction or injury
whether or not Lessor will repair or rebuild. If Lessor elects not to repair or
rebuild, this Lease shall be terminated. If Lessor shall elect to repair or
rebuild, Lessor shall specify the time within which such repair or
reconstruction will be complete, and Lessee shall have the option, within ten
(10) days after the receipt of such notice, to elect either to terminate this
Lease and further liability hereunder, or to extend the term of the Lease by a
period of time equivalent to the time from the happening of such destruction or
injury until the Leased Premises are restored to their former condition. In the
event Lessee elects to extend the term of the Lease, Lessor shall restore the
Leased Premises to their former condition within the specified time in the
notice, and Lessee shall not be liable to pay rent for the period from the time
of such destruction or injury until the Leased Premises are so restored to their
former condition.
ARTICLE 13. EMINENT DOMAIN.
--------------
Section 1. If the whole or substantially all of the Leased
---------
Premises hereby leased shall be taken by a public authority under the power of
eminent domain, then the term of this Lease shall cease as of the day possession
shall be taken by such public authority, and the rent shall be paid up to that
date with a proportionate refund by Lessor of such rent as shall have been paid
in advance.
7
<PAGE>
Section 2. If less than substantially all of the floor area of the
---------
Leased Premises shall be so taken, the term of this Lease shall cease only on
the parts so taken as of the day possession shall be taken by such public
authority, and the rent shall be paid up to that day with a proportionate refund
by Lessor of such rent as may have been paid in advance, and thereafter the
minimum rent shall be equitably abated, and Lessor shall at its own cost and
expense make all necessary repairs or alterations as to constitute the remaining
Leased Premises a complete architectural unit.
Section 3. All damages awarded for such taking under the power of
---------
eminent domain, whether for the whole or a part of the Leased Premises, shall be
the property of Lessor whether such damages shall be awarded as compensation for
diminution in value of the leasehold or to the fee of the Leased Premises;
provided, however, that the Lessor shall not be entitled to any separate award
made to Lessee for loss of business, depreciation to and cost of removal of
stock and fixtures.
ARTICLE 14. ASSIGNMENT OR SUBLETTING.
------------------------
Section 1. Lessee shall not assign or in any manner transfer this
---------
Lease or any interest therein, nor sublet said Leased Premises or any part or
parts thereof, nor permit occupancy by anyone with, through, or under it,
without the previous written consent of Lessor which consent shall not be
unreasonably withheld. Consent by Lessor to one or more assignments of this
Lease or to one or more sublettings of the Leased Premises shall not operate as
a waiver of Lessor's rights under this Article to any subsequent assignment or
subletting. No assignment shall release Lessee of any of its obligations under
this Lease or be construed or taken as a waiver of any of Lessor's rights or
remedies hereunder.
Section 2. Neither this Lease nor any interest therein, nor any
---------
estate thereby created, shall pass to any trustee or receiver in bankruptcy or
any assignee for the benefit of creditors or by operation of law.
Section 3. Provided that the Lessee with Lessor's consent assigns
---------
or sublets part or all of the Leased Premises at a rental that exceeds the
current rental herein reserved, the Lessor shall be entitled to receive as
additional rental one-half of such excess of the current rental. The Lessee
shall remit one-half of such excess within five (5) days after receipt by it.
ARTICLE 15. ACCESS TO LEASED PREMISES.
-------------------------
The Lessor shall retain duplicate keys to all of the doors of the
Leased Premises to be used by the Lessor, so long as the Lessee is not in
default; only in the case of emergencies. The Lessor or its agents shall have
the right to enter upon the Leased Premises at all reasonable hours for the
purpose of inspecting the same or of making repairs, additions or alterations
thereto or to the building in which the same are located with prior notice to
Lessee. The Lessor shall have the right, upon reasonable notice, to show the
Leased Premises to prospective Lessees,
8
<PAGE>
purchasers or others. Lessor shall not be liable to Lessee in any manner for
any expense, loss or damage by reason thereof, nor shall the exercise of such
right be deemed an eviction or disturbance of Lessee's use or possession.
ARTICLE 16. ATTORNMENT.
----------
In the event the Leased Premises are sold or transferred due to any
foreclosure sale or sales, judicial proceedings, or voluntary conveyance in lieu
of such foreclosure, or in the event the Premises are transferred by any
mortgagee in a sale, exchange or otherwise, this Lease shall continue in full
force and effect, and Lessee agrees, upon request, to attorn to and acknowledge
the foreclosure purchaser or purchasers at such sale, or other party succeeding
to the interest of Lessor, as Lessors hereunder. This Lease will, upon request
of any person owning or succeeding to the interest of Lessor, automatically
become a direct lease between said owner or successor and Lessee, without change
in the terms or the provisions of this Lease. Upon request by said owner or
successor in interest, Lessee shall execute and deliver an instrument or
instruments confirming such attornment.
If the successor Lessor requests such attornment, then so long as
Lessee shall faithfully discharge the obligations on its part to be kept and
performed under the terms of this Lease, Lessee's tenancy will not be disturbed
nor this Lease affected by any default under any mortgage. Lessee agrees that
this Lease shall remain in full force and effect even though default in the
mortgage may occur.
ARTICLE 17. LIMITATION UPON LIABILITY.
-------------------------
Notwithstanding any other provision of this Lease, Lessee agrees to
look solely to Lessor's interest in the Building (subject to any mortgage on the
Building) for the recovery of any judgment requiring the payment of money by
Lessor; it being agreed that Lessor, and if Lessor is a partnership, its
partners whether general or limited, or if Lessor is a corporation, its
directors, officers, or shareholders, shall never be personally liable for any
such judgment, and no other assets of the Lessor shall be subject to levy,
execution or other procedures for the satisfaction of Lessee's judgment. The
provision contained in the foregoing sentence is not intended to, and shall not,
limit any right that Lessee might otherwise have to obtain injunctive relief
against Lessor or Lessor's successors in interest, or to maintain any other
action not involving the personal liability of Lessor, or to maintain any suit
or action in connection with enforcement or collection of amounts which may
become owing or payable under or on account of insurance maintained by Lessor.
ARTICLE 18. LESSOR'S SUCCESSORS.
-------------------
The term "Lessor" as used in this Lease shall be limited to mean
and include only the owner or owners, at the time, of the fee of the Building,
their successors and assigns, so that in the event of any sale or sales of the
Building, the previous Lessor shall be entirely released
9
<PAGE>
with respect to the performance of all subsequently accruing covenants and
obligations on the part of Lessor. The retention of fee ownership by a lessor
of the Building or of the land on which it is located under an underlying lease
which is now or hereafter in effect, shall not be deemed to impose on such
underlying lessor any liability, initial or continuing, for the performance of
the covenants and obligations of Lessor.
ARTICLE 19. LESSEE'S DEFAULT.
----------------
Section 1. The Lessee, ten (10) days after receipt of written
---------
notice, shall be considered in default of this Lease upon failure to pay when
due the rent or any other sum required by the terms of the Lease. The Lessee,
thirty (30) days after receipt of written notice, shall be considered in default
of this Lease upon failure to perform any term, covenant or condition of this
Lease; the commencement of any action or proceeding for the dissolution,
liquidation or reorganization under the Bankruptcy Act, of Lessee, or for the
appointment of a receiver or trustee of the Lessee's property; the making of any
assignment for the benefit of creditors by Lessee; the suspension of business;
or the abandonment of the Leased Premises by the Lessee.
Section 2. In the event of default of this Lease by Lessee, then
---------
Lessor, besides other rights or remedies it may have, shall have the immediate
right of reentry with or without prior notice, and may remove all persons and
property from the Leased Premises; such property may be removed and stored in
any other place in the building in which the Leased Premises are situated, or in
any other place, for the account of, and at the expense and at the risk of
Lessee. Lessee hereby waives all claims for damages which may be caused by the
reentry of Lessor. Should Lessor elect to reenter, as herein provided, or should
it take possession pursuant to legal proceedings or pursuant to any notice
provided for by law, it may either terminate this Lease, or it may without
terminating this Lease relet said Leased Premises or any part thereof for such
term or terms and at such rental or rentals and upon such other terms and
conditions as Lessor may deem advisable, with the right to make alterations and
repairs to said Leased Premises for the purpose of rerental. Should such
rentals received from such reletting during any month be less than required to
be paid by Lessee as defined above, then Lessee shall immediately pay such
deficiency to Lessor.
Section 3. No such reentry or taking possession of said Leased
---------
Premises by Lessor shall be construed as an election on its part to terminate
this Lease, unless a written notice of such intention be given to Lessee or
unless the termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, Lessor may at any time
thereafter elect to terminate this Lease for such previous breach or act or
default. Should Lessor at any time terminate this Lease for any breach or act
of default, in addition to any other remedy it may have, it may recover from
Lessee all damages it may incur by reason of such breach or act of default,
including the cost of recovering the Leased Premises, legal fees, and including
the worth at the time of such termination of the excess, if any, of the amount
of rent
10
<PAGE>
and charges equivalent to rent reserved in this Lease for the remainder of the
stated term over the then reasonable rental value of the Leased Premises for the
remainder of the stated term.
ARTICLE 20. SURRENDER OF LEASED PREMISES.
----------------------------
Section 1. If Lessee holds possession of the Leased Premises after
---------
the termination of this Lease for any reason, Lessee shall pay Lessor 150% of
the last monthly rent provided for herein for each month or a portion of a month
that Lessee holds over, together with all other charges due hereunder. Such
payment of rent shall not create any Lease arrangement whatsoever between Lessor
and Lessee, unless expressly agreed to in writing by Lessor. It is further
understood that during such period that Lessee holds over, the Lessor retains
all of Lessor's rights under this Lease, including damages as a result of the
termination of this Lease and the right to immediate possession of the Leased
Premises. This paragraph shall not be construed to grant Lessee permission to
hold over.
Section 2. At the expiration of the tenancy created hereunder,
---------
whether by lapse of time or otherwise, Lessee shall surrender the Leased
Premises broom clean, free of tire marks, free of all debris and in good
condition and repair, reasonable wear and loss by fire or other unavoidable
casualty excepted.
Section 3. Prior to surrender of the Leased Premises, the Leased
---------
Premises will be reviewed by a representative of the Lessor and Lessee to
determine if there is any deferred maintenance or unrepaired damage which the
Lessee was responsible to perform. In the event that there is such deferred
maintenance and/or unrepaired damage, Lessor may effect such maintenance and
repairs, and Lessee will pay the cost thereof.
Section 4. Upon the expiration of the tenancy hereby created, if
---------
Lessor so requests in writing, Lessee shall promptly remove any additions,
fixtures and installations placed in the Leased Premises by Lessee that is
designated in said request, and repair any damage occasioned by such removals at
its own expense, and in default thereof, Lessor may effect such removals and
repairs, and Lessee shall pay Lessor the cost thereof, with interest at the rate
of eight (8) percent per annum from the date of payment by Lessor.
ARTICLE 21. SUBORDINATION.
-------------
This Lease shall be subject to and subordinate at all times to the
lien of any mortgages, now or hereafter made on the Leased Premises, and to all
advances made or hereafter to be made thereunder. The Lessee agrees to execute
a subordination agreement should Lessor's lender request same so long as the
lendor provided the Lessee standard nondisturbance language reasonably
acceptanble to the Lessee.
11
<PAGE>
ARTICLE 22. NOTICE.
------
All notices under this Lease may be personally delivered; sent by
courier service, with receipt; or mailed to the address shown by certified mail,
return receipt requested. The effective date of any mailed notice shall be one
(1) day after delivery of the same to the United States Postal Service.
Lessor: Miller-Valentine Partners Limited
Mail: P.O. Box 744
Dayton, Ohio 45401-0744
Lessee: Prestolite Power Corporation.
Mail: Attn: I. Conrad Schwab
2100 Commonwealth Boulevard, Suite 300
Ann Arbor, MI 48105
Either party may from time to time designate in writing other addresses.
ARTICLE 23. WAIVER OF SUBROGATION.
---------------------
The Lessor and Lessee waive all rights, each against the other, for
damages caused by fire or other perils covered by insurance where such damages
are sustained in connection with the occupancy of the Leased Premises.
ARTICLE 24. ESTOPPEL CERTIFICATE.
--------------------
The Lessee agrees to execute an Estoppel Certificate within ten
(10) days of receipt of a written request by Lessor for the benefit of any
purchaser and/or prospective lender designated by Lessor as well as Lessor's
present lender; that wherein the Lessee acknowledges the terms and conditions of
this Lease. The Lessor agrees to similarly execute such estoppel certificates
and acknowledgments as Lessee's lender may from time to time request.
ARTICLE 25. RENT DEMAND.
-----------
Every demand for rent due wherever and whenever made shall have the
same effect as if made at the time it falls due and at the place of payment, and
after the service of any notice or commencement of any suit, or final judgment
therein, Lessor may receive and collect any rent due, and such collection or
receipt shall not operate as a waiver of nor affect such notice, suit or
judgment.
12
<PAGE>
ARTICLE 26. NO REPRESENTATION BY LESSOR.
---------------------------
Lessor and its agent have made no representations or promises with
respect to the Leased Premises or the building of which the same form a part
except as herein expressly set forth.
ARTICLE 27. WAIVER OF BREACH.
----------------
No waiver of any breach of the covenants, provisions or conditions
contained in this Lease shall be construed as a waiver of the covenant itself or
any subsequent breach itself, and if any breach shall occur and afterwards be
compromised, settled or adjusted, this Lease shall continue in full force and
effect as if no breach had occurred, unless otherwise agreed. The acceptance of
rent hereunder shall neither be or construed to be a waiver of any breach of any
term, covenant or condition of this Lease.
ARTICLE 28. QUIET ENJOYMENT.
---------------
Lessor hereby covenants and agrees that if Lessee shall perform all
the covenants and agreements herein stipulated to be performed on Lessee's part,
Lessee shall at all times during the continuance hereof have the peaceable and
quiet enjoyment and possession of the Leased Premises without any manner of let
or hindrance from Lessor or any person or persons lawfully claiming the Leased
Premises except as otherwise provided for herein.
ARTICLE 29. ENVIRONMENTAL PROVISIONS.
------------------------
Section 1. The Lessor, to the best of its knowledge, represents to
---------
the Lessee that no toxic, explosive or other dangerous materials or hazardous
substances have been concealed within, buried beneath, released on or from, or
removed from and stored off-site of the Property upon which the Leased Premises
is constructed.
Section 2. Lessee shall at all times during the term of this Lease
---------
comply with all applicable federal, state, and local laws, regulations,
administrative rulings, orders, ordinances, and the like, pertaining to the
protection of the environment, including but not limited to, those regulating
the handling and disposal of waste materials. Further, during the term of this
Lease, neither Lessee nor any agent or party acting at the direction or with the
consent of Lessee shall treat, store, or dispose of any "hazardous substance,"
as defined in Section 101 (14) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), or petroleum (including crude
oil or any fraction thereof) on or from the Property.
Section 3. Lessee shall fully and promptly pay, perform,
---------
discharge, defend, indemnify and hold harmless Lessor from any and all claims,
orders, demands, causes of action, proceedings, judgments, or suits and all
liabilities, losses, costs or expenses (including, without limitation, technical
consultant fees, court costs, expenses paid to third parties and reasonable
13
<PAGE>
legal fees) and damages arising out of, or as a result of, (i) any "release" as
defined in Section 101 (22) of CERCLA, of any "hazardous substance," as defined
in Section 101 (14) of CERCLA, or petroleum (including crude oil or any fraction
thereof), or placed into, on or from the Property at any time after the date of
this Lease by Lessee, its agents, or employees; (ii) any contamination of the
Property's soil or groundwater or damage to the environment and natural
resources of the Property the result of actions occurring after the date of this
Lease, whether arising under CERCLA or other statutes and regulations, or common
law by Lessee, its agents, or employees; and (iii) any toxic, explosive or
otherwise dangerous materials or hazardous substances which have been buried
beneath, concealed within or released on or from the Property after the date of
this Lease by Lessee, its agents, or employees.
ARTICLE 30. INTERPRETATION.
--------------
Section 1. Wherever either the word "Lessor" or "Lessee" is used
---------
in the Lease, it shall be considered as meaning the singular and/or neuter
pronouns as used herein, and the same shall be construed as including all
persons and corporations designated respectively as Lessor or Lessee in the
heading of this instrument wherever the context requires.
Section 2. If any clause, sentence, paragraph, or part of this
---------
Lease shall for any reason be adjudged by any court of competent jurisdiction to
be invalid, such judgment shall not effect, impair, or invalidate the remainder
of this Lease, but be confined in its operation to the clause, sentence,
paragraph, or part thereof directly involved in the controversy in which such
judgment shall have been rendered, and in all other respects said Lease shall
continue in full force and effect.
ARTICLE 31. FINANCIAL STATEMENTS.
--------------------
At Lessor's request, the Lessee, within thirty (30) days of
Lessor's request, shall furnish the Lessor with Lessee's most current annual
financial statements including the Lessee's balance sheet, a consolidated
statement of earnings and retained earnings, and changes in Lessee's financial
position for such year. All such statements shall be certified by an independent
certified public accountant. All such financial statements shall be prepared in
accordance with generally accepted accounting principles which shall be
consistently applied.
ARTICLE 32. AMERICANS WITH DISABILITIES ACT COMPLIANCE.
------------------------------------------
Lessor shall construct the building and the Leased Premises in
compliance with Americans with Disabilities Act of 1990 as amended ("ADA").
Notwithstanding anything set forth herein to the contrary, Lessor shall be
solely responsible and liable for making any modifications to the exterior of
the Building (including the exterior doors and entrances leading to the Leased
Premises) that may be required to comply with future amendments to the ADA;
Lessee, at its sole cost and expense, shall remove any barriers or provide such
accommodations as may be necessary for the interior of the Leased Premises to
comply with future amendments
14
<PAGE>
to the ADA. Any structural alterations or renovations that the Lessee may make
to the Premises, as permitted under this Lease, shall comply with the
accessibility standards and regulations of the ADA. If the Lessee fails to
fulfill its obligations under this Article, the Lessor may elect to provide the
modifications and renovations required pursuant to the ADA and seek
reimbursement from the Lessee. Should the Lessor incur any such expenses for
the obligations of Lessee, the amount of such expenses may, at the Lessor's
option, be added to the rent due from the Lessee under the terms of this Lease.
Lessor and Lessee hereby mutually indemnify and hold each other harmless against
any and all liability, losses, fines or other penalties that may be incurred or
assessed against the other, including reasonable attorney fees, due to the
failure of the other to adhere to their respective obligations under this
Article of the Lease.
ARTICLE 33. MEMORANDUM OF LEASE.
-------------------
It is agreed by both parties that this instrument is not recordable
and if either party should record the same in the Office of the Recorder of
Miami County, Ohio, the recording shall have no effect. When possession of the
Leased Premises has been delivered to Lessee, the parties hereto may execute,
acknowledge and deliver a Memorandum of Lease in recordable form specifying the
terms of this Lease and renewal periods of this Lease. In the event they differ
from the dates herein, the date in the Memorandum shall control.
ARTICLE 34. TIME.
----
Time is of the essence in this Lease.
ARTICLE 35. RIGHT OF FIRST NOTIFICATION.
---------------------------
Lessor hereby grants to Lessee, effective during the initial lease
term only, a Right of First Notification on 40,000 square feet of additional
space in the building (or portions thereof) in which the 120,000 square feet of
existing Leased Premises are contained. If at the time of the giving of such
notice, there are no defaults in the covenants, agreements, terms and conditions
on the part of Lessee to be kept and performed, and all rents are and have been
fully paid, when Lessor begins serious negotiations with a prospect, Lessor
shall notify Lessee in writing and Lessee shall have fifteen (15) business days
to commit to such space in writing. The rate to be charged will be at the same
rate that Lessee is presently paying at time of notification and the approximate
date possession is to be delivered shall be included in Lessor's notice to
Lessee. Such space shall be offered in its existing condition and if accepted,
it shall become a part of the Leased Premises and the Lease shall be amended
accordingly. In the event Lessee takes over the entire building (160,000 SF),
then Lessee shall have the option to assume Lessor's responsibility for matters
covered in Article 6. Common Area., Article 8., Sections 1 and 2, Repairs.,
----------- -------
Article 11., Sections 2 and 3, Insurance. and land taxes, and in such event the
---------
Annual Rent shall be reduced by $0.25 per square foot. In such event, Lessee
shall be responsible for painting the exterior of the building as needed, but no
later than the beginning of the sixth lease year and Lessee shall be responsible
to reseal the parking lot every three (3) years. Provided however, in
15
<PAGE>
the event the Lessee shall fail to maintain the exterior of the building to
Lessor's current standard, as stated herein, then the Lessor may provide such
maintenance, and bill the same to the Lessee.
ARTICLE 36. RIGHT TO DECREASE THE SQUARE FOOTAGE OF THE LEASED PREMISES.
-----------------------------------------------------------
Lessor hereby grants to Lessee, effective after the first five (5)
years of the initial Lease Term and with twelve (12) months' prior written
notice to Lessor, a one-time right to decrease the size of the Leased Premises.
If Lessee shall elect to decrease the size of the Leased Premises by up to
40,000 square feet (i.e., reducing the size of the Leased Premises to not less
than 80,000 square feet), the Lessee shall incur no penalty for exercising this
right. If the Lessee elects to decrease the size of the Leased Premises by more
than 40,000 square feet as stated above, the Lessee shall pay to Lessor a
penalty payment equal to $4.00 per square foot for any portion greater than
40,000 square feet (i.e., the penalty shall apply to the extent the size of the
Leased Premises is reduced below 80,000 square feet). The Lessee shall vacate
the space given be upon expiration of the twelve (12) month notice period and
Lessor shall invoice Lessee for the penalty amount, which shall be paid to
Lessor within thirty (30) days after receipt of Lessor's invoice.
ARTICLE 37. ENTIRE AGREEMENT.
----------------
This Lease contains the entire agreement between the parties; it
supersedes all previous understandings and agreements between the parties, if
any, and no oral or implied representation or understandings shall vary its
terms; and it may not be amended except by a written instrument executed by both
parties hereto.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto set their hands to triplicates
hereof, this ____________ day of _________________, 1996, as to Lessor, and this
20 day of March, 1996, as to Lessee.
Signed and acknowledged LESSOR: MILLER-VALENTINE PARTNERS
in the presence of: LIMITED
[ILLEGIBLE]
_________________________ By: ________________________________
James M. Miller
Its: Member
_________________________ --------------------------------
LESSEE: PRESTOLITE POWER CORPORATION
/s/ Dennis J. Whitehead By: /s/ I. Conrad Schwab
- - - - - - - - - - - -------------------------- ---------------------------------
Dennis J. Whitehead I. Conrad Schwab
Its: President
_________________________ ---------
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was acknowledged before me this __________ day
of ___________, 1996, by James M. Miller, Member on behalf of MILLER-VALENTINE
-----------------------
PARTNERS LIMITED, an Ohio general partnership.
----------------------------------
Notary Public
STATE OF Ohio, COUNTY OF Miami, SS:
The foregoing instrument was acknowledged before me this 20 day of March,
1996, by I. Conrad Schwab, the President of PRESTOLITE POWER CORPORATION, a
corporation, on behalf of said corporation.
/s/ Shari E. Stanforth
----------------------
Notary Public
17
<PAGE>
GUARANTEE
In consideration of the leasing of the Premises at Corporate Way, Troy,
Ohio 45373 under a Lease dated March 20, 1996, by MILLER-VALENTINE PARTNERS
LIMITED (Lessor) to PRESTOLITE POWER CORPORATION (Lessee) the undersigned
Guarantor does hereby unconditionally and continuingly guarantee Lessee's
performance under said Lease, and agree that if Lessee shall become in default
in the payment of rent or the performance of any other term or condition under
said Lease, then upon notice in writing of such fact, they will within ten (10)
days of receipt of such notice cure any existing default and continue to perform
or cause to be performed all obligations of the Lessee under such Lease. In the
event the Guarantor shall so direct, Lessor will thereafter recognize the
Guarantor as Lessee under the Lease. The Guarantor further consents
prospectively to any amendment of such Lease or any election shall not affect
their obligation under this Guarantee. In the event of default, Lessor may look
to the Guarantor for performance of all obligations of Lessee and for recovery
of any loss or damage resulting from such default without the necessity or prior
exhaustion of remedies against Lessee.
Guarantor acknowledges that Lessor entering into this Lease with Lessee
is adequate consideration to Guarantor to give this Guarantee.
IN WITNESS WHEREOF, the Guarantor have/has executed this Guarantee as of
the 20th day of March, 1996.
Witnessed By: By: PRESTOLITE ELECTRIC INCORPORATED
/s/ DENNIS WHITEHEAD Name: /s/ Rogar A. Cutsinger
_________________________ ---------------------------
/s/ RICHARD PLAINE Title: Vice President
_________________________ ---------------------
/s/ DENNIS WHITEHEAD Name: /s/ Conrad Schwab
_________________________ -------------------------
/s/ Richard Plaine Title: Vice President
_________________________ ---------------------
STATE OF OHIO, COUNTY OF Miami, SS:
The foregoing instrument was acknowledged before me this 20th day of
March, 1996, by I. Conrad Schwab, the Vice President of PRESTOLITE ELECTRIC
INCORPORATED.
18
<PAGE>
Shari E. Stanforth
------------------
Notary Public
STATE OF OHIO, COUNTY OF Miami, SS:
The foregoing instrument was acknowledged before me this 20th day of
March, 1996, by I. Conrad Schwab, the Vice President of PRESTOLITE ELECTRIC
INCORPORATED.
/s/ Shari E. Stanforth
----------------------
Notary Public
19
<PAGE>
PRESTOLITE -- Troy, Ohio
Page 1 of 4
March 20, 1996
EXHIBIT B
OUTLINE SPECIFICATION
This Exhibit B is a preliminary building specification for the manufacturing,
office and lab space for Prestolite Power Corporation. The cost of the
specifications in this Exhibit B are included within the annual rent and do not
anticipate the "over improvement" costs. While the attachments to Exhibit C set
forth Prestolite Power's currently anticipated plant fit-up specifications,
Prestolite Power has not completely finalized their office, lab and
manufacturing space layout and these specifications are subject to change based
on Prestolite Power Corporation's final design and specification requirements.
This project consists of a 160,000 SF Warehouse Building with a minimum clear
height to the bar joist of 19'0". The Floor Plan shall have a configuration of
200' wide and 800' long.
SITE WORK:
. Asphalt paving shall consists of 6" of stone base with 2 1/2" of asphalt
for the car parking lot and 8" stone base with 3 1/2" asphalt for the
truck dock area.
. Utility extensions to the building for electric, gas, water and sanitary
sewer.
. Complete storm drainage system for the building and asphalt paving.
CONCRETE:
. Building foundations based on 300 PSF soil bearing capacity using 3000
PSI concrete.
. Building slab on grade using 3500 PSI concrete, non-reinforced 6" floor
over 6" of compacted 304 stone base.
. Tilt-up concrete building wall panels using 3500 PSI concrete with
necessary reinforcing, lifting accessories and an exterior architectural
finish.
1
<PAGE>
PRESTOLITE -- Troy, Ohio
Page 2 of 4
March 20, 1996
METALS:
. Structural system, including columns, bar joists, and joist girders.
Clear height minimum 19'0" to bottom of bar joist at the exterior wall.
. Roof deck, 1.5 B wide ribbed.
MOISTURE, THERMAL PROTECTION:
. Roof system shall be a one ply E.P.D.M. (rubber) membrane, ballasted roof
with isocyanurate insulation for a total R = 12.0. Roof shall carry the
manufacturer's 20-year membrane warranty, and the manufacturer's 10-year
watertight warranty.
. Roof drains, interior down spouts.
. 2 1/2" thick, embossed vinyl-faced fiberglass insulation will be used
from 8 feet above finished floor to roof deck. The lower 8 feet shall
have 2 x 4 fire treated stud cavity with 3 1/2" batt insulation and 5/8"
thick plywood sheeting. "R" value for wall construction shall be 10.
DOORS, WINDOWS:
. Aluminum entry glazing system. Including one pair of 3'-0" x 7'-0"
aluminum doors. Frames to be clear anodized aluminum, thermally broken.
Glass to be 1" clear insulated and tinted, tempered per code.
. Flush panel, insulated overhead doors as follows:
--- 12'-0" x 14'-0" drive in doors.
--- 8'-0" x 9'-0" dock doors.
SPECIALTIES:
. Pan style levelers, 30,000 lb. Capacity with weather seals, 6' x 6' at
each dock door.
FIRE PROTECTION:
. System designed to be automatic wet system designed for moderate hazard.
Installation to be per NFPA, local fire department and ISO (Insurances
Services of Ohio) with density of 0.29 gpm/2,000 SF.
2
<PAGE>
PRESTOLITE -- Troy, Ohio
Page 3 of 4
March 20, 1996
PLUMBING:
. Provide excavation and compacted granular backfill for a minimum 6"
sanitary lateral for the entire length of the building. Sanitary line to
be located 28'-0" from the inside face of the front wall. Clean-outs to
be located at every column line (40'-0" on center). The tops of the
clean-outs to left one inch (1") below finish floor.
. Provide 2" water line (Type L copper) the length of the building with one
tee and valve per bay. Water line to receive white fiberglass jacketed
insulation with all joints taped.
HVAC:
. Provide gas-fired unit heaters complete with accustats, flue and interior
gas line. Units to be sized to maintain 60" F. interior at 0" F.
exterior.
. Provide rooftop exhaust fans and curb for ventilation (one air change per
hour).
ELECTRICAL:
. Provide and install 8'-0" H.O. 2 lamp industrial fluorescent fixtures
with reflectors. These are to be mounted to the bottom of the bar joist
(4 each per 40'-0" x 40'-0" bay) to provide approximately 20 to 30 foot
candles.
. House Lighting Panels that consist of one (1) 200 amp, 480/277 volt, 3-
phase, 4 wire panel with exterior DP&L meter for all exterior lighting
and one (1) 45 KVA transformer to feed one (1) 100 amp 120/208 volt 3-
phase, 4 wire panel for fire alarm bells, irrigation controller and phone
room electrical.
. Vacant Area Panels consisting of one (1) 200 amp, 480/277 volt, 3-phase,
4 wire panel with exterior DP&L meter for vacant area lights and one (1)
45 KVA transformer to feed one (1) 100 amp, 208/120 volt, 3-phase, 4 wire
panel for unit heaters.
END OF SPECIFICATIONS
3
<PAGE>
1 of 2
EXHIBIT C
<TABLE>
<S> <C> <C>
PRESTOLITE 3/8/96
120,000 S.F.
OFFICE IMPROVEMENTS
6000 S.F $ 30,00 S.F. $ 180,000
6800 S.F. $ 30,00 S.F. $ 204,000
PLANT FITUP IMPROVEMENTS $ 700,000 *
AMORTIZED IN LEASE OVER 5 YEARS $ 100,000
CASH CONTRIBUTION BY PRESTOLITE $ 600,000
LEASE RATE
S.F. ANNUAL
RATE RENT
BASE RATE $ 3.50 420,000
OPERATING EXPENSES $ 0.25 30,000
5% OFFICE (6000 S.F.) (10 YR AMORT) $ 0.24 28,545
6,800 S.F. OFFICE (5 YR AMORT) $ 0.43 52,013
PLANT IMPROVEMENTS (5 YR. AMORT) $ 0.21 25,496
TOTAL $ 4.63 556,054
</TABLE>
- - - - - - - - - - - --------------
* PRELIMINARY ROUGH ESTIMATE. EXACT COST TO BE DETERMINED AFTER FINAL BUILDING
AND PLANT DESIGN SUBJECT TO PRESTOLITE POWER CORPORATION'S FINAL BUILDING
REQUIREMENTS.
(Preliminary Allowance Attached)
<PAGE>
2 of 2
PRESTOLITE
Troy, Ohio
Estimated Over-lmprovement to be Paid by Lessee
<TABLE>
<CAPTION>
March 15, 1996
<S> <C> <C>
Allowance
1a. 6,400 SF Engineering Lab/ Procedures Lab $ 77,000.00
1b. 3,200 SF Procedures Lab with Conference Room $ 40,000.00
1c. 3,200 SF Service/Repair Shop $ 27,000.00
2. 4,800 SF Battery Lab with Load Banks/Storage $ 100,000.00
3a. 8'x 8' SF Engine Testing Enclosure at Engineering Lab $ 12,000.00
3b. 8 x 8' SF Engine Testing Enclosure at Rotating Assembly Line $ 12,000.00
4. Three Plant Restroom Groups with Underground $ 58,000.00
5. Premium for 3000 AMP Service $ 148,000.00
6. Premium for Metal Halide Lights from 25 FC to 80/100 FC $ 93,000.00
7. Plant Area Emergency and Exit Lights $ 26,000.00
8. 20 each 110 Volt Isolated Ground with Data Stub $ 11,000.00
9. Card Swipe Security System $ 14,000.00
10. Compressed Air Loop $ 42,000.00
11. Dock Seals, Truck Restraints and Dock Lights (6 Sets) $ 19,000.00
12. Power for Inverter Area and Smog Hog $ 8,000.00
13. Power for Assembly Cells at Smog Hog $ 16,000.00
14. Double Duplex Receptacles at Plant (22 Each) $ 5,000.00
15. Add Two (2) Each 35,000 CFM Exhaust Fans and Four (4) Each 25,000 CFM $ 23,000.00
Filtered Supply Air Fans to Increase Air Changes From One to Three Per Hour
16. Punched Exterior Office Windows $ 23,000.00
Subtotal $ 754,000.00
Cost Reduction Anticipated After Final Design and Specifications ($54,000.00)
TOTAL $ 700,000.00
</TABLE>
<PAGE>
MILLER-VALENTINE PARTNERS, LTD.
-------------------------------
WAREHOUSE/DISTRIBUTION
----------------------
SHORT TERM AGREEMENT OF LEASE
-----------------------------
THIS SHORT TERM LEASE made this 13th day of November, 1996, by and
between MILLER-VALENTINE PARTNERS, LTD. hereinafter referred to as Lessor and
PRESTOLITE POWER CORPORATION, hereinafter referred to as Lessee. The Lessee's
business enterprise is organized as a corporation and is admitted to do business
in the State of Ohio.
W I T N E S S E T H :
---------------------
Contingent upon the signing and full execution of a new Lease by and
between MILLER-VALENTINE PARTNERS, LTD. and SHAFFER METAL FAB, INC. for a term
of ten (10) years, the Lessor does hereby lease and let to Lessee and the Lessee
accepts from the Lessor under the terms and conditions of this Lease, the
following described Premises:
1. Premises: 40,000 square feet as shown on Exhibit A hereto
attached of a building which contains 160,000 square feet more or less at
Corporate Way, Troy, Ohio 45353. The Leased Premises shall be delivered "as
is" which the Lessee has examined and finds in a condition suitable for its use
and purpose.
2. Commencing on or about November 1, 1996, the term of the Lease
will be six (6) months, ending on or about May 31, 1997. It is agreed between
the Lessee and Lessor that this Lease shall commence upon the substantial
completion, subject to punch list items, of the construction of the building in
which the Leased Premises are located. If applicable, a prorated portion of
rent shall be invoiced to Lessee from Lessor for less than a full month of
occupancy.
3. Except as provided for in Item No. 2 above, Rent will be due and
payable monthly on the first day of each month without demand in the amount of
$13,166.67. Checks should be made payable to Miller-Valentine Partners, Ltd.
and sent to Miller-Valentine Partners, Post Office Box 744, Dayton, Ohio
45401-0744, ATTN: ACCOUNTS RECEIVABLE.
4. NOTICE.
-------
All notices under this Lease may be personally delivered; sent by
courier service, with receipt; or mailed to address shown by certified mail,
return receipt requested. The effective date of any mailed notice shall be one
(1) day after delivery of same to the United States Postal Service.
Lessor: MILLER-VALENTINE PARTNERS, LTD.
Mail: 4000 Miller-Valentine Court
Moraine, Ohio 45439
Lessor: PRESTOLITE POWER CORPORATION
Mail: Attn: I. Conrad Schwab
2100 Commonwealth Blvd., Ste 300
Ann Arbor, Michigan 48105
5. Other Terms and Conditions. During the term of the Lease, the
Lessee will comply with other terms and conditions set forth on Exhibit B
attached and in accordance with all other provisions as set forth in the fully
executed Lease of 120,000 square feet dated March 20, 1996 between Lessee and
Lessor.
<PAGE>
IN WITNESS WHEREOF, the Lessor and Lessee have affixed their
signatures to triplicates of this Short Term Warehouse/Distribution Lease, this
3rd day of September, 1996, as to Lessee and this 13th day of November, 1996, as
- - - - - - - - - - - --- --------- ---- --------
to Lessor.
Signed and acknowledged LESSOR: MILLER-VALENTINE PARTNERS, LTD.
in the presence of:
/s/ Vernan H. Oakley By: /s/ James M. Miller
- - - - - - - - - - - --------------------------------- -----------------------------------
James M. Miller
/s/ Michelle Atkinson Title: Member
- - - - - - - - - - - --------------------------------- -----------------------------------
LESSEE: PRESTOLITE POWER CORPORATION
/s/ [ILLEGIBLE] By: /s/ I. Conrad Schwab
- - - - - - - - - - - --------------------------------- -----------------------------------
I. Conrad Schwab
/s/ RICHARD A. PLAINE Title: President
- - - - - - - - - - - --------------------------------- -----------------------------------
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was acknowledged before me this 13th day of
November, 1996, by James M. Miller, Member, on behalf of MILLER-VALENTINE
PARTNERS, LTD.
[SEAL OF NOTARY PUBLIC] /s/ Mary Anne Hartley
-----------------------------------
NOTARY PUBLIC
STATE OF OHIO, COUNTY OF MIAMI, SS:
---- -----
The foregoing instrument was acknowledged before me this 3rd day of
September, 1996, by I. Conrad Schwab, the President of PRESTOLITE POWER
CORPORATION, a corporation on behalf of said corporation.
/s/ Edward Hillman, III
------------------------------------
NOTARY PUBLIC
Edward Hillman, III, Notary
Public in and for the State of
Ohio
My Commission Expires March 28,
1998
<PAGE>
EXHIBIT A
[MAP APPEARS HERE]
<PAGE>
EXHIBIT B
---------
SHORT TERM WAREHOUSE/DISTRIBUTION LEASE
---------------------------------------
OTHER TERMS AND CONDITIONS
--------------------------
1. Utilities. The lessee shall pay for all utilities supplied to the premises.
---------
Any utilities which are not separately metered to the lessee will be
prorated among the Lessees in the building on the basis of square footage
serviced by a given meter or occupancy of the building. Lessee shall pay its
share to Lessor when billed.
2. Use of Premises. The Premises shall be used and occupied only for
---------------
warehousing and distribution, and for no other purpose or purposes without
the written consent of the Lessor. The Lessee shall operate its business in
a safe and proper manner as is normal, considering the use of the Premises
above provided; shall not manufacture, use, store, or display any products
or materials that will endanger the Premises; and shall do nothing that
would increase the cost of insurance on the building or invalidate existing
policies.
3. Repairs. The Lessor will keep the foundations, exterior walls and roof of
-------
the building in good repair. The Lessee shall keep the Premises and any
equipment, facilities or fixtures contained herein in good condition and
repair. On expiration or earlier termination of the Lease, the Lessee shall
surrender the Premises to the Lessor in as good condition as when received,
broom clean and free of tire marks, ordinary wear and tear excepted.
4. Installations and Alterations. Lessee shall not make any alterations or
-----------------------------
additions to the Premises without first procuring Lessor's written consent.
The Lessee shall not erect or install any signage without first procuring
Lessor's written consent. The Lessee shall have no rights to use and shall
not use the roof of the Premises for any purpose without the written consent
of the Lessor.
5. Indemnification. Except to the extent of the gross negligence or misconduct
---------------
of Lessor, Lessee agrees to indemnify and hold Lessor harmless against and
from any and all claims, damages, costs, and expenses, including reasonable
attorney's fees, arising out of Lessee's use or occupancy of the Premises or
any breach of this Lease by Lessee.
6. Insurance. Lessee agrees to procure and maintain a policy or policies of
---------
insurance, at its own expense, insuring from all claims, demands or actions
for injury to or death of more than one person in any one accident and for
damages to property in an aggregate amount of not less than $2,000,000 made
by or on behalf of any person or persons, firm or corporation, arising from,
related to, or connected with the conduct and operation of Lessee's business
in the Premises. Lessor shall be named an additional insured party in said
policy. Said insurance shall not be subject to cancellation except after at
least thirty (30) days prior written notice to Lessor, and a Certificate of
Insurance shall be deposited with Lessor upon request .
<PAGE>
AMENDMENT NO. 1 TO LEASE
------------------------
THIS AGREEMENT made this 13th day of November, 1996, by and between
---- --------
MILLER-VALENTINE PARTNERS LTD., as Lessor and PRESTOLITE POWER CORPORATION, as
Lessee located at 2200 Corporate Drive, Troy, Ohio 45353.
W I T N E S S E T H :
---------------------
WHEREAS, Lessor and Lessee entered into a Lease dated March 20, 1996,
and
WHEREAS, the Lessor and Lessee desire to amend the Lease of 120,000
square feet to revise the term.
NOW THEREFORE, the Lease is amended as follows.
1. ARTICLE 1. TERM. Shall be revised as follows.
-----
TO HAVE AND TO HOLD unto the Lessee for a term of ten (10) years
commencing on the 1st day of November 1996, and ending on the 31st day of
October 2006, both dates inclusive. Provided however, the Lessee is granted a
right to reduce the Leased Premises in accordance with Article 36.
2. Except as expressly amended herein, all other terms and
conditions of the Lease remain in full force and effect.
IN WITNESS WHEREOF, the Lessor and Lessee have affixed their
signatures to triplicates of this Amendment, this _____ day of __________, 1996,
as to Lessee and this 13th day of November, 1996, as to Lessor.
---- --------
Signed and acknowledged LESSOR: MILLER-VALENTINE PARTNERS LTD.
in the presence of:
/s/ [ILLEGIBLE] By: /s/ James M. Miller
- - - - - - - - - - - ------------------------------ -----------------------------------
/s/ [ILLEGIBLE] Title: Member
- - - - - - - - - - - ------------------------------ --------------------------------
LESSEE: PRESTOLITE POWER CORPORATION
/s/ [ILLEGIBLE] By: /s/ I. Conrad Schwab
- - - - - - - - - - - ------------------------------ -----------------------------------
I. Conrad Schwab
/s/ [ILLEGIBLE] Title: President
- - - - - - - - - - - ------------------------------ ----------------------------
<PAGE>
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was
acknowledged before me this 13th day of
November, 1996, by James M. Miller, Member,
on behalf of MILLER-VALENTINE PARTNERS LTD.,
AN OHIO GENERAL PARTNERSHIP.
/s/ Mary Anne Hartley
[SEAL OF NOTARY PUBLIC] ------------------------
NOTARY PUBLIC
STATE OF OHIO, COUNTY OF MIAMI, SS:
The foregoing instrument was
acknowledged before me this 13th day of
November, 1996, by I. Conrad Schwab, the
President of PRESTOLITE POWER CORPORATION,
a corporation on behalf of corporation.
/s/ Mary Anne Hartley
[SEAL OF NOTARY PUBLIC] ---------------------
NOTARY PUBLIC
<PAGE>
- - - - - - - - - - - ------------------------------------------------
To: Bruce Conybeare
Ed Hillman
Rich Plaine
Attached is a copy of the lease as signed by
Prestolite. Miller Valentine will execute their
signatures on the lease the week of March 25,
1998. Upon receipt, originals will be sent
for safe keeping to Conybeare & Cornelius. -
Fm: Conrad Schwab March 20, 1996
- - - - - - - - - - - ------------------------------------------------
MILLER-VALENTINE PARTNERS
-------------------------
WAREHOUSE/DISTRIBUTION
----------------------
AGREEMENT OF LEASE
------------------
TABLE OF CONTENTS
-----------------
LEASE FOR PRESTOLITE POWER CORPORATION
PROPERTY LOCATED AT Corporate Way, Troy Ohio 45353
<TABLE>
<CAPTION>
ARTICLE PAGE
- - - - - - - - - - - ------- ----
<S> <C>
1 TERM........................................................... 1
2 LEASED PREMISES................................................ 1
3 POSSESSION..................................................... 1
4 RENT........................................................... 1
5 SECURITY DEPOSIT............................................... 2
6 COMMON AREA.................................................... 3
7 USE OF LEASED PREMISES......................................... 3
8 REPAIRS........................................................ 3
9 INSTALLATIONS AND ALTERATIONS.................................. 4
10 INDEMNIFICATION................................................ 5
11 INSURANCE...................................................... 5
12 DAMAGE BY FIRE OR OTHER CASUALTY............................... 5
13 EMINENT DOMAIN................................................. 6
14 ASSIGNMENT OR SUBLETTING....................................... 6
15 ACCESS TO LEASED PREMISES...................................... 7
16 ATTORNMENT..................................................... 7
17 LIMITATION UPON LIABILITY...................................... 7
18 LESSOR'S SUCCESSORS............................................ 8
19 LESSEE'S DEFAULT............................................... 8
20 SURRENDER OF LEASED PREMISES................................... 9
21 SUBORDINATION.................................................. 9
22 NOTICE......................................................... 9
23 WAIVER OF SUBROGATION.......................................... 10
24 ESTOPPEL CERTIFICATE........................................... 10
25 RENT DEMAND.................................................... 10
26 NO REPRESENTATION BY LESSOR.................................... 10
27 WAIVER OF BREACH............................................... 10
28 QUIET ENJOYMENT................................................ 10
29 ENVIRONMENTAL PROVISIONS....................................... 10
30 INTERPRETATION................................................. 11
31 FINANCIAL STATEMENTS........................................... 11
32 AMERICANS WITH DISABILITIES ACT COMPLIANCE..................... 11
33 MEMORANDUM OF LEASE............................................ 12
34 TIME........................................................... 12
35 RIGHT OF FIRST NOTIFICATION.................................... 12
36 RIGHT TO DECREASE THE SQUARE FOOTAGE OF THE LEASED PREMISE..... 12
37 ENTIRE AGREEMENT............................................... 13
</TABLE>
<PAGE>
A BUILDING/SITE PLAN
B IMPROVEMENT SPECIFICATION
C OVERIMPROVEMENT AMORTIZATION SCHEDULE
D PROPOSED SITE PLAN
<PAGE>
EXHIBIT 10.25
MILLER-VALENTINE PARTNERS
-------------------------
WAREHOUSE/DISTRIBUTION/MANUFACTURING
------------------------------------
AGREEMENT OF LEASE
------------------
THIS LEASE made this 7th day of November, 1997, by and between MILLER-
VALENTINE PARTNERS LTD., hereinafter referred to as the Lessor, and PRESTOLITE
POWER CORPORATION, hereinafter referred to as Lessee. The Lessee's business
enterprise is organized as a Corporation and is admitted to do business in the
State of Ohio.
W I T N E S S E T H:
The Lessor does hereby lease and let to the Lessee and the Lessee
accepts from the Lessor under the terms and conditions of this Lease, the
following described Premises:
40,000 square feet of a building which contains 160,000 square feet
more or less at 2216-2222 Corporate Way, Troy, Ohio 45373 hereinafter referred
to as the Leased Premises.
ARTICLE 1. TERM.
TO HAVE AND TO HOLD unto the Lessee for a term of nine (9) years, one
(1) month commencing on the 1st day of October 1997, and ending on the 31st day
of October 2006, both dates inclusive. Provided however, the Lessee is granted
a right to terminate the Leased Premises in accordance with Article 35.
ARTICLE 2. LEASED PREMISES.
The Leased Premises, as shown on Exhibit A hereto attached, are
delivered to the Lessee in their existing condition which the Lessee has
examined and finds in a condition suitable to its use and purpose.
ARTICLE 3. POSSESSION. INTENTIONALLY OMITTED.
ARTICLE 4. RENT.
Section 1. Lessee shall pay to the Lessor as Annual Rent for the
---------
Leased Premises for the first five (5) Lease years the sum of ONE HUNDRED FIFTY-
EIGHT THOUSAND AND NO/100 DOLLARS ($158,000.00) which shall be paid in equal
monthly installments of THIRTEEN THOUSAND ONE HUNDRED SIXTY-SIX AND 67/100
DOLLARS ($13,166.67), due and payable on the first day of each month, in
advance, without demand. Lessee shall pay to the Lessor as Annual Rent for the
Leased Premises for years 6 through 9th year, one month the sum of ONE HUNDRED
SIXTY-EIGHT THOUSAND AND NO/100 DOLLARS $168,000.00) which shall be paid in
equal monthly installments of FOURTEEN THOUSAND AND NO/100 DOLLARS ($14,000.00)
due and payable on the first day of each month, in advance, without demand.
Checks should be made payable to Miller-Valentine Partners Ltd. and sent c/o
Miller-Valentine Group, Post Office Box 744, Dayton, Ohio 45401-0744. Said rent
shall be paid to the Lessor, or to the duly authorized agent of the Lessor, at
its office during business hours. If the commencement date of this Lease is
other than the first day of the month, any rental adjustment or additional rents
hereinafter provided for shall be prorated accordingly. The Lessee will pay the
rent as herein provided, without deduction whatsoever, and without any
obligation of the Lessor to make demand for it. Any installment of rent
accruing hereunder and any other sum payable hereunder, if not paid when due,
shall bear interest at the rate of eighteen percent (18%) per annum until paid.
4
<PAGE>
ARTICLE 5. SECURITY DEPOSIT. INTENTIONALLY OMITTED.
ARTICLE 6. COMMON AREA.
For the purpose of this Lease, common area shall be defined as all of
the property described herein that is not actually occupied by the building.
The Lessee shall have the use in common with other Lessees to the parking areas
and driveways for ingress and egress to the Leased Premises. The Lessee shall
have no right to use the common area for storage purposes and trash shall be
stored only in approved containers in the common area. The Lessor shall
maintain the common area and keep the same in good order and repair, including
landscaping, snow and ice removal, parking/drive/sidewalk sweeping, maintenance
and repairs, signage maintenance and repairs and electric maintenance and
repairs. Lessor and Lessee acknowledge that the costs for the foregoing,
together with exterior lighting and certain other costs, are included in the
Annual Rent and Lessee shall have no additional obligation with respect thereto.
ARTICLE 7. USE OF LEASED PREMISES.
Section 1. The Leased Premises shall be used and occupied only for
---------
office purposes and/or warehousing and distribution of materials of light or
ordinary hazard, for manufacturing operations and laboratory space and for no
other purpose or purposes without the written consent of the Lessor.
Section 2. The Lessee shall operate its business in a safe and proper
---------
manner as is normal, considering the uses of the Leased Premises above provided;
and shall not manufacture, store, display or maintain any products or materials
that will endanger the Leased Premises; shall do nothing that would increase the
cost of insurance on the building or invalidate existing policies; shall not
obstruct the sidewalks; shall not use the plumbing for any other purpose than
for which it was constructed; shall not make or permit any noise and/or odor
objectionable to the public or adjacent occupants; shall not create a nuisance
on the Leased Premises; and shall commit no waste.
Section 3. The Lessee shall abide by all police and fire regulations
---------
concerning the operation of its business; shall store all trash, rubbish, and
debris in closed containers; and shall practice all proper procedures and
methods that are common to its business enterprise. The Lessee shall maintain a
minimum temperature in the Leased Premises of 55 degrees F.
ARTICLE 8. REPAIRS.
Section 1. Lessor shall keep the foundations, exterior walls (except
---------
plate glass or glass or other breakable materials used in structural portions)
and roof in good repair.
Section 2. Generally, the Lessee shall, at its expense, maintain the
---------
mechanical equipment servicing the Leased Premises. Lessee shall use a
mechanical contractor satisfactory to Lessor. The Lessee shall replace any hot
water heater as the need should arise with the same type and quality servicing
the Leased Premises. The Lessor shall replace, as needed, the heating and air
conditioning equipment, provided the unit has been serviced annually, and the
cost of replacement shall be prorated over the warranty period for such
equipment, and further prorated among the Lessee benefiting from such equipment;
the result of such proration to be an annual share of cost to Lessee, and the
Lessee will pay one-twelfth thereof for each month during the remaining term and
renewals of this Lease.
Section 3. Lessor shall not be liable for any damage done or
---------
occasioned by or from the electrical system, the heating and/or air condition
system, the plumbing and sewer system in, above, upon or about the Leased
Premises nor for damage occasioned by water, snow or
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ice being upon or coming through the roof, trapdoor, walls, windows, doors or
otherwise, except as above provided. The Lessee shall reimburse the Lessor the
cost of all repairs to the Leased Premises, fixtures and appurtenances
necessitated by the fault of the Lessee, its agents, employees or guests and
shall reimburse the Lessor for the cost of repair, at or before the end of the
term or sooner if so requested by Lessor, all injury done by the installation or
removal of furniture or other property.
Section 4. Except as provided in Sections 1, 2, and 3 of this
---------
Article, Lessor shall not be obligated to make repairs, replacements or
improvements of any kind upon said Leased Premises, or any equipment facilities
or fixtures therein contained, which shall at all times be kept in good order,
conditions and repair by Lessee, and in a clean, sanitary and safe condition and
in accordance with all applicable laws, ordinances and regulations of any
governmental authority having jurisdiction. Lessee shall permit no waste,
damage, or injury to the Leased Premises.
Section 5. Lessee shall forthwith at its own cost and expense replace
---------
with glass of the same kind and quality any cracked or broken glass, including
plate glass or glass or other breakable materials used in structural portions,
and any interior and exterior windows and doors in the Leased Premises.
ARTICLE 9. INSTALLATIONS AND ALTERATIONS.
Section 1. Lessee shall not make any alterations or additions to the
---------
Leased Premises without first procuring Lessor's written consent and delivering
to Lessor the plans and specifications and copies of the proposed contracts and
necessary permits, and shall furnish indemnification against liens, costs,
damages and expenses as may be reasonably required by Lessor. All alterations,
additions, improvements and fixtures, other than trade fixtures, which may be
made or installed by either of the parties hereto upon the Leased Premises and
which in any manner are attached to the floors, walls or ceilings, at the
termination of this Lease shall become the property of Lessor, unless Lessor
requests their removal, and shall remain upon and be surrendered with the Leased
Premises as a part thereof, without damage or injury; any linoleum or other
floor covering of similar character which may be cemented or otherwise
adhesively affixed to the floor shall likewise become the property of Lessor,
all without compensation or credit to Lessee.
Section 2. The Lessee shall not erect or install any signage
---------
without first procuring Lessor's written consent.
Section 3. The Lessee shall have no rights to use and shall not use
---------
the roof of the Leased Premises for any purpose without the written consent of
the Lessor. The Lessee shall not use the roof for storage, for any activity
that will result in traffic on the roof, for anything that will penetrate the
roof, use the roof as an anchor or otherwise damage the roof. The consent of
the Lessor must be in writing for each specific use and must also approve the
method of installation of the permitted use. Should the Lessee break this
covenant, the Lessee shall be responsible for any damages caused to the roof or
other parts of the building and shall assume the cost of maintaining and
repairing the roof during the term of the Lease, including any renewals.
ARTICLE 10. INDEMNIFICATION.
Except to the extent of the negligence or misconduct of Lessor, Lessee
agrees to indemnify and hold Lessor harmless against and from any and all
claims, damages, costs, and expenses, including reasonable attorney's fees,
arising out of Lessee's use or occupancy of the Leased Premises. Except to the
extent of Lessee's negligence or misconduct, Lessor agrees to indemnify and hold
Lessee harmless against and from any and all claims, damages, costs, and
expenses,
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including reasonable attorney's fees, arising out of Lessor's failure to perform
its duties and obligations as owner or agent of the owner of the property of
which the Leased Premises is a part.
ARTICLE 11. INSURANCE.
Section 1. Lessee shall not carry any stock of goods or do anything
---------
in or about said Leased Premises which will in any way tend to increase
insurance rates on said Leased Premises or the building in which the same are
located. If Lessor shall consent to such use, Lessee agrees to reimburse Lessor
on a pro rata basis for any increase in premiums for insurance against loss by
fire or extended coverage risks resulting from the business carried on in the
Leased Premises by Lessee. If Lessee installs any electrical equipment that
overloads the power lines to the building, Lessee shall at its own expense make
whatever changes are necessary to comply with the requirements of insurance
underwriters and insurance rating bureaus and governmental authorities having
jurisdiction.
Section 2. Lessee agrees to procure and maintain a policy or policies
---------
of insurance, at its own costs and expense, insuring from all claims, demands or
actions for injury to or death of one or more persons in any one accident and
for damages to property in an aggregate amount of not less than $2,000,000.00
made by or on behalf of any person or persons, firm or corporation, arising
from, related to, or connected with the conduct and operation of Lessee's
business in the Leased Premises. Lessor shall be named an Additional Insured
Party in said policy. Such insurance shall be primary relative to any other
valid and collectible insurance. Said insurance shall not be subject to
cancellation except after at least thirty (30) days prior written notice to
Lessor, and the policy or policies, or duly executed certificate or certificates
for the same, together with satisfactory evidence of the payment of the premium
thereon, shall be deposited with Lessor at the commencement of the term and
renewals of such coverage. If Lessee fails to comply with such requirement,
Lessor may obtain such insurance and keep the same in effect, and Lessee shall
pay Lessor the premium cost thereof upon demand.
Section 3. All property which may be upon said Leased Premises during
---------
the term hereof or any renewal thereof shall be at and upon the sole risk and
responsibility of Lessee except Lessor shall maintain adequate casualty coverage
with respect to the building.
ARTICLE 12. DAMAGE BY FIRE OR OTHER CASUALTY.
Section 1. If the Leased Premises shall be destroyed or so injured by
---------
any cause as to be unfit, in whole or in part, for occupancy and such
destruction or injury could reasonably be repaired within three (3) months from
the happening of such destruction or injury, then Lessee shall not be entitled
to surrender possession of the Leased Premises nor shall Lessee's liability to
pay rent under this Lease cease without mutual consent of the parties hereto,
but in case of any such destruction or injury Lessor shall repair the same with
all reasonable speed and shall complete such repairs within three (3) months
from the happening of such injury, and if during such period Lessee shall be
unable to use all or any portion of the Leased Premises, a proportionate
allowance shall be made to Lessee from the rent corresponding to the time during
which and to the portion of the Leased Premises of which Lessee shall be so
deprived of the use on account thereof.
Section 2. If such destruction or injury cannot reasonably be
---------
repaired within three (3) months from the happening thereof, Lessor shall notify
Lessee within ten (10) days after the happening of such destruction or injury
whether or not Lessor will repair or rebuild. If Lessor elects not to repair or
rebuild, this Lease shall be terminated. If Lessor shall elect to repair or
rebuild, Lessor shall specify the time within which such repairs or
reconstruction will be complete, and Lessee shall have the option,
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within ten (10) days after the receipt of such notice, to elect either to
terminate this Lease and further liability hereunder, or to extend the term of
the Lease by a period of time equivalent to the time from the happening of such
destruction or injury until the Leased Premises are restored to their former
condition. In the event Lessee elects to extend the term of the Lease, Lessor
shall restore the Leased Premises to their former condition within the specified
time in the notice, and Lessee shall not be liable to pay rent for the period
from the time of such destruction or injury until the Leased Premises are so
restored to their former condition.
ARTICLE 13. EMINENT DOMAIN.
Section 1. If the whole or substantially all of the Leased Premises
---------
hereby leased shall be taken by a public authority under the power of eminent
domain, then the term of this Lease shall cease as of the day possession shall
be taken by such public authority, and the rent shall be paid up to that date
with a proportionate refund by Lessor of such rent as shall have been paid in
advance.
Section 2. If less than substantially all of the floor area of the
---------
Leased Premises shall be so taken, the term of this Lease shall cease only on
the parts so taken as of the day possession shall be taken by such public
authority, and the rent shall be paid up to that day with a proportionate refund
by Lessor of such rent as may have been paid in advance, and thereafter the
minimum rent shall be equitably abated, and Lessor shall at its own cost and
expense make all necessary repairs or alterations as to constitute the remaining
Leased Premises a complete architectural unit.
Section 3. All damages awarded for such taking under the power of
---------
eminent domain, whether for the whole or a part of the Leased Premises, shall be
the property of Lessor whether such damages shall be awarded as compensation for
diminution in value of the leasehold or to the fee of the Leased Premises;
provided, however, that the Lessor shall not be entitled to any separate award
made to Lessee for loss of business, depreciation to and cost of removal of
stock and fixtures.
ARTICLE 14. ASSIGNMENT OR SUBLETTING.
Section 1. Lessee shall not assign or in any manner transfer this
---------
Lease or any interest therein, nor sublet said Leased Premises or any part or
parts thereof, nor permit occupancy by anyone with, through, or under it,
without the previous written consent of Lessor which consent shall not be
unreasonably withheld. It IS AGREED HOWEVER, THAT THE LESSOR HEREBY GIVES ITS
CONSENT THAT LESSEE MAY ASSIGN THIS LEASE TO THERMAL ARC AT ANYTIME DURING THE
LEASE TERM BUT ONLY IF PRESTOLITE IS NOT THEN IN DEFAULT THEREUNDER AND MILLER-
VALENTINE (AND ITS LENDER) HAVE REASONABLY APPROVED THE CREDITWORTHINESS OF
THERMAL ARC (AND ITS PARENT, THERMADYNE HOLDINGS CORPORATION). Consent by
Lessor to one or more assignments of this Lease or to one or more sublettings of
the Leased Premises shall not operate as a waiver of Lessor's rights under this
Article to any subsequent assignment or subletting. No assignment shall release
Lessee of any of its obligations under this Lease or be construed or taken as a
waiver of any of Lessor's rights or remedies hereunder.
Section 2. Neither this Lease nor any interest therein, nor any
---------
estate thereby created, shall pass to any trustee or receiver in bankruptcy or
any assignee for the benefit of creditors or by operation of law.
Section 3. Provided that the Lessee with Lessor's consent assigns or
---------
sublets part or all of the Leased Premises at a rental that exceeds the current
rental herein reserved, the Lessor shall be entitled to receive as additional
rental one-half of such excess of the current rental. The Lessee shall remit
one-half of such excess within five (5) days after receipt by it.
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ARTICLE 15. ACCESS TO LEASED PREMISES.
The Lessor shall retain duplicate keys to all of the doors of the
Leased Premises to be used by the Lessor, so long as the Lessee is not in
default, only in the case of emergencies. The Lessor or its agents shall have
the right to enter upon the Leased Premises at all reasonable hours for the
purpose of inspecting the same or of making repairs, additions or alterations
thereto or to the building in which the same are located with prior notice to
Lessee. The Lessor shall have the right, upon reasonable notice, to show the
Leased Premises to prospective Lessees, purchasers or others. Lessor shall not
be liable to Lessee in any manner for any expense, loss or damage by reason
thereof, nor shall the exercise of such right be deemed an eviction or
disturbance of Lessee's use or possession.
ARTICLE 16. ATTORNMENT.
In the event the Leased Premises are sold or transferred due to any
foreclosure sale or sales, judicial proceedings, or voluntary conveyance in lieu
of such foreclosure, or in the event the Premises are transferred by any
mortgagee in a sale, exchange or otherwise, this Lease shall continue in full
force and effect, and Lessee agrees, upon request, to attorn to and acknowledge
the foreclosure purchaser or purchasers at such sale, or other party succeeding
to the interest of Lessor, as Lessors hereunder. This Lease will, upon request
of any person owning or succeeding to the interest of Lessor, automatically
become a direct lease between said owner or successor and Lessee, without change
in the terms or the provisions of this Lease. Upon request by said owner or
successor in interest, Lessee shall execute and deliver an instrument or
instruments confirming such attornment.
If the successor Lessor requests such attornment, then so long as
Lessee shall faithfully discharge the obligations on its part to be kept and
performed under the terms of this Lease, Lessee's tenancy will not be disturbed
nor this Lease affected by any default under any mortgage. Lessee agrees that
this Lease shall remain in full force and effect even though default in the
mortgage may occur.
ARTICLE 17. LIMITATION UPON LIABILITY.
Notwithstanding any other provision of this Lease, Lessee agrees to
look solely to Lessor's interest in the Building (subject to any mortgage on the
Building) for the recovery of any judgment requiring the payment of money by
Lessor; it being agreed that Lessor, and if Lessor is a partnership, its
partners whether general or limited, or if Lessor is a corporation, its
directors, officers, or shareholders, shall never be personally liable for any
such judgment, and no other assets of the Lessor shall be subject to levy,
execution or other procedures for the satisfaction of Lessee's judgment. The
provision contained in the foregoing sentence is not intended to, and shall not,
limit any right that Lessee might otherwise have to obtain injunctive relief
against Lessor or Lessor's successors in interest, or to maintain any other
action not involving the personal liability of Lessor, or to maintain any suit
or action in connection with enforcement or collection of amounts which may
become owing or payable under or on account of insurance maintained by Lessor.
ARTICLE 18. LESSOR'S SUCCESSORS.
The term "Lessor" as used in this Lease shall be limited to mean and
include only the owner or owners, at the time, of the fee of the Building, their
successors and assigns, so that in the event of any sale or sales of the
Building, the previous Lessor shall be entirely released with respect to the
performance of all subsequently accruing covenants and obligations on the part
of Lessor. The retention of fee ownership by a lessor of the Building or of the
land on which it is located under an underlying lease which is now or hereafter
in effect, shall not be deemed to impose on such underlying
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<PAGE>
lessor any liability, initial or continuing, for the performance of the
covenants and obligations of Lessor.
ARTICLE 19. LESSEE'S DEFAULT.
Section 1. The Lessee, ten (10) days after receipt of written notice,
---------
shall be considered in default of this Lease upon failure to pay when due the
rent or any other sum required by the terms of the Lease. The Lessee, thirty
(30) days after receipt of written notice, shall be considered in default of
this Lease upon failure to perform any term, covenant or condition of this
Lease; the commencement of any action or proceeding for the dissolution,
liquidation or reorganization under the Bankruptcy Act, of Lessee, or for the
appointment of a receiver or trustee of the Lessee's property; the making of any
assignment for the benefit of creditors by Lessee; the suspension of business;
or the abandonment of the Leased Premises by the Lessee.
Section 2. In the event of default of this Lease by Lessee, then
---------
Lessor, besides other rights or remedies it may have, shall have the immediate
right of reentry with or without prior notice, and may remove all persons and
property from the Leased Premises; such property may be removed and stored in
any other place in the building in which the Leased Premises are situated, or in
any other place, for the account of, and at the expense and at the risk of
Lessee. Lessee hereby waives all claims for damages which may be caused by the
reentry of Lessor. Should Lessor elect to reenter, as herein provided, or
should it take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, it may either terminate this Lease, or it may
without terminating this Lease relet said Leased Premises or any part thereof
for such term or terms and at such rental or rentals and upon such other terms
and conditions as Lessor may deem advisable, with the right to make alterations
and repairs to said Leased Premises for the purpose of rerental. Should such
rentals received from such reletting during any month be less than required to
be paid by Lessee as defined above, then Lessee shall immediately pay such
deficiency to Lessor.
Section 3. No such reentry or taking possession of said Leased
---------
Premises by Lessor shall be construed as an election on its part to terminate
this Lease, unless a written notice of such intention be given to Lessee or
unless the termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, Lessor may at any time
thereafter elect to terminate this Lease for such previous breach or act of
default. Should Lessor at any time terminate this Lease for any breach or act of
default, in addition to any other remedy it may have, it may recover from Lessee
all damages it may incur by reason of such breach or act of default, including
the cost of recovering the Leased Premises, legal fees, and including the worth
at the time of such termination of the excess, if any, of the amount of rent and
charges equivalent to rent reserved in this Lease for the remainder of the
stated term over the then reasonable rental value of the Leased Premises for the
remainder of the stated term.
ARTICLE 20. SURRENDER OF LEASED PREMISES.
Section 1. If Lessee holds possession of the Leased Premises after
---------
the termination of this Lease for any reason, Lessee shall pay Lessor 150% the
last monthly rent provided for herein for each month or a portion of a month
that Lessee holds over, together with all other charges due hereunder. Such
payment of rent shall not create any Lease arrangement whatsoever between Lessor
and Lessee, unless expressly agreed to in writing by Lessor. It is further
understood that during such period that Lessee holds over, the Lessor retains
all of Lessor's rights under this Lease, including damages as a result of the
termination of this Lease and the right to immediate possession of the Leased
Premises. This paragraph shall not be construed to grant Lessee permission to
hold over.
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Section 2. At the expiration of the tenancy created hereunder,
---------
whether by lapse of time or otherwise, Lessee shall surrender the Leased
Premises broom clean, free of tire marks, free of all debris and in good
condition and repair, reasonable wear and loss by fire or other unavoidable
casualty excepted.
Section 3. Prior to surrender of the Leased Premises, the Leased
---------
Premises will be reviewed by a representative of the Lessor and Lessee to
determine if there is any deferred maintenance or unrepaired damage which the
Lessee was responsible to perform. In the event that there is such deferred
maintenance and/or unrepaired damage, Lessor may effect such maintenance and
repairs, and Lessee will pay the cost thereof.
Section 4. Upon the expiration of the tenancy hereby created, if
---------
Lessor so requests in writing, Lessee shall promptly remove any additions,
fixtures and installations placed in the Leased Premises by Lessee that is
designated in said request, and repair any damage occasioned by such removals at
its own expense, and in default thereof, Lessor may effect such removals and
repairs, and Lessee shall pay Lessor the cost thereof, with interest at the rate
of eight (a) percent per annum from the date of payment by Lessor
ARTICLE 21. SUBORDINATION.
This Lease shall be subject to and subordinate at all times to the
lien of any mortgages, now or hereafter made on the Leased Premises, and to all
advances made or hereafter to be made thereunder. The Lessee agrees to execute
a subordination agreement should Lessor's lender request same so long as the
lender provided the Lessee standard nondisturbance language reasonably
acceptable to the Lessee.
ARTICLE 22. NOTICE.
All notices under this Lease may be personally delivered; sent by
courier service, with receipt; or mailed to the address shown by certified mail,
return receipt requested. The effective date of any mailed notice shall be one
(1) day after delivery of the same to the United States Postal Service.
Lessor: Miller-Valentine Partners Ltd.
Mail: P.O. Box 744
Dayton, Ohio 45401-0744
Courier: 4000 Miller-Valentine Court
Moraine, Ohio 45439
Lessee: Prestolite Power Corporation
Mail: Attn: I. Conrad Schwab
2100 Commonwealth Boulevard, Suite 300
Ann Arbor, MI 48105
Either party may from time to time designate in writing other addresses.
ARTICLE 23. WAIVER OF SUBROGATION.
The Lessor and Lessee waive all rights, each against the other, for
damages caused by fire or other perils covered by insurance where such damages
are sustained in connection with the occupancy of the Leased Premises.
ARTICLE 24. ESTOPPEL CERTIFICATE.
The Lessee agrees to execute an Estoppel Certificate within ten (10)
days of receipt of a written request by Lessor for the benefit of any purchaser
and/or prospective Lender designated by Lessor as well as Lessor's present
Lender; that wherein the Lessee acknowledges the terms and conditions of this
Lease. The Lessor
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agrees to similarly execute such estoppel certificates and acknowledgments as
Lessee's lender may from time to time request.
ARTICLE 25. RENT DEMAND.
Every demand for rent due wherever and whenever made shall have the
same effect as if made at the time it falls due and at the place of payment, and
after the service of any notice or commencement of any suit, or final judgment
therein, Lessor may receive and collect any rent due, and such collection or
receipt shall not operate as a waiver of nor affect such notice, suit or
judgment.
ARTICLE 26. NO REPRESENTATION BY LESSOR.
Lessor and its agent have made no representations or promises with
respect to the Leased Premises or the building of which the same form a part
except as herein expressly set forth.
ARTICLE 27. WAIVER OF BREACH.
No waiver of any breach of the covenants, provisions or conditions
contained in this Lease shall be construed as a waiver of the covenant itself or
any subsequent breach itself, and if any breach shall occur and afterwards be
compromised, settled or adjusted, this Lease shall continue in full force and
effect as if no breach had occurred, unless otherwise agreed. The acceptance of
rent hereunder shall neither be or construed to be a waiver of any breach of any
term, covenant or condition of this Lease.
ARTICLE 28. QUIET ENJOYMENT.
Lessor hereby covenants and agrees that if Lessee shall perform all
the covenants and agreements herein stipulated to be performed on Lessee's part,
Lessee shall at all times during the continuance hereof have the peaceable and
quiet enjoyment and possession of the Leased Premises without any manner of let
or hindrance from Lessor or any person or persons lawfully claiming the Leased
Premises except as otherwise provided for herein.
ARTICLE 29. ENVIRONMENTAL PROVISIONS.
Section 1. The Lessor, to the best of its knowledge, represents to
---------
the Lessee that no toxic, explosive or other dangerous materials or hazardous
substances have been concealed within, buried beneath, released on or from, or
removed from and stored off-site of the Property upon which the Leased Premises
is constructed.
Section 2. Lessee shall at all times during the term of this Lease
---------
comply with all applicable federal, state, and local laws, regulations,
administrative rulings, orders, ordinances, and the like, pertaining to the
protection of the environment, including but not limited to, those regulating
the handling and disposal of waste materials. Further, during the term of this
Lease, neither Lessee nor any agent or party acting at the direction or with the
consent of Lessee shall treat, store, or dispose of any "hazardous substance,"
as defined in Section 101 (14) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), or petroleum (including crude
oil or any fraction thereof) on or from the Property.
Section 3. Lessee shall fully and promptly pay, perform, discharge,
---------
defend, indemnify and hold harmless Lessor from any and all claims, orders,
demands, causes of action, proceedings, judgments, or suits and all liabilities,
losses, costs or expenses (including, without limitation, technical consultant
fees, court costs, expenses paid to third parties and reasonable legal fees) and
damages arising out of, or as a result of, (I) any "release" as defined in
Section 101 (22) of CERCLA, of any "hazardous substance," as defined in Section
101 (14) of CERCLA, or petroleum, (including crude oil or any fraction
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thereof) or placed into, on or from the Property at any time after the date of
this Lease by Lessee, its agents, or employees; (ii) any contamination of the
Property's soil or groundwater or damage to the environment and natural
resources of the Property the result of actions occurring after the date of this
Lease, whether arising under CERCLA or other statutes and regulations, or common
law by Lessee, its agents, or employees; and (iii) any toxic, explosive or
otherwise dangerous materials or hazardous substances which have been buried
beneath, concealed within or released on or from the Property after the date of
this Lease by Lessee, its agents, or employees.
ARTICLE 30. INTERPRETATION.
Section 1. Wherever either the word "Lessor" or "Lessee" is used in
---------
the Lease, it shall be considered as meaning the singular and/or neuter pronouns
as used herein, and the same shall be construed as including all persons and
corporations designated respectively as Lessor or Lessee in the heading of this
instrument wherever the context requires.
Section 2. If any clause, sentence, paragraph, or part of this Lease
---------
shall for any reason be adjudged by any court of competent jurisdiction to be
invalid, such judgment shall not effect, impair, or invalidate the remainder of
this Lease, but be confined in its operation to the clause, sentence, paragraph,
or part thereof directly involved in the controversy in which such judgment
shall have been rendered, and in all other respects said Lease shall continue in
full force and effect.
ARTICLE 31. FINANCIAL STATEMENTS.
At Lessor's request, the Lessee, within thirty (30) days of Lessor's
request, shall furnish the Lessor with Lessee's most current annual financial
statements including the Lessee's balance sheet, a consolidated statement of
earnings and retained earnings, and changes in Lessee's financial position for
such year. All such statements shall be certified by an independent certified
public accountant. All such financial statements shall be prepared in
accordance with generally accepted accounting principles which shall be
consistently applied.
ARTICLE 32. AMERICANS WITH DISABILITIES ACT COMPLIANCE.
Lessor shall construct the building and the Leased Premises in
compliance with Americans with Disabilities Act of 1990 as amended ("ADA").
Notwithstanding anything set forth herein to the contrary, Lessor shall be
solely responsible and liable for making any modifications to the exterior of
the Building (including the exterior doors and entrances leading to the Leased
Premises) that may be required to comply with future amendments to the ADA.
Lessee, at its sole cost and expense, shall remove any barriers or provide such
accommodations as may be necessary for the interior of the Leased Premises to
comply with future amendments to the ADA. Any structural alterations or
renovations that the Lessee may make to the Premises, as permitted under this
Lease, shall comply with the accessibility standards and regulations of the ADA.
If the Lessee fails to fulfill its obligations under this Article, the Lessor
may elect to provide the modifications and renovations required pursuant to the
ADA and seek reimbursement from the Lessee. Should the Lessor incur any such
expenses for the obligations of Lessee, the amount of such expenses may, at the
Lessor's option, be added to the rent due from the Lessee under the terms of
this Lease. Lessor and Lessee hereby mutually indemnify and hold each other
harmless against any and all liability, losses, fines or other penalties that
may be incurred or assessed against the other, including reasonable attorney
fees, due to the failure of the other to adhere to their respective obligations
under this Article of the Lease.
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ARTICLE 33. MEMORANDUM OF LEASE.
It is agreed by both parties that this instrument is not recordable
and if either party should record the same in the Office of the Recorder of
Miami County, Ohio, the recording shall have no effect. When possession of the
Leased Premises has been delivered to Lessee, the parties hereto may execute,
acknowledge and deliver a Memorandum of Lease in recordable form specifying the
terms of this Lease and renewal periods of this Lease. In the event they differ
from the dates herein, the date in the Memorandum shall control.
ARTICLE 34. TIME.
Time is of the essence in this Lease.
ARTICLE 35. RIGHT TO TERMINATE.
Upon the full execution by and between the Lessee and Lessor of a new
lease for 40,000 square feet or more, for a term of five (5) years or more, in
one of Miller-Valentine's existing buildings, or a new building constructed by
Miller-Valentine, Lessor grants to the Lessee the right to terminate this Lease
and shall incur no penalty for exercising this right.
ARTICLE 36. ENTIRE AGENT.
This Lease contains the entire agreement between the parties; it
supersedes all previous understandings and agreements between the parties, if
any, and no oral or implied representation or understandings shall vary its
terms; and it may not be amended except by a written instrument executed by both
parties hereto.
IN WITNESS WHEREOF, the parties hereto set their hands to triplicates
hereof, this 11th day of November 1997, as to Lessor, and this 7th day of
November, 1997, as to Lessee.
14
<PAGE>
Signed and acknowledged LESSOR: MILLER-VALENTINE PARTNERS LTD.
Signed and acknowledged in LESSOR: MILLER-VALENTINE PARTNERS, LTD.
the presence of: an Ohio general partnership
/s/ Vernan H. Oakley BY: /s/ James M. Miller
- - - - - - - - - - - ---------------------------- -------------------------------
ITS: James M. Miller
General Partner
/s/ Michelle Atkinson
- - - - - - - - - - - ----------------------------
LESSEE: PRESTOLITE POWER CORPORATION
/s/ [ILLEGIBLE] BY: I.Conard Schwab
- - - - - - - - - - - ---------------------------- -------------------------------
ITS: I. Conrad Schwab
President
/s/ [ILLEGIBLE]
- - - - - - - - - - - ----------------------------
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was acknowledged before me this 11th day of November,
1997, by James M. Miller, General Partner on behalf of MILLER-VALENTINE
PARTNERS, LTD.
/s/ Sharon L. Rislund
---------------------
Notary Public
STATE OF Ohio, COUNTY OF Miami, SS:
---- -----
The foregoing instrument was acknowledged before me this 7th day of November,
1997, by I. Conrad Schwab the President of PRESTOLITE POWER CORPORATION, a
corporation, on behalf of said corporation.
/s/ Edward Hillman
------------------
Notary Public
15
<PAGE>
GUARANTEE
---------
In consideration of the leasing of the Premises at Corporate Way,
Troy, Ohio 45373 under a Lease dated November 7, 1997, by MILLER-VALENTINE
PARTNERS LTD. (Lessor) to PRESTOLITE POWER CORPORATION (Lessee) the undersigned
Guarantor does hereby unconditionally and continuingly guarantee Lessee's
performance under said Lease, and agree that if Lessee shall become in default
in the payment of rent or the performance of any other term or condition under
said Lease, then upon notice in writing of such fact, they will within ten (10)
days of receipt of such notice cure any existing default and continue to perform
or cause to be performed all obligations of the Lessee under such Lease. In the
event the Guarantor shall so direct, Lessor will thereafter recognize the
Guarantor as Lessee under the Lease. The Guarantor further consents
prospectively to any amendment of such Lease or any election shall not affect
their obligation under this Guarantee. In the event of default, Lessor may look
to the Guarantor for performance of all obligations of Lessee and for recovery
of any loss or damage resulting from such default without the necessity or prior
exhaustion of remedies against Lessee.
Guarantor acknowledge that Lessor entering into this Lease with Lessee
is adequate consideration to Guarantor to give this Guarantee.
IN WITNESS WHEREOF, the Guarantor have/has executed this Guarantee as
of the 7th day of November, 1997.
Witnessed By: By: PRESTOLITE ELECTRIC INCORPORATED
/s/ [ILLEGIBLE] /s/ I.C. Schwab
- - - - - - - - - - - ----------------------- ---------------
/s/ [ILLEGIBLE] Its: Vice President
- - - - - - - - - - - ------------------------ --------------
STATE OF OHIO, COUNTY OF Miami, SS:
The foregoing instrument was acknowledged before me this 7th day of November,
1997, by I. Conrad Schwab, the Vice President of PRESTOLITE ELECTRIC
INCORPORATED.
/s/ Edward Hillman
------------------
Notary Public
16
<PAGE>
WAREHOUSE/DISTRIBUTION
----------------------
AGREEMENT OF LEASE
------------------
TABLE OF CONTENTS
-----------------
LEASE FOR PRESTOLITE POWER CORPORATION
----------------------------
PROPERTY LOCATED AT 2216-2222 CORPORATE DRIVE, TROY, OHIO 45353
-------------------------------------------
<TABLE>
<CAPTION>
ARTICLE PAGE
- - - - - - - - - - - ------- ----
<S> <C> <C>
ARTICLE 1. TERM...................................... 4
ARTICLE 2. LEASED PREMISES........................... 4
ARTICLE 3. POSSESSION. INTENTIONALLY OMITTED........ 4
ARTICLE 4. RENT...................................... 4
ARTICLE 5. SECURITY DEPOSIT. INTENTIONALLY OMITTED.. 5
ARTICLE 6. COMMON AREA............................... 5
ARTICLE 7. USE OF LEASED PREMISES.................... 5
ARTICLE 8. REPAIRS................................... 5
ARTICLE 9. INSTALLATIONS AND ALTERATIONS............. 6
ARTICLE 10. INDEMNIFICATION........................... 6
ARTICLE 11. INSURANCE................................. 7
ARTICLE 12. DAMAGE BY FIRE OR OTHER CASUALTY.......... 7
ARTICLE 13. EMINENT DOMAIN............................ 8
ARTICLE 14. ASSIGNMENT OR SUBLETTING.................. 8
ARTICLE 15. ACCESS TO LEASED PREMISES................. 9
ARTICLE 16. ATTORNMENT................................ 9
ARTICLE 17. LIMITATION UPON LIABILITY................. 9
ARTICLE 18. LESSOR'S SUCCESSORS....................... 9
ARTICLE 19. LESSEE'S DEFAULT.......................... 10
ARTICLE 20. SURRENDER OF LEASED PREMISES.............. 10
ARTICLE 21. SUBORDINATION............................. 11
ARTICLE 22. NOTICE.................................... 11
ARTICLE 23. WAIVER OF SUBROGATION..................... 11
ARTICLE 24. ESTOPPEL CERTIFICATE...................... 11
ARTICLE 25. RENT DEMAND............................... 12
ARTICLE 26. NO REPRESENTATION BY LESSOR............... 12
ARTICLE 27. WAIVER OF BREACH.......................... 12
ARTICLE 28. QUIET ENJOYMENT........................... 12
ARTICLE 29. ENVIRONMENTAL PROVISIONS.................. 12
ARTICLE 30. INTERPRETATION............................ 13
ARTICLE 31. FINANCIAL STATEMENTS...................... 13
ARTICLE 32. AMERICANS WITH DISABILITIES ACT COMPLIANCE 13
ARTICLE 33. MEMORANDUM OF LEASE....................... 14
ARTICLE 34. TIME...................................... 14
ARTICLE 35. RIGHT TO TERMINATE........................ 14
ARTICLE 36. ENTIRE AGENT.............................. 14
</TABLE>
17
<PAGE>
EXHIBIT 10.26
LEASE
THIS INDENTURE evidences a lease agreement made and entered into this 12th day
of January, 1994, by and between the CITY OF WAGONER, OKLAHOMA, a municipal
corporation, as Lessor, and PRESTOLITE ELECTRIC INC., a corporation as Lessee,
the terms and conditions of which are as follows:
1. Lessor, in consideration of the agreements hereinafter set forth, does
by these presents lease unto Lessee the following described premises situated in
Wagoner County, Oklahoma, to-wit:
LEGAL DESCRIPTION
LOT 1, 2, 3, 4, 5, 6, BLOCK 372, AND WEST 60 FEET OF GRANT AVENUE ADJACENT TO
LOTS 1 AND 6 OF SAID BLOCK 372, ALL IN THE CITY OF WAGONER, WAGONER COUNTY,
OKLAHOMA, ACCORDING TO THE RECORDED PLAT THEREOF,
AND
THE FOLLOWING PORTIONS OF THE VACATED STREETS COMPRISING THOSE PORTIONS OF
SOUTHWEST FIRST STREET, AND SOUTHWEST SECOND STREET LYING BETWEEN THE EAST
RIGHT-OF-WAY LINE OF HAYS AVENUE AND THE WEST RIGHT-OF-WAY LINE OF GRANT AVENUE,
AND THE VACATED ALLEY IN BLOCK 372.
for a term of two (2) years beginning upon occupancy by lessee or when the
building is ready for occupancy by lessee, whichever occurs first.
1
<PAGE>
2. Lessee, in consideration of the premises herein set forth, agrees to
pay Lessor as rental for the leased premises, the sum of Five Thousand.Dollars
($5,000.00) per month, payable in advance on the 1st day of each calendar month
during the term hereof.
3. Lessee shall, at the expiration of the initial term hereof, have the
option to renew this lease for ten (10) additional successive terms of two (2)
years each on the same terms herein specified by giving Lessor written notice of
its election to exercise such option at lease ninety (90) days prior to the
expiration of the initial term hereof or any renewal term hereof, provided,
however, that lease payments shall increase for each renewal in an amount equal
to the percentage increase in the Consumer Price Index from the beginning date
of this lease to the renewal date or dates thereof. It is understood that the
lease payments hereunder shall not decrease regardless of the changes in the
Consumer Price Index.
4. Lessee may, at its own expense, erect and construct on the leased
premises any improvements, including signs, billboards, fixtures or other
equipment which Lessee deems necessary to the efficient operation of its
business and may remove, at any time during the term of this lease or any
extension thereof, any such signs, billboards, fixtures or other equipment not
attached to any building erected on the leased premises by Lessee. Any building
erected on the leased premises by Lessee and all fixtures hereto by Lessee and
constituting a part of such building shall, at the termination of this lease or
any extension thereof, become the property of Lessor. In addition, any signs,
billboards, fixtures or other equipment not removed from the leased premises by
Lessee during the term of this lease or any extension thereof shall, if not
removed from the leased premises within thirty (30) days after the termination
of this lease or any extension thereof, become the property of Lessor.
Notwithstanding anything to the contrary
2
<PAGE>
contained herein, Lessor acknowledges and agrees that Lessee may, at the
termination of this lease or any extension thereof, remove any fixtures or other
equipment installed by Lessee at the leased premises, including, but not limited
to, any machinery, equipment, compressed air systems, HVAC systems or similar
items.
5. Lessee shall pay all special assessments due and payable on the leased
premises during the term of this lease or any renewal thereof before such
assessments become delinquent. In the event Lessee shall fail to pay such
special assessments, Lessor may, at its option, consider such failure a default
of the terms of this lease in which event Lessor shall have all remedies
available to them under the provisions of Paragraph 11 hereof. The parties
acknowledge that Lessor is a tax exempt municipal corporation and that property
owned by municipal corporations may be exempt from ad valorem taxes. If ad
valorem taxes are properly assessed, Lessee shall pay said taxes to the taxing
authority. If ad valorem taxes are not assessed, Lessee shall pay to Lessor and
assessment in lieu of taxes in a sum equal to the amount ad valorem taxes would
be if assessed. Lessor will distribute said funds in the same percentages to
the same entities ad valorem taxes are paid and shall acknowledge that such
payment are from Lessee.
6. Lessee shall pay all charges for utilities used in or on the leased
premises.
7. Lessee may assign this lease or sublet the premises with the written
approval of Lessor; but any such assignment or subletting of the premises shall
not, without the written consent of Lessor, relieve Lessee of any duties imposed
upon Lessee under the terms of this lease.
8. In the event the entire leased premises are taken by eminent domain,
this lease shall terminate and expire as of the date of such taking and Lessor
shall repay to Lessee any
3
<PAGE>
unearned rentals held by Lessor and shall reimburse Lessee therefore. In the
event the entire leased premises or any portion thereof are taken by eminent
domain, Lessee shall be entitled to a proportionate share of any condemnation
award grant in the amount which any unamortized leasehold improvements made by
Lessee bear to the total value of the leased premises.
9. In the event that part of the leased premises are taken by eminent
domain which taking would substantially destroy the business being conducted
thereon by Lessee, then the Lessee shall have the option of terminating this
lease or electing to remain in that portion of the leased premises which have
not been taken. In the event part of the leased premises are taken by eminent
domain and this lease is not terminated but continues, the rent payable
hereunder shall be reduced in the proportion that the square footage of the
remaining part of the leased premises bears to the square footage of the entire
leased premises leased.
10. Lessee shall keep and maintain the leased premises in a neat, clean
condition and shall comply with all laws and ordinances related to the use by
Lessee of the leased premises. Lessee shall not use the leased premises in any
manner which would constitute a nuisance under the laws of the State of
Oklahoma, nor will Lessee permit any other person to use the premises in such a
manner as to constitute a nuisance under the laws of the State of Oklahoma.
11. Lessor shall give Lessee written notice of any default by Lessee in
the payment of rent or the performance of any other obligation to be kept or
performed by Lessee; and if such default continues for a period of thirty (30)
days after receipt by Lessee of a written notice from Lessor specifying such
default, Lessor may thereafter, without further notice or demand, enter onto the
leased premises and take full and absolute possession thereof, with such re-
entry causing
4
<PAGE>
a forfeiture of the rent to be paid or the covenants to be performed by Lessee
hereunder for the full term of this lease and may thereafter lease or sublease
the premises for such rent as Lessor may reasonably obtain, crediting Lessee
with the rent so obtained after deducting the costs Lessor reasonably incurs by
such re-entry, leasing or subleasing; or the Lessor, at its election may
terminate this lease and re-enter and take full and absolute possession of the
leased premises free from any further right or claim by Lessee.
12. All rental payments and notices required or to be furnished hereunder
shall be mailed, addressed as follows, until such addresses are changed by
thirty (30) days notice in writing:
LESSOR: City Clerk, P.O. Box 406, Wagoner, Oklahoma 74477
LESSEE: Prestolite Electric Inc., Hwy 20 West, P.O. Box 2205, Decatur, Alabama
35609
13. In the event of an assignment to creditors by Lessee or the
institution of bankruptcy proceedings by or against Lessee, Lessor may, at its
option, cancel this lease and all rights thereunder and the right to possession
of the property shall immediately by such cancellation, pass to Lessor at its
option.
14. In the event either Lessor and Lessee shall be required to institute
any legal proceedings to enforce the terms of this lease, the losing party shall
pay all cost and expenses incurred in that proceeding, including a reasonable
attorney's fee for the prevailing party to be fixed by the Court enforcing the
terms of this lease.
15. The parties hereto acknowledge that the leased premises have
previously been zoned for Industrial use and lessee intends to use the property
for Industrial purposes. Should, for any reason, the property be adjudged by a
Court of competent jurisdiction to be unusable for
5
<PAGE>
Industrial purposes, the obligation of Lessee shall immediately terminate.
16. Lessor further agrees to make, at its expense, certain modifications
to the buildings located on the property as reflected in the architectural
drawing attached hereto as "Exhibit A" and made a part hereof by reference.
Further modifications will be made by Lessee. The specifics of the
modifications are not final at the time of this agreement but both parties agree
to continue to work in good faith toward further identifying and agreeing to
necessary modifications and as to which party shall make said modifications.
17. Lessee shall be responsible for all usual and routine maintenance on
the facility including interior and exterior walls, roof, flooring, mechanical,
electrical and plumbing. Lessor will be responsible for major repairs on
replacement such as roof replacement, or the replacement of unrepairable
flooring, mechanical, electrical and plumbing.
18. Upon termination of this lease, Lessee will surrender the leased
premises to Lessor in as good condition as they are at the commencement of this
lease, reasonable wear and tear incident to Lessee's business along excepted.
19. Lessee shall maintain, during the entire term hereof, general
liability insurance for injury to, or death of, persons, and damage to property
occurring in or on the leased premises and arising out of the negligence of
Lessee, its employees or agents. Such insurance shall be in such amount as may
be agreed upon from time to time between Lessor and Lessee. Lessee shall furnish
Lessor a certificate evidencing that such insurance is in effect. Further Lessee
shall insure the premises against casualty loss and Lessor shall be named Loss
Payee on said property in a sum of not less than $500,000.00. Said sum shall be
adjusted at each renewal date in an amount equal to the percentage increase in
the Consumer Price Index from the beginning of
6
<PAGE>
the lease date to the renewal date thereof. Lessee shall furnish Lessor a
certificate evidencing that such insurance in effect.
20. The terms and conditions of this lease shall extend to, and be binding
upon the heirs, executors, administrators, devisers, trustees, successors and
assigns of the parties hereto.
21. Lessor covenants that Lessee, upon payment of all rentals and other
amounts described in this lease and upon performance of all other obligations of
Lessee under this lease, shall and may peacefully have, hold and enjoy the
leased premises for the prescribed term of this lease.
7
<PAGE>
IN WITNESS WHEREOF the parties hereto have hereunto set their hands this
12th day of January, 1994
THE CITY OF WAGONER, OKLAHOMA
a municipal corporation
By: /s/ Kenneth D. Peters
-------------------------
Kenneth D. Peters, Mayor
ATTEST:
/s/ Linda K. Gaylor
- - - - - - - - - - - --------------------
Linda K. Gaylor
City Clerk
PRESTOLITE ELECTRIC, INC.
By: /s/ Rogar A. Cutsinger
------------------------
Corporate Officer
ATTEST:
Corporate Secretary
Copies To: Prestolite Electric Inc.
2100 Common Wealth Blvd.
Ann Arbor, Michigan 48105
Prestolite Electric Inc.
300 S.E. 15th
Wagoner, Oklahoma 74467
8
<PAGE>
EXHIBIT 10.27
FIRST LEASE AMENDMENT
---------------------
THIS FIRST LEASE AMENDMENT (the "Amendment") is executed this 31st day
----
of JULY, 1996, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
----
limited partnership ("Landlord"), and PRESTOLITE ELECTRIC INCORPORATED, a
Delaware corporation ("Tenant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Tenant entered into a certain Lease dated June 28,
1996 (the "Lease"), whereby Tenant leased from Landlord certain premises
consisting of approximately 85,000 square feet of space (the "Original
Premises") located at 7585 Empire Drive, Florence, Kentucky 41042; and
WHEREAS, Landlord and Tenant desire to expand the Original premises by
5,365 square feet (the "Additional Space"). Collectively, the Original Premises
and Additional Space shall hereinafter be referred to as the "Leased Premises";
and
WHEREAS, Landlord and Tenant desire to amend certain provisions of the
Lease to reflect such expansion;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants herein contained and each act performed hereunder by the parties,
Landlord and Tenant hereby enter into this Amendment.
1. Amendment of Paragraph 1.
------------------------
Paragraph 1 of the Lease is hereby amended as follows:
B. Rentable Area: approximately 90,365 square feet;
C. Building Expense Percentage: 60.9%;
D. Minimum Annual Rent:
Years 1-5 $296,595.00 per year;
E. Monthly Rental installments:
Months 1-60 $24,716.25 per month;
2. Amendment of paragraph 2
------------------------
Paragraph 2 of the Lease is hereby amended by substituting Amended
-------
Exhibit A, attached hereto and incorporated herein by reference, on which the
- - - - - - - - - - - ---------
original Premises are striped and the Additional Space is cross-hatched, in lieu
of Exhibit A attached to the Lease.
---------
3. Tenant's Representations and Warranties. The undersigned represents
---------------------------------------
and warrants to Landlord that (i) Tenant is duly organized, validly existing and
in good standing in accordance with the laws of the state under which it was
organized; (ii) all action necessary to authorize the execution of this
Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
<PAGE>
4. Examination of Amendment. Submission of this instrument for
------------------------
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
5. Definitions. Except as otherwise provided herein, the capitalized
-----------
terms used in this Amendment shall have the definitions set forth in the Lease.
6. Incorporation. This Amendment shall be incorporated into and made a
-------------
part of the Lease, and all provisions of the Lease not expressly modified or
amended hereby shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
WITNESSES: DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
/s/ Bob Fessler
__________________________ By: Duke Realty Investments, Inc.,
BOB FESSLER Its general partner
__________________________
(Printed) /S/ Jeffrey G. Tulloch
By: _______________________
/s/ Nicole C. Stevens Jeffrey G. Tulloch
__________________________ Vice President
NICOLE C. STEVENS Cincinnati Group
__________________________
(Printed)
TENANT:
WITNESSES: PRESTOLITE ELECTRIC INCORPORATED,
a Delaware corporation
/s/ Melissa E. York
__________________________ /s/ Thomas R. Jennett
MELISSA E. YORK By: _________________________
__________________________
(Printed) THOMAS R. JENNETT
Printed: _____________________
/s/ Stephen C. Denison
__________________________ DIV. PRESIDENT
STEPHEN C. DENISON Title: ______________________
__________________________
(Printed)
WITNESSES: /s/ K. Cornelius
By: _________________________
/s/ Joan E. Tobin
__________________________ K. CORNELIUS
JOAN E. TOBIN Printed: _____________________
__________________________
(Printed) Vice President
Title: ______________________
/S/ Karen A. Oldham
__________________________
KAREN A. OLDHAM
__________________________
(Printed)
-2-
<PAGE>
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State, personally
appeared Jeffrey G. Tulloch, by me known and by me known to be the Vice
President, Cincinnati Group of Duke Realty Investments, Inc., an Indiana
corporation, the general partner of Duke Realty Limited partnership, an Indiana
limited partnership, who acknowledged the execution of the foregoing "First
Lease Amendment" on behalf of said partnership.
WITNESS my hand and Notarial Seal this 31 day of July, 1996.
-- ----
[NOTARIAL SEAL APPEARS HERE] /s/ Nicole C. Stevens
____________________________
Notary Public
NICOLE C. STEVENS
____________________________
(Printed Signature)
My Commission Expires: 10/31/00
--------------
My County of Residence: Hamilton
-------------
<PAGE>
STATE OF MICHIGAN )
) SS:
COUNTY OF MONROE )
Before me, a Notary Public in and for said County and State, personally
appeared Kenneth C. Cornelius, by me known and by me known to be the Vice
-------------------- ----
President of Prestolite Electric Incorporated, a Delaware corporation, who
- - - - - - - - - - - ---------
acknowledged the execution of the foregoing "First Lease Amendment" on behalf of
said corporation.
WITNESS my hand and Notarial Seal this 15th day of July, 1996.
---- ----
[NOTARIAL SEAL APPEARS HERE] /s/ Karen A Oldham
____________________________
Notary Public
KAREN A. OLDHAM
____________________________
(Printed Signature)
My Commission Expires: 7/10/98
---------
My County of Residence: Monroe
---------
-4-
<PAGE>
STATE OF KENTUCKY )
)
COUNTY OF BOONE )
Before me, a Notary Public in and for said County and State, personally
appeared Thomas R. Jennett, by me known and by me known to be the Division
President of Prestolite Electric Incorporated, a Delaware corporation, who being
first duly sworn, acknowledged the execution of the foregoing "Lease Agreement"
for and on behalf of said corporation.
WITNESS my hand and Notarial Seal this 24 day of July, 1996.
-- ----
/s/ Melissa E. York
____________________________
Notary Public
My Commission Expires: January 29, 2000 [NOTARIAL SEAL APPEARS HERE]
--------------------
My County of Residence: Pendleton
--------------------
<PAGE>
[MAP PRESTOLITE APPEARS HERE]
7585 Empire Drive
Boone County, Kentucky
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT. executed this 28th day of June 1996, by and between
DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership ("Lessor"), and
PRESTOLITE ELECTRIC INCORPORATED, an Delaware corporation ("Lessee").
WITNESSETH
1. Basic Lease Provisions. The following constitute the "Basic Lease
----------------------
Provisions" and definitions:
A. Building Name/Number. Prestolite Building;
Address: 7585 Empire Drive, Florence, Kentucky;
B. Rentable Area: approximately 85,000 square feet;
C. Building Expense Percentage: 57.3%;
D. Minimum Annual Rent:
Years 1-5 $280,500.00 per year;
E. Monthly Rental Installments:
Months 1-60 $23,375.00 per month;
F. Term: Five (5) years and zero (0) months;
G. Commencement Date: July 1, 1996;
H. Base Amount: $0.00;
I. Security Deposit: $0.00;
J. Brokers: Duke Realty Limited Partnership and Ostendorf Morris;
K. Address for payments and notices as follows:
Lessor: Duke Realty Limited Partnership
8044 Montgomery Road, Suite 600
Cincinnati, Ohio 45236
Lessee: Prestolite Electric Incorporated
7585 Empire Drive
Florence, KY 41042
Address for rental
and other payments: Duke Realty Limited Partnership
P.O. Box 960664
Cincinnati, Ohio 45296-0664
2. The Leased Premises. Lessor hereby leases and demises to Lessee and
-------------------
Lessee agrees to lease from Lessor a portion of the certain building described
in Item A of the Basic Lease Provisions (the "Building"). The portion of the
Building hereby leased to Lessee has a gross area of approximately the square
footage shown in Item B of the Basic Lease Provisions, and is cross-hatched on
the floor plan attached hereto as Exhibit A which is incorporated herein by
---------
reference (the "Leased Premises").
<PAGE>
Lessor also grants to Lessee, together with and subject to the same rights
granted from time to time by Lessor to other lessees and occupants of the
Building, the non-exclusive right to use the common parking area adjoining the
Building, access roads, ingress-egress and any other facilities intended for
common use by all lessees within the Building.
Notwithstanding anything contained herein to the contrary, Lessee agrees to
the non-exclusive use of two (2) dock doors while Lessor constructs two (2)
additional dock doors in the Building.
3. Term.
----
(A) The term of this Lease shall be for the period shown in Item F of the
Basic Lease Provisions (the "Lease Term") commencing on the Commencement Date
shown in Item G of the Basic Lease Provisions. See page 2A attached hereto.
(B) Lessee has personally inspected the Leased Premises and accepts the
same "as is" without representation or warranty by Lessor of any kind and with
the understanding that Lessor shall have no responsibility with respect thereto
except to construct in a good and workmanlike manner the improvements, if any,
designated as Lessor's obligations in the attached Exhibit B, so that the Leased
---------
Premises will be available for Lessee's occupancy by the Commencement Date,
unless prevented by causes beyond Lessor's reasonable control. Such improvements
shall be in accordance with and at the expense of the party indicated on
Exhibit B.
- - - - - - - - - - - ---------
(C) Lessee agrees that if Lessor is unable to deliver possession of the
Leased Premises on the Commencement Date, then Lessor shall not be liable to
Lessee for any loss or damage therefrom, nor shall this Lease be void or
voidable; but in such event the Commencement Date, termination date and all of
the dates of the Lease Term shall be extended to conform to the time of Lessor's
tendered possession of the Leased Premises to Lessee, and Lessee shall not be
obligated to pay Minimum Annual Rent or other sums due Lessor until possession
of the Leased Premises is tendered to Lessee.
4. Minimum Rent.
------------
(A) Lessee agrees to pay as minimum rent for the Leased Premises the sum
of the Minimum Annual Rent as set forth in Item D of the Basic Lease Provisions
payable in Monthly Rental installments as set forth in Item E of the Basic Lease
Provisions without deduction or set-off. The Monthly Rental installments shall
be paid in advance beginning on the Commencement Date and on the first day of
each month thereafter for the term of this Lease (the "Minimum Rent"). The
Monthly Rental installments for partial months shall be prorated based on the
number of the days in such month which are included within the Lease Term
divided by thirty (30).
(B) Lessee acknowledges that Lessor shall incur certain additional
unanticipated costs and expenses, including administrative costs and attorneys'
fees, if Lessee fails to timely pay any payment required hereunder. Therefore,
as compensation for such additional expenses, and in addition to the other
remedies available to Lessor hereunder, if any payment of Minimum Rent or any
other sum or charge required to be paid by Lessee to Lessor hereunder shall
become overdue for a period of five (5) days, a late charge of ten percent (10%)
of the payment so due shall be paid by Lessee as additional rent. In addition,
if Lessee fails to pay within thirty (30) days after the same is due and payable
any sum or charge required to be paid by Lessee to Lessor, such unpaid amount
shall bear interest from the due date thereof to the date of payment at the rate
of twenty-one percent (21%) per annum.
5. Additional Rent, Lessee agrees to pay as "Additional Rent" its
---------------
proportionate share of the amount paid or incurred by Lessor during the Lease
Term for real estate taxes, insurance premiums and common area expenses for the
Building and appurtenant common areas (collectively "Operating Expenses") to the
extent any such amount exceeds the Base Amount per square foot of the Building
area per year as set forth in Item H of the Basic Lease Provisions. Operating
Expenses shall include all Lessor's expenses for operation, repair and
maintenance as necessary to keep the Building and appurtenant common areas in
good order, condition and repair, including but not limited to, utilities (to
the extent such are not separately
2
<PAGE>
Option to Extend.
----------------
A. Grant and Exercise of Option. Provided (i) Lessee is not in default
----------------------------
hereunder, and (ii) Lessee originally named herein remains in possession of and
has continuously operated its business in the Leased Premises, Lessee shall have
the option to extend the Term of this Lease (the "Original Term") for two (2)
additional periods of five (5) years each (the "Extension Term(s)"). The
Extension Term shall be upon the same terms and conditions contained in the
Lease for the Original Term except (i) this provision giving two (2) extension
options shall be amended to reflect the remaining options to extend, if any and
(ii) the Minimum Annual Rent shall be adjusted as set forth below (the "Rent
Adjustment"). Lessee shall exercise such option by (i) delivering to Lessor no
later than one hundred twenty (120) days prior to the expiration of such Term,
written notice of Lessee's desire to extend the Term of the Lease and (ii)
delivering to Lessor within ten (10) business days of receipt of the Rent
Adjustment, written notice of its acceptance thereof or withdrawal of its
exercise of such option. Unless Lessor otherwise agrees in writing, Lessee's
failure to timely exercise such option shall waive it and any succeeding option.
Lessor shall notify Lessee of the amount of the Rent Adjustment no later than
ninety (90) days prior to the commencement of the Extension Term. If Lessee
properly exercises its option to extend, Lessor and Lessee shall execute an
amendment to the Lease reflecting the terms and conditions of the Extension
Term.
B. Market Rent Adjustment. The Minimum Annual Rent for the applicable
----------------------
Extension Term shall be an amount equal to the Minimum Annual Rent then being
quoted by Lessor to prospective tenants of the Building for space of comparable
size and quality and with similar or equivalent improvements as are found in the
Building, and if none, then in similar buildings in the vicinity; provided,
however, that in no event shall the Minimum Annual Rent during any Extension
Term be less than the highest Minimum Annual Rent payable during the immediately
preceding Term. The Minimum Monthly Rent shall be an amount equal to one-twelfth
(1/12) of the Minimum Annual Rent for the Extension Term and shall be paid at
the same time and in the same manner as provided in the Lease.
2A
<PAGE>
metered), expenses associated with the fire suppression system, driveways,
access roads and parking areas (including resealing, repatching of the parking
lot and snow, trash and ice removal), security systems, lighting facilities,
landscaped areas, walkways, directional signage, curbs, drainage strips, sewer
lines, roof, painting, inspection fees, and all charges assessed against the
Building pursuant to any applicable easements, covenants or development
standards, and management fees (equal annually to fifteen percent (15%) of the
total Operating Expenses for the Building for such year). Operating Expenses
shall not include the costs for capital improvements unless such costs result in
a decrease in the Operating Expenses of the Building, are required by any
governmental authority. The proportionate share to be paid by Lessee shall be a
percentage based upon the proportion that the square footage of the Leased
Premises bears to the total square footage of the Building, which proportion
shall be the amount set forth as the Building Expense Percentage in Item C of
the Basic Lease Provisions. Lessor shall be entitled to estimate the total
amount of Additional Rent to be paid by Lessee during each calendar year and,
upon notice to Lessee of such estimate, to collect such estimate in twelve (12)
equal installments, each such installment due with thc Monthly Rental
Installment payable under this Lease. Within a reasonable-time after the end of
such calendar year, Lessor shall submit to Lessee a statement of the actual
amount of Operating Expenses and the Additional Rent due from Lessee hereunder,
and within thirty (30) days after receipt or such statement, Lessee shall pay
any deficiency between the actual amount owed and the estimates paid during such
calendar year, or in the event of overpayment, Lessor shall credit the amount of
such overpayment toward the next Monthly Rental Installments of Minimum Rent. It
is not intended, however, that Lessee be required to pay its share of any
increased tax assessments resulting from additional improvements constructed for
other lessees in the Building after the Building has been fully completed and
assessed. Operating Expenses shall not include any costs for the initial repairs
and replacements made as part of the improvements to the Building and common
areas as set forth in the second sentence of Section 9B and on Exhibit B-1
attached hereto. -----------
As used herein, the term "real estate taxes" shall include any form of real
estate tax or assessment, general, special, ordinary or extraordinary, and any
license fee, commercial rental tax, improvement bond or bonds, levy or tax
(other than inheritance, personal income or estate taxes) imposed upon the
Leased Premises by any authority having the direct or indirect power to tax,
including any city, state or federal government or any school, agricultural,
sanitary, fire, street, drainage or other improvement district thereof, or
against Lessor's business of leasing the Leased Premises. If the Leased Premises
are not separately assessed, then Lessee's liability shall be an equitable
proportion of the real estate taxes for all of the land and improvements
included within the tax parcel assessed, such proportion to be determined by
Lessor from the respective valuations assigned in Assessor's worksheets or such
other information as may be reasonably available. Lessor's reasonable
determination thereof, in good faith shall be conclusive.
Lessee shall pay, prior to delinquency, all taxes assessed against and levied
upon trade fixtures, furnishings, equipment and all other personal property of
Lessee contained in the Leased Premises or elsewhere. Lessee shall cause such
trade fixtures, furniture, equipment and all other personal property to be
assessed and billed separately from the Leased Premises.
6. Utilities. Lessee shall pay the costs of all utilities serving the Leased
---------
Premises which are separately metered and its proportionate share of any
utilities not separately metered. Lessor does not warrant the uninterrupted
availability of such utilities and any interruption shall not be deemed an
eviction or disturbance of Lessee's right to possession, occupancy and use of
the Leased Premises or any part thereof or render Lessor liable to Lessee for
damages by abatement of rent or otherwise or relieve Lessee from the obligation
to perform its covenants under this Lease. Notwithstanding paragraph 5 and 6
above, Lessee agrees to pay during the Term and any renewals all costs for heat
to the Building so long as the use of the non Leased Premises of the Building is
limited to warehouse uses with minimal associated office space.
7. Security Deposit. Lessee hereby deposits with Lessor the sum set forth in
----------------
Item I of the Basic Lease Provisions as security for the full and faithful
performance by Lessee of all of the terms, conditions and covenants contained in
this Lease on the part of Lessee to be performed, including but not limited to
the payment of the rent. In the event of a default by Lease of any term,
condition or covenant herein contained, Lessor may apply all or part of
3
<PAGE>
such security deposit to curing all or any part of such default; and Lessee
agrees to promptly, upon demand, deposit such additional sum with Lessor as may
be required to maintain the full amount of the security deposit. All sums held
by Lessor pursuant to this section shall be without interest. At the end of the
Lease Term, provided that there is then no uncured default, Lessor shall return
the security deposit to Lessee.
8. Use of Leased Premises. The Leased Premises are to be used by Lessee for
----------------------
office use, warehousing, storage and related purposes, and for no other purpose
without the prior written consent of Lessor. Lessee shall not use the Leased
Premises or fail to maintain them in any manner, constituting a violation of the
covenants or any ordinance, statute, regulation or order of any governmental
authority, including but not limited to those governing zoning, health, safety
and occupational hazards, and pollution and environmental control. Lessee shall
not maintain or permit any nuisance to occur on the Leased Premises; nor shall
Lessee's use of the Leased Premises interfere with the reasonable use of the
Building or the common parking areas associated therewith by other lessees.
Lessee shall comply with and obey all reasonable directions of Lessor including
the Rules and Regulations attached to this Lease as Exhibit C and those that may
be adopted by Lessor from time to time.
Lessee covenants and agrees that Lessee will use, maintain and occupy the
Leased Premises in a careful, safe and proper manner and will not commit waste
thereon.
9. Maintenance and Repairs. During the term of this Lease:
-----------------------
(A) Lessee shall, at its own cost and expense, maintain in good
condition and repair the interior of the Leased Premises, including but not
limited to the electrical systems, heating, air conditioning and ventilation
systems, plate glass, windows and doors, sprinkler and plumbing systems.
Lessee's obligations to repair and maintain the Leased Premises shall include
without limitation all plumbing and sewage facilities within the Leased
Premises; fixtures; interior walls; floors; ceilings; windows in the storefront;
doors; plate glass; show cases; skylights; all electrical facilities and
equipment including without limitation lighting fixtures, lamps, fans and any
exhaust equipment and systems; electrical motors; and all other appliances and
equipment of every kind and nature located in, upon or about the Leased Premises
except as to such maintenance and repair as is the obligation of Lessor pursuant
to Subparagraph 9(B) herein. All glass, both interior and exterior, is at the
sole risk of Lessee; and any broken glass shall be promptly replaced at Lessee's
expense by glass in kind, size and quality. Lessee shall obtain a preventative
maintenance contract on the heating, ventilating and air conditioning systems
which shall be subject to the reasonable approval of Lessor and paid for by
Lessee. Notwithstanding anything contained herein to the contrary, Lessee agrees
to maintain at its sole cost and expense, the boiler and heating system and
replace at its sole cost and expense air conditioning and ventilation system
units servicing the Leased Premises. See page 4A attached hereto.
(B) Lessor shall maintain in good condition and repair the exterior
walls, roof, foundation and structural frame of the Building, the fire
suppression system and the parking and landscaped areas and provide the services
which make up the Operating Expenses, the costs of which shall be included in
Operating Expenses provided, to the extent any of the foregoing items require
repair because of the negligence, misuse or default of Lessee, its employees or
invitees, Lessor shall make such repairs at Lessee's expense. Lessor shall at
its own cost and expense, replace the roof, parking lot, the boiler and heating
systems and make other replacements to the Building and Building systems as
Lessor deems necessary.
(C) Unless the same is caused solely by the negligence or willful
misconduct of Lessor, Lessor shall not be liable to Lessee or to any other
person for any damage occasioned by failure in any utility system or by the
bursting or leaking of any vessel or pipe in or about the Lead Premises; or for
any damage occasioned by water coming into the Leased Premises or arising from
the acts or neglects of occupants of adjacent property or the public.
10. Alterations. Lessee shall not permit alterations of or upon any part
-----------
of the Leased Premises or additions to the Leased Premises without first
obtaining the written consent of Lessor. As a condition of such consent, Lessor
may require Lessee to remove the alterations and restore the Leased Premises
upon termination of this Lease.
4
<PAGE>
Lessor agrees to contribute toward the cost of any repairs or replacements of
the air conditioning and ventilation system units servicing the Leased Premises
in the maximum amount of Six Thousand Dollars ($6,000.00) in the aggregate for
such repairs or replacements made during the fourth (4th) and fifth (5th) years
of the term of the Lease.
4A
<PAGE>
Any alterations, improvements or utility installations in, on or about the
Leased Premises that Lessee shall desire to make which require the consent of
Lessor shall be presented to Lessor in written form with proposed detailed
plans. If Lessor shall give its consent, such consent shall be deemed
conditioned upon (i) Lessee's acquiring a permit to do so from appropriate
governmental agencies, (ii) the furnishing of a copy thereof to Lessor prior to
the commencement of the work and (iii) the compliance by Lessee of all
conditions of said permit in a prompt and expeditious manner. All alterations
and additions to the Leased Premises shall be made in accordance with all
applicable laws and Lessee shall indemnify and save harmless Lessor from all
costs, loss or expense in connection with any construction or installation. All
alterations, additions or improvements shall be installed at Lessee's sole
expense in compliance with all applicable laws and by a licensed contractor
approved in writing by Lessor. Lessor may require Lessee to provide Lessor, at
Lessee's sole cost and expense, a lien and completion bond in an amount equal to
one and one-half (1-1/2) times the estimated cost of such improvements to insure
against any liability for mechanic's and materialmen's liens and to insure
completion of the work. No person shall be entitled to any lien directly or
indirectly derived through or under Lessee or through or by virtue of any act or
omission of Lessee upon the Leased Premises for any improvements or fixtures
made thereon or installed therein or for or on account of any labor or material
furnished to the Leased Premises or for or on account of any matter or thing
whatsoever; and nothing in this Lease contained shall be construed to constitute
a consent by Lessor to the creation of any lien. In the event any lien is filed
against the Leased Premises, or any part thereof, for work claimed to have been
done for or material claimed to have been furnished to Lessee, Lessee shall
cause such lien to be discharged of record within thirty (30) days after filing
by bonding or as provided or required by law or in any other lawful manner.
Lessee shall indemnify and save harmless Lessor from all costs, losses,
expenses, and attorneys' fees in connection with any such lien.
11. Inspection. Lessor or Lessor's agent shall be permitted to inspect or
----------
examine the Leased Premises at any reasonable time, and Lessor shall have the
right to make any repairs to the Leased Premises which are necessary for its
preservation; provided, however, that any repairs made by Lessor shall be at
Lessee's expense, except as provided in Section 9(b) hereof. In addition, during
the last ninety (90) days of the Lease Term, Lessor shall have the right to show
the Leased Premises to prospective lessees; provided, however, that Lessor shall
use good faith efforts to minimize any disruption to Lessee's business. Lessor
shall incur no liability to Lessee for such entry, nor shall such entry
constitute an eviction of Lessee or termination of this Lease, or entitle Lessee
to any abatement of rent.
12. Assignment and Sublease. Lessee shall not assign or sublet this Lease
-----------------------
in whole or in part without the prior written consent of Lessor. In the event
Lessor consent to such assignment or subletting, Lessee shall remain primarily
liable to perform all of the covenants and conditions contained in this Lease,
including but not limited to payment of Minimum Rent and Additional Rent as
provided herein. The acceptance of rent from any other person shall not be
deemed to be a waiver of any of the provisions of this Lease or to be a consent
to the assignment of this Lease or the subletting of the Leased Premises.
Without in any way limiting Lessor's right to refuse to give consent to any
assignment or subletting of this Lease, Lessor reserves the right to refuse to
give consent if in Lessor's discretion and opinion (i) the use of the Leased
Premises is or may be in any way adversely affected; (ii) the business
reputation of the proposed assignee or sublessee is deemed unacceptable; or
(iii) the financial worth of the proposed assignee or sublessee is less than
that of Lessee. Lessor further expressly reserves the right to refuse to give
its consent to any subletting if the proposed rent is to be less than the then
current rent for similar premises in the development of which the Building is a
part (the "Development"). Lessee agrees to reimburse Lessor for reasonable
accounting and attorneys' fees incurred in conjunction with the processing and
documentation of any such requested transfer, assignment, subletting or any
other hypothecation of this Lease or Lessee's interest in and to the Leased
Premises.
If Lessee, having obtained Lessor's consent, shall assign this Lease or
sublet the Leased Premises or any part thereof at a rental or for other
consideration in excess of the Minimum Rent or pro rata portion thereof due and
payable by Lessee under this Lease, then Lessee shall pay to Lessor as
additional rent all such excess rent or other monetary consideration immediately
upon receipt thereof from said assignee or sublessee. If only a portion of the
5
<PAGE>
Leased Premises is being sublet, the Minimum Rent due under the terms of this
Lease shall be allocated on a square foot basis to the portion so sublet, and
all excess rent or other consideration due from the sublessee for such month
over the portion of the Minimum Rent so allocated shall be paid to Lessor
immediately upon receipt thereof. It is agreed, however, that Lessor shall not
be responsible for any deficiency if Lessee shall assign this Lease or sublet
the Leased Premises or any part thereof at a rental less than provided for
herein.
13. Fire and Extended Coverage Insurance. During the term of this Lease,
------------------------------------
Lessor shall maintain fire and extended coverage insurance on the Building (the
premiums for which shall be included in Operating Expenses), but shall not
protect Lessee's property on the Leased Premises; and, Lessor shall not be
liable for any damage to Lessee's property, however, caused. Lessee agrees to
maintain insurance on all of its property in the Leased Premises. Lessee hereby
expressly waives any right of recovery against Lessor for damage to any property
of Lessee located in or about the Leased Premises, unless due to the gross
negligence of Lessor; and, Lessor hereby expressly waives any rights of recovery
against Lessee for damage to the Leased Premises or the Building resulting from
the perils insured against under Lessor's fire and extended coverage insurance.
All insurance policies maintained by Lessor or Lessee as provided in this
Section shall contain an agreement by the insurer waiving the insurer's right of
subrogation against the other party to this Lease or agreeing not to acquire any
rights of recovery which the insured has expressly waived prior to loss.
Lessee shall not use the Leased Premises in any manner or store anything in or
upon the Leased Premises which would result in an increase in the premiums for
the fire and extended coverage insurance.
14. Fire and Other Casualty. In the event of total or partial destruction of
-----------------------
the Leased Premises by fire or other casualty insured under the fire and
extended coverage insurance provided pursuant to the terms of this Lease, and in
the event that the insurance proceeds are released by any mortgagee entitled to
such proceeds, Lessor agrees to promptly restore and repair the Leased Premises
at Lessor's expense; provided, however, that in the event the Leased Premises
are (i) so destroyed that they cannot be repaired or rebuilt within one hundred
twenty (120) days after the date of the damage or destruction; or (ii) destroyed
by a casualty which is not covered by the insurance required hereunder, then, in
the case of a clause (i) casualty, either Lessor or Lessee may, or, in the case
of a clause (ii) casualty, then Lessor may, upon thirty (30) days written notice
to the other party, terminate and cancel this Lease; and all further obligations
hereunder shall thereupon cease and terminate. Lessor shall determine whether or
not it is going to repair or rebuild within fifteen days after Lessor receives a
determination from the insurance carrier regarding the availability and amount
of insurance proceeds for rebuilding under clause (i) or within thirty (30) days
after a casualty in the event of a casualty under clause (ii). In the event of a
clause, (i) damage or destruction as described above, Lessee shall have thirty
(30) days after Lessor determines to repair or rebuild the Leased Premises to
terminate this Lease. Any proceeds from the fire and extended coverage insurance
policies not utilized by Lessor in restoring or repairing the Leased Premises
shall become the sole property of Lessor. Rent shall proportionately abate
during the time that the Leased Premises or part thereof are unusable by reason
of any such damage thereto.
15. Liability Insurance. Lessor shall not be liable to Lessee or to any other
-------------------
person for (i) damage to property or injury or death to persons due to the
condition of the Leased Premises, the Building or the appurtenant common areas,
or (ii) the occurrence of any accident in or about the Leased Premises or the
appurtenant common areas, or (iii) any act or neglect of Lessee or any other
tenant or occupant of the Building or of any other person, unless such damage,
injury or death is the result of Lessor's gross negligence; and Lessee hereby
releases Lessor from any and all liability for the same. Lessee shall be liable
for, and shall indemnify and defend Lessor and hold it harmless from, any and
all liability for (i) any act or neglect of Lessee and any person coming on the
Leased Premises or appurtenant common areas by the license of Lessee, express or
implied, (ii) any damage to the Leased Premises, and (iii) any loss of or damage
or injury to any person (including death resulting therefrom) or property
occurring in, on or about the Leased Premises, regardless of cause, except for
any loss or damage from fire or casualty insured as provided herein and except
for that caused by Lessor's gross negligence. Notwithstanding the foregoing,
Lessee shall bear the risk of any loss or damage to its property.
6
<PAGE>
Lessee, in order to insure against the liabilities specified in this Lease,
shall at all times during the term of this Lease carry, at its own expense, one
or more policies of general public liability and property damage insurance,
issued by one or more insurance companies holding a general policyholder's
rating of at least A+ as set forth in the most current issue of "Best's
Insurance Guide," and acceptable to Lessor, with the following minimum
coverages:
A. Worker's Compensation: minimum statutory amount.
B. Comprehensive General Liability Insurance, including blanket, contractual
liability, broad form property damage, personal injury, completed
operations, products liability, and fire damage: Not less than $1,000,000
Combined Single Limit for both bodily injury and property damage.
C. Fire and Extended Coverage, Vandalism and Malicious Mischief, and Sprinkler
Leakage insurance, if applicable, for the full cost of replacement of
Lessee's property.
D. Business interruption insurance.
The insurance policy or policies shall protect Lessee and Lessor as their
interests may appear, naming Lessor and Lessor's managing agent and mortgagee as
additional insureds, and shall provide that they may not be cancelled on less
than thirty (30) days prior written notice to Lessor. Lessee shall furnish
Lessor with Certificates of Insurance evidencing all required coverage. Should
Lessee fail to carry such insurance and furnish Lessor with such Certificates of
Insurance after a request to do so, Lessor shall have the right to obtain such
insurance and collect the cost thereof from Lessee as additional rent.
16. Waiver of Subrogation. Lessor and Lessee each hereby release and
---------------------
relieve the other and waive their entire right of recovery against the other for
loss or damage arising out of or incident to the perils insured against or which
are required to be insured against pursuant to the terms of this Lease, which
perils occur in, on or about the Leased Premises.
17. Eminent Domain. If all or any substantial part of the Building or
--------------
appurtenant common areas shall be acquired by the exercise of eminent domain,
Lessor may terminate this Lease by giving written notice to Lessee thirty (30)
days prior to possession thereof is so taken. If all or any part of the Leased
Premises shall be acquired by the exercise of eminent domain in such a manner
that the Leased Premises shall become unusable by Lessee for the purpose for
which it is then being used, Lessee may terminate this Lease by giving written
notice to Lessor within fifteen (15) days after notice of condemnation and this
Lease shall terminate upon the date the Leased Premises or part thereof is so
taken. Lessee shall have no claim against Lessor on account of any such
acquisition for the value of any unexpired lease term remaining after possession
of the Leased Premises is taken. All damages awarded shall belong to and be the
sole property of Lessor; provided, however, that Lessee shall be entitled to any
award expressly made to Lessee by any governmental authority for the cost of or
the removal of Lessee's stock, equipment and fixtures and other moving expenses.
18. Lessor's Right to Mortgage. Lessee agrees at any time, and from time
--------------------------
to time. to execute a consent to the assignment of this Lease by Lessor to its
mortgagee. Lessee's rights shall be subject and subordinate to any bona fide
mortgage now existing upon or hereafter placed upon the Leased Premises by
Lessor; provided, however, that if the mortgagee shall take title to the Leased
Premises through foreclosure or deed in lieu of foreclosure, Lessee shall be
allowed to continue in possession of the Leased Premises as provided for in this
Lease so long as Lessee shall not be in default. Within ten (10) days following
receipt of a written request from Lesser, Lessee shall execute and deliver to
Lessor without cost any instrument confirming the subordination and non-
disturbance of this Lease.
19. Default and Remedy.
------------------
A. The occurrence of any of the following shall be deemed an "Event of
Default":
<PAGE>
(1) Lessee shall fail to pay any Monthly Rental installment or Additional
Rent within five (5) days after the same shall be due and payable, or Lessee
shall fail to pay any other amounts due Lessor from Lessee within ten (10) days
after the same shall be due and payable.
(2) Lessee shall fail to perform or observe any term, condition, covenant
or obligation as required under this Lease for a period of thirty (30) days
after notice thereof from Lessor; provided, however, that if the nature of
Lessee's default is such that more than thirty (30) days are reasonably required
to cure, then such default shall be deemed to have been cured if Lessee
commences such performance within said thirty-day period and thereafter
diligently completes the required action within a reasonable time.
(3) Lessee shall vacate or abandon the Leased Premises for any period, or
fail to occupy the Leased Premises or any substantial portion thereof for a
period of thirty (30) days.
(4) All or substantially all of Lessee's assets in the Leased Premises or
Lessee's interest in this Lease are attached or levied under execution (and
Lessee does not discharge the same within sixty (60) days thereafter); a
petition in bankruptcy, insolvency or for reorganization or arrangement is filed
by or against Lessee (and Lessee fails to secure a stay or discharge thereof
within sixty (60) days thereafter); Lessee shall be insolvent and unable to pay
its debts as they become due; Lessee makes a general assignment for the benefit
of creditors; Lessee takes the benefit of any insolvency action or law; the
appointment of a receiver or trustee in bankruptcy for Lessee or its assets if
such receivership has not been vacated or set aside within thirty (30) days
thereafter; dissolution or other termination of Lessee's corporate charter if
Lessee is a corporation.
B. Upon the occurrence of any Event of Default, Lessor shall have the
following rights and remedies, in addition to those allowed by law, any one or
more of which may be exercised without further notice to or demand upon Lessor:
(1) Lessor may apply the security deposit or re-enter the Leased Premises
and cure any default of Lessee and Lessor shall reimburse Lessee as additional
rent for any costs and expenses which Lessor thereby incurs; and Lessor shall
not be liable to Lessor for any loss or damage which Lessor may sustain by
reason of Lessee's action, regardless of whether caused by Lessor's negligence
or otherwise.
(2) Lessor may terminate this Lease or, without terminating this Lease,
terminate Lessee's right to possession of the Leased Premises as of the date of
such default, and thereafter (i) neither Lessee nor any person claiming under or
through Lessee shall be entitled to possession of the Leased Premises, and
Lessee shall immediately surrender the Leased Premises to Lessee; and (ii)
Lessor may re-enter the Leased Premises and dispossess Lessee and any other
occupants of the Leased Premises by any lawful means and may remove their
effects, without prejudice to any other remedy which Lessor may have. Upon the
termination of this Lease, Lessor may declare the present value (as determined
by Lessor) of all rent which would have been due under this Lease for the
balance of the Lease Term to be immediately due and payable, whereupon Lessee
shall be obligated to pay the same to Lessor, together with all loss or damage
which Lessor may sustain by reason of Lessee's default ("Default Damages"),
which shall include without limitation expenses of preparing the Leased Premises
for re-letting, demolition, repairs, tenant finish improvements, and brokers'
and attorneys' fees, it being expressly understood and agreed that the
liabilities and remedies specified in this subsection (b) shall survive the
termination of this Lease.
(3) Lessor may, without terminating this Lease, re-enter the Leased
Premises and re-let all or any part thereof for a term different from that which
would otherwise have constituted the balance of the Lease Term and for rent and
on terms and conditions different from those contained herein, whereupon Lessee
shall be immediately obligated to pay to Lessor as liquidated damages the
difference between the rent provided for herein and that provided for in any
lease covering a subsequent re-letting of the Leased Premises, for the period
which would otherwise have constituted the balance of the Lease Term, together
with all of Lessor's Default Damages.
<PAGE>
(4) Lessor may sue for injunctive relief or to recover damages for any loss
resulting from the breach.
(5) in addition to the defaults and remedies described above, the parties
hereto agree that if Lessee defaults in the performance of any (but not
necessarily the same) term or condition of this Lease three (3) or more times
during any twelve (12) month period, regardless of whether such defaults are
ultimately cured, then such conduct shall, at Lessor's option, represent a
separate Event of Default. Lessee acknowledges that (i) Lessor will incur
additional unanticipated costs as a result of such repetitive defaults,
including but not limited to administrative costs and legal fees, and (ii) the
purpose of this provision is to adequately compensate Lessor for those costs,
which would be difficult to determine with certainty. Therefore, Lessee agrees
to pay to Lessor upon a default under this habitual default provision the amount
of One Thousand Dollars ($1,000.00) as liquidated damages to cure such default,
payable within ten (10) days after written demand therefor to Lessee by Lessor.
C. Neither party's failure or delay in exercising any of its rights or
remedies or other provisions of this Lease shall be construed to be a waiver
thereof or affect its right thereafter to exercise or enforce each and every
such right or remedy or other provision. No waiver of any default shall be
deemed to be a waiver of any other default. Lessor's receipt of less than the
full rent due shall not be construed to be other than a payment on account of
rent then due, nor shall any statement on Lessee's check or any letter
accompanying Lessee's check be deemed an accord and satisfaction, and Lessor may
accept such payment without prejudice to Lessor's right to recover the balance
of the rent due or to pursue any other remedies provided in this Lease. No act
or omission by Lessor or its employees or agents during the term of this Lease
shall be deemed an acceptance or a surrender of the Leased Premises, and no
agreement to accept such a surrender shall be valid unless in writing and signed
by Lessor.
20. Waiver. No waiver of any covenant or condition or the breach of any
------
covenant or condition of this Lease shall be taken to constitute a waiver of any
subsequent breach of such covenant or condition nor justify or authorize a non-
observance on any other occasion of such covenant or condition or any other
covenant or condition; nor shall the acceptance of rent by Lessor at any time
when Lessee is in default of any covenant or condition hereof be construed as a
waiver of such default or of Lessor's right to terminate this Lease on account
of such default.
21. Right to Relocate. INTENTIONALLY OMITTED.
-----------------
22. Surrender and Holdover. Upon the expiration or other termination of
----------------------
this Lease. Lessee shall quit and surrender to Lessor the Leased Premises,
together with all other property affixed to the Leased Premises, broom clean,
and in good order and condition, ordinary wear and tear, fire and similar
casualty excepted. Any damage caused to the Leased Premises by removal of any
property shall be promptly repaired by Lessee. Lessee shall remove all property
of Lessee as directed by Lessor; and failing to do so, Lessor may cause all of
said property to be removed at the expense of Lessee, and Lessee hereby agrees
to pay all the costs and expenses thereby reasonably incurred. Lessee's
obligation to observe or perform this covenant shall survive the expiration or
other termination of this Lease.
Lessee shall, prior to the expiration of the Lease Term, remove all of
Lessee's trade fixtures and equipment, and any damage to the Leased Premises
shall be promptly repaired; provided, however, that all alterations or additions
to the Leased Premises shall, at the option of Lessor, become a part of the
Building and the property of Lessor. Lessee shall give written notice to Lessor
at least thirty (30) days prior to vacating the Leased Premises and shall
arrange to meet with Lessor for a joint inspection of the Leased Premises prior
to vacating. In the event of Lessee's failure to give such notice or arrange
such joint inspection, Lessor's inspection at or after Lessee's vacating the
Leased Premises shall be conclusively deemed correct for purposes of determining
Lessee's responsibility for repairs and restoration.
If Lessee shall remain in possession of all or any part of the Leased
Premises after the expiration of the Lease Term, then Lease shall be deemed a
lessee of the Leased Premises from month to month with the Minimum Rent being
increased to an amount equal to 150% of the Minimum Rent in effect at the end of
the Lease Term and the term of the Lease shall be
9
<PAGE>
month-to-month. All other terms and conditions of this Lease shall remain in
full force and effect during such time Lessee remains in possession of all or
any part of the Leased Premises. Acceptance by Lessor of rent after such
expiration or earlier termination shall not result in a renewal of this Lease
and Lessee shall vacate and surrender the Leased Premises to Lessor upon Lessee
being given thirty (30) days' prior written notice from Lessor to vacate.
23. Covenant of Quiet Enjoyment. Lessor agrees that if Lessee shall
---------------------------
perform all of the covenants and agreements herein provided to be performed on
Lessee's part, Lessee shall, at all times during the Lease Term, have the
peaceable and quiet enjoyment of possession of the Leased Premises without any
manner of hindrance from Lessor or any persons lawfully claiming under Lessor,
except as may be provided in this Lease.
24. Notice. Any notice required or permitted to be given or served by
------
either party to this Lease shall be deemed to have been given or served by
either party if it is written and delivered in person or delivered by overnight
courier or mailed, by certified or registered mail, addressed to the addresses
set forth in Item K of the Basic Lease Provisions. All rental payments shall be
made to Lessor at the above address. The addresses may be changed from time to
time by either party by serving notice as above provided.
25. Benefit of Lessor and Lessee. This Lease and all of the terms and
----------------------------
provisions hereof shall inure to the benefit of and be binding upon Lessor and
Lessee and their respective heirs, successors, assigns and legal
representatives.
26. Governing Law. This Lease shall be governed in accordance with the
-------------
laws of the State of Kentucky.
27. Attorneys' Fees. The defaulting party shall be liable for and hereby
---------------
agree to pay any and all expenses, including reasonable attorneys' fees,
incurred by the other party in connection with any default under the terms,
covenants and conditions contained in this Lease.
28. Signs. Lessee may, at its own expense, erect a sign concerning the
-----
business of Lessee which shall be in keeping with the decor and other signs on
the Building. All signage (including the signage described in the preceding
sentence) in or about the Leased Premises shall be first approved by Lessor and
shall be in compliance with the applicable codes and any recorded restrictions
applicable to the Building. Lessee agrees to maintain any sign in good state of
repair, and upon expiration of the Lease Term, Lessee agrees to promptly remove
such signs and repair any resulting damage to the Leased Premises.
29. Estoppel Certificate. Lessee shall, within fifteen (15) days following
--------------------
receipt of a request from Lessor, execute, acknowledge and deliver to Lessor, or
to any lender, holder of any mortgage, purchaser or prospective lender or
purchaser designated by Lessor, a written statement in such form as Lessor may
reasonably request certifying (i) that this Lease is in full force and effect
and unmodified (or, if modified, stating the nature of such modification); (ii)
the date to which the Minimum Rent, Additional Rent, and other charges have been
paid; and (iii) that there are not, to Lessee's knowledge, any uncured defaults
(or specifying such defaults if any are claimed). Any such statement may be
relied upon by any prospective purchaser or mortgagee. Lessee's failure to
deliver such statement within such period shall be conclusive upon Lessee that
this Lease is in full force and effect and unmodified and that there are no
uncured defaults in Lessor's performance hereunder.
30. Broker. Lessee has engaged no brokers who would be entitled to any
------
commission or fee based on the execution of this Lease. Lessee acknowledges that
it has worked with Ostendorf Morris in connection with this transaction but that
no commission or fee is due to such broker. Lessor acknowledges that Lessee
shall have no obligation to pay a broker's commission to Lessor or its
affiliates on this Lease.
31. Limitation of Lessor's Liability. If Lessor shall fail to perform or
--------------------------------
observe any term, condition, covenant or obligation required to be performed or
observed by it under this Lease and if Lessee shall, as a consequence thereof,
recover a money judgment against Lessor, Lessee agrees that it shall look solely
to Lessor's right, title and interest in and to the Building for the collection
of such judgment, that being the sole asset to which Lessee may look for payment
of
10
<PAGE>
any such judgment; and Lessee further agrees that no other assets of Lessor,
wherever situate, shall be subject to levy, execution or other process for the
satisfaction of Lessee's judgment and that Lessor shall not be liable for any
deficiency.
The references to "Lessor" in this Lease shall be limited to mean and
include only the owner or owners, at the time, of the fee simple interest in the
Building. In the event of a sale or transfer of such interest (except a mortgage
or other transfer as security for a debt), the "Lessor" named herein, or, in the
case of a subsequent transfer, the transferor, shall, after the date of such
transfer, be automatically released from all personal liability for the
performance or observance of any term, condition, covenant or obligation
required to be performed or observed by Lessor hereunder; and the transferee
shall be deemed to have assumed all of such terms, conditions, covenants and
obligations.
32. Hazardous Materials. Lessee shall not in any manner use, maintain or
-------------------
allow the use or maintenance of the Leased Premises in violation of any law,
ordinance, statute, regulation, rule or order of any governmental authority
(collectively "Laws"), including but not limited to laws governing zoning,
health, safety (including fire safety), occupational hazards, pollution and the
environment. Lessee shall not use, maintain or allow the use or maintenance of
the Leased Premises or any part thereof to treat, store, dispose of, transfer,
release, convey or recover hazardous, toxic or infectious waste nor shall Lessee
otherwise, in any manner, possess or allow the possession of any hazardous,
toxic infectious waste on or about the Leased Premises; provided, however, any
toxic material lawfully permitted and generally recognized as necessary and
appropriate for general office use may be stored and used on the Leased Premises
so long as (i) such storage and use is in the ordinary course of Lessee's
business permitted under this Lease; (ii) such storage and use is performed in
compliance with all applicable laws and in compliance with the highest standards
prevailing in the industry for the storage and use of such materials; (iii)
Lessee delivers prior written notice to Lessor of the identity of and
information regarding such materials as Lessor may require; and (iv) Lessor
consents thereto. Hazardous, toxic or infectious waste shall mean any solid,
liquid or gaseous waste, substance or emission or any combination thereof which
may (i) cause or significantly contribute to an increase in mortality or in
serious illness, or (ii) pose the risk of a substantial present or potential
hazard to human health, to the environment or otherwise to animal or plant life,
and shall include without limitation hazardous substances and materials
described in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; the Resource Conservation and Recovery Act,
as amended; and any other applicable federal, state or local laws. Lessee shall
immediately notify Lessor of the presence or suspected presence of any
hazardous, toxic or infectious waste on or about the Leased Premises and shall
deliver to Lessor any notice received by Lessee relating thereto.
Lessor and its agents shall have the right, but not the duty, to inspect
the Leased Premises and conduct tests thereon at any time to determine whether
or the extent to which there is hazardous, toxic or infectious waste on the
Leased Premises. Lessor shall have the right to immediately enter upon the
Leased Premises to remedy any contamination found thereon, in exercising its
rights herein, Lessor shall use reasonable efforts to minimize interference with
Lessee's business but such entry shall not constitute an eviction of Lessee in
whole or in part, and Lessor shall not be liable for any interference, loss or
damage to Lessee's property or business caused thereby. If any lender or
governmental agency shall ever require testing to ascertain whether there has
been a release of hazardous materials, then the reasonable costs thereof shall
be reimbursed by Lessee to Lessor upon demand as Additional Rent if such
requirement arose in whole or in part because of Lessee's use of the Leased
Premises. Lessee shall execute affidavits, representations and the like from
time to time, at Lessor's request, concerning Lessee's best knowledge and belief
regarding the presence of any hazardous, toxic or infectious waste on the Leased
Premises or Lessee's intent to store or use toxic materials on the Leased
Premises. Lessee shall indemnify and hold harmless Lessor from any and all
claims, loss, liability, costs, expenses or damage, including attorneys' fees
and costs of remediation, incurred by Lessor in connection with any breach by
Lessee of its obligations under this section. The covenants and obligations of
Lessee hereunder shall survive the expiration or earlier termination of this
Lease.
11
<PAGE>
33. Miscellaneous.
-------------
(A) Lessee acknowledges having reviewed and signed the attached Agency
Disclosure Statement and Lessee acknowledges that said Statement is signed and
attached. Duke Realty Services Limited Partnership, its agent and employees,
have represented only the Lessor, and have not in any way represented the
Lessee, in the marketing, negotiation, and completion of this Lease transaction.
(B) During the Lease Term and any extensions thereof, Lessee shall provide
to Lessor on an annual basis, within ninety (90) days following the end of
Lessee's fiscal year, a copy of Lessee's most recent certified and audited
financial statements prepared as of the end of Lessee's fiscal year. Such
financial statements shall be prepared in conformity with generally accepted
accounting principles, consistently applied.
(C) The undersigned represents and warrants to Lessor that (i) Lessee is a
Delaware corporation that is duly organized, validly existing and in good
standing in accordance with the laws of the state under which it was organized;
(ii) all action necessary to authorize the execution of this Lease has been
taken by Lessee; and (iii) the individual executing and delivering this Lease on
behalf of Lessee has been authorized to do so, and such execution and delivery
shall bind Lessee. Lessee, at Lessor's request, shall provide Lessor with
evidence of such authority.
(D) Lessee acknowledges that the Building contains asbestos materials and
that Lessor is in the process of complying with OSHA regulations regarding such
asbestos.
(E) Additional provisions, if any, are attached hereto as an Addendum, the
provisions of which are incorporated herein by reference, in the event of any
inconsistencies between the provisions of this Lease and of the Addendum, the
provisions of the Addendum shall control.
(F) Provided Lessee is not in default hereunder, Lessee shall have the
option to terminate this Lease at the end of the thirty-sixth (36th) month of
the Lease Term. Such option shall be exercised by (i) Lessee's giving written
notice to Lessor of its intention to terminate at least six (6) months prior to
the effective date of such termination, and (ii) Lee's payment to Lessor of an
amount equal to One Hundred Forty Thousand Two Hundred Fifty Dollars
($140,250.00), which shall accompany the notice provided in (i) above. Such
payment is made in consideration for Lessor's grant of this option to terminate,
to compensate Lessor for rental and other concessions given to Lessee, and for
other good and valuable consideration. Such payment shall not in any manner
affect Lessee's obligations to pay Minimum Annual Rent and Additional Rent or to
perform its obligations under the Lease up to and including the date of
termination. Failure to timely and properly exercise this option shall forever
waive and extinguish it. If such option is validly exercised, then upon such
termination, Lessee shall surrender the Leased Premises to Lessor in accordance
with the terms of this Lease and each party shall be released from further
liability hereunder; provided, however, that such termination shall not affect
any right or obligation arising prior to termination.
EXECUTED BY LESSOR, this 28th day of June, 1996.
---- ----
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
WITNESSES: By: Duke Realty Investments, Inc.,
/s/ Stephen C. Denison General Partner
_________________________
Stephen C. Denison
_________________________
(Printed) By: /s/ Robert D. Fessler
---------------------------
/s/ Lynn O. Hughes Robert D. Fessler,
________________________ Vice President
Lynn O. Hughes
________________________
(Printed)
<PAGE>
EXECUTED BY LESSEE, this 28th day of June, 1996
PRESTOLITE ELECTRIC INCORPORATED,
WITNESSES: a Delaware corporation
/s/ Bruce C. Conybeare, Jr. By:/s/ Kenneth C. Cornelius
____________________________ _____________________________
Bruce C. Conybeare, Jr. Printed: Kenneth C. Cornelius
____________________________ ________________________
(Printed) Title: Senior Vice President
__________________________
/s/ Rhonda P. Brown
____________________________
Rhonda P. Brown
____________________________
(Printed)
WITNESSES:
/s/ Ann C. Colussi By: /s/ Thomas R. Jennett
_________________________________ ______________________________
Ann C. Colussi
_________________________________ Printed: Thomas R. Jennett
(Printed) _________________________
/s/ Lynn O. Hughes Title: Vice President
_________________________________ ___________________________
Lynn O. Hughes
_________________________________
(Printed)
STATE OF OHIO )
)SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State, personally
appeared Robert D. Fessler, by me known to be the Vice President of Duke Realty
Investments, Inc., an Indiana corporation, the general partner of Duke Realty
Limited Partnership, an Indiana limited partnership, who acknowledged the
execution of the foregoing "Lease" on behalf of said partnership.
WITNESS my hand and Notarial Seal this 28th day of June, 1996.
---- ----
/s/ Lynn O. Hughes
_______________________________
Notary Public
Lynn O. Hughes
_______________________________
(Printed Signature)
My Commission Expires: _______________________
[SEAL OF NOTARY PUBLIC]
My County of Residence: ______________________
13
<PAGE>
STATE OF MICHIGAN )
)SS:
COUNTY OF WASHTENAW )
Before me, a Notary Public in and for said County and State, personally
appeared Kenneth C. Cornelius, by me known and by me known to be the Senior Vice
-------------------- -----------
President of Prestolite Electric Incorporated, a Delaware corporation, who
- - - - - - - - - - - ---------
acknowledged the execution of the foregoing "Lease" on behalf of said
corporation.
WITNESS my hand and Notarial Seal this 28th day of June, 1996.
[Notary Stamp /s/ Bruce C. Conybeare, Jr.
appears here] _______________________________
Notary Public
_______________________________
(Printed Signature)
My Commission Expires: _____________________
My County of Residence: __________________
STATE OF )
)SS:
COUNTY OF )
Before me, a Notary Public in and for said County and State, personally
appeared Thomas R. Jennett, by me known and by me known to be the Vice President
----------------- --------------
of Prestolite Electric Incorporated, a Delaware corporation, who acknowledged
the execution of the foregoing "Lease" on behalf of said corporation.
The foregoing instrument was acknowledged before me this 28th day of June, 1996.
WITNESS my hand and Notarial Seal this 28th day of June, 1996.
Lynn O. Hughes
_______________________________
Notary Public
_______________________________
(Printed Signature)
[Notary Stamp
My Commission Expires: _______________________ appears here]
My County of Residence: ___________________
<PAGE>
EXHIBIT A
---------
[MAP OF 7585 EMPIRE DRIVE]
<PAGE>
EXHIBIT B
---------
Lessee accepts the Leased Premises "As Is" except Lessor shall construct a
demising wall to divide the Building.
<PAGE>
EXHIBIT B-l
-----------
To be included in this Exhibit.
1. Lessor to install two (2) additional dock high doors 9 x 10 with edge of
dock plates, dock seals and dock lights.
2. Lessor to install demising wall separating the Leased Premises from the
rest of the space in the Building.
<PAGE>
EXHIBIT C
---------
RULES AND REGULATIONS
(These Rules and Regulations have been adopted for the purpose of insuring
order and safety in the Building and of maintaining the rights of Lessee and of
the Lessor.)
1. The sidewalks, entrances, driveways and roadways serving and adjacent to
the Leased Premises, are the property of the Lessor, and shall not be obstructed
or used for any purpose other than ingress and egress. The Lessor shall in all
cases retain the right to control and prevent access to the Property, of all
persons whose presence, in the judgment of the Lessor or its employees, shall be
prejudicial to the safety, character, reputation or interests of the property or
neighboring buildings.
2. No awnings or other projections shall be attached to the outside walls of
the Building. Neither the interior nor the exterior of any windows shall be
coated or otherwise sunscreened without written consent of Lessor.
3. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown herein. All damages
resulting from any misuse of the fixtures shall be borne by the Lessee who, or
whose sublessees, assignees or any of their servants, employees, agents,
visitors or licensees shall have caused the same.
4. No Lessee shall mark, paint, drill into or in any way deface any part of
the exterior Leased Premises or in the Building. No boring, cutting or stringing
of wires shall be permitted, except with the prior written consent of the Lessor
and Lessor may direct.
5. No birds or animals of any kind shall be brought onto or kept in or about
the Property, and no cooking shall be done or permitted by any Lessee on the
Leased Premises, except that the preparation of coffee, tea, hot chocolate and
similar items for Lessees and their employees shall be permitted provided power
shall not exceed that amount which can be provided by a 30-amp circuit. No
Lessee shall cause or permit any unusual or objectionable odors to be produced
or permeate outside the Leased Premises.
6. The Leased Premises shall not be used for manufacturing, unless the use
conforms to the zoning applicable to the area and the Lessor provides written
consent. No Lessee shall operate a business or an office in the Leased Premises
for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as
a retail or wholesale store or general office, in contradiction to the permitted
use in this Lease, without the express written consent of Lessor, not to be
unreasonably withheld. The Leased Premises shall not be used for lodging or
sleeping or for any immoral or illegal purpose.
7. No Lessee shall make, or permit to be made, any noise which may disturb or
interfere with occupants of neighboring buildings whether by the use of any
musical instrument, radio, phonograph, unusual noise or in any other way.
8. No Lessee, sublessee or assignees nor any of its servants, employees,
agents, visitors or licensees shall at any time bring or keep upon the Leased
Premises any flammable, combustible or explosive fluid, chemical or substance,
other than that which is ordinary and necessary for the Lessee's use of the
Leased Premises, as contemplated herein.
9. Each Lessee must upon the termination of its tenancy, deliver to the
Lessor all keys to the offices, storage rooms, toilet rooms, either furnished
to, or otherwise procured by, such Lessee.
10. All persons employed by any Lessee to do work upon the Leased Premises,
while in the Building and outside of the Leased Premises, shall be subject to
and under the control and direction of the Lessee, and Lessee shall be
responsible for all acts of such persons.
<PAGE>
11. Canvassing, soliciting and peddling in the adjacent buildings are
prohibited, and each Lessee shall report and otherwise cooperate to prevent the
same.
12. Lessee agrees that it shall not discriminate upon the basis of race,
color, religion, sex or national origin in the use and occupancy or in, any
sublease or subletting of the Leased Premises.
13. No outside storage is permitted including without limitation the storage
of trucks and other vehicles.
14. The Lessor reserves the right to reasonably rescind, modify or supplement
any of these rules and to make such other and further reasonable rules and
regulations which, in the Lessor's judgment may from time to time be necessary
for the safety and cleanliness of the Leased Premises, and for the assurance of
good order therein. Lessor agrees to provide Lessee with a copy of said rules
which shall be deemed a part of this Lease.
Anything contained in these Rules and Regulations which is contrary to or
inconsistent with any express provision of the Lease shall be void and of no
force and effect.
<PAGE>
COMERICA LESSOR'S ACKNOWLEDGEMENT AND SUBORDINATION
[For Use Without Assignment Lease]
-------
The undersigned, Duke Realty Limited Partnership, an Indiana limited
partnership, LESSOR, under the terms of a Lease, a copy of which is attached
hereto ("Lease"), acknowledges that Prestolite Electric Incorporated, LESSEE,
has or will receive from Comerica Bank ("Bank"), 100 Renaissance Center,
Detroit, Michigan 48243, Attention: Loan Documentation Review, certain credit
accommodations.
Notice LESSOR agrees to notify Bank in writing (at the address specified above)
not less than thirty (30) days before commencing any proceedings or otherwise
taking any action to terminate the Lease or to enforce its remedies thereunder.
Subordination LESSOR agrees that Lessee's machinery, equipment, inventory,
fixtures or other property ("Lessee's Property") which may be located on the
leased premises shall remain the personal property of the Lessee and shall not
become a fixture or part of the realty notwithstanding anything that may be
implied by law from the mode of attachment, installation or otherwise. LESSOR
further agrees that any lien or security interest it may claim against any of
Lessee's Property, is hereby subordinated to any lien or security interest now
or subsequently held by Bank in any of such property.
Limited Right of Entry LESSOR acknowledges that, notwithstanding any
noncompliance with or default by LESSEE under the Lease, the Bank shall have the
limited right to enter into and remain in possession of the leased premises for
a period of up to thirty (30) consecutive days for the purpose of enforcing its
liens and security interests in Lessee's Property, including the sale and/or
detachment and/or removal from the leased premises of such property. For the
initial ten (10) days Bank is in possession under this paragraph, Bank shall
have no obligation for rent or other occupancy charges. For the remaining twenty
(20) days (or any portion thereof) Bank is in possession under this paragraph,
Bank shall pay to LESSOR, on a weekly basis in arrears (pro rata, depending on
the number of says Bank is in possession), the current monthly rent accruing
under the Lease during the period while Bank is in possession of the leased
premises, net of any obligations of LESSEE for taxes, insurance or other sums.
Bank shall have no responsibility whatsoever for any back rent or other
obligations which have accrued under the Lease prior to Bank's entry into
possession under this paragraph.
Acknowledgement LESSOR further acknowledges that Bank's rights have been given
for security purposes only, and that unless and until Bank agrees expressly and
in writing to do so, Bank shall have no obligations whatsoever under the Lease.
Date: June 28, 1996
ADDRESS OF LEASED PREMISES: LESSOR(S):
7585 Empire Drive DUKE REALTY LIMITED PARTNERSHIP,an
- - - - - - - - - - - ----------------- ----------------------------------
Indiana limited partnership
Florence, KY 41042 By: Duke Realty Investments, Inc.
- - - - - - - - - - - ------------------ its general partner
By: /s/ Robert D. Fessler
_____________________
Robert D. Fessler
Vice President
Acknowledged by LESSEE:
PRESTOLITE ELECTRIC INCORPORATED
BY: /s/ Thomas Jennett,
-------------------
SIGNATURE OF
ITS: Thomas Jennett, Vice President
------------------------------
TITLE (if applicable)
Date: June 28 1996
<PAGE>
THIRD AMENDMENT TO AGREEMENT FOR PURCHASE
AND SALE OF PROPERTY
This Third Amendment to Agreement for Purchase and Sale of Property is
executed as of the 14th day of June, 1996, by and between DUKE REALTY LIMITED
PARTNERSHIP, an Indiana limited partnership ("Duke"), and PRESTOLITE ELECTRIC
INCORPORATED, a Delaware corporation ("Prestolite").
R E C I T A L S:
- - - - - - - -
A. Duke and Prestolite have entered into an Agreement for Purchase and
Sale of Property dated March 29, 1996, as amended by amendments thereto dated
May 13, 1996 and May 31, 1996 (collectively, the "Agreement").
B. The Inspection Date (as defined in the Agreement) is June 14, 1996.
C. Under Section 6.3 of the Agreement, Duke has until the Inspection
Date to exercise its rights to terminate the Agreement and have the Earnest
Money (as defined in the Agreement) returned to it.
D. Duke and Prestolite continue to negotiate acceptable terms of
purchase of the Property (as defined in the Agreement).
E. Duke and Prestolite desire to extend the Inspection Date until June
28, 1996 and change the purchase price for the Property.
NOW, THEREFORE, in consideration of the recitals, the mutual convenants
and agreements herein contained and contained in the Agreement and other good
and valuable consideration, the receipt and sufficiency which are hereby
mutually acknowledged, and intending to be legally bound, Prestolite and Duke
hereby agree to amend the Agreement as follows:
1. The first sentence of Section 4.1 is hereby deleted and the following
sentence is substituted in lieu thereof:
The purchase price (the "Purchase Price") for the Property shall be
Three Million Two Hundred Thousand Dollars ($3,200,000.00). Buyer and
Seller acknowledge that the Purchase Price is reduced from the original
Purchase Price agreed to by the parties in the Agreement to account for
the failure to obtain a third party tenant for a portion of the Property
and the condition of the roof. Notwithstanding anything to the contrary
in the Agreement, buyer accepts the roof, AS IS.
2. The second sentence of Section 6.3 is hereby deleted and the
following sentence is substituted in its place:
<PAGE>
Buyer shall have until June 28,1996 (the "Inspection Date") in which to
make such investigations and studies with respect to the Property as
Buyer deems appropriate, and to terminate this Agreement, by written
notice to Seller, to be received on or before the Inspection Date, if
Buyer is not, for any reason satisfied with the Property.
3. This amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original, all of which taken together shall
constitute one and the same instrument.
"DUKE"
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
By: Duke Realty Investments, Inc.,
its General Partner
/s/ Robert D. Fessler
By: ____________________________
Robert D. Fessler
Vice President
"PRESTOLITE"
PRESTOLITE ELECTRIC INCORPORATED,
a Delaware corporation,
/s/ Thomas R. Jennett
By: _________________________________
Thomas R. Jennett
Vice President
/s/ Kenneth C. Cornelius
By: _________________________________
Kenneth C. Cornelius
Sr. Vice President
<PAGE>
SECOND AMENDMENT TO AGREEMENT FOR PURCHASE
AND SALE OF PROPERTY
This Second Amendment to Agreement for Purchase and Sale of Property dated
this 31st day of May, 1996, between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
limited partnership ("Duke"), and PRESTOLITE ELECTRIC INCORPORATED, a Delaware
corporation ("Prestolite").
R E C I T A L S:
- - - - - - - -
A. Duke and Prestolite have entered into an Agreement for Purchase and
Sale of Property dated March 29, 1996, as amended by an amendment thereto dated
May 13, 1996 (collectively, the "Agreement").
B. The Inspection Date (as defined in the Agreement) is May 31, 1996.
C. Under Section 6.3 of the Agreement, Duke has until the Inspection Date
to exercise its rights to terminate the Agreement and have the Earnest Money (as
defined in the Agreement) returned to it.
D. Duke and Prestolite continue to negotiate acceptable terms of purchase
of the Property (as defined in the Agreement).
E. Duke and Prestolite desire to extend the Inspection Date until June 14,
1996.
NOW, THEREFORE, in consideration of the recitals, the mutual convenants and
agreements herein contained and contained in the Agreement and other good and
valuable consideration, the receipt and sufficiency which are hereby mutually
acknowledged, and intending to be legally bound, Prestolite and Duke hereby
agree to amend the Agreement as follows:
1. The second sentence of Section 6.3 is hereby deleted and the following
sentence is substituted in its place:
Buyer shall have until June 14,1996 (the "Inspection Date") in which to
make such investigations and studies with respect to the Property as Buyer
deems appropriate, and to terminate this Agreement, by written notice to
Seller, to be received on or before the Inspection Date, if Buyer is not,
for any reason satisfied with the Property.
2. This amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original, all of which taken together shall
constitute one and the same instrument.
<PAGE>
Dated May 31, 1996.
"DUKE"
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
By: Duke Realty Investments, Inc.,
its General Partner
By: /s/ Richard W. Horn
----------------------------
Richard W. Horn
Vice President Acquisitions
"PRESTOLITE"
PRESTOLITE ELECTRIC INCORPORATED,
a Delaware corporation
By: Thomas R. Jennett
---------------------------
Thomas R. Jennett
Vice President
By: /s/ Kenneth C. Cornelius
----------------------------------
Printed: Kenneth C. Cornelius
-----------------------------
Title: Vice President
-------------------------------
2
<PAGE>
AMENDMENT TO AGREEMENT FOR PURCHASE
AND SALE OF PROPERTY
This Amendment to Agreement for Purchase and Sale of Property dated this
13th day of May, 1996, between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
limited partnership ("Duke"), and PRESTOLITE ELECTRIC INCORPORATED, a Delaware
corporation ("Prestolite").
R E C I T A L S:
- - - - - - - -
A. Duke and Prestolite have entered into an Agreement for Purchase and
Sale of Property dated March 29, 1996 (the "Agreement").
B. The Inspection Date (as defined in the Agreement) is May 13, 1996.
C. Under Section 6.3 of the Agreement, Duke has until the Inspection Date
to exercise its rights to terminate the Agreement and have the Earnest Money (as
defined in the Agreement) returned to it.
D. Duke and Prestolite continue to negotiate acceptable terms of purchase
of the Property (as defined in the Agreement).
E. Duke and Prestolite desire to extend the Inspection Date until May 31,
1996.
NOW, THEREFORE, in consideration of the recitals, the mutual convenants and
agreements herein contained and contained in the Agreement and other good and
valuable consideration, the receipt and sufficiency which are hereby mutually
acknowledged, and intending to be legally bound, Prestolite and Duke hereby
agree to amend the Agreement as follows:
1. The second sentence of Section 6.3 is hereby deleted and the following
sentence is substituted in its place:
Buyer shall have until May 31,1996 (the "Inspection Date") in which to make
such investigations and studies with respect to the Property as Buyer deems
appropriate, and to terminate this Agreement, by written notice to Seller,
to be received on or before the Inspection Date, if Buyer is not, for any
reason satisfied with the Property.
2. This amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original, all of which taken together shall
constitute one and the same instrument.
<PAGE>
Dated May 13, 1996.
"DUKE"
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
By: Duke Realty Investments, Inc.,
its General Partner
By: /s/ Richard W. Horn
------------------------------
Richard W. Horn
Vice President Acquisitions
"PRESTOLITE"
PRESTOLITE ELECTRIC INCORPORATED,
a Delaware corporation
By: /s/ Thomas R. Jennett
--------------------------------------
Thomas R. Jennett
Vice President
By: ________________________________
Printed: _____________________________
Title: _______________________________
2
<PAGE>
Dated May 13, 1996.
"DUKE"
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
By: Duke Realty Investments, Inc., its
General Partner
By: Richard W. Horn
-------------------------
Richard W. Horn
Vice President Acquisitions
"PRESTOLITE"
PRESTOLITE ELECTRIC INCORPORATED,
a Delaware corporation
By: _________________________________
Thomas R. Jennett
Vice President
/s/ Kenneth C. Cornelius
By: _________________________________
Kenneth C. Cornelius
Printed: ____________________________
Sr. Vice President
Title: _____________________________
2
<PAGE>
AGREEMENT FOR PURCHASE
----------------------
AND SALE OF PROPERTY
--------------------
THIS AGREEMENT is made and entered into as of this 29th day of March.
----
1996, by and between PRESTOLITE ELECTRIC INCORPORATED, an Delaware corporation
("Seller"), and DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership
("Buyer").
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
WHEREAS, Buyer wishes to purchase, and Seller wishes to sell, the
Property (as hereinafter defined), but only upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the Earnest
Money, the mutual covenants and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
Section 1. Definitions and Exhibits.
--------- -------------------------
1.1 Definitions. For purposes of this Agreement. each of the following
-----------
terms, when used herein with an initial capital letter, shall have the meaning
ascribed to it as follows:
1.1.1 Agreement. This Agreement for Purchase and Sale of Property.
---------
1.1.2 BOMA Standards. The American National Standard adopted and
--------------
approved by the Building Owners and Managers Association International on July
31, 1980, as amended from time to time.
1.1.3 Broker. The broker described in Section 16.1 hereof.
------
1.1.4 Building. The Prestolite Electric Building (148,445 square
--------
feet) located at 7585 Empire Drive in Florence, Kentucky.
1.1.5 Closing. The closing and consummation of the purchase and
-------
sale of the Property pursuant hereto.
1.1.6 Closing Date. The date on which the Closing occurs as
------------
provided in Section 11.1 hereof.
<PAGE>
1.1.7 Confidential Information. The confidential information
------------------------
described in Section 6.1 hereof.
1.1.8 Contract Date. The date upon which this Agreement shall be
-------------
deemed effective, which shall be the date first above written.
1.1.9 Deed. The Warranty Deed to be executed by Seller in the form
----
attached hereto as Exhibit J.
---------
1.1.10 Disclosures. The disclosures described in Section 8.9 hereof
-----------
1.1.11 Environmental Laws. Any applicable statute, code, enactment,
------------------
ordinance, rule, regulation, permit, consent, approval, authorization, license,
judgment, order, writ, common law rule (including without limitation the common
law respecting nuisance and tortious liability), decree, injunction, or other
requirement having the force and effect of law, whether local, state,
territorial or national, at any time in force or effect relating to:
(i) Emissions, discharges, spills, releases or threatened releases of
Hazardous Substances into ambient air, surface water, ground water,
watercourses, publicly or privately owned treatment works, drains, sewer
systems, wetlands, septic systems or onto land;
(ii) The use, treatment, storage, disposal, handling, manufacturing,
transportation or shipment of Hazardous Substances:
(iii) The regulation of storage tanks; or
(iv) Otherwise relating to pollution or the protection of human health
or the environment..
1.1.12 Earnest Money. The amount deposited by Buyer in escrow with
-------------
Escrow Agent as earnest money pursuant to the terms and conditions of Section 3
hereof, together with any interest earned thereon (which shall follow
principal).
1.1.13 Escrow Agent. The Title Insurer or such other mutually
------------
acceptable escrow agent acting as Escrow Agent pursuant to the terms and
conditions of the Escrow Agreement and Section 3 hereof.
1.1.14 Escrow Agreement. That certain Escrow Agreement of even date
----------------
herewith among Seller, Buyer and Escrow Agent referred to in Section 3 hereof
and attached hereto as Exhibit A and by this reference made a part hereof.
---------
1.1.15 Hazardous Substances. All substances, wastes, pollutants,
--------------------
contaminants and materials regulated, or defined or designated as hazardous,
extremely or imminently hazardous, dangerous, or toxic, under the following
federal statues and
2
<PAGE>
their state counterparts, as well as these statutes' implementing regulations:
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. (S)(S)9601 et seq., the Federal Insecticide, Fungicide, and Rodenticide
Act, 7 U.S.C. (S)(S)136 et seq., the Atomic Energy Act, 42 U.S.C. (S)(S)201 1 et
seq, and the Hazardous Materials Transportation Act, 42 U.S.C. (S)(S)l801 et
seq.;
(ii) Petroleum and petroleum products including crude oil and any
fractions thereof;
(iii) Asbestos: and
(iv) Natural gas, synthetic gas, and any mixtures thereof.
1.1.16 Guarantor or Guarantors. Each guarantor of any of a Tenant's
-----------------------
duties and obligations under such Tenant's Lease (collectively, the
"Guarantors").
1.1.17 Guaranty or Guaranties. Each guaranty presently in effect of
----------------------
all or any of a Tenant's duties and obligations under a Lease (collectively, the
"Guaranties").
1.1.18 Improvements. The Building and any other buildings,
------------
structures and improvements located upon the Land.
1.1.19 Inspection Date. The Inspection Date set forth in Section
---------------
6.3 hereof.
1.1.20 Land. All those tracts or parcels of land described in
----
Exhibit B attached hereto and by this reference made a part hereof.
- - - - - - - - - - - ---------
1.1.21 Lease: Leases. Each lease of space or property within the
-------------
Property in force and effect as of the date hereof (collectively, the "Leases")
within the Property, the Leases being listed in Exhibit C attached hereto and by
---------
this reference made a part hereof.
1.1.22 Permitted Title Exceptions. Those matters identified on
--------------------------
Exhibit D attached hereto and by this reference made a part hereof.
- - - - - - - - - - - ---------
1.1.23 Property. All of Seller's right, title and interest in, to
--------
and under the following property:
(i) The Leases;
(ii) The Land;
(iii) The Improvements;
3
<PAGE>
(iv) The personal property (collectively, the "Personal Property")
listed on Exhibit E attached hereto and by this reference made a part
---------
hereof:
(v) The Guaranties;
(vi) The Security Deposits;
(vii) The Surviving Service Contracts; and
(viii) All rights of way or use, licenses, tenements, hereditaments,
appurtenances and easements now or hereafter belonging or pertaining to any
of the foregoing, except those, if any, hereinafter reserved to Seller.
1.1.24 Proration Date. The effective date of the prorations provided
--------------
in Section 4.2 hereof, which is midnight on the eve of the Closing Date.
1.1.25 Purchase Price. The purchase price for the Property described
--------------
in Section 4.1 hereof.
1.1.26 Rent Roll. The rent roll attached hereto as Exhibit F and by
--------- ---------
this reference made a part hereof, or any updated version thereof.
1.1.27 Rents. The rents and other charges under the Leases described
-----
in Section 4.2.1 hereof.
1.1.28 Security Deposits. Any and all security deposits made
-----------------
pursuant to the Leases.
1.1.29 Service Contracts. All of the service or management
-----------------
contracts, equipment, labor or material contracts, maintenance or repair
contracts or other agreements (other than the Leases) that are in force and
effect and affect the Property or the operation, repair or maintenance thereof,
a complete list of such contracts or agreements being contained in Exhibit G
---------
attached hereto and by this reference made a part hereof.
1.1.30 Survey. The survey of the Land described in Section 6.4
------
hereof.
1.1.31 Surviving Service Contracts. Those Service Contracts which
---------------------------
Buyer may elect in writing to assume, with Seller's consent, pursuant to Section
7 below and which shall be assigned to Buyer at the Closing.
1.1.32 Tenant or Tenants. Each Tenant who has executed a Lease
-----------------
(collectively, the "Tenants").
4
<PAGE>
1.1.33 Tenant Estoppel Certificates. The estoppel certificates which
----------------------------
Seller shall devote its good faith efforts to obtain from the Tenants, as
provided in Section 10 hereof, such certificates to be substantially in the form
of Exhibit H attached hereto and by this reference made a part hereof.
---------
1.1.34 Title Insurer. Chicago Title Insurance Company or such other
-------------
title insurer acceptable to Buyer and Seller.
1.2 Exhibits and Schedules. Attached hereto and forming an integral part
----------------------
of this Agreement are the following exhibits and schedules, all of which are
incorporated into this Agreement as fully as if the contents thereof were set
out in full herein at each point of reference thereto:
Exhibit A - Escrow Agreement
Exhibit B - Description of Land
Exhibit C - List of Leases
Exhibit D - Permitted Title Exceptions
Exhibit E - List of Personal Property
Exhibit F - Rent Roll
Exhibit 0 - Service Contracts
Exhibit H - Form of Tenant Estoppel Certificate
Exhibit I - Description of Litigation Affecting Seller
or the Property
Exhibit J - Form of Deed
Exhibit K - Assignment and Assumption of Leases and
Guaranties
Exhibit L - Non-Foreign Certificate
Exhibit M - Bill of Sale
Exhibit N - Assignment and Assumption of Surviving
Service Contracts
Exhibit O - Uncompleted Tenant Improvements
5
<PAGE>
Exhibit P - Notice to Tenants
Schedule 1-
Form of
Lease for Prestolite Electric Incorporated
Schedule 2-
Form of Lease
for Continental PET
Section 2. Purchase and Sale Agreement.
--------- ---------------------------
Subject to and in accordance with the terms and provisions hereof,
Seller agrees to sell and Buyer agrees to purchase the Property.
Section 3. Earnest Money.
--------- -------------
3.1 Earnest Money. Simultaneously herewith, Buyer has deposited with
-------------
Escrow Agent the sum of Twenty-five Thousand Dollars ($25,000.00) as the earnest
money deposit under this Agreement On the Inspection Date, in the event Buyer
completes its due diligence inspections and elects to close on and acquire the
Property, Buyer shall deposit with the Escrow Agent the additional sum of
Twenty-five Thousand Dollars ($25,000.00) as an additional earnest money deposit
under this Agreement. Such deposits, together with any interest or other income
earned thereon (collectively, the "Earnest Money"), shall be held, invested and
disbursed pursuant to the respective terms and provisions hereof and of the
Escrow Agreement.
3.2 Disbursement. Whenever the Earnest Money is by the terms hereof to
------------
be disbursed by Escrow Agent, Seller and Buyer agree promptly to execute and
deliver such notice or notices as shall be necessary or, in the opinion of
Escrow Agent, appropriate to authorize Escrow Agent to make such disbursement.
Section 4. Purchase Price.
--------- --------------
4.1 Purchase Price. The purchase price (the "Purchase Price") for the
--------------
Property shall be Three Million Four Hundred Thousand Dollars ($3,400,000.00).
The Purchase Price, as adjusted by the prorations provided in Section 4.2 hereof
and as reduced by the Earnest Money, which, unless otherwise disbursed
hereunder, shall be disbursed by Escrow Agent at the Closing to Seller as a
portion of the Purchase Price, shall be paid by Buyer to Seller at the Closing
in United States dollars, by Federal Reserve System wire transfer or other
immediately available funds acceptable to Seller.
4.2 Prorations. The following items shall be prorated between Seller and
----------
Buyer as of the Proration Date, and prorations favoring Buyer, to the extent
determinable as of the Proration Date, shall reduce the Purchase Price payable
by Buyer
6
<PAGE>
at the Closing, and such prorations favoring Seller, to the extent determinable
as of the Proration Date, shall increase the Purchase Price payable by Buyer at
the Closing:
4.2.1 Rents, additional rents, common area maintenance charges,
charges for taxes and insurance premiums or for escalations thereof, if any, and
other charges under the Leases (hereinafter collectively referred to as the
"Rents"). If on the Proration Date, any Tenant is delinquent in the payment of
any Rents, then Buyer shall refund to Seller an amount, up to the full amount of
such receivable, at the time of Buyer's receipt of any Rents from such Tenant,
to the extent of any portion of such payment remaining after Buyer deducts all
Rents due Buyer from such Tenant after the Proration Date and after Buyer
deducts any costs of collecting such Rents. Any adjustments for common area
maintenance, taxes or utility charges collected after the Proration Date which
are attributable to any period prior to the Proration Date shall be refunded to
Seller, if, as and when received, after Buyer deducts any costs of collecting
such Rents.
4.2.2 The state and county ad valorem property taxes becoming a lien
on the Property during the calendar year of Closing. If the actual tax bills
have not been issued, then such proration shall be based on 105% of such taxes
for the prior year or tax period, unless Buyer and Seller agree that such taxes
may be more accurately estimated. After the tax bills for the year or tax period
of Closing are received by either Buyer or Seller, Buyer and Seller shall adjust
such proration, and any amount then owing shall be paid within twenty (20) days
of demand by the party entitled thereto. All assessments with regard to the
Property, whether due and payable currently or in future periods, shall be paid
in full by Seller prior to the Closing Date or credited against the Purchase
Price in favor of Buyer.
4.2.3 Sanitary sewer taxes, assessments and utility charges, if any,
to the extent, and only to the extent, such taxes and charges are not required
to be paid by any Tenant.
4.2.4 Operating expenses of the Property, including, without
limitation, charges under the Surviving Service Contracts.
4.2.5 In assuming Seller's obligations under the Leases at the
Closing, Buyer shall specifically assume and agree to pay any and all leasing
commissions, tenant improvement allowances and rent concessions that may become
due and owing or may be required to be credited under any of the Leases after
the Closing, subject, however, to Section 8.3 hereof. Buyer shall not be
entitled to, and shall not receive, a credit against the Purchase Price for any
such future payments. In particular, at Closing Buyer shall pay leasing
commissions of six percent (6%) of the base annual rent payable in the first
three (3) years of the Continental PET lease, and, in addition, Buyer shall
assume responsibility and/or reimburse Seller for the cost of tenant finish
improvements and related construction as required by the Continental PET lease;
provided, however, that Seller shall contract with Buyer or an affiliate of
Buyer for such construction and tenant finish.
7
<PAGE>
4.2.6 If the parties make any errors in the closing prorations or if
they subsequently determine that any dollar amount prorated to be incorrect,
each agrees, upon notice from the other within one (1) year after the Closing,
to make any adjustment necessary to correct the error, including payment of any
amount to the other then determined to be owing.
Buyer shall cooperate with Seller and use its best efforts to collect any
payment required to be prorated under this Section 4.2 after the Closing;
provided, however, that Buyer shall have no obligation to bring any legal action
to collect such payment, although Seller shall have the right to sue delinquent
Tenants for delinquent rent so long as Seller does not cause a termination of
any Lease. Seller shall have the right, at any time for one (1) year after the
Closing upon prior notice to Buyer, to review, inspect and audit any and all
books; records and other information of Buyer relating to any proration required
under this Section 4.2. Buyer and Seller shall promptly pay to the other party
any amount due to the other party as a result of any proration required under
this Section 4.2. All amounts due hereunder shall be payable no later than
twenty (20) days after demand by the payee, and, if such payments duly owing are
not then timely paid, then all such amounts shall bear interest at a rate equal
to fifteen percent (15%) per annum until such time as all such amounts are paid
in full. The terms and conditions set forth in this Section 4.2 shall expressly
survive the Closing hereunder only for the period of time necessary to achieve
final prorations of all amounts due and owing hereunder.
Section 5. Title to the Property. Seller shall convey merchantible and
--------- --------------------
marketable fee simple title to the Land and the Improvements to Buyer in the
form of the Deed, which shall expressly be made subject to the Permitted Title
Exceptions. Buyer shall have until thirty (30) days after the Contract Date by
which to examine title to the Property, obtain any title commitments from the
Title Insurer, and to give written notice to Seller of any objections which
Buyer may have. If Buyer falls to give any notice to Seller by such date, Buyer
shall be deemed to have waived such right to object to any title exceptions or
defects. If Buyer does give Seller timely notice of objection to any other title
exceptions or defects, Seller shall use commercially reasonable efforts to cure
or satisfy such objection by the Closing. If such objection is not so timely and
reasonably cured or satisfied or undertaken to be reasonably cured or satisfied
by Seller, then Buyer shall, within five (5) days thereafter, elect by written
notice to be received by Seller on or before such fifth (5th) day, either to (a)
terminate this Agreement, in which case the Earnest Money shall be returned to
Buyer by Escrow Agent, and the parties shall have no further rights or
obligations hereunder, except for those which expressly survive any such
termination, or (b) waive its objections hereunder and proceed with the
transaction pursuant to the remaining terms and conditions of this Agreement. If
Buyer fails to give Seller notice of its election by such time, it shall be
deemed to have elected the option contained in subparagraph (a) above. If Seller
does so reasonably cure or satisfy, or undertake to reasonably cure or satisfy,
such objection to the satisfaction of Buyer, as determined in its sole
discretion, then this Agreement shall continue in full force and effect. Buyer
shall have the right at any time to waive any objections that it may have made
and, thereby, to preserve this Agreement in full force and effect. Seller
8
<PAGE>
agrees nor to further voluntarily alter or encumber in any way Seller's title to
the Property after the Contract Date (except to the extent provided in Section 9
below) without Buyer's written consent. Notwithstanding anything to the contrary
contained herein, Seller shall be obligated to remove as a title exception (i)
all mortgages, security deeds or other security instruments encumbering the
Property, and (ii) all past due ad valorem taxes and assessments, owners
association, roadway or other easement fees, dues or assessments of any kind,
whether or not of record, which constitute, or may constitute, a lien against
the Property. In addition, Seller shall be obligated to remove (or bond over)
any judgments against the Seller (which do not result from acts or omissions on
the part of Buyer) which have attached to and become a lien against the
Property.
Section 6. Buyer's Inspection.
--------- ------------------
6.1 Document Inspection. Buyer and Seller acknowledge that Buyer shall
-------------------
inspect the Property and shall examine, review and inspect the books and records
relating to the ownership and operation of the Property pursuant to the terms
hereof. Within ten (10) days after the date hereof, Seller shall make available
to Buyer each of the following documents related to the Property that it has in
its possession as of that date:
(a) The Leases:
(b) A rent roll for the Property, outlining the terms of all Leases and
dated not more than thirty (30) days prior to the Contract Date. Seller
shall update such rent roll to a date which is not more than thirty (30)
days prior to the Closing Date;
(c) List of all security deposits, prepaid rent or other sums currently
held by Landlord under the Leases;
(d) All material tenant correspondence, and all financial statements for
tenants which are not subject to a confidentiality agreement. Further,
Buyer shall have the right to visit Seller's offices to inspect and review
tenants' files located at Seller's offices:
(e) Copies of all service, management, leasing or brokerage contracts,
personal property leases and other executory contracts respecting the
Property. Seller shall update such list to a date which is not more than
thirty (30) days prior to the Closing Date;
(f) Copies of real estate tax bills and assessments for the Property for
the current year and for the past three (3) years;
(g) All engineering and architectural plans and specifications,
drawings, site plans, surveys, soil boring test results, other test
results, studies
9
<PAGE>
and as-built plans and specifications of the Property, traffic studies, and
other construction and zoning materials for the Property;
(h) Operating statements and related documents and records for the
Property for the current year and for the three (3) years immediately
preceding the current year;
(i) Copies of all certificates of occupancy for the building shell and
for all occupied tenant spaces, licenses, permits, authorizations and
approvals required by law or by any governmental authority having
jurisdiction over the Property, relating to the construction, occupancy,
operation or present use of the Property;
(j) The most recent budget for the Property, including income, operating
expenses, property taxes and assessments and capital expenditures;
(k) A list of all personal property located on the Property and owned by
Seller;
(l) Copies of all warranties and guaranties issued in connection with
the Property;
(m) Copies of all environmental reports of the Property;
(n) Copies of any prior surveys of the Property;
(o) Copies of insurance policies, insurance certificates delivered by
tenants, and claims documentation for the current year and for the past
three (3) years respecting the insurance maintained on the Property or any
portion thereof;
(p) Any other information or documentation relating to the design,
construction, layout, structure, mechanical, electrical and plumbing
systems, fire protection systems and subsurface conditions relating to the
Property; and
(q) Copies of all books, records, bills, invoices, lease files, credit
reports, and other documentation related to the ownership, construction,
operation and leasing of the Property.
6.2 Physical Inspection. Subject to the rights of the Tenants under the
-------------------
Leases and any rights or restrictions under any of the Permitted Title
Exceptions, Buyer and its agents shall have the right, from time to time prior
to the Closing, to enter upon the Property to examine the same and the condition
thereof, and to conduct such surveys and to make such engineering and other
inspections, tests and studies as Buyer shall determine to be reasonably
necessary, all at Buyer's sole cost and expense. Buyer agrees to give Seller
advance notice of such examinations or surveys and to conduct such examinations
or surveys during normal business hours to the extent practicable. Buyer
10
<PAGE>
agrees to conduct all examinations and surveys of the Property in a manner that
will not harm or damage the Property or cause any claim adverse to Seller or
default under any Lease, and agrees to restore the Property to its condition
prior to any such examinations or surveys immediately after conducting the same.
6.3 Formal Inspection Period. Notwithstanding Buyer's right of
------------------------
inspection contained in Section 6.2 above, with respect to the condition of the
Property, Buyer's obligation to close under this Agreement is subject to and
conditioned upon Buyer's investigation and study of and satisfaction with the
Property. Buyer shall have until the forty-fifth (45th) day after the date Buyer
has received the Survey, the documents listed in Section 6.1 and a title
commitment and exception documents from the Title Insurer (the "Inspection
Date") in which to make such investigations and studies with respect to the
Property as Buyer deems appropriate, and to terminate this Agreement, by written
notice to Seller, to be received on or before the Inspection Date, if Buyer is
not, for any reason satisfied with the Property. If Buyer fails to give notice
of such termination, to be received by Seller on or before the Inspection Date,
then Buyer's rights under this Section 6.3 shall be deemed to have been
exercised by Buyer and this Agreement shall terminate and the Earnest Money
shall be refunded to Buyer by Escrow Agent, and the parties shall have no
further rights or obligations hereunder, except for those which expressly
survive any such termination.
6.4 Survey. Within thirty (30) days after the Contract Date, Buyer, at
------
Seller's expense shall obtain a current, ALTA/ACSM as-built survey of the
Property in the form acceptable to Buyer (the "Survey"). The Survey shall (a) be
completed in accordance with the minimum standard detail requirements for the
ALTA Urban survey and certified to Seller. Buyer, Buyer's lender and the Title
Company by such surveyor; (b) have one perimeter description of the Property;
(c) show all easements, right-of-way, setback lines, encroachments and other
matters affecting the use or development of the Property; (d) show the number
and location of all parking spaces; (e) show the address, dimensions and
location of the Improvements and the height and square footage thereof; (f) show
the acreage of the Property; (g) certify the zoning of the Property; and (h)
certify that no portion of the Property lies within a flood plain or wetlands
area. The Deed to be delivered by Seller to Buyer at the Closing shall contain
the legal description of the Property as shown on the Survey.
6.5 Environmental Assessment. Within thirty (30) days after the Contract
------------------------
Date, Buyer shall obtain, at Buyer's expense, a current ASTM Phase I
environmental site assessment for the Property, performed by an environmental
consultant acceptable to Buyer. If the Phase I environmental site assessment
recommends that Phase II environmental site assessment be prepared, Buyer shall
immediately notify Seller. Seller shall have five (5) days after receiving such
notice to either pay for the cost of such Phase II environmental site assessment
and extend the Inspection Date until a reasonable period following completion of
that assessment, or terminate this Agreement. In the event Seller elects to
terminate this Agreement, the Earnest Money shall be promptly returned to Buyer.
11
<PAGE>
6.6 Leases. On or before the Inspection Date, Seller and Continental PET
------
shall have entered into valid and binding leases in the forms attached hereto as
Schedule 1 and Schedule 2 respectively, with such changes as are acceptable to
- - - - - - - - - - - ---------- ----------
Buyer.
6.7 Roof Condition. On or before the Inspection Date, Buyer shall have
--------------
confirmed its expectations and assumption that the roof of the Building is in
good condition with an extended useful life of seven (7) years or more.
Section 7. Service Contracts. Seller shall, at or prior to the Closing,
--------- -----------------
terminate all Service Contracts, except those Service Contracts, designated by
Buyer within ten (10) days of the Closing Date to be Surviving Service
Contracts, which Buyer elects to assume with Seller's consent. Seller shall pay
any cost, penalty or fee of terminating the Service Contracts not designated as
Surviving Service Contracts.
Section 8. Representations and Warranties.
--------- ------------------------------
As of the Contract Date, Seller hereby warrants and represents to Buyer
as follows:
8.1 Rent Roll. The Rent Roll attached hereto as Exhibit F is complete
--------- ---------
and accurate in all material respects, and Seller shall provide an updated
version of the Rent Roll to Buyer at the Closing.
8.2 Leases - Complete Copies. The Leases listed on Exhibit C hereto,
------------------------ ---------
made available to Buyer pursuant to Section 6.1 hereof, are complete and
accurate copies of all of the agreements affecting the use or occupation of the
Property between third parties and Seller, and there are no written or oral
promises, understandings or commitments with any Tenant other than as set forth
in such Leases or described in the Rent Roll, any addendums thereto or Exhibit C
---------
hereto.
8.3 Leases - Default. All of the Leases are in full force and effect.
----------------
Seller has not notified any Tenant that such Tenant is in default, Seller has
not received any notice from any Tenant that Seller is in default under any of
the Leases, Seller has no knowledge of any existing or uncured default, or any
claim of default, under any of the Leases, and no Tenant has asserted or has any
defense, set-off or counterclaim with respect to its tenancy or its obligation
to pay rent, additional rent and other charges pursuant to its Lease. There are
and shall be, from and after the Closing Date, no rental, lease or other
commissions now or hereafter payable to any person or entity with respect to the
Leases. Seller has completed and paid for all tenant improvements required by
the Leases, except as revealed on Exhibit O attached hereto; and, except as may
---------
be revealed in the Leases and on Exhibit O, Landlord has no further obligations
---------
with respect thereto.
8.4 Guaranties - Complete Copies. The Guaranties made available to Buyer
----------------------------
pursuant to Section 6.1 hereof are complete and accurate copies of all of the
Guaranties, all of which are in full force and effect.
12
<PAGE>
8.5 Service Contracts. A complete and accurate list and description of
-----------------
all of the Service Contracts is set forth in Exhibit G hereto. To Seller's
---------
knowledge, all such Service Contracts are in full force and effect in accordance
with their respective terms. Seller has not given or received any notice of
default under the Service Contracts, and Seller has no knowledge of any event
which, with the passage of time or the giving of notice, would constitute a
default thereunder. All of the Service Contracts are cancelable without penalty
or premium on thirty (30) days notice by the owner of the Property.
8.6 No Litigation. Except as described in Exhibit I attached hereto and
------------- ---------
by this reference made a part hereof, Seller has no knowledge nor has Seller
received notice, of (a) any actual or pending litigation or proceeding by any
organization, person, individual or governmental agency against Seller with
respect to the Property or against the Property, (b) any violation of the
Property's compliance with applicable fire safety laws, building code
ordinances, zoning ordinances or any similar statutes, ordinances, laws, rules
or regulations, (c) any condition, direct or inadequacy which, if not corrected.
would result in the termination of, or increase in the cost of, insurance
coverage, (d) any proceedings which could cause the change, redefinition or
other modification of the zoning classifications or of other legal requirements
applicable to the Property or any part thereof, or (e) pending or threatened
condemnation proceeding that would affect the Property. Except as revealed in
the information delivered by Seller to Buyer hereunder, Seller has no knowledge
of any material defects in the structural or mechanical components of the
Buildings.
8.7 Boundary Lines of Land. There is no pending litigation or dispute,
----------------------
and Seller has no knowledge nor has Seller received notice, of any dispute,
concerning the location of the lines and corners of the Land, and Seller has not
been served with any legal action concerning the location of the lines and
corners of the Land.
8.8 Authority. Seller is a duly organized and validly formed corporation
---------
under the laws of the State of Delaware, is in good standing in the State of
Kentucky, is qualified to do business in the State in which the Land is located,
is not subject to any involuntary proceeding for dissolution or liquidation
thereof, and has obtained all requisite authorizations to enter into this
Agreement with Buyer and to consummate and close the purchase and sale of the
Property pursuant hereto. Seller's execution, delivery and performance of its
obligations under this Agreement will not conflict with or result in a breach
of, or constitute a default under, any of the provisions of Seller's
organizational documents or of any contract, instrument, law, governmental rule,
regulation, judgment, decree or order to which Seller is a party or by which
Seller is bound.
8.9 No Rights to Purchase. Seller is the sole owner of the Property and,
---------------------
no Person, other than Buyer, has any right, agreement, commitment, option, right
of first refusal or any other agreement, whether oral or written, with respect
to the purchase, assignment or transfer of all or any portion of the Property
(other than the rights of Tenants to lease portions of the Property, as tenants
only, pursuant to the Leases). No
13
<PAGE>
party other than Seller and Tenants has or claims any unrecorded or undisclosed
legal or equitable interest in the Property.
8.10 Taxes and Assessments. Except as may be revealed in the public
---------------------
records where the Land is located, the Land is not subject to or affected by any
special assessment for public improvements or otherwise, whether or not
presently a lien upon the Land. Seller has made no commitment to any
governmental authority, utility company, school board, church or other religious
body, homeowner or homeowner's association or any other organization, group or
individual relating to the Property which would impose an obligation upon Seller
or its successors or assigns to make any contributions or dedications of money
or land, or to construct, install or maintain any improvements of a public or
private nature as part of the Property or upon separate lands. No governmental
authority has imposed any requirement that Seller pay, directly or indirectly,
any special fees or contributions or incur any expenses or obligations in
connection with the development of the Property or any portion thereof, other
than any regular and nondiscriminatory local real estate or school taxes
assessed against the Property. No federal, state or local taxing authority has
asserted any tax deficiency, lien, interest or penalty, special assessment or
other assessment against the Property or Seller which has not been paid; and
there is no pending audit or inquiry form any federal, state or local tax
authority or other matter relating to the Property or Seller of which Seller has
notice or knowledge which reasonably may be expected to result in a tax
deficiency, lien, interest, penalty, special assessment or other assessment
against the Property or Seller.
8.11 Environmental Matters. To Seller's knowledge, and except as may be
---------------------
revealed in any environmental report delivered to Buyer pursuant to Section 6.1
hereof:
(a) Hazardous Substances have not been used, generated, transported,
treated, stored, released, discharged or disposed of in, onto, under or
from the Property in violation of any Environmental Laws by Seller or by
any predecessor-in-title or agent of Seller, by any Tenant or by any other
Person at any time;
(b) no notification of release of a Hazardous Substance has been filed
as to the Property, nor is the Property listed on the National Priority
List promulgated pursuant to CERCLA or on any other Federal or state list
of Hazardous Substance sites requiring investigation or cleanup;
(c) there are no above-ground or underground tanks or any other
underground storage facilities located on the Property, and there have
never been such tanks or facilities on the Property.
(d) the Property does not contain any PCBs, asbestos or urea
formaldehyde; and
(e) the Property does not lie within or contain, in whole or in any
part, any wetlands.
14
<PAGE>
Seller has received no written or oral notice or other communication of pending
or threatened claims, actions, suits, proceedings or investigations against
Seller or any Tenant or occupant of the Property related to (i) the disposal or
release of solid, liquid or gaseous waste into the environment from the
Property, (ii) the use, generation, transportation, treatment, storage, release,
discharge, disposal or other handling of any Hazardous Substance on the
Property, or (ii) any alleged violation of any Environmental Laws in relation to
the Property.
8.12 Non-Foreign Status. Seller is not a "foreign person" as that term
------------------
is defined in the Internal Revenue Code of 1986, as amended and the Regulations
promulgated pursuant thereto.
8.13 Utilities. All water, sewer, electric, natural gas, telephone and
---------
drainage facilities, and all other utilities required for the intended operation
of the Property, are installed to the Property and are connected with valid
permits. To the best of Seller's knowledge, all utility lines serving the
Property are located within the boundaries of the Property, within lands
dedicated to public use, or within recorded easements for such purpose.
8.14 Warranties. The warranties and guaranties made available to Buyer
----------
pursuant to Section 6.1 hereof are complete and accurate. All such warranties
and guaranties are in full force and effect in accordance with their respective
terms.
8.15 Compliance. To the best of Seller's knowledge, after due inquiry
----------
(i) all governmental approvals necessary for the construction and operation of
the Property have been obtained and are in full force and effect, and (ii) the
Property is in compliance with all zoning, building, health, traffic,
environmental, flood control, fire safety and all other applicable rules,
regulations, ordinances and statutes of all governmental entities having
jurisdiction over the Property.
8.16 Condition. To the best of Seller's knowledge, after due inquiry,
---------
all improvements (including without limitation all pavement; elevators; roofs;
mechanical, plumbing, drainage, structural, heating, ventilating and air-
conditioning systems; or other systems at or servicing the Property and all
other facilities and equipment relating thereto) are in good order and operating
condition, free from physical or mechanical defects (whether latent or patent),
and fully usable for their intended purpose.
8.17 Seller's Knowledge. Whenever a representation and warranty made by
------------------
Seller in this Section 8 is limited to Seller's knowledge, the phrase "Seller's
knowledge" or any derivation thereof shall mean that Seller has made due inquiry
as to the accuracy of the representations and warranties to those of its
officers and supervising employees who are currently employed by Seller and who
are or were responsible on behalf of Seller for the acquisition, development,
leasing, management operation and disposition of the Property and construction
of the Improvements.
15
<PAGE>
8.18 Miscellaneous. It shall be a condition of Closing that the
-------------
representations and warranties contained in this Section 8 are true and correct
at Closing and Seller shall be deemed to have reaffirmed these representations
and warranties at Closing. In the event that Seller or Buyer learns that any of
said representations or warranties becomes inaccurate between the Contract Date
and the Closing Date, Seller or Buyer shall immediately notify the other party
in writing of such change. Seller shall then use its good faith efforts to cure
such change after giving or receiving notice thereof as require herein. The
Closing Date shall be automatically extended in order to allow Seller to cure
such change. In the event Seller so cures such change, this Agreement shall
remain in full force and effect. If Seller is unable to cure such change, Buyer
may either (a) terminate this Agreement by written notice to Seller, in which
case the Earnest Money shall be returned to Buyer and the parties shall have no
further rights or obligations hereunder, except for those which expressly
survive such termination, or (b) waive such right to terminate and proceed with
the transaction pursuant to the remaining terms and conditions of this
Agreement. In the event Buyer elects option (b) in the preceding sentence or in
the event Buyer elects to Close with the knowledge that a representation or
warranty of Seller herein is untrue or incorrect, the representations and
warranties shall be deemed to be automatically amended to reflect said change.
The representations and warranties contained in this Section 8 shall survive
Closing but shall terminate one (1) year after the Closing Date, unless a suit
is filed thereupon in a court of competent jurisdiction on or before the
expiration of said one (1) year period.
Section 9. Preservation of Leases, Surviving Service Contracts and
--------- -------------------------------------------------------
Guaranties. Without Buyer's prior written consent, which shall not be
- - - - - - - - - - - ----------
unreasonably withheld or delayed, Seller shall not enter into any new leases or
amend or modify the Leases or the Surviving Service Contracts after the Contract
Date. After the Contract Date, Seller shall not, without Buyer's prior written
consent, cancel any Lease, Surviving Service Contract or Guaranty, consent to
any surrender or release of any Lease or Guaranty or consent to any assignment
or sublease under any Lease. Seller shall give Buyer notice of any such
contemplated action, and Buyer shall give Seller either its written consent or
objection, giving its reasons for any objection, to be received by Seller on or
before the fifth (5th) day after Buyer's receipt of such notice. If Buyer fails
to give notice of its election within said time period, it shall be deemed to
have not given its consent to said request. Seller shall, from and after the
date of this Agreement to the Closing Date, perform and discharge its duties and
obligations and otherwise comply with every material covenant and agreement of
the landlord or lessor under the Leases and the Surviving Service Contracts, in
its ordinary manner of business and within the time limits required thereunder.
Section 10. Conditions to Closing. Buyer's obligation to proceed to
---------- ---------------------
Closing under this Agreement is subject to the following conditions precedent:
(a) Seller shall have performed and satisfied each and all of Seller's
obligations under this Agreement:
16
<PAGE>
(b) Each and all of Seller's representations and warranties set forth in
this Agreement shall be true and correct at the Contract Date and at the
Closing Date;
(c) Buyer shall have received not less than ten (10) days prior to the
Closing Date a Tenant Estoppel Certificate substantially in the form
attached hereto as Exhibit H and in the form acceptable to Buyer, from all
---------
tenants or occupants under each Lease.
(d) There shall be no material change between the Contract Date and the
Closing Date in the physical or financial condition or profitability of the
Property or Improvements or in Seller's obligations with respect thereto;
(e) Seller shall have addressed to the satisfaction of Buyer any
obligations to tenants identified in Exhibit 0;
---------
(f) Buyer shall have received all corporate approvals to complete this
transaction on or before the Closing Date; and
In the event any of the foregoing conditions are not satisfied on the Closing
Date, Buyer shall have no obligation to proceed to Closing and, unless Buyer
shall deliver written notice to Seller that Buyer has waived any unsatisfied
condition and will proceed to Closing, this Agreement shall cease and terminate,
the Earnest Money shall be returned and paid to Buyer, and neither party shall
have any further obligation hereunder. Notwithstanding the foregoing, nothing
contained herein shall waive or diminish any right or remedy Buyer may have for
Seller's default or breach of this Agreement.
Section 11. Closing.
---------- -------
11.1 Time and Place. Provided that all of the conditions set forth in
--------------
this Agreement are theretofore fully satisfied or performed, the Closing shall
be held at the offices of the Escrow Agent on a date selected by Buyer and
reasonably acceptable to Seller, which shall be on or before fifteen (15) days
after the Inspection Date, unless the Closing Date is postponed pursuant to the
express terms of this Agreement or as otherwise agreed by Seller and Buyer in
writing.
11.2 Closing Documents. For and in consideration of, and as a condition
-----------------
precedent to Buyer's delivery to Seller of the Purchase Price, Seller shall
obtain and deliver to Buyer at the Closing the following documents (all of which
shall be duly executed and witnessed, which documents Buyer agrees to execute
where required):
11.2.1 A Deed. in the form attached as Exhibit J hereto and by this
---------
reference made a part hereof, conveying to Buyer all of Seller's right, title
and interest in and to the Property, subject to the Permitted Title Exceptions
and such other exceptions as are permitted by Section 5 hereof.
17
<PAGE>
11.2.2 An Assignment and Assumption of Leases and Guaranties,
including but not limited to an assignment and assumption of all commissions due
under the Leases, in the form attached as Exhibit K hereto and by this reference
made a part hereof; ---------
11.2.3 A Non-Foreign Certificate, in the form attached as Exhibit L
hereto and by this reference made a part hereof; ---------
11.2.4 Such evidence as the Title Insurer shall reasonably require
as to the authority of the parties acting on behalf of Seller and Buyer to enter
into this Agreement and to discharge the obligations of Seller and Buyer
pursuant hereto;
11.2.5 An original executed counterpart or certified copy of each
Lease, Guaranty and Surviving Service Contract,
11.2.6 An updated Rent Roll;
11.2.7 All original Tenant files in possession of Seller;
11.2.8 A Bill of Sale for all Personal Property, in the form
attached as Exhibit M hereto and by this reference made a part hereof;
---------
11.2.9 An Assignment and Assumption of Surviving Service Contracts
and Warranties, in the form attached hereto as Exhibit N and by this reference
made a part hereof; ---------
11.2.10 Notice from Seller to each Tenant and Guarantor of the sale
of the Property to Buyer, in the form attached hereto as Exhibit P and by this
reference made a part hereof; ---------
11.2.11 The Tenant Estoppel Certificates (and certificate of Seller,
if applicable) as required by Section 9 hereof;
11.2.12 A properly-completed property transfer tax return, in form
and substance appropriate to the jurisdiction in which the Property is located;
11.2.13 A Closing Statement;
11.2.14 An affidavit of title or other affidavit customarily
required of sellers by the Title Insurer to remove the standard exceptions from
an owner's title insurance policy which are capable of being removed by such an
affidavit; and
11.2.15 Such further instructions, documents and information,
including, but not limited to a Form 1099, as Buyer, Seller or Title Insurer may
18
<PAGE>
reasonably request as necessary to consummate the purchase and sale contemplated
by this Agreement.
11.3 Costs. At the Closing, Seller and Buyer shall pay their own
-----
respective costs incurred with respect to the consummation of the purchase and
sale of the Property as contemplated herein, including, without limitation,
attorneys' fees. Notwithstanding the foregoing, it is expressly agreed that
Seller shall pay any city, county or state transfer taxes related to this
sale, one-half of any escrow fees charged by Escrow Agent for the Closing, the
cost of the Survey, the premium for Buyer's title insurance policy (including
the cost of extended coverage and any endorsements, as determined by Buyer in
its sole discretion). Buyer shall pay the cost of recording the Deed, the
costs of any governmental filings required of Buyer, the cost of the Phase I
environmental assessment, one-half of any escrow fees charged by Escrow Agent
for the Closing, any mortgage recording or intangibles tax and all other
taxes, costs, fees or expenses relating to Buyer's financing of the Property,
together with any due diligence costs of Buyer not expressly addressed above.
11.4 Security Deposits and Prepaid Rent. Seller shall pay over and
----------------------------------
assign and transfer to Buyer at the Closing a sum equal to the aggregate of the
Security Deposits, other deposits under the Leases and any Rents prepaid for
months after the month of the Closing Date, and Buyer shall indemnify Seller
against any liability with respect thereto.
Section 12. Default and Remedies.
---------- --------------------
12.1 Buyer's Default. In the event of a default by Buyer under the terms
---------------
of this Agreement, Escrow Agent shall disburse the Earnest Money to Seller, and
Seller shall be entitled, as its sole and exclusive remedy hereunder, to retain
the Earnest Money as full liquidated damages for such default of Buyer,
whereupon this Agreement shall terminate and the parties shall have no further
rights or obligations hereunder, except for those which expressly survive any
such termination. It is hereby agreed that Seller's damages in the event of a
default by Buyer hereunder are uncertain and difficult to ascertain, and that
the Earnest Money constitutes a reasonable liquidation of such damages and is
intended not as a penalty, but as full liquidated damages. Buyer covenants not
to bring any action or suit challenging the amount of liquidated damages
provided hereunder in the event of such default. This provision shall expressly
survive the termination of this Agreement.
12.2 Seller's Default. In the event of a default by Seller under the
----------------
terms of this Agreement which is first discovered by Buyer prior to the Closing
and is not cured by Seller as provided hereunder, Buyer's sole and exclusive
remedies hereunder shall be to either terminate this Agreement and receive a
refund of the Earnest Money from Escrow Agent, or to seek specific performance
of Seller's obligations under this Agreement, together with any damages caused
by Seller's default hereunder.
19
<PAGE>
Section 13. Condemnation or Destruction.
---------- ---------------------------
13.1 Condemnation. Seller hereby represents and warrants that Seller has
------------
no knowledge of any action or proceeding pending, instituted or threatened for
condemnation or other taking of all or any part of the Property by friendly
acquisition or statutory proceeding. Seller agrees to give Buyer immediate
written notice of such actions or proceedings that may result in the taking of
all or a part of the Property. If, prior to the Closing, all or any material
part of the Property is subject to a bona fide threat of condemnation by a body
having the power of eminent domain, or is taken by eminent domain or
condemnation, or sale in lieu thereof, then Buyer, by written notice to Seller,
to be received within thirty (30) calendar days of Buyer's receiving Seller's
notice of such threat, condemnation or taking, or by the Closing Date, whichever
is earlier, may elect to terminate this Agreement.
13.2 Damage or Destruction. If, prior to the Closing, all or any
---------------------
material part of the Property is damaged or destroyed by any cause, Seller
agrees to give Buyer immediate written notice of such occurrence and the nature
and extent of such damage and destruction, and Buyer, by written notice to
Seller, to be received within thirty (30) calendar days of Buyer's receipt of
Seller's notice of such damage or destruction, or by the Closing Date, whichever
is earlier, may elect to terminate this Agreement.
13.3 Termination. If this Agreement is terminated as a result of the
-----------
provisions of either Section 13.1 or Section 13.2 hereof, Buyer shall be
entitled to receive a refund of the Earnest Money from Escrow Agent, whereupon
the parties shall have no further rights or obligations hereunder, except for
those which expressly survive any such termination.
13.4 Awards and Proceeds. If Buyer does not elect to terminate this
-------------------
Agreement following any notice of a threat of taking or taking by condemnation
or notice of damage or destruction to the Property, as provided above, this
Agreement shall remain in full force and effect and the conveyance of the
Property contemplated herein, less any interest taken by eminent domain or
condemnation, or sale in lieu thereof, shall be effected with no further
adjustments. At the Closing, Seller shall assign, transfer and set over to Buyer
all of Seller's right, title and interest in and to any awards, payments or
insurance proceeds for the actual value of the property lost or destroyed, up to
but not in excess of the Purchase Price, that have been or may thereafter be
made for any such taking, sale in lieu thereof or damage or destruction, to the
extent such awards, payments or proceeds shall not have theretofore been used
for restoration of the Property pursuant to a plan of restoration approved in
writing by Buyer. In addition there shall be credited to Buyer against the
Purchase Price the amount of any insurance deductible or other limitation on
insurance proceeds.
20
<PAGE>
Section 14. Assignment.
---------- ----------
14.1 Assignment by Buyer. Except as herein expressly provided, Buyer
-------------------
shall not, without the prior written consent of Seller, which Seller may
withhold in its sole and absolute discretion, assign any of Buyer's rights
hereunder or any part thereof to any person, firm, partnership, corporation or
other entity. If any assignment is made with the consent of Seller, then the
sale contemplated by this Agreement shall be consummated in the name of, and by
and through the authorized officials of, any such assignee. Notwithstanding
anything to the contrary contained herein, Buyer may assign this Agreement and
all of its interests herein to an entity related to Buyer without the consent
of, but with notice to, Seller. Upon such assignment or nomination, the assignee
or nominee shall have and be subject to all the rights, benefits, duties and
obligations of Buyer hereunder, but Buyer shall not be released from any
liability or obligation of Buyer hereunder.
14.2 Assignment by Seller. From and after the Contract Date, Seller
--------------------
shall not, without the prior written consent of Buyer, which consent Buyer may
withhold in its sole discretion, assign, transfer, convey, hypothecate or
otherwise dispose of all or any part of its right, title and interest in the
Property.
Section 15. Buyer's Representation and Warranty.
---------- -----------------------------------
Buyer does hereby represent and warrant to Seller as of the Contract
Date and the Closing Date that it is a validly formed limited partnership under
the laws of the State of Indiana; that it is in good standing in the state of
its organization and qualified to do business in the State in which the Land is
located; that it is not subject to any involuntary proceeding for the
dissolution or liquidation thereof; that it has all requisite authorizations to
enter into this Agreement; and that the parties executing this Agreement on
behalf of Buyer are duly authorized to so do. If Buyer does not terminate this
Agreement on or before the Inspection Date, Buyer shall be deemed to have
represented and warranted to Seller as of the Inspection Date and the Closing
Date that Buyer has all requisite authorization to consummate the transactions
contemplated hereby.
Section 16. Broker and Broker's Commission. Seller retained Ostendorff
---------- ------------------------------
Morris and will pay a commission of One Hundred Thirty Two Thousand Dollars
($132,000.00) to Ostendorff Morris with regard to the sale of the Property.
Except as provided in the preceding sentence, Buyer and Seller each warrant
and represent to the other that such party has not employed a real estate
broker or agent in connection with the transaction contemplated hereby. Each
party agrees to indemnify and hold the other harmless from any loss or cost
suffered or incurred by it as a result of the other's representation herein
being untrue. This Section 16 shall expressly survive the Closing hereunder.
21
<PAGE>
Section 17. Notices.
---------- -------
Wherever any notice or other communication is required or permitted
hereunder, such notice or other communication shall be in writing and shall be
delivered by hand, by nationally-recognized overnight express delivery service,
by U.S. registered or certified mail, return receipt requested, postage prepaid,
or by electronic transfer with prompt telephone confirmation to the addresses
set out below or at such other addresses as are specified by written notice
delivered in accordance herewith:
SELLER: Prestolite Electric Incorporated
7585 Empire Drive
Florence, KY 41042
Attn: Thomas Jennette
Fax: (606) 525-6457
With a copy to: Hooper, Hathaway, Price, Beuche & Wallace
126 S. Main Street
Ann Arbor, MI 48104-1945
Attn: Bruce C. Conybeare. Jr.
Fax: (313) 662-9559
BUYER: Duke Realty Limited Partnership
8888 Keystone Crossing, Suite 1200
Indianapolis, IN 46240
Attn: Richard W. Horn
Fax: (317) 574-3509
With a copy to: Duke Realty Limited Partnership
8888 Keystone Crossing, Suite 1200
Indianapolis, IN 46240
Attn: Peter N. Anderson
Fax: (317) 574-3693
Any notice or other communication mailed as hereinabove provided shall be deemed
effectively given (a) on the date of delivery, if delivered by hand; (b) on the
date mailed if sent by overnight express delivery or if sent by U.S. mail; or
(c) on the date of transmission, if sent by electronic transfer device with a
follow-up by regular mail. Such notices shall be deemed received (a) on the date
of delivery, if delivered by hand or overnight express delivery service; (b) on
the date indicated on the return receipt if mailed; or (c) on the date of
transmission, if sent by electronic transfer device. If any notice mailed is
properly addressed but returned for any reason, such notice shall be deemed to
be effective notice and to be given on the date of mailing.
22
<PAGE>
Section 18. Miscellaneous.
---------- -------------
18.1 Governing Law; Headings; Rules of Construction. This Agreement
----------------------------------------------
shall be governed by and construed in accordance with the internal laws of the
State of Indiana, without reference to the conflicts of laws or choice of law
provisions thereof. The titles of sections and subsections herein have been
inserted as a matter of convenience of reference only and shall not control or
affect the meaning or construction of any of the terms or provisions herein. All
references herein to the singular shall include the plural, and vice versa. The
parties agree that this Agreement is the result of negotiation by the parties,
each of whom was represented by counsel, and thus, this Agreement shall not be
construed against the maker thereof.
18.2 No Waiver. Neither the failure of either party to exercise any
---------
power given such party hereunder or to insist upon strict compliance by the
other party with its obligations hereunder, nor any custom or practice of the
parties at variance with the terms hereof shall constitute a waiver of either
party's right to demand exact compliance with the terms hereof.
18.3 Entire Agreement. This Agreement contains the entire agreement of
----------------
the parties hereto with respect to the Property, and no representations,
inducements, promises or agreements, oral or otherwise, between the parties not
embodied herein or incorporated herein by reference shall be of any force or
effect
18.4 Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors and assigns
(subject to Section 14 above).
18.5 Amendments. No amendment to this Agreement shall be binding on any
----------
of the parties hereto unless such amendment is in writing and is executed by the
party against whom enforcement of such amendment is sought.
18.6 Possession. Possession of the Property shall be granted by Seller
----------
to Buyer no later than the Closing Date, subject to the Permitted Title
Exceptions and other tide matters allowed under Section 5.1 hereof.
18.7 Date For Performance. If the time period by which any right, option
--------------------
or election provided under this Agreement must be exercised, or by which any act
required hereunder must be performed, or by which the Closing must be held,
expires on a Saturday, Sunday or legal or bank holiday, then such time period
shall be automatically extended through the close of business on the next
regularly scheduled business day.
18.8 Recording. Seller and Buyer agree that they will not record this
---------
Agreement and that they will not record a short form of this Agreement.
23
<PAGE>
18.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which,
when taken together, shall constitute but one and the same instrument.
18.10 Time of the Essence. Time shall be of the essence of this
-------------------
Agreement and each and every term and condition hereof.
18.11 Severability. This Agreement is intended to be performed in
------------
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations, and is intended, and shall for all purposes
be deemed to be, a single, integrated document setting forth all of the
agreements and understandings of the parties hereto, and superseding all prior
negotiations, understandings and agreements of such parties. If any term or
provision of this Agreement or the application thereof to any person or
circumstance shall for any reason and to any extent be held to be invalid or
unenforceable, then such term or provision shall be ignored, and to the maximum
extent possible, this Agreement shall continue in full force and effect, but
without giving effect to such term or provision.
18.12 Confidentiality. Buyer covenants and agrees that the terms of this
---------------
Agreement, as well as the identity of the parties to the transactions
contemplated thereby and hereby, and all information concerning the Property
(including, without limitation, all information obtained by Buyer prior to the
Closing Date) shall be kept in strictest confidence by Buyer prior to the
Closing, and thereafter, if the Closing fails to occur for any reason. After the
occurrence of the Closing, Buyer may disclose that the transactions contemplated
hereby have occurred and that the Property has been sold, but shall not disclose
the Purchase Price, except to actual or prospective lenders, investors,
shareholders and governmental agencies. Notwithstanding the foregoing, nothing
contained herein shall be construed so as to prohibit Buyer from making (a) a
disclosure to officers, employees and those agents, contractors or vendors which
need to know in order to assist Buyer in its purchase of the Property, (b) any
disclosure required by law, including any such disclosure required by any
Federal, state or local governmental agency or court of competent jurisdiction,
or (c) any disclosure which is reasonably necessary to protect any such party's
interest in any action, suit or proceeding brought by or against such party and
relating to the Properties or the subject matter of this Agreement.
18.13 Attorneys' Fees. In the event that either party shall bring an
---------------
action or legal proceeding for an alleged breach of any provision of this
Agreement or any representation, warranty, covenant or agreement herein set
forth, or to enforce, protect, determine or establish any term, covenant or
provision of this Agreement or the rights hereunder of either party, the
prevailing party shall be entitled to recover from the nonprevailing party, as a
part of such action or proceedings, or in a separate action brought for that
purpose, reasonable attorneys' fees and costs, expert witness fees and court
costs as may be fixed by the court or jury.
24
<PAGE>
18.14 Like-Kind Exchange. Buyer shall have the right to acquire the
------------------
Property as part of a transaction that Buyer intends to qualify as a tax-
deferred exchange under Section 1031 of the Internal Revenue Code. Seller shall
make all reasonable efforts to cooperate with Buyer, provided, however, that the
date of Closing hereunder shall not thereby be delayed, Seller shall not be
obligated to incur any additional expenses and Buyer shall defend, indemnify and
hold harmless Seller against any and all losses, costs, expenses and liabilities
which may arise out of such tax-deferred exchange. To facilitate such exchange,
Buyer shall have the right to assign all of its right, title and interest in
this Agreement to a qualified intermediary and to require Seller to convey the
Property to that intermediary pursuant to the terms of this Agreement.
18.15 Financial Representations. At Buyer's request, Seller agrees to
-------------------------
make available to Buyer or Buyer's designated representative all financial books
and records for the Property being sold, and to provide such assistance so as to
permit preparation, at Buyer's expense, of audited or unaudited financial
statements for all periods required to be prepared by the Rules and Regulations
of the Securities and Exchange Commission relating to the purchase of the
Property. Seller also agrees to make such reasonable representations to Buyer's
independent accountants as may be required by such independent accountants in
order to enable them to render an opinion on the financial statements of the
Property for the periods.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed and sealed by its duly authorized signatory, effective as of the
day and year first above written.
SELLER:
------
PRESTOLITE ELECTRIC INCORPORATED
/s/ Thomas R. Jennette
By: __________________________
Name: Thomas R. Jennette
Title: Vice President
/s/ Jerry L. Weisenauer
By: __________________________
Name: Jerry L. Weisenauer
Title: Senior Vice President
[CORPORATE SEAL]
25
<PAGE>
BUYER:
-----
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
By: Duke Realty Investments, Inc., an
Indiana corporation, as general
partner
/s/ Richard W. Horn
By: __________________________
Richard W. Horn
Vice President Acquisitions
/s/ Peter N. Anderson
Attest: __________________________
Peter N. Anderson
Corporate Attorney
26
<PAGE>
EXHIBIT A
---------
ESCROW AGREEMENT
----------------
THIS AGREEMENT is made and entered into this ____ day of ______________
1995, by and among _____________________________________ a(n)
_______________________ ("Seller"), and DUKE REALTY LIMITED PARTNERSHIP, an
Indiana limited partnership ("Buyer"), and _____________________________________
("Escrow Agent").
WHEREAS, Seller and Buyer have entered into that certain Agreement for
Purchase and Sale of Property (the "Purchase Agreement") dated as of __________,
1995, for the sale and purchase of that certain real property described therein;
the Purchase Agreement is attached hereto as Exhibit A and by this reference
---------
made a part hereof, and all terms used but not defined herein shall have the
meanings given to such terms in the Purchase Agreement; and
WHEREAS, Buyer and Seller desire to have Escrow Agent hold the Earnest
Money in escrow, as required by the Purchase Agreement and pursuant to the terms
hereof.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency whereof are hereby
acknowledged, the parties hereto hereby covenant and agree as follows:
1. Buyer and Seller appoint _______________________ as Escrow Agent
hereunder.
2. Buyer will deliver and deposit with Escrow Agent the amount of
$________, representing the Earnest Money required by Section 3 of the Purchase
Agreement. The Escrow Agent agrees to immediately deposit the Earnest Money in
an interest-bearing account in a national banking association and to hold and
disburse the same, together with any interest earned thereon, as required by the
Purchase Agreement.
3. Upon the Closing Date, Escrow Agent shall apply the Earnest Money,
together with any accrued interest thereon, to the Purchase Price as required by
the Purchase Agreement.
4. Within fifteen (15) days after written notification from both Buyer
and Seller that the sale contemplated by the Purchase Agreement shall not take
place, Escrow Agent shall deliver the Earnest Money as required by the Purchase
Agreement.
A-1
<PAGE>
5. Buyer and Seller hereby covenant and agree that Escrow Agent shall
not be liable for any loss, cost or damage which it may incur as a result of
serving as Escrow Agent hereunder, except for any loss, cost or damage arising
out of Escrow Agent's gross negligence or willful misconduct. Accordingly,
Escrow Agent shall not incur any liability with respect to (a) any action taken
or omitted to be taken in good faith upon advice of its counsel, given with
respect to any questions relating to its duties and responsibilities hereunder,
or (b) any action taken or omitted to be taken in reliance upon any document,
including any written notice of instruction provided for herein or in the
Purchase Agreement, not only as to the due execution and the validity and
effectiveness thereof, but also as to the truth and accuracy of any information
contained therein, which Escrow Agent shall in good faith believe to be genuine
and to have been signed or presented by proper person or persons in conformity
with the provisions of this Agreement. Buyer and Seller hereby agree to
indemnify and hold harmless Escrow Agent against any and all losses, claims,
damages, liabilities and expenses, including, without limitation, reasonable
costs of investigation and reasonable attorneys' fees and disbursements actually
incurred, which may be imposed upon and incurred by Escrow Agent in connection
with its serving as Escrow Agent hereunder. In the event of a dispute between
Buyer and Seller, Escrow Agent shall be entitled to tender unto the registry or
custody of any court of competent jurisdiction in Marion County, Indiana all
money or property in Escrow Agent's hands held under the terms of this Agreement
and the Purchase Agreement, together with such legal pleadings as it deems
appropriate, and thereupon shall be discharged of its obligations hereunder and
under the Purchase Agreement.
6. Any notice required hereunder shall be delivered to the parties and
in the manner as required by the Purchase Agreement. Escrow Agent's address for
notice purposes is as follows:
_______________________________
_______________________________
_______________________________
Attn:__________________________
Telephone:_____________________
Facsimile: ____________________
7. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of ___________________, without reference to the
conflicts of laws or choice of law provisions thereof.
8. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, executors, administrators,
legal representatives, successors and assigns.
A-2
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and sealed as of the date first written above.
SELLER:
------
By: __________________________
Name: ________________________
Title: _______________________
Attest: ______________________
Name: ________________________
Title: _______________________
[CORPORATE SEAL]
BUYER:
-----
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
By: Duke Realty Investments, Inc.,
an Indiana corporation, as general
partner
By: ________________________
Richard W. Horn
Vice President Acquisitions
Attest: ________________________
Name: __________________
Title: _________________
[CORPORATE SEAL]
A-3
<PAGE>
ESCROW AGENT:
------ -----
By: __________________________
Name: ________________________
Title: _______________________
A-4
<PAGE>
EXHIBIT A TO ESCROW AGREEMENT
-----------------------------
[THE PURCHASE AGREEMENT]
A-5
<PAGE>
EXHIBIT B
---------
DESCRIPTION OF LAND
-------------------
B-1
<PAGE>
EXHIBIT C
---------
LIST OF LEASES
--------------
C-1
<PAGE>
EXHIBIT D
---------
PERMITTED TITLE EXCEPTIONS
--------------------------
1. Taxes and assessments becoming a lien in the calendar year in which the
Closing occurs but which are not, as of the date of Closing, due and payable.
2. Written leases with tenants and any new written leases entered into between
the Contract Date and the Closing Date in accordance with this Agreement.
3. Matters shown on the Survey.
4. Other title exceptions listed in Buyer's Title Commitment and acceptable to
Buyer.
D-1
<PAGE>
EXHIBIT E
---------
LIST OF PERSONAL PROPERTY
-------------------------
NONE
----
E-1
<PAGE>
EXHIBIT F
---------
RENT ROLL
---------
F-1
<PAGE>
EXHIBIT G
---------
SERVICE CONTRACTS
-----------------
G-1
<PAGE>
EXHIBIT H
---------
TENANT ESTOPPEL CERTIFICATE
---------------------------
Tenant: _____________________________________ ("Tenant")
Landlord: _____________________________________ ("Landlord")
Buyer: ______________________________________ and its successors and
assigns ("Buyer")
Regarding: Lease by and between ________________________ and
______________
____________________dated ___________,19___, as amended by amendments
dated ___________________ (collectively the "Lease")
Leased Premises: __________________________________ ("Premises")
In connection with Buyer's purchase of the Premises, Tenant certifies to
Buyer as follows:
1. Attached hereto as Exhibit A is a true, correct and complete copy of
---------
the Lease, as the same may have been modified or amended, together with any and
all guaranties of the Lease that may have been delivered to Landlord or any
predecessor to Landlord thereunder.
2. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as indicated above; and the Lease
represents the entire agreement between the parties as to this leasing and/or
Tenant's rights to the Premises. There are no oral agreements or understandings
between Landlord (and its predecessors and/or successors if applicable) and
Tenant with respect to the Lease or any obligations of any party thereunder. The
Lease contains no options to purchase, rights of refusal, rights of first offer
or rights of negotiation in favor of Tenant with respect to the purchase of the
property of Landlord (or its predecessors, if applicable).
3. The term of the Lease commenced on ______________ and expires on
___________________. Tenant has given Landlord a security deposit of
$________________.
H-1
<PAGE>
4. Rent under the Lease of $___________ per month has been paid through
the date of ___________________. No rent due has been paid more than one (1)
month in advance. Tenant has no defenses or offsets which could be alleged in
any action brought for rent accruing subsequent to the date of this Certificate.
On ____________ 19__ rent under the Lease increases to $________ per month.
5. Tenant currently pays Landlord $________ per month for charges other
than rent, including operating expense pass throughs, which are due and payable
under the Lease. Such payments have not been made for any period more than one
(1) month in advance of such payment. For the latest fiscal, calendar or lease
year commencing 199 , to date, Tenant has paid to Landlord $_________ for such
costs. Tenant does not dispute the amount or method of calculating such charges.
6. Tenant has not executed any lease or sublease with respect to the
Premises except the Lease, and Tenant has not assigned or encumbered its
interest in the Lease.
7. Landlord has satisfied all conditions under the Lease in the nature of
inducements to Tenant's occupancy, including without limitation all co-tenancy
requirements thereunder; and all improvements required by the terms of the Lease
to be made by Landlord have been satisfactorily completed.
8. Landlord has paid in full all amounts required by the Lease to be paid
by Landlord to Tenant on account of Tenant's improvements or as otherwise
required by the Lease.
9. Landlord has no present or future obligation to Tenant for upfitting,
decorating or improvements in connection with or arising out of the Lease,
whether the same relates to space which Tenant currently occupies, space upon
which Tenant may have an option, or otherwise.
10. Tenant has not defaulted and is not currently in default in its
obligations under the Lease and, to the best of Tenant's knowledge, Landlord has
not defaulted and is not currently in default in any of its obligations under
the Lease. Neither Tenant nor, to the best of Tenant's knowledge, Landlord has
committed any breach under the Lease which, alone or with the passage of time,
the giving of notice, or both, would constitute a default thereunder Tenant has
not received from or given to Landlord any notice of default or breach under the
Lease. To the best of Tenant's knowledge, on this date Tenant has no defenses,
offsets or counterclaims against Landlord's enforcement of the Lease or Tenant's
payment of rent and other charges thereunder.
H-2
<PAGE>
11. Tenant's operation and use of the Premises do not involve the
generation, treatment, storage, disposal or release of a hazardous substance or
material or a solid waste. To the best of Tenant's knowledge, the Premises do
not contain any hazardous substances or materials except (i) those lawfully
permitted and generally recognized as necessary and appropriate for Tenant's
permitted use. And (ii) Tenant is operating the Premises in accordance with all
applicable laws. Tenant has received no notice of noncompliance with any
applicable law.
In the event the Lease is assigned to Buyer, or in the event Buyer
purchases and acquires the land and improvements in or on which is located the
space demised by the Lease, Tenant agrees that from and after the date of such
acquisition, and until otherwise notified by Buyer, Tenant shall make its
payments of rent and other charges due under the Lease to Buyer at the following
address:
__________________________
__________________________
__________________________
Tenant agrees that, upon Buyer's purchase of the Premises, Tenant will
attorn to and recognize Buyer as the Landlord under the Lease, with the same
force and effect as if there were a direct lease between Tenant and Buyer.
Tenant further agrees that Buyer shall not be liable for any defaults or other
acts or omissions of Buyer's predecessors in interest in the Premises
(including, but not limited to, Landlord).
Tenant acknowledges that Buyer has relied on the information contained in
this Tenant Estoppel Certificate in determining whether to acquire the land and
improvements in or on which is located the space demised by the Lease. The
statements contained herein may be relied upon by Landlord, Buyer, and Buyer's
Lender, if any, in connection with Buyer's purchase of the Premises.
Executed this _____ day of ___________, 1995.
TENANT:
By:_____________________________
Printed:________________________
Title:___________________________
H-3
<PAGE>
EXHIBIT I
---------
DESCRIPTION OF LITIGATION AFFECTING SELLER OR THE PROPERTY
----------------------------------------------------------
NONE
----
I-1
<PAGE>
EXHIBIT J
---------
LIMITED WARRANTY DEED
THIS INDENTURE WITNESSETH, that ______________________________ a(n)
corporation ("Grantor"), CONVEYS AND SPECIALLY WARRANTS to
________________________________ a(n) corporation for the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt of which is
hereby acknowledged, certain real estate and all improvements located thereon
located in _____________________, ___________, as more specifically described in
the attached Exhibit A, subject to those matters more specifically described on
---------
Exhibit B, which is attached hereto and incorporated herein by reference.
- - - - - - - - - - - ---------
The warranty of title by Grantor is limited to a warranty against the acts
of Grantor and those claiming by, through or under Grantor, and not otherwise.
IN WITNESS WHEREOF, Grantor has caused this Limited Warranty Deed to be
executed this ___ day of ________________, 199___.
______________________________
a(n) _____________ corporation
WITNESSES
By: ___________________________
______________________
(printed) Printed:________________________
______________________ Title:_____________________________
(printed)
J-1
<PAGE>
STATE OF __________)
) SS:
COUNTY OF __________)
Before me, a Notary Public in and for said County and State, personally
appeared _____________, by me known and by me known to be the _______________ of
____________________, a(n) corporation, who acknowledged the execution of the
foregoing on behalf of said ____________________________.
WITNESS my hand and Notarial Seal this ___th day of ______________,
199__.
_____________________________
Notary Public
_____________________________
(Printed Signature)
My Commission Expires:_______________
My County of Residence:_______________
This instrument was prepared by: ______________, Attorney at Law,
____________________________
After recording return to: _______________________________
_______________________________
_______________________________
Sent tax bills to: _______________________________
_______________________________
_______________________________
J-2
<PAGE>
EXHIBIT K
---------
STATE OF__________
COUNTY OF________
ASSIGNMENT AND ASSUMPTION OF
----------------------------
LEASES AND GUARANTIES
---------------------
THIS ASSIGNMENT is made and entered into as of this ____ day of
_____________, 19___, by and between ________________________________., a
______________________ corporation (hereinafter referred to as "Assignor") and
DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership (hereinafter
referred to as "Assignee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, contemporaneously with the execution and delivery of this
Assignment, Assignor has sold and conveyed to Assignee all that tract or parcel
of land more particularly described in Exhibit A attached hereto and
---------
incorporated herein by reference, together with all improvements thereon and all
rights, easements and appurtenances thereto (hereinafter collectively referred
to as the "Property");
WHEREAS, in connection with such conveyance of the Property, Assignor
and Assignee have agreed that Assignor shall transfer and assign to Assignee all
right, title and interest of Assignor in and to all leases, subleases and other
occupancy agreements (hereinafter collectively referred to as the "Leases") in
force and effect at the date hereof, whether or not of record, for the use or
occupancy of any portion of the Property, as described in Exhibit B attached
---------
hereto and incorporated herein by reference, all guaranties (hereinafter
collectively referred to as the "Guaranties") of the obligations of the tenants
under the Leases as described in Exhibit C attached hereto, and all security
---------
deposits (hereinafter collectively referred to as the "Security Deposits") as
described in Exhibit D attached hereto, the receipt of which is hereby
---------
acknowledged by Assignee;
WHEREAS, Assignor and Assignee have further agreed that Assignee shall
expressly assume all of the obligations of Assignor arising under each of the
Leases from and after (but not before) the date of this Assignment, including,
without limitation, all obligations under the Leases with respect to Security
Deposits:
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00), the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each party hereto.
Assignor and Assignee hereby agree as follows:
K-1
<PAGE>
1. Transfer and Assignment. Assignor hereby sells, transfers,
-----------------------
assigns, delivers and conveys to Assignee, its successors and assigns, subject
to the permitted title exceptions set forth in Exhibit E attached hereto and
made a part hereof, all right, title and interest of Assignor in, to and under
the Leases, the Guaranties and the Security Deposits.
2. Assumption of Obligations. Assignee hereby assumes and agrees to
-------------------------
observe and perform all of the obligations and duties of Assignor under each of
the Leases for that period of time from and after, but not before, the date of
this Assignment, including without limitation, all covenants and obligations of
Assignor with respect to the Security Deposits.
3. Indemnity. Assignor hereby indemnifies and holds Assignee harmless
---------
from and against all claims, demands, losses, damages, expenses and costs
including, but not limited to, reasonable attorneys' fees and expenses actually
incurred, arising out of or in connection with Assignor's failure, prior to the
date of this Assignment, to observe, perform and discharge each and every one of
the covenants, obligations and liabilities of the lessor or landlord under the
Leases to he observed, performed or discharged on, or relating to, or accruing
with respect to the period prior the date of this Assignment. Assignee, jointly
and severally, hereby indemnifies and holds Assignor harmless from and against
all claims, demands, losses, damages, expenses and costs including, but not
limited to, reasonable attorneys' fees and expenses actually incurred, arising
out of or in connection with Assignee's failure, from and after the date of this
Assignment, to observe, perform and discharge each and every one of the
covenants, obligations and liabilities assumed by Assignee with respect to the
Leases and relating to, or accruing with respect to, the period from and after,
but not before, the date of this Assignment, including, without limitation, any
liability for any application of the Security Deposits by Assignee from and
after the date of this Assignment.
4. Governing Law. This instrument shall be governed by and construed
-------------
in accordance with the internal laws of the State of _________________, without
reference to the conflicts of laws or choice of law provisions thereof.
5. Binding Effect. This instrument shall be binding upon and shall
--------------
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors and assigns.
K-2
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee has each caused this
Assignment to be executed and sealed by its duly authorized signatory as of the
day and year first above written.
ASSIGNOR:
By: __________________________
Name: ____________________
Title: ___________________
Attest: ________________________
Name: __________________
Title: _________________
[CORPORATE SEAL]
ASSIGNEE:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
By: Duke Realty Investments, Inc., an
Indiana corporation, as general partner
By: ________________________
Richard W. Horn
Vice President Acquisitions
Attest: ________________________
Name: __________________
Title: _________________
[CORPORATE SEAL]
K-3
<PAGE>
EXHIBIT A TO ASSIGNMENT AND ASSUMPTION OF LEASES AND
----------------------------------------------------
GUARANTIES
----------
[LEGAL DESCRIPTION OF PROPERTY]
EXHIBIT B TO ASSIGNMENT AND ASSUMPTION OF LEASES AND
----------------------------------------------------
GUARANTIES
----------
[LEASES]
EXHIBIT C TO ASSIGNMENT AND ASSUMPTION OF LEASES AND
----------------------------------------------------
GUARANTIES
----------
[GUARANTIES]
EXHIBIT D TO ASSIGNMENT AND ASSUMPTION OF LEASES AND
----------------------------------------------------
GUARANTIES
----------
[SECURITY DEPOSITS]
K-4
<PAGE>
EXHIBIT L
---------
STATE OF ____________
COUNTY OF__________
CERTIFICATE AND AFFIDAVIT OF NON-FOREIGN STATUS
-----------------------------------------------
The undersigned, being duly sworn, hereby deposes, certifies and states on
oath as follows:
1. The undersigned is currently the _______________________ of
______________________________________, a(n)_______________ organized and
existing under the laws of the State of _______________ (the "Corporation"), and
that the address of the Corporation is _________________________________, Suite
______ _________________.
2. The Corporation is not a "non-resident alien" for purposes of United
States income taxation or otherwise a "foreign person," as defined in Section
1445 of the United States Internal Revenue Code of 1986 (as amended, the
"Code").
3. The Corporation's United States taxpayer identification number or, if
applicable, Social Security Number is 94-3142032.
4. The undersigned is making this Certificate and Affidavit pursuant to
the provisions of the Code in connection with the sale of the real property
described on Exhibit A, attached hereto and incorporated herein by reference, by
---------
the Corporation to Duke Realty Limited Partnership (the "Transferee"), which
sale constitutes the disposition by the Corporation/Partnership of a United
States real property interest, for the purposes of establishing that the
Transferee is not required to withhold tax pursuant to Section 1445 of the Code
in connection with such disposition.
5. The undersigned acknowledges that this Certificate and Affidavit may be
disclosed to the Internal Revenue Service by the Transferee, that this
Certificate and Affidavit is made under penalty of perjury, and that any false
statement made herein could be punished by fine, imprisonment or both.
6. Under penalty of perjury, I declare that I have examined the foregoing
Certificate and Affidavit and hereby certify that it is true, correct and
complete.
L-1
<PAGE>
Certified, sworn to and subscribed before me
this _____ day of _________, 19__.
____________________ _____________________ (SEAL)
Notary Public
My Commission Expires:
_____________________
(NOTARIAL SEAL)
L-2
<PAGE>
EXHIBIT M
---------
STATE OF __________
COUNTY OF ________
BILL OF SALE
------------
THIS BILL OF SALE is executed and delivered as of the ___ day of
_____________, 19___, by _____________________________________ a(n)
_______________________ (hereinafter referred to as "Seller"), and DUKE REALTY
LIMITED PARTNERSHIP, an Indiana limited partnership (hereinafter referred to as
"Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, contemporaneously with the execution and delivery of this Bill of
Sale, Seller has sold and conveyed to Purchaser the improved real property (the
"Property") described on Exhibit A attached hereto and incorporated herein by
---------
reference; and
WHEREAS, in connection wit such conveyance of the Property, Seller has
agreed to sell to Purchaser and Purchaser has agreed to purchase from Seller all
right, title and interest of Seller in and to the personal property, if any,
owned by Seller and located on the Property (hereinafter referred to as the
"Personal Property");
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) in hand paid at or before the execution, sealing and delivery
hereof, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by Seller. Seller hereby agrees as follows:
1. Sale and Conveyance. Seller hereby sells, transfers and conveys unto
-------------------
Purchaser, its successors and assigns, without warranties, express or implied,
all right, tide and interest of Seller in and to the Personal Property.
2. Governing Law. This Bill of Sale shall be governed by and construed in
-------------
accordance with the internal laws of the State of ___________________, without
reference to the conflicts of laws or choice of law provisions thereof.
3. Binding Effect. This Bill of Sale shall be binding upon and shall inure
--------------
to the benefit of the parties hereto and their respective heirs, executors,
administrators legal representatives, successors and assigns.
M-1
<PAGE>
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed and
sealed by its duly authorized signatory as of the day and year first above
written.
SELLER:
By: __________________________
Name: ____________________
Title: _____________________
Attest: ________________________
Name: ____________________
Title: _____________________
[CORPORATE SEAL]
M-2
<PAGE>
EXHIBIT A TO BILL OF SALE
-------------------------
[LEGAL DESCRIPTION OF PROPERTY]
M-3
<PAGE>
EXHIBIT N
---------
STATE OF___________
COUNTY OF_________
ASSIGNMENT AND ASSUMPTION OF
----------------------------
SURVIVING SERVICE CONTRACTS AND WARRANTIES
------------------------------------------
THIS ASSIGNMENT is made and entered into as of this ___ day of
___________, 19 , by and between ________________________________,
a(n)_______________________ (hereinafter referred to as "Assignor"), and DUKE
REALTY LIMITED PARTNERSHIP, an Indiana limited partnership (hereinafter referred
to as "Assignee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, contemporaneously with the execution and delivery hereof,
Assignor has sold and conveyed to Assignee all that tract or parcel of land more
particularly described in Exhibit A attached hereto and incorporated herein by
---------
reference, together with all improvements thereon and all rights, easements and
appurtenances thereto (hereinafter collectively referred to as the "Property");
and
WHEREAS, in connection with such conveyance of the Property, Assignor
and Assignee have agreed that Assignor shall transfer and assign to Assignee all
right, tide and interest of Assignor in and to all service, management,
equipment, labor, material, maintenance, repair, lease commission and other
contracts relating to the maintenance, repair or operation of the Property which
have not been terminated by Assignor as of the date hereof and continue in force
and effect (hereinafter collectively referred to as the "Surviving Service
Contracts"); and
WHEREAS, Assignor and Assignee have further agreed that Assignee shall
expressly assume all of the obligations of Assignor arising under the Surviving
Service Contracts from and after the date of this Assignment;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each party hereto, Assignor and
Assignee hereby agree as follows:
N-1
<PAGE>
1. Transfer and Assignment. Assignor hereby sells, transfers and
-----------------------
assigns to Assignee, its successors and assigns, all right, title and interest
of Assignor in, to and under the Surviving Service Contracts together with all
warranties and guaranties (collectively, the "Warranties") in favor of Assignor
on equipment and improvements on the Property (to the extent said Warranties are
assignable by Assignor), all of which are more particularly described on Exhibit
-------
B attached hereto and incorporated herein by reference. If any of the Warranties
- - - - - - - - - - - -
are not assignable by Assignor, Assignor agrees to folly cooperate with
Assignee, but without cost or expense to Assignor, to enforce such Warranties
for the benefit of Assignee.
2. Assumption of Obligations. Assignee hereby assumes and agrees to
-------------------------
observe and perform all of the obligations and duties of Assignor under each of
the Surviving Service Contracts and the Warranties arising from and after, but
not before, the date of this Assignment.
3. Indemnity. Assignor hereby indemnifies and holds Assignee
---------
harmless from and against all claims, demands, losses, damages, expenses and
costs including, but not limited to, reasonable attorneys' fees and expenses
actually incurred, arising out of or in connection with Assignor's failure,
prior to the date hereof, to observe, perform and discharge each and every one
of the covenants, obligations and liabilities of the Assignor under the
Surviving Service Contracts and the Warranties to be observed, performed or
discharged with respect to the period prior to the date of this Assignment.
Assignee hereby indemnifies and holds Assignor harmless from and against all
claims, demands, losses, damages, expenses and costs including, but not limited
to, reasonable attorneys' fees and expenses actually incurred, arising out of or
in connection with Assignee's failure, from and after the delivery of this
Assignment, to observe, perform and discharge all covenants, obligations and
liabilities with respect to the period on and after, but not before, the date of
this Assignment.
4. Governing Law. This Assignment shall be governed by and construed
-------------
in accordance with the internal laws of the State of ________________ without
reference to the conflicts of laws or choice of law provisions thereof.
5. Binding Effect. This Assignment shall be binding upon and shall
--------------
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors and assigns.
N-2
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have each caused this
Assignment to be executed and sealed by its duly authorized signatory as of the
day and year first above written.
ASSIGNOR:
By: __________________________
Name: ____________________
Title: _____________________
Attest: ________________________
Name: ____________________
Title: _____________________
[CORPORATE SEAL]
ASSIGNEE:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
By: Duke Realty Investments, Inc., an
Indiana corporation, as general partner
By: ________________________
Richard W. Horn
Vice President Acquisitions
Attest: ________________________
Name: _____________________
Title: _____________________
[CORPORATE SEAL]
N-3
<PAGE>
EXHIBIT A TO ASSIGNMENT AND ASSUMPTION OF SURVIVING SERVICE
-----------------------------------------------------------
CONTRACTS AND WARRANTIES
------------------------
[LEGAL DESCRIPTION OF PROPERTY]
N-4
<PAGE>
EXHIBIT B TO ASSIGNMENT AND ASSUMPTION OF SURVIVING SERVICE
-----------------------------------------------------------
CONTRACTS AND WARRANTIES
------------------------
[LIST OF WARRANTIES AND SURVIVING SERVICE CONTRACTS, INCLUDING
--------------
LEASE COMMISSION AGREEMENTS]
N-5
<PAGE>
EXHIBIT O
---------
UNCOMPLETED TENANT IMPROVEMENTS
[TO BE ADDED]
O-1
<PAGE>
Prior Deed Reference: Recorded in Deed Book 465, Pg. 235, Group No. 2049A
Boone County, Kentucky Clerk's Records
SPECIAL WARRANTY DEED
---------------------
KNOW ALL MEN BY THESE PRESENTS:
That PRESTOLITE ELECTRIC INCORPORATED (f/k/a PEI 1991 Acquisition, Inc.), a
Delaware corporation ("Grantor"), whose mailing address is 7585 Empire Dr.,
Florence, Kentucky 41042, for and in consideration of Three Million Two Hundred
Fifty Thousand Dollars ($3,250,000.00), to it paid by the Grantee herein, the
receipt of which is acknowledged, does bargain, sell, and convey to DUKE REALTY
LIMITED PARTNERSHIP, an Indiana limited partnership ("Grantee"), whose mailing
address is 8888 Keystone Crossing, Suite 1200, Indianapolis, Indiana 46240
certain real estate and all improvements located thereon in Florence, Boone
County, Kentucky, as more specifically described in the attached Exhibit A,
---------
subject to those matters more specifically described on Exhibit B, attached
hereto and incorporated herein by reference. ---------
Present Street Address: 7585 Empire Dr., Florence, Kentucky 41042
Being the same premises conveyed to the Grantor herein by deed recorded in Deed
Book 465, Pg. 235 of the Boone County, Kentucky Clerk's Records.
Together with all the PRIVILEGES AND APPURTENANCES to the same belonging. TO
HAVE AND TO HOLD the same to the said DUKE REALTY LIMITED PARTNERSHIP, the
Grantor hereby covenanting with the Grantee, that title so conveyed is clear,
free and unencumbered, and that Grantor specially warrants and defends such
title against the acts of Grantor and those claiming by, through or under
Grantor, and not otherwise.
IN WITNESS WHEREOF, the said Grantor, having resolved by consent resolution of
its Board of Directors to so convey this real property and further authorized
Kenneth C. Cornelius, Senior Vice President and Thomas R. Jennett, Vice
President to execute this deed and any other documents necessary to effect this
transfer hereunto set their hand as of this 28th day of June, 1996.
PRESTOLITE ELECTRIC INCORPORATED.
a Delaware corporation
By: /s/ Kenneth C. Cornelius
------------------------
Kenneth C. Cornelius
Senior Vice President
By: /s/ Thomas R. Jennett
------------------------
Thomas R. Jennett
Vice President
<PAGE>
STATE OF MICHIGAN )
)SS:
COUNTY OF WASHTENAW )
Before me, a Notary Public in and for said County and State, personally appeared
Kenneth C. Cornelius, by me known to be the Senior Vice President of Prestolite
Electric Incorporated, a Delaware corporation, who acknowledged the execution of
the foregoing "Special Warranty Deed" on behalf of said corporation.
The foregoing instrument was acknowledged before me this 28th day of June, 1996.
/s/ Bruce C. Conybeure Jr.
_______________________________
Notary Public
Bruce C. Conybeure Jr.
_______________________________
Printed Signature
Commission Expires: 8/4/97
------------------------------
[NOTARY STAMP]
My County of Residence: Washtenaw County, Michigan
--------------------------
STATE OF OHIO )
)SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State, personally appeared
Thomas R. Jennett, by me known to be the Vice President of Prestolite Electric
Incorporated, a Delaware corporation, who acknowledged the execution of the
foregoing "Special Warranty Deed" on behalf of said corporation.
The foregoing instrument was acknowledged before me this 28th day of June, 1996.
/s/ Ruth L. Brunner
_______________________________
Notary Public
_______________________________
Printed Signature
Commission Expires: _______________________
My County of Residence: ___________________
[NOTARY SEAL]
<PAGE>
CERTIFICATE OF CONSIDERATION
Grantor and Grantee both certify, under oath pursuant to KRS Chapter 382, that
the consideration reflected in this deed is the true, correct and full
consideration paid for the real property herein conveyed. We further certify and
understand that falsification of the stated consideration or rate price of real
property is a class D felony, subject to one to five years imprisonment and
fines up to Ten Thousand Dollars ($10,000.00). Grantee joins in this deed for
the sole purpose of making this certificate about the consideration.
Sworn to on this 28th day of June, 1996.
Grantor's mailing address: 7585 Empire Dr., Florence, Kentucky 41042
Grantee's mailing address: 8888 Keystone Crossing, Suite 1200, Indianapolis,
IN 46240
GRANTOR: GRANTEE:
PRESTOLITE ELECTRIC INCORPORATED, DUKE REALTY LIMITED PARTNERSHIP,
a Delaware corporation an Indiana limited partnership
By: /s/ Kenneth C. Cornelius By: Duke Realty Investments, Inc.,
------------------------ its General Partner
Kenneth C. Cornelius
Senior Vice President
By: /s/ Robert D. Fessler
---------------------
Robert D. Fessler
Vice President
By: /s/ Thomas R. Jennett
---------------------
Thomas R. Jennett
Vice President
STATE OF MICHIGAN )
)SS:
COUNTY OF WASHTENAW)
Before me, a Notary Public in and for said County and State, personally appeared
Kenneth C. Cornelius, by me known to be the Senior Vice President of Prestolite
Electric Incorporated, a Delaware corporation, who acknowledged the execution of
the foregoing "Certificate of Consideration" on behalf of said corporation.
The foregoing instrument was acknowledged before me this 28th day of June, 1996.
/s/ Bruce C. Conybeare, Jr.
---------------------------
Notary Public
Bruce C. Conybeare, Jr.
---------------------------
Printed Signature
Commission Expires: 8/4/97
---------------------------- [Notary Seal appears here]
My County of Residence: Washtown County, Michigan
-------------------------
<PAGE>
STATE OF OHIO )
)SS:
COUNTY OF HAMILTON)
Before me, a Notary Public in and for said County and State, personally appeared
Thomas R. Jennett, by me known to be the Vice President of Prestolite Electric
Incorporated, a Delaware corporation, who acknowledged the execution of the
foregoing "Certificate of Consideration" on behalf of said corporation.
The foregoing instrument was acknowledged before me this 28th day of June, 1996.
/s/ Ruth L. Brunner
-------------------
Notary Public
___________________
Printed Signature
Commission Expires: _______________________ [NOTARY SEAL APPEARS
HERE]
My County of Residence: ___________________
STATE OF OHIO )
)SS:
COUNTY OF HAMILTON)
Before me, a Notary Public in and for said County and State, personally appeared
Robert D. Fessler, by me known to be the Vice President of Duke Realty
Investments, Inc., an Indiana corporation, the general partner of Duke Realty
Limited Partnership, an Indiana limited partnership, who acknowledged the
execution of the foregoing "Certificate of Consideration" on behalf of said
corporation.
WITNESS my hand and Notarial Seal this 28th day of June, 1996.
/s/ Ruth L. Brunner
-------------------
Notary Public
__________________
Printed Signature
[NOTARY SEAL APPEARS
HERE]
Commission Expires: _______________________
My County of Residence: ___________________
This instrument was prepared by: /s/ Ann L. Colussi
-------------------------------
Ann L. Colussi, Attorney at Law
Duke Realty Investments, Inc.
8888 Keystone Crossing, Suite 1200
Indianapolis, IN 46240
<PAGE>
EXHIBIT A
---------
GROUP No. 2049 A
PIDN N. 73-35 B
Situated in the city of Florence, Boone County, Kentucky and more particularly
described follows:
Beginning at a point in the center line of Empire Drive at Highway Station
18+13.0; said point being a common corner to Grantor and Litton Education
Publishing Company; said point shall hereinafter be referred to as Reference
Point "A"; thence along the center line of Empire Drive on a curve to the left
(radius equals 851.25 feet) an arc distance of 18l.8 feet to a point of tangency
(formerly called (radius equals 818.60 feet) an arc distance 174.33 feet) ;
thence S. 22 deg. 26' 35" S. along the center line of Empire Drive a distance of
176.04 feet to a point in the northern right of way line of the lead track to
serve Globe Union and others (formerly called S. 22 deg. 26' 45" E. a distance
of 166.44 feet) said point shall hereinafter be referred to as Reference Point
"B"; thence S. 89 deg. 14' 45" W. along said northern right of way line a
distance of 185.15 feet to a point; (formerly called S. 89 deg. 14' 45" W. a
distance of 164.42 feet); thence S. 45 deg. 14' 45" W. along said northern right
of way line a distance of 1105.76 feet to a common cor to Grantor and Globe
Union, Inc.; (formerly called S. 45 deg. 14' 45" W. a distance of 1126.09 feet;
said point shall hereinafter be referred to as Reference Point "C"; thence 44
deg. 45' 14" W. along the dividing line between Grantor and Globe Union, Inc, a
distance of 336.10 feet to a common corner to Grantor, Litton Educational
Publishing Company and Globe Union, Inc.; said point shall hereinafter by
referred to as Reference Point "D"; thence N. 35 deg. 45' 15" E. along the
dividing line between Grantor and Litton Education Publishing Company, a
distance of 786.12 feet to a common corner to Grantor and Litton Educational
Publishing Company; thence continuing along said dividing line N. 69 deg. O5 30"
E. a distance of 673.00 feet to the place of beginning.
Excluding from the above described tract is all that land which lies 25 feet to
the west right side of the lines connecting aforementioned Reference Point "A"
and Reference Point "B".
Said parcel contains 11.638 acres more or less.
LESS AND EXCEPT that portion of the above real estate conveyed by City of
Florence, Kentucky and Prestolite Electric Incorporated to the Commonwealth of
Kentucky by deed dated October 27, 1987 and recorded January 6, 1988 in Highway
Deed Book 15, page 51 of the Bo County, Kentucky Clerk's Records.
The foregoing real estate is also described as follows, based upon a survey
dated August 23, 1991 by Daniel J. Rensing, KY. PLS NO. 2761, of Joseph M. Allen
Company:
Located in the City of Florence, Boone County, Kentucky, described as follows:
(Continued)
<PAGE>
Commencing at the intersection of the westerly line of Empire Drive with the
northwestern line of Bluegrass Drive, thence S. 45 deg. 14' 45" W. along the
northwesterly line of Bluegrass Drive, 1019.12 feet, thence N. 44 deg. 45' 15"
W. 598.00 feet to the True Place of Beginning; thence N, 44 deg. 45' 15" W.,
336.10 feet; thence N, 35 deg. 45' 15" E. 786.69 feet; thence N. 69 deg. O5' 30"
E., 645.77 feet to the westerly line of Empire Drive; thence southwardly along
the westerly line of Empire Drive, on a curve to the le for 182.46 feet, said
curve having a radius of 876.25 feet, and a long chord bearing S. deg. 28' 40"
E., 182.13 feet; thence continuing with said westerly line, S. 22 deg. 26' 35"
E., 166.10 feet; thence leaving said westerly line of Empire Drive, S. 89 deg.
14' W., 157.34 feet; thence S. 45 deg. 14' 45" W., 1104.04 feet to the true
place of beginning, containing 11.6177 acres.
Being the same property conveyed to the Grantor by a deed recorded in Deed Book
465, Pa 235 of the Boone County, Kentucky records at Burlington.
<PAGE>
EXHIBIT B
---------
1. Right of way and easement for general utility purposes as set forth in a
grant from Northern Kentucky Industrial Foundation, Inc., to The Union
Light, Heat and Power Company dated February 7, 1964 in Miscellaneous Book
28, page 396 of the Boone County, Kentucky Clerk's Records, and as shown on
the survey prepared by JMA Consultants, Inc. Job No. 948, dated February
26, 1996.
2. Right of way and easement for general utility purposes as set forth in a
grant from Northern Kentucky Industrial Foundation, Inc. to The Union
Light, Heat and Power Company dated October 10, 1967 and recorded October
25, 1967 in Miscellaneous Book 43, page 34 of the Boone County, Kentucky
Clerk's Records and as shown on the survey prepared by JMA Consultants,
Inc. Job No. 948, dated February 26, 1996.
3. Right of way and easement for general utility purposes as set forth in a
grant from American Can Company to The Union Light, Heat and Power Company
dated January 3, 1974 and recorded February 16, 1974 in Easement Book 1,
page 395 of the Boone County, Kentucky Clerk's Records and as shown on the
survey prepared by JMA Consultants, Inc. Job No. 948, dated February 26,
1996.
4. Right of way and easement for general utility purposes as set forth in a
grant from City of Florence, Kentucky, to The Union Light, Heat and Power
Company dated October 13, 1981 and recorded November 12, 1981 in Easement
Book 9, page 121 of the Boone County, Kentucky Clerk's Records and as shown
on the survey prepared by JMA Consultants, Inc. Job No. 948, dated February
26, 1996.
5. Easements as set forth in the deed from City of Florence, Kentucky to Eltra
Corporation dated June 1, 1979, recorded June 1, 1979 in Deed Book 260,
page 247 and in the deed from Eltra Corporation to City of Florence,
Kentucky dated as of January 29, 1980, recorded January 29, 1980 in Deed
Book 271, page 205; said easements depicted in Deed Book 202, at page 449
and Plat Book 8, page 47, of the Boone County, Kentucky Clerk's Records and
as shown on the survey prepared by JMA Consultants, Inc. Job No. 948, dated
February 26, 1996.
6. Minimum Building Lines noted of the survey by JMA & Associates, dated
October 4, 1994 and updated February 26, 1996.
<PAGE>
7. The Boone County 1995 General Tax Duplicate, Bill no. 72361, PIDN NO> 73-
35B, Valuation: $4,000,000.00.
Taxes: $ 37,136.00, Paid.
Taxes and assessments for the year 1996 and thereafter are a lien, not yet
due and payable.
<PAGE>
DISCHARGE OF MORTGAGE
---------------------
Know all men by these presents that the undersigned, COMERICA BANK, does
hereby release and discharge the real estate described on Exhibit "A" attached
hereto from the operation of that certain mortgage from Prestolite Electric
Incorporated to Comerica Bank, executed October 25, 1994, filed for record
October 28, 1994 in Mortgage Book 1043, page 266 of the Boone County, Kentucky
Clerk's Records.
In witness whereof the said COMERICA BANK, by Thomas W. Radcliffe, its Vice
President, being thereunto duly authorized, has executed this instrument as of
the ________ day of ____________________, 1996. to be effective June 28,
1996.
Witnesses: COMERICA BANK
/s/ Cheryl Graham By: /s/ Thomas W. Radcliffe
- - - - - - - - - - - ---------------------- -----------------------
Thomas W. Radcliffe
/s/ Laura A. Gigliotti
- - - - - - - - - - - ---------------------- Its: Vice President
State of Michigan
County of Wayne (S)(S)
Be it remembered, that on this 3rd day of June, 1996, before me, the
subscribed, a Notary Public in and for said County and State, personally
appeared and proved to me to be Thomas W. Radcliffe of COMERICA BANK, the
corporation which executed the foregoing instrument, who acknowledged that he
did sign the foregoing instrument as such Vice President on behalf of said
corporation and by authority of its Board of Directors; and that said instrument
is his free act and deed individually and as such Vice President and the free
and corporate act and deed of said COMERICA BANK.
In testimony whereof, I hereunto set my hand and affix my seal on the day
and year last aforesaid.
/s/ Phyllis
[NOTARY STAMP] ------------------------------
Notary Public
My Commission Expires: 8-27-99
This instrument prepared by: /s/ Nicholas P. Scavone (signature)
-----------------------
Nicholas P. Scavone, Jr., Esq. (typed name)
Bodman, Longley & Dahling LLP (Company)
100 Renaissance Center (Address)
34th Floor
Detroit, Michigan 48243
<PAGE>
EXHIBIT 10.28
LICENSE ASSIGNMENT
------------------
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, PMI HOLDING CORP., PRESTOLITE ELECTRIC
INCORPORATED, PRESTOLITE ELECTRIC OF NEW YORK, INC., all Delaware corporations,
PRESTOLITE ELECTRIC OF MICHIGAN, INC., a Michigan corporation, and PRESTOLITE
TECHNOLOGY CORPORATION, a Delaware corporation (hereinafter collectively
referred to as the "SELLERS"), do hereby, jointly and severally, assign to PEI
1991 ACQUISITION, INC., a Delaware corporation, all of their right, title and
interest in and to the Trademark License and Trade Name Agreement, dated April
22, 1986, by and between Allied Corporation, a New York corporation, and PMI
Holding Corp., a Delaware corporation, a copy of which License and Agreement is
attached to this License Assignment as Exhibit A.
Dated: October 29 , 1991
--------- ----
PMI HOLDING CORP.
ATTEST: By: /s/ John B. Kelly
-------------------
Title: President
-----------
[ILLEGIBLE]
- - - - - - - - - - - ------------------------
PRESTOLITE ELECTRIC INCORPORATED
ATTEST: By: /s/ John B. Kelly
-------------------
Title: President
-----------
[ILLEGIBLE]
- - - - - - - - - - - ------------------------
1
<PAGE>
PRESTOLITE ELECTRIC OF NEW YORK, INC.
ATTEST: By: /s/ John B. Kelly
-------------------
Title: President
-----------
[ILLEGIBLE]
- - - - - - - - - - - ------------------------
PRESTOLITE ELECTRIC OF MICHIGAN, INC.
ATTEST: By: /s/ John B. Kelly
-------------------
Title: President
-----------
[ILLEGIBLE]
- - - - - - - - - - - ------------------------
PRESTOLITE TECHNOLOGY CORPORATION
ATTEST: By: /s/ John B. Kelly
-------------------
Title: President
-----------
[ILLEGIBLE]
- - - - - - - - - - - ------------------------
<PAGE>
ACKNOWLEDGMENTS
---------------
STATE OF Ohio )
)
COUNTY OF Cuyahoga )
The foregoing License Assignment was executed and acknowledged before
me this 17 day of October , 1991, by John B. Kelly , the President
------ ----------- ----------------- -------------
of PMI HOLDING CORP., a Delaware corporation, who acknowledged that he did sign
the foregoing document on behalf of the Corporation and that the same was his
free act and deed and the free act and deed of the Corporation.
/s/ S. L. Denman
-------------------
Notary Public
STATE OF Ohio )
)
COUNTY OF Cuyahoga )
The foregoing License Assignment was executed and acknowledged before
me this 17 day of October , 1991, by John B. Kelly , the President
------ ----------- ----------------- -------------
of PRESTOLITE ELECTRIC INCORPORATED, a Delaware corporation, who acknowledged
that he did sign the foregoing document on behalf of the Corporation and that
the same was his free act and deed and the free act and deed of the Corporation.
/s/ S. L. Denman
-------------------
Notary Public
3
<PAGE>
STATE OF Ohio )
)
COUNTY OF Cuyahoga )
The foregoing License Assignment was executed and acknowledged before
me this 17 day of October , 1991, by John B. Kelly , the President
------ ----------- ----------------- -------------
of PRESTOLITE ELECTRIC OF NEW YORK, INC., a Delaware corporation, who
acknowledged that he did sign the foregoing document on behalf of the
Corporation and that the same was his free act and deed and the free act and
deed of the Corporation.
/s/ S. L. Denman
-------------------
Notary Public
STATE OF Ohio )
)
COUNTY OF Cuyahoga )
The foregoing License Assignment was executed and acknowledged before
me this 17 day of October , 1991, by John B. Kelly , the President
------ ----------- ----------------- -------------
of PRESTOLITE ELECTRIC OF MICHIGAN, INC., a Delaware corporation, who
acknowledged that he did sign the foregoing document on behalf of the
Corporation and that the same was his free act and deed and the free act and
deed of the Corporation.
/s/ S. L. Denman
-------------------
Notary Public
4
<PAGE>
STATE OF Ohio )
)
COUNTY OF Cuyahoga )
The foregoing License Assignment was executed and acknowledged before
me this 17 day of October , 1991, by John B. Kelly , the President
------ ----------- ----------------- -------------
of PRESTOLITE TECHNOLOGY CORPORATION, a Delaware corporation, who acknowledged
that he did sign the foregoing document on behalf of the Corporation and that
the same was his free act and deed and the free act and deed of the Corporation.
/s/ S. L. Denman
-------------------
Notary Public
5
<PAGE>
EXHIBIT A
---------
TRADEMARK LICENSE AND TRADE NAME AGREEMENT
------------------------------------------
This Agreement, dated as of April 22, 1986 by and between Allied
Corporation, a corporation of the State of New York, U.S.A., having an office at
Columbia Road & Park Avenue, Morris Township, New Jersey 07960, hereinafter
called "AC"; and PMI Holding Corp., a corporation of the State of Delaware
having its office at Toledo, Ohio, hereinafter called "PMI."
W I T N E S E T H
-----------------
WHEREAS, AC is the owner of rights throughout
the world in the Licensed Trademarks, hereinafter defined;
WHEREAS, AC, through its Prestolite Motor and Ignition Division, has
adopted and is using the trade name "Prestolite Motor and Ignition Division" in
connection with motors and ignition products and is also using the Licensed
Trademarks in connection with motors and ignition products;
WHEREAS, by a Purchase Agreement to be executed among AC, its parent
corporation, Allied-Signal Inc., PMI and Prestolite Electric Incorporated, a
Delaware corporation and direct wholly-owned subsidiary of PMI ("Prestolite,"
collectively with PMI, "Buyer") (the "Purchase Agreement") AC has agreed to
sell, and BUYER has agreed to buy, certain real and personal property utilized
in the manufacturing operations of AC'S Prestolite Motor and Ignition Division,
the shares of Prestolite Electrical Limited, an English company and subsidiary
of AC, and the business pertaining thereto;
WHEREAS, BUYER desires to use the Licensed Trademarks and the trade
name
1
<PAGE>
"Prestolite Electric" or "Prestolite Electrical" on or in connection with
Licensed Goods marketed by BUYER; and
WHEREAS, AC, subject to the terms and conditions hereinafter set
forth, is willing to grant BUYER a right and license to so use the Licensed
Trademarks and the trade name "Prestolite Electric" or "Prestolite Electrical";
NOW, THEREFORE, in consideration of the above premises end of the
mutual covenants herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and intending to
be legally bound, the parties hereto agree as follows:
I. Definitions
-----------
Section 1-A The term "Licensed Territory," as used herein,
-----------
means all countries of the world.
Section 1-B The term "Licensed Goods," as used herein, means motor
-----------
and ignition products, and logical extension of motor and ignition products
which will not include storage batteries, battery parts or spark plugs.
Section 1-C The term "Licensed Trademarks," as used herein, means the
-----------
trademarks listed in Schedule A attached hereto. The Prestolite symbol referred
to in Schedule A is shown in Exhibit A attached hereto.
Section 1-D The term "Trade Name," as used herein, shall mean the
-----------
trade name "Prestolite Electric" or "Prestolite Electrical."
2
<PAGE>
II. License
-------
Section 2-A Subject to the licenses listed in the Proprietary Rights
-----------
Schedule of the Purchase Agreement, AC hereby grants to BUYER an exclusive,
royalty-free right and license to use the Licensed Trademarks in the Licensed
Territory on or in connection with Licensed Goods marketed by BUYER in the
Licensed Territory. AC further grants to BUYER an exclusive, royalty-free right
in the Licensed Territory to use the Trade Name solely in connection with
Licensed Goods, which grant does not include the right to use "Prestolite" in a
trade name without also using the words "Electric" or "Electrical" in such trade
name. Such rights and licenses shall be perpetual, subject to the termination
provisions of Article V hereof.
Section 2-B The Licensed Trademarks used on or in connection with
-----------
Licensed Goods are the sole and exclusive property of AC. Except as otherwise
provided herein and subject to the terms and conditions stated in this
Agreement, BUYER shall not have any right, title or interest, express or
implied, in the Licensed Trademarks or their use, and BUYER shall not at any
time, whether during the life or after expiration of this Agreement, assert or
claim any right to manufacture, sell or offer for sale products under any of the
Licensed Trademarks.
Section 2-C AC agrees to maintain the Licensed Trademarks in full
-----------
force and effect as long as AC owns rights in the Licensed Trademarks, and BUYER
agrees to provide assistance as is required or essential for such maintenance.
If AC cannot maintain any or all of the Licensed Trademarks, BUYER shall be
entitled to take over such maintenance.
Section 2-D AC agrees that it will not extend the use of the Licensed
-----------
Trademarks to products other than those on which the Licensed Trademarks are
currently used or licensed to others.
Section 2-E The rights and licenses granted hereunder shall include
-----------
the right to sublicense, provided however that any sublicense agreement shall
contain quality control terms
3
<PAGE>
and other limitations consistent with this Agreement.
Section 2-F No license, either express or implied, is granted by AC
-----------
to BUYER hereunder with respect to any trademark or trade name except as
specifically stated herein.
Section 2-G The rights and licenses granted in Section 2-A are
-----------
exclusive with respect to all others, including LICENSOR and SELLER.
III. Marking and Method of Use
-------------------------
Section 3-A BUYER may, at its option, display the Licensed Trademarks
-----------
and the Trade Name on or in connection with any of the Licensed Goods sold by
BUYER. BUYER shall also display such other notices, if any, as are required by
the laws or as may be customary practice in the Licensed Territory in which the
Licensed Trademarks may be used by BUYER under the terms of this Agreement.
Section 3-B BUYER shall not use in any aspect of its business
-----------
activities the Licensed Trademarks or any notice relating thereto, except in a
form, context and location which has obtained AC's prior consent. The form,
content and location of the Licensed Trademarks as the same are currently used
by AC in the operation of AC's Prestolite Motor and Ignition Division are hereby
approved.
Section 3-C Without the prior consent of AC, BUYER shall not use the
-----------
Licensed Trademarks in combination or in close association with any other
trademark or ornamentation, nor shall BUYER use the Licensed Trademarks as a
corporate or commercial name or trade style or any part thereof, except as
authorized herein, and any such approved use by BUYER of the Licensed Trademarks
shall cease upon the termination of this Agreement for whatever reason.
4
<PAGE>
Section 3-D For purposes of Sections 3-B and 3-C, consent shall be
-----------
deemed to have been given if BUYER shall have notified AC of a proposed use, and
AC shall not have notified BUYER of its reasonable objections to such proposed
use within thirty (30) days following such notice.
IV. Quality Control
---------------
Section 4-A All Licensed Goods manufactured by BUYER shall meet
-----------
standards established by all applicable national, state and local laws and
regulations and shall meet quality standards not appreciably lower than
standards met by Licensed Products manufactured by AC immediately prior to the
date hereof.
Section 4-B BUYER shall, at the request of AC, submit to AC at
-----------
reasonable intervals established by AC, for inspection, testing, quality
evaluation and approval, representative samples of all Licensed Goods to be sold
under the Licensed Trademarks and the Trade Name.
Section 4-C BUYER shall permit authorized representatives of AC to
-----------
enter offices, factories, warehouses and shipping locations of BUYER at any
reasonable time and to make such inspections as are reasonably necessary to
ascertain whether this Agreement is being complied with, including (without
limitation upon the generality of the foregoing) inspecting Licensed Goods and
parts therefor in stock and in process of manufacture, observing manufacturing
operations, inspecting the workmanship used and the materials used or to be used
in Licensed Goods and parts therefor and inspecting the labeling, marking and
packing methods and practices.
Section 4-D If it is determined by AC that any Licensed Goods or
-----------
parts therefor do not meet the required standards of quality set forth herein,
AC shall notify BUYER giving full details regarding the deficiencies therein.
Upon receipt of such notice, BUYER shall discontinue
5
<PAGE>
the sale and distribution of all such goods under the Licensed Trademarks until
the deficiencies noted by Licensor have been corrected and Licensor has
expressed its satisfaction to BUYER in writing.
Section 4-E The maintenance by BUYER of the quality standards stated
-----------
herein is of the essence of this Agreement, and performance by BUYER hereunder
shall not be deemed complete unless BUYER maintains such quality standards.
Section 4-F AC does not make, and shall not be deemed to have made,
-----------
any warranties or indemnities of any nature whatsoever with respect to any
product manufactured, sold or used by BUYER, except as provided herein.
V. Duration
--------
Section 5-A This Agreement is effective as of the date first set
-----------
forth above and, unless sooner terminated under the provisions below, is
perpetual; provided, however, that if the Purchase Agreement is not entered into
-------- -------
prior to April 30, 1986, this Agreement shall terminate automatically.
Section 5-B If either party defaults for any reason in any of its
-----------
obligations hereunder, the other party will have the right to terminate this
Agreement by giving written notice of termination at least sixty (60) days prior
to the effective date of such termination, such notice specifying the default;
provided, however, that such notice will be of no effect and termination will
- - - - - - - - - - - -------- -------
not occur if the specified default is remedied prior to said effective date of
termination.
Section 5-C AC may terminate this Agreement forthwith in the event of
-----------
the bankruptcy or insolvency of BUYER or an assignment for the benefit of
creditors of BUYER. AC may terminate the license granted hereunder, on a
country-by-country basis, if a country
6
<PAGE>
nationalizes BUYER's operations of making or selling Licensed Products therein.
Such termination shall be without prejudice to any other rights or claims AC may
have against BUYER.
Section 5-D Upon the termination of this Agreement, BUYER (a) shall
-----------
cease all use of the Licensed Trademarks and the Trade Name and shall not
thereafter use any confusingly similar mark in any other manner whatsoever, (b)
shall discontinue the use of the Licensed Trademarks and Trade Name, on
letterheads, stationery, and other forms, and shall not thereafter indicate, in
connection with the marketing of Licensed Products, that BUYER is or has been a
trademark licensee of LICENSOR or has the right to use the Trade Name and (c)
shall thereafter refrain from directly or indirectly using or displaying any
advertising or promotional material or performing any other act which might
cause anyone to infer or believe BUYER to be or to have been a trademark
licensee of AC or has or had the right to use the Trade Name; provided, however,
-------- -------
that within one hundred and twenty (120) days from the termination of this
Agreement BUYER may sell or otherwise dispose of any Licensed Goods and parts
therefor in the possession or under the control of BUYER and bearing the
Licensed Trademarks or the Trade Name at the date of termination.
Section 5-E Upon termination of this Agreement, BUYER shall perform
-----------
all acts which may be necessary or useful to render effective the termination of
the interest of BUYER in the Licensed Trademarks, including but not limited to
the cancellation of any registration or recordation of this Agreement, or any
summary thereof, and BUYER shall execute any assignment, conveyance,
acknowledgement or other document that LICENSOR may require relinquishing or
conveying to LICENSOR any and all rights to or interest in the Licensed
Trademarks which BUYER has, may have had, or may have acquired, and any goodwill
appertaining thereto.
VI. Protection of Mark; Litigation
------------------------------
7
<PAGE>
Section 6-A AC will at all times have the sole right to take whatever
-----------
steps it deems necessary or desirable to protect the Licensed Trademarks,
including the filing and prosecution of litigation and opposing applications for
trademark or service mark registration for marks that are confusingly similar to
any of the Licensed Trademarks, and AC shall have the right to include BUYER as
a party in such litigation where necessary for the conduct thereof. If AC and
BUYER desire and agree to joint participation in any infringement suit or other
action with respect to the Licensed Trademarks, the respective responsibilities
of the parties, and their contributions to the costs and participation in any
recoveries, will be agreed upon in writing prior to undertaking such action.
Notwithstanding the foregoing, if BUYER desires to file litigation or oppose the
trademark or service mark application of a third party in order to protect the
Licensed Trademarks or any of them, and AC declines to commence such litigation
or to oppose such application, BUYER shall be entitled to commence and prosecute
litigation or oppose an application at its expense, and shall be entitled to all
monetary damages and other benefits received as the result thereof. AC shall
cooperate with BUYER in the prosecution of such litigation or in such
opposition, and shall, in its discretion, be entitled to participate at its
expense in such prosecution or opposition.
Section 6-B AC and Buyer agree to notify each other promptly if
-----------
either party receives notice of (i) any conflicting uses of, or any applications
or registrations for, a trademark or service mark that conflicts with any of the
Licensed Trademarks or (ii) any acts of infringement or unfair competition
involving any of the Licensed Trademarks or the Trade Name or (iii) any
allegations that the use of any of the Licensed Trademarks or the Trade Name by
AC or BUYER infringes the trademark or service mark or other rights (including
rights relating to unfair competition or any other person).
Section 6-C The parties agree to notify each other of the
-----------
commencement of any legal action for trademark infringement or unfair
competition based upon any of the Licensed Trademarks or the Trade Name, and to
keep each other apprised of any developments in such cases. With respect to an
action against BUYER, BUYER shall not file any pleadings or
8
<PAGE>
otherwise defend against any such action or threatened action for the period
commencing thirty (30) days from the date of notice of such action to AC without
first obtaining the express written approval of AC, except such as may be
necessary to prevent any action adverse to BUYER or LICENSOR, by default or
otherwise. AC, in its sole discretion, may defend any such suit at its own
expense, in the name of BUYER or otherwise, or may negotiate a settlement
thereof, provided that without BUYER'S prior written consent, AC shall not
settle such action upon any terms that might adversely affect the rights of
BUYER to use the Licensed Trademarks or the Trade Name. BUYER shall cooperate
with and assist AC and shall make available without charge all evidence,
information or particulars in its possession which might assist AC in such
defense. AC shall keep BUYER fully and promptly informed concerning the progress
of such suit.
Section 6-D BUYER agrees to be solely responsible for, to defend and
-----------
indemnify AC, and its respective officers, agents and employees, and to hold
each of them harmless from any claims, demands, causes of action, or damages,
including reasonable attorney's fees, arising out of or in connection with the
sale, distribution, or use of the Licensed Products by BUYER or BUYER's
sublicensee except for any action (a) for trademark infringement arising out of
BUYER's use of any of the Licensed Trademarks as authorized by this Agreement,
violates the rights of such third party; or (c) which arises out of a breach of
any representation or covenant of AC contained herein.
VII. Recordation of Agreement
------------------------
Section 7-A BUYER shall, in its discretion, determine what may or
-----------
shall be required to satisfy the laws or regulations governing the Licensed
Territory with respect to the recordation of, validation of, or otherwise
rendering effective this Agreement, and AC shall provide such assistance as
BUYER may require to satisfy such laws or regulations. Upon termination of this
Agreement for whatever reason BUYER will cooperate with AC to effect the
cancellation of any such recordation.
9
<PAGE>
VIII. Miscellaneous
-------------
Section 8-A AC agrees to be solely responsible for, defend and
-----------
indemnify BUYER, and its respective officers, agents and employees, and to hold
each of them harmless from any claims, demands, causes of action, or damages,
including reasonable attorney's fees, resulting from or arising out of any
inability on the part of AC to convey the rights set out in this Agreement
including, but not limited to, any trademark infringement asserted by any third
parties.
Section 8-B Any notice required or permitted hereunder shall be in
-----------
writing and shall be sufficiently given when mailed prepaid first class
registered mail and addressed to the party for whom it is intended at its record
address, and such notice shall be effective as of the date it is deposited in
the mail. The record address of AC and BUYER are those set forth in the
preamble of this Agreement. With respect to AC, such notice shall be addressed
to the attention of "General Counsel." Any party may, at any time, substitute
for its previous record address any other address by giving written notice of
the substitution.
Section 8-C This Agreement does not in any way create the
-----------
relationship of principal and agent between AC and BUYER, and BUYER shall not
under any circumstances act as or represent itself to be an agent of AC.
Section 8-D Failure of either party to insist upon the strict
-----------
performance of any provisions hereof or to exercise any right or remedy shall
not be deemed a waiver of any right or remedy with respect to any existing or
subsequent breach or default; the election by either party of any particular
right or remedy shall not be deemed to exclude any other; and all rights and
remedies of either party shall be cumulative.
Section 8-E If any provision or provisions of this Agreement in any
-----------
10
<PAGE>
way contravene a law of any state or country in which this Agreement is
effective, the remaining provisions of this Agreement shall not be affected
thereby and this Agreement shall be modified to conform with such law.
Section 8-F More than one counterpart of this Agreement may be
-----------
executed hereto, and each fully executed counterpart shall be deemed an
original.
Section 8-G This Agreement may not be assigned or otherwise
-----------
transferred by any party hereto without the prior written consent of the other,
except that this Agreement may be signed by LICENSOR to a subsequent purchaser
acquiring ownership of the Licensed Trademarks.
Section 8-H This Agreement contains all of the terms and conditions
-----------
agreed upon by LICENSOR, SELLER and BUYER regarding the specific subject matter
hereof; and this Agreement may be modified only by an instrument in writing
executed on behalf of AC and BUYER by their respective duly authorized officers.
11
<PAGE>
IN WITNESS WHEREOF, BUYER and AC have caused this Agreement to be
executed by their respective duly authorized officers on the date first set
forth above.
Attest: PMI HOLDING CORP.
[ILLEGIBLE] By:/s/ J. M. Goode
- - - - - - - - - - - ----------------------------------- ---------------------
(Authorized Signature)
PRESTOLITE ELECTRIC
Attest: INCORPORATED
[ILLEGIBLE] By:/s/ J.M. Goode
- - - - - - - - - - - ----------------------------------- ---------------------
(Authorized Signature)
Attest: ALLIED CORPORATION
[ILLEGIBLE] By:/s/ Barbara K. Baker
- - - - - - - - - - - ----------------------------------- ---------------------
(Authorized Signature)
12
<PAGE>
EXHIBIT 10.29
AGREEMENT
---------
AGREEMENT, dated as of January 1, 1997 (the "Agreement"), between PEI
HOLDING, INC., a Delaware corporation (the "Company"), and P. KIM PACKARD (the
"Employee").
The Employee is employed as an executive manager by an operating
consolidated subsidiary of the Company, and the Employee and the Company (on
behalf of itself and its operating consolidated subsidiaries) desire that
Employee continue to provide services in that capacity. Now, therefore, the
parties hereby agree as follows:
1. If the Employee's employment with the Company and/or any of its
operating consolidated subsidiaries is terminated at any time for any
reason (other than (a) by the Employee voluntarily [except for voluntary
termination in the event of a substantial diminution in the Employee's
responsibilities, in which case the Employee shall remain entitled to the
salary and benefits specified in this Section 1], (b) by the Company and/or
any of its operating consolidated subsidiaries for "cause", or (c) as a
result of the death or permanent disability of the Employee), then the
Employee shall receive from the Company for a period of one (1) year
following the date of termination of employment the then current salary and
fringe benefits that the Employee would otherwise have been entitled to
receive.
2. If a "change in control" shall occur and if the Employee's
employment with the Company and/or any of its operating consolidated
subsidiaries is terminated at any time within twelve (12) months following
the occurrence of such "change in control" for any reason (other than by
the Company for "cause"), then the Employee shall continue to receive from
the Company an additional one (1) year period of such salary and benefits
following the expiration of the salary and benefits the Employee is
entitled to receive pursuant to Section 1. (As a point of clarification,
the Employee is eligible to receive up to two (2) years of such salary and
benefits.)
3. For purposes of this Agreement, "cause" and "change in control"
shall have the following meanings:
(i) "Cause" means termination by the Company and/or any of its
operating consolidated subsidiaries of the Employee's employment with
the Company and/or any of its operating consolidated subsidiaries by
reason of (a) the Employee's conviction of a felony, (b) an act of
personal dishonesty or breach of duty by the Employee in connection
with such Employee's employment by the Company and/or any of its
operating consolidated subsidiaries, (c) the Employee's commission of
an act involving gross negligence in the conduct of his duties for the
Company and/or any of its operating consolidated subsidiaries or (d)
the Employee's willful and repeated failure to execute the policies of
the Company and/or any of its operating consolidated subsidiaries as
established by the Board of Directors thereof.
(ii) "Change in Control" means (a) the sale or other transfer of
50% or more of the ownership interests of the capital stock of the
Company and/or
1.
<PAGE>
Prestolite Electric Incorporated ("Prestolite") to one or more
corporations, persons or other entities not affiliated with Genstar
Capital Corporation ("Genstar"), (b) the merger or consolidation of
the Company and/or Prestolite with another corporation such that the
stockholders of the Company and/or Prestolite immediately preceding
the merger or consolidation own less than 50% of the capital stock of
the corporation surviving the merger or consolidation, (c) the sale or
other transfer of all or substantially all of the Company's
consolidated assets to one or more corporations, persons or other
entities not affiliated with Genstar, and/or (d) the dissolution or
liquidation of the Company and/or Prestolite; provided, however, that
no "change in control" shall be deemed to have occurred if Genstar,
after giving effect to one or more of the transactions described in
this Section 3(ii), controls the Board of Directors of the Company
and/or Prestolite, as the case may be.
4. Such salary and benefits shall be paid at such time and in such
manner as may be mutually agreed in writing by the Employee and the
Company; provided, however, that in the absence of such agreement such
salary and benefits shall be paid at such time and in such manner as if the
Employee remained employed by the Company and/or any of its operating
consolidated subsidiaries. This Agreement may be enforced by the Employee
against the Company and each of its operating consolidated subsidiaries.
All salary and benefits shall continue as provided herein notwithstanding
re-employment and/or death of the Employee following termination of
employment with the Company and/or any of its operating consolidated
subsidiaries.
5. Except as specifically provided in this Agreement, all terms and
conditions which governed the Employee's employment by the Company and/or
one or more of its operating consolidated subsidiaries prior to the
effective date hereof shall remain in full force and effect.
6. This Agreement (a) may be amended or terminated only by a writing
signed by both parties, (b) is not assignable by either party, (c) shall
bind and inure to the benefit of the respective heirs, personal
representatives and successors of the parties, and (d) sets forth the
entire understanding of the parties regarding its subject matter.
In witness whereof, the parties have executed this Agreement as of the date
first above written.
PEI HOLDING, INC.
By: /s/ Richard D. Paterson
---------------------------------
Richard D. Paterson, Chairman
/s/ P. Kim Packard By: /s/ Kenneth C. Cornelius
- - - - - - - - - - - ------------------------- ---------------------------------
P. Kim Packard Kenneth C. Cornelius, President
2.
<PAGE>
EXHIBIT 10.30
AGREEMENT
---------
AGREEMENT, dated as of January 1, 1997 (the "Agreement"), between PEI
HOLDING, INC., a Delaware corporation (the "Company"), and KENNETH C. CORNELIUS
(the "Employee").
The Employee is employed as an executive manager by an operating
consolidated subsidiary of the Company, and the Employee and the Company (on
behalf of itself and its operating consolidated subsidiaries) desire that
Employee continue to provide services in that capacity. Now, therefore, the
parties hereby agree as follows:
1. If the Employee's employment with the Company and/or any of its
operating consolidated subsidiaries is terminated at any time for any
reason (other than (a) by the Employee voluntarily [except for voluntary
termination in the event of a substantial diminution in the Employee's
responsibilities, in which case the Employee shall remain entitled to the
salary and benefits specified in this Section 1], (b) by the Company and/or
any of its operating consolidated subsidiaries for "cause", or (c) as a
result of the death or permanent disability of the Employee), then the
Employee shall receive from the Company for a period of one (1) year
following the date of termination of employment the then current salary and
fringe benefits that the Employee would otherwise have been entitled to
receive.
2. If a "change in control" shall occur and if the Employee's
employment with the Company and/or any of its operating consolidated
subsidiaries is terminated at any time within twelve (12) months following
the occurrence of such "change in control" for any reason (other than by
the Company for "cause"), then the Employee shall continue to receive from
the Company an additional one (1) year period of such salary and benefits
following the expiration of the salary and benefits the Employee is
entitled to receive pursuant to Section 1. (As a point of clarification,
the Employee is eligible to receive up to two (2) years of such salary and
benefits.)
3. For purposes of this Agreement, "cause" and "change in control"
shall have the following meanings:
(i) "Cause" means termination by the Company and/or any of its
operating consolidated subsidiaries of the Employee's employment with
the Company and/or any of its operating consolidated subsidiaries by
reason of (a) the Employee's conviction of a felony, (b) an act of
personal dishonesty or breach of duty by the Employee in connection
with such Employee's employment by the Company and/or any of its
operating consolidated subsidiaries, (c) the Employee's commission of
an act involving gross negligence in the conduct of his duties for the
Company and/or any of its operating consolidated subsidiaries or (d)
the Employee's willful and repeated failure to execute the policies of
the Company and/or any of its operating consolidated subsidiaries as
established by the Board of Directors thereof.
1.
<PAGE>
(ii) "Change in Control" means (a) the sale or other transfer of
50% or more of the ownership interests of the capital stock of the
Company and/or Prestolite Electric Incorporated ("Prestolite") to one
or more corporations, persons or other entities not affiliated with
Genstar Capital Corporation ("Genstar"), (b) the merger or
consolidation of the Company and/or Prestolite with another
corporation such that the stockholders of the Company and/or
Prestolite immediately preceding the merger or consolidation own less
than 50% of the capital stock of the corporation surviving the merger
or consolidation, (c) the sale or other transfer of all or
substantially all of the Company's consolidated assets to one or more
corporations, persons or other entities not affiliated with Genstar,
and/or (d) the dissolution or liquidation of the Company and/or
Prestolite; provided, however, that no "change in control" shall be
deemed to have occurred if Genstar, after giving effect to one or more
of the transactions described in this Section 3(ii), controls the
Board of Directors of the Company and/or Prestolite, as the case may
be.
4. Such salary and benefits shall be paid at such time and in such
manner as may be mutually agreed in writing by the Employee and the
Company; provided, however, that in the absence of such agreement such
salary and benefits shall be paid at such time and in such manner as if the
Employee remained employed by the Company and/or any of its operating
consolidated subsidiaries. This Agreement may be enforced by the Employee
against the Company and each of its operating consolidated subsidiaries.
All salary and benefits shall continue as provided herein notwithstanding
re-employment and/or death of the Employee following termination of
employment with the Company and/or any of its operating consolidated
subsidiaries.
5. Except as specifically provided in this Agreement, all terms and
conditions which governed the Employee's employment by the Company and/or
one or more of its operating consolidated subsidiaries prior to the
effective date hereof shall remain in full force and effect.
6. This Agreement (a) may be amended or terminated only by a writing
signed by both parties, (b) is not assignable by either party, (c) shall
bind and inure to the benefit of the respective heirs, personal
representatives and successors of the parties, and (d) sets forth the
entire understanding of the parties regarding its subject matter.
In witness whereof, the parties have executed this Agreement as of the date
first above written.
PEI HOLDING, INC.
By: /s/ Richard D. Paterson
-----------------------------
Richard D. Paterson, Chairman
/s/ Kenneth C. Cornelius By: /s/ P. Kim Packard
- - - - - - - - - - - --------------------------- -----------------------------
Kenneth C. Cornelius P. Kim Packard, President
2.
<PAGE>
EXHIBIT 10.31
AGREEMENT
---------
AGREEMENT, dated as of January 1, 1997 (the "Agreement"), between PEI
HOLDING, INC., a Delaware corporation (the "Company"), and THOMAS E. HUNT (the
"Employee").
The Employee is employed as an executive manager by an operating
consolidated subsidiary of the Company, and the Employee and the Company (on
behalf of itself and its operating consolidated subsidiaries) desire that
Employee continue to provide services in that capacity. Now, therefore, the
parties hereby agree as follows:
1. If a "change in control" shall occur and if the Employee's
employment with the Company and/or any of its operating consolidated
subsidiaries is terminated at any time within twelve (12) months following
the occurrence of such "change in control" for any reason (other than by
the Company for "cause"), then the Employee shall receive from the Company
for a period of one (1) year following the date of termination of
employment the then current salary and fringe benefits that the Employee
would otherwise have been entitled to receive.
2. For purposes of this Agreement, "cause" and "change in control"
shall have the following meanings:
(i) "Cause" means termination by the Company and/or any of its
operating consolidated subsidiaries of the Employee's employment with
the Company and/or any of its operating consolidated subsidiaries by
reason of (a) the Employee's conviction of a felony, (b) an act of
personal dishonesty or breach of duty by the Employee in connection
with such Employee's employment by the Company and/or any of its
operating consolidated subsidiaries, (c) the Employee's commission of
an act involving gross negligence in the conduct of his duties for the
Company and/or any of its operating consolidated subsidiaries or (d)
the Employee's willful and repeated failure to execute the policies of
the Company and/or any of its operating consolidated subsidiaries as
established by the Board of Directors thereof.
(ii) "Change in Control" means (a) the sale or other transfer of
50% or more of the ownership interests of the capital stock of the
Company and/or Prestolite Electric Incorporated ("Prestolite") to one
or more corporations, persons or other entities not affiliated with
Genstar Capital Corporation ("Genstar"), (b) the merger or
consolidation of the Company and/or Prestolite with another
corporation such that the stockholders of the Company and/or
Prestolite immediately preceding the merger or consolidation own less
than 50% of the capital stock of the corporation surviving the merger
or consolidation, (c) the sale or other transfer of all or
substantially all of the Company's consolidated assets to one or more
corporations, persons or other entities not affiliated with Genstar,
and/or (d) the dissolution or liquidation of the Company and/or
Prestolite; provided, however, that no "change in control" shall be
deemed to have occurred if Genstar, after giving effect to one or more
of the transactions described in this Section 3(ii),
1.
<PAGE>
controls the Board of Directors of the Company and/or Prestolite, as
the case may be.
3. Such salary and benefits shall be paid at such time and in such
manner as may be mutually agreed in writing by the Employee and the
Company; provided, however, that in the absence of such agreement such
salary and benefits shall be paid at such time and in such manner as if the
Employee remained employed by the Company and/or any of its operating
consolidated subsidiaries. This Agreement may be enforced by the Employee
against the Company and each of its operating consolidated subsidiaries.
All salary and benefits shall continue as provided herein notwithstanding
re-employment and/or death of the Employee following termination of
employment with the Company and/or any of its operating consolidated
subsidiaries.
4. Except as specifically provided in this Agreement, all terms and
conditions which governed the Employee's employment by the Company and/or
one or more of its operating consolidated subsidiaries prior to the
effective date hereof shall remain in full force and effect.
5. This Agreement (a) may be amended or terminated only by a writing
signed by both parties, (b) is not assignable by either party, (c) shall
bind and inure to the benefit of the respective heirs, personal
representatives and successors of the parties, and (d) sets forth the
entire understanding of the parties regarding its subject matter.
In witness whereof, the parties have executed this Agreement as of the date
first above written.
PEI HOLDING, INC.
By: /s/ Richard D. Paterson
---------------------------------
Richard D. Paterson, Chairman
/s/ Thomas E. Hunt By: /s/ P. Kim Packard
- - - - - - - - - - - -------------------- ---------------------------------
Thomas E. Hunt P. Kim Packard, President
2.
<PAGE>
EXHIBIT 10.32
AGREEMENT
---------
AGREEMENT, dated as of January 1, 1997 (the "Agreement"), between PEI
HOLDING, INC., a Delaware corporation (the "Company"), and MICHAEL LEA (the
"Employee").
The Employee is employed as an executive manager by an operating
consolidated subsidiary of the Company, and the Employee and the Company (on
behalf of itself and its operating consolidated subsidiaries) desire that
Employee continue to provide services in that capacity. Now, therefore, the
parties hereby agree as follows:
1. If the Employee's employment with the Company and/or any of its
operating consolidated subsidiaries is terminated at any time for any
reason (other than (a) by the Employee voluntarily [except for voluntary
termination in the event of a substantial diminution in the Employee's
responsibilities, in which case the Employee shall remain entitled to the
salary and benefits specified in this Section 1], (b) by the Company and/or
any of its operating consolidated subsidiaries for "cause", or (c) as a
result of the death or permanent disability of the Employee), then the
Employee shall receive from the Company for a period of one (1) year
following the date of termination of employment the then current salary and
fringe benefits that the Employee would otherwise have been entitled to
receive.
2. If a "change in control" shall occur and if the Employee's
employment with the Company and/or any of its operating consolidated
subsidiaries is terminated at any time within twelve (12) months following
the occurrence of such "change in control" for any reason (other than by
the Company for "cause"), then the Employee shall continue to receive from
the Company an additional one (1) year period of such salary and benefits
following the expiration of the salary and benefits the Employee is
entitled to receive pursuant to Section 1. (As a point of clarification,
the Employee is eligible to receive up to two (2) years of such salary and
benefits.)
3. For purposes of this Agreement, "cause" and "change in control"
shall have the following meanings:
(i) "Cause" means termination by the Company and/or any of its
operating consolidated subsidiaries of the Employee's employment with
the Company and/or any of its operating consolidated subsidiaries by
reason of (a) the Employee's conviction of a felony, (b) an act of
personal dishonesty or breach of duty by the Employee in connection
with such Employee's employment by the Company and/or any of its
operating consolidated subsidiaries, (c) the Employee's commission of
an act involving gross negligence in the conduct of his duties for the
Company and/or any of its operating consolidated subsidiaries or (d)
the Employee's willful and repeated failure to execute the policies of
the Company and/or any of its operating consolidated subsidiaries as
established by the Board of Directors thereof.
(ii) "Change in Control" means (a) the sale or other transfer of
50% or more of the ownership interests of the capital stock of the
Company and/or
1.
<PAGE>
Prestolite Electric Incorporated ("Prestolite") to one or more
corporations, persons or other entities not affiliated with Genstar
Capital Corporation ("Genstar"), (b) the merger or consolidation of
the Company and/or Prestolite with another corporation such that the
stockholders of the Company and/or Prestolite immediately preceding
the merger or consolidation own less than 50% of the capital stock of
the corporation surviving the merger or consolidation, (c) the sale or
other transfer of all or substantially all of the Company's
consolidated assets to one or more corporations, persons or other
entities not affiliated with Genstar, and/or (d) the dissolution or
liquidation of the Company and/or Prestolite; provided, however, that
no "change in control" shall be deemed to have occurred if Genstar,
after giving effect to one or more of the transactions described in
this Section 3(ii), controls the Board of Directors of the Company
and/or Prestolite, as the case may be.
4. Such salary and benefits shall be paid at such time and in such
manner as may be mutually agreed in writing by the Employee and the
Company; provided, however, that in the absence of such agreement such
salary and benefits shall be paid at such time and in such manner as if the
Employee remained employed by the Company and/or any of its operating
consolidated subsidiaries. This Agreement may be enforced by the Employee
against the Company and each of its operating consolidated subsidiaries.
All salary and benefits shall continue as provided herein notwithstanding
re-employment and/or death of the Employee following termination of
employment with the Company and/or any of its operating consolidated
subsidiaries.
5. Except as specifically provided in this Agreement, all terms and
conditions which governed the Employee's employment by the Company and/or
one or more of its operating consolidated subsidiaries prior to the
effective date hereof shall remain in full force and effect.
6. This Agreement (a) may be amended or terminated only by a writing
signed by both parties, (b) is not assignable by either party, (c) shall
bind and inure to the benefit of the respective heirs, personal
representatives and successors of the parties, and (d) sets forth the
entire understanding of the parties regarding its subject matter.
In witness whereof, the parties have executed this Agreement as of the date
first above written.
PEI HOLDING, INC.
By: /s/ Richard D. Paterson
-----------------------------------
Richard D. Paterson, Chairman
/s/ Michael Lea By: /s/ P. Kim Packard
- - - - - - - - - - - --------------------- -----------------------------------
Michael Lea P. Kim Packard, President
2.
<PAGE>
EXHIBIT 10.33
AGREEMENT
---------
AGREEMENT, dated as of January 1, 1997 (the "Agreement"), between PEI
HOLDING, INC., a Delaware corporation (the "Company"), and THOMAS C. DOLSON (the
"Employee").
The Employee is employed as an executive manager by an operating
consolidated subsidiary of the Company, and the Employee and the Company (on
behalf of itself and its operating consolidated subsidiaries) desire that
Employee continue to provide services in that capacity. Now, therefore, the
parties hereby agree as follows:
1. If the Employee's employment with the Company and/or any of
its operating consolidated subsidiaries is terminated at any time for
any reason (other than (a) by the Employee voluntarily [except for
voluntary termination in the event of a substantial diminution in the
Employee's responsibilities, in which case the Employee shall remain
entitled to the salary and benefits specified in this Section 1], (b) by
the Company and/or any of its operating consolidated subsidiaries for
"cause", or (c) as a result of the death or permanent disability of the
Employee), then the Employee shall receive from the Company for a period
of one (1) year following the date of termination of employment the then
current salary and fringe benefits that the Employee would otherwise
have been entitled to receive.
2. If a "change in control" shall occur and if the Employee's
employment with the Company and/or any of its operating consolidated
subsidiaries is terminated at any time within twelve (12) months
following the occurrence of such "change in control" for any reason
(other than by the Company for "cause"), then the Employee shall
continue to receive from the Company an additional one (1) year period
of such salary and benefits following the expiration of the salary and
benefits the Employee is entitled to receive pursuant to Section 1. (As
a point of clarification, the Employee is eligible to receive up to two
(2) years of such salary and benefits.)
3. For purposes of this Agreement, "cause" and "change in
control" shall have the following meanings:
(i) "Cause" means termination by the Company and/or any of
its operating consolidated subsidiaries of the Employee's
employment with the Company and/or any of its operating
consolidated subsidiaries by reason of (a) the Employee's
conviction of a felony, (b) an act of personal dishonesty or
breach of duty by the Employee in connection with such
Employee's employment by the Company and/or any of its operating
consolidated subsidiaries, (c) the Employee's commission of an
act involving gross negligence in the conduct of his duties for
the Company and/or any of its operating consolidated
subsidiaries or (d) the Employee's willful and repeated failure
to execute the policies of the Company and/or any of its
operating consolidated subsidiaries as established by the Board
of Directors thereof.
(ii) "Change in Control" means (a) the sale or other
transfer of 50% or more of the ownership interests of the
capital stock of the Company and/or
1.
<PAGE>
Prestolite Electric Incorporated ("Prestolite") to one or more
corporations, persons or other entities not affiliated with
Genstar Capital Corporation ("Genstar"), (b) the merger or
consolidation of the Company and/or Prestolite with another
corporation such that the stockholders of the Company and/or
Prestolite immediately preceding the merger or consolidation own
less than 50% of the capital stock of the corporation surviving
the merger or consolidation, (c) the sale or other transfer of
all or substantially all of the Company's consolidated assets to
one or more corporations, persons or other entities not
affiliated with Genstar, and/or (d) the dissolution or
liquidation of the Company and/or Prestolite; provided, however,
that no "change in control" shall be deemed to have occurred if
Genstar, after giving effect to one or more of the transactions
described in this Section 3(ii), controls the Board of Directors
of the Company and/or Prestolite, as the case may be.
4. Such salary and benefits shall be paid at such time and in
such manner as may be mutually agreed in writing by the Employee and the
Company; provided, however, that in the absence of such agreement such
salary and benefits shall be paid at such time and in such manner as if the
Employee remained employed by the Company and/or any of its operating
consolidated subsidiaries. This Agreement may be enforced by the Employee
against the Company and each of its operating consolidated subsidiaries.
All salary and benefits shall continue as provided herein notwithstanding
re-employment and/or death of the Employee following termination of
employment with the Company and/or any of its operating consolidated
subsidiaries.
5. Except as specifically provided in this Agreement, all terms
and conditions which governed the Employee's employment by the Company
and/or one or more of its operating consolidated subsidiaries prior to the
effective date hereof shall remain in full force and effect.
6. This Agreement (a) may be amended or terminated only by a
writing signed by both parties, (b) is not assignable by either party, (c)
shall bind and inure to the benefit of the respective heirs, personal
representatives and successors of the parties, and (d) sets forth the
entire understanding of the parties regarding its subject matter.
In witness whereof, the parties have executed this Agreement as of the date
first above written.
PEI HOLDING, INC.
By: /s/ Richard D. Paterson
-----------------------
Richard D. Paterson, Chairman
/s/ Thomas C. Dolson By: /s/ P. Kim Packard
- - - - - - - - - - - -------------------- ------------------
Thomas C. Dolson P. Kim Packard, President
2.
<PAGE>
EXHIBIT 10.34
AGREEMENT
---------
AGREEMENT, dated as of January 1, 1997 (the "Agreement"), between PEI
HOLDING, INC., a Delaware corporation (the "Company"), and I. CONRAD SCHWAB (the
"Employee").
The Employee is employed as an executive manager by an operating
consolidated subsidiary of the Company, and the Employee and the Company (on
behalf of itself and its operating consolidated subsidiaries) desire that
Employee continue to provide services in that capacity. Now, therefore, the
parties hereby agree as follows:
1. If the Employee's employment with the Company and/or any of
its operating consolidated subsidiaries is terminated at any time for
any reason (other than (a) by the Employee voluntarily [except for
voluntary termination in the event of a substantial diminution in the
Employee's responsibilities, in which case the Employee shall remain
entitled to the salary and benefits specified in this Section 1], (b) by
the Company and/or any of its operating consolidated subsidiaries for
"cause", or (c) as a result of the death or permanent disability of the
Employee), then the Employee shall receive from the Company for a period
of one (1) year following the date of termination of employment the then
current salary and fringe benefits that the Employee would otherwise
have been entitled to receive.
2. If a "change in control" shall occur and if the Employee's
employment with the Company and/or any of its operating consolidated
subsidiaries is terminated at any time within twelve (12) months
following the occurrence of such "change in control" for any reason
(other than by the Company for "cause"), then the Employee shall
continue to receive from the Company an additional one (1) year period
of such salary and benefits following the expiration of the salary and
benefits the Employee is entitled to receive pursuant to Section 1. (As
a point of clarification, the Employee is eligible to receive up to two
(2) years of such salary and benefits.)
3. For purposes of this Agreement, "cause" and "change in
control" shall have the following meanings:
(i) "Cause" means termination by the Company and/or any
of its operating consolidated subsidiaries of the Employee's
employment with the Company and/or any of its operating
consolidated subsidiaries by reason of (a) the Employee's
conviction of a felony, (b) an act of personal dishonesty or
breach of duty by the Employee in connection with such
Employee's employment by the Company and/or any of its operating
consolidated subsidiaries, (c) the Employee's commission of an
act involving gross negligence in the conduct of his duties for
the Company and/or any of its operating consolidated
subsidiaries or (d) the Employee's willful and repeated failure
to execute the policies of the Company and/or any of its
operating consolidated subsidiaries as established by the Board
of Directors thereof.
(ii) "Change in Control" means (a) the sale or other
transfer of 50% or more of the ownership interests of the
capital stock of the Company and/or
1.
<PAGE>
Prestolite Electric Incorporated ("Prestolite") to one or more
corporations, persons or other entities not affiliated with
Genstar Capital Corporation ("Genstar"), (b) the merger or
consolidation of the Company and/or Prestolite with another
corporation such that the stockholders of the Company and/or
Prestolite immediately preceding the merger or consolidation own
less than 50% of the capital stock of the corporation surviving
the merger or consolidation, (c) the sale or other transfer of
all or substantially all of the Company's consolidated assets to
one or more corporations, persons or other entities not
affiliated with Genstar, and/or (d) the dissolution or
liquidation of the Company and/or Prestolite; provided, however,
that no "change in control" shall be deemed to have occurred if
Genstar, after giving effect to one or more of the transactions
described in this Section 3(ii), controls the Board of Directors
of the Company and/or Prestolite, as the case may be.
4. Such salary and benefits shall be paid at such time and in
such manner as may be mutually agreed in writing by the Employee and the
Company; provided, however, that in the absence of such agreement such
salary and benefits shall be paid at such time and in such manner as if
the Employee remained employed by the Company and/or any of its
operating consolidated subsidiaries. This Agreement may be enforced by
the Employee against the Company and each of its operating consolidated
subsidiaries. All salary and benefits shall continue as provided herein
notwithstanding re-employment and/or death of the Employee following
termination of employment with the Company and/or any of its operating
consolidated subsidiaries.
5. Except as specifically provided in this Agreement, all terms
and conditions which governed the Employee's employment by the Company
and/or one or more of its operating consolidated subsidiaries prior to
the effective date hereof shall remain in full force and effect.
6. This Agreement (a) may be amended or terminated only by a
writing signed by both parties, (b) is not assignable by either party,
(c) shall bind and inure to the benefit of the respective heirs,
personal representatives and successors of the parties, and (d) sets
forth the entire understanding of the parties regarding its subject
matter.
In witness whereof, the parties have executed this Agreement as of the
date first above written.
PEI HOLDING, INC.
By: /s/ Richard D. Paterson
-----------------------
Richard D. Paterson, Chairman
/s/ I. Conrad Schwab By: /s/ P. Kim Packard
---------------- ------------------
I. Conrad Schwab P. Kim Packard, President
2.
<PAGE>
EXHIBIT 12
PEI HOLDING, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing operations
before income taxes and extradordinary item (517) 3,666 (1,578) 1,717 5,126
Fixed charges:
Interest 3,066 3,360 4,282 5,313 5,384
33% of rental expense 597 543 492 535 1,054
-------- -------- -------- -------- --------
Total fixed charges 3,663 3,903 4,774 5,848 6,438
-------- -------- -------- -------- --------
Income (loss) plus fixed charges 3,146 7,569 3,196 7,565 11,564
-------- -------- -------- -------- --------
Ratio of earnings to fixed charges NA 1.9 NA 1.3 1.8
======== ======== ======== ======== ========
Amount by which earnings were insufficient
to cover fixed charges 517 NA 1,578 NA NA
======== ======== ======== ======== ========
</TABLE>
<PAGE>
[LETTERHEAD OF COOPERS & LYBRAND]
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 and
related Prospectus of Prestolite Electric Incorporated (Prestolite) and PEI
Holding, Inc. (PEI) related to Prestolite's $125 million 9 5/8% senior notes and
related guarantee of PEI of our report dated January 30, 1998, except for Note
21(b) for which the date is March 26, 1998, on our audits of the financial
statements and financial statement schedule of PEI Holding, Inc. and
Subsidiaries. We also consent to the reference to our Firm under the caption
"Experts."
Detroit, Michigan
March 30, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 30, 1998, with respect to the financial statements
of the Heavy Duty Products Division of Lucas industries plc in the Registration
Statement Form S-4 and related Prospectus of Prestolite Electric Incorporated
("Prestolite") and PEI Holding, Inc. ("PEI") for the registration of
$125,000,000 9-5/8% Senior Notes due 2008 of Prestolite and related guarantee of
PEI.
ERNST & YOUNG
Chartered Accountants
London, England
March 30, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Prestolite Electric
Incorporated and PEI Holding, Inc. on Form S-4 of our report dated March 30,
1998 on the financial statements of Lucas Indiel Argentina S.A. and subsidiaries
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & CO.
Buenos Aires, Argentina
March 30, 1998
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN]
EXHIBIT 23.4
31 March, 1998
The Directors
Prestolite Electric Incorporated
2100 Commonwealth Boulevard
Ann Arbor
Michigan 48105
U.S.A.
Dear Sirs:
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Prestolite Electric Holdings South Africa
(Proprietary) Limited and subsidiaries dated February 27, 1998 (and to all
references to our firm) included in or made a part of the Registration Statement
on Form S-4 and related Prospectus of Prestolite Electric Incorporated
("Prestolite") and PEI Holdings, Inc. ("PEI") for the registration of
Prestolite's 9-5/8 Senior Notes due 2008 and related guarantee of PEI.
Johannesburg, South Africa Arthur Andersen & Co.
March 30, 1998 Chartered Accountants (S.A.)
<PAGE>
EXHIBIT 25
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER
THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(B)(2)___
_______________________________________________________
U.S. BANK TRUST NATIONAL ASSOCIATION
F/K/A FIRST TRUST NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
111 E. WACKER DRIVE, SUITE 3000
CHICAGO, ILLINOIS 60601 36-4046888
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) I.R.S. EMPLOYER IDENTIFICATION NO.
</TABLE>
JAMES D. KHAMI
535 GRISWOLD, SUITE 740
DETROIT, MICHIGAN 48226
TELEPHONE (313) 234-4713
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
PRESTOLITE ELECTRIC CORPORATION
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 94-3142032
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
PEI HOLDING, INC.
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 94-3142033
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
2100 COMMONWEALTH BLVD.
ANN ARBOR, MICHIGAN 48105
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
9 5/8% SENIOR EXCHANGE NOTES DUE 2008
(TITLE OF THE INDENTURE SECURITIES)
______________________________________________________________________________
<PAGE>
FORM T-1
--------
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE.
A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C.
B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
YES
ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
NONE
ITEMS 3-15 NOT APPLICABLE BECAUSE, TO THE BEST OF TRUSTEE'S KNOWLEDGE, THE
TRUSTEE IS NOT A TRUSTEE UNDER ANY OTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY
OTHER SECURITIES OF THE OBLIGOR ARE OUTSTANDING AND THERE IS NOT,
NOR HAS THERE BEEN, A DEFAULT WITH RESPECT TO SECURITIES ISSUED
UNDER THIS INDENTURE.
ITEM 16. LIST OF EXHIBITS: LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
STATEMENT OF ELIGIBILITY AND QUALIFICATION.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE NOW IN EFFECT,
FILED HEREWITH.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 2 TO ITEM 16 OF
FORM T-1, REGISTRATION NO. 33-64175.*
3. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO EXERCISE
CORPORATE TRUST POWERS, INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 3
TO ITEM 16 OF FORM T-1, REGISTRATION NO. 33-64175.*
4. A COPY OF THE EXISTING BYLAWS OF THE TRUSTEE, AS NOW IN EFFECT, FILED
HEREWITH.
5. NOT APPLICABLE.
6. THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE TRUST
INDENTURE ACT OF 1939, INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 6
OF FORM T-1, REGISTRATION NO. 33-64175.*.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY, FILED HEREWITH.
8. NOT APPLICABLE.
9. NOT APPLICABLE.
2
<PAGE>
* EXHIBITS THUS DESIGNATED ARE INCORPORATED HEREIN BY REFERENCE TO
EXHIBITS BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 FILED BY THE
TRUSTEE WITH THE SECURITIES AND EXCHANGE COMMISSION WITH THE SPECIFIC
REFERENCES NOTED.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, AS
AMENDED, THE TRUSTEE, U.S. BANK TRUST NATIONAL ASSOCIATION, F/K/A FIRST
TRUST NATIONAL ASSOCIATION, A NATIONAL BANKING ASSOCIATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, HAS DULY CAUSED
THIS STATEMENT OF ELIGIBILITY AND QUALIFICATION TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF DETROIT,
STATE OF MICHIGAN ON THE 30TH DAY OF MARCH, 1998.
U.S. BANK TRUST NATIONAL ASSOCIATION
F/K/A FIRST TRUST NATIONAL ASSOCIATION
BY: /S/ JAMES D. KHAMI
------------------------------------
JAMES D. KHAMI
VICE PRESIDENT AND ASSISTANT SECRETARY
3
<PAGE>
EXHIBIT 1
U.S. BANK TRUST NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
-----------------------
For the purpose of organizing an association to perform any lawful
activities of national banks, the undersigned do enter into the following
Amended and Restated Articles of Association:
FIRST. The title of this Association shall be "U.S. Bank Trust
National Association."
SECOND. The main office of this Association shall be in the City of
Chicago, County of Cook and State of Illinois. The business of this Association
will be limited to that of a national trust bank, and to support activities
incidental thereto. This Association will not amend these Articles of
Association to expand the scope of or alter its business beyond that stated in
this Article Second without the prior approval of the Comptroller of the
Currency. Prior to the transfer of any stock of the Association, the
Association will seek the prior approval of the appropriate federal depository
institution regulatory agency.
THIRD. The board of directors of the Association shall consist of not
less than five nor more than 25 persons, the exact number to be fixed and
determined from time to time by resolution of a majority of the full board of
directors or by resolution of a majority of the shareholders at any annual or
special meeting thereof. Each director shall own common or preferred stock of
this Association with an aggregate par, fair market, or equity value of not less
than $1,000.00, as of either (i) the date of purchase, (ii) the date the person
became a director, whichever is more recent. Any combination of common or
preferred stock of this Association or U.S. Bancorp may be used.
Any vacancy in the board of directors may be filled by action of a
majority of the remaining directors between meetings of shareholders. The board
of directors may not increase the number of directors between meetings of
shareholders to a number that (1) exceeds by more than two the number of
directors last elected by shareholders where the number was fifteen or less; and
(2) exceeds by more than four the number of directors last elected by
shareholders where the number was sixteen or more, but in no event shall the
number of directors exceed twenty-five.
Terms of directors, including directors selected to fill vacancies,
shall expire at the next regular meeting of shareholders at which directors are
elected, unless the directors resign or are removed from office.
-1-
<PAGE>
Despite the expiration of a director's term, the director shall
continue to serve until his or her successor is elected and qualifies or until
there is a decrease in the number of directors and his or her position is
eliminated.
Honorary or advisory members of the board of directors, without voting
power or power of final decision in matters concerning the business of this
Association, may be appointed by resolution of a majority of the full board of
directors, or by resolution of shareholders at any annual or special meeting.
Honorary or advisory directors shall not be counted for purposes of determining
the number of directors of this Association or the presence of a quorum in
connection with any board action, and shall not be required to own qualifying
shares.
FOURTH. There shall be an annual meeting of the shareholders to elect
directors and transact whatever other business may be brought before the
meeting. It shall be held at the main office or any other convenient place the
board of directors may designate, on the day of each year specified therefore in
the bylaws, or if that day falls on a legal holiday in the State in which this
Association is located, on the next following banking day. If no election is
held on the day fixed, or in event of a legal holiday, an election may be held
on any subsequent day within sixty days of the day fixed, to be designated by
the board of directors, or, if the directors fail to fix the day, by
shareholders representing two-thirds of the shares issued and outstanding. In
all cases at least ten-days advance notice of the meeting shall be given to the
shareholders by first class mail.
A director may resign at any time by delivering written or oral notice
to the board of directors, its chairperson, or to this Association, which
resignation shall be effective when the notice is delivered unless the notice
specifies a later effective date.
A director may be removed by shareholders at a meeting called to
remove him or her, when notice of the meeting stating that the purpose or one of
the purposes is to remove him or her is provided, if there is a failure to
fulfill one of the affirmative requirements for qualification, or for cause;
provided, however, that a director may not be removed if the number of votes
- - - - - - - - - - - -------- -------
sufficient to elect him or her under cumulative voting is voted against his or
her removal.
FIFTH. The authorized amount of capital stock of this Association
shall be 10,000 shares of common stock of the par value of one-hundred dollars
($100.00) each; but said capital stock may be increased or decreased from time
to time, according to the provisions of the laws of the United States.
-2-
<PAGE>
No holder of shares of the capital stock of any class of this
Association shall have any preemptive or preferential right of subscription to
any shares of any class of stock of this Association, whether now or hereafter
authorized, or to any obligations convertible into stock of this Association,
issued, or sold, nor any right of subscription to any thereof other than such,
if any, as the board of directors, in its discretion may from time to time
determine and at such price as the board of directors may from time to time fix.
Unless otherwise specified in these Articles of Association or
required by law, (1) all matters requiring shareholder action, including
amendments to the articles of Association must be approved by shareholders
owning a majority voting interest in the outstanding voting stock, and (2) each
shareholder shall be entitled to one vote per share.
Unless otherwise provided in the bylaws, the record date for
determining shareholders entitled to notice of and to vote at any meeting is the
close of business on the day before the first notice is mailed or otherwise sent
to the shareholders, provided that in no event may a record date be more than
seventy days before the meeting.
SIXTH. The board of directors shall appoint one of its members
president of this Association and one of its members chairperson of the board.
The board of directors shall also have the power to appoint one or more vice
presidents, a secretary who shall keep minutes of the directors' and
shareholders' meetings and be responsible for authenticating the records of this
Association, and such other officers and employees as may be required to
transact the business of this Association. A duly appointed officer may appoint
one or more officers or assistant officers if authorized by the board of
directors in accordance with the bylaws.
The board of directors shall have the power to:
(1) Define the duties of the officers, employees, and agents of this
Association.
(2) Delegate the performance of its duties, but not the responsibility
for its duties, to the officers, employees, and agents of this
Association.
(3) Fix the compensation and enter into employment contracts with its
officers and employees upon reasonable terms and conditions,
consistent with applicable law.
(4) Dismiss officers and employees.
-3-
<PAGE>
(5) Require bonds from officers and employees and to fix the penalty
thereof.
(6) Ratify written policies authorized by this Association's
management or committees of the board.
(7) Regulate the manner in which any increase or decrease of the
capital of this Association shall be made; provided, however,
-------- -------
that nothing herein shall restrict the power of shareholders to
increase or decrease the capital of this Association in
accordance with law, and nothing shall raise or lower from two-
thirds the percentage required for shareholder approval to
increase or reduce the capital.
(8) Manage and administer the business and affairs of this
Association.
(9) Adopt bylaws, not inconsistent with law or these Articles of
Association, for managing the business and regulating the affairs
of this Association.
(10) Amend or repeal bylaws, except to the extent that the articles of
Association reserve this power in whole or in part to
shareholders.
(11) Make contracts.
(12) Generally to perform all acts that are legal for a board of
directors to perform.
SEVENTH. The board of directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Chicago without the approval of the shareholders, and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location permitted under applicable law, without the approval of
the shareholders, subject to approval by the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue
until terminated according to the laws of the United States.
-4-
<PAGE>
NINTH. The board of directors of this Association, or any three (3)
or more shareholders owning, in the aggregate, not less than twenty-five percent
(25%) of the stock of this Association, may call a special meeting of
shareholders at any time. Unless otherwise provided by the bylaws or the laws
of the United States, or waived by shareholders, a notice of the time, place,
and purpose of every annual and special meeting of the shareholders shall be
given by first-class mail, postage prepaid, mailed at least ten, and no more
than sixty, days prior to the date of the meeting to each shareholder of record
at his/her address as shown upon the books of this Association. Unless
otherwise provided by these Articles of Association or the bylaws, any action
requiring approval of shareholders must be effected at a duly called annual or
special meeting.
TENTH. Any action required to be taken at a meeting of the
shareholders or directors or any action that may be taken at a meeting of the
shareholders or directors may be taken without a meeting if consent in writing,
setting forth the action as taken shall be signed by all the shareholders or
directors entitled to vote with respect to the matter thereof. Such action
shall be effective on the date on which the last signature is placed on the
writing, or such earlier date as is set forth therein.
ELEVENTH. Meetings of the board of directors or shareholders, regular
or special, may be held by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can simultaneously hear each other, and participation in such meeting by
such aforementioned means shall constitute presence in person at such meeting.
TWELFTH. (a) Any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than any action
by or in the right of the Association) by reason of the fact that he is or was a
director, officer, employee or agent of the Association, or is or was serving at
the request of the Association as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified by the Association, unless similar indemnification is
provided by such other corporation, partnership, joint venture, trust or other
enterprise (any funds received by any person as a result of the provisions of
this Article being deemed an advance against his receipt of any such other
indemnification from any such other corporation, partnership, joint venture,
trust or other enterprise), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interest of the Association, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction
-5-
<PAGE>
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
---- ----------
create a presumption that the person seeking indemnification did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interest of the Association, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) Any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
Association to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the Association, or
is or was serving at the request of the Association as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other corporation, partnership, joint venture, trust or other enterprise shall
be indemnified by the Association, unless similar indemnification is provided by
such other corporation, partnership, joint venture, trust or other enterprise
(any funds received by any person as a result of the provisions of this Article
being deemed an advance against his receipt of any such other indemnification
from any such other corporation, partnership, joint venture, trust or other
enterprise), against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Association and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Association
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
of the circumstances of the case, such person is fairly and reasonably entitled
to indemnify for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Association has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, such person shall be indemnified by the
Association against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
(d) Except as set forth in paragraph (c) of this Article, any
indemnification under paragraphs (a) and (b) of this Article (unless ordered by
the court), shall be made by the Association only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in paragraphs (a) and (b) of this
Article. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding,
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<PAGE>
even though less than a quorum, or (2) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion, or
(3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the Association in advance of the final disposition
of such action, suit or proceeding upon receipt of any undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Association.
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification or seeking advancement of expenses may be entitled under any by-
law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in an official capacity and as to action in another capacity
while holding such office.
(g) By action of the Board of Directors, notwithstanding any interest of
the directors in the action, the Association may purchase and maintain
insurance, in such amounts as the Board of Directors deems appropriate, on
behalf of any person who is or was a director, officer, employee or agent of the
Association, or is or was serving at the request of the Association as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Association shall have the power to indemnify him against
such liability under the provisions of this Article.
(h) For purpose of this Article, references to "the Association" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this Article with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; reference to "fines" shall include any excise
taxes assessed on
-7-
<PAGE>
a person with respect to an employee benefit plan; and references to "serving at
the request of the Association" shall include any service as a director,
officer, employee or agent of the Association which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Association" as referred to in this Article.
(j) The indemnification and advancement of expenses hereby provided shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
THIRTEENTH. These Articles of Association may be amended at any
regular or special meeting of the shareholders by the affirmative vote of the
holders of a majority of the stock of this Association, unless the vote of the
holders of a greater amount of stock is required by law, and in that case by the
vote of the holders of such greater amount. This Association's board of
directors may propose one or more amendments to these Articles of Association
for submission to the shareholders.
-8-
<PAGE>
EXHIBIT 4
U.S. BANK TRUST NATIONAL ASSOCIATION
BYLAWS
------
AS LAST AMENDED ON MARCH 30, 1998
---------------------------------
ARTICLE I
----------
Meetings of Shareholders
------------------------
Section 1.1. Annual Meeting. The annual meeting of the shareholders, for
--------------
the election of directors and the transaction of other business, shall be held
at a time and place as the Chairman or President may designate. Notice of such
meeting shall be given at least ten days prior to the date thereof, to each
shareholder of the Association. If, for any reason, an election of directors is
not made on the designated day, the election shall be held on some subsequent
day, as soon thereafter as practicable, with prior notice thereof.
Section 1.2. Special Meetings. Except as otherwise specially provided by
----------------
law, special meetings of the shareholders may be called for any purpose, at any
time by a majority of the board of directors, or by any shareholder or group of
shareholders owning at least ten percent of the outstanding stock. Every such
special meeting, unless otherwise provided by law, shall be called upon not less
than ten days prior notice stating the purpose of the meeting.
Section 1.3. Nominations for Directors. Nominations for election to the
-------------------------
board of directors may be made by the board of directors or by any shareholder.
Section 1.4. Proxies. Shareholders may vote at any meeting of the
-------
shareholders by proxies duly authorized in writing. Proxies shall be valid only
for one meeting and any adjournments of such meeting and shall be filed with the
records of the meeting.
Section 1.5. Quorum. A majority of the outstanding capital stock,
------
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law. A majority of the votes cast
shall decide every question or matter submitted to the shareholders at any
meeting, unless otherwise provided by law or by the Articles of Association.
ARTICLE II
-----------
Directors
---------
Section 2.1. Board of Directors. The board of directors (hereinafter
------------------
referred to as the "board"), shall have power to manage and administer the
business and affairs of the Association. All authorized corporate powers of the
Association shall be vested in and may be exercised by the board.
Section 2.2. Powers. In addition to the foregoing, the board of directors
------
shall have and may exercise all of the powers granted to or conferred upon it by
the Articles of Association, the Bylaws and by law.
-1-
<PAGE>
Section 2.3. Number. The board shall consist of a number of members to be
------
fixed and determined from time to time by resolution of the board or the
shareholders at any meeting thereof, in accordance with the Articles of
Association.
Section 2.4. Organization Meeting. The newly elected board shall meet for
--------------------
the purpose of organizing the new board and electing and appointing such
officers of the Association as may be appropriate. Such meeting shall be held on
the day of the election or as soon thereafter as practicable, and, in any event,
within thirty days thereafter. If, at the time fixed for such meeting, there
shall not be a quorum present, the directors present may adjourn the meeting
until a quorum is obtained.
Section 2.5. Regular Meetings. The regular meetings of the board shall be
----------------
held, without notice, as the Chairman or President may designate and deem
suitable.
Section 2.6. Special Meetings. Special meetings of the board may be called
----------------
by the Chairman or the President of the Association, or at the request of two or
more directors. Each member of the board shall be given notice stating the time
and place of each such meeting.
Section 2.7. Quorum. A majority of the directors shall constitute a quorum
------
at any meeting, except when otherwise provided by law; but fewer may adjourn any
meeting. Unless otherwise provided, once a quorum is established, any act by a
majority of those constituting the quorum shall be the act of the board.
Section 2.8. Vacancies. When any vacancy occurs among the directors, the
---------
remaining members of the board may appoint a director to fill such vacancy at
any regular meeting of the board, or at a special meeting called for that
purpose.
ARTICLE III
------------
Committees
----------
Section 3.1. Advisory Board of Directors. The board may appoint persons,
---------------------------
who need not be directors, to serve as advisory directors on an advisory board
of directors established with respect to the business affairs of either this
Association alone or the business affairs of a group of affiliated organizations
of which this Association is one. Advisory directors shall have such powers and
duties as may be determined by the board, provided, that the board's
responsibility for the business and affairs of this Association shall in no
respect be delegated or diminished.
Section 3.2. Audit Committee. The board shall appoint an Audit Committee
---------------
which shall consist of at least two Directors of the Association or of an
affiliate of the Association. If legally permissible, the board may determine
to name itself as the Audit Committee. The Audit Committee shall direct and
review audits of the Association's fiduciary activities.
The members of the Audit Committee shall be appointed each year and shall
continue to act until their successors are named. The Audit Committee shall have
power to adopt its own rules and procedures and to do those things which in the
judgment of such Committee are
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<PAGE>
necessary or helpful with respect to the exercise of its functions or the
satisfaction of its responsibilities.
Section 3.3. Executive Committee. The board may appoint an Executive
-------------------
Committee which shall consist of at least three directors and which shall have,
and may exercise, all the powers of the board between meetings of the board or
otherwise when the board is not meeting.
Section 3.4. Other Committees. The board may appoint, from time to time,
----------------
committees of one or more persons who need not be directors, for such purposes
and with such powers as the board may determine. In addition, either the
Chairman or the President may appoint, from time to time, committees of one or
more officers, employees, agents or other persons, for such purposes and with
such powers as either the Chairman or the President deems appropriate and
proper.
Whether appointed by the board, the Chairman, or the President, any such
Committee shall at all times be subject to the direction and control of the
board.
Section 3.5. Meeting Minutes and Rules. An advisory board of directors
-------------------------
and/or committee shall meet as necessary in consideration of the purpose of the
advisory board of directors or committee, and shall maintain minutes in
sufficient detail to indicate actions taken or recommendations made; unless
required by the members, discussions, votes or other specific details need not
be reported. An advisory board of directors or a committee may, in consideration
of its purpose, adopt its own rules for the exercise of any of its functions or
authority.
ARTICLE IV
-----------
Officers and Employees
----------------------
Section 4.1. Chairman of the Board. The board may appoint one of its
---------------------
members to be Chairman of the board to serve at the pleasure of the board. The
Chairman shall supervise the carrying out of the policies adopted or approved by
the board; shall have general executive powers, as well as the specific powers
conferred by these Bylaws; shall also have and may exercise such powers and
duties as from time to time may be conferred upon or assigned by the board.
Section 4.2. President. The board may appoint one of its members to be
---------
President of the Association. In the absence of the Chairman, the President
shall preside at any meeting of the board. The President shall have general
executive powers, and shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the Office of President, or
imposed by these Bylaws. The President shall also have and may exercise such
powers and duties as from time to time may be conferred or assigned by the
board.
Section 4.3. Vice President. The board may appoint one or more Vice
--------------
Presidents who shall have such powers and duties as may be assigned by the board
and to perform the duties of the President on those occasions when the President
is absent, including presiding at any meeting of the board in the absence of
both the Chairman and President.
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<PAGE>
Section 4.4. Secretary. The board shall appoint a Secretary, or other
---------
designated officer who shall be Secretary of the board and of the Association,
and shall keep accurate minutes of all meetings. The Secretary shall attend to
the giving of all notices required by these Bylaws to be given; shall be
custodian of the corporate seal, records, document and papers of the
Association; shall provide for the keeping of proper records of all transactions
of the Association; shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the Secretary, or imposed
by these Bylaws; and shall also perform such other duties as may be assigned
from time to time by the board.
Section 4.5. Other Officers. The board may appoint, and may authorize the
--------------
Chairman or the President to appoint, any officer as from time to time may
appear to the board, the Chairman or the President to be required or desirable
to transact the business of the Association. Such officers shall exercise such
powers and perform such duties as pertain to their several offices, or as may be
conferred upon or assigned to them by these Bylaws, the board, the Chairman or
the President.
Section 4.6. Tenure of Office. The Chairman or the President and all other
----------------
officers shall hold office for the current year for which the board was elected,
unless they shall resign, become disqualified, or be removed. Any vacancy
occurring in the Office of Chairman or President shall be filled promptly by the
board.
Any officer elected by the board or appointed by the Chairman or the
President may be removed at any time, with or without cause, by the affirmative
vote of a majority of the board or, if such officer was appointed by the
Chairman or the President, by the Chairman or the President, respectively.
ARTICLE V
----------
Stock
-----
Section 5.1. Shares of stock shall be transferable on the books of the
Association, and a transfer book shall be kept in which all transfers of stock
shall be recorded. Every person becoming a shareholder by such transfer shall,
in proportion to such person's shares, succeed to all rights of the prior holder
of such shares. Each certificate of stock shall recite on its face that the
stock represented thereby is transferable only upon the books of the Association
properly endorsed.
ARTICLE VI
-----------
Corporate Seal
--------------
Section 6.1. The Association shall have no corporate seal; provided,
however, that if the use of a seal is required by, or is otherwise convenient or
advisable pursuant to, the laws or regulations of any jurisdiction, the
following seal may be used, and the Chairman, the President, the Secretary and
any Assistant Secretary shall have the authority to affix such seal:
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<PAGE>
ARTICLE VII
------------
Miscellaneous Provisions
------------------------
Section 7.1. Execution of Instruments. All agreements, checks, drafts,
------------------------
orders, indentures, notes, mortgages, deeds, conveyances, transfers,
endorsements, assignments, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, guarantees, proxies and other instruments or
documents may be signed, countersigned, executed, acknowledged, endorsed,
verified, delivered or accepted on behalf of the Association, whether in a
fiduciary capacity or otherwise, by any officer of the Association, or such
employee or agent as may be designated from time to time by the board by
resolution, or by the Chairman or the President by written instrument, which
resolution or instrument shall be certified as in effect by the Secretary or an
Assistant Secretary of the Association. The provisions of this section are
supplementary to any other provision of the Articles of Association or Bylaws.
Section 7.2. Records. The Articles of Association, the Bylaws and the
-------
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for the purpose. The minutes or each meeting shall be signed by the Secretary,
or other officer appointed to act as Secretary of the meeting.
Section 7.3. Trust Files. There shall be maintained in the Association
-----------
files all fiduciary records necessary to assure that its fiduciary
responsibilities have been properly undertaken and discharged.
Section 7.4. Trust Investments. Funds held in a fiduciary capacity shall
-----------------
be invested according to the instrument establishing the fiduciary relationship
and according to law. Where such instrument does not specify the character and
class of investments to be made and does not vest in the Association a
discretion in the matter, funds held pursuant to such instrument shall be
invested in investments in which corporate fiduciaries may invest under law.
Section 7.5. Notice. Whenever notice is required by the Articles of
------
Association, the Bylaws or law, such notice shall be by mail, postage prepaid,
telegram, in person, or by any other means by which such notice can reasonably
be expected to be received, using the address of the person to receive such
notice, or such other personal data, as may appear on the records of the
Association. Prior notice shall be proper if given not more than 30 days nor
less than 10 days prior to the event for which notice is given.
ARTICLE VIII
-------------
Indemnification
---------------
Section 8.1. The Association shall indemnify to the full extent permitted
by, and in the manner permissible under, the Articles of Association and the
laws of the United States of America, as applicable and as amended from time to
time, any person made, or threatened to be made, a party to any action, suit or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that such person is or was a director, advisory director, officer
-5-
<PAGE>
or employee of the Association, or any predecessor of the Association, or served
any other enterprise as a director or officer at the request of the Association
or any predecessor of the Association.
Section 8.2. The board in its discretion may, on behalf of the
Association, indemnify any person, other than a director, advisory director,
officer or employee, made a party to any action, suit or proceeding by reason of
the fact that such person is or was an agent of the Association or any
predecessor of the Association serving in such capacity at the request of the
Association or any predecessor of the Association.
ARTICLE IX
-----------
Interpretation and Amendment
----------------------------
Section 9.1. These Bylaws shall be interpreted in accordance with and
subject to appropriate provisions of law, and may be amended, altered or
repealed, at any regular or special meeting of the board.
Section 9.2. A copy of the Bylaws, with all amendments, shall at all times
be kept in a convenient place at the main office of the Association, and shall
be open for inspection to all shareholders during Association hours.
-6-
<PAGE>
EXHIBIT 7
First Trust National Association Call Date: 12/31/97 ST-BK: 17-1638
400 North Michigan Avenue Vendor ID: D CERT: 34094
Chicago, IL 60611
Transit Number: 09600069
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for December 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC - Balance Sheet
<TABLE>
<CAPTION>
C200 -
Dollar Amounts in Thousands
- - - - - - - - - - - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCON
----
a. Noninterest-bearing balances and currency and coin (1)......................... 0081 55,536 1.a
b. Interest-bearing balances (2) ................................................. 0071 0 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)..................... 1754 0 2.a
b. Available-for-sale securities (from Schedule RC-B, column D)................... 1773 3,216 2.b
3. Federal funds sold and securities purchased under agreements to resell.............. 1350 0 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income RCON
----
(from Schedule RC-C)........................................................... 2122 0 4.a
b. LESS: Allowance for loan and lease losses...................................... 3123 0 4.b
c. LESS: Allocated transfer risk reserve.......................................... 3128 0 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c)............................ 2125 0 4.d
5. Trading assets...................................................................... 3545 0 5.
6. Premises and fixed assets (including capitalized leases)............................ 2145 95 6.
7. Other real estate owned (from Schedule RC-M)........................................ 2150 0 7.
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M)...................................................................... 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding........................ 2155 0 9.
10. Intangible assets (from Schedule RC-H).............................................. 2143 48,072 10.
11. Other assets (from Schedule RC-F)................................................... 2160 2,435 11.
12. Total assets (sum of items 1 through 11)............................................ 2170 109,354 12.
</TABLE>
________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
First National Association
400 North Michigan Avenue
Chicago, IL 60611 Vendor ID: D CERT: 34094
Transit Number: 09600069
Schedule RC - Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- - - - - - - - - - - --------------------------------------------------------------------------------------------------------------------
LIABILITIES
<S> <C> <C> <C>
13. Deposits
a. In domestic offices (sum of totals of RCON
----
columns A and C from Schedule RC-?)........................................ 2200 0 13.a
RCON
----
(1) Noninterest-bearing................................................... 6631 0 13.a.1
(2) Interest-bearing...................................................... 6636 0 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and ???
(1) Noninterest-bearing...................................................
(2) Interest-bearing......................................................
14. Federal funds purchased and securities sold under agreements to repurchase...... 2800 0 14.
15. a. Demand notes issued to the U.S. Treasury................................... 2840 0 15.a
b. Trading liabilities........................................................ 3548 0 15.b
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less.............................. 2332 0 16.a
b. With a remaining maturity of more than one year through three years........ A567 0 16.b
c. With a remaining maturity of more than three years......................... A548 0 16.c
17. Not applicable
18. Bank's liability on acceptances executed and outstanding........................ 2920 0 18.
19. Subordinated notes and debentures (2)........................................... 3200 0 19.
20. Other liabilities (from Schedule RC-G).......................................... 2930 2,072 20.
21. Total liabilities (sum of items 13 through 20).................................. 2948 2,072 21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus................................... 3838 0 23.
24. Common stock.................................................................... 3230 1,000 24.
25. Surplus (exclude all surplus related to preferred stock)........................ 3839 106,712 25.
26. a. Undivided profits and capital reserves..................................... 3632 (430) 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities..... 8434 0 26.b
27. Cumulative foreign currency translation adjustments.............................
28. Total equity capital (sum of items 23 through 27)............................... 3210 107,282 28.
29. Total liabilities and equity capital (sum of items 21 and 28)................... 3300 109,354 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed for
the bank by independent external auditors as of any date during 1996........... 6724 N/A M.1
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
_______________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited life preferred stock and related surplus.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001057053
<NAME> PEI HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 455
<SECURITIES> 0
<RECEIVABLES> 28,138
<ALLOWANCES> 1,812
<INVENTORY> 24,687
<CURRENT-ASSETS> 55,659
<PP&E> 46,348
<DEPRECIATION> 20,169
<TOTAL-ASSETS> 88,685
<CURRENT-LIABILITIES> 28,267
<BONDS> 38,734
0
0
<COMMON> 2
<OTHER-SE> 19,862
<TOTAL-LIABILITY-AND-EQUITY> 88,685
<SALES> 171,700
<TOTAL-REVENUES> 171,700
<CGS> 137,792
<TOTAL-COSTS> 137,792
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,384
<INCOME-PRETAX> 5,126
<INCOME-TAX> 2,303
<INCOME-CONTINUING> 2,823
<DISCONTINUED> (1,673)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,150
<EPS-PRIMARY> 6.67
<EPS-DILUTED> 6.34
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR TENDERS OF
$125,000,000 AGGREGATE PRINCIPAL AMOUNT OF
9 5/8% SENIOR NOTES DUE 2008
OF
PRESTOLITE ELECTRIC INCORPORATED
FULLY AND UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS BY PEI HOLDING, INC.
PURSUANT TO THE PROSPECTUS DATED , 1998
OF PRESTOLITE ELECTRIC INCORPORATED
--------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE") UNLESS THE EXCHANGE
OFFER IS EXTENDED (BUT IN NO EVENT TO A DATE LATER THAN , 1998).
TENDERED SECURITIES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
TO: U.S. BANK TRUST NATIONAL ASSOCIATION, EXCHANGE AGENT
By Facsimile: By Mail:
U.S. Bank Trust National Association
U.S. Bank Trust National Association P.O. Box 64485
(612) 244-1537 St. Paul, Minnesota 55164-9549
Attention: Melina Black (SPFT0414) Attention: Specialized Finance
Confirm by Telephone to: (SPFT0414)
(612) 244-8161
By Hand Before 5:00 p.m. By Overnight Courier and by
(New York Time): Registered/Certified Mail:
U.S. Bank Trust National Association
100 Wall Street U.S. Bank Trust National Association
20th Floor 180 East Fifth Street
New York, NY 10005 St. Paul, Minnesota 55101
Attention: Specialized Finance
(SPFT0414)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER
OF TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES FOR THEIR
OUTSTANDING NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT
WITHDRAW) THEIR OUTSTANDING NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION
DATE.
The undersigned acknowledges that it has received and reviewed the Prospectus
dated , 1998 (the "Prospectus"), of Prestolite Electric Incorporated
(the "Issuer"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together constitute the Issuer's offer (the "Exchange Offer") to exchange
an aggregate principal amount of up to $125,000,000 of its 9 5/8% Senior Notes
Due 2008 (the "Exchange Notes"), for a like principal amount of the Issuer's
issued and outstanding 9 5/8% Senior Notes Due 2008 (the "Outstanding Notes").
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Issuer, in its sole discretion, extends the Exchange Offer
(but in no event to a date later than , 1998). The Issuer reserves the right,
at any time or from time to time, to extend the period of time during which the
Exchange Offer is open at its sole discretion, in which event the term
"Expiration Date" shall mean the time and date when the Exchange Offer as so
extended shall expire. During any such extension, all Outstanding Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Issuer. Any Outstanding Notes not accepted for
exchange for any reason will be returned without expense to the tendering
holder thereof as promptly as practicable after the expiration or termination
of the Exchange Offer.
<PAGE>
The Issuer expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Outstanding Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified in the Prospectus under the section entitled "The
Exchange Offer--Certain Conditions to the Exchange Offer."
The Issuer shall notify the holders of the Outstanding Notes of any
extension, amendment, non-acceptance or termination by means of a press
release or other public announcement not later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
The Exchange Notes will bear interest from the last interest payment date on
which interest was paid on the Outstanding Notes surrendered in exchange
therefor or, if no interest has been paid on such Outstanding Notes, from the
date of original issue of the Outstanding Notes at the same rate and upon the
same terms as the Outstanding Notes. Holders whose Outstanding Notes are
accepted for exchange will not receive interest on such Outstanding Notes for
any period subsequent to the last interest payment date, if any, of the
Outstanding Notes to occur prior to the issue date of the Exchange Notes and
will be deemed to have waived the right to receive any payment in respect of
interest on the Outstanding Notes accrued from and after such interest payment
date or, if no interest has been paid, from January 22, 1998.
The Exchange Offer is not conditioned upon any minimum principal amount of
Outstanding Notes being tendered for exchange. However, the Exchange Offer is
subject to certain conditions. Please see the Prospectus under the section
entitled "The Exchange Offer--Certain Conditions to the Exchange Offer."
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Outstanding Notes in any jurisdiction in which the
making or acceptance of the Exchange Offer would not be in compliance with the
laws of such jurisdiction.
This Letter of Transmittal is to be completed by a holder of Outstanding
Notes either if certificates are to be forwarded herewith or if a tender of
certificates for Outstanding Notes, if available, is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in "The Exchange Offer--Procedures for Tendering Outstanding Notes"
section of the Prospectus. Holders of Outstanding Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry
Confirmation") and deliver all other documents required by this Letter of
Transmittal to the Exchange Agent on or prior to the Expiration Date, may
tender their Outstanding Notes according to the guaranteed delivery procedures
set forth in the Prospectus under the section entitled "The Exchange Offer--
Guaranteed Delivery Procedures."
Holders who wish to tender their Outstanding Notes must complete this Letter
of Transmittal in its entirety.
2
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the certificate numbers
and principal amount of Outstanding Notes should be listed on a separate
signed schedule affixed hereto.
DESCRIPTION OF OUTSTANDING NOTES
(SEE INSTRUCTIONS 2, 3 AND 8)
<TABLE>
<CAPTION>
- - - - - - - - - - - ------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) OUTSTANDING NOTE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- - - - - - - - - - - ------------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES AGGREGATE PRINCIPAL AMOUNT OF
AND CERTIFICATE PRINCIPAL AMOUNT OUTSTANDING NOTES
NUMBER(S)(1) OF OUTSTANDING NOTE TENDERED(2)
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
<S> <C> <C> <C>
TOTAL
- - - - - - - - - - - ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certificate numbers not required if Outstanding Notes are being
tendered by book-entry transfer.
(2) Unless otherwise indicated in this column, a holder will be deemed to
have tendered the entire principal amount represented by the
Outstanding Note indicated in column 2. Outstanding Notes tendered
hereby must be in denominations of $1,000 or integral multiples
thereof. See Instruction 1.
[_]CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ______________________
Account Number: _____________________________________
Transaction Code Number: ____________________________
[_]CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): ____________________
Window Ticket Number (if any): ______________________
Date of Execution of Notice of Guaranteed Delivery: _
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _______________________________________________
Address: ____________________________________________
______________________________________________
______________________________________________
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE
ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuer the aggregate principal amount of
Outstanding Notes indicated above. The undersigned has completed, executed and
delivered this Letter of Transmittal to indicate the action the undersigned
desires to take with respect to the Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the
Outstanding Notes tendered hereby, the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest
in and to such Outstanding Notes as are being tendered hereby. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent its agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts as the
agent of the Issuer with respect to the tendered Outstanding Notes) with full
power of substitution to (i) deliver certificates for such Outstanding Notes
to the Issuer and deliver all accompanying evidences of transfer and
authenticity to, or upon the order of, the Issuer, (ii) present such
Outstanding Notes for transfer on the books of the Issuer and (iii) receive
for the account of the Issuer all benefits and otherwise exercise all rights
of the beneficial ownership of such Outstanding Notes, all in accordance with
the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Outstanding Notes
tendered hereby and that the Issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim when the same are accepted by the Issuer.
The undersigned hereby further represents that (i) any Exchange Notes acquired
in exchange for Outstanding Notes tendered hereby will have been acquired in
the ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is the undersigned, (ii) neither the holder nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and (iii) neither the
holder nor any such other person is an "affiliate", as described in Rule 405
under the Securities Act of 1933, as amended (the "Securities Act"), of the
Issuer or PEI Holding, Inc. ("PEI").
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of the
Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Outstanding Notes, it
represents that the Outstanding Notes to be exchanged for Exchange Notes were
acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes pursuant to the Exchange Offer; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the assignment, transfer and sale of the Outstanding
Notes tendered hereby. All authority conferred or agreed to be conferred in
this Letter of Transmittal and every obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in the instructions contained in this Letter of
Transmittal.
For the purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Outstanding Notes when, as and if the Issuer has
given oral or written notice thereof to the Exchange Agent.
If any tendered Outstanding Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted
Outstanding Notes will be returned (or, in the case of Outstanding Notes
tendered by book-entry transfer through the Book-Entry Transfer Facility, will
be credited to an account maintained at the Book-Entry Transfer Facility),
without expense, to the undersigned at the address shown below or at a
different address as may be indicated herein under the "Special Delivery
Instructions" as promptly as practicable after the Expiration Date.
4
<PAGE>
The undersigned understands that tenders of Outstanding Notes pursuant to
the procedures described under the section entitled "The Exchange Offer--
Procedures for Tendering Outstanding Notes" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the conditions of the
Exchange Offer.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Outstanding Notes for any Outstanding
Notes not exchanged) in the name(s) of the undersigned or, in the case of a
book-entry delivery of Outstanding Notes, please credit the account indicated
above maintained at the Book-Entry Transfer Facility. Similarly, unless
otherwise indicated under the box entitled "Special Delivery Instructions"
below, please send the Exchange Notes (and, if applicable, substitute
certificates representing Outstanding Notes for any Outstanding Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Outstanding Notes." In the event that both "Special Issuance
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the Exchange Notes issued in exchange for the
Outstanding Notes accepted for exchange in the name(s) of, and return any
certificates for Outstanding Notes not tendered or not exchanged to, the
person(s) so indicated. The undersigned understands that the Issuer has no
obligation pursuant to the "Special Issuance Instructions" and "Special
Delivery Instructions" to transfer any Outstanding Notes from the name of the
registered holder(s) thereof if the Issuer does not accept for exchange any of
the Outstanding Notes so tendered.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING
NOTES" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE OUTSTANDING NOTES AS SET FORTH IN SUCH BOX ABOVE.
5
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
, 1998
------------------------------------------------- ---------------------
, 1998
------------------------------------------------- ---------------------
, 1998
------------------------------------------------- ---------------------
SIGNATURE(S) OF OWNER(S) DATE
If a holder is tendering any Outstanding Notes, this Letter of Transmittal
must be signed by the registered holder(s) as the name(s) appear(s) on the
certificates for the Outstanding Note(s) or on a security position listing or
by any person(s) authorized to become registered holder(s) by endorsements
and documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 4.
Name(s):______________________________________________________________________
______________________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity:_____________________________________________________________________
Address:______________________________________________________________________
______________________________________________________________________
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 4)
Signature(s) Guaranteed by
an Eligible Institution: _____________________________________________________
(AUTHORIZED SIGNATURE)
______________________________________________________________
(TITLE)
______________________________________________________________
(NAME OF FIRM)
Dated: ___________________________, 1998
6
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5) (SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cates for Outstanding Notes not cates for Outstanding Notes not
exchanged and/or Exchange Notes exchanged and/or Exchange Notes
are to be issued in the name of are to be sent to someone other
and sent to someone other than than the person or persons whose
the person or person(s) whose signature(s) appear(s) on this
signature(s) appear(s) on this Letter of Transmittal above or to
Letter of Transmittal above, or such person or persons at an ad-
if Outstanding Notes delivered by dress other than shown in the box
book-entry transfer which are not entitled "Description of Out-
accepted for exchange are to be standing Notes" on this Letter of
returned by credit to an account Transmittal above.
maintained at the Book-Entry
Transfer Facility other than the
account indicated above.
Mail Exchange Notes and/or Out-
standing Notes to:
Issue Exchange Notes and/or Out- Name(s)___________________________
standing Notes to: (PLEASE TYPE OR PRINT)
__________________________________
Name(s) __________________________ (PLEASE TYPE OR PRINT)
(PLEASE TYPE OR PRINT)
__________________________________ Address __________________________
(PLEASE TYPE OR PRINT)
__________________________________
Address __________________________ (INCLUDING ZIP CODE)
__________________________________
(INCLUDING ZIP CODE)
(Complete accompanying Substi-
tute Form W-9)
Credit unexchanged Outstanding
Notes delivered by book-entry
transfer to the Book-Entry Trans-
fer Facility account set forth
below:
__________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING ANY BOX ABOVE.
THIS LETTER OF TRANSMITTAL MUST BE USED TO FORWARD, AND MUST ACCOMPANY, ALL
CERTIFICATES FOR OUTSTANDING NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER.
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates. This Letter of
Transmittal is to be completed by holders if certificates are to be forwarded
herewith or if tenders are to be made pursuant to the procedures for delivery
by book-entry transfer set forth in "The Exchange Offer--Procedures for
Tendering Outstanding Notes" section of the Prospectus. Certificates for all
physically tendered Outstanding Notes, or Book-Entry Confirmation, as the case
may be, as well as a properly completed and duly executed Letter of
Transmittal (or a copy hereof) and any other documents required by this Letter
of Transmittal, must be received by the Exchange Agent at the address set
forth herein on or prior to the Expiration Date, or the tendering holder must
comply with the guaranteed delivery procedures set forth below. Outstanding
Notes tendered hereby must be in denominations of $1,000 or integral multiples
thereof.
The method of delivery of this Letter of Transmittal, the Outstanding Notes
and all other required documents is at the election and risk of the tendering
holders, but the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If Outstanding Notes are sent by mail, it is
suggested that the mailing be made sufficiently in advance of the Expiration
Date to permit delivery to the Exchange Agent prior to the Expiration Date. NO
LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE ISSUER.
Holders who wish to tender their Outstanding Notes and (i) whose Outstanding
Notes are not immediately available, (ii) cannot deliver their Outstanding
Notes, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date or (iii) who cannot comply
with the procedures for book entry tender on a timely basis must tender their
Outstanding Notes according to the guaranteed delivery procedures set forth in
the Prospectus. Pursuant to such procedures: (x) such tender must be made
through an Eligible Institution (as defined below); (y) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by mail, courier or hand delivery or transmitted via facsimile)
setting forth the name and address of the holder, the certificate number(s) of
the Outstanding Notes to be tendered (except in the case of book-entry
tenders) and the principal amount of Outstanding Notes to be tendered, stating
that the tender is being made thereby and guaranteeing that, within three NYSE
(as defined in the Prospectus) trading days after the Expiration Date, this
Letter of Transmittal (or a copy hereof) together with the certificate(s)
representing the Outstanding Notes (except in the case of book-entry
tender(s)) and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (z) such properly completed and
executed Letter of Transmittal (or a copy thereof), as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all tendered Outstanding Notes (except in the case of book-entry
tender(s)) in proper form for transfer or a Book-Entry Confirmation with
respect to such Outstanding Notes, must be received by the Exchange Agent
within three NYSE trading days after the Expiration Date, all as provided in
the Prospectus under the section entitled "The Exchange Offer--Guaranteed
Delivery Procedures." Any holder who wishes to tender its Outstanding Notes
pursuant to the guaranteed delivery procedures described above must ensure
that the Exchange Agent receives the Notice of Guaranteed Delivery prior to
the Expiration Date. As used in this Letter of Transmittal, "Eligible
Institution" shall mean a firm which is a member 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.
All questions as to the validity, eligibility (including time of receipt),
acceptance and withdrawal of tendered Outstanding Notes will be determined by
the Issuer in its sole discretion, which determination will be final and
binding. The Issuer reserves the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Issuer's
acceptance of which would, in the opinion of counsel for the Issuer, be
unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Outstanding Notes. The
Issuer's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
the Issuer shall determine. Neither the Issuer, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Outstanding Notes, nor shall any of
them incur any liability for failure to give such notification. Tenders of
Outstanding Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Outstanding Notes received by
the Exchange Agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned by
8
<PAGE>
the Exchange Agent to the tendering holders, unless otherwise provided in this
Letter of Transmittal, as soon as practicable following the Expiration Date.
See "The Exchange Offer" in the Prospectus.
2. Tender by Holder. Only a registered holder of Outstanding Notes may
tender such Outstanding Notes in the Exchange Offer. Any beneficial owner
whose Outstanding Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on behalf of such beneficial owner. If such beneficial owner
wishes to tender on such owner's own behalf, such owner must, prior to
completing and executing this Letter of Transmittal and delivering such
owner's Outstanding Notes, either make appropriate arrangements to register
ownership of the Outstanding Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
3. Partial Tenders and Withdrawals. Tenders of Outstanding Notes will be
accepted only in denominations of $1,000 and integral multiples thereof. If
less than all of the Outstanding Notes represented by a certificate or owned
by a holder are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount of Outstanding Notes to be tendered in the box
above entitled "Description of Outstanding Notes--Principal Amount of
Outstanding Notes Tendered." A reissued certificate representing the balance
of non-tendered Outstanding Notes will be sent to such tendering holder
(except in the case of book-entry tenders), unless otherwise provided in the
appropriate box on this Letter of Transmittal, promptly after the Expiration
Date. All of the Outstanding Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
Any holder who has tendered Outstanding Notes may withdraw the tender by
delivering written notice of withdrawal to the Exchange Agent prior to the
Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent at its address set forth on
the first page of this Letter of Transmittal. Any such notice of withdrawal
must (i) specify the name of the person having deposited the Outstanding Notes
to be withdrawn (the "Depositor"); (ii) identify the Outstanding Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Outstanding Notes (except in the case of book-entry tenders)); (iii) be
signed by the holder in the same manner as the original signature on this
Letter of Transmittal by which such Outstanding Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee (as defined in the Prospectus) register the
transfer of such Outstanding Notes into the name of the person withdrawing the
tender, and (iv) specify the name in which any such Outstanding Notes are to
be registered, if different from that of the Depositor. If Outstanding Notes
have been delivered or otherwise identified to the Exchange Agent, the name of
the registered holder and the certificate numbers of the particular
Outstanding Notes withdrawn must also be furnished to the Exchange Agent as
aforesaid prior to the physical release of the withdrawn Outstanding Notes. If
the Outstanding Notes have been tendered pursuant to the procedures for book-
entry tender set forth in the Prospectus, a notice of withdrawal must specify,
in lieu of certificate numbers, the name and account number at the Book-Entry
Transfer Facility to be credited with the withdrawn Outstanding Notes.
Outstanding Notes properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer; provided, however, that withdrawn
Outstanding Notes may be tendered by again following one of the procedures
herein at any time prior to the Expiration Date. All questions as to the
validity, form and eligibility (including time of receipt) of notice of
withdrawal will be determined by the Issuer in its sole discretion, which
determination will be final and binding on all parties. Neither the Issuer,
the Exchange Agent nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification. See "The
Exchange Offer--Withdrawal Rights" in the Prospectus.
4. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signature. If this Letter of Transmittal is signed by the
registered holder of the Outstanding Notes tendered hereby, the signature must
correspond exactly with the name as written on the face of the certificates
(if applicable) without any change whatsoever.
If any tendered Outstanding Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
9
<PAGE>
If any tendered Outstanding Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder or
holders of the Outstanding Notes specified herein and tendered hereby, no
endorsements of certificates or separate bond powers are required. If,
however, the Exchange Notes are to be issued, or any untendered Outstanding
Notes are to be reissued, to a person other than the registered holder, then
endorsements of any certificates transmitted hereby or separate bond powers
are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of any certificate(s) specified herein, such
certificate(s) must be endorsed or accompanied by appropriate bond powers, in
either case signed exactly as the name or names of the registered holder(s)
appear(s) on the certificate(s).
If this Letter of Transmittal or any certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and, unless waived by the
Issuer, proper evidence satisfactory to the Issuer of their authority to so
act must be submitted.
Endorsements on certificates for Outstanding Notes or signatures on bond
powers required by this Instruction 4 must be guaranteed by an Eligible
Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Outstanding Notes are tendered: (i) by a
registered holder of such Outstanding Notes (which term, for purposes of the
Exchange Offer, includes any participant in the Book-Entry Transfer Facility
system whose name appears on a security position listing as the holder of such
Outstanding Notes) who has not completed the box entitled "Special Issuance
Instructions" on this Letter of Transmittal; or (ii) for the account of an
Eligible Institution.
5. Special Issuance and Delivery Instructions. Tendering holders of
Outstanding Notes should indicate in the applicable box the name and address
in or to which Exchange Notes issued pursuant to the Exchange Offer and/or
substitute certificates evidencing Outstanding Notes not exchanged are to be
issued or sent, if different from the name or address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
employer identification or social security number of the person named must
also be indicated. Holders tendering Outstanding Notes by book-entry transfer
may request that Outstanding Notes not exchanged be credited to such account
maintained at the Book-Entry Transfer Facility as such holder may designate
hereon. If no such instructions are given, such Outstanding Notes not
exchanged will be returned to the name or address of the person signing this
Letter of Transmittal.
6. Transfer Taxes. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Outstanding Notes to it or its order pursuant to
the Exchange Offer. If however, Exchange Notes and/or substitute Outstanding
Notes not exchanged are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Outstanding
Notes tendered hereby, or if tendered Outstanding Notes are registered in the
name of any person other than the person signing this Letter of Transmittal,
or if a transfer tax is imposed for any reason other than the transfer of
Outstanding Notes to the Issuer or its order pursuant to the Exchange Offer,
the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes specified in this
Letter of Transmittal.
7. Waiver of Conditions. Subject to the terms and conditions set forth in
the Prospectus, the Issuer reserves the absolute right to waive satisfaction
of any or all conditions enumerated in the Prospectus.
8. No Conditional Tenders. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Outstanding
Notes, by execution of this Letter of Transmittal, shall waive any right to
receive notice of the acceptance of their Outstanding Notes for exchange.
10
<PAGE>
Neither the Issuer nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. Mutilated, Lost, Stolen or Destroyed Outstanding Notes. Any holder whose
Outstanding Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
10. Requests for Assistance or Additional Copies. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange
Agent, at the address indicated on the first page of this Letter of
Transmittal or by telephone at (612) 244-8161.
11
<PAGE>
IMPORTANT TAX INFORMATION
Under U.S. federal income tax laws, a registered holder of Outstanding Notes
or Exchange Notes is required to provide the Trustee (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below or otherwise establish a basis for exemption from backup withholding. If
such holder is an individual, the TIN is his or her social security number. If
the Trustee is not provided with the correct TIN, a $50 penalty may be imposed
by the Internal Revenue Service, and payments made to such holder with respect
to Outstanding Notes or Exchange Notes may be subject to backup withholding.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Trustee a properly completed Internal Revenue Service Form W-8, signed
under penalties of perjury, attesting to that holder's exempt status. A Form
W-8 can be obtained from the Trustee.
If backup withholding applies, the Trustee is required to withhold 31% of
any payments made to the holder or other payee. Backup withholding is not an
additional U.S. federal income tax. Rather, the U.S. federal income tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
Purpose of Substitute Form W-9. To prevent backup withholding on payments
made with respect to Outstanding Notes or Exchange Notes the holder is
required to provide the Trustee with: (i) the holder's correct TIN by
completing the form below, certifying that the TIN provided on Substitute Form
W-9 is correct (or that such holder is awaiting a TIN) and that (A) such
holder is exempt from backup withholding, (B) the holder has not been notified
by the Internal Revenue Service that the holder is subject to backup
withholding as a result of failure to report all interest or dividends or (C)
the Internal Revenue Service has notified the holder that the holder is no
longer subject to backup withholding and (ii) if applicable, an adequate basis
for exemption.
12
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE "IMPORTANT TAX INFORMATION"ABOVE)
PAYER'S NAME: U.S. BANK TRUST NATIONAL ASSOCIATION
- - - - - - - - - - - -------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE SOCIAL SECURITY NUMBER
FORM W-9 YOUR TIN IN THE BOX AT OR EMPLOYER IDENTIFI-
RIGHT AND CERTIFY BY CATION NUMBER
SIGNING AND DATING BELOW.
DEPARTMENT OF THE
TREASURY ----------------------
PART II -- Certification -- PART III -- AWAITING
Under Penalties of TIN [_]
Perjury, I certify that:
INTERNAL REVENUE --------------------------------------------------------
SERVICE
(1) The number shown on
PAYER'S REQUEST FOR this form is my correct
TAXPAYER Taxpayer Identification
IDENTIFICATION NUMBER Number (or I am waiting
(TIN) for a number to be
issued to me) and
(2) I am not subject to
backup withholding
either because I have
not been notified by
the Internal Revenue
Service ("IRS") that I
am subject to backup
withholding as a result
of failure to report
all interest or
dividends, or the IRS
has notified me that I
am no longer subject to
backup withholding.
--------------------------------------------------------
CERTIFICATE INSTRUCTIONS -- You must cross out item
(2) in Part 2 above if you have been notified by the
IRS that you are subject to backup withholding
because of underreporting interest or dividends on
your tax return. However, if after being notified by
the IRS that you were subject to backup withholding
you received another notification from the IRS
stating that you are no longer subject to backup
withholding, do not cross out item (2).
- - - - - - - - - - - -------------------------------------------------------------------------------
SIGNATURE __________________________ DATE _______________________________
- - - - - - - - - - - -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF EXCHANGE NOTES
PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES
FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM
W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
-------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
60 days, 31% of all payments made to me thereafter will be withheld until I
provide a number.
____________________________________ ____________________________________
Signature Date
-------------------------------------------------------------------------------
13
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
9 5/8% SENIOR NOTES DUE 2008
OF
PRESTOLITE ELECTRIC INCORPORATED
FULLY AND UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS BY PEI HOLDING, INC.
As set forth in the Prospectus dated , 1998 (the "Prospectus") of
Prestolite Electric Incorporated (the "Issuer") and in the accompanying Letter
of Transmittal and instructions thereto (the "Letter or Transmittal"), this
form or one substantially equivalent hereto must be used to accept the Issuer's
exchange offer (the "Exchange Offer") to purchase all of its outstanding 9 5/8%
Senior Notes Due 2008 (the "Outstanding Notes") if (i) certificates
representing the Outstanding Notes to be tendered for exchange pursuant to the
Exchange Offer are not lost but are not immediately available, (ii) time will
not permit the Letter of Transmittal, certificates representing such
Outstanding Notes or other required documents to reach the Exchange Agent prior
to the Expiration Date or (iii) the procedures for book-entry transfer cannot
be completed prior to the Expiration Date. This form may be delivered by an
Eligible Institution by mail, courier or hand delivery, or transmitted via
facsimile (receipt confirmed by telephone), to the Exchange Agent as set forth
below. All capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE") UNLESS
THE EXCHANGE OFFER IS EXTENDED (BUT IN NO EVENT TO A DATE LATER
THAN , 1998). TENDERS OF OUTSTANDING NOTES MAY BE WITHDRAWN AT
ANY TIME PRIOR TO 5:00 P.M. NEW YORK CITY TIME ON THE
EXPIRATION DATE.
By Facsimile: By Mail:
U.S. Bank Trust National Association U.S. Bank Trust National Association
(612) 244-1537 P.O. Box 64485
Attention: Melina Black (SPFT0414) St. Paul, Minnesota 55164-9549
Confirm by Telephone to: Attention: Specialized Finance
(612) 244-8161 (SPFT0414)
By Hand Before 5:00 p.m. By Overnight Courier and
(New York Time): by Registered/Certified Mail:
U.S. Bank Trust National Association
20th Floor U.S. Bank Trust National Association
100 Wall Street 180 East Fifth Street
New York, NY 10005 St. Paul, Minnesota 55101
Attention: Specialized Finance
(SPFT0414)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
LADIES AND GENTLEMEN:
The undersigned hereby tender(s) to the Issuer, upon the terms and subject to
the conditions set forth in the Prospectus and the Letter of Transmittal,
receipt of which is hereby acknowledged, the aggregate principal amount of
Outstanding Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer--
Guaranteed Delivery Procedures."
The undersigned understands that tenders of Outstanding Notes will be
accepted only in principal amounts equal to $1,000 or integral multiples
thereof. The undersigned understands that tenders of Outstanding Notes pursuant
to the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time,
on the Expiration Date pursuant to the procedures set forth in the Prospectus
under the caption "The Exchange Offer--Withdrawal Rights."
<PAGE>
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned,
and every obligation of the undersigned under this Notice of Guaranteed
Delivery shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE COMPLETE AND SIGN
SIGNATURE(S) OF REGISTERED HOLDER(S) NAME(S) OF REGISTERED HOLDER(S):
OR AUTHORIZED SIGNATORY: ______________________________________
______________________________________ ______________________________________
______________________________________
______________________________________ ADDRESS:
______________________________________ _______________________________
______________________________________
PRINCIPAL AMOUNT OF OUTSTANDING NOTES
TENDERED: AREA CODE AND TELEPHONE NO.:
______________________________________ ______________________________________
______________________________________
IF OUTSTANDING NOTES WILL BE
DELIVERED BY BOOK-ENTRY TRANSFER AT
THE DEPOSITORY TRUST COMPANY, INSERT
DEPOSITORY TRUST ACCOUNT NO.:
CERTIFICATE NO(S). OF OUTSTANDING NOTES
(IF AVAILABLE):
______________________________________ ______________________________________
______________________________________
DATE:
______________________________________
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Outstanding Notes exactly as its (their) name(s) appear on
certificates for Outstanding Notes or on a security position listing as the
owner of Outstanding Notes, or by person(s) authorized to become registered
holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
NAME(S): ______________________________________________________________________
_______________________________________________________________________________
CAPACITY: _____________________________________________________________________
ADDRESS(ES): __________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
DO NOT SEND OUTSTANDING NOTES WITH THIS FORM. OUTSTANDING NOTES SHOULD BE
SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL.
2
<PAGE>
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or a correspondent in the United
States, hereby (a) represents that each holder of Outstanding Notes on whose
behalf this tender is being made "own(s)" the Outstanding Notes covered hereby
within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as
amended, (b) represents that such tender of Outstanding Notes complies with
such Rule 14e-4, and (c) guarantees that, within three NYSE (as defined in the
Prospectus) trading days after the Expiration Date, a properly completed and
duly executed Letter of Transmittal (or a copy thereof), together with the
certificate(s) representing the Outstanding Notes covered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such
Outstanding Notes into the Exchange Agent's account at The Depository Trust
Company, pursuant to the procedure for book-entry transfer set forth in the
Prospectus) and any other required documents will be deposited by the
undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of Transmittal
and Outstanding Notes tendered hereby to the Exchange Agent within the time
period set forth above and that failure to do so could result in financial
loss to the undersigned.
______________________________________ ______________________________________
NAME OF FIRM AUTHORIZED SIGNATURE
ADDRESS: _____________________________ ______________________________________
______________________________________ NAME
______________________________________ ______________________________________
AREA CODE AND TELEPHONE NO. TITLE
______________________________________
DATE
3
