EXHIBIT 10.3
Dated April 21, 1998
---------------------------------------
PRESTOLITE ELECTRIC LIMITED
- and -
LOMBARD NATWEST DISCOUNTING LIMITED
- and -
PRESTOLITE ELECTRIC INCORPORATED
-----------------------
SUBORDINATION AGREEMENT
-----------------------
WILDE SAPTE
0 Xxxxx Xxxxx
Xxxxxx XX0X 0XX
Tel. 0000 000 0000
Fax. 0000 000 0000
REF. AJW/MNS/095503/BF307429.06
THIS SUBORDINATION AGREEMENT is made on 1998
BETWEEN:
(1) PRESTOLITE ELECTRIC LIMITED, a company incorporated in England and Wales
registered under number 01189048 (the "COMPANY");
(2) LOMBARD NATWEST DISCOUNTING LIMITED, of Xxxxx Xxxxx, X.X. Xxx 00, Xxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxx, XX00 0XX ("LND"); and
(3) PRESTOLITE ELECTRIC INCORPORATED a company incorporated under the State
of Delaware (the "PARENT").
WHEREAS:
(A) By an invoice discounting agreement (the "INVOICE DISCOUNTING AGREEMENT")
of today's date and made between (1) LND and (2) the Company as Initial
Client, LND agreed to make available certain facilities to the Company.
(B) By a parent loan agreement (the "PARENT LOAN AGREEMENT") dated 22nd
January 1998 and made between (1) the Parent and (2) the Company, the
Parent agreed to lend the Company the sum of (Pounds)18,453,000 (the
"PARENT LOAN").
(C) In accordance with the terms of a memorandum of repayment dated
1998 the Parent has agreed to subscribe for 4,800,000 ordinary shares in
the Company in partial repayment of the Parent Loan.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement:
"ACCESSION DEED" means an accession deed in favour of LND substantially
in the form set out in Schedule 1 (or in such other form as LND shall
approve in writing);
"ARTICLES" means the articles of association and other constitutional
documents of the Company from time to time;
"LND LIABILITIES" means all present and future sums, liabilities and
obligations (whether actual, contingent, present and/or future) payable
or owing by the members of the Group to LND under the Invoice Discounting
Agreement and the other Discounting Documents;
"PARENTAL AGREEMENTS" means the Articles and the Parent Loan Agreement;
"PARENTAL LIABILITIES" means all present and future sums, liabilities and
obligations (whether actual, contingent, present and/or future) payable
or owing by the Company to the Parent under the Articles (including the
right to dividends) or the Parent Loan Agreement other than fees and
expenses payable to the Parent under the Parent Loan
-1-
Agreement and fees and expenses payable to any director of the Company
appointed by the Parent;
"PERMITTED PAYMENTS" means the making of any payment in or towards
discharging all or any of the Acquisition Costs and other fees incurred
under or in connection with any Transaction Document or any other fees or
commissions or interest, dividends or distributions permitted to be paid
under Clause 12.3(i) of the Invoice Discounting Agreement to the extent,
in each case, that such payments may be made by the Company without
breaching any term of the Invoice Discounting Agreement; and
"SHARES" means all or any of the issued share capital of the Company.
1.2 Terms defined in the Invoice Discounting Agreement as at the date of this
Agreement have the same meanings in this Agreement except as otherwise
defined herein.
1.3 Unless the context or the express provisions of this Agreement otherwise
requires:
(a) words importing the singular shall include the plural and vice
versa;
(b) the term "assets" includes properties and revenues;
(c) references to clauses or schedules are to be construed as
references to the clauses of and schedules to this Agreement;
(d) references to (or to any specified provision of) this Agreement or
any other document (including without limitation the Invoice
Discounting Agreement) shall be construed as references to that
provision or that document as in force for the time being and as
amended, varied, novated, substituted or supplemented, as the case
may be, from time to time save that references in this Agreement
to any of the Parental Agreements shall be to such documents as at
the date of this Agreement (unless otherwise agreed in writing by
LND);
(e) all references to a party include references to its permitted
assigns and transferees and its successors in title whether
immediate or derivative; and
(f) headings are for convenience only and shall not affect the
construction hereof.
2. PURPOSE OF THIS AGREEMENT
2.1 In consideration of LND entering into its obligations in respect of the
financing of the acquisition contemplated under the Acquisition Documents
the Parent hereby agrees to regulate its claims in relation to the
Parental Liabilities, as the case may be, in the manner set out in this
Agreement.
2.2 The Company enters into this Agreement for the purpose of acknowledging
and agreeing the arrangements between LND and the Parent and none of the
undertakings given in this Agreement is given to the Company or shall be
enforceable by it.
-2-
3. RANKING OF LIABILITIES
Each of LND and the Parent hereby agrees and the Company acknowledges
that the LND Liabilities, whether secured or unsecured, shall rank in
priority to the Parental Liabilities.
4. UNDERTAKINGS OF THE COMPANY AND THE PARENT
4.1 For so long as any of LND Liabilities are or may be outstanding, except
with the prior written consent of LND, the Company will not (and, to the
extent it is able, the Parent will not permit or require the Company to):
(a) secure all or any part of any of the Parental Liabilities; or
(b) amend the Articles in relation to the payment of dividends; or
(c) pay, prepay or redeem the Parental Liabilities, as the case may be
other than Permitted Payments in accordance with Clause 12.3(i) of
the Invoice Discounting Agreement.
4.2 The Parent shall not enter into any management or consultancy or other
service agreement with the Company or any other member of the Group
without LND's prior written consent or as otherwise permitted under the
Invoice Discounting Agreement.
4.3 For the avoidance of doubt, a payment is not a Permitted Payment if it is
or is to be made otherwise than strictly in accordance with the terms of
the Parental Agreements or if made or to be made in breach of this
Agreement.
4.4 Subject to Clause 12.3(i) of the Invoice Discounting Agreement and
notwithstanding anything to the contrary, the Company shall not make (and
the Parent shall not to the extent it is respectively able, permit or
require the Company to make) any Permitted Payments if a Default or
Potential Default has occurred and is continuing or would occur on making
any such payment.
5. COVENANTS
For so long as any of LND Liabilities are or may be outstanding:
(a) none of the Parent nor any agent or trustee on its behalf will
ask, demand, xxx, claim, take or receive from the Company or any
of its Subsidiaries, by cash receipt, set-off or in any other
manner whatsoever, the whole or any part of the Parental
Liabilities other than Permitted Payments in accordance with the
Invoice Discounting Agreement (subject always to Clause 5(d));
(b) in respect of the Parental Liabilities, none of the Parent nor any
agent or trustee on its behalf will petition or apply for or vote
in favour of any resolution or take any other steps for the
winding-up, dissolution or administration of the Company or any of
its Subsidiaries (including the service of a statutory demand or
the presentation of a petition or the exercise by the Parent of
any of their rights as the legal or beneficial holders of shares
in the Company to call for or to vote in favour of the winding up
of the Company;
-3-
(c) in respect of the Parental Liabilities, none of the Parent nor an
agent or trustee on its behalf shall obtain or enforce any
judgment in respect of any sums due and owing to it by the Company
or any of its Subsidiaries;
(d) none of the Parent nor any agent or trustee on its behalf shall
call or enforce (or take any steps to do so) the benefit of any
provision of the Parental Agreements, or otherwise exercise its
rights and powers in relation thereto against the Company to the
extent that to do so would result in the Company being in breach
of, or a Default or a Potential Default occurring under, the terms
of the Invoice Discounting Agreement;
(e) if the Parent shall receive any sums paid to it by the Company or
any of its Subsidiaries in breach of the terms of this Agreement
or the Invoice Discounting Agreement such sums shall be held on
trust for and immediately be paid to the Company; and
(f) the Parent shall procure that its agents, trustees and/or
nominee(s) which holds shares in the Company (or any interest
therein from time to time on its behalf), shall comply with the
provisions of this Clause 5.
6. SUBORDINATION ON INSOLVENCY
6.1 If while any of LND Liabilities are or may be outstanding:
(a) there occurs any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or
otherwise, of all or any part of the assets of the Company or the
proceeds thereof, to creditors of the Company, by reason of the
insolvent liquidation, dissolution or other winding-up of the
Company or its businesses or any sale, receivership or insolvency
proceeding or assignment for the benefit of creditors; or
(b) the Company goes into insolvent liquidation or becomes subject to
any insolvency or rehabilitation proceeding, administration or
voluntary arrangement or any proceeding similar to any of the
foregoing,
then and in any such event:
(i) the Parental Liabilities shall thereupon immediately be postponed
and subordinated to LND Liabilities and the Parent will file any
proof or other claim necessary for the recovery of the Parental
Liabilities;
(ii) any payment or distribution of any kind or character and all and
any rights in respect thereof, whether in cash, securities or
other property which is payable or deliverable upon or with
respect to the Parental Liabilities or any part thereof by a
liquidator, administrator or receiver (or the equivalent thereof)
of the Company or its estate made to or paid to, or received by
the Parent or to which the Parent is entitled shall be held in
trust by the Parent, for LND and shall forthwith be paid or, as
the case may be, transferred or assigned to LND in accordance with
the terms of the Invoice Discounting Agreement; and
-4-
(iii) if the trust referred to in (ii) above fails or cannot be given
effect, the Parent (so as also to bind any agent or trustee on its
behalf) receiving any such payment or distribution will subject to
the provisions of Clause 6.2 pay an amount equal to such payment
or distribution to LND in accordance with the terms of the Invoice
Discounting Agreement.
6.2 If the Parent receives any payment under this Agreement or paid in
respect of the Parental Liabilities in a currency other than the currency
of the LND Liabilities (or any relevant part thereof) the Parent may
convert the currency received into the currency of the LND Liabilities
(or any relevant part thereof) at the prevailing market rate of exchange.
6.3 (a) The Parent irrevocably authorises and empowers LND to demand,
xxx and prove for, collect and receive every payment or
distribution referred to in Clause 6.1(ii) and give acquittance
therefor and to file claims and take such other proceedings, in
LND's own name or in the name of the Parent or otherwise, as LND
may deem necessary or advisable for the enforcement of this
Agreement.
(b) The Parent will execute and deliver to LND such powers of
attorney, assignments or other instruments as may be reasonably
requested by LND in order to enable LND to enforce any and all
claims upon or with respect to the Parental Liabilities or any
part thereof, and, insofar as it is able to do so, collect and
receive any and all payments or distributions which may be payable
or deliverable at any time upon or with respect to the Parental
Liabilities or any part thereof in accordance with the terms of
this Agreement.
(c) The liquidator or other insolvency representative or trustee of
the Company or its estate is hereby authorised by the Parent to
apply any assets or monies received by them in accordance with the
terms of this Agreement.
7. SET-OFF
The Parent shall not set off against the Parental Liabilities any amount
payable by the Parent to the Company. If, however, any Parental
Liabilities are discharged in whole or in part by way of set-off, the
Parent will promptly pay to LND for application against LND Liabilities
an amount equal to the amount of the Parental Liabilities discharged by
such set-off.
8. NEW MONEY
8.1 LND may, at its discretion, make further advances to the Company.
8.2 The Parent hereby agrees that LND Liabilities payable or owing to LND
under any of the Discounting Documents may be refinanced on terms no more
onerous to the Company and that any obligations incurred by the Company
in refinancing such LND Liabilities will be LND Liabilities within the
meaning of this Agreement and will rank ahead of the Parental Liabilities
on, mutatis mutandis, the terms set out herein.
-5-
9. WAIVER OF DEFENSES
The subordinations effected or intended to be effected by this Agreement
and the obligations of the Parent hereunder shall not be affected by any
act, omission or circumstances which but for this provision might operate
to release or otherwise exonerate the Parent from its obligations
hereunder or affect such obligations or such subordinations including
without limitation and whether or not known to the Parent or any other
person:
(a) any time or indulgence granted to or composition with the Company
or any other person; or
(b) the taking, variation (no matter how fundamental or extensive),
compromise, renewal or release of, or refusal or neglect to
perfect or enforce, any rights, remedies or securities against or
granted by the Company or any other person; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Company or any other person or,
subject to the other provisions of this Agreement, any amendment
to or variation of the terms of the Discounting Documents or any
other document.
10. ASSIGNMENT
10.1 LND shall have a full and unfettered right to assign or otherwise
transfer the whole or any part of the benefit of this Agreement to any
person to whom all or a corresponding part of its rights, benefits and
obligations under any of the Discounting Documents are assigned or
transferred in accordance with the provisions thereof (including, without
limitation, such assignment or transfer on the terms to be provided for
in clause 19.4 and 19.5 of the Invoice Discounting Agreement)
10.2 Subject to the terms of the Invoice Discounting Agreement, the Parent
shall procure that any purchaser, assignee or transferee of any shares in
the Company held by it or its nominee(s) shall enter into an Accession
Deed.
10.3 Subject to the terms of the Discounting Documents, the Company shall
procure that any person or persons who shall subscribe for any of the
shares in the Company shall enter into an Accession Deed.
11. ACCOUNTANTS' REPORT
Notwithstanding any other provision of this Agreement, nothing in this
Agreement shall prevent any of the parties hereto making a claim for
costs or damages in relation to the Accountants' Report provided that:
(a) before any party to this Agreement takes such action it will
consult with the other parties to this Agreement on the nature of
such action to be taken; and
(b) if the Parent receives any moneys before the discharge in full of
LND Liabilities as a result of making any claim for costs or
damages in relation to the Accountants' Report, it shall pay an
amount equal to the amount of such moneys (less the costs and
expenses directly incurred in making such claim) to
-6-
the Company, unless there is a Default or Potential Default
continuing and unwaived, in which case such moneys will be paid
to LND for application against LND Liabilities PROVIDED FURTHER
THAT any such payment to the Company will be made on the basis
that the amount may not be paid or repaid to the Parent at any
time before the expiry of the Security Period and that any such
payment to LND is deemed to be out of the proceeds of a payment
to the Company made on that basis.
12. WAIVER
12.1 No failure on the part of LND to exercise, or delay on its part in
exercising, any of its rights, powers and remedies provided by this
Agreement or by law (collectively the "RIGHTS") shall operate as a waiver
thereof, nor shall any single or partial waiver of any of the Rights
preclude any further or other exercise of that one of the Rights
concerned or the exercise of any other of the Rights.
13. PROVISIONS SEVERABLE
13.1 Every provision contained in this Agreement shall be severable and
distinct from every other such provision and if at any time any one or
more of such provisions is or becomes invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining such
provisions shall not in any way be affected thereby.
14. CONTINUATION AND RELEASE
14.1 Save with the prior written consent of LND or as otherwise provided
herein, this Agreement shall remain in full force and effect
notwithstanding the termination of the Parental Agreements, or the
obligations of the Parent thereunder ceasing to be valid or enforceable
for any reason whatsoever so that the obligations of the Parent to LND
hereunder shall continue as if the relative Parent Loan Agreement had not
been terminated and the relevant obligations continued to be valid and
fully enforceable.
14.2 Subject to the terms of the Invoice Discounting Agreement, on a transfer
by the Parent of any Shares, as the case may be, upon registration of
such transfer with the Company and delivery of an Accession Deed to LND
executed by the transferee, the transferor shall be relieved of all
obligations and liabilities under this Agreement (other than under
Clauses 5 and 11) not accrued prior to the said transfer to the extent
relating to such Shares and assumed by the transferee pursuant to the
said Accession Deed.
15. TRUSTS
The perpetuity period for each trust created by this Agreement shall be
80 years.
16. GOVERNING LAW AND JURISDICTION
16.1 This Agreement shall be governed by, and construed in all respects in
accordance with, English law.
-7-
16.2 All the parties irrevocably agree that the courts of England are to have
exclusive jurisdiction to settle any disputes which may arise out of or
in connection with this Agreement and that accordingly any suit, action
or proceeding (together in this Clause referred to as "PROCEEDINGS")
arising out of or in connection with this Agreement shall be brought in
such courts.
16.3 Each party to this Agreement consents generally in respect of any
Proceedings arising out of or in connection with this Agreement to the
giving of any relief or the issue of any process in connection with such
Proceedings including, without limitation, the making, enforcement or
execution against any property or assets whatsoever of any order or
judgment which may be made or given in such Proceedings.
17. AMENDMENT
17.1 This Agreement shall not be varied or amended in any way except in
writing signed by all the parties hereto.
18. COUNTERPARTS
18.1 This Agreement may be executed in any number of counterparts and all such
counterparts when executed and taken together shall constitute one and
the same Agreement.
19. TERMINATION
19.1 This Agreement shall terminate when all sums outstanding pursuant to the
Discounting Documents have been repaid in full and LND has no further
obligations thereunder.
IN WITNESS whereof this Agreement has been duly executed by the parties hereto
the day and year first above written.
-8-
SCHEDULE 1
ACCESSION DEED
This Deed is made 19
BY: [ ] of [ ] ("Acceding Party")
SUPPLEMENTAL to a Subordination Agreement (the "Subordination Agreement") dated
[ ] 1998 and made between Prestolite Electric Limited,
Lombard NatWest Discounting Limited and Prestolite Electric Inc.
NOW THE PARTIES AGREE AS FOLLOWS:
1. Words and expressions defined in the Subordination Agreement shall bear
the same meaning herein.
2. The Acceding Party confirms it has been supplied with a copy of the
Subordination Agreement and that [ ] (the "Transferor") has
agreed to transfer to it the Shares detailed in the schedule hereto.
3. The Acceding Party covenants with LND and also for the benefit of all
persons who subsequently become LND, to assume, fulfil and discharge all
obligations and liabilities of the Transferor under the Subordination
Agreement of a general nature or relating to the said Shares incurred
after the said transfer, and from the date of the said transfer to
observe, perform and be bound by all the terms of the Subordination
Agreement to the intent and effect that the Acceding Party shall be a
party to the Subordination Agreement together with the Parent (insofar as
any obligations shall remain binding on it) with effect from the date the
Acceding Party is registered as a holder of such Shares.
4. This Deed shall be governed by, and construed in accordance with, English
law.
IN WITNESS whereof this Deed has been duly executed by the parties hereto the
day and year first above written.
-9-
SCHEDULE
--------
[Description of Shares]
Executed as a Deed by )
[ ] )
in the presence of: )
[OR]
Executed as a Deed and Delivered by )
[ ] LIMITED )
acting by: )
Director
Director/Secretary
-10-
THE COMPANY
SIGNED by )
for and on behalf of )
PRESTOLITE ELECTRIC LIMITED )
LND
SIGNED by )
for and on behalf of )
LOMBARD NATWEST DISCOUNTING LIMITED )
THE PARENT
SIGNED by )
for and on behalf of )
PRESTOLITE ELECTRIC INCORPORATED )
-11-
