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                                 Exhibit 10.1

                               January 12, 2000


Prestolite Electric Incorporated
2100 Commonwealth Blvd, Suite 300
Ann Arbor, MI 48105

Attention: Ken Cornelius
           Chief Financial Officer

Dear Ken:

On behalf of Robert W. Baird & Co. Incorporated ("Baird") we wish to thank you
for the opportunity to represent Prestolite Electric Incorporated ("Prestolite"
or the "Company") in connection with the possible sale or other disposition of
certain of the Company's businesses. This letter confirms the agreement between
Baird and the Company under which Baird is engaged as financial advisor to the
Company in connection with the proposed Disposition(s) (as defined below).

     1.   Baird accepts this engagement and agrees to:

          (a)  become familiar, to the extent we deem appropriate, with the
               business, operations, properties, financial condition, and
               prospects of the Company;

          (b)  assist the Company in analyzing and evaluating the operations and
               financial position of certain businesses the Company is
               considering divesting;

          (c)  assist the Company and its other financial advisor, Lincoln
               Partners LLC, in the preparation and implementation of a
               marketing plan with respect to the proposed Disposition(s) and in
               the screening of interested prospective purchasers;

          (d)  assist the Company in evaluating proposals which are received
               from potential purchasers; counsel the Company as to strategy and
               tactics for negotiating with potential purchasers and, advise the
               Company with respect to the form and structure of, and
               consideration to be received in, the proposed Disposition(s).

          If Baird is asked to provide other services not specifically
          contemplated above, the Company and Baird shall enter into a separate
          agreement covering such additional services to be rendered and the fee
          payable by the Company.

     2.   Baird's engagement shall commence on the date of this letter and shall
          expire on January 3, 2001 unless extended by mutual written agreement,
          but may be terminated earlier by either the Company or Baird at any
          time upon 30 days'
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          written notice from one party to the other. Notwithstanding expiration
          or termination of Baird's engagement, the provisions of this letter
          concerning confidentiality, indemnification, contribution, legal
          matters and the Company's obligations to pay Baird's fees and
          reimburse Baird's expenses shall survive and remain in effect.

     3.   For the purposes of this letter:

          (a)  A "Disposition" means any transaction or a series of transactions
               which results, directly or indirectly, in the transfer of control
               of the Company's Battery Charger Business or DC Motor Business
               (as defined in your December 16, 1999 Board of Directors
               information package entitled, "Breakup and Sale of Prestolite")
               or any material part of their assets or businesses (a
               "Business"), including without limitation: (i) any merger,
               consolidation, reorganization, recapitalization or other business
               combination pursuant to which a Business is transferred to or
               combined with that of another non-affiliated entity; (ii) the
               acquisition by an acquirer (or a "group", as defined in Section
               13(d)(3) of the Securities Exchange Act of 1934, as amended) of
               beneficial ownership of more than 50% of any class of capital
               stock (or rights to acquire the same) of the Company or any of
               its affiliates or of all or substantially all of the assets of
               the DC Motor Business or the Battery Charger Business; or (iii) a
               lease of a material part of the assets of the DC Motor Business
               or the Battery Charger Business, with or without a purchase
               option, or the formation of a joint venture or partnership, or
               similar transaction with another party with respect to a
               Business.

          (b)  "Transaction Date" means the date of the closing of any
               Disposition.

          (c)  "Consideration" means the aggregate value, whether in cash,
               securities, assumption of (or purchase subject to) debt or
               liabilities (including, without limitation, indebtedness for
               borrowed money, pension liabilities, guarantees and other
               calculable liabilities but excluding trade liabilities and trade
               payables), or other property, obligations or services, paid or
               payable directly or indirectly (through an escrow or otherwise)
               or otherwise assumed in connection with a Disposition (including
               amounts paid to holders of any warrants, stock purchase rights or
               convertible securities of the Company and to holders of any
               options or stock appreciation rights issued by the Company,
               whether or not vested). For the purpose of computing the value of
               Consideration, the value of securities shall be determined as
               follows:

               (i)  the value of securities (whether debt or equity) that are
                    traded on a national securities exchange, the NASDAQ system
                    or the over-the-counter market shall be the last reported
                    sales price prior to the Transaction Date; and

               (ii) the value of other securities, indebtedness, obligations,
                    property and services (including assumed liabilities) shall
                    be their fair market value as of the Transaction Date, or
                    such other value as may be mutually agreed upon by the
                    Company and Baird.
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               If any part of the Consideration consists of contingent payments
               to be calculated by reference to uncertain future occurrences,
               such as future financial or business performance, then any
               portion of Baird's fees payable hereunder relating to such
               portion of the Consideration shall be payable upon the receipt of
               such portion of the Consideration.

               If all or any portion of the Consideration is paid in any
               currency other than United States Dollars, the value of such
               Consideration shall be converted into United States Dollars at
               the prevailing exchange rate on the Transaction Date.

          (d)  Notwithstanding (c) above, if a Disposition entails the sale or
               transfer of only a portion of the assets of the DC Motor Business
               or the Battery Charger Business and the retention (or sale to a
               party other than the acquiring party or parties) of cash, cash
               equivalents, securities, investments or receivables
               (collectively, "Liquid Assets"), then such Liquid Assets shall be
               deemed to be included in the Consideration and shall be valued in
               accordance with (c) above; provided, however, that the value of
               inventories and receivables shall be their book value.


     4.   Baird shall be entitled to the following compensation for its services
          hereunder:

          (a)  a non-refundable retainer fee of $15,000 with $1,500 payable
               promptly upon execution of this letter and with the balance
               payable in nine monthly installments of $1,500 beginning February
               1, 2000 through October 1, 2000 (the "Financial Advisory Fee").

          (b)  if a Disposition is consummated:

               (i)   during the term of Baird's engagement under this letter; or

               (ii)  during the 12 months following termination or expiration of
                     Baird's engagement with any person or entity (or any other
                     person or entity formed by or affiliated with such person
                     or entity) identified to the Company by Baird or involving
                     a person or entity or transaction as to which Baird has
                     performed services during the period of its engagement; or

               (iii) which results from, or completes a Disposition contemplated
                     by, an agreement in principle or a definitive agreement to
                     effect a Disposition which is entered into during the term
                     of Baird's engagement or the 12 months following
                     termination or expiration of Baird's engagement;

          then the Company shall pay to Baird in cash on the Transaction Date, a
          transaction fee (the "Transaction Fee") equal to the percentages
          specified below of the Consideration paid or payable in such
          Disposition.
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               Total Consideration Paid                             Percentage
               ------------------------                             ----------
               On the amount up to $35 million                         0.10%
               On the amount between $35 million and $40 million       0.30%
               On the amount over $40 million                          0.40%

          It is intended that the Transaction Fee payable to Baird shall be 10%
          of the success fee paid to Lincoln Partners LLC by the Company in
          connection with the proposed Disposition(s).

     5.   In addition to the fees payable to Baird, the Company shall reimburse
          Baird and its affiliates, upon request, for its and their reasonable
          out-of-pocket expenses incurred in connection with Baird's engagement.
          Out-of-pocket expenses may include, but are not limited to,
          transportation, lodging, meals, document services, data base services,
          facsimile charges, courier charges, word processing requirements and
          fees and expenses of third parties such as legal counsel.

     6.   The Company shall furnish all information reasonably requested by
          Baird for the purpose of rendering services hereunder (the
          "Information"). The Company recognizes and confirms that Baird (i)
          will use and rely on the Information and on other information
          available from generally recognized public sources in performing the
          services contemplated by this letter without any obligation to
          independently verify the Information or such other information; (ii)
          will not assume responsibility for the accuracy or completeness of the
          Information or such other information; and (iii) will not make an
          appraisal of any of the assets or liabilities of the Company or any
          other entity. To the best of the Company's knowledge, the Information
          will be true and correct in all material respects and will not contain
          any material misstatement of a fact or omit to state any material fact
          necessary to make the statements contained therein not misleading.

          Baird agrees as provided in this letter to keep all non-public
          Information provided to it by the Company confidential, except as
          required by law. Notwithstanding anything to the contrary in this
          letter, Baird may disclose non-public Information to its agents and
          advisors, who shall also be bound by the terms of this paragraph,
          whenever Baird determines that such disclosure is necessary or
          appropriate to provide the services contemplated in this letter. The
          Company acknowledges that all opinions and advice (written or oral)
          given by Baird to the Company in connection with Baird's engagement
          are intended solely for the benefit and use of the Company (including
          its management, directors and attorneys) in considering the
          transaction(s) to which they relate and the Company agrees that,
          except as specifically permitted hereunder, no such opinion or advice
          shall be used for any other purpose or reproduced, disseminated,
          quoted or referred to at any time, in any manner or for any purpose,
          nor shall any public references to Baird be made by the Company (or
          such persons), without the prior written consent of Baird, which
          consent shall not be unreasonably withheld.

     7.   The Company hereby agrees to indemnify, hold harmless and reimburse
          Baird and each other Indemnified Party (as hereinafter defined) as
          follows:

          (a)  The Company agrees to indemnify and hold Baird, its affiliates
               and their respective directors, officers, partners, employees,
               agents and controlling
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               person (Baird and each such person being an "Indemnified Party")
               harmless from and against any and all losses, claims, damages and
               liabilities, joint or several, to which such Indemnified Party
               may become subject, relating to or arising out of the engagement
               of Baird, actions taken or omitted in connection therewith, or
               the matters contemplated by this letter (including amounts paid
               in settlement), and will reimburse each Indemnified Party for all
               expenses (including without limitation fees and expenses of legal
               counsel) as they are incurred in connection with investigating,
               preparing or defending, or providing evidence in, any pending or
               threatened claim or any action or proceeding arising therefrom,
               whether or not such Indemnified Party is a party and whether or
               not such claim, action or proceeding is brought by or on behalf
               of the Company; provided, however, that the Company shall not be
               liable pursuant to the foregoing indemnification provision in
               respect of any loss, claim, damage or liability that a court of
               competent jurisdiction shall have determined by final judgment
               (not subject to further appeal) to be the sole result of the
               willful misfeasance or gross negligence of such Indemnified
               Party.

          (b)  If indemnification is to be sought hereunder by an Indemnified
               Party, then such Indemnified Party shall notify the Company of
               the commencement of any litigation, proceeding or other action in
               respect thereof; provided, however, that the failure to notify
               the Company shall not relieve the Company from any liability or
               obligation that it may have under this paragraph or otherwise to
               such Indemnified Party. Following such notification, the Company
               may elect in writing to assume the defense of such litigation,
               proceeding or other action (and the costs related thereto) and,
               upon such election, the Company shall not be liable for any legal
               costs subsequently incurred by such Indemnified Party (other than
               costs of investigation or the production of documents or
               witnesses) unless (i) the Company has failed to provide legal
               counsel reasonably satisfactory to such Indemnified Party in a
               timely manner or (ii) such Indemnified Party shall have concluded
               that (A) the representation of such Indemnified Party by legal
               counsel selected by the Company would be inappropriate due to
               actual or potential conflicts of interest or (B) there may be
               legal defenses available to such Indemnified Party that are
               different from or additional to those available to the Company or
               any other Indemnified Party represented by such legal counsel.
               Nothing set forth herein shall preclude any Indemnified Party
               from retaining its own counsel at its own expense. The Company
               agrees that it will not, without the prior written consent of
               Baird, settle, compromise or consent to the entry of judgment in
               any pending or threatened claim, proceeding, or action in respect
               of which indemnification could be sought hereunder (whether or
               not any Indemnified Party is a party to such claim or proceeding)
               unless such settlement includes a provision unconditionally
               releasing Baird and all other Indemnified Parties from and
               holding them harmless against all liability in respect of claims
               by any releasing party related to or arising out of such matters
               or any transaction or conduct in connection therewith.

          (c)  If the indemnification and reimbursement provisions set forth
               above are unavailable or insufficient to hold an Indemnified
               Party harmless, then the Company shall nonetheless contribute to
               any such amounts paid or
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               payable by such Indemnified Party in a proportion that
               appropriately reflects the relative benefits received by the
               Company, on the one hand, and Baird, on the other hand, in
               connection with the matters to which such expenses or other
               amounts relate. If the foregoing allocation according to relative
               benefits is not permitted by applicable law, then amounts shall
               be contributed by the Company to the Indemnified Party in such
               proportion as appropriately reflects not only the relative
               benefits referred to above, but also so reflects the relative
               fault of the Company, on the one hand, and Baird, on the other
               hand, as well as any other relevant equitable considerations.

          (d)  If multiple claims are asserted against an Indemnified Party in
               any action or other proceeding, including an arbitration, and
               indemnification as to at least one of such claims is permitted
               under applicable law and provided for under this agreement, the
               Company agrees that any judgment or award shall be conclusively
               deemed to be based on claims as to which indemnification is
               permitted and provided for, except to the extent the judgment or
               award expressly states that the judgment or award, or any portion
               thereof, is based solely on a claim or claims as to which
               indemnification is not available.

          (e)  In connection with Baird's engagement hereunder, Baird may also
               be engaged to act for the Company in one or more additional
               capacities, and the terms of any such additional engagement may
               or may not be embodied in one or more separate written
               agreements. The provisions of this paragraph shall (i) apply to
               the original engagement, any such additional engagement, and any
               modification of the original engagement or such additional
               engagement, (ii) remain in full force and effect whether or not
               any of the transactions contemplated by this engagement or such
               additional engagement are consummated, (iii) survive the
               expiration or termination of the period of Baird's engagement,
               and (iv) be in addition to any liability that the Company might
               otherwise have to any Indemnified Party. The Company also agrees
               that no Indemnified Party (including Baird) shall have any
               liability (direct or indirect, in contract or tort or otherwise)
               to the Company or its security holders, creditors or affiliates
               in connection with any matter relating to the engagement of Baird
               hereunder, except to the extent that a court having competent
               jurisdiction shall have determined by final judgment (not subject
               to further appeal) that such liability resulted solely from the
               willful misfeasance or gross negligence of such Indemnified
               Party. In no event shall the aggregate amount of liability of all
               Indemnified Parties hereunder be in excess of the fees (exclusive
               of expense reimbursement) actually paid to Baird under this
               letter.

     8.   If a Disposition is effected and the Company is not the surviving
          entity after such Disposition or in the event of a sale of all or
          substantially all of the assets of the Company, the Company shall
          cause the acquirer or acquirers to assume and honor the obligations
          and liabilities of the Company in this letter, including without
          limitation the Company's obligations and liabilities pursuant to
          provisions concerning indemnification, contribution and the Company's
          obligations to pay Baird's fees and to reimburse Baird's expenses.
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     9.   The Company acknowledges that Baird is a full service securities firm
          and as such Baird and its affiliates may from time to time hold long
          or short positions or effect transactions, for its own account or the
          accounts of customers, in securities or options on securities of the
          Company or other parties that might be involved in transactions with
          the Company.

     10.  The Company and Baird agree and acknowledge that (i) this letter is
          solely for the benefit of the parties to this letter, (ii) Baird shall
          owe no duty to any person or entity other than the Company, and (iii)
          no other person or entity, including without limitation the Company's
          shareholders and the Company and its shareholders' respective
          employees, officers, directors, trustees, affiliates and agents, shall
          be deemed a third party beneficiary of this letter or have any rights
          with respect to Baird's engagement.

     11.  This letter may not be amended or modified except in writing executed
          by the Company and Baird. This letter may be executed in counterparts,
          each of which shall be deemed an original and all of which shall
          constitute one and the same instrument. Solely for purposes of
          enforcing this agreement, the Company consents to personal
          jurisdiction, service and venue in any court in which any claim,
          action or proceeding which is subject to this agreement (including
          without limitation the indemnification provisions) is brought against
          Baird or any other Indemnified Party. Any right to trial by jury with
          respect to any claim, action or proceeding related to or arising out
          of Baird's engagement, any transaction or conduct in connection
          therewith or this agreement is hereby waived. This letter shall be
          governed by and construed in accordance with the internal laws of the
          State of Illinois without reference to principles of conflicts of law.

Please confirm that the foregoing is in accordance with the Company's
understanding by signing and returning to Baird the enclosed duplicate of this
letter.

                                           Very truly yours,


                                           ROBERT W. BAIRD & CO. INCORPORATED


                                           By: /s/ Steven G. Booth
                                               --------------------------------
                                           Its: Managing Director
                                                -------------------------------

Accepted and agreed to as of
the date first written above

PRESTOLITE ELECTRIC INCORPORATED

By:  /s/ Kenneth C. Cornelius
     -----------------------------
Its: /s/ Vice President
     -----------------------------