<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
/ X / Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended October 2, 1999.
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period From
______________to_________________.
Commission file Number 333-49429-01
Prestolite Electric Holding, Inc.
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-3142033
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2100 Commonwealth Blvd., Ste 300, Ann Arbor, Michigan 48105
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(Address of principal executive offices) (Zip Code)
(734) 913 - 6600
----------------
(Registrant's telephone number, including area code)
Not Applicable
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(Former name, address, and former fiscal year, if changed since last report)
Indicate whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
Yes ____X_____ No ____________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Number of common shares outstanding
Class: as of November 1, 1999
Common Stock 1,993,000
Page 1
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FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C>
Part I: Financial Information
Item 1: Condensed Consolidated Balance Sheets 3
at October 2, 1999 (unaudited) and December 31, 1998
Condensed Consolidated Statement of Operations 4
Three and nine months ended October 2, 1999 (unaudited)
and October 3, 1998 (unaudited)
Condensed Consolidated Statements of Cash Flows 5
Nine months ended October 2, 1999 (unaudited)
and October 3, 1998 (unaudited)
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
Part II: Other Information 19
Signatures 20
</TABLE>
Page 2
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Prestolite Electric Holding, Inc. and Subsidiaries
(including Prestolite Electric Incorporated)
Condensed Consolidated Balance Sheet
(in thousands, except share amounts)
<TABLE>
<CAPTION>
October 2, December 31,
1999 1998
-------------- ---------------
<S> <C> <C>
Assets
Current Assets:
Cash $ 832 $ 896
Accounts receivable, net of allowances 51,605 51,352
Inventories, net 55,556 52,082
Deferred tax asset 2,898 2,134
Prepaid and other current assets 2,203 2,286
-------------- ---------------
Total current assets 113,094 108,750
Property, plant and equipment, net 55,981 56,064
Deferred tax asset 1,002 1,002
Investments 4,770 4,996
Intangible assets 10,923 11,528
Long-term receivables, pension assets and assets
of discontinued operations 5,747 5,807
-------------- ---------------
Total assets $ 191,517 $ 188,147
============== ===============
Liabilities
Current Liabilities:
Revolving credit $ 5,660 $ 4,935
Current portion of long-term debt 3,060 2,401
Accounts payable 25,223 26,088
Accrued liabilities 19,108 27,135
-------------- ---------------
Total current liabilities 53,051 60,559
Long-term debt 147,169 133,416
Other non-current liabilities 1,958 3,090
-------------- ---------------
Total liabilities 202,178 197,065
Stockholders' equity
Common stock, par value $.01, 5,000,000 shares 2 2
authorized, 1,993,000 shares issued and outstanding
at October 2, 1999 and December 31, 1998, respectively
Paid-in capital 16,623 16,623
Retained earnings (accumulated deficit) (2,024) (404)
Notes receivable, employees' stock purchase, 7.74% due 2002 (513) (559)
Foreign currency translation adjustment (300) (131)
Treasury stock, 1,310,000 shares on October 2, 1999 and
December 31, 1998, respectively (24,449) (24,449)
-------------- ---------------
Total stockholders' equity (10,661) (8,918)
-------------- ---------------
Total liabilities and stockholders' equity $ 191,517 $ 188,147
============== ===============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Page 3
<PAGE>
Prestolite Electric Holding, Inc. and Subsidiaries
(including Prestolite Electric Incorporated)
Condensed Consolidated Unaudited Statements of Operations
(in thousands except share amounts)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
-------------------------------- --------------------------------
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Sales $ 65,433 $ 70,450 $ 195,952 $ 217,823
Cost of goods sold 52,580 56,198 156,878 174,117
------------- ------------- -------------- --------------
Gross profit 12,853 14,252 39,074 43,706
Selling, general and administrative 9,472 9,732 28,786 29,370
Costs associated with option repurchase - - - 2,101
Restructuring charge - - - 980
------------- ------------- -------------- --------------
Operating income 3,381 4,520 10,288 11,255
Interest expense 4,029 3,425 11,915 9,951
Other expense (income) (201) 47 (1,249) (475)
------------- ------------- -------------- --------------
Income (loss) from continuing operations
before extraordinary loss and income taxes (447) 1,048 (378) 1,779
Loss (benefit) from unconsolidated subsidiaries 44 - 160 -
Provision for income taxes 312 369 1,082 632
------------- ------------- -------------- --------------
Income (loss) from continuing operations (803) 679 (1,620) 1,147
Extraordinary loss, net of taxes of $716 - - - 1,275
for the nine months ended October 3, 1998
------------- ------------- -------------- --------------
Net income (loss) $ (803) $ 679 $ (1,620) $ (128)
============= ============= ============== ==============
Other comprehensive income (expense):
Foreign currency translation adjustment $ 1,899 $ 865 $ (169) $ (62)
------------- ------------- -------------- --------------
Comprehensive income (loss) $ 1,096 $ 1,544 $ (1,789) $ (190)
============= ============= ============== ==============
Basic earnings per common share
Income (loss) from continuing operations $ (0.40) $ 0.34 $ (0.81) $ 0.54
Extraordinary item $ - $ - $ - $ (0.61)
------------- ------------- -------------- --------------
Net income (loss) $ (0.40) $ 0.34 $ (0.81) $ (0.07)
============= ============= ============== ==============
Diluted earnings per common share
Income (loss) from continuing operations $ (0.40) $ 0.32 $ (0.81) $ 0.54
Extraordinary item $ - $ - $ - $ (0.61)
------------- ------------- -------------- --------------
Net income (loss) $ (0.40) $ 0.32 $ (0.81) $ (0.07)
============= ============= ============== ==============
Basic shares outstanding 1,993,000 1,993,000 1,993,000 2,105,052
Dilutive shares outstanding 2,125,886 2,103,860 2,126,219 2,224,501
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Page 4
<PAGE>
Prestolite Electric Holding, Inc. and Subsidiaries
(including Prestolite Electric Incorporated)
Condensed Consolidated Unaudited Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (1,620) $ (128)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Loss on debt refinancing - 1,991
Option repurchase - 2,101
Cash provided by discontinued operations 170 1,603
Depreciation 8,117 8,215
Amortization 1,410 800
Gain on sale of property, plant, and equipment (128) (236)
Loss from unconsolidated subsidiaries 160 -
Deferred taxes (764) (1,431)
Changes in working capital items (13,576) (4,239)
-------------- --------------
Net cash provided by (used in) operating activities (6,231) 8,676
Cash Flows from Investing Activities:
Capital expenditures (6,782) (7,806)
Proceeds from disposal of fixed assets 239 18
Acquisition of:
Lucas businesses - (49,943)
Roberts Remanufacturing (2,958) -
Investment in affiliates 66 (2,640)
-------------- --------------
Net cash used in investing activities (9,435) (60,371)
Cash Flows from Financing Activities:
Net increase in revolving line of credit 14,471 2,990
Payments on long-term debt - (32,146)
Proceeds from borrowings 659 125,000
Costs related to new borrowings, including loss on refinancing - (5,785)
Purchase of treasury stock, options and warrants, employee stock receivable 46 (29,895)
Borrowings (payments) on capital leases 26 (173)
Other financing costs, net (19) (6,773)
-------------- --------------
Net cash provided by financing activities 15,183 53,218
Effect of exchange rate changes on cash 419 141
-------------- --------------
Net increase (decrease) in cash (64) 1,664
Cash - beginning of period 896 455
-------------- --------------
Cash - end of period $ 832 $ 2,119
============== ==============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Page 5
<PAGE>
Prestolite Electric Holding, Inc. and Subsidiaries
(including Prestolite Electric Incorporated)
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1: General Information
Prestolite Electric Holding, Inc. conducts all of its operations through its
wholly-owned principal subsidiary, Prestolite Electric Incorporated. There are
no material differences between the financial statements of Prestolite Electric
Holding, Inc. and Prestolite Electric Incorporated (collectively, "Prestolite,"
"us," "we" or the "Company").
These unaudited condensed consolidated financial statements have been prepared
by us in accordance with Rule 10-01 of Regulation S-X and have been prepared on
a basis consistent with our audited financial statements for the year ended
December 31, 1998. These statements reflect all adjustments, consisting only of
items of a normal recurring nature, which are, in the opinion of management,
necessary for the fair statement of the consolidated financial condition and
consolidated results of operations for the interim period presented.
Certain information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial
statements and the related notes should be read in conjunction with our audited
financial statements, the notes to those statements and the other material
included in our Annual Report on Form 10-K for the year ended December 31, 1998.
The year-end 1998 condensed balance sheet data was derived from our audited
financial statements, but does not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. The results of operations for the three- and nine-month periods
ended October 2, 1999 are not necessarily indicative of the operating results
that may be expected for the full year or any other interim period.
Genstar Capital Corporation and Company management own all of the equity
securities of Prestolite Electric Holding, Inc.
Note 2: Acquisitions
On January 15, 1999, we acquired a remanufacturing business unit from Roberts
Generator for $2.9 million. This business unit operates as Roberts
Remanufacturing and rebuilds alternators and starter motors for specialty
applications. We financed this purchase with funds borrowed under our United
States revolving line of credit.
On January 22, 1998 Prestolite acquired the heavy duty products division of
Lucas Industries, plc. (a U. K. corporation), Lucas South Africa and Lucas
Indiel Argentina S. A., collectively referred to as "the Lucas Acquisition," for
approximately $44.3 million in cash, net of cash acquired and including the
assumption of approximately $3.2 million in debt, inventory purchases of
approximately $1.4 million during 1998, and up to $4.1 million for certain
accounts receivable as they are collected ($1,074,000 paid during 1998, and $0.1
million paid to date in 1999). In addition, Prestolite has agreed to pay Lucas
up to an additional $6.6 million if certain operating targets are achieved in
Argentina in 1999 and 2000 and up to $ 4.9 million if certain fully reserved
receivables are collected. No liability for this $11.5 million is accrued, as
management does not consider payment probable. Any future payments will be
recorded as an
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adjustment to the purchase price. In addition, on January 22, 1998, Prestolite
Electric Incorporated completed the offering of $125 million of 9.625% Senior
Notes due 2008 (the "Notes"). The proceeds of the Notes funded the Lucas
Acquisition and repaid approximately $42 million of our outstanding
indebtedness. Approximately $29.7 million of the proceeds were also used for the
repurchase of common stock, warrants and options to purchase common stock. These
transactions are more fully described in our Annual Report on Form 10-K for the
year ended December 31, 1998.
In conjunction with these transactions, during the first quarter of 1998 the
Company charged operations for $2.1 million for the repurchase of options and
recorded an extraordinary charge of $1.275 million, net of tax benefit, related
to the debt refinancing. The Company also recorded a $0.98 million
restructuring charge in the first quarter of 1998 related to costs anticipated
to be incurred at the Company's existing facilities as a result of the Lucas
Acquisition.
Note 3: Inventories
Inventories are summarized as follows (in thousands of U.S. dollars):
<TABLE>
<CAPTION>
As of As of
October 2, December 31,
1999 1998
----------- ----------
<S> <C> <C>
Raw Material $16,953 $15,014
Work in Progress 16,619 16,171
Finished Goods 21,984 20,897
----------- ----------
$55,556 $52,082
=========== ==========
</TABLE>
Note 4: Property, Plant and Equipment
Property, Plant and Equipment consists of the following (in thousands of U.S.
dollars):
<TABLE>
<CAPTION>
As of As of
October 2, December 31,
1999 1998
---------- -----------
<S> <C> <C>
Land & Buildings $ 29,725 $ 29,433
Machinery & Equipment 60,515 54,863
Construction in Progress 3,927 2,699
---------- -----------
Total, at Cost 94,167 86,995
Accumulated Depreciation (38,186) (30,931)
---------- -----------
Net $ 55,981 $ 56,064
========== ===========
</TABLE>
Page 7
<PAGE>
Note 5: Investments
Investments consist of the following (in thousands of U.S. dollars):
<TABLE>
<CAPTION>
As of As of
October 2, December 31,
1999 1998
----------- ------------
<S> <C> <C>
DAX Industries, Inc. (35% interest) $1,671 $1,869
Ecoair Corp. (7% interest, at cost) 2,000 2,000
Prestolite Asia Ltd. (50% interest) 576 530
Auto Ignition, Ltd. (4% interest, at cost) 523 597
----------- ------------
$4,770 $4,996
=========== ============
</TABLE>
Note 6: Debt
In 1998 we issued $125 million of 9.625% (interest payable semiannually)
unsecured senior notes. The senior notes mature on February 1, 2008 but may be
redeemed earlier at our option under conditions specified in the indenture
pursuant to which the senior notes were issued. The senior notes are senior
unsecured obligations of Prestolite Electric Incorporated and are fully and
unconditionally guaranteed on a senior unsecured basis by Prestolite Electric
Holding, Inc. The senior notes are subordinated to our secured credit
facilities, to the extent of the value of the assets securing such indebtedness,
including the secured facilities described below. The senior notes are also
subordinated to the indebtedness of any subsidiary of Prestolite Electric
Incorporated, including the indebtedness of its United Kingdom subsidiary. The
proceeds were used to refinance existing debt, fund the acquisition of the Lucas
businesses and to repurchase certain Prestolite Electric Holding, Inc.
securities. The senior notes are more fully described in our Prospectus dated
June 26, 1998.
In connection with the issuance of the Notes, we entered into new credit
agreements in the U. S. and the U. K. The U. S. agreement consists of a $23.0
million revolving credit facility ($23.0 million available at October 2, 1999)
which is advanced according to a formula based on eligible accounts receivable
and inventory levels. The borrowings are collateralized by all U. S. accounts
receivable and inventories and mature on July 31, 2000. Interest is payable at
the bank's prime rate (8.25 percent at October 2, 1999) or at the "London Late
Eurodollar" rate plus 2.75 percent at our option. In certain situations these
rates may be increased by 0.125 percent.
On November 2, 1999, the Company revised its United Kingdom borrowing
arrangements. The revised agreement makes available an overdraft facility of
(Pounds)4.0 million with interest at 1.25% above the bank's base rate (5.25% at
November 1, 1999), a (Pounds)2.0 million floating rate term loan with interest
at 1.35% above the bank's base rate and principal payable over 60 months, and a
(Pounds)2.0 million fixed rate term loan with an interest rate to be established
upon the drawing of the loan. The Company intends to draw the full amount of
the floating rate term loan and a portion of the overdraft facility in November,
1999. The receivables and facilities of the Company in the United Kingdom
secure these loans.
In Argentina and South Africa, we have arrangements with several banks which
allow our subsidiaries in these countries to discount or borrow against accounts
receivable, generally at the prime rates of the banks involved. Those rates
ranged from 16.9 percent to 18.0 percent at
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October 2, 1999. Total available credit in Argentina and South Africa at October
2, 1999 was approximately $5.1 million.
Debt consists of the following (in thousands of U.S. dollars):
<TABLE>
<CAPTION>
As of As of
October 2, December 31,
1999 1998
------------ -------------
<S> <C> <C>
U.S. Bank Debt $ 20,628 $ 3,366
U.S. Unpresented Checks 1,299 385
U.K. Bank Debt 4,327 8,132
Argentina Bank Debt 2,729 2,120
South Africa Bank Debt 571 269
Senior Notes 125,000 125,000
Capital Lease Obligations 1,222 1,196
Other Debt 113 284
------------ -------------
Total Debt 155,889 140,752
Current Maturities 8,720 7,336
------------ -------------
Long Term Debt $147,169 $133,416
============ =============
Cash 832 896
------------ -------------
Total Debt net of Cash $155,057 $139,856
============ =============
</TABLE>
The current maturities shown above represent $660,000 of required principal
payments on the United Kingdom term loan, all Argentina bank debt, and
management's estimate of the maximum amounts to be paid down in the next year on
revolver and overdraft facilities for which no principal repayment is specified.
The Company was in violation of the fixed charge covenant of its United States
bank agreement at October 2, 1999. On October 28, 1999, the bank waived the
violation and the covenant was amended to reduce the fixed charge coverage
requirements through December 30, 2000. The Company presently anticipates that
it will be able to comply with the amended covenant.
Note 7: Segment Reporting
In 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. Prior quarter information is restated to
conform with the provisions of SFAS No. 131. Prestolite operates in four
principal geographic regions. Sales in South Africa and Argentina consist
largely of products for the automotive market while sales of products in the
United States and United Kingdom consist largely of products for non-automotive
applications. Sales between geographic segments and between operating segments
are priced at cost plus a standard markup.
Sales to external customers, based on country of origin, is as follows (in
thousands of U.S. dollars):
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<TABLE>
<CAPTION>
North United South
America Kingdom Argentina Africa Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
For quarter ended October 2, 1999 $ 37,205 $18,940 $ 5,250 $ 4,038 $ 65,433
For quarter ended October 3, 1998 36,543 16,712 14,236 2,959 70,450
For nine months ended October 2, 1999 $108,193 $48,365 $28,407 $10,987 $195,952
For nine months ended October 3, 1998 106,822 54,367 46,780 9,854 217,823
</TABLE>
During 1998, the Company began to manage itself on the basis of three business
units (Heavy Duty Systems, Electric Vehicle Systems, and Automotive Systems) and
to evaluate the performance of its segments based on earnings before interest
expense, taxes, depreciation and amortization and excluding restructuring and
option repurchase charges ("EBITDA"). Corporate overhead and certain other
charges are not allocated to the divisions. Segment assets are not currently
broken out in the normal course of managing segment operations; accordingly,
such information is not available for disclosure. In accordance with SFAS No.
131, the operating results for the quarters ended October 2, 1999 and October 3,
1998 are summarized by operating segment (in thousands of U.S. dollars) below:
<TABLE>
<CAPTION>
Heavy Electric
Duty Vehicle Automotive
Systems Systems Systems Unallocated
Division Division Divison Costs Total
----------- ----------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Sales to external customers:
For quarter ended October 2, 1999 $ 36,041 $20,104 $ 9,288 $ - $ 65,433
For quarter ended October 3, 1998 32,758 20,497 17,195 - 70,450
EBITDA:
For quarter ended October 2, 1999 5,766 1,967 264 $(1,031) 6,966
For quarter ended October 3, 1998 4,371 2,558 2,415 (1,733) 7,611
Sales to external customers:
For nine months ended October 2, 1999 100,593 55,965 39,394 - 195,952
For nine months ended October 3, 1998 100,778 60,409 56,636 - 217,823
EBITDA:
For nine months ended October 2, 1999 15,898 6,122 2,915 (3,871) 21,064
For nine months ended October 3, 1998 14,012 8,653 5,785 (4,624) 23,826
</TABLE>
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<PAGE>
A reconciliation of EBITDA to income from continuing operations before income
taxes follows (in thousands of U.S. dollars):
<TABLE>
<CAPTION>
For the three months ended
October 2, October 3,
1999 1998
------------ ------------
<S> <C> <C>
EBITDA for reporting segments $ 6,966 $ 7,611
Depreciation and amortization 3,384 3,138
Loss in unconsolidated subsidiaries 44 -
Interest expense 4,029 3,425
------------ ------------
Income (loss) from continuing operations before income taxes $ (403) $ 1,048
============ ============
<CAPTION>
For the nine months ended
October 2, October 3,
1999 1998
------------ -----------
<S> <C> <C>
EBITDA for reporting segments $ 21,064 $ 23,826
Depreciation and amortization 9,527 9,015
Loss in unconsolidated subsidiaries 160 -
Option repurchase - 2,101
Restructuring - 980
Interest expense 11,915 9,951
------------ -----------
Income (loss) from continuing operations before income taxes $ (218) $ 1,779
============ ===========
</TABLE>
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<PAGE>
ITEM 2: Management's Discussion and Analysis
of Financial Condition and Results of Operation.
Overview
We manufacture alternators, starter motors, direct current motors, battery
chargers, and switching devices. These are supplied under the "Prestolite,"
"Leece-Neville," "Hobart," "Lucas," and "Indiel" brand names for original
equipment and aftermarket application on a variety of vehicles and industrial
equipment. "Hobart" is used under license from a subsidiary of Illinois Tool
Works, Inc. "Lucas" is used under license from a subsidiary of LucasVarity plc.
Most of our products are component parts used on diesel engines, automobiles and
electric vehicles, sold to both aftermarket customers and original equipment
manufacturers. We sell our products to a variety of markets, in terms of both
end-use and geography.
In January 1998, we acquired three businesses from a subsidiary of LucasVarity
plc. These businesses operate in England, South Africa, and Argentina. We
purchased these businesses for approximately $44.3 million in cash, net of cash
acquired and including the assumption of $3.2 million in debt, plus certain
future obligations, as described in Note 2 to the financial statements.
The Lucas acquisition was financed from the sale of $125.0 million of 9.625%
senior notes due 2008 issued under Rule 144A of the Securities Act of 1933, as
amended. Proceeds from the offering of our senior notes were also used to repay
existing debt in the United States and United Kingdom, to repurchase all the
warrants issued to holders of the Company's subordinated debt, to repurchase 40%
of the common stock held by Genstar Capital Corporation, to repurchase 8.5% of
the common stock held by management and to repurchase 40% of the options held by
management. The total cost associated with the repurchase of these securities
was approximately $29.7 million.
In January 1999, we acquired a remanufacturing business that continues to
operate in Saddlebrook, NJ. We purchased this business for $2.9 million,
financed through our U.S. revolving line of credit.
During 1998, we organized our business into three divisions. While the three
divisions bear the names of their principal markets, no division sells
exclusively into its target market. Further, each division has some sales into
the target markets of the other divisions.
The Heavy Duty Systems Division produces alternators, starter motors, inline
pumps, control boxes and other products, primarily for installation on diesel
engines used in the heavy duty, defense, marine and industrial markets. The
division's major facilities are in Arcade, NY; Florence, KY; Acton, England; and
Leyland, England, with a smaller remanufacturing facility in Garfield, NJ
(previously located in Saddlebrook, NJ and reported with the Automotive Systems
Division).
The Electric Vehicle Systems Division produces motors (including starter motors,
material handling motors, and pump and winch motors), controls (including
contactors, solenoids, relays, distributors, and control boxes), battery
chargers and other products. The division's major facilities are in Decatur,
AL; Wagoner, OK; Florence, KY; Troy, OH; and Leyland, England, with a smaller
remanufacturing facility in Dearborn, MI (previously reported with the
Automotive Systems Division). We sell these products into many of the same
markets as the
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products of our Heavy Duty Systems Division. In addition, the products of our
Electric Vehicles Systems Division are sold into the material handling market
for installation on or use with lift trucks and other electric vehicles; the
truck accessory market for use in winches, snow plow lifts and other
applications; and the telecommunications market where contactors are used in
battery backup systems.
The Automotive Systems Division manufactures automotive components, primarily
alternators and starter motors. The division's facilities are in South Africa
and Argentina. The Argentina operation also manufactures steering columns and
distributors. Some of the products of this division are sold into the heavy duty
and material handling markets. In both South Africa and Argentina more than half
of our sales are to the automotive aftermarket, and about half of those
aftermarket sales are products purchased for resale.
Results of Operations
Three Months Ended October 2, 1999 Compared to Three Months Ended October 3,
1998
Sales for the three months ended October 2, 1999 were $65.4 million, a decrease
of $5.0 million, or 7.1%, from $70.5 million in the third quarter of 1998. The
decrease in sales dollars is mainly attributable to the Automotive Systems
Division. Automotive Systems sales declined $7.9 million or 45.9%. An Argentina
sales decline of $9.0 million was partially offset by a $1.1 million increase in
sales in South Africa. Heavy Duty Systems sales increased $3.3 million or 10.0%.
Heavy Duty Systems sales in the United Kingdom declined $0.4 million but were
offset by a $3.7 million increase in Heavy Duty Systems sales in the United
States, including $1.1 million in Roberts Remanufacturing sales. While Heavy
Duty Systems defense sales in the United States declined $2,000, or 0.2%, other
U.S. sales, not including the Roberts Remanufacturing sales, increased by $2.6
million, or 13.9%. Electric Vehicle Systems sales declined $0.4 million or 1.9%.
Contributing to this were declines in defense sales of $0.4 million, or 21.7%,
material handling sales of $0.4 million, or 17.1%, Beech Remanufacturing sales
of $74,000, or 13.2%, and other U.S. sales of $0.2 million. These declines were
offset by an Electric Vehicle sales increase in the United Kingdom of $0.7
million, or 26.3%.
Gross profit was $12.9 million in the third quarter of 1999, or 19.6% of sales.
This compares to gross profit of $14.3 million, or 20.2% of sales, in the third
quarter of 1998. Lower sales volume, higher material costs, and a shift to sales
of lower margin products contributed to this decline.
Selling, general, and administrative expense was $9.5 million, or 14.5% of
sales, for the third quarter of 1999, a decrease of $0.3 million, or 2.9%, from
$9.7 million, or 13.8% of sales, in the third quarter of 1998. Reduction in
selling, general, and administrative expense in our international locations
continues to reflect the cost control benefits of the integration of the
businesses acquired in the Lucas acquisition. This reduction is offset in part
by the increased selling, general, and administrative expense in the U.S. Heavy
Duty Systems due to the Roberts acquisition.
Operating income in the third quarter of 1999 was $3.4 million, or 5.2% of
sales, a decrease of $1.1 million, or 25.2%, from the $4.5 million, or 6.4% of
sales, in the third quarter of 1998. This was due to the factors discussed
above.
Other income was $201,000 in the third quarter of 1999 versus other expenses of
$47,000 in the third quarter of 1998. This consists of the net effect of
interest income, pension expense for
Page 13
<PAGE>
inactive defined benefit pension plans associated with United States facilities
that have been closed, foreign currency exchange losses, royalty expenses, South
Africa export rebate income and South Africa trademark expense.
Interest expense was $4.0 million in the third quarter of 1999, an increase of
$0.6 million, or 17.6%, compared to $3.4 million in the third quarter of 1998.
This increase is due to increases in bank debt in the United States and the
United Kingdom.
The provision for income taxes was $312,000, 69.8% of the loss from continuing
operations before taxes, for the third quarter of 1999 as compared to the
$369,000 provision for income taxes for the third quarter of 1998, 35.2% of
income from continuing operations before taxes and the extraordinary item. The
change in the tax rate is due to losses in Argentina for which no tax benefit
has been recorded.
Nine Months Ended October 2, 1999 Compared to Nine Months Ended October 3, 1998
Sales for the nine months ended October 2, 1999 were $196.0 million, a decrease
of $21.9 million, or 10.0%, from $217.8 million in the first nine months of
1998. The decrease in sales dollars is mainly attributable to the Automotive
Systems Division. Automotive Systems sales declined $17.2 million or 30.4%. An
Argentina sales decline of $18.3 million was partially offset by a $1.1 million
increase in sales in South Africa. Heavy Duty Systems sales declined $185,000 or
0.2%. Heavy Duty Systems sales in the United Kingdom declined $6.3 million but
were offset by a $6.1 million increase in Heavy Duty Systems sales in the United
States, including an increase of $3.7 million in Roberts Remanufacturing sales
for the period. While Heavy Duty Systems defense sales in the United States
declined $0.5 million, or 14.2%, other heavy Duty systems sales in the United
States increased by $2.9 million, or 5.7%, not including the $3.7 million
increase in Roberts Remanufacturing sales. Electric Vehicle Systems sales
declined $4.4 million or 7.4%. Contributing to this were declines in defense
sales of $3.2 million, or 44.7%, in material handling sales of $1.6 million, or
21.9%, Beech Remanufacturing sales of $208,000, or 11.5%, and other U.S. sales
of $0.3 million. Electric Vehicle Systems sales in the United Kingdom increased
$878,000, or 10.3%, partially offsetting the declines in other areas.
Gross profit was $39.1 million in the first nine months of 1999, or 19.9% of
sales. This compares to gross profit of $43.7 million, or 20.1% of sales, for
the first nine months of 1998. The decrease in gross profit as a percent of
sales results from several factors. Ongoing cost cutting measures in the United
Kingdom and Argentina have reduced overhead costs. The benefit of these
reductions is offset by declining volume, higher material costs, and a shift in
sales to lower margin products at some locations. The Roberts Remanufacturing
business, acquired in January 1999, has higher margins than the company average,
mitigating some of the decline.
Selling, general, and administrative expense was $28.8 million, or 14.7% of
sales, for the first nine months of 1999, a decrease of $0.6 million, or 2.0%,
from $29.4 million, or 13.5% of sales, in the first nine months of 1998.
Reduction in selling, general, and administrative expense in our international
locations continues to reflect the cost control benefits of the integration of
the businesses acquired in the Lucas acquisition. This reduction is offset in
part by the increased selling, general, and administrative expense in U.S. Heavy
Duty Systems due to the Roberts acquisition.
Page 14
<PAGE>
We recorded a $2.1 million charge in January of 1998 to reflect our repurchase
from management of 40% of then-outstanding options to purchase our common stock.
We also recorded a first quarter charge in 1998 of $1.0 million to cover
severance payments related to restructuring activities at our facilities in
Leyland, England and Decatur, Alabama. Of this total, $0.5 million was spent in
1998 and $0.2 million was spent in the first nine months of 1999. The remainder
is expected to be spent during the fourth quarter of 1999.
Operating income in the first nine months of 1999 was $10.3 million, or 5.3% of
sales, a decrease of $967,000, or 8.6%, from the $11.3 million, or 5.2% of
sales, in the first nine months of 1998. This was due to the factors discussed
above.
Other income was $1.2 million in the first nine months of 1999 versus $475,000
in the first nine months of 1998. This consists of South Africa export rebate
income, the elimination of a lawsuit-related reserve in Argentina in 1999,
proceeds on the sales of fixed assets, interest income, and miscellaneous
income. These were partially offset by pension expense for inactive defined
benefit pension plans associated with United States facilities that have been
closed, foreign currency exchange losses, royalty expenses, and South Africa
trademark expense.
Interest expense was $11.9 million in the first nine months of 1999, an increase
of $2.0 million, or 19.7%, compared to $9.9 million in the first nine months of
1998. This increase is due to increases in bank debt in the United States,
United Kingdom and South Africa, as well as increases in capital leases, as
compared to levels of debt in the first nine months of 1998.
The provision for income taxes was $1.1 million on the $378,000 loss from
continuing operations before taxes for the first nine months of 1999. This
compares to a provision for income taxes of $632,000 for the first nine months
of 1998, 35.5% of income from continuing operations before taxes and the
extraordinary item. The higher 1999 tax rate is due to losses in Argentina for
which tax benefits have not been recorded.
In conjunction with the incurrence of additional debt, the refinancing of our
existing debt and repurchase of warrants, we recorded an extraordinary item of
$1.3 million net-of-tax in 1998. On a pretax basis this charge covered $728,000
in debt prepayment fees, $335,000 for the write-off of unamortized financing
costs, $733,000 to write off the unamortized discount on subordinated debt and
$195,000 related to the repurchase of warrants.
Liquidity and Capital Resources
Cash used by operating activities in the first nine months of 1999 was $6.2
million. Capital spending for the first nine months of 1999 was $6.8 million, a
$1.0 million reduction from the $7.8 million of capital spending in the first
nine months of 1998. Capital spending for the first nine months of 1999 in the
Unites States was $3.7 million as compared to capital spending in 1998 of $4.9
million. Capital spending for the first nine months of 1999 in the United
Kingdom of $1.4 million, in Argentina of $1.4 million, and in South Africa of
$0.3 million, compares to the first nine months of 1998 levels in the United
Kingdom of $1.6 million, in Argentina of $0.7 million, and in South Africa of
$0.6 million. Planned capital expenditures consist primarily of expenditures to
reduce costs through automation, replace existing equipment and enable us to
manufacture new products.
Page 15
<PAGE>
We spent $4.9 million in 1998 and $1.4 million in the first nine months of 1999
on redundancy costs. We expect to spend approximately $1.4 million in the fourth
quarter of 1999 on redundancy costs. These amounts have been or will be charged
to the reserves established in connection with the Lucas acquisition in 1998 or
as a result of the 1998 restructuring charge discussed above.
In connection with the acquisition of our Argentina operations from Lucas in
1998, we agreed to certain future obligations to Lucas. Remaining obligations
include post-closing payments to Lucas of up to $3.0 million upon the collection
of certain receivables expected to be collected in 1999, 2000, and 2001, up to
$4.9 million contingent upon the collection of certain fully-reserved
receivables and up to $6.6 million contingent upon the achievement by our
Argentina subsidiary of certain earnings targets in 1999 and 2000. Aggregate
payments for receivables collected totaled $1.1 million in 1998 and $0.1 million
in the first nine months of 1999. We expect to pay any of these contingencies
from the collection of receivables or from such earnings.
Debt, net of cash, increased from $139.9 million at December 31, 1998 to $155.1
million at October 2, 1999. The increase was due, in part, to the acquisition of
the Roberts Remanufacturing business in January 1999. We had revolving credit
facilities with banks in the United States and United Kingdom under which
additional borrowings of $1.9 million and $5.4 million were available based on
the October 2, 1999 levels of receivables (United States and United Kingdom) and
inventory (United States only) which are pledged to support that debt. In
addition, during July 1999, we modified our U.S. bank agreement to allow
borrowings above the amount supported by receivables and inventory. The
additional amount is $3.0 million effective July 30, 1999 declining in steps to
zero at December 1, 1999. In Argentina and South Africa, we have arrangements
with several banks permitting discounting or borrowing against receivables.
Total net additional credit available in Argentina and South Africa as of
October 2, 1999 was approximately $1.9 million. In November 1999, we increased
the amounts which can be borrowed in the United Kingdom, as described in Note 6
to the financial statements.
We expect our liquidity needs to consist primarily of working capital needs and
scheduled payments of principal and interest on our indebtedness. We expect our
short-term liquidity needs to be provided by operating cash flows and borrowings
under our revolving credit facilities. We expect to fund our long-term liquidity
needs from our operating cash flows, the issuance of debt and/or equity
securities and bank borrowings. We believe that cash flows from operations, our
existing cash balances and amounts available under these revolving credit
facilities will provide adequate funds for on going operation, planned capital
expenditures, investments, and debt service for at least the next twelve months.
Estimates as to working capital needs and other expenditures may be materially
affected if the foregoing sources are not available or do not otherwise provide
sufficient funds to meet our obligations.
Year 2000
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 be modified to distinguish 21st century
dates from 20th century dates. As a result, many companies' information systems
and software need to be upgraded or replaced in order to function correctly
after December 31, 1999.
We have completed our Year 2000 assessments of our information technology and
embedded systems, and are continuing efforts to prepare our systems and
applications for the Year 2000 as
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<PAGE>
part of a larger, general program to enhance all of our computer systems. The
Year 2000 element of these efforts consists primarily of installing or upgrading
enterprise resource planning systems to be Year 2000 compliant at our United
States, United Kingdom and Argentina facilities, and ensuring compliance by an
outside service bureau utilized by our South African facility. All software
remediation efforts are complete as of October 2, 1999. Because the majority of
our operations outside of the United States were acquired in early 1998 and
these operations were not Year 2000 compliant, our efforts to deal with the Year
2000 issue outside the United States required a larger investment than our
domestic programs. In Argentina, a new Year 2000 compliant system has been
installed. In the United Kingdom, a system used in two locations was replaced
with Year 2000 compliant systems, while the system in use at a third location
was upgraded for Year 2000 compliance. In addition, we have reviewed our product
base and believe that our products will not be affected by Year 2000 issues.
In connection with the overall computer enhancement program, including Year 2000
compliance, we expect to incur aggregate internal and third party costs of
approximately $3.0 million, of which approximately $2.6 million had been
incurred by the third quarter of 1999. The $3.0 million total includes
approximately $0.5 million related to in-house efforts to enhance the
performance of our United States warehousing systems, approximately $1.0 million
for each of the United Kingdom and Argentina software conversions and
approximately $0.5 million related to ancillary Year 2000 efforts.
We rely on third party vendors and service providers for certain products and
services, including certain data processing capabilities. We are communicating
with our principal vendors and service providers to assess the Year 2000
readiness of their products and services. Responses indicate that our
significant providers currently have compliant versions available or are well
into renovation and testing phases with completion scheduled prior to December
31, 1999. However, we can give no guarantee that the systems of these vendors
and service providers in which we rely will be timely Year 2000 compliant. Our
contingency planning for Year 2000 issues related primarily to securing backup
vendors (which have been identified for key purchased products) and the
possibility of stockpiling raw materials. Contingency planning will continue
throughout 1999 and our plans will be modified based upon the progress of our
remediation efforts, system updates and installations and based upon our
communications with selected suppliers.
While we believe that the estimated cost of becoming Year 2000 compliant will
not be significant to our results of operations, failure to complete all the
work in a timely manner could have a material adverse effect on our results of
operations. While we expect all planned work to be completed, we cannot
guarantee that all systems will be in compliance by the Year 2000, that the
systems of suppliers and other companies and government agencies on which we
rely will be converted in a timely manner or that our contingency planning will
be able to fully address all potential interruptions. Therefore, date-related
issues could cause delays in our ability to produce or ship our products,
process transactions or otherwise conduct business in any of our markets.
Forward-Looking Statements
This form 10-Q contains, in addition to historical information, forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. All statements other than statements of historical fact included herein
may contain forward-looking statements. Forward-looking statements generally
can be identified by the use of forward-looking terminology such as
Page 17
<PAGE>
"may", "will", "expect", "intend", "estimate", "anticipate", "believe", or
"continue" or the negative thereof or variations thereon or similar terminology.
Such forward-looking statements are based upon information currently available
in which our management shares its knowledge and judgement about factors that
they believe may materially affect our performance. We make the forward-looking
statements in good faith and believe them to have a reasonable basis. However,
such statements are speculative, speak only as of the date made and are subject
to certain risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results could vary materially from those anticipated,
estimated or expected. Factors that might cause actual results to differ
materially from those in such forward-looking statements include, but are not
limited to, those discussed in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations." All subsequent written and oral
statements that we make are qualified in their entirety by these factors.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Amendment Number 1 to U.S. Credit Facility
10.2 Amendment Number 2 to U.S. Credit Facility
10.3 Amendments to U.K. Credit Facility
27.1 Financial Data Schedule
(b) Reports on Form 8-K We have not filed any reports on Form 8-K
during the quarterly period ended October 2, 1999.
Page 19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 15, 1999 By: /s/ Kenneth C. Cornelius
------------------------
Kenneth C. Cornelius
Senior Vice President and
Chief Financial Officer
(principal financial and
accounting officer)
Page 20
<PAGE>
Exhibit 10.1
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT, dated as of July 30, 1999, 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").
W I T N E S S E T H:
WHEREAS, said parties desire to amend that certain Second Amended and
Restated Credit Agreement dated as of December 31, 1998, entered into by and
between Company and Bank (herein called "Agreement"), to extend the maturity
date of the line of credit, to revise the borrowing base, to change the
Applicable Margins, and to make other revisions;
NOW, THEREFORE, IT IS AGREED that the Agreement is amended as follows:
1. The definition of "Applicable Eurodollar Margin" in Section 1 is
amended to read in its entirety as follows:
"Applicable Eurodollar Margin" shall mean, as of any date of
determination thereof, the following Margins:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
The Applicable Eurodollar Margin is:
--------------------------------------------------------
If Funded Debt Margin Reduction Non-Margin
Ratio ("x") is: Period Reduction Period
----------------------------------------------------------------------------------
<S> <C> <C>
x more than 5.5 3.25% 3.375%
----------------------------------------------------------------------------------
5 less than x less than or equal to 5.5 3% 3.125%
----------------------------------------------------------------------------------
4 less than x less than or equal to 5 2.75% 2.875%
----------------------------------------------------------------------------------
3.5 less than x less than or equal to 4 2.5% 2.625%
----------------------------------------------------------------------------------
3 less than x less than or equal to 3.5 2.25% 2.25%
----------------------------------------------------------------------------------
x less than or equal to 3 2% 2.0%
----------------------------------------------------------------------------------
</TABLE>
2. The definition of "Applicable Prime-based Margin" in Section 1 is
amended to read in its entirety as follows:
"Applicable Prime-based Margin" shall mean as of any date of
determination thereof, the following margins:
Page 21
<PAGE>
<TABLE>
<CAPTION>
The Applicable Prime-based Margin is:
---------------------------------------------------
If Funded Debt Margin Reduction Non-Margin
Ratio ("x") is: Period Reduction Period
------------------------------------------------------------------------------
<S> <C> <C>
x more than 5.5 .50% .625%
------------------------------------------------------------------------------
5 less than x less than or equal to 5.5 .25% .375%
------------------------------------------------------------------------------
4 less than x less than or equal to 5 0 .125%
------------------------------------------------------------------------------
3.5 less than x less than or equal to 4 0 0
------------------------------------------------------------------------------
3 less than x less than or equal to 3.5 0 0
------------------------------------------------------------------------------
x less than or equal to 3 0 0
------------------------------------------------------------------------------
</TABLE>
3. The definition of "Revolving Credit Maturity Date" in Section 1 is
amended by deleting the July 31, 2000 where it appears therein and replacing it
with the date July 31, 2001.
4. The definition of "Borrowing Base" in Section 1 is amended to read in
its entirety as follows:
"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) 84% of Eligible Accounts plus (b) the lesser of 35% of Eligible
----
Inventory or $9,000,0000, plus (c) the Overformula Amount, and (ii)
----
during any Margin Reduction Period, the sum of (a) 80% of Eligible
Accounts, plus (b) the lesser of 25% of Eligible Inventory or
----
$9,000,000, plus the Overformula Amount."
----
5. Section 1 is amended by adding a new definition of "Overformula
Amount" to read in its entirety as follows:
"Overformula Amount" shall mean (i) $3,000,000 for the period from
July 30, 1999 to September 30, 1999, (ii) $1,500,000 for the period
from October 1, 1999 to November 30, 1999, and (iii) $0 at all times
thereafter.
6. Section 1 is amended by adding a new definition of "Applicable
Commitment Fee Percentage" to read in its entirety as follows:
"Applicable Commitment Fee Percentage" shall mean as of the date of
determination thereof, the following per annum rate:
Page 22
<PAGE>
<TABLE>
<CAPTION>
The Applicable Commitment Fee
If Funded Debt Ratio ("x") is: Percentage is:
------------------------------------------------------------------------------
<S> <C>
x more than 5.5 .625%
------------------------------------------------------------------------------
5 less than x less than or equal to 5.5 .50%
------------------------------------------------------------------------------
4 les than x less than or equal to 5 .375%
------------------------------------------------------------------------------
3.5 less than x less than or equal to 4 .25%
------------------------------------------------------------------------------
3 less than x less than or equal to 3.5 .25%
------------------------------------------------------------------------------
x less than or equal to 3 .25%
------------------------------------------------------------------------------
</TABLE>
7. Section 2.2 is amended to read in its entirety as follows:
"2.2 The Revolving Credit Note shall mature on the Revolving Credit
Maturity Date and each Advance from time to time outstanding
thereunder shall bear interest at its Applicable Interest Rate. The
amount and date of each Advance, its Applicable Interest Rate, its
Interest Period, and the amount and date of any repayment shall be
noted on Bank's records, which records will be conclusive evidence
thereof. Effective July 30, 1999, the Applicable Margins shall be
2.875% for Eurodollar-based Advances and .125% for Prime-based
Advances. Adjustments to the Applicable Margin based on the Funded
Debt Ratio shall be implemented as follows:
(a) Such Applicable Margin adjustments shall be given prospective
effect only, effective immediately as to any Prime-based
Advance, and as to any Eurodollar-based Advance, effective
upon the expiration of the applicable Interest Period(s), if
any, in effect on the date of delivery of the annual
financial statements and compliance certificate required
under Sections 10.1(a) and 10.10 hereof, as the case may be,
establishing applicability of the appropriate adjustments,
with no retroactivity or claw-back (provided, however, that
if Company fails to timely deliver such financial statements
and compliance certificate, the Applicable Margins shall be
3.25% or 3.375%, as applicable, for Eurodollar-based Advances
and 0.50% or .625%, as applicable, for Prime-based Advances
for the number of days such financial statements and
certificate were not timely delivered, commencing on the
first Business Day after the latest due date for such
financial statements and certificate and continuing until the
first Business Day after delivery of such financial
statements and certificate;
(b) An adjustment hereunder, after becoming effective, shall
remain in effect only through the end of the applicable
Interest Period(s) in effect on the delivery of subsequent
quarterly financial certificates, as aforesaid, demonstrating
any change in such Funded Debt Ratio or the occurrence of any
event which under the terms hereof causes
Page 23
<PAGE>
such adjustment no longer to be applicable; and any such
subsequent adjustment or no adjustment, as the case may be,
shall apply (and said pricing shall thereby be adjusted up
or down, as applicable), effective with the commencement of
the Interest Period immediately following such change or
event;
(c) Such Applicable Margin adjustments under this Section 2.2
shall be made irrespective of, and in addition to, any other
interest rate adjustments hereunder."
8. Section 2.6 is amended to read in its entirety as follows:
"2.6 Company shall pay to Bank a non-refundable revolving credit
commitment fee on the daily average amount by which $23,000,000 exceeds
the aggregate amount of Advances outstanding from time to time. The
revolving credit commitment fee shall be equal to the amount of such
excess times the Applicable Commitment Fee percentage computed on a
daily basis. The revolving credit commitment fee shall be payable
quarterly in arrears on the first day of each January, April, July and
October, and at the Revolving Credit Maturity Date, and shall be
computed on the basis of a year of 360 days and assessed for the actual
number of day elapsed. Commencing July 30, 1999, the revolving credit
commitment fee shall be .375% per annum. Adjustments thereto shall be
given prospective effect, effective on delivery of the annual financial
statements and certificate required under Sections 10.10 and 10.1(a)
establishing applicability of the appropriate adjustments, with no
retroactivity or claw-back; provided, that if Company fails to timely
deliver such financial certificate, the revolving credit commitment fee
shall be .625% per annum for the number of days such financial
statements and certificate was not timely delivered, commencing on the
first day of such next fiscal quarter. For purposes of calculating the
revolving credit commitment fee, the face amount of outstanding letters
of credit shall be considered to be outstanding Advances.
9. Section 3.1(a) is amended by inserting the words "and the Overformula
Amount is $0" after the word "continuing" in the second line thereof.
10. A new Section 8.3 is added to the Agreement, to read in its entirety
as follows:
"8.3 Commencing with the execution and delivery of Amendment No. 1 to
this Credit Agreement, the Company will pay to the Bank, on the date of
any amendment to this Agreement which extends the Revolving Credit
Maturity Date, its non-refundable loan extension fee in the amount of
one-eighth percent (_%) of the amount of the maximum amount of the
Revolving Credit as described in Section 2.1 hereof."
This Amendment shall be effective as of the date hereof and upon payment by
Company to Bank of its non-refundable loan amendment fee in the amount of $7,500
and non-refundable loan extension fee in the amount of $28,750. Except as
modified hereby, all of the terms and conditions of the Agreement and the
Revolving Credit Note shall remain in full force and effect.
Page 24
<PAGE>
Company hereby represents and warrants that, after giving effect to the
amendments contained herein, (a) the execution, delivery and performance of this
Amendment and any other documents and instruments required under this Amendment
or the Agreement are within Company's 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 Amendment, and
any other documents and instruments required under this Amendment or the
Agreement, are valid and binding in accordance with their terms; (b) the
continuing representations and warranties of Company set forth in Section 9.1
through 9.5 and 9.8 through 9.16 of the Agreement are true and correct on and as
of the date hereof, and the continuing representations and warranties of Company
set forth in Section 9.6 of the Agreement are true and correct as of the date
hereof with respect to the most recent financial statements furnished to Bank by
Company in accordance the Agreement; and (c) no Default or Event of Default has
occurred and is continuing as of the date hereof.
WITNESS the execution hereof as of the date and year first above written.
COMERICA BANK PRESTOLITE ELECTRIC INCORPORATED
By: /s/ Peggy Cummins By: /s/ Dennis Chelminski
--------------------------- -----------------------------------
Its: Vice President Its: Controller
--------------------------- -----------------------------------
CONSENT OF GUARANTOR
--------------------
The undersigned guarantor hereby consents to the foregoing Amendment as of
the date thereof and reaffirms and ratifies all of its obligations to the Bank
under the guaranty of the obligations of Company previously executed and
delivered by it.
PRESTOLITE ELECTRIC HOLDING, INC.
By: /s/ Dennis Chelminski
----------------------------------------
Its: Treasurer
---------------------------------------
Page 25
<PAGE>
Exhibit 10.2
AMENDMENT NO. 2 TO CREDIT AGREEMENT AND WAIVER
----------------------------------------------
THIS AMENDMENT, dated as of October 28, 1999, 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").
W I T N E S S E T H:
WHEREAS, said parties desire to amend that certain Second Amended and
Restated Credit Agreement dated as of December 31, 1998, entered into by and
between Company and Bank, as amended by Amendment No. 1 dated as of July 30,
1999 (herein called "Agreement"), to modify the financial covenants;
NOW, THEREFORE, IT IS AGREED that the Agreement is amended as follows:
(ii) Section 10.13 is hereby amended to read in its entirety as follows:
"10.13 Maintain, as of the last day of each fiscal quarter, a
Fixed Charge Coverage Ratio of not less than the following during the
periods specified below:
September 30,1999 through December 30,2000.................. 2 to 1
December 31,2000 and thereafter ............................ 2.5 to 1"
(ii) Bank hereby waives the Event of Default arising by reason of the
breach by Company of Section 10.13 (Fixed Charge Coverage Ratio) for
the quarter ending September 30, 1999. Such waiver is given in
accordance with Section 14.7 of the Agreement. In particular, and with
limitation, such waiver shall be strictly limited to its terms and
shall not act as a waiver of or consent to any other Default or Event
of Default, transaction, act or omission, whether related or unrelated
to the foregoing.
This Amendment shall be effective as of the date hereof and upon payment by
Company of a non-refundable waiver fee in the amount of $5,000. Except as
modified hereby, all of the terms and conditions of the Agreement and the
Revolving Credit Note shall remain in full force and effect. Company hereby
represents and warrants that, after giving effect to the amendments contained
herein, (a) the execution, delivery and
Page 26
<PAGE>
performance of this Amendment and any other documents and instruments required
under this Amendment or the Agreement are within Company's 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 Amendment,
and any other documents and instruments required under this Amendment or the
Agreement, are valid and binding in accordance with their terms; (b) the
continuing representations and warranties of Company set forth in Section 9.1
through 9.5 and 9.8 through 9.16 of the Agreement are true and correct on and as
of the date hereof, and the continuing representations and warranties of Company
set forth in Section 9.6 of the Agreement are true and correct as of the date
hereof with respect to the most recent financial statements furnished to Bank by
Company in accordance the Agreement; and (c) no Default or Event of Default has
occurred and is continuing as of the date hereof.
WITNESS the execution hereof as of the date and year first above written.
COMERICA BANK PRESTOLITE ELECTRIC INCORPORATED
By: /s/ Peggy Cummins By: /s/ Dennis Chelminski
---------------------------- ------------------------------------
Its: Vice President Its: Controller
---------------------------- ------------------------------------
CONSENT OF GUARANTOR
--------------------
The undersigned guarantor hereby consents to the foregoing Amendment as of
the date thereof and reaffirms and ratifies all of its obligations to the Bank
under the guaranty of the obligations of Company previously executed and
delivered by it.
PRESTOLITE ELECTRIC HOLDING, INC.
By: /s/ Dennis Chelminski
------------------------------------
Its: Treasurer
------------------------------------
Page 27
<PAGE>
Exhibit 10.3
Advice of Borrowing Terms
Relationship Office: Cotswolds & Kennet Corporate Date: 18 October 1999
Business Centre Gloucestershire
Office
Borrower(s) Registered Number:
Prestolite Electric Limited 1189048
We intend that the facilities listed in Part 1 of the attached Facility Schedule
(the "on-demand facilities") should remain available to the borrower(s) until
7th October 2000 and all facilities should be reviewed on or before that date.
The facilities are, however, subject to the following:-
. the terms and conditions below,
. the specific conditions applicable to an individual facility as detailed in
the Facility Schedule,
. the Security detailed in the attached Security Schedule, and
. the attached General Terms.
All amounts outstanding are repayable on demand which may be made by us at our
discretion at any time and the facilities may be withdrawn, reduced, made
subject to further conditions or otherwise varied by us giving notice in
writing.
Preconditions:
--------------
Preconditions which must be satisfied before facilities can be utilised:
. A signed copy of this Advice of Borrowing Terms to be returned to us.
. Receipt of a certified copy of a resolution of your board of directors
confirming:-
. certification by the chairman of the meeting that a valid quorum was
present and the meeting was duly convened
. agreement to give security (if applicable)
. acceptance of the terms and conditions of the facility/facilities
. authorisation of a person or persons to sign the Form of Acceptance in
this Advice of Borrowing Terms and to take such other action as may be
necessary for the purpose of the facility/facilities
Page 28
<PAGE>
. Professional valuation of the Larden Road site, Acton, London, confirming an
Open Market Value of not less than (Pounds)5,000,000.
. Execution of the stated `new' security, as outlined in `Security
Schedule `below.
. Written confirmation from Prestolite Electric Inc. that it will not seek any
repayment under its inter-group loan ( after the (Pounds)6m reduction now to
be effected by facilities provided by National Westminster Bank Plc ), until
such time as no further amounts remain outstanding under the facilities
minuted herein.
Conditions:
-----------
The following conditions must be satisfied at all times while the facilities are
outstanding, but this will not affect our right to demand repayment at any time:
. Monthly management accounts including profit and loss, balance sheet,
schedule of aged debtors, funds flow statement and commentary on working
capital movements to be provided to us within 30 days of the end of the month
to which they relate. This information should also incorporate quarterly
rolling budgets and cash flow forecast.
. From the above management information, the Bank will monitor a lending
formula of the Group Overdraft being covered 200% by UK debtors of less than
90 days.
. Audited accounts to be provided to us within 180 days of the financial year
end to which they relate.
Interest Set Off:
-----------------
Debit and cleared credit balances in the same currency on non-interest bearing
current and loan accounts repayable on demand (the "Interest Set Off Accounts")
will be used to calculate, on a daily basis, the net debit balance of the
Interest Set Off Accounts. The Interest Set Off accounts, which we have agreed
are to be set off for interest calculation purposes, are detailed in the
attached Facility Schedule which also specifies the frequency at which interest
will be payable and the rate or rates at which it will be charged on the net
debit balance
Debit balances which are set off on a daily basis by cleared credit balances on
the Interest Set Off Accounts will incur interest at the Set Off Rate specified
in the attached Facility Schedule.
Jon Hayes
Senior Corporate Manager
For and on behalf of
National Westminster Bank Plc
Acceptance:
To signify your agreement to the terms and conditions outlined above please sign
and return the enclosed copy of this Advice of Borrowing Terms within 28 days.
Form of Acceptance
------------------
Page 29
<PAGE>
I accept the facility/facilities on the above terms and conditions and confirm
that I have been authorised by the Board(s) of Directors of the Borrower(s) to
sign this Form of Acceptance on behalf of the Borrower(s).
By (name and title): /s/ John Wilkinson Date 2nd November, 1999
------------------- ------------------
For and on behalf of: Prestolite Electric Limited
Page 30
<PAGE>
Facility Schedule
Part 1 - Facilities Repayable on Demand:
<TABLE>
<CAPTION>
---------------------------
Group Overdraft
Facility
---------------------------
=========================================================================================================================
Accounts Included Name: Account Number:
------------------------------------------ ---------------------------------------------------
in the Group Prestolite Electric Limited 4233204, 24475637 and
Facility 24475645
Arrangement:
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Limit: Gross (Pounds)4,000,000 Inclusive of any Sub limits detailed
below for individual Accounts
- --------------------------------------------------
Limit: Net (Pounds)4,000,000
- -------------------------------------------------------------------------------------------------------------------------
Purpose: To finance working capital/repay element of Parental loan
- -------------------------------------------------------------------------------------------------------------------------
Repayment: Fully fluctuating but (Pounds)2,000,000 parental loan element to be
repaid by 30 November 2000.
- -------------------------------------------------------------------------------------------------------------------------
1/st/ Debit Interest Rate: 1.25% above the Bank's Base rate (payable on any net overdrafts)
- -------------------------------------------------------------------------------------------------------------------------
Interest Payable: Quarterly
- -------------------------------------------------------------------------------------------------------------------------
Excess Fees: We will be entitled to charge an excess fee at the Bank's published rate
for each day any agreed limit is exceeded (see our "Services & Charges
for Business Customers" brochure for details).
- -------------------------------------------------------------------------------------------------------------------------
Arrangement Fee: (Pounds)60,000 to be taken at (Pounds)5,000 per month from account no:
04233204 commencing 20.10.99 and monthly thereafter. This fee also
covers the new Loan Facilities minuted below under `Facilities Subject
To Separate Documentation'.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
Interest Set-Off Arrangement - Sterling
---------------------------------------------------------------
========================================================================================================
The Interest Set-Off Name: Account Number:
-------------------------------------- -----------------------------------
Accounts: Prestolite Electric Limited 4233204, 24475637 and
24475645
- --------------------------------------------------------------------------------------------------------
<S> <C>
1/st/ Debit Interest 1.25% above the Bank's Base rate (payable on any net
Rate: overdrafts)
- --------------------------------------------------------------------------------------------------------
Set Off Rate: 0% per annum
- --------------------------------------------------------------------------------------------------------
Interest/Set Off Quarterly
Payable:
- -------------------------------------------------------------------------------------------------------
Account to be 04233204
debited:
- -------------------------------------------------------------------------------------------------------
</TABLE>
Page 31
<PAGE>
<TABLE>
<CAPTION>
-----------------------------
Terminable
Indemnities
- -------------------------------------------------------------------------------------------------
<S> <C>
Name of Borrower: Prestolite Electric Limited
- -------------------------------------------------------------------------------------------------
Limit: (Pounds)300,000
- -------------------------------------------------------------------------------------------------
Type and Purpose: 2 months duty deferment bond at (Pounds)150,000 per month
- -------------------------------------------------------------------------------------------------
Indemnity Fee: 1% p.a. payable quarterly in advance, to be debited to
account number 04233204.
- -------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------
Documentary
Credits
- -------------------------------------------------------------------------------------------------
<S> <C>
Name of Borrower: Prestolite Electric Limited
- -------------------------------------------------------------------------------------------------
Limit: (Pounds)300,000
- -------------------------------------------------------------------------------------------------
Purpose: Importation of stock
- -------------------------------------------------------------------------------------------------
Documents required: Full Set Clean On-Board Marine Bills of Lading to order &
blank endorsed
- -------------------------------------------------------------------------------------------------
Fees: Subject to separate tariff which will have been agreed
with you in advance.
- -------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------
Settlement Risk
- -------------------------------------------------------------------------------------------------
<S> <C>
Name of Borrower: Prestolite Electric Limited
- -------------------------------------------------------------------------------------------------
Limit/Frequency: (Pounds)1,500,000 per day
- -------------------------------------------------------------------------------------------------
Type and Purpose: BACS facility to facilitate salary & supplier payments.
- -------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------
Settlement Risk
- -------------------------------------------------------------------------------------------------
<S> <C>
Name of Borrower: Prestolite Electric Limited
- -------------------------------------------------------------------------------------------------
Limit/Frequency: (Pounds)20,000 any one time
- -------------------------------------------------------------------------------------------------
Type and Purpose: Documents released in trust.
- -------------------------------------------------------------------------------------------------
</TABLE>
Page 32
<PAGE>
Part 2 - Facilities Subject to Separate Documentation:
The following facilities are made available on the terms of the separate
documentation between us.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Name of Borrower Facility and Purpose Amount Date
(Pounds) Agreement
Signed
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prestolite Electric Limited Commercial Fixed Rate Loan - 2,000,000 To Be Signed
to repay element of Parental
Loan
- -------------------------------------------------------------------------------------------------------
Prestolite Electric Limited Commercial Variable Rate Loan 2,000,000 To be Signed
- to repay element of Parental
Loan
- -------------------------------------------------------------------------------------------------------
</TABLE>
Security Schedule
We rely on the security detailed below (and require additional security where
specified) to repay, on demand, all your current and future liabilities (both
actual and contingent) to us. These liabilities include, without limitation,
those incurred by you under the facility(ies) specified in the Facility
Schedule.
<TABLE>
<CAPTION>
Date Security: Given/to be given by:
Executed/New:
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
22 January 1987 Mortgage debenture Prestolite Electric Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee Prestolite Wales Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee HB Switchgear
(Contractors) Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee Butec Electrics Limited
- ------------------------------------------------------------------------------------------------------
26 October 1995 Legal mortgage Over Life policy Prestolite Electrical Limited
(TO BE RELEASED) (Pounds)500,000 on the life of Dr M Lee
(policy expiry 6/2000)
- ------------------------------------------------------------------------------------------------------
New First legal mortgage over Larden Road site, Prestolite Electric Limited
Acton, London.
- ------------------------------------------------------------------------------------------------------
Butec Electrics Ltd
- ------------------------------------------------------------------------------------------------------
22 January 1988 Mortgage Debenture Butec Electrics Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Legal Mortgage over land off Cleveland Butec Electrics Limited
Road, Leyland, Preston.
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee Prestolite Electric Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee HB Switchgear
(Contractors) Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee Prestolite Wales Limited
- ------------------------------------------------------------------------------------------------------
HB Switchgear
(Contractors)
Limited
- ------------------------------------------------------------------------------------------------------
</TABLE>
Page 33
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
29 January 1987 Mortgage Debenture HB Switchgear
(Contractors) Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee Prestolite Wales Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee Prestolite Electric Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee Butec Electrics Limited
- ------------------------------------------------------------------------------------------------------
Prestolite Wales
Limited
- ------------------------------------------------------------------------------------------------------
29 January 1987 Mortgage Debenture Prestolite Wales Limited
- ------------------------------------------------------------------------------------------------------
4 April 1986 Lien 700 HB Switchgear (Contractors)
(TO BE RELEASED) Limited (Pounds)1 fully paid shares
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee Prestolite Electric Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee HB Switchgear (Contractors)
Limited
- ------------------------------------------------------------------------------------------------------
22 January 1988 Unlimited Guarantee Butec Electrics Limited
- ------------------------------------------------------------------------------------------------------
13 February 1987 Legal Mortgage land over Ipswich Road, Prestolite Wales Limited
Cardiff, South Glamorgan (known as Royal
Works)
- ------------------------------------------------------------------------------------------------------
</TABLE>
Page 34
<PAGE>
Commercial Fixed Rate Loan
Agreement
We, National Westminster Bank Plc and any person to whom we transfer our rights
or duties under this agreement agree to offer you a loan under the terms and
conditions set out below and on the attached appendix. The first part of the
appendix explains some of the words and phrases used in this agreement.
(ii) Date of offer: 18/th/ October 1999
(ii) Your name: Prestolite Electric Limited (Registered No. 1189048) Cleveland
Road, Leyland, Preston, Lancs.
(ii) Lending Branch: Cheltenham
(ii) Amount: (Pounds)2,000,000 (two million pounds).
(ii) Purpose of the Loan: To repay an element of the Parental loan
(ii) Period of the Loan: 5 years
(ii) Interest rate:
A fixed rate of interest for the whole period of the Loan. (Please see:
. paragraph 4 of the appendix for how we work out the interest; and
. paragraph 5 of the appendix for how we fix the rate of interest).
(ii) Fee: (Pounds)60,000 to include availability of the overdraft facility per
the concurrent Advice of Borrowing Terms.
(ii) Drawing the Loan: You must draw the Loan in full in one amount.
(ii) Repayment: You must have repaid the Loan in full on the last day of the
period shown in term 6 of this agreement.
Subject always to our rights under paragraph 13 of the appendix,
You will repay the Loan by 60 instalments of principal and interest
payable every month. We will tell you the amounts you need to pay to
repay the Loan in full by the last day of the period shown in term 6
of this agreement together with interest which will be calculated in
the manner referred to in paragraph 4. Such instalments will commence
one month after the date you draw the Loan.
From time to time we will tell you the instalments you must pay.
(ii) Security:
First legal mortgage over Larden Road premises, Acton, London.
First legal mortgage over site at Cleveland Road, Leyland, Preston, Lancs.
First legal mortgage over land off Ipswich Road, Cardiff, South Glamorgan
(known as Royal Works).
Cross Guarantees and Mortgage Debentures from:-
Prestolite Electric Limited,
Prestolite Wales Limited,
Page 35
<PAGE>
H B Switchgear (Contractors) Limited,
Butec Electrics Limited.
(ii) Value of Security:
The first legal mortgages shown in term 11 of this agreement together with
any security provided pursuant to paragraph 5 of the appendix must be worth
(calculated on an Open Market Value basis) at least 125% of the total
amount which you owe at any time on this Loan and the Commercial Variable
Rate Loan Agreement of even date.
(ii) Financial agreements:
You agree to the following for so long as any amounts remain outstanding
under this loan:-
Please see paragraph 2 of the appendix for an explanation of the words and
phrases used below.
(ii) You will not allow Total Borrowing to be more than 125% of Tangible
Net Worth in 1999, 100% of Tangible Net Worth in 2000, and 75% of
Tangible Net Worth thereafter.
(ii) You will not allow Cash Generated to be less than 100% of Debt
Service Costs.
(ii) You will not allow Profit to be less than 250 % of Borrowing Costs.
(ii) Management information to be provided monthly within 30 days of the
month end to which the information relates. To include Profit & Loss
and Balance Sheet statements, aged debtor analysis, funds flow
statement and specific commentary on working capital movements.
E No preference shares or redeemable ordinary shares to be
withdrawn/repaid during the term of this loan.
F Acquisitions of more than (Pounds)500,000 not to be made without the
Bank's prior agreement.
G You will not, without the prior approval of the Bank, make any
repayments of principal to Prestolite Electric Inc. under the
intra-group loan of (Pounds)6m or equivalent (this amount is after
the (Pounds)6m reduction from the total of (Pounds)8m of banking
facilities being put in place of even date by National Westminster
Bank Plc).
(ii) You will not and you (and your Parent (if specified in term 2(b))
will procure that none of your (or if your Parent is specified in
term 2(b) its) subsidiary undertakings as defined by S. 258 of the
Companies Act 1985 ("Subsidiary Undertakings") will, without our
prior written consent either create, extend or increase any security
interest on the whole or any part of your or the Group's
undertaking, property or assets (including uncalled capital) whether
present or future in aggregate above (Pounds)250,000. Security
interest includes (without limitation) liens, pledges, charges,
mortgages or other encumbrances.
(ii) You will provide us with such financial and other information
relating to you or to the Group as we may reasonably require
including (without limitation) copies of the consolidated audited
accounts of the Group not later than 6 months after the end of the
accounting period to which they relate.
In order to verify whether you are complying with these covenants, we will
refer to your management accounts on a quarterly basis and audited accounts
on an annual basis, for the Consolidated Accounts of Prestolite Electric
Limited. In respect of the Cash Generated covenant, this will be tested
quarterly on a rolling 12 month basis as follows:
3 months ended 31/3/2000
6 months ended 30/6/2000
9 months ended 30/9/2000
12 months ended 31/12/2000
12 months ended 31/3/2001 and each rolling 12 month period thereafter
(ii) Overdue payments:
Page 36
<PAGE>
If you do not make any payment under this agreement on the date it is due,
then, without prejudice to our other rights, we will charge interest on the
overdue amount from the date it was due to the date upon which we receive
payment (as well after as before judgement). This will be calculated (and
compounded in accordance with our normal practice) on the basis of a year
of 365 days and the actual number of days elapsed.
You will pay interest to us at a rate which is equal to the sum of:-
5% per year; and
our base rate from time to time
Any late payments may be debited to a separate account.
(ii) Early Repayment:
Paragraph 8 of the appendix gives details of how you may ask to repay the
Loan before the specified repayment dates. In connection with paragraph 8
of the appendix, the prepayment fee is 0.5% of the amount which you prepay.
(ii) Environmental Liabilities:
Paragraph 20 of the appendix will apply.
Page 37
<PAGE>
Appendix
(ii) Agreement
---------
This appendix forms part of the agreement between us.
If we refer to a paragraph, this will mean a paragraph of this appendix.
If we refer to a term this will mean a term of the agreement.
(ii) Meanings of words and phrases used in this agreement:
----------------------------------------------------
the `Agreement Date' means the date on which our offer is accepted in
the way set out in paragraph 3 of the appendix.
`Business Day' shall mean a day on which banks in general are open in
the City of London for the transaction of business of the nature set out
in this agreement.
`Event of Default' shall mean any event specified in paragraph 13 of the
appendix.
`the Group' means you and your (or where your Parent is specified in
term 2(b), your Parent and its) subsidiary undertakings (as defined by
Section 258 of the Companies Act 1985) taken as a whole (and, save where
the context does not admit, any of them individually); if there are no
subsidiary undertakings for the time being, references to the Group
shall be taken to be references to you and the word "consolidated" in
relation to any accounts or other financial matters shall be ignored.
The `Loan' means the loan facility which we have agreed to provide under
the terms and subject to the conditions of this agreement and, where
necessary, it will mean all amounts owed under this agreement.
`the Offer Date' is the date shown in term 1 of the agreement. This is
the date on which we make the written offer of the Loan.
`Option' means either of the interest rate options shown in term 7 of
the agreement
`Quotation' means a statement from us in response to a request under
paragraph 5 of the appendix giving details of a period and an interest
rate and any other terms under which we are willing to provide the Loan.
`the Quotation Date' is the date on which we make a Quotation.
`Security' means the security shown in term 11 of the agreement and any
other security which you provide under paragraph 6 of the appendix.
`Subsidiary Undertaking' shall mean a subsidiary undertaking (as defined
by S.258 of the Companies Act 1985).
The following definitions apply to the financial agreements in term 13
of the agreement.
`Borrowing Costs' means, in respect of any financial period, all
continuing, regular or periodic costs, charges and expenses (including
but not limited to, interest and any capitalised interest) incurred by
the Group in effecting, servicing or maintaining Total Borrowing.
`Capital Expenditure' means, in respect of any financial period, the
aggregate expenditure of the Group on the purchase of fixed assets (as
determined in accordance with generally accepted United Kingdom
accounting principles (consistently applied)).
Page 38
<PAGE>
`Cash Generated' means, in respect of any financial period, the sum
of:-
(ii) Profit; plus
(ii) an amount equal to the depreciation charged on fixed assets of
the Group during such period and any other non-cash movements; plus
(iii) an amount equal to any decrease in net working capital (being,
in respect of any period, the net surplus (or deficit) of the
aggregate stock in trade of the Group and the amount owed to members
of the Group by debtors less the amount owed by them to creditors at
the end of such period); plus
(iv) the proceeds of new ordinary or other redeemable shares issued
by you during such period.
LESS the sum of:-
(ii) an amount equal to the tax paid by the Group during such period;
plus
(ii) an amount equal to any increase in net working capital (as
defined above) during such period; plus
(iii) an amount equal to the Capital Expenditure (including
investments) by the Group during such period less an amount equal to
the net proceeds of disposal of fixed assets during such period; plus
(iv) an amount equal to the aggregate amount of dividends on ordinary
shares paid by you during such period; plus
(v) any receipts of the Group by way of extraordinary items during
such period.
`Current Assets' means all assets of the Group which would be
classified, in accordance with generally accepted United Kingdom
accounting principles (consistently applied) as current assets.
`Current Liabilities' means all liabilities of the Group which would
be classified, in accordance with generally accepted United Kingdom
accounting principles (consistently applied) as current liabilities.
`Debt Service Costs' means, in respect of any financial period:-
(ii) all interest, commission, periodic fees and other financial
charges payable by any member of the Group during such period
(including the interest element payable under finance leases);
plus
(ii) the aggregate amount of all dividend payments on redeemable
preference shares (and other redeemable shares) made by you during
such period; plus
(iii) the aggregate amount of all debt repayments made by any member
of the Group or due from any member of the Group (including redemption
of any redeemable preference shares and inter company and parental
loans) during such period.
`Net Cash Flow before Financing' means, in respect of any financial
period, the sum of:-
(ii) Profit; plus
(ii) an amount equal to the depreciation charged on fixed assets of
the Group during such period and any other non- cash movements during
such period; plus
Page 39
<PAGE>
(iii) an amount equal to any decrease in net working capital (being,
in respect of any period, the net surplus (or deficit) of the
aggregate stock in trade of the Group and the amount owed to members
of the Group by debtors less the amount owed by them to creditors at
the end of such period);
LESS the sum of:-
(ii) an amount equal to the tax paid by the Group during such period;
plus
(ii) an amount equal to any increase in net working capital (as
defined above) during such period; plus
(iii) an amount equal to the Capital Expenditure (including
investments) by the Group during such period less an amount equal to
the net proceeds of disposal of fixed assets during such period; plus
(iv) an amount equal to the interest paid (less interest received) by
the Group for such period; plus
(v) an amount equal to the aggregate amount of dividends on ordinary
shares paid by you during such period; plus
(vi) any receipts of the Group by way of extraordinary items during
such period.
`Net Working Assets' means, in respect of any period, the aggregate
stock in trade of the Group and the amounts owed to members of the Group
by trade debtors less the amounts owed by them to trade creditors at the
end of such period.
`Profit' means, in respect of any financial period, the amount of
profit of the Group (excluding profit attributable to minority
interests) before taxation, interest payable, and any unusual,
extraordinary or exceptional items.
`Tangible Net Worth' means the amount for the time being paid up or
credited as paid up on your (or where your Parent is specified in term
2(b), your Parent's) issued share capital plus all reserves of the Group
which would, in accordance with generally accepted United Kingdom
accounting principles (consistently applied) be classified as
shareholders capital plus retained earnings of the Group but deducting
assets of the Group which would, in accordance with such principles, be
classified as intangible assets.
`Total Borrowing' means the total outstanding principal amount of all
borrowings or monies otherwise raised by the Group from all sources
whatever, whether by way of debenture, mortgage, unsecured loan,
overdraft or in any other manner (including redeemable preference shares
and inter company and parental loans) plus the aggregate face amount of
all discounted acceptance credits.
(ii) Availability of Loan
--------------------
From the Offer Date shown in term 1 of the agreement you will have 30 days
in which you can draw the Loan. However, you can only accept this offer and
draw the Loan if we have received the following items from you and are
satisfied with them:-
a) A copy of this agreement with the acceptance form signed on your
behalf (and if your Parent is specified in term 2(b) on behalf of your
Parent).
b) A certified copy of a resolution of your board of directors (and if
your Parent is specified in term 2(b) a copy of a resolution of its
board of directors) showing that you (and if applicable your Parent)
. accept the terms and conditions of the Loan;
Page 40
<PAGE>
. agree to give the security set out in term 11 of the agreement; and
. authorise a person or persons to take such other action on your
behalf (and if applicable your Parent's behalf) as may be necessary
for the purpose of the agreement.
c) Your (and if your Parent is specified in term 2(b) its) Certificate
of Incorporation and such other evidence as we may require that you
and (if your Parent is specified in term 2(b)) your Parent are
companies incorporated in England, Wales or Scotland under the
Companies Act 1985 (or any predecessor Act) and that neither you nor
your Parent are a charity.
d) The security set out in term 11 of the Agreement together with
certified copies of such board resolutions and shareholders
resolutions from the giver of such security as we may require and, in
the case of a corporate entity which is giving security to us which is
either (I) a charity or (ii) a Non-Companies Act company, a certified
copy of its Memorandum and Articles of Association rules or other
equivalent constitutional documents certified by its Secretary or a
Director as being up to date (including copies of all amending
resolutions). A "Non-Companies Act Company" is any company other than
a company incorporated in England, Wales or Scotland under the
Companies Act 1985 (or any predecessor Act).
e) Written confirmation from Prestolite Electric Inc. that it will not
seek any repayment under its intra-group loan (after the (Pounds)6m
reduction now to be effected by this and other facilities provided by
National Westminster Bank Plc), until such time as no further amounts
remain outstanding under this Facility.
You must give us three days' notice of your intention to draw the Loan.
These days must be Business Days. We will credit your current account with
the amount of the Loan on the day on which you accept the Quotation.
You may not draw the Loan until we are satisfied that you have accepted a
Quotation.
Acceptance of the offer contained in this agreement may be effected by
receipt by us at the lending branch (please see term 3 of the agreement)
within thirty days of the date specified in term 1 of the agreement of the
items specified in this paragraph.
(ii) Interest
--------
We will work out interest on the balance of the Loan outstanding from day
to day on the basis of the actual number of days elapsed and a 365 day
year.
You must pay interest to us on our usual charging days in March, June,
September and December or by combined interest and principal instalments
(where specified under term 10) on such dates as are specified under term
10 of the agreement.
You will pay a fixed rate of interest for the entire period of the Loan as
specified in your Quotation. This rate of interest will be the rate shown
in the Quotation.
We may charge interest to your current account or to your loan account.
If you do not make any payments on the due date under this agreement, then
the rate of interest specified in term 14 shall apply to any overdue
amounts.
(ii) Fixed Rate of Interest
----------------------
You must give us three days' notice in writing of the date on which you
want to draw the Loan. All these days must be Business Days.
If we have received the items listed in paragraph 3 of this appendix
(within the time period set out there), you may ask for a Quotation at any
time up to 4 p.m. on the required day for the Loan (which must be a
Business Day). You must also tell us the interest rate option you want.
Page 41
<PAGE>
You must accept or reject our Quotation immediately. If you do not accept
the Quotation immediately you shall be deemed to have rejected it.
Once you have accepted the Quotation we will normally send to you written
details of the terms of the Quotation. These details will include the
interest rate and the period for which such rate applies repayment dates
and repayment instalment amounts but if you do not receive these written
details it will not affect your obligations in respect of the Quotation
which you have accepted.
Accepting the Quotation in any way (whether by telephone telex or in any
other way) shall be binding on you and will mean that you will have to
borrow the full amount of the Loan as set out in this agreement and the
Quotation on the Quotation Date.
If we do not receive instructions from you in relation to the Quotation
which you have accepted we shall be entitled to credit the amount of the
Loan to a current account in your name at the lending branch shown in term
3 of the agreement and you shall be deemed to have drawn the Loan.
(ii) Security
--------
You must give us the security shown in term 11 of the agreement and this
will be a continuing security for the discharge on demand of all your
indebtedness and your other liabilities to us from time to time.
You undertake to provide any extra security which we need to maintain the
value of the Security at the level specified in term 12 of the agreement
within such period as we may require. The open market value of the Security
shall be determined at our option from time to time by an independent
professional valuation. You will have to pay for this valuation.
(ii) Fees and Costs
--------------
We have the right to debit your current account with the fees set out in
term 8 and 15 of the agreement.
(ii) Early Repayment
---------------
We may (but are not obliged to) agree to let you repay the Loan early if
you ask us in writing. You must give us five days notice in writing to do
this. This notice shall be irrevocable and these days must be Business
Days. If we allow you to repay the Loan early, the prepayment will be on
such terms as we may require including (without limitation) you
indemnifying us against any funding or other costs, losses, expenses or
liabilities (including loss of profit) sustained or incurred by us as a
result of such prepayment. An example of the method by which we shall,
until further notice, calculate this amount is set out in the attached
Schedule.
If we allow you to repay the Loan early you will also have to pay us the
prepayment fee set out in term 15 of the agreement.
A certificate by one of our officers as to any of the amounts due from you
under this paragraph shall, save for manifest error, be conclusive evidence
(and admissible as such) against and binding on you.
You cannot reborrow any amount you have prepaid.
(ii) Liability
---------
If you are more than one person then the expression "you" shall mean all of
such persons and (save where the context does not so admit) any of them and
the obligation of those persons shall be joint and several.
Each such person irrevocably appoints each other person as his agent for
the service of any demand or notice under this agreement.
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(ii) Current Accounts
----------------
You agree to maintain a current account with us throughout the period of
the Loan.
(ii) Payments
--------
We may transfer amounts from your current account to meet the repayments
set out in term 10 of the agreement.
We may use any repayment instalment (including instalments of principal and
interest) or any part of any repayment instalment to:
. reduce the amount of principal outstanding on the Loan.
. pay interest accrued on the Loan.
. discharge any other payment due under this agreement.
You must make all payments under this agreement in full in pounds sterling
without any deduction or withholding (whether in respect of set-off,
counterclaim, duties, taxes, charges or otherwise howsoever). If you are
compelled by law to make any deduction or withholding, you will promptly
pay to us such additional amounts as will make the net amount received by
us equal to the full amount payable by you had there been no deduction or
withholding.
(ii) Set-Off
-------
We shall be entitled to set-off against any of your liabilities to us under
this agreement (whether present, future, actual or contingent) any of your
credit balances on any of your accounts with us or in your name. We do not
have to give you any prior notice to do this.
(ii) Default
-------
If any of the following events occur, we may, by giving you written notice,
cancel our outstanding commitments to you (including the availability of
the Loan if you have not drawn it) and demand immediate repayment of your
indebtedness to us and exercise our rights under any Security:-
(ii) If you breach any term or condition (including any covenant) of
this agreement.
(ii) If you do not make any payment on the date it is due under this
agreement and whether by way of principal, interest or otherwise.
(ii) If you do not use the Loan for the purpose set out in term 5 of the
agreement.
(ii) If the Security or any part of the Security shall cease to be fully
enforceable in accordance with its terms or with effect from the
date on which the determination of the continuing nature of the
Security or any part of the Security occurs, such continuing nature
is determined whether such determination be by actual or
constructive notice or be deemed to have occurred or any binding
undertaking provided in the Security or any part of the Security
shall be breached or any guarantor gives or purports to give notice
to terminate its liabilities under any guarantee in respect of the
Loan.
(ii) If you sell or dispose of any asset listed in term 11 of the
agreement or it ceases to be in your sole possession.
(ii) If your current account becomes overdrawn after the debiting of any
payment due from you under the Loan or it becomes overdrawn in
excess of any limit agreed with us and you do not offer payment in
cash to us when we inform you of this.
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<PAGE>
(ii) If any representation, warranty or statement made to us by you in
connection with the Loan is breached or is false or if you fail to
tell us anything which in our opinion is material to the Loan.
(ii) If you or any member of the Group make any default in the
performance of any other agreement for borrowed money whether with
us or any other lender whereby the due date of repayment thereunder
is rendered capable of acceleration; or
if any of your indebtedness or the indebtedness of any member of
the Group becomes or is declared by the holder or the lender
thereof to be due and payable prior to its stated maturity or such
indebtedness is not repaid in full at its stated maturity; or
if such indebtedness (including the indebtedness of any member of
the Group) is repayable on demand and is not repaid in full
immediately upon demand being made or if any guarantee or indemnity
given by any giver of security in connection with any of your
liabilities to us or the liabilities of any member of the Group to
us or any other lender is not honoured when due and called upon.
(ii) If a petition is presented or a resolution passed for your winding
up or that of any member of the Group or a petition is presented
for an administration order to be made in relation to you or any
member of the Group; or
your directors or the directors of any member of the Group make a
proposal for a voluntary arrangement with your creditors or the
creditors of any member of the Group; or
you are unable to pay your debts within the meaning of Section 123
of the Insolvency Act 1986 or any member of the Group is unable to
pay its debts within the meaning of such section or an encumbrancer
takes possession of or a receiver or an administrative receiver is
appointed over any of your assets or over the assets of any member
of the Group.
(ii) If there shall occur in our opinion a material effective change of
control (as defined by Section 840 of the Income and Corporation
Taxes Act 1988) of you or your Parent.
(ii) If there has occurred any change which in our reasonable opinion is
a material adverse change in your business, assets or financial
condition or in the business, assets or financial condition of the
Group or any member of the Group which, in our reasonable opinion,
may affect your ability to comply with your obligations under this
agreement.
(ii) If any judgement, distress, warrant of attachment, writ of
execution or similar process is issued, levied or enforced upon any
of your assets or the assets of any member of the Group or if any
asset held by the Bank as security for the Loan is charged or
becomes encumbered elsewhere.
(ii) If you or any member of the Group ceases or threatens to cease to
carry on its business or sells, transfers or otherwise disposes of
in any one transaction or series of related transactions any
substantial part of its assets.
(ii) If you cease to be a Subsidiary Undertaking of Prestolite Electric
Holding, Inc.
(ii) Delay in exercising our rights
------------------------------
If we delay in giving any notice or exercising any of our rights under this
agreement this should not be construed as a waiver of any of our rights.
(ii) Demands and Notices
-------------------
Any demand or notice to you will be made in writing and be signed by one of
our officers and served either by personal delivery on you at any place or
by post addressed to you at your place of business last known to us.
Service by post on you shall be deemed to be effective on the next Business
Day after the date of posting even if it is returned undelivered.
Any notice to us under this agreement must be made in writing and signed by
you or where you are a
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<PAGE>
company, by a duly authorised officer on your behalf. It must be delivered
by hand or by post to the lending branch specified in term 3 of the
agreement.
(ii) Costs and Expenses
------------------
You will pay all costs, charges and expenses arising in connection with the
Loan and the Security including the negotiation and preparation of this
agreement and the Security and all costs, charges and expenses arising in
connection with the preservation and/or enforcement of our rights under
this agreement or under the Security and will indemnify us for any and all
losses, costs and expenses occasioned by the occurrence of an Event of
Default.
17 Increased Costs and Illegality
------------------------------
(a) If we determine in our opinion that as a result of any Requirement
or compliance by us with any Requirement the cost to us of funding,
maintaining or making available the Loan (or any undrawn amount of the
Loan) is increased or the effective return to us on the Loan or on our
capital is reduced, then you shall pay to us on demand such sums as may be
certified to you by us as shall compensate us for the increased cost or
reduction. `Requirement' means any law, regulation, directive or official
request (whether or not having the force of law) and includes any change in
its interpretation or application. It also includes any Requirement
relating to a change in currency of a country.
(ii) If the effect of the introduction of or any change in applicable law or
directive or the interpretation of such law or directive is to make or
purport to make the Loan unlawful then our obligations under this agreement
shall cease and you will on demand pay to us all amounts outstanding under
the Loan.
18 General Points
--------------
(a) If at any time any one or more of the provisions in this agreement
is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality or enforceability of the remaining provisions of this
agreement shall not in any way be affected or impaired.
(ii) Unless we expressly agree to do so in writing we do not hold ourselves out
as providing advice on or considering the general suitability of this Loan
for your particular circumstances (including tax circumstances) and neither
we nor our employees shall be liable for any indications given as to such
suitability. We make no warranties or representations about the
advisability of any underlying transaction entered into by you. You should
obtain independent professional advice on such matters, and upon any
Security required by us.
(ii) If more than one currency or currency unit are at the same time recognised
by the Bank of England as the lawful currency of the United Kingdom then:
any reference in this agreement to, and any obligations arising under this
agreement in, the currency of the United Kingdom shall be translated into,
or paid in, the currency or currency unit of the United Kingdom designated
by us; and
any translation from one currency or currency unit to another shall be at
the official rate of exchange recognised by the Bank of England for the
conversion of that currency or currency unit into the other, rounded up or
down by us acting reasonably.
(ii) If a change in any currency of the United Kingdom occurs, this agreement
will be amended to the extent we specify to be necessary to reflect the
change in currency and to put us in the same position, so far as possible,
that we would have been in if no change in currency had occurred.
(ii) We may assign or transfer all or any of our rights and obligations
under the Loan. You may not assign or transfer any of your rights
or obligations under the Loan.
(ii) This agreement is governed by the laws of England.
(ii) All expressions in this agreement bearing a plural meaning shall
(where the context so admits) also bear the singular meaning and
vice versa.
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<PAGE>
(ii) All references in this agreement to any statutory provision shall
be deemed to include any statutory modification or re-enactment of
such provision.
(ii) Representations and Warranties
------------------------------
You represent and warrant that you have full power to accept and be bound
by the terms and conditions set out in this agreement and to draw the Loan
and that you have taken all necessary steps and obtained all necessary
consents and authorisations to do so and that accordingly this agreement
constitutes your legal, valid and binding obligations fully enforceable in
accordance with their terms.
You represent and warrant as follows:-
(ii) You are duly incorporated and validly existing under the laws of
England.
(ii) No Event of Default has occurred or is outstanding and no event has
occurred which with the giving of notice or the lapse of time would
constitute an Event of Default.
(ii) All information, exhibits and reports furnished to us in connection
with this agreement were and remain true and accurate in all
respects and do not omit any facts thereby rendering misleading any
statement contained therein.
(d) The representations and warranties set out above shall survive your
acceptance of this agreement and the drawing of the Loan and shall be
deemed to be repeated on each day throughout the period of the Loan with
reference to the facts and circumstances existing at that time.
(e) A suitably authorised officer of your Parent Company has seen and
approved the terms of this agreement.
20 Environmental Matters
---------------------
(a) We may at any time during the period of the Loan require you to
obtain a written up-date of the environmental audit referred to in
paragraph 3 of the appendix (or if no audit was required under paragraph 3,
a written confirmation that neither your assets nor the use of those assets
has broken or is likely to break any Environmental Law). This must be done
by an environmental consultant acceptable to us and at your expense.
(ii) You must notify us immediately if you receive any claim, notice or
other communication in respect of any alleged breach of
Environmental Law.
(ii) You undertake to notify us immediately if any Environmental Licence
is withdrawn or is not renewed.
(ii) You must give us certified copies of any new Environmental Licence
and any renewal of any Environmental Licences within twenty-eight
days of issue and you must meet all associated costs and expenses.
(ii) You represent and warrant to us that you have obtained all
necessary Environmental Licences and you have at all times complied
in all material respects with the terms and conditions of the
Environmental Licences applicable to you and all other applicable
Environmental Law.
You also confirm that no Hazardous Materials (other than those incidental
to your business and which are stored in full compliance with Environmental
Licence(s)) have been used, disposed of, generated, stored, transported,
deposited, buried or emitted at, on, from or under any premises (whether or
not owned, leased, occupied or controlled by you) in circumstances where
this might result in a liability on you.
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<PAGE>
(ii) You represent that you have not received any notices of withdrawal,
violations and/or advisory action by regulatory agencies regarding
environmental control matters or Environmental Licence compliance.
(ii) You will indemnify and hold us and our respective officers,
directors, employees and agents (the `Indemnified Parties') free
and harmless from and against any and all actions, causes of
action, losses, costs, liabilities and damages of any kind and
every kind of character known or unknown, fixed or contingent, out
of pocket or consequential and all expenses incurred in connection
therewith including reasonable legal fees and disbursements
(irrespective of whether any such Indemnified Parties are a party
to the action for which indemnification is sought) (the
"Indemnified Environmental Liabilities") incurred by the
Indemnified Parties or any of them as a result of or arising out of
or relating to:-
(ii) The imposition or recording of any liens, pledges, charges or
mortgages on or over any of your assets by any government agency or
local governmental agency or authority pursuant to any
Environmental Law or the removal of any such liens, pledges,
charges or mortgages over any of your assets.
(ii) The claims of any private parties or local government or government
agency or authority regarding violations of Environmental Law in
connection with your operations or the effect of the presence of
any Hazardous Material on the value of the assets belonging to you
or in connection with compliance by you or the Indemnified Parties
with any regulation or order issued pursuant to Environmental Law.
Your obligations to the Indemnified Parties shall continue after
you have repaid the Loan. For the purposes of this agreement:-
"Environmental Law" shall mean any law, regulation, code of practice,
circular, guidance notes or the like (whether in the United Kingdom or
elsewhere and whether now existing or subsequently enacted or
promulgated) or any judicial or administrative interpretation thereof
concerning the protection of human health or the environment or the
conditions of the work place or the generation, transportation,
storage, treatment and disposal of hazardous materials.
"Hazardous Materials" shall mean any radioactive emissions and any
natural or artificial substance (whether in solid or liquid form or in
the form of a gas or vapour and whether alone or in combination with
any other substance) which are defined, determined identified
prohibited, limited or regulated by Environmental Law or any other
chemical, material, substance or element existing now or in the future
and which is capable of causing harm to man or any other living
organism which is capable of damaging the environment or public health
or welfare including any controlled, special, dangerous, toxic,
radioactive or hazardous waste.
"Environmental Licence" shall mean any permit, licence or
authorisation, consent or other approval required by Environmental
Law.
/s/ Jon Hays
-------------
For and on behalf of
National Westminster Bank Plc
FORM OF ACCEPTANCE
------------------
We accept the Loan on the terms and conditions set out in this
agreement
By: /s/ John Wilkinson
-------------------
For and on behalf of Prestolite Electric Limited
Date: /s/ 2/nd/ November, 1999
------------------------
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<PAGE>
SCHEDULE
Indicative Calculation of Maximum Breakage Costs
Actuarial Style (Reducing Capital and Interest)
- ----------------------------------------------
Original Loan Amount (Pounds)500,000
Term of Loan 2 Years
Fixed Rate 10.25%
Term Expired 1 Year
Loan Amount Outstanding (Pounds)251,505
Available Rate at Early
Repayment Date 8.625%
Breakage Costs (Pounds)4,401*
As a guide only, the formula which will apply can be stated as follows:
Current amount of loan outstanding
-------
Multiplied by
Remaining period (in years) to maturity of the fixed rate period
Multiplied by
Existing loan rate minus (Current available fixed rate for the remaining term
-------
minus 0.125% )
Actual breakage costs will be confirmed on the day early redemption takes place
*Note: The breakage cost payable is subject to a minimum of 0.125% and in
addition to the 0.5% prepayment fee
Page 48
<PAGE>
Agreement
We, National Westminster Bank Plc and any person to whom we transfer our rights
or duties under this agreement agree to offer you a loan under the terms and
conditions set out below and on the attached appendix. The first part of the
appendix explains some of the words and phrases used in this agreement.
(ii) Date of offer: 18/th/ October 1999
2 Your name: Prestolite Electric Limited ( Registered No. 1189048 ) Cleveland
Road, Leyland, Preston, Lancs.
(ii) Lending Branch: Cheltenham
(ii) Amount: (Pounds)2,000,000 (two million pounds)
5 Purpose of the Loan: Repay element of Parental Loan
(ii) Period of the Loan: 5 years
7 Interest rate: You will pay interest at a rate equal to the sum of 1.375%
per year plus the Bank's base rate from time to time.
(ii) Fee: (Pounds)60,000 to include availability of the overdraft facility per
the Advice of Borrowing Terms of even date.
(ii) Drawing the Loan: You may draw the Loan in full in one amount or in stages.
If stage drawings are required, these are permitted subject to minimum
single drawings of (Pounds)500,000. Full drawdown must be achieved within
12 months of the Agreement Date. If the Loan is not drawn in full within
this period, the undrawn part of the Loan will be deemed to be cancelled
and no longer available for drawing.
(ii) Repayment: You must have repaid the Loan in full on the last day of the
period shown in term 6 of this agreement (such period commencing on the
earlier of the date on which the Loan is drawn in full and the date on
which any undrawn part of the Loan is cancelled under term 9 of this
agreement).
Subject always to our rights under paragraph 12 of the appendix,
You will repay the Loan by 60 instalments of principal and interest
payable every one month. We will tell you the amounts you need to pay
to repay the Loan in full by the last day of the period shown in term
6 of this agreement together with interest which will be calculated in
the manner referred to in paragraph 4 of the appendix. Such
instalments will commence 1 month after the earlier of the date on
which you draw the Loan in full and the date on which any undrawn part
of the Loan is cancelled under term 9 of this agreement.
From time to time we will tell you the instalments you must pay.
From the date on which a drawing is first made under the Loan until
such date as you commence your instalments of principal and interest
hereunder, interest at the rate specified in this agreement may be
debited to your loan account on our usual charging days in March,
June, September and December.
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<PAGE>
(ii) Security:
First legal mortgage over Larden Road Premises, Acton, London.
First legal mortgage over land off Ipswich Road, Cardiff (known as Royal
Works). First legal mortgage over site at Cleveland Road, Leyland,
Preston, Lancashire.
Cross Guarantees and Mortgage Debentures from:-
Prestolite Electric Limited,
Prestolite Wales Limited,
H B Switchgear (Contractors) Limited,
Butec Electrics Limited.
(ii) Value of Security:
The first legal mortgages shown in term 11 of this agreement together with
any security provided pursuant to paragraph 5 of the appendix must be worth
(calculated on an Open Market Value basis) at least 125% of the total
amount which you owe at any time on this Loan and the Commercial Fixed Rate
Loan Agreement of even date.
(ii) Financial agreements:
You agree to the following for as long as any amounts remain outstanding
under this loan.
Please see paragraph 2 of the appendix for an explanation of the words and
phrases used below.
(ii) You will not allow Total Borrowing to be more than 125% of Tangible
Net Worth in 1999, 100% of Tangible Net Worth in 2000, and 75% of
Tangible Net Worth thereafter.
(ii) You will not allow Cash Generated to be less than 100% of Debt
Service Costs.
(ii) You will not allow Profit to be less than 250% of Borrowing Costs.
(ii) Management information to be provided monthly within 30 days of the
month end to which the information relates. To include Profit &
Loss and Balance Sheet statements, aged debtor analysis, funds flow
statement and specific commentary on working capital movements.
E No preference shares or redeemable ordinary shares to be
withdrawn/repaid during the term of this loan.
F Acquisitions of more than (Pounds)500,000 not to be made without
the Bank's prior agreement.
G You will not, without the prior approval of the Bank, make any
repayments of principal to Prestolite Electric Inc. under the
intra-group loan of (Pounds)6m or equivalent (this amount is after
the (Pounds)6m reduction from the total of (Pounds)8m of banking
facilities being put in place of even date by National Westminster
Bank Plc).
(ii) You will not and you (and your Parent (if specified in term 2(b))
will procure that none of your (or if your Parent is specified in
term 2(b) its) subsidiary undertakings as defined by S.258 of the
Companies Act 1985 ("Subsidiary Undertakings") will, without our
prior written consent either create, extend or increase any
security interest on the whole or any part of your or the Group's
undertaking, property or assets (including uncalled capital)
whether present or future in aggregate above (Pounds)250,000.
Security interest includes (without limitation) liens, pledges,
charges, mortgages or other encumbrances.
(ii) You will provide us with such financial and other information
relating to you or to the Group as we may reasonably require
including (without limitation) copies of the consolidated audited
accounts of the Group not later than 6 months after the end of the
accounting period to which they relate.
In order to verify whether you are complying with these covenants, we
will refer to your management accounts on a quarterly basis and audited
accounts on an annual basis, for the consolidated accounts of Prestolite
Electric Limited. In respect of the Cash Generated covenant (point b
above), this will be tested quarterly on a rolling 12 month basis as
follows:
3 months ended 31/3/2000
6 months ended 30/6/2000
9 months ended 30/9/2000
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<PAGE>
12 months ended 31/12/2000
12 months ended 31/3/2001 and each rolling 12 month period thereafter.
(ii) Overdue payments:
If you do not make any payment under this agreement on the date it is due,
then, without prejudice to our other rights, we will charge interest on the
overdue amount from the date it was due to the date upon which we receive
payment (as well after as before judgement). This will be calculated (and
compounded in accordance with our normal practice) on the basis of a year
of 365 days and the actual number of days elapsed.
You will pay interest to us at a rate which is equal to the sum of:-
5% per year; and
our base rate from time to time
Any late payments may be debited to a separate account.
(ii) Early Repayment:
Paragraph 7 of the appendix gives details of how you may ask to repay the
Loan before the specified repayment dates. In connection with paragraph 7
of the appendix, the prepayment fee is 0.5% of the amount which you prepay.
(ii) Environmental Liabilities
-------------------------
Paragraph 18 of the Appendix will apply.
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<PAGE>
Appendix
(ii) Agreement
---------
This appendix forms part of the agreement between us.
If we refer to a paragraph, this will mean a paragraph of this appendix.
If we refer to a term this will mean a term of the agreement.
(ii) Meanings of words and phrases used in this agreement:
----------------------------------------------------
the `Agreement Date' means the date on which our offer is accepted in
the way set out in paragraph 3 of the appendix.
`Business Day' shall mean a day on which banks in general are open in
the City of London for the transaction of business of the nature set
out in this agreement.
`Event of Default' shall mean any event specified in paragraph 12 of
the appendix.
`the Group' means you and your (or where your Parent is specified in
term 2(b), your Parent and its) subsidiary undertakings (as defined by
Section 258 of the Companies Act 1985) taken as a whole (and, save
where the context does not admit, any of them individually); if there
are no subsidiary undertakings for the time being, references to the
Group shall be taken to be references to you and the word
"consolidated" in relation to any accounts or other financial matters
shall be ignored.
The `Loan' means the loan facility which we have agreed to provide
under the terms and subject to the conditions of this agreement and,
where necessary, it will mean all amounts owed under this agreement.
`the Offer Date' is the date shown in term 1 of the agreement. This is
the date on which we make the written offer of the Loan.
`Security' means the security shown in term 11 of the agreement and
any other security which you provide under paragraph 5 of the
appendix.
`Subsidiary Undertaking' shall mean a subsidiary undertaking (as
defined by S.258 of the Companies Act 1985).
The following definitions apply to the financial agreements in term
13 of the agreement.
`Borrowing Costs' means, in respect of any financial period, all
continuing, regular or periodic costs, charges and expenses (including
but not limited to, interest and any capitalised interest) incurred by
the Group in effecting, servicing or maintaining Total Borrowing.
`Capital Expenditure' means, in respect of any financial period, the
aggregate expenditure of the Group on the purchase of fixed assets (as
determined in accordance with generally accepted United Kingdom
accounting principles (consistently applied)).
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<PAGE>
`Cash Generated' means, in respect of any financial period, the sum
of:-
(ii) Profit; plus
(ii) an amount equal to the depreciation charged on fixed assets of
the Group during such period and any other non-cash movements; plus
(iii) an amount equal to any decrease in net working capital (being,
in respect of any period, the net surplus (or deficit) of the
aggregate stock in trade of the Group and the amount owed to members
of the Group by debtors less the amount owed by them to creditors at
the end of such period); plus
(iv) the proceeds of new ordinary or other redeemable shares issued
by you during such period.
LESS the sum of:-
(ii) an amount equal to the tax paid by the Group during such
period; plus
(ii) an amount equal to any increase in net working capital (as
defined above) during such period; plus
(iii) an amount equal to the Capital Expenditure (including
investments) by the Group during such period less an amount equal to
the net proceeds of disposal of fixed assets during such period;
plus
(iv) an amount equal to the aggregate amount of dividends on
ordinary shares paid by you during such period; plus
(v) any receipts of the Group by way of extraordinary items during
such period.
`Current Assets' means all assets of the Group which would be
classified, in accordance with generally accepted United Kingdom
accounting principles (consistently applied) as current assets.
`Current Liabilities' means all liabilities of the Group which would
be classified, in accordance with generally accepted United Kingdom
accounting principles (consistently applied) as current liabilities.
`Debt Service Costs' means, in respect of any financial period:-
(ii) all interest, commission, periodic fees and other financial
charges payable by any member of the Group during such
period (including the interest element payable under
finance leases); plus
(ii) the aggregate amount of all dividend payments on redeemable
preference shares (and other redeemable shares) made by you during
such period; plus
(iii) the aggregate amount of all debt repayments made by any member
of the Group or due from any member of the Group (including
redemption of any redeemable preference shares and inter company and
parental loans) during such period.
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<PAGE>
`Net Cash Flow before Financing' means, in respect of any financial
period, the sum of :-
(ii) Profit; plus
(ii) an amount equal to the depreciation charged on fixed assets of
the Group during such period and any other non- cash movements
during such period; plus
(iii) an amount equal to any decrease in net working capital (being,
in respect of any period, the net surplus (or deficit) of the
aggregate stock in trade of the Group and the amount owed to members
of the Group by debtors less the amount owed by them to creditors at
the end of such period);
LESS the sum of :-
(ii) an amount equal to the tax paid by the Group during such
period; plus
(ii) an amount equal to any increase in net working capital (as
defined above) during such period; plus
(iii) an amount equal to the Capital Expenditure (including
investments) by the Group during such period less an amount equal to
the net proceeds of disposal of fixed assets during such period;
plus
(iv) an amount equal to the interest paid (less interest received)
by the Group for such period; plus
(v) an amount equal to the aggregate amount of dividends on ordinary
shares paid by you during such period; plus
(vi) any receipts of the Group by way of extraordinary items during
such period.
`Net Working Assets' means, in respect of any period, the aggregate
stock in trade of the Group and the amounts owed to members of the
Group by trade debtors less the amounts owed by them to trade
creditors at the end of such period.
`Profit' means, in respect of any financial period, the amount of
profit of the Group (excluding profit attributable to minority
interests) before taxation, interest payable, and any unusual,
extraordinary or exceptional items.
`Tangible Net Worth' means the amount for the time being paid up or
credited as paid up on your (or where your Parent is specified in term
2(b), your Parent's) issued share capital plus all reserves of the
Group which would, in accordance with generally accepted United
Kingdom accounting principles (consistently applied) be classified as
shareholders capital plus retained earnings of the Group but deducting
assets of the Group which would, in accordance with such principles,
be classified as intangible assets.
`Total Borrowing' means the total outstanding principal amount of
all borrowings or monies otherwise raised by the Group from all
sources whatever, whether by way of debenture, mortgage, unsecured
loan, overdraft or in any other manner (including redeemable
preference shares and inter company and parental loans) plus the
aggregate face amount of all discounted acceptance credits.
(ii) Availability of Loan
--------------------
From the Offer Date shown in term 1 of the agreement you will have 30
days in which you can draw the Loan. However, you can only accept this
offer and draw the Loan if we have received the following items from you
and are satisfied with them:-
Page 54
<PAGE>
a) A copy of this agreement with the acceptance form signed on your
behalf (and if your Parent is specified in term 2(b) on behalf of your
Parent).
b) A certified copy of a resolution of your board of directors (and if
your Parent is specified in term 2(b) a copy of a resolution of its
board of directors) showing that you (and if applicable your Parent)
. accept the terms and conditions of the Loan;
. agree to give the security set out in term 11 of the agreement;
and
. authorise a person or persons to take such other action on your
behalf (and if applicable your Parent's behalf) as may be
necessary for the purpose of the agreement.
c) Your (and if your Parent is specified in term 2(b) its) Certificate
of Incorporation and such other evidence as we may require that you
and ( if your Parent is specified in term 2(b)) your Parent are
companies incorporated in England, Wales or Scotland under the
Companies Act 1985 (or any predecessor Act) and that neither you nor
your Parent are a charity.
d) The security set out in term 11 of the Agreement together with
certified copies of such board resolutions and shareholders
resolutions from the giver of such security as we may require and, in
the case of a corporate entity which is giving security to us which is
either (I) a charity or (ii) a Non-Companies Act company, a certified
copy of its Memorandum and Articles of Association rules or other
equivalent constitutional documents certified by its Secretary or a
Director as being up to date (including copies of all amending
resolutions). A "Non-Companies Act Company" is any company other than
a company incorporated in England, Wales or Scotland under the
Companies Act 1985 (or any predecessor Act).
e) Written confirmation from Prestolite Electric Inc. that it will not
seek any repayment under its intra-group loan (after the (Pounds)6m
reduction now to be effected by this and other facilities provided by
National Westminster Bank Plc), until such time as no further amounts
remain outstanding under this Facility.
You must give us three days' notice of your intention to draw the Loan or
any part of it. These days must be Business Days. We will credit your
current account with the amount of your drawing
Acceptance of the offer contained in this agreement may be effected by
receipt by us at the lending branch (please see term 3 of the agreement)
within thirty days of the date specified in term 1 of the agreement of the
items specified in this paragraph.
(ii) Interest
--------
We will work out interest on the balance of the Loan outstanding from day
to day on the basis of the actual number of days elapsed and a 365 day
year.
You must pay interest to us on our usual charging days in March, June,
September and December or by combined interest and principal instalments
(where specified under term 10) on such dates as are specified under term
10 of the agreement.
You will pay a fixed rate of interest for the entire period of the Loan as
specified in your Quotation. This rate of interest will be the rate shown
in the Quotation.
We may charge interest to your current account or to your loan account.
If you do not make any payments on the due date under this agreement, then
the rate of interest specified in term 14 shall apply to any overdue
amounts.
(ii) Security
--------
You must give us the security shown in term 11 of the agreement and this
will be a continuing security for the discharge on demand of all your
indebtedness and your other liabilities to us from time to time.
Page 55
<PAGE>
You undertake to provide any extra security which we need to maintain the
value of the Security at the level specified in term 12 of the agreement
within such period as we may require. The open market value of the Security
shall be determined at our option from time to time by an independent
professional valuation. You will have to pay for this valuation.
(ii) Fees and Costs
--------------
We have the right to debit your current account with the fees set out in
term 8 and 15 of the agreement.
(ii) Early Repayment
---------------
We may (but are not obliged to) agree to let you repay the Loan early if
you ask us in writing. You must give us five days notice in writing to do
this. This notice shall be irrevocable and these days must be Business
Days. If we allow you to repay the Loan early, the prepayment will be on
such terms as we may require including (without limitation) you
indemnifying us against any funding or other costs, losses, expenses or
liabilities (including loss of profit) sustained or incurred by us as a
result of such prepayment.
If we allow you to repay the Loan early you will also have to pay us the
prepayment fee set out in term 15 of the agreement.
You cannot reborrow any amount you have prepaid.
(ii) Liability
---------
If you are more than one person then the expression "you" shall mean all of
such persons and (save where the context does not so admit) any of them and
the obligation of those persons shall be joint and several.
Each such person irrevocably appoints each other person as his agent for
the service of any demand or notice under this agreement.
(ii) Current Accounts
----------------
You agree to maintain a current account with us throughout the period of
the Loan.
(ii) Payments
--------
We may transfer amounts from your current account to meet the repayments
set out in term 10 of the agreement.
We may use any repayment instalment (including instalments of principal and
interest) or any part of any repayment instalment to:
. reduce the amount of principal outstanding on the Loan.
. pay interest accrued on the Loan.
. discharge any other payment due under this agreement.
You must make all payments under this agreement in full in pounds sterling
without any deduction or withholding (whether in respect of set-off,
counterclaim, duties, taxes, charges or otherwise howsoever). If you are
compelled by law to make any deduction or withholding, you will promptly
pay to us such additional amounts as will make the net amount received by
us equal to the full amount payable by you had there been no deduction or
withholding.
(ii) Set-Off
-------
We shall be entitled to set-off against any of your liabilities to us under
this agreement (whether present, future, actual or contingent) any of your
credit balances on any of your accounts with us or in your name. We do not
have to give you any prior notice to do this.
Page 56
<PAGE>
(ii) Default
-------
If any of the following events occur, we may, by giving you written notice,
cancel our outstanding commitments to you (including the availability of
the Loan if you have not drawn it) and demand immediate repayment of your
indebtedness to us and exercise our rights under any Security:-
(ii) If you breach any term or condition (including any covenant) of
this agreement.
(ii) If you do not make any payment on the date it is due under this
agreement and whether by way of principal, interest or otherwise.
(ii) If you do not use the Loan for the purpose set out in term 5 of
the agreement.
(ii) If the Security or any part of the Security shall cease to be
fully enforceable in accordance with its terms or with effect
from the date on which the determination of the continuing nature
of the Security or any part of the Security occurs, such
continuing nature is determined whether such determination be by
actual or constructive notice or be deemed to have occurred or
any binding undertaking provided in the Security or any part of
the Security shall be breached or any guarantor gives or purports
to give notice to terminate its liabilities under any guarantee
in respect of the Loan.
(ii) If you sell or dispose of any asset listed in term 11 of the
agreement or it ceases to be in your sole possession.
(ii) If your current account becomes overdrawn after the debiting of
any payment due from you under the Loan or it becomes overdrawn
in excess of any limit agreed with us and you do not offer
payment in cash to us when we inform you of this.
(ii) If any representation, warranty or statement made to us by you in
connection with the Loan is breached or is false or if you fail
to tell us anything which in our opinion is material to the Loan.
(ii) If you or any member of the Group make any default in the
performance of any other agreement for borrowed money whether
with us or any other lender whereby the due date of repayment
thereunder is rendered capable of acceleration; or if any of your
indebtedness or the indebtedness of any member of the Group
becomes or is declared by the holder or the lender thereof to be
due and payable prior to its stated maturity or such indebtedness
is not repaid in full at its stated maturity; or if such
indebtedness (including the indebtedness of any member of the
Group) is repayable on demand and is not repaid in full
immediately upon demand being made or if any guarantee or
indemnity given by any giver of security in connection with any
of your liabilities to us or the liabilities of any member of the
Group to us or any other lender is not honoured when due and
called upon.
(ii) If a petition is presented or a resolution passed for your
winding up or that of any member of the Group or a petition is
presented for an administration order to be made in relation to
you or any member of the Group; or your directors or the
directors of any member of the Group make a proposal for a
voluntary arrangement with your creditors or the creditors of any
member of the Group; or you are unable to pay your debts within
the meaning of Section 123 of the Insolvency Act 1986 or any
member of the Group is unable to pay its debts within the meaning
of such section or an encumbrancer takes possession of or a
receiver or an administrative receiver is appointed over any of
your assets or over the assets of any member of the Group.
(ii) If there shall occur in our opinion a material effective change
of control (as defined by Section 840 of the Income and
Corporation Taxes Act 1988) of you or your Parent.
(ii) If there has occurred any change which in our reasonable opinion
is a material adverse change in your business, assets or
financial condition or in the business, assets or financial
condition of the
Page 57
<PAGE>
Group or any member of the Group which, in our reasonable
opinion, may affect your ability to comply with your obligations
under this agreement.
(ii) If any judgement, distress, warrant of attachment, writ of
execution or similar process is issued, levied or enforced upon
any of your assets or the assets of any member of the Group or if
any asset held by the Bank as security for the Loan is charged or
becomes encumbered elsewhere.
(ii) If you or any member of the Group ceases or threatens to cease to
carry on its business or sells, transfers or otherwise disposes
of in any one transaction or series of related transactions any
substantial part of its assets.
(ii) If you cease to be a Subsidiary Undertaking of Prestolite
Electric Holding, Inc.
(ii) Delay in exercising our rights
------------------------------
If we delay in giving any notice or exercising any of our rights under this
agreement this should not be construed as a waiver of any of our rights.
(ii) Demands and Notices
-------------------
Any demand or notice to you will be made in writing and be signed by one of
our officers and served either by personal delivery on you at any place or
by post addressed to you at your place of business last known to us.
Service by post on you shall be deemed to be effective on the next Business
Day after the date of posting even if it is returned undelivered.
Any notice to us under this agreement must be made in writing and signed by
you or where you are a company, by a duly authorised officer on your
behalf. It must be delivered by hand or by post to the lending branch
specified in term 3 of the agreement.
(ii) Costs and Expenses
------------------
You will pay all costs, charges and expenses arising in connection with the
Loan and the Security including the negotiation and preparation of this
agreement and the Security and all costs, charges and expenses arising in
connection with the preservation and/or enforcement of our rights under
this agreement or under the Security and will indemnify us for any and all
losses, costs and expenses occasioned by the occurrence of an Event of
Default.
(ii) General Points
--------------
(ii) If at any time any one or more of the provisions in this
agreement is or becomes invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the
remaining provisions hereof shall not in any way be affected or
impaired thereby.
(ii) Unless we expressly agree to do so in writing we do not hold
ourselves out as providing advice on or considering the general
suitability of this Loan for your particular circumstances
(including tax circumstances) and neither we nor our employees
shall be liable for any indications given as to such suitability.
We make no warranties or representations about the advisability
of any underlying transaction entered into by you. You should
obtain independent professional advice on such matters, and upon
any Security required by us.
(ii) If we determine in our opinion that as a result of any
Requirement or compliance by us with any Requirement the cost to
us of funding, maintaining or making available the Loan (or any
undrawn amount of the Loan) is increased or the effective return
to us on the Loan or on our capital is
Page 58
<PAGE>
reduced, then you shall pay to us on demand such sums as may be
certified to you by us as shall compensate us for the increased
cost or reduction. 'Requirement' means any law, regulation,
directive or official request(whether or not having the force of
law) and includes any change in its interpretation or
application. It also includes any Requirement relating to a
change in currency of a country.
(ii) If more than one currency or currency unit are at the same time
recognised by the Bank of England as the lawful currency of the
United Kingdom then:
any reference in this agreement to, and any obligations arising under this
agreement in, the currency of the United Kingdom shall be translated into,
or paid in, the currency or currency unit of the United Kingdom designated
by us; and
any translation from one currency or currency unit to another shall be at
the official rate of exchange recognised by the Bank of England for the
conversion of that currency or currency unit into the other, rounded up or
down by us acting reasonably.
(ii) If a change in any currency of the United Kingdom occurs, this
agreement will be amended to the extent we specify to be
necessary to reflect the change in currency and to put us in the
same position, so far as possible, that we would have been in if
no change in currency had occurred.
(ii) We may assign or transfer all or any of our rights and
obligations under the Loan. You may not assign or transfer any of
your rights or obligations under the Loan.
(ii) This agreement is governed by the laws of England.
(ii) All expressions in this agreement bearing a plural meaning shall
(where the context so admits) also bear the singular meaning and
vice versa.
(ii) All references in this agreement to any statutory provision shall
be deemed to include any statutory modification or re-enactment
of such provision.
(ii) If the effect of the introduction of or any change in applicable
law or directive or the interpretation of such law or directive
is to make or purpose to make the Loan unlawful then our
obligations under this agreement shall cease and you will on
demand pay to us all amounts ourstanding under the Loan
(ii) Representations and Warranties
------------------------------
You represent and warrant that you have full power to accept and be bound
by the terms and conditions set out in this agreement and to draw the Loan
and that you have taken all necessary steps and obtained all necessary
consents and authorisations to do so and that accordingly this agreement
constitutes your legal, valid and binding obligations fully enforceable in
accordance with their terms.
You represent and warrant as follows:-
(ii) You are duly incorporated and validly existing under the laws of
England.
(ii) No Event of Default has occurred or is outstanding and no event has
occurred which with the giving of notice or the lapse of time would
constitute an Event of Default.
(ii) All information, exhibits and reports furnished to us in connection
with this agreement were and remain true and accurate in all respects
and do not omit any facts thereby rendering misleading any statement
contained therein.
(d) The representations and warranties set out above shall survive your
acceptance of this agreement and the drawing of the Loan and shall be
deemed to be repeated on each day throughout the period of the Loan
with reference to the facts and circumstances existing at that time.
Page 59
<PAGE>
(e) A suitably authorised officer of your Parent Company has seen and
approved the terms of this agreement.
18 Environmental Matters
---------------------
(a) We may at any time during the period of the Loan require you to
obtain a written up-date of the environmental audit referred to in
paragraph 3 of the appendix (or if no audit was required under paragraph 3,
a written confirmation that neither your assets nor the use of those assets
has broken or is likely to break any Environmental Law). This must be done
by an environmental consultant acceptable to us and at your expense.
(ii) You must notify us immediately if you receive any claim, notice
or other communication in respect of any alleged breach of
Environmental Law.
(ii) You undertake to notify us immediately if any Environmental
Licence is withdrawn or is not renewed.
(ii) You must give us certified copies of any new Environmental
Licence and any renewal of any Environmental Licences within
twenty-eight days of issue and you must meet all associated costs
and expenses.
(ii) You represent and warrant to us that you have obtained all
necessary Environmental Licences and you have at all times
complied in all material respects with the terms and conditions
of the Environmental Licences applicable to you and all other
applicable Environmental Law.
You also confirm that no Hazardous Materials (other than those incidental
to your business and which are stored in full compliance with Environmental
Licence(s)) have been used, disposed of, generated, stored, transported,
deposited, buried or emitted at, on, from or under any premises (whether or
not owned, leased, occupied or controlled by you) in circumstances where
this might result in a liability on you.
(ii) You represent that you have not received any notices of
withdrawal, violations and/or advisory action by regulatory
agencies regarding environmental control matters or Environmental
Licence compliance.
(ii) You will indemnify and hold us and our respective officers,
directors, employees and agents (the `Indemnified Parties') free
and harmless from and against any and all actions, causes of
action, losses, costs, liabilities and damages of any kind and
every kind of character known or unknown, fixed or contingent,
out of pocket or consequential and all expenses incurred in
connection therewith including reasonable legal fees and
disbursements (irrespective of whether any such Indemnified
Parties are a party to the action for which indemnification is
sought) (the "Indemnified Environmental Liabilities") incurred by
the Indemnified Parties or any of them as a result of or arising
out of or relating to:-
(ii) The imposition or recording of any liens, pledges, charges or
mortgages on or over any of your assets by any government agency
or local governmental agency or authority pursuant to any
Environmental Law or the removal of any such liens, pledges,
charges or mortgages over any of your assets.
(ii) The claims of any private parties or local government or
government agency or authority regarding violations of
Environmental Law in connection with your operations or the
effect of the presence of any Hazardous Material on the value of
the assets belonging to you or in connection with compliance by
you or the Indemnified Parties with any regulation or order
issued pursuant to Environmental Law. Your obligations to the
Indemnified Parties shall continue after you have repaid the
Loan. For the purposes of this agreement:-
"Environmental Law" shall mean any law, regulation, code of practice,
circular, guidance notes or the like (whether in the United Kingdom or
elsewhere and whether now existing or subsequently enacted or
promulgated) or any judicial or administrative interpretation thereof
concerning the protection of
Page 60
<PAGE>
human health or the environment or the conditions of the work place or
the generation, transportation, storage, treatment and disposal of
hazardous materials.
"Hazardous Materials" shall mean any radioactive emissions and any
natural or artificial substance (whether in solid or liquid form or in
the form of a gas or vapour and whether alone or in combination with any
other substance) which are defined, determined identified prohibited,
limited or regulated by Environmental Law or any other chemical,
material, substance or element existing now or in the future and which is
capable of causing harm to man or any other living organism which is
capable of damaging the environment or public health or welfare including
any controlled, special, dangerous, toxic, radioactive or hazardous
waste.
"Environmental Licence" shall mean any permit, licence or authorisation,
consent or other approval required by Environmental Law.
By: /s/ Jon Hays
-------------
For and on behalf of
National Westminster Bank Plc
Date 25 October, 1999
----------------
FORM OF ACCEPTANCE
------------------
We accept the Loan on the terms and conditions set out in this agreement
By:/s/ John Wilkinson
-------------------
For and on behalf of Prestolite Electric Limited
Date: 2/nd/ November, 1999
--------------------
Page 61
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED INCOME STATEMENTS FOR
PRESTOLITE ELECTRIC HOLDINGS, INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001057053
<NAME> PRESTOLITE ELECTRIC HOLDING, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> OCT-02-1999
<CASH> 832
<SECURITIES> 0
<RECEIVABLES> 54,790
<ALLOWANCES> (3,185)
<INVENTORY> 55,556
<CURRENT-ASSETS> 113,094
<PP&E> 94,167
<DEPRECIATION> (38,186)
<TOTAL-ASSETS> 191,517
<CURRENT-LIABILITIES> 59,064
<BONDS> 143,114
0
0
<COMMON> 2
<OTHER-SE> 16,623
<TOTAL-LIABILITY-AND-EQUITY> 191,517
<SALES> 195,952
<TOTAL-REVENUES> 195,952
<CGS> 156,878
<TOTAL-COSTS> 185,664
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,915
<INCOME-PRETAX> (538)
<INCOME-TAX> 1,082
<INCOME-CONTINUING> (1,620)
<DISCONTINUED> 0
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<EPS-BASIC> (0.81)
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