EXHIBIT 10.7
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND IS BEING SOLD PURSUANT TO AN EXEMPTION FROM
REGISTRATION THEREUNDER. THIS SECURITY MAY NOT BE TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
PRESTOLITE NEWCO, INC.
----------------------
A$1.00 January 22, 1998
FOR VALUE RECEIVED, the undersigned PRESTOLITE NEWCO, INC., a Delaware
corporation (the "Company"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order
of ▇▇▇▇▇ INDUSTRIES PLC, an English corporation (the "Holder"), the principal
sum of ONE ARGENTINE PESO (A$1.00), or such other amounts as shall be payable
under clause 3 hereof, in instalments payable on such dates and in such amounts
as are specified herein on and subject to the following terms and conditions.
ARTICLE I
1. DEFINITIONS/TERMS OF PAYMENT, ETC.
As used in this Note, the following terms shall have the following
meanings, such terms to be equally applicable to the singular and the
plural forms of the terms so defined:
"A$" means Argentine Pesos, the lawful
currency of Argentina
"Affiliate" of any specified person means (i)
any other person which, directly
or indirectly, is in control
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of, is controlled by or is under
common control with such specified
person or (ii) any other person
who is a director or executive
officer (A) of such specified
person, (B) of any Subsidiary of
such specified person or (C) of
any person described in clause (i)
above.
"Annual Audit" means the profit and loss
statement of Indiel conducted on
an annual basis and prepared in
accordance with international
accounting standards.
"Business Day" means a day of the year on which
banks are not required or
authorised to close in New York
City, United States, London,
England or Buenos Aires, Argentina.
"Capital Stock" means any and all shares,
interests, rights to purchase,
warrants, options, participations
or other equivalents of or
interests in (however designated)
corporate stock, including any
preferred stock.
2
"Closing Date Tax Receivable" means the lesser of A$4,100,000
and the value of the tax
receivable recorded as an asset in
the Final Completion Statement (as
defined in the Purchase Agreement)
due to Indiel from the Argentine
government, and arising in
connection with the VAT
Promotional Scheme .
"Date of Utilisation" means :-
(i) where any amount taken into
account in calculating the Tax
Receivable is cash, the date of
receipt of such cash; or
(ii) where any amount taken into
account in calculating the Tax
Receivable is a freely
transferable bond, the date of
transfer by Indiel of such bond
either to the Holder or a third
party, or if such bond is not
transferred, the date such bond is
utilised to reduce or eliminate
any liability of Indiel or any
Affiliate of Indiel to make an
actual payment of taxation;
(iii) where any amount taken
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into account in calculating the Tax
Receivable is a credit or relief
against taxation (other than a
freely transferable bond) the date
that the payment of taxation would
be due against which such amount
Settlement Consideration is
utilised to reduce or eliminate
any liability of Indiel or any
Affiliate of Indiel to make such
payment of taxation.
"Indiel" means ▇▇▇▇▇ Indiel Argentina S.A.,
an Argentine corporation.
"Payment Calculation Date" means 31 March, 30 June, 30
September and 31 December in every
year from the date of this note
until all amounts due under this
note (determined in accordance
with clause 3 have been paid in
full).
"Payment Date" means the date which is 10
business days after each
corresponding Payment Calculation
Date
Purchase Agreement" means an agreement entered into
between ▇▇▇▇▇ Industries plc,
Prestolite Electric Incorporated
and the Company on the date of
this document for the sale and
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purchase of the entire issued
share capital of ▇▇▇▇▇ Argentine
Holdings, Inc. and shares in ▇▇▇▇▇
Indiel Argentina S.A.
"Subsidiary" means any corporation,
association, partnership or other
business entity of which more than
50% of the total voting power of
shares of Capital Stock or other
interests (including partnership
interests) entitled (without
regard to the occurrence of any
contingency) to vote in the
election of directors, managers or
trustees thereof is at the time
owned or controlled, directly or
indirectly, by (i) the Company,
(ii) the Company and one or more
Subsidiaries or (iii) one or more
Subsidiaries.
"Tax Receivable" means the tax receivable recorded
as an asset in the accounting
records of Indiel as being due to
Indiel from the Argentine
government, and arising in
connection with the VAT
Promotional Scheme (and taking
5
into account any consideration,
credit relief or bond received by
Indiel or any Affiliate of Indiel
in satisfaction or partial
satisfaction of the Closing Date
Tax Receivable) provided that if
Indiel fails to keep in its
accounting records a balance for
such asset on the above basis
calculated consistently with the
calculation of the Closing Date
Tax Receivable (disregarding the
words "the lesser of A$4,100,000
and" in that definition for this
purpose only) or with the
provisions of this note then "Tax
Receivable" shall mean the amount
that would have been so recorded
if Indiel had kept such accounting
records
"VAT Promotional Scheme" means the regime set forth by Laws
21,608 and 22,021 and its
implementing regulations,
including Decress 435/90, 1033/91
and 2054/92 and DGI RG 3838 and
3905.
2. PAYMENTS, CURRENCY AND COMPUTATIONS
-----------------------------------
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2.1 The Company shall make each payment hereunder not later than 2:00 P.M.
(New York City time) on the Payment Date in United States dollars (or such
other currency as the Company and the Holder may agree) to the Holder at
its address referred to in clause 11, in same day funds. The amount of
such payment shall be converted from the amount due hereunder in Argentine
pesos at the average exchange rate (calculated at the average of the "bid"
and "asked" exchange rate) quoted by Reuters (or a different independent
wire service providing international spot exchange rates as agreed to by
the Company and the Holder) in New York at 1:00 p.m. on the Payment Date.
2.2 Any failure by the Company to make a payment within five days after a
Payment Date when due shall obligate the Company to pay interest to the
Holder at a rate per annum 5% above prime rate as quoted in the Eastern
edition of the Wall Street Journal as of the Payment Date and, in the
event such a rate is not quoted on such date then on the immediately
preceding date such rate is quoted, such interest due and payable upon the
payment of principal otherwise due and payable. All computations of
interest shall be made on the basis of a year of 365 or 366, as the case
may be, days for the actual number of days (including the first day but
excluding the last day) occurring in the period for which interest is
payable.
3. TOTAL OBLIGATION; CALCULATION OF PAYMENT AMOUNT
-----------------------------------------------
3.1 The obligation of the Company to pay principal hereunder shall
automatically, and without any further action on the part of either the
Company or the Holder, be increased from time to time to an amount equal
to the amount by which the Tax Receivable has reduced since the date of
this Note less any principal payments made by the Company to the Holder at
and prior to such date, provided however, reductions in the balance of the
Tax Receivable attributable to a termination of the VAT.Promotional Scheme
by the Argentine Government related to such Tax Receivable shall not be
included in such calculations
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(unless they give rise to an "amount" as defined in clause 3.4).. The
total aggregate principal balance due under this note shall not exceed the
Closing Date Tax Receivable. Two examples of how the amounts under this
clause 3.1 will be calculated are contained in the Schedule.
3.2 In the event of a dispute between the Company and the Holder concerning
the amount of the Tax Receivable or any Date of Utilisation, an
independent auditor and location for audit (chosen by the Holder and the
Company (and in the absence of agreement as to the auditor, the audit
shall be by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ in New York City, New York) and acting as an
expert and not as an arbitrator) shall determine the issue in dispute;
such decision to be final and binding on the Company and the Holder in the
absence of manifest error. The Company and Indiel shall allow such auditor
reasonable access to Indiel and its books and records. The costs of such
auditor shall be borne equally by the Company and the Holder.
3.3 If Indiel and ▇▇▇▇▇ any Affiliates of Indiel areis no longer entitled to
receive any consideration, credit, relief or bond that would otherwise
have been taken into account in calculating the Tax Receivable as a
consequence of any action or omission of Indiel or any Affiliate of Indiel
which reduces such obligation of the Argentine Government (or if any such
company takes any voluntary action outside the ordinary course of its
business which has the result of materially reducing or materially
delaying any payment under this Note) then Clause 3.1 shall apply as if
the Tax Receivable were reduced at that time and all subsequent times) to
nil.
3.4 In calculating the Tax Receivable consideration, credits, reliefs and
bonds ("amounts") shall be taken as having the following value:-
(i) where the amount is cash the amount of such cash; or
8
(ii) where the amount is a freely transferable bond, either (a) the face
value of such bond if transferred to the Holder, (b) the amount
received by Indiel or any Affiliate on the transfer of such bond if
transferred to a third party, or (c) the amount of taxation saved by
Indiel or any Affiliate by utilising such bond together, in each
case, with any interest received on such bonds less any tax paid on
such interest; or
(iii) where the amount is a credit or relief against taxation (other than
a freely transferable bond) the amount of taxation actually saved by
Indiel or any Affiliate by utilising such credit or relief
and these amounts will be taken into account on the relevant Date of
Utilisation.
4. PAYMENTS OF PRINCIPAL
-- ---------------------
4.1 The Company shall pay to the Holder in full on each Payment Date an
amount equal to the reduction (if any) in the Tax Receivable since
the previous Payment Calculation Date to the current Payment
Calculation Date (or in the case of the first Payment Calculation
Date to the current Payment Calculation Date, since the date of
this note until the current Payment Calculation Date).
4.2 Where an amount taken into account in calculating the Tax
Receivable is a freely transferable bond, the Company shall notify
the Holder of the receipt and procure that Indiel or any Affiliate
takes such action to either transfer such bond or utilise it to
reduce or eliminate any tax liability as the Holder may request.
4.3 Where an amount taken into account in calculating the Tax
Receivable is a relief or credit from taxation (other than a freely
transferable bond) the Company shall notify the holder of the
receipt and procure that Indiel or any Affiliate takes such action
as is necessary to utilise such relief or credit as soon as
possible.
9
4.4 If Indiel has the opportunity of recovering part or all of the Tax
Receivable in advance of the scheduled date (under DGI RG 4182) the
Company will notify the Holder and (at the cost of the Holder)
procure that Indiel takes any reasonable steps to apply for and
obtain such recovery PROVIDED THAT Indiel shall not be required to
take any steps which put it in default under any other agreement.
Any amounts received by virtue of such action will be treated as
received in cash for the purposes of calculating the Tax
Receivable.
4.5 Following a notification referred to in clause 4.2 or 4.3, the
Company shall procure that Indiel gives the Holder reasonable
access at all reasonable times to its financial and tax books,
records, computations and accounts for the purpose of confirmation
of the Tax Receivable at any date or any Date of Utilisation.
5. REDUCTION OF PRINCIPAL OBLIGATION
---------------------------------
After all payments have been received under this note in respect of all of
the Closing Date Tax Receivable and all principal and any other amounts due
hereunder have been paid in full, this Note shall be surrendered to the
Company for cancellation and shall not be released.
6. CANCELLATION
------------
Notwithstanding any other provision contained herein, if the Tax Receivable
shall be reduced to zero pursuant to a termination of the VAT Promotional
Scheme by the Argentine Government related to such Tax Receivable, then
upon payment of all amounts due under clause 3.1 this note shall be deemed
paid in full and surrendered for cancellation.
7. TAXES
-----
If the Company makes any payment hereunder in respect of which it is
required by law to make any deduction or withholding, it shall pay the full
amount to be deducted or withheld to the relevant taxation or other
authority within the time allowed for such
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payment under applicable law and promptly thereafter shall furnish to the
Holder an original or certified copy of a receipt evidencing payment
thereof, together with such other information and documents as the Holder
may reasonably request.
8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants as follows:
8.1 The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware.
8.2 The execution, delivery and performance by the Company of this Note
are within the Company's corporate powers, have been duly
authorised by all necessary corporate action, and do not contravene
(a) the Company's charter or by-laws or (b) any law or any
contractual restriction binding on or affecting the Company.
8.3 No authorisation or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the
Company of this Note
8.4 This Note is the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
9. REPRESENTATIONS AND WARRANTIES OF THE HOLDER
--------------------------------------------
The Holder represents and warrants as follows:
9.1 The Holder has been advised and understands that this Note has not
been registered under the Securities Act. The Holder, by purchasing
this Note, agrees for the benefit of the Company that this Note may
not be resold, pledged or otherwise transferred.
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9.2 The Holder has the full legal right and power and all authority and
approvals required to execute and deliver, or authorise execution
and delivery of, this Note and all other instruments executed and
delivered by or on behalf of such Holder in connection with the
purchase of this Note, and to purchase this Note. The signature of
the party signing on behalf of the Holder is binding on the Holder.
10. AMENDMENTS, ETC
---------------
No amendment or waiver of any provision of this Note, nor consent to any
departure by the Company herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Holder and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.
11. NOTICES, ETC
------------
11.1 All notices and other communications provided for hereunder shall
be in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled
or delivered, if to the Company, to it care of Prestolite Electric
Incorporated, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: President; and if to the Holder care of ▇▇▇▇▇ Industries
plc, at its address at Stratford Road, Solihull, B90 4LA; or, as to
each party, at such other address as shall be designated by such
party in a written notice to the other party. All such notices and
communications shall, when mailed, telecopied, telegraphed, telexed
or cabled, be effective when deposited in the mails, telecopied,
delivered to the telegraph company, confirmed by telex answerback
or delivered to the cable company, respectively, except that
notices to the Holder shall not be effective until received by the
Holder. Upon request from the Holder, the Company will provide the
Holder with the information required in Treasury Regulation,
Section 1.1275-3(b)(1)(i).
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11.2 The Company waives presentment demand protest notice of dishonour,
notice of demand and notice of non-payment.
12. NO WAIVER; REMEDIES
-------------------
No failure on the part of the Holder to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
13. REIMBURSEMENT OF HOLDER
-----------------------
The Company shall reimburse the Holder upon demand for any and all costs
and expenses (including without limitation Court costs, legal expenses and
reasonable attorney fees whether or not suit is instituted and if suit is
instituted whether at the trial court level, appellate level in a
bankruptcy probate or administrative proceeding or otherwise) incurred in
collecting this note or incurred in any other matter or proceeding relating
to this note where in such matter or proceeding the Holder is successful.
14. BINDING EFFECT
--------------
14.1 Subject to clause 14.2 this Note shall be binding upon and inure to
the benefit of the Company and the Holder and their respective
successors, except that the Company shall not have the right to assign
any of its rights or obligations hereunder.
14.2 The Holder may, upon at least 20 Business Days' notice to the
Company, assign to a controlled Affiliate all of its rights and
obligations under this Note; all costs and expenses relating to such
assignment shall be borne by the parties thereto.
15. GOVERNING LAW
-------------
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This Note shall be governed by, and construed in accordance with, the laws
of the internal State of New York, United States.
16. CONSENT TO JURISDICTION: VENUE
------------------------------
The Company irrevocably consents to the jurisdiction of any state or
federal Court located in the Borough of Manhattan, City of New York United
States; provided however that nothing contained in this note shall prohibit
the holder from bringing any action enforcing any award of judgement or
exercising any other rights against the Company or against any property of
the Company within any other County, State or foreign or domestic
jurisdiction. The Company acknowledges and agrees that the venue provided
above is the most convenient forum for the Company and the Holder and the
Company waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this note.
17. WAIVER OF JURY TRIAL
The Company irrevocably waives any and all rights the Company may have to a
trial by jury in any action proceeding or claim of any nature relating to
this Note, any documents executed in connection with this Note or any
transaction contemplated in any of such documents. The Company
acknowledges that the foregoing waiver is knowing and voluntary.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its
officer thereunto duly authorised, as of the date first above written.
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SCHEDULE
These are the example calculations referred to in clause 3.1
Example:- (Volumes increase in Quarter 3 - 4 of 1998 to cause an increase in the
Tax Receivable)
--------------------------------------------------------------------------------------------------------------------
1998 1999
--------------------------------------------------------------------------------------------------------------------
A $ M Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
--------------------------------------------------------------------------------------------------------------------
Opening Balance of 4.3 4.2 4.0 4.2 4.6 4.4 3.9 3.4
Tax Receivable
--------------------------------------------------------------------------------------------------------------------
Change (0.1) (0.2) 0.2 0.4 (0.2) (0.5) (0.5) (0.6)
--------------------------------------------------------------------------------------------------------------------
Closing Balance 4.2 4.0 4.2 4.6 4.4 3.9 3.4 2.8
--------------------------------------------------------------------------------------------------------------------
Amount to be paid 0.1 0.2 NIL NIL NIL 0.1 0.5 0.6
to the Holder
under clause 3.1
--------------------------------------------------------------------------------------------------------------------
Example 2:- (Volumes increase, but reductions in the Tax Receivable continue)
1998 1999
----------------------------------------------------------------------------------------------------------------------
A $ M Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
----------------------------------------------------------------------------------------------------------------------
Opening Balance of 4.3 4.1 3.9 3.8 3.7 3.0 2.3 1.7
Tax Receivable
----------------------------------------------------------------------------------------------------------------------
Change (0.2) (0.2) (0.1) (0.1) (0.7) (0.7) (0.6) (0.6)
----------------------------------------------------------------------------------------------------------------------
Closing Balance 4.1 3.9 3.8 3.7 3.0 2.3 1.7 1.1
----------------------------------------------------------------------------------------------------------------------
Amount to be paid 0.2 0.2 0.1 0.1 0.7 0.7 0.6 0.6
to the Holder
under clause 3.1
----------------------------------------------------------------------------------------------------------------------
Note: Position in 2000 onwards not shown in examples
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PRESTOLITE NEWCO, INC.
By: /s/ ▇. ▇▇▇ ▇▇▇▇▇▇▇
-------------------
Name: ▇. ▇▇▇ ▇▇▇▇▇▇▇
Title: President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
SIGNED by ▇▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇ ) /s/ ▇▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇
as duly authorised attorney ) ----------------------
for and on behalf of )
▇▇▇▇▇ INDUSTRIES PLC, as )
to clause 11 only: )
▇▇▇▇▇ ▇▇▇▇- ▇▇▇▇▇▇▇ as attorney for ▇▇▇▇▇
Industries plc
16
