Public Offering Registration - REMY INTERNATIONAL, INC. - 10-10-1997 by RMYI-Agreements

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									As filed with the Securities and Exchange Commission on October 10, 1997. Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

DELCO REMY INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware (State or Other Jurisdiction of Incorporation or Organization) 6719 (Primary Standard Industrial Classification Code Number) 35-1909253 (I.R.S. Employer Identification No.)

2902 Enterprise Drive, Anderson, Indiana 46013, Telephone: (765) 778-6499 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) Susan E. Goldy, Esq. Vice President and General Counsel Delco Remy International, Inc. 2902 Enterprise Drive, Anderson, Indiana, 46013, Telephone (765) 778-6799 (Address Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to:

Christopher G. Karras, Esq. Dechert Price & Rhoads 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, Pennsylvania 19103-2793 (215) 994-4000

Marc S. Rosenberg, Esq. Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 (212) 474-1000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_]
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CALCULATION OF REGISTRATION FEE ================================================= ======================= ===================== Proposed Maximum Title of Each Class of Aggregate Offering Amount of Securities to be Registered Price (1) Registration Fee ------------------------------------------------- ----------------------- --------------------Class A Common Stock, par value $.01 per share $69,000,000 $20,910

================================================= ======================= =====================

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o). The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

DELCO REMY INTERNATIONAL, INC. CROSS-REFERENCE SHEET Pursuant to Item 501 of Regulation S-K
Form S-1 Part I Item -------------------1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus........ Inside Front and Outside Back Cover Pages of Prospectus............................... 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges................ 4. Use of Proceeds............................... 5. Determination of Offering Price............... 6. Dilution...................................... 7. Selling Security Holders...................... 8. Plan of Distribution.......................... 9. Description of Securities to be Registered.... 10. Interests of Named Experts and Counsel........ 11. Information with Respect to the Registrant.... 2. Caption or Location in Prospectus --------------------------------Outside Front Cover Page Inside Front Prospectus Summary; Risk Factors Use of Proceeds Underwriters Dilution Not Applicable Outside Front Cover Page; Underwriters Description of Capital Stock Not Applicable Prospectus Summary; Risk Factors; Company History; Use of Proceeds; Dividend Policy; Capitalization; Selected Consolidated Historical Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Certain Transactions; Principal Stockholders; Description of Capital Stock; Description of Indebtedness; Index to Financial Statements Not Applicable

12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.................................

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ + Information contained herein is subject to completion or amendment. A + + registration statement relating to these securities has been filed with the + + Securities and Exchange Commission. These securities may not be sold nor may +
+ + + + offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be + + + +

+ unlawful prior to registration or qualification under the securities laws of + + any such State. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PROSPECTUS (Subject to Completion)
Issued October 10, 1997 [LOGO OF DELCO REMY INTERNATIONAL APPEARS HERE] Shares DELCO REMY INTERNATIONAL, INC. CLASS A COMMON STOCK ----------------------

All of the Shares of Class A Common Stock offered hereby (this "Offering" or the "Equity Offering") are being sold by the Company. Prior to the Equity Offering, there has been no public market for the Class A Common Stock. It is currently estimated that the initial public offering price per share will be between $ and $ . See "Underwriters" for a discussion of the factors considered in determining the initial public offering price. Concurrently with the Equity Offering, $130,000,000 of % Senior Notes Due 2007 are being offered to the public by the Company (the "Notes Offering" and, together with the Equity Offering, the "Offerings"). See "Prospectus Summary-- The Offering--Concurrent Offerings." The Notes Offering and the Equity Offering are each contingent on consummation of the other.

Application has been made to list the Class A Common Stock on the New York Stock Exchange under the symbol "RMY."

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

PRICE $ A SHARE
Underwriting Discounts and Commissions (1) --------------$ $

Per Share.............................. Total (3)..............................

$

Price to Public -----$

$

Proceeds to Company (2) ----------$

(1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. (2) Before deducting expenses payable by the Company estimated at $ . (3) The Company has granted to the Underwriters an option, exercisable within 30 days of the date hereof, to purchase up to an aggregate of additional shares of Class A Common Stock at the price to public less underwriting discounts and commissions for the purpose of covering over- allotments, if any. If the Underwriters exercise such option in full, the total price to public, underwriting discounts and commissions and proceeds to Company will be $ , $ and $ , respectively. See "Underwriters."

The shares are offered, subject to prior sale, when, as and if accepted by the Underwriters named herein and subject to approval of certain legal matters by Cravath, Swaine & Moore, counsel for the Underwriters. It is expected that the delivery of the Shares will be made on or about , 1997 at the office of Morgan Stanley & Co. Incorporated, New York, New York, against payment therefor in immediately available funds.

MORGAN STANLEY DEAN WITTER CREDIT SUISSE FIRST BOSTON SALOMON BROTHERS INC , 1997

Certain statements contained in this Prospectus that are not related to historical results are forward-looking statements. Actual results may differ materially from those projected or implied in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. These forward-looking statements involve risks and uncertainties including, but not limited to, those set forth under "Risk Factors." Until , 1997 (25 days after the commencement of this offering), all dealers effecting transactions in the Class A Common Stock, whether or not participating in this distribution, may be required to deliver a Prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a Prospectus when acting as Underwriters and with respect to unsold allotments or subscriptions. TABLE OF CONTENTS
Prospectus Summary..................................4 Risk Factors.......................................11 Company History....................................16 Use of Proceeds....................................17 Dividend Policy....................................19 Dilution...........................................19 Capitalization.....................................20 Selected Consolidated Historical Financial Data....21 Pro Forma Condensed Consolidated Financial Data (Unaudited)................................23 Management's Discussion and Analysis of Financial Condition and Results of Operations...31 Business...........................................38 Management.........................................52 Principal Stockholders.............................58 Certain Transactions...............................61 Description of Capital Stock.......................61 Description of Indebtedness........................63 Shares Eligible for Future Sale....................67 Certain United States Federal Tax Consequences to Non-United States Holders....................67 Underwriters.......................................69 Legal Matters......................................71 Experts............................................71 Additional Information.............................71 Index to Financial Statements.....................F-1 --------------

No person is authorized in connection with any offering made hereby to give any information or to make any representation other than as contained in this Prospectus, and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or any Underwriter. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy the Class A Common Stock offered hereby by any person in any jurisdiction in which it is unlawful for such person to make any such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall under any circumstances imply that the information contained herein is correct as of any date subsequent to the date hereof.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF THE CLASS A COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS." 3

PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data, on August 1, 1996 and (b) for purposes of balance sheet data, on July 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October , 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a -for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over- allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY General The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia-Pacific. Net sales and EBITDA (as defined) for fiscal year 1997 were $689.8 million and $87.3 million, respectively. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters and its U.S. and Canadian requirements for heavy duty starters and alternators. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system. See "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of 4

the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately % of the Company's outstanding Common Stock ( % of the voting power), and will be able to control the Company and elect its Board of Directors. Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. Growth Strategy The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: Increasing Aftermarket Presence Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. Expanding Globally The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly 5

growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India; and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. Introducing Technologically Advanced New Products As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of-the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. Operating Strategy The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "Focus" Factories to Drive Manufacturing Excellence The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company will occupy five focus factories and will have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. Productivity Improvements In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. Product Quality and Continuous Improvement In July 1997, the Company received the prestigious Supplier of the Year award from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and 6

the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. Recent Developments On October , 1997, the Company entered into a definitive agreement to acquire Ballantrae for $49.2 million (including assumed debt). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." Other Information For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary, minority interest in income of subsidiaries, gain on sale of building and restructuring charges, plus depreciation, amortization and non-cash post-retirement benefits other than pensions, and (ii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING
Class A Common Stock offered hereby(1).................. Common Stock to be outstanding after the Equity Offering(2)(3).......................................... Concurrent Offerings.................................... shares shares of Class A Common Stock and shares of Class B Common Stock. See "Description of Capital Stock." Concurrently with the Equity Offering, the Company is offering $130,000,000 of % Senior Notes Due 2007 (the "Notes"). The Notes Offering and the Equity Offering are each contingent upon consummation of the other. See "Description of Indebtedness." The net proceeds of the Offerings (estimated to be approximately $181.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds." RMY See "Risk Factors" beginning on page for a discussion of certain factors that should be considered by prospective purchasers of the Class A Common Stock.

Use of Proceeds.........................................

Proposed NYSE Symbol.................................... Risk Factors............................................

(1) Assumes no exercise of the Underwriters' over-allotment option. See "Underwriters." (2) Does not include (i) up to shares of Class A Common Stock that may be subject to a stock option plan which the Company expects to adopt prior to the consummation of the Offerings and (ii) 7

shares of Class A Common Stock issuable upon exercise of the Warrants (as defined). See "Management--Stock Options" and "Description of Capital Stock." (3) Shares of Class A Common Stock and Class B Common Stock are generally convertible into each other on a one-for-one basis. Subject to certain exceptions, shares of Class B Common Stock are non-voting. See "Description of Capital Stock." 8

SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA The following table sets forth summary consolidated historical financial data of the Company for the years ended July 31, 1995, 1996 and 1997 and as of July 31, 1997 and summary consolidated pro forma financial data for the Company as of and for the year ended July 31, 1997. The statement of operations data for the years ended July 31, 1995, 1996 and 1997 and the balance sheet data as of July 31, 1997 were derived from audited Consolidated Financial Statements of the Company included elsewhere herein. The pro forma consolidated statement of operations data for the year ended July 31, 1997 were prepared to illustrate the estimated effect of the Transactions, including the Offerings and the application of the estimated net proceeds therefrom, as if they had occurred on August 1, 1996. The pro forma consolidated balance sheet data were prepared to illustrate the estimated effect of the Transactions, including the Offerings and the application of the estimated net proceeds therefrom, as if they had occurred on July 31, 1997 (other than the acquisition of World Wide, which is reflected in the consolidated historical balance sheet data). The pro forma data do not purport to be indicative of the results of operations or the financial position of the Company that would have been obtained if the Transactions had in fact been completed as of such dates or to project the results of operations or the financial position of the Company for any future date or period. The table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Consolidated Financial Statements of the Company, "Pro Forma Condensed Consolidated Financial Data," related notes and other financial information included elsewhere in this Prospectus.
For the Year Ended July 31 --------------------------------------------------------------Pro Forma 1995 1996 1997 1997 ------------------------------------------------(dollars in thousands, except per share data) $ 573,423 98,207 61,206 -37,001 18,432 9,326 2,363 6,963 $ $ $ 636,852 126,774 77,994 8,101 40,679 27,367 5,796 10,637 (4,841) $ $ 689,787 149,553 89,098 34,500 25,955 38,774 (10,263) 1,682 (14,296) $ $ 776,368 170,522 101,567 34,500 34,455 35,295 (1,377) ---

Statement of operations data: Net sales................................ Gross profit............................. Selling, engineering and administrative expenses............................. Restructuring charges.................... Operating income......................... Interest expense......................... Income (loss) from continuing operations........................... Loss from discontinued operations, net of tax.................................. Net income (loss)........................ Income (loss) from continuing operations per share................. Net income (loss) per share.............. Financial ratios and other data: Depreciation and amortization............ Capital expenditures..................... EBITDA(a)................................ Gross margin............................. Cash flow from operations................ EBITDA margin............................ Ratio of EBITDA to interest expense...... Ratio of total debt to EBITDA............ Ratio of earnings to fixed charges(b)....

$

14,533 11,241 55,968 17.1% 21,921 9.8% 3.0x 3.5x 1.8x

$

19,555 32,741 72,087 19.9% (684) 11.3% 2.6x 4.1x 1.3x

$

22,323 31,888 87,269 21.7% 22,537 12.7% 2.3x 4.2x --(c)

$

24,961 32,974 99,493 22.0% 33,832 12.8% 2.8x 3.4x 1.0x

Balance sheet data: Working capital.......................................................... Total assets............................................................. Total debt............................................................... Total stockholders' (deficit) equity.....................................

As of July 31, 1997 -----------------------------Historical Pro Forma ------------------------$ 155,302 570,569 363,768 (8,536) $ 171,023 632,060 341,294 86,153

9

(a) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary, minority interest in income of subsidiaries, gain on sale of building and restructuring charges, plus depreciation, amortization and non-cash post-retirement benefits other than pensions. EBITDA should not be construed as a substitute for income from operations, net income or cash flow from operating activities for the purpose of analyzing the Company's operating performance, financial position and cash flows. The Company has presented EBITDA because it is commonly used by certain investors to analyze and compare companies on the basis of operating performance and to determine a company's ability to service debt. This definition of EBITDA differs from the definition of EBITDA used in the Indenture for the Notes and may not be comparable to EBITDA as defined by other companies. See "Description of Notes--Certain Definitions." (b) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes and fixed charges. Fixed charges include preferred dividend requirement of subsidiary, interest expense and the portion of operating rents that is deemed representative of an interest factor. (c) The deficiency of earnings to fixed charges was $13.5 million. Excluding the restructuring charge, the ratio of earnings to fixed charges would have been 1.5x. 10

RISK FACTORS In evaluating an investment in the securities offered hereby, prospective investors should carefully consider the following risk factors, as well as the other information set forth elsewhere in this Prospectus. Substantial Leverage and Debt Service Obligations The Company incurred substantial indebtedness in connection with the GM Acquisition. After adjusting for the Transactions and the application of the net proceeds therefrom, at July 31, 1997, the Company's total indebtedness would have been $341.3 million (exclusive of unused commitments and outstanding letters of credit), and the Company would have had common stockholders' equity of $86.2 million. The degree to which the Company is leveraged could have important consequences, including the following: (i) the Company's ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; (ii) a substantial portion of the Company's cash flow from operations must be dedicated to the payment of interest on its existing indebtedness, thereby reducing the funds available to the Company for other purposes; (iii) the Company's operations are restricted by the agreements governing the Company's long-term indebtedness which contain certain financial and operating covenants; (iv) certain indebtedness under the Senior Credit Facility will be at variable rates of interest, which will cause the Company to be vulnerable to increases in interest rates; (v) all of the indebtedness outstanding under the Senior Credit Facility will be secured by substantially all the assets of the Company and that indebtedness, together with the Senior Subordinated Notes (as defined), will become due prior to the time the principal on the Notes will become due; (vi) the Company may be hindered in its ability to adjust rapidly to changing market conditions; and (vii) the Company's substantial degree of leverage could make it more vulnerable in the event of a downturn in general economic conditions or in its business. The Company may be required to refinance all or a portion of its present indebtedness, substantially all of which matures prior to the maturity of the Notes, at or prior to the maturity of such indebtedness. In the event that the Company is unable to refinance its existing indebtedness or otherwise raise funds to repay such indebtedness, the Company's financial condition and ability to fund its operations would be materially adversely affected. See "Description of Capital Stock," "Description of Indebtedness" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." Dependence on General Motors GM accounted for approximately 97% of the Company's 1997 pro forma automotive OEM net sales and approximately 4.5% of the Company's 1997 pro forma heavy duty OEM net sales. GM SPO accounted for approximately 24.2% of the Company's 1997 pro forma aftermarket net sales, and GM and GM SPO collectively accounted for approximately 38.8% of the Company's total 1997 pro forma net sales. In connection with the GM Acquisition, GM entered into long-term contracts pursuant to which it has agreed to purchase from the Company 100% of its North American requirements for automotive starters (other than for Saturn and Geo) and 100% of its U.S. and Canadian requirements for heavy duty starters and alternators, in each case to purchase the existing product line (as of August 1994). GM's obligations to purchase automotive starters and heavy duty starters and alternators from the Company terminate in 2004 and 2000, respectively, except for automotive products released in 1996 and 1997, for which GM's obligation will terminate in 2006 and 2007, respectively. GM's commitments to purchase products from the Company in the future are subject, however, to the Company's remaining competitive as to technology, design and price. See "Business--Customers." There can be no assurance that GM will not develop alternative sources for components currently produced by the Company and purchase some or all of its requirements for starters and alternators from these alternative sources at the expiration of its obligation to purchase such components from the Company. In addition, GM has been designated as an exclusive distributor of a significant amount of the Company's automotive and heavy duty aftermarket products and has agreed to provide the Company with purchasing support, which enables it to obtain raw materials at competitive prices. The Company's exclusive distribution arrangements with GM for the Company's heavy duty aftermarket products and automotive aftermarket products terminate on July 31, 1998 and in 2009, respectively. There can be no assurance that the Company and GM will negotiate a new arrangement for the distribution of heavy duty aftermarket products when the current distribution arrangement terminates on July 31, 1998, or whether the Company or GM will develop alternative distribution channels. 11

The loss of GM as a customer of OEM or aftermarket products, the default by GM on its obligations to act as a distributor or to purchase the Company's OEM or aftermarket products, a substantial decrease in demand for GM's automobile models containing the Company's products or the failure of the Company to obtain supply orders for its products used in GM's new automobile models could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, strikes and work stoppages affecting GM's operations may postpone GM's need for components produced by the Company, which, because of the Company's highly leveraged position, could have a material adverse effect on the Company's business, financial condition and results of operations. See "Risk Factors--Labor Negotiations." Relocation of Facilities The Company is in the process of relocating certain of its manufacturing facilities. Specifically, the Company has relocated certain production lines from three of its OEM manufacturing facilities to three focus factories. The Company has entered into leases for two additional focus factories and will relocate additional production lines to those facilities and one additional facility over the next year. At the conclusion of the relocation, the Company will have vacated the three plants leased from GM. In addition, the Company expects to relocate certain of its aftermarket facilities due to increased space requirements and the need for a regional presence. The Company's subsidiaries have conducted these moves in the past without significant disruption to operations. While the Company believes that it has prepared for such relocations, there can be no assurance that the complicated nature of such moves will not result in unforeseen costs or delays or result in disruptions in the Company's operations at the affected facilities. In addition, there can be no assurance that additional moves will not be required in the future. The restructuring charge recorded by the Company in 1997 does not include startup costs the Company expects to incur, based on its prior startups, in connection with the new focus factories. See "Risk Factors--Restructuring Charges; Net Losses" and "Business--Manufacturing and Facilities." Concentration of Ownership Upon completion of the Transactions, CVC will own beneficially approximately % of the Company's outstanding Common Stock (including non-voting Class B Common Stock which, subject to applicable law, is convertible at the holder's option into voting Class A Common Stock and after giving pro forma effect to the exchange of the Company's Junior Subordinated Notes for Class A Common Stock) and members of the management of the Company will own beneficially approximately % of the Company's outstanding Common Stock. Certain other existing stockholders of the Company will own beneficially approximately % of the Company's outstanding Common Stock. If these stockholders were to vote all of their shares in a similar manner, they would effectively control the Company. In most circumstances, they would have sufficient voting power to elect the entire Board of Directors of the Company and, in general, to determine (without the consent of the Company's other stockholders) the outcome of any corporate transaction or other matter submitted to the stockholders for approval, including mergers, consolidations and the sale of all or substantially all of the Company's assets, and to prevent or cause a change in control of the Company. Further, CVC, certain members of management and other existing stockholders have entered into a Stockholders' Agreement (as defined) whereby they have agreed to vote their shares in such a manner as to elect the entire Board of Directors of the Company. See "Principal Stockholders--Stockholders' Agreement." Restructuring Charges; Net Losses The Company incurred restructuring charges totaling $34.5 million and $8.1 million in fiscal years 1997 and 1996, respectively. These charges contributed to a loss from continuing operations and a net loss in fiscal year 1997 of $10.3 million and $14.3 million, respectively, and to a net loss in fiscal year 1996 of $4.8 million. These charges substantially reduced the Company's stockholders' equity. For a discussion of these charges and other factors contributing to such losses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." There can be no assurance that the Company will be able to realize the benefits it anticipates from the restructurings or that the Company will not incur additional charges in the future in connection with these restructurings or other actions. See "Risk Factors--Relocation of Facilities" and "Risk Factors--Labor Negotiations." 12

Restrictive Debt Covenants The agreements governing the Company's bank and other indebtedness include certain covenants that, among other things, restrict the Company's ability to: (i) pay dividends and make certain other restricted payments; (ii) incur additional indebtedness; (iii) grant liens, other than liens created pursuant to such agreements and certain permitted liens; and (iv) sell material assets. The Senior Credit Facility also requires the Company to maintain certain financial ratios, including interest coverage and leverage ratios, and to maintain a minimum level of consolidated cash flow. There can be no assurance that these requirements will be met in the future. If they are not, the holders of the indebtedness under such agreements would be entitled to declare such indebtedness immediately due and payable. See "Description of Capital Stock" and "Description of Indebtedness." Dependence on Automotive Industry; Cyclical Business The sale of a significant portion of the Company's products is directly related to the overall level of automobile, truck and heavy duty vehicle production in North America, which is cyclical. Consequently, a decline in the demand for new automobiles and trucks, particularly in North America, could have a material adverse effect on the Company's business, financial condition and results of operations. The Company has not yet operated during a general economic downturn, and historical financial information for the Company during adverse economic conditions is not available. Risk Relating to Acquisitions To expand its markets and take advantage of the consolidation trend in the automotive parts industry, the Company's business strategy includes growth through acquisitions. Although the Company believes that the operations of the five companies it has acquired since the GM Acquisition are being successfully integrated with the Company's operations, there can be no assurance that such integration will continue to be successful, that future acquisitions can be consummated on acceptable terms or that any acquired companies can be successfully integrated into the Company's operations. The Company currently has no commitments, understandings or arrangements with respect to any specific acquisitions (other than for Ballantrae). However, the Company has entered into strategic joint ventures in Mexico and Korea and expects to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998 and is continually investigating opportunities for domestic and foreign acquisitions. The Company's ability to make future acquisitions may also be constrained by its ability to obtain financing. To the extent the Company uses equity to finance future acquisitions, there is a risk of dilution to holders of Class A Common Stock. See "Risk Factors--Substantial Leverage and Debt Service Obligations," "Risk Factors--Restrictive Debt Covenants," "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Business--Business Strategy" and "Description of Indebtedness." In addition, acquisitions may involve a number of special risks, including: initial reductions in the Company's reported operating results; diversion of management's attention; unanticipated problems or legal liabilities; and a possible reduction in reported earnings due to amortization of acquired intangible assets in the event that such acquisitions are made at levels that exceed the fair market value of net tangible assets. Some or all of these items could have a material adverse effect on the Company. There can be no assurance that businesses acquired in the future will achieve sales and profitability that justify the investment therein. In addition, to the extent that consolidation becomes more prevalent in the industry, the prices for attractive acquisition candidates may increase to unacceptable levels. Labor Negotiations As of July 31, 1997, the Company employed 4,949 people, 848 of whom were in management, engineering, supervision and administration and 4,101 of whom were hourly employees. Of the Company's hourly employees, 1,969 are represented by unions. In the United States, 1,485 of the Company's hourly workers are represented by the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America ("UAW") under a master agreement between DRA (a wholly owned subsidiary of the Company) and the UAW. The Company and the UAW agreed to a new master agreement in March 1997 when the agreement that had been assumed by the Company expired. Wage and benefit increases under the new contract generally follow the same pattern of the prior agreement and continue to track the wages and benefits paid by GM and, as a result, the Company will experience higher wage and benefit rates in future periods. In addition, grow-in provisions under the 13

new agreement will require the Company to move lower wage and benefit employees to higher wage and benefit levels. There can be no assurance that the Company will be able to effect cost reductions or productivity improvements to offset such increased wage and benefit levels or that the Company's labor costs will not increase significantly, in which case the Company's competitive position and results of operations would be adversely affected. The master agreement between the UAW and DRA will expire on March 22, 2001. As of July 31, 1997, 141 of the Company's 459 Canadian employees were represented by the Canadian Auto Workers and 97 were represented by the Metallurgists Unis d'Amerique. The agreements with these unions expire on November 8, 1999 and September 30, 1998, respectively. As of July 31, 1997, approximately 246 of Autovill's 366 employees were affiliated with the Hungarian Steel Industry Workers Union. The agreement was signed July 17, 1996 and is perpetual, subject to termination upon three months' notice from either party. The Company's other facilities are primarily non-union. The Company is unaware of any current efforts to organize any of the Company's facilities. There can be no assurance that there will not be any labor union efforts to organize employees at facilities that are not currently unionized. Since the GM Acquisition, the Company has not experienced any organized work stoppages. There can be no assurance, however, that any actions taken by the Company, including the current restructurings, will not adversely affect the Company's relations with its employees. At the present time, the Company believes that its relations with its employees are good. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--General." Competition The motor vehicle parts industry in which the Company operates is highly competitive. Some of the Company's OEM competitors are divisions or subsidiaries of companies that are larger and have substantially greater resources than the Company. There can be no assurance that the Company will be able to compete successfully with its competitors. See "Business--Competition." Availability of Cores In its remanufacturing operations, the Company obtains used components, commonly known as "cores," from various sources, principally the Company's existing customers. The Company also obtains cores from brokers who specialize in buying and selling cores. The ability to obtain cores of the types and quantities required by the Company is essential to the Company's ability to meet demand and expand production in the remanufacturing business. A sufficient supply of cores may not always be available to the Company to permit it to respond fully to customer demands for the Company's remanufactured products. Shortages of cores could result from, among other things, (i) a time lag between the initial customer order for a remanufactured product and the return of cores for such products, (ii) an inability to salvage cores for reuse due to excessive wear or deterioration or (iii) an inability of the Company to acquire cores because of loss or significant deterioration of the Company's relationships with its customers. Although the Company believes that its relationships with several of its customers will continue to provide it with access to cores, there can be no assurance that the Company will continue to have an adequate supply of cores for its remanufactured products. Acquisition of Ballantrae; Conflicts of Interest On October , 1997, the Company entered into an Agreement and Plan of Merger to acquire Ballantrae (the "Ballantrae Acquisition Agreement"). Although the Company has entered into the Ballantrae Acquisition Agreement and completed its due diligence, the consummation of the transactions contemplated thereby are subject to customary closing conditions for a transaction of this type, including termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the lack of any material adverse change in the business of Ballantrae. Although the Company does not currently foresee any impediments to the consummation of the acquisition of Ballantrae, the Company cannot offer any assurances that the acquisition will be consummated. Even if consummated, the Company cannot guarantee that the businesses conducted by Ballantrae can be effectively integrated into the Company's other operations or that the Company will realize the 14

benefits it expects to achieve through the acquisition of Ballantrae. The Company has incurred due diligence, legal and other expenses in anticipation of the acquisition of Ballantrae. If the acquisition is not consummated, these expenses will have to be written off as non-recurring charges. See "Company History," "Business--Acquisition of Ballantrae," and "Certain Transactions." The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. As of July 31, 1997, CVC owned, on a fully-diluted basis, 71.9% of the outstanding common stock and 74.7% of the outstanding preferred stock of Ballantrae. At that date, CVC also owned 47.5% of the Company's Common Stock. See "Risk Factors--Concentration of Ownership." The Company believes, however, that the terms of such agreement are fair to the Company and has obtained a fairness opinion from Salomon Brothers Inc. The Company's directors, excluding Messrs. Delaney, Cashin and Gerrity, have determined that the acquisition of Ballantrae is in the best interests of the Company and its stockholders and have approved the acquisition of Ballantrae. Because Mr. Gerrity is a director of Ballantrae and as of July 31, 1997 owned, on a fully-diluted basis, 15.0% of Ballantrae's common stock and 10.4% of its preferred stock and Messrs. Delaney and Cashin are directors of Ballantrae, as well as each being a stockholder and director of the Company, there is a conflict of interest with respect to the acquisition of Ballantrae. As a consequence, their economic interest in the transaction may result in decisions that do not reflect the interests of the Company. Any damages which the Company may suffer which result from a breach of the Ballantrae Acquisition Agreement will be subject to a $10 million cap and the Company will only be able to recover approximately % and % of its damages from CVC and Mr. Gerrity, respectively (in each case including their affiliates). See "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." Environmental Risks The Company's operations and properties are subject to federal, state, local and foreign laws, regulations and ordinances relating to the use, storage, handling, generation, transportation, treatment, emission, release, discharge and disposal of certain materials, substances and wastes. The nature of the Company's operations exposes it to the risk of liabilities or claims with respect to environmental matters, including off-site disposal matters, and there can be no assurance that material costs will not be incurred in connection with such liabilities or claims or that the indemnities provided by the sellers of the various businesses acquired will be applicable or available. Based upon the Company's experience to date, the Company believes that the future cost of compliance with existing environmental laws, regulations and ordinances (or liability for known environmental claims) will not have a material adverse effect on the Company's business, financial condition and results of operations. However, future events, such as changes in existing laws and regulations or their interpretation, may give rise to additional compliance costs or liabilities that could have a material adverse effect on the Company's business, financial condition and results of operations. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing laws, may require additional expenditures by the Company that may be material. See "Business--Regulatory Matters." Shares Eligible for Future Sale; Registration Rights No prediction can be made as to the effect, if any, that future sales of shares, or the availability of shares for future sale, will have on the market price of the Class A Common Stock prevailing from time to time. Sales of substantial amounts of Class A Common Stock, or the perception that such sales could occur, could adversely affect prevailing market prices of the Class A Common Stock. The existing stockholders of the Company (the "Existing Stockholders") were granted piggyback registration rights with respect to the Company's Class A Common Stock when they purchased such shares. These piggyback registration rights cover substantially all of the shares of Class A Common Stock beneficially owned by the Existing Stockholders. In addition, CVC and (after the consummation of the Equity Offering) World Equity Partners, L.P. have demand rights to require registration of the shares of Class A Common Stock held by them (including shares of Common Stock issuable upon exercise of the Warrants). Of the shares of Common Stock to be outstanding after the Offerings and the other Transactions, approximately million shares will be shares of Class A Common Stock, and million shares will be shares of Class B Common Stock. In addition, up to shares of Class A Common Stock may be subject to a stock option plan of the Company and shares of Class A Common Stock are issuable upon exercise of the Warrants. The Company and each of the Company's current stockholders, directors, senior 15

officers and warrant holders have agreed, subject to certain exceptions, not to register for sale or offer, sell or transfer any shares of Common Stock for a period of 180 days after the date of this Prospectus, without the prior written consent of Morgan Stanley & Co. Incorporated. These agreements cover approximately million shares of Class A Common Stock and million shares of Class B Common Stock. The registration rights and related restrictions described above apply to the shares of Class A Common Stock subject to the stock option plan and the Warrants and any shares of Class B Common Stock converted into Class A Common Stock. See "Shares Eligible for Future Sale" and "Principal Stockholders--Registration Rights Agreement." Dilution Purchasers of Class A Common Stock in this Offering will experience immediate and substantial dilution in net tangible book value per share of Class A Common Stock from the initial public offering price. The Existing Stockholders will experience an increase in net tangible book value per share as a result of this Offering. Assuming an offering price of $ per share (the midpoint of the range of prices set forth on the cover of this Prospectus), the dilution in net tangible book value to purchasers of Class A Common Stock in this Offering would be $ per share, and the Existing Stockholders, including certain members of the management of the Company, CVC and current and former employees and directors of the Company, would experience an increase in net tangible book value of $ per share as a result of this Offering. In addition, the price per share of Common Stock paid by the Existing Stockholders is significantly lower than the assumed price for the shares offered hereby. In connection with the Offerings, the holders of the Company's Junior Subordinated Notes will exchange such notes for shares of Class A Common Stock at a per share price equal to the price of the shares of Class A Common Stock offered by this Prospectus less underwriting discounts and commissions. The calculations in this paragraph give effect to such exchange. See "Dilution" and "Principal Stockholders." Holding Company Structure Because the Company is a holding company which derives all of its operating income from its subsidiaries, the Company will be dependent on dividends and other payments from its subsidiaries to generate the funds necessary to meet its obligations and pay any dividends. The ability of the Company's subsidiaries to pay dividends and make other payments are subject to certain statutory, contractual and other restrictions. See "Description of Indebtedness." Absence of Public Market for the Class A Common Stock Prior to the Offering, there has been no public market for the Class A Common Stock. Although application has been made to list the Class A Common Stock on the New York Stock Exchange, there can be no assurance that an active or liquid trading market in the Class A Common Stock will develop upon completion of the Equity Offering or, if developed, that it will be sustained. The initial public offering price of the Class A Common Stock will be determined through negotiations between the Company and the Underwriters and may not be indicative of the market price for the Class A Common Stock after the Equity Offering. The market price for shares of the Company's Class A Common Stock may be highly volatile depending on changes in general market and industry conditions. See "Underwriters." COMPANY HISTORY The Company was formed in November 1993 for the purpose of acquiring certain assets of the automotive starter business and the heavy duty starter and alternator business of the Former GM Division, which businesses the Company acquired in July 1994. Between January 1995 and May 1997, the Company completed five strategic acquisitions and two international joint ventures. On January 6, 1995, the Company acquired all of the capital stock of Nabco, Inc. ("Nabco") (the "Nabco Acquisition"), a producer of remanufactured automotive starters and alternators. In addition to selling its products to national automotive parts chains (primarily Western Auto), prior to its acquisition by the Company, Nabco supplied remanufactured parts in bulk (known as "kits") to the Company and GM for final assembly and distribution. On March 31, 1995, the Company acquired all of the capital stock of The A&B Group, Inc. ("A&B Group") (the "A&B Acquisition"), a remanufacturer of automotive starters, heavy duty starters and alternators and related 16

subcomponents and parts. Prior to its acquisition by the Company, the A&B Group was the Company's contract supplier of all heavy duty and certain automotive remanufactured products. On April 14, 1995, the Company acquired 96% of the capital stock of Autovill, RT Ltd. ("Autovill") (the "Autovill Acquisition and, together with the Nabco Acquisition and the A&B Acquisition, the "1995 Acquisitions"), a Budapest, Hungary-based producer of new and remanufactured heavy duty starters and alternators both for the OEM market and the aftermarket in Western and Eastern Europe. Principal customers of Autovill include Caterpillar and Mercedes Benz. The remaining 4% of the capital stock of Autovill is owned by current and former employees of Autovill. On February 6, 1996, the Company acquired 82.5% of the capital stock of Power Investments, Inc. ("Power Investments") (the "Power Investments Acquisition"), a remanufacturer of diesel and gasoline engines, transmissions, fuel systems, alternators and starters for medium and heavy duty trucks and automobiles; and, to a lesser extent, a remanufacturer of brakes, water pumps, power steering pumps and various other truck parts and assemblies. Power Investments has 15 facilities located in the United States and in five provinces of Canada and is designated as a Ford FAR in such provinces. The remaining 17.5% of the capital stock of Power Investments is owned by current management of Power Investments, subject to put/call arrangements at a formula price for the purchase by the Company of the remaining 17.5% of the shares of Power Investments beginning in 2001. In December 1996, the Company formed a 50/50 joint venture in Korea with individual Korean investors to purchase the assets related to the starter motor operations of the Company's former Korean licensee. In April 1997, the Company and its former Mexican licensee, Sistemas y Electricos Componetos ("Sistemas"), formed a joint venture, 76% of which is owned by the Company and 24% of which is owned by an affiliate of Sistemas. Each of these joint ventures will manufacture starters and alternators for the OEM market. On May 8, 1997, the Company acquired 82.5% of the capital stock of World Wide (the "World Wide Acquisition"), a remanufacturer and distributor of import automotive starters and alternators. World Wide sells its products to national automotive parts chains, including Auto Zone, Pep Boys, Advance Auto and Discount Auto. The remaining 17.5% of the capital stock of World Wide is owned by current management of World Wide, subject to put/call arrangements at a formula price for the purchase by the Company of the remaining 17.5% of the shares beginning in 2000. On October , 1997, the Company entered into the Ballantrae Acquisition Agreement to acquire Ballantrae for $49.2 million (including assumed debt). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company will exchange shares of its Common Stock with a value (at the initial public offering price in the Equity Offering) of approximately $19 million for the equity of Ballantrae and will repay approximately $30 million of Ballantrae's debt. The Common Stock of the Company received by Ballantrae's existing stockholders in the acquisition will be subject to resale restrictions under applicable securities laws. The acquisition is expected to be completed at or prior to the consummation of the Offerings. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Business--Acquisition of Ballantrae" and "Certain Transactions." USE OF PROCEEDS The net proceeds to the Company from the Offerings are estimated to be approximately $181.1 million (approximately $189.4 million if the over-allotment option in the Equity Offering is exercised in full) assuming an initial public offering price of $ per share in the Equity Offering and after deduction of underwriting discounts and commissions and estimated offering expenses. The use of the proceeds of the Offerings, together with $1.4 million of available cash, will be to repay in full the following indebtedness, which was incurred by the Company in connection with the GM Acquisition and certain of the Company's subsequent acquisitions: (i) the $75 million 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., an affiliate of one of the Company's existing stockholders (the "World Note"), at a price equal to 103% of such principal amount, (ii) the $59.2 million 11 1/2% Subordinated Note due July 31, 2004 to GM (the "GM Acquisition Note"), (iii) the $8.3 million 9.86% Subordinated Notes due February 6, 2001 to the selling stockholders of Power Investments (the 17

"Power Investments Seller Notes"), (iv) the $3.5 million 10% Subordinated Notes due September 30, 2001 to the selling stockholders of A&B Group (the "A&B Seller Notes"), (v) the $20.8 million of borrowings outstanding under Ballantrae's senior credit facility (the "Ballantrae Senior Bank Debt") and (vi) $9.3 million of Tractech's $10.0 million 11% Subordinated Note due October 31, 2006 to Dyneer Corporation (the "Ballantrae Subordinated Debt"). Any accrued and unpaid interest on such indebtedness will also be repaid with the proceeds of the Offerings. The following table sets forth a summary of the expected sources and uses of the estimated net proceeds from the Offerings, assuming no exercise of the over-allotment option in the Equity Offering and including interest accrued to December 15, 1997, the assumed date of the consummation of the Offerings (in millions of dollars):
Sources of Funds (net of underwriting discounts and commissions) Equity Offering.................................. $ 55.8 Notes Offering................................... 126.8 Available Cash................................... 1.4 ------------Total sources of funds...................... $ 184.0 =============

Uses of Funds Repayment of Power Investments Seller Notes...... Repayment of World Note.......................... Repayment of GM Acquisition Note................. Repayment of A&B Seller Notes.................... Repayment of Ballantrae Senior Bank Debt......... Repayment of Ballantrae Subordinated Debt........ Fees and expenses for the Offerings.............. Total uses of funds.........................

$

8.3 78.9 61.7 3.6 20.8 9.2 1.5 -------------

$ 184.0 =============

18

DIVIDEND POLICY Payment of dividends is within the discretion of the Company's Board of Directors and will depend, among other factors, upon the Company's earnings, financial condition and capital requirements and the terms of the Company's financing agreements. The Company plans to retain future earnings for use in the business and, accordingly, the Company does not anticipate paying dividends in the foreseeable future. The Company has not previously paid any cash dividends to its stockholders. The Senior Credit Facility and the indentures for the Notes and the Senior Subordinated Notes restrict the ability of the Company to make dividend payments. DILUTION The deficiency in net tangible book value (tangible assets minus total liabilities) of the Company as of July 31, 1997 was $ million, or $ per share of Class A Common Stock assuming the Stock Split. After giving effect to the sale of the shares, of Class A Common Stock offered by the Company hereby at an assumed initial offering price of $ per share (and deducting the estimated underwriting discount and offering expenses), the pro forma net tangible book value of the Company as of July 31, 1997 would have been approximately $ , or $ per share. This change represents an immediate increase in net tangible book value of $ per share to the Existing Stockholders and an immediate dilution of $ per share to investors purchasing shares of Class A Common Stock in this Offering. The following table illustrates this per share dilution:
Initial public offering price per share.......................... Net tangible book value (deficit) per share before this Offering. Increase in net tangible book value per share attributable to new investors........................................................ Net tangible book value per share after this Offering............ Dilution per share to new investors.............................. ( ) $

---------------------------$ ==============

The foregoing table assumes no exercise of the Underwriters' over-allotment option. After giving effect to the issuance of Common Stock in connection with the acquisition of Ballantrae, the dilution per share to new investors would be $ . The following table summarizes as of , 1997, the differences between Existing Stockholders and investors purchasing shares of Class A Common Stock in this Offering with respect to the number of shares of Common Stock purchased from the Company (assuming no exercise of the Underwriters' over- allotment option), the total consideration paid and the average price per share paid:
Shares Purchased --------------------------------Number --------------------------============== Percent --------------% --------------% =============== Total Consideration --------------------------------Amount -------------$ -------------$ ============== Percent --------------% --------------% ===============

Existing Stockholders New Investors Total

Average Price Per Share --------------$

In connection with the Offerings, the holders of the Company's Junior Subordinated Notes will exchange such notes for shares of Class A Common Stock at a per share price equal to the price of the shares of Class A Common Stock offered by this Prospectus less underwriting discounts and commissions. The calculations set forth in this section give effect to such exchange. 19

CAPITALIZATION The following table sets forth the current portion of the long-term debt and the consolidated capitalization of the Company as of July 31, 1997 and pro forma to give effect to the Transactions including the Offerings (assuming no exercise of the over-allotment option in connection with the Equity Offering) and the application of the net proceeds thereof. See "Use of Proceeds." This table should be read in conjunction with the unaudited "Pro Forma Condensed Consolidated Financial Data," "Selected Consolidated Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes thereto included elsewhere in this Prospectus. See also "Description of Capital Stock" and "Description of Indebtedness."
As of July 31, 1997 ------------------------------------Historical Pro Forma -------------------------------(in thousands) $ 507 $ 507 ================= ================

Current portion of long-term debt.................................. Long-term debt: Senior Credit Facility........................................ Power Investments Seller Notes................................ World Note.................................................... % Senior Notes Due 2007................................... Senior Subordinated Notes..................................... GM Acquisition Note........................................... 8% Subordinated Debenture..................................... A&B Seller Notes.............................................. Ballantrae Subordinated Debt.................................. Other, including capital lease obligations.................... Junior Subordinated Notes..................................... Total long-term debt...................................... Minority interest.................................................. Redeemable exchangeable preferred stock of subsidiary.............. Stockholders' (deficit) equity: Class A Common Stock (par value $.01; authorized 1,000,000; issued and outstanding 525,477 historical, pro forma) Class B Common Stock (par value $.01; authorized 1,000,000; issued and outstanding 385,523 historical, pro forma). Additional paid-in capital.................................... Retained (deficit) earnings................................... Cumulative translation adjustment............................. Stock purchase plan........................................... Total stockholders' (deficit) equity...................... Total capitalization......................................

$

34,963 8,300 75,000 -140,000 59,155 -3,500 -17,132 25,211 ----------------363,261 8,032 16,071(a)

$

34,963 --130,000 140,000 -17,942(a) -750 17,132 ----------------340,787 8,032 --

5 4 10,194 (12,174) (1,752) (4,813) ----------------(8,536) ----------------$ 378,828 =================

5 4 109,455 (16,746) (1,752) (4,813) ---------------86,153 ---------------$ 434,972 ================

(a) Reflects the exchange of the redeemable exchangeable preferred stock of subsidiary to the 8% Subordinated Debenture as permitted by the terms of such preferred stock. For details regarding this exchange, see footnote (d) to the "Unaudited Pro Forma Condensed Consolidated Statement of Operations." 20

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA The following table sets forth selected consolidated historical financial data of the Company for and as of the years ended July 31, 1995, 1996 and 1997. The statement of operations data for the years ended July 31, 1995, 1996 and 1997 and the balance sheet data as of July 31, 1995, 1996 and 1997 were derived from audited Consolidated Financial Statements of the Company, which have been audited by Ernst & Young LLP, independent auditors. The table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Consolidated Financial Statements of the Company and related notes and the other financial information included elsewhere in this Prospectus.
For the Year Ended July 31 --------------------------------------------------------1995 1996 1997 ----------------------------------------------(dollars in thousands, except per share data) $ 573,423 98,207 61,206 -37,001 18,432 9,326 2,363 6,963 $ $ $ 636,852 126,774 77,994 8,101 40,679 27,367 5,796 10,637 (4,841) $ $ 689,787 149,553 89,098 34,500 25,955 38,774 (10,263) 1,682 (14,296)

Statement of operations data: Net sales................................ Gross profit............................. Selling, engineering and administrative expense.............................. Restructuring charges.................... Operating income......................... Interest expense......................... Income (loss) from continuing operations. Loss from discontinued operations, net of tax benefit.......................... Net income (loss)........................ Income (loss) from continuing operations per share............................ Net income (loss) per share.............. Financial ratios and other data: Depreciation and amortization............ Capital expenditures..................... EBITDA(a)................................ Cash flow from operations................ Gross margin............................. EBITDA margin............................ Ratio of EBITDA to interest expense...... Ratio of total debt to EBITDA............ Ratio of earnings to fixed charges(b).... Balance sheet data (at end of period): Working capital.......................... Total assets............................. Total debt............................... Redeemable exchangeable preferred stock of subsidiary........................ Total stockholders' equity (deficit).....

$

14,533 11,241 55,968 21,921 17.1% 9.8% 3.0x 3.5x 1.8x 61,268 322,527 196,988 12,903 8,430

$

19,555 32,741 72,087 (684) 19.9% 11.3% 2.6x 4.1x 1.3x 113,801 475,082 298,796 14,420 1,589

$

22,323 31,888 87,269 22,537 21.7% 12.7% 2.3x 4.2x --(c) 155,302 570,569 363,768 16,071 (8,536)

$

$

$

See Accompanying Notes 21

(a) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary, minority interest in income of subsidiaries, gain on sale of building and restructuring charges, plus depreciation, amortization and non-cash post-retirement benefits other than pensions. EBITDA should not be construed as a substitute for income from operations, net income or cash flow from operating activities for the purpose of analyzing the Company's operating performance, financial position and cash flows. The Company has presented EBITDA because it is commonly used by certain investors to analyze and compare companies on the basis of operating performance and to determine a company's ability to service debt. This definition of EBITDA differs from the definition of EBITDA used in the Indenture for the Notes and may not be comparable to EBITDA as defined by other companies. See "Description of Notes--Certain Definitions." (b) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes and fixed charges. Fixed charges include preferred dividend requirement of subsidiary, interest expense (which includes amortization of deferred financing costs) and the portion of operating rents that is deemed representative of an interest factor. (c) Earnings were insufficient to cover fixed charges by $13.5 million. Excluding the restructuring charge, the ratio of earnings to fixed charges would have been 1.5x. 22

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA (UNAUDITED) The following unaudited pro forma condensed consolidated financial data are based on the Consolidated Financial Statements included elsewhere in this Prospectus, adjusted to give effect to the Transactions, including the Offerings. The unaudited pro forma condensed consolidated statement of operations for the year ended July 31, 1997 have been adjusted to give effect to the Transactions, including the Offerings, as if they had occurred on August 1, 1996. The unaudited pro forma condensed consolidated balance sheet at July 31, 1997 has been adjusted to give effect to the Transactions, including the Offerings, as if they had occurred on July 31, 1997 (other than the acquisition of World Wide, which is reflected in the historical balance sheet data). The unaudited pro forma financial data do not purport to be indicative of the results of operations or the financial position that would actually have been obtained if the Transactions, including the Offerings, had occurred on the dates indicated or of the results of operations or the financial position that may be obtained in the future. The unaudited pro forma financial data are presented for comparative purposes only. The pro forma adjustments, as described in the accompanying data, are based on available information and certain assumptions that management believes are reasonable. The unaudited pro forma financial data should be read in conjunction with the Consolidated Financial Statements of the Company and related notes thereto included elsewhere in this Prospectus. The unaudited pro forma financial data with respect to the acquisitions of World Wide and Ballantrae are based on the historical financial statements of the businesses acquired and have been accounted for using the purchase method of accounting. The purchase price, including the related fees and expenses, have been allocated to the tangible and identifiable intangible assets and liabilities of the acquired businesses based upon the Company's estimates of their fair value, with the remainder allocated to goodwill. The pro forma adjustments directly attributable to the acquisitions of World Wide and Ballantrae include adjustments to interest expense related to the financing, charges for amortization of intangible assets and depreciation of property and equipment relating to the allocation of the purchase price and the related tax effects. 23

Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Year Ended July 31, 1997

(in thousands)
Adjustments for the Acquisitions of World Wide and Ballantrae(a) ------------$ 86,581 65,612 ------------20,969 12,469 -------------8,500 -(4,905) ------------Pro Forma for the Acquisitions of World Wide and Ballantrae -----------$ 776,368 605,846 -----------170,522 101,567 34,500 -----------34,455 2,082 (43,679) ------------

Net sales..................................... Cost of goods sold............................ Gross profit.................................. Selling, engineering, and administrative expenses................................. Restructuring charges......................... Operating income.............................. Other income (expense): Gain on sale of building................. Interest expense......................... (Loss) income from continuing operations before income taxes, preferred dividend requirement of subsidiary, and minority interest................................. Minority interest in income of subsidiary..... Income taxes (benefit)........................ Preferred dividend requirement of subsidiary.. (Loss) income from continuing operations...... Loss from continuing operations per share.....

Historical -----------$689,787 540,234 -----------149,553 89,098 34,500 -----------25,955 2,082 (38,774) ------------

Adjustments for Other Transactions -----------$ -----------------------------8,384 (b) ------------

Pro Forma for Transactions -----------$ 776,368 605,846 -----------170,522 101,567 34,500 -----------34,455 2,082 (35,295) ------------

(10,737) 892 (3,014) 1,648 -----------$(10,263) ============

3,595 -1,387 -------------$ 2,208 =============

(7,142) 892 (1,627) 1,648 -----------$ (8,055) ============

8,384 -3,354 (c) (1,648)(d) -----------$ 6,678 ============

1,242 892 1,727 ------------$ (1,377) ============ $ ============

See Accompanying Notes 24

Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations (in thousands) (a) The adjustments for the acquisitions of World Wide and Ballantrae represent the effects on the statement of operations of such acquisitions as if they occurred on August 1, 1996. These adjustments are summarized in the following table:
World Wide -------------$ 49,014 40,935 -------------8,079 6,319 -------------1,760 (2,280) (47) -------------$ (473) ============== Ballantrae --------------$ 37,567 24,677 --------------12,890 6,150 --------------6,740 (2,625) 1,434 --------------$ 2,681 =============== Combined --------------$ 86,581 65,612 --------------20,969 12,469 --------------8,500 (4,905) 1,387 --------------$ 2,208 ===============

Net sales.................................................. Cost of goods sold......................................... Gross profit............................................... Selling, engineering, and administrative expenses.......... Operating income........................................... Interest expense........................................... Income taxes (benefit)..................................... (Loss) income from continuing operations...................

(b) Reflects decreases (or increases) in interest expense and amortization of deferred financing costs as if the Transactions occurred on August 1, 1996 as follows:
For the Year Ended July 31, 1997 --------------$ 190 (30) 818 7,875 454 (11,050) (400) 6,552 350 1,552 1,073 2,593 (1,593) --------------$ 8,384 ===============

Reduced interest from the amendment of the Senior Credit Facility.............. Amortization of deferred financing costs associated with the amendment to the Senior Credit Facility.................................................... Repayment of Power Investments Seller Notes.................................... Repayment of World Note........................................................ Reversal of 1997 amortization of deferred financing costs associated with repayment of World Note................................................... Interest expense for the % Senior Notes Due 2007......................... Amortization of deferred financing costs associated with % Senior Notes Due 2007............................................................ Repayment of GM Acquisition Note............................................... Repayment of A&B Seller Notes.................................................. Repayment of Ballantrae Senior Bank Debt....................................... Repayment of Ballantrae Subordinated Debt...................................... Exchange of Junior Subordinated Notes.......................................... Interest expense relating to the 8% Subordinated Debenture exchanged for the redeemable exchangeable preferred stock of subsidiary..................... Net reduction in interest expense..............................................

The interest rate on the % Senior Notes Due 2007 is assumed to be 8 1/2%. For each 1/4% difference in the interest rate the annual interest expense would change by $325. (c) Represents the income tax expense related to the pro forma interest expense reduction at an assumed marginal tax rate of 40%. 25

(d) Represents the reversal of preferred dividend requirement of subsidiary recorded in 1997 which results from the assumed exchange of the preferred stock for the 8% Subordinated Debenture effective August 1, 1996. A deemed preferred dividend of subsidiary arises from the exchange of the redeemable exchangeable preferred stock of subsidiary for the excess of the fair value of the 8% Subordinated Debenture over the carrying value of the redeemable exchangeable preferred stock of subsidiary as shown below. This nonrecurring charge, which has not been reflected in the pro forma condensed consolidated statement of operations, will be charged against the income of the Company in the period of exchange. Upon completion of the exchange no further dividends will occur.
For the Year Ended July 31, 1997 --------------$ 17,942 16,071 --------------$ 1,871 ===============

Fair value of the 8% Subordinated Debenture.................................... Carrying value of the redeemable exchangeable preferred stock of subsidiary.... Deemed preferred dividend of subsidiary arising from exchange..................

26

Unaudited Pro Forma Condensed Consolidated Balance Sheet July 31, 1997

(in thousands)
Adjustments for Ballantrae Acquisition(a) ------------$ 347 5,838 --10,127 -55 ------------16,367 16,834 -------------16,834 -21,168 --728 ------------$ 55,097 ============= Pro Forma for Ballantrae Acquisition -------------$ 10,397 116,022 10,487 2,889 174,544 21,474 4,698 -------------340,511 164,056 26,858 -------------137,198 8,803 107,780 25,279 3,119 2,976 -------------$ 625,666 ============== Adjustments for Other Transactions ------------$ 2,635(b) --1,801(g) ---------------4,436 ---------------1,958(c) ----------------$ 6,394 ============= Pro Forma for Transactions -------------$ 13,032 116,022 10,487 4,690 174,544 21,474 4,698 -------------344,947 164,056 26,858 -------------137,198 10,761 107,780 25,279 3,119 2,976 -------------$ 632,060 ==============

Assets: Current Assets: Cash and cash equivalents........ Trade accounts receivable........ Other receivables................ Recoverable income tax........... Inventories...................... Deferred income taxes............ Other current assets............. Total current assets............. Property and equipment............... Less accumulated depreciation........

Historical ------------$ 10,050 110,184 10,487 2,889 164,417 21,474 4,643 ------------324,144 147,222 26,858 ------------120,364 8,803 86,612 25,279 3,119 2,248 ------------$ 570,569 =============

Deferred financing costs............. Goodwill (less accumulated amortization).................... Net assets held for disposal......... Investment in affiliate.............. Other assets......................... Total assets......................... Liabilities and stockholders' (deficit) equity: Current liabilities: Accounts payable................. Accrued interest payable......... Accrued restructuring charges.... Liabilities related to discontinued operations Other liabilities and accrued expenses......................... Current portion of long-term debt Total current liabilities........ Deferred income taxes................ Long-term debt, less current portion(d)....................... Post-retirement benefits other than pension.......................... Accrued pension benefit.............. Other non-current liabilities........ Minority interest in subsidiary...... Redeemable exchangeable preferred stock of subsidiary.............. Stockholders' (deficit) equity: Common Stock:.................... Class A Shares................ Class B Shares................ Paid-in capital(f)............... Retained earnings (deficit)...... Cumulative translation adjustment Stock purchase plan.............. Stockholders' (deficit) equity....... Total liabilities and stockholders' (deficit) equity.................

$

88,578 3,107 37,377 3,324

$

2,398 2,078 ---

$

90,976 5,185 37,377 3,324

--------------------(53,224) ----(16,071)(e)

$

90,976 5,185 37,377 3,324

35,949 507 ------------168,842 1,556 363,261 12,677 4,542 4,124 8,032 16,071

606 -------------5,082 265 30,750 ------

36,555 507 -------------173,924 1,821 394,011 12,677 4,542 4,124 8,032 16,071

36,555 507 -------------173,924 1,821 340,787 12,677 4,542 4,124 8,032 --

5 4 10,194 (12,174) (1,752) (4,813) ------------(8,536) ------------$ 570,569 =============

--19,000 ---------------19,000 ------------$ 55,097 =============

5 4 29,194 (12,174) (1,752) (4,813) -------------10,464 -------------$ 625,666 ==============

--80,261(f) (4,572)(g) --------------75,689 ------------$ 6,394 =============

5 4 109,455 (16,746) (1,752) (4,813) -------------86,153 -------------$ 632,060 ==============

See Accompanying Notes 27

Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet (in thousands) (a) Represents the adjustments for the Ballantrae acquisition as if it had occurred as of July 31, 1997. The acquisition will be accounted for by the purchase method of accounting. Using the purchase method of accounting, the total purchase price will be allocated to tangible and intangible assets and liabilities of Ballantrae based upon the Company's estimates of their respective fair values at the date of the acquisition. (b) Represents the sources and uses of cash in connection with the Transactions as follows:
As of July 31, 1997 --------------$ 182,550 (210) (8,300) (77,250) (59,155) (3,500) (20,750) (9,250) (1,500) ---------------

Estimated proceeds from the Offerings (net of underwriting discounts and commissions)............................... Senior Credit Facility refinancing fee........................ Repayment of Power Investments Seller Notes................... Repayment of World Note....................................... Repayment of GM Acquisition Note.............................. Repayment of A&B Seller Notes................................. Repayment of Ballantrae Senior Bank Debt...................... Repayment of Ballantrae Subordinated Debt..................... Other fees and expenses of the Offerings...................... Cash available for general corporate purposes.................

$ 2,635 ===============

(c) Represents the change in the deferred financing costs and related tax benefit with respect to the World Note as follows:
As of July 31, 1997 --------------$ 4,000 210 (2,252) --------------$ 1,958 ===============

Deferred financing costs related to the Offerings............. Deferred financing costs related to the Senior Credit Facility refinancing.............................................. Write-off of World Note deferred financing costs as a result of early extinguishment..................................

28

(d) Details regarding the changes to long-term debt are as follows:
Total long-term debt (historical)........................ Ballantrae Senior Bank Debt.............................. Ballantrae Subordinated Debt............................. Pro forma for Ballantrae Acquisition..................... Power Investments Seller Notes........................... World Note............................................... GM Acquisition........................................... A&B Seller Notes......................................... Ballantrae Senior Bank Debt.............................. Ballantrae Subordinated Debt............................. Junior Subordinated Notes................................ % Senior Notes Due 2007............................ 8% Subordinated Debenture................................ Adjusted for other Transactions.......................... Pro forma for Transactions............................... $ 363,261

20,750 10,000 ----------------394,011 ----------------(8,300) (75,000) (59,155) (3,500) (20,750) (9,250) (25,211) 130,000 17,942 ----------------(53,224) ----------------$ 340,787 =================

(e) Elimination of redeemable exchangeable preferred stock of subsidiary exchanged for the 8% Subordinated Debenture. (f) Details regarding the changes to equity, exchange of equity, issuance of Common Stock and exchange of Junior Subordinated Notes are as follows:
Paid in capital (historical)....................................... Common Stock issued in Ballantrae acquisition...................... Pro forma for Ballantrae acquisition............................... Equity Offering.................................................... Exchange of Junior Subordinated Notes.............................. Fees for Equity Offering........................................... Adjusted from other transactions................................... Pro forma for Transactions......................................... $ 10,194 19,000 --------------29,194 --------------55,800 25,211 (750) --------------80,261 --------------$ 109,455 ===============

29

(g) Represents the extraordinary loss relating to the early extinguishment of the World Note net of taxes at a marginal rate of 40% and the deemed preferred dividend of subsidiary arising from the exchange of the redeemable exchangeable preferred stock of subsidiary as follows:
As of July 31, 1997 --------------$ (2,250) (2,252) 1,801 (1,871) --------------$ (4,572) ===============

Early extinguishment penalty on World Note.................... Write-off of World Note deferred financing costs as a result of early extinguishment.................................. Tax effect of early extinguishments........................... Deemed dividend of preferred stock of subsidiary.............. Net charge to retained earnings (deficit).....................

30

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The Company sells its products in the aftermarket and the OEM market, principally in North America and also in Europe, Latin America and Asia-Pacific. In addition to purchasing newly manufactured parts for use in new vehicle production, OEMs are also significant customers of the Company's aftermarket products. These aftermarket products are distributed through the OEMs' affiliated dealer networks. The aftermarket is highly fragmented and competitive. The Company believes that consolidation of aftermarket suppliers is occurring due, in part, to higher quality standards for remanufactured products, which may be more expensive or technically difficult for smaller remanufacturers to meet. The Company plans to continue to increase its penetration of the aftermarket through internal growth and strategic acquisitions. The demand for components in the OEM market is cyclical. The Company believes that opportunities for growth in the OEM market will come primarily through the introduction of new products and expansion of the Company's global operations. The Company believes that its aftermarket and OEM businesses are complementary and provide the Company with a competitive advantage in meeting customer needs and maintaining the high levels of expertise necessary to compete successfully in both markets. The high capability necessary to meet the stringent requirements for OEM technology and quality are transferable by the Company to its aftermarket operations. For 1997, the aftermarket accounted for approximately 45.2% of the Company's net sales and approximately 62.8% of the Company's EBITDA (as defined). Net sales and EBITDA attributable to the OEM market accounted for the remainder. The primary components of cost of goods sold in the Company's aftermarket business include the cost of cores and component parts, labor costs and overhead. While the availability and cost of cores fluctuate based on supply and demand, the Company's relationships with dealers and other customers have historically provided it with sufficient access to cores at favorable prices. The primary components of cost of goods sold in the Company's OEM business include material, labor and overhead. The Company's domestic OEM labor force is represented primarily by the UAW. In March 1997, the Company signed a new master agreement with the UAW. Wage and benefit increases under the new agreement generally follow the same pattern as the prior agreement and continue to track the wages and benefits paid by GM and, as a result, the Company will experience higher wage and benefit rates in future periods. In addition, grow-in provisions under the new agreement will require the Company to move lower wage and benefit employees to higher wage and benefit levels. Under provisions of the national agreement, the UAW and the Company have recently developed a special program of incentives for hourly employees who agree to leave the Company. The cost of this program is included in the restructuring charges for fiscal year 1997 described below. The Company is in the process of shifting OEM production to focus factories which the Company believes can reduce costs. Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions, joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.1% in fiscal year 1997. The portion of the Company's net sales derived from the aftermarket have increased significantly over the past two years, from approximately 19.2% in fiscal year 1995 to 45.2% in fiscal year 1997. For fiscal year 1997, GM accounted for approximately 43.7% of the Company's total net sales, of which 30.3% were to GM's OEM businesses and 13.4% were to GM SPO. Substantially all of the Company's fiscal year 1997 automotive OEM sales were to GM. 31

In connection with the GM Acquisition, GM entered into long-term contracts (the "Supply Agreements") pursuant to which it has agreed to purchase from the Company 100% of its North American requirements for automotive starters (other than for Saturn and Geo) and 100% of its U.S. and Canadian requirements for heavy duty starters and alternators, in each case with respect to the Company's existing product line. In addition, GM has been designated as an exclusive distributor of a significant amount of the Company's automotive and heavy duty aftermarket products and has agreed to provide the Company with purchasing support, which enables it to obtain raw materials at competitive prices. GM's obligations to purchase the Company's automotive starters and heavy duty starters and alternators under the Supply Agreements are subject to such products remaining competitive as to price, technology and design. However, GM may not terminate the Supply Agreement for the Company's prices of automotive products for failing to be so competitive prior to July 31, 2001. The Supply Agreements will terminate (i) with respect to automotive products, on July 31, 2004 (except that GM's obligations with respect to automotive products introduced in 1996 and 1997 will terminate on July 31, 2006 and July 31, 2007, respectively), and (ii) with respect to heavy duty products, July 31, 2000. GM's obligations to distribute the Company's heavy duty aftermarket products terminate on July 31, 1998, and GM's obligations to distribute the Company's automotive aftermarket products terminate on July 31, 2009. See "Business--Customers." Although the Company expects that its automotive and heavy duty products will remain competitive throughout the term of the agreements with GM, there can be no assurance that GM will not develop alternative sources for such components and purchase some or all of its requirements from these sources prior to or following the expiration of the agreements. See "Risk Factors--Dependence on General Motors." In fiscal year 1997, the Company decided to restructure its OEM manufacturing operations, incurring a restructuring charge of $34.5 million and establishing a reserve for that amount. The Company's OEM business has seven principal manufacturing operations, two in Meridian, Mississippi and five in Anderson, Indiana. The Company has announced its intention to close its two facilities in Meridian, Mississippi by the end of the 1998 fiscal year, including one facility leased from GM at the time of the GM Acquisition. The balance of the Company's OEM facilities are located in Anderson, Indiana. Two of the Anderson facilities are leased from GM and will be vacated by the end of 1999. The Company is operating three new focus factories in Anderson and intends to begin operations in two additional focus factories by the end of 1999. This restructuring will provide a reduction of over 70% in square footage from the Company's existing plants to the focus factories due to streamlining of manufacturing processes, phasing out of certain manufacturing equipment and elimination of excess unutilized floor space or floor space used by GM in each of the existing facilities. The restructuring reserve does not include approximately $3 million in startup costs the Company expects to incur, based on its prior focus factory startups, in connection with the two additional focus factories. The restructuring plan included accelerating the Company's move to focus factories and closing the Company's operations in three old, vertically-integrated factories. These decisions resulted in the impairment of certain production assets with a carrying amount of $30.3 million, which the Company plans to dispose of. The Company has estimated the loss on disposal including related costs at $26.3 million. In addition, the Company has estimated a cost of $8.2 million for reducing its workforce through several transition programs related to the restructuring of the operations. The results of operations for the products which will be discontinued are not separately identifiable. The 1997 restructuring reserve is expected to be utilized throughout 1998 and 1999. In 1998, the Company expects to reduce the 1997 restructuring reserve balance to approximately $12.1 million through cash payments of $5.8 million and other charges of $16.6 million. The remaining balance is expected to be completely utilized in 1999 through cash payments of $4.5 million and other charges of $7.6 million. See "Risk Factors--Restructuring Charges; Net Losses." In fiscal year 1996, the Company decided to eliminate the production of certain parts and certain straight drive starter motors and offered a voluntary retirement transition program to certain eligible salaried employees resulting in the recognition of a restructuring charge of $8.1 million. The Company purchased new, more efficient equipment for use in the production of certain heavy duty alternators resulting in the impairment of certain production equipment with a carrying amount of approximately $5.2 million, which the Company plans to dispose of at an estimated loss of $4.4 million, including disposal costs. The retirement transition program, which was charged to operations for $3.7 million in 1996, was offered in conjunction with a similar plan offered by GM which allowed employees special additional benefits not typically provided upon retirement. These additional benefits included salaried payments for six months and future supplemental payments under the salaried retirement 32

plan. Cost savings have been identified and realized in the decisions to eliminate specific parts and motors and implement the voluntary retirement transition program. The results of operations for the parts and straight drive starter motors for which production will be discontinued are not separately identifiable. In fiscal year 1996, cash payments of $1.7 million and other charges of $0.9 million reduced the outstanding balance of the restructuring reserves to $5.5 million as of July 31, 1996. In 1997, cash payments of $0.8 million and other charges of $1.8 million further reduce the outstanding balance to $2.9 million as of July 31, 1997. This remaining balance is expected to be completely utilized during 1998. The following table sets forth certain statement of operations data expressed as a percentage of sales:
For the Year Ended July 31 ---------------------------------------------1995 1996 1997 ------------------------------------100.0% 100.0% 100.0% 82.9 80.1 78.3 ------------------------------------17.1 19.9 21.7 10.7 12.2 12.9 -1.3 5.0 ------------------------------------6.5 6.4 3.8 -(3.2) ------------3.2 -1.4 0.2 ------------1.6 0.4 --------------1.2% ============= -(4.3) ------------2.1 0.0 0.9 0.2 ------------0.9 0.2 1.4 -------------(0.8)% ============= 0.3 (5.6) ------------(1.6) 0.1 (0.4) 0.2 ------------(1.5) 0.1 0.1 0.3 ------------(2.0)% =============

Net sales........................................................ Cost of goods sold............................................... Gross profit..................................................... Selling, engineering and administrative expenses................. Restructuring charges............................................ Operating income................................................. Other income (expense): Gain on sale of building.................................... Interest expense............................................ Income (loss) from continuing operations before minority interest, income taxes and preferred divided requirement of subsidiary.................................................. Minority interest................................................ Income taxes..................................................... Preferred dividend requirement of subsidiary..................... Income (loss) from continuing operations......................... Discontinued operations: Loss from operations of discontinued businesses (less applicable income tax benefit).................... Loss on disposal of businesses (less applicable income tax benefit).................... Extraordinary item: Write-off of debt issuance costs (less applicable income tax benefit).................................................... Net income (loss)................................................

Fiscal Year Ended July 31, 1997 Compared to Fiscal Year Ended July 31, 1996 Net Sales. Net sales were $689.8 million for 1997, an increase of $52.9 million, or 8.3%, over the prior year. The increase resulted from the inclusion of the net sales of World Wide from its acquisition date and Power Investments for the entire 1997 fiscal year. These sales increases were partially offset by the absence in 1997 of orders for the initial stocking of stores that occurred when the Company added a new retail customer and one of its existing retail customers made significant acquisitions. 33

Gross Profit. Gross profit was $149.6 million for 1997, an increase of $22.8 million, or 18.0%, over the prior year. As a percentage of net sales, gross profit increased to 21.7% for the year ended July 31, 1997 from 19.9% for the prior year. This increase was primarily attributable to the higher gross profit margins of the Power Investments Acquisition and the World Wide Acquisition as well as improved productivity and cost reductions in the Company's OEM operations. These profitability improvements and cost reductions represent the benefits from the restructuring actions begun in 1996 and were partially offset by start-up costs for the focus factories. The Company also launched a family of new gear reduction starters that initially generate lower margins than those of the mature straight drive starters. The continued replacement of the straight drive starter with the new gear reduction starter is expected to have a less adverse effect on gross profit margin in 1998. Selling, Engineering and Administrative Expenses. Selling, engineering and administrative ("SE&A") expenses were $89.1 million for 1997, an increase of $11.1 million, or 14.2%, over the prior year. As a percentage of net sales, SE&A expenses increased to 12.9% for 1997 from 12.2% during the prior year. The increase in SE&A expense as a percent of net sales resulted primarily from higher SE&A expense as a percent of net sales for the acquired companies, start-up costs for the focus factories and costs for information systems. Operating Income. Operating income was $26.0 million for 1997, a decrease of $14.7 million, or 36.2%, from the prior year. As a percent of net sales, operating income decreased to 3.8% for the year ended July 31, 1997 from 6.4% for the prior year. This decrease was attributable to the inclusion of $34.5 million of restructuring charges, as compared to restructuring charges of $8.1 million in 1996, as discussed above. Excluding the restructuring charges, operating income was 8.8% of sales in 1997 and 7.7% in 1996. Interest Expense. Interest expense was $38.8 million for 1997, an increase of $11.4 million, or 41.7%, over the prior year. The increase was due primarily to the additional debt incurred to finance acquisitions and increased borrowings to fund working capital requirements. Income Taxes. The Company had an income tax benefit of $3.0 million in 1997 as compared to income tax expense of $5.7 million for 1996. The tax benefit was 28.1% of the loss from continuing operations before tax in 1997, and the income tax expense was 43.1% of income from continuing operations before tax for the prior year. Due to continuing tax planning initiatives, the Company expects its effective tax rate to be approximately 38% in future years. Loss From Discontinued Operations. The after-tax loss from discontinued operations of $1.7 million for 1997 relates to the Company's plan to divest its large bore diesel remanufacturing operations and its marine operations. These operations were not part of the Company's core strategic focus. The loss reflects the direct costs of production and identifiable SE&A expense expected to be incurred by these businesses from the date the Company decided to dispose of them until the expected disposal date, and a loss on disposal of assets and an allocation of interest expense based on capital employed by the business. Net Income (Loss). As a result of the foregoing factors, the net loss was $14.3 million for 1997, compared to a loss of $4.8 million in the prior year. Excluding restructuring charges and loss on discontinued operations, the Company's net income for 1997 was $10.5 million and $10.7 million for 1996. Fiscal Year Ended July 31, 1996 Compared to Fiscal Year Ended July 31, 1995 Net Sales. Net sales were $636.9 million for 1996, an increase of $63.4 million, or 11.1%, over the prior year. The increase resulted from the inclusion of the net sales of the 1995 Acquisitions for the entire 1996 fiscal year and the net sales of the Power Investments Acquisition for the last six months of the 1996 fiscal year. Sales increases from these newly-acquired subsidiaries were partially offset by decreased sales to GM as a result of certain work actions at GM, GM's high inventory levels at the beginning of 1996, and an industry-wide softening of OEM heavy duty truck production. Gross Profit. Gross profit was $126.8 million for 1996, an increase of $28.6 million, or 29.1%, over the prior year. As a percentage of net sales, gross profit increased to 19.9% for the year ended July 31, 1996 from 17.1% for the prior year. This increase was attributable primarily to the higher gross profit margins of the businesses acquired as well as improved productivity and cost reductions in the OEM operations. These benefits were partially offset by decreased sales to GM which negatively affected gross profit margins at certain of the Company's OEM operations. 34

Selling, Engineering and Administrative Expenses. SE&A expenses were $78.0 million for 1996, an increase of $16.8 million, or 27.4%, over the prior year. As a percentage of net sales, SE&A expenses increased to 12.2% for 1996 from 10.7% during the prior year. The increase in SE&A expenses as a percent of net sales reflects the relatively higher SE&A expenses the acquired businesses incurred in order to service the aftermarket. Operating Income. Operating income was $40.7 million for 1996, an increase of $3.7 million, or 9.9%, over the prior year. As a percentage of net sales, operating income decreased slightly to 6.4% for the year ended July 31, 1996 from 6.5% for the prior year. This decrease was attributable to the inclusion of restructuring charges of $8.1 million, as discussed above. Excluding the restructuring charges, operating income was 7.7% of sales in 1996. Interest Expense. Interest expense was $27.4 million for 1996, an increase of $8.9 million, or 48.5% over the prior year. The increase was due primarily to the additional debt incurred to finance acquisitions and increased borrowings to fund working capital requirements. Income Taxes. Income taxes were $5.7 million for 1996, a decrease of $2.1 million from the prior year. The Company's effective tax rate was 43.1% for 1996 and 42.3% for the prior year. The increase in the effective tax rate was due, in part, to the inclusion of Power Investments and higher tax rates in foreign operations. Loss From Discontinued Operations. The after-tax loss from discontinued operations of $10.6 million for 1996 relates principally to the Company's Powder Metal Forge ("PMF") business. PMF manufactures products that are not part of the Company's core business. This loss reflects the direct costs of production and identifiable SE&A expense incurred by the PMF business, and estimated losses from operations during a transition period from the date the Company decided to dispose of PMF until production is relocated to the seller's facility, as well as a loss on disposal of assets and an allocation of interest expense based on capital employed by the business. Net Income (Loss). Net loss was $4.8 million for 1996, an earnings decrease of $11.8 million from the prior year. The decrease in net income was attributable to the restructuring charges and the loss on discontinued operations discussed above. Excluding loss from discounted operations and restructuring charges, net income was $10.7 million in 1996. Quarterly Results of Operations The following table sets forth, for the periods shown, certain statements of operations data for the Company (in millions):
Fiscal 1996 Quarter Ended ---------------------------------Oct. 31 Jan. 31 April 30 July 31 -------------------------$ 156.7 $ 147.8 $ 164.5 $ 167.9 31.1 28.3 34.1 33.4 17.8 17.5 21.4 21.3 ---8.1 13.3 10.8 12.6 4.0 17.9 15.5 17.4 21.3 Fiscal 1997 Quarter Ended ---------------------------------Oct. 31 Jan. 31 April 30 July 31 -------------------------$ 167.6 $ 164.9 $ 180.4 $ 176.9 38.8 32.0 38.4 40.2 24.1 20.4 23.3 21.3 ---34.5 14.7 11.6 15.1 (15.4) 22.6 18.6 21.9 24.2

Net sales.................. Gross profit............... SE&A....................... Restructuring charges...... Operating income........... EBITDA.....................

The following table sets forth, for the periods shown, certain statement of operations data for the Company, expressed as a percent of sales:
Fiscal 1996 Quarter Ended ---------------------------------Oct. 31 Jan. 31 April 30 July 31 -------------------------100.0% 100.0% 100.0% 100.0% 19.8% 19.1% 20.7% 19.9% 11.4% 11.8% 13.0% 12.7% ---4.8% 8.5% 7.3% 7.7% 2.4% 11.4% 10.5% 10.6% 12.7% Fiscal 1997 Quarter Ended ---------------------------------Oct. 31 Jan. 31 April 30 July 31 -------------------------100.0% 100.0% 100.0% 100.0% 23.2% 19.4% 21.3% 22.7% 14.4% 12.3% 12.9% 12.0% ---19.5% 8.8% 7.0% 8.4% (8.7)% 13.5% 11.3% 12.1% 13.7%

Net sales................. Gross profit.............. SE&A...................... Restructuring charges..... Operating income.......... EBITDA....................

35

Liquidity and Capital Resources The Company's liquidity needs include required debt service, working capital needs and the funding of capital expenditures. The Company does not currently have any significant maturities of long-term debt prior to 2006 other than the Senior Credit Facility, any potential payments under the GM Contingent Note and the 8% Subordinated Debenture. See "Description of Indebtedness." The Company anticipates temporary additional working capital requirements for increased inventories at its existing facilities in connection with the relocation to focus factories. The Company estimates that net proceeds from the Offerings will be approximately $181.1 million, net of fees and related costs and assuming no exercise of the over-allotment option in the Equity Offering. The net proceeds will be used to repay (i) the World Note with a principal amount of $75.0 million at a price equal to 103% of the principal amount, (ii) the GM Acquisition Note of $59.2 million, (iii) the Power Investments Seller Notes and the A&B Seller Notes of in an aggregate of $11.8 million, (iv) the Ballantrae Senior Bank Debt of $20.8 million and (v) the Ballantrae Subordinated Debt of $9.3 million. Any accrued and unpaid interest on such indebtedness will also be repaid with the proceeds of the Offerings. See "Use of Proceeds." In connection with the Offerings, the Company will amend and restate its Senior Credit Facility to provide up to $180 million of revolving credit availability. Each of the Company's domestic operating subsidiaries will be parties to the Senior Credit Facility. The obligations under the Senior Credit Facility of each domestic operating subsidiary will be unconditionally guaranteed by each other domestic operating subsidiary and each of the Company and its domestic subsidiaries which are holding companies. Initially, the amount available to the Company for borrowing under the Senior Credit Facility (the "Commitment Amount") will be $180 million, all of which will be available for general corporate purposes including acquisitions (with a sub-limit for letters of credit equal to the lesser of the Commitment Amount at the time of issuance of a letter of credit and $30 million). Beginning with the thirteenth quarter following the date of the Senior Credit Facility, the Commitment Amount will decrease by $11.25 million at the end of each quarter through the twenty-eighth such quarter, at which time the Senior Credit Facility terminates. As of July 31, 1997, after giving pro forma effect to the Transactions, approximately $35.0 million in borrowings would have been outstanding under the Senior Credit Facility, together with approximately $11.6 million in outstanding stand-by letters of credit thereunder. Cash interest expense for 1995, 1996 and 1997 was $10.3 million, $19.5 million and $30.8 million, respectively. The portion of total interest represented by non-cash interest for the three years was $8.1 million, $7.9 million and $7.9 million for 1995, 1996 and 1997 respectively. Interest payments under the Company's indebtedness will continue to result in significant liquidity requirements for the Company. Following the Offerings, all of the Company's interest payments must be made in cash. The Company's capital expenditures were $31.9 million in 1997 and are expected to be $22.5 million in 1998. Planned capital expenditures consist primarily of new capacity to accommodate the introduction of several new products, including additional gear reduction starters for automotive applications and alternators with enhanced features for the medium and heavy duty truck market, as well as production equipment for the Company's new focus factories. Cost reduction programs account for a significant portion of planned capital expenditures and include upgrades in machinery technology, new quality standards and environmental compliance. The Company's ability to make capital expenditures is subject to certain restrictions under the Senior Credit Facility. The Company granted put/call options in connection with the acquisitions of Power Investments and World Wide that become exercisable in March 2001 for Power Investments and November 2000 for World Wide. The exercise prices of the put/call options are based on an earnings formula and cannot now be estimated. See "Company History." The Company's principal sources of cash to fund its liquidity needs will be net cash from operating activities and borrowings under the Senior Credit Facility. The Company's cash position increased to $10.0 million at year end 1997 compared to $3.4 million at year end 1996. Cash provided by operating activities was $22.5 million in 1997 as compared to cash used in operating activities of $684,000 in 1996. Non-cash items in 1997, including 36

$22.0 million of depreciation and amortization and the $32.9 million restructuring reserve, more than offset the Company's net loss and increased working capital requirements. From July 31, 1996 to July 31, 1997, the Company's inventory increased by $40.8 million. The increase in inventory was attributable primarily to the Company's expanding aftermarket business, including inventory associated with the World Wide acquisition as well as higher levels of finished goods inventory required to service aftermarket customers. Cash used in investing activities of $74.1 million in 1997 was composed of $42.2 million for the acquisition of World Wide and $31.9 million of capital expenditures. Cash provided by financing activities in 1997 was $57.8 million, as debt issuances exceeded debt repayments. The components of net cash from operating activities are detailed in the Consolidated Financial Statements and related notes. Under the terms of the GM Acquisition, GM retained the liability for post-retirement benefits earned by the Company's employees while employed by GM. In addition, GM retained the liability for post-retirement benefits for all of the Company's employees that return to GM pursuant to contractual arrangements at the time of the GM Acquisition. Since relatively senior employees have returned to GM and have been replaced by the Company with employees who have later retirement dates, the Company's actual cash expenditures for post-retirement benefits will be significantly less than the amount recorded as an expense over the next ten years. The excess of the amount accrued over the cash paid for post-retirement benefits during 1995, 1996 and 1997 was $4.4 million, $3.8 million and $4.5 million, respectively. The Company believes that cash generated from operations, together with the amounts available under the Senior Credit Facility, will be adequate to meet its debt service requirements, capital expenditures and working capital needs for at least the next twelve months, although no assurance can be given in this regard. The Company's future operating performance and ability to extend or refinance its indebtedness will be dependent on future economic conditions and financial, business and other factors that are beyond the Company's control. Seasonality The Company's business is moderately seasonal, as its major OEM customers historically have one- to two-week summer shutdowns of operations during July. In addition, the Company typically has shut down its own operations for one week each July, depending on backlog, scheduled maintenance and inventory buffers, as well as an additional week during the December holidays. Consequently, the Company's second and fourth quarter results reflect the effects of these shutdowns. Effects of Inflation The Company believes that the relatively moderate inflation over the last few years has not had a significant impact on the Company's revenues or profitability and that it has been able to offset the effects of inflation by increasing prices or by realizing improvements in operating efficiency. The Company has provisions in many of its contracts which provide for the pass through of fluctuations in the price of certain raw materials, such as copper and aluminum. Foreign Sales Approximately 15.9%, 12.4% and 21.1% of the Company's 1995, 1996 and 1997 net sales, respectively, were derived from sales made to customers in foreign countries. Because of these foreign sales, the Company's business is subject to the risks of doing business abroad, including currency exchange rate fluctuations, limits on repatriation of funds, compliance with foreign laws and other economic and political uncertainties. Accounting Pronouncements For a discussion of pending accounting pronouncements that may affect the Company, see Note 2 to the Consolidated Financial Statements included elsewhere in this Prospectus. 37

BUSINESS General The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia-Pacific. Net sales and EBITDA (as defined) for fiscal year 1997 were $689.8 million and $87.3 million, respectively. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters and its U.S. and Canadian requirements for heavy duty starters and alternators. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system. See "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately % of the Company's outstanding Common Stock ( % of the voting power), and will be able to control the Company and elect its Board of Directors. Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the 38

cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. Growth Strategy The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: Increasing Aftermarket Presence Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. Expanding Globally The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India; and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. Introducing Technologically Advanced New Products As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new 39

products underscore the Company's commitment to developing state-of-the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. Operating Strategy The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "Focus" Factories to Drive Manufacturing Excellence The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company will occupy five focus factories and will have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. Productivity Improvements In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. Product Quality and Continuous Improvement In July 1997, the Company received the prestigious Supplier of the Year award from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. Acquisition of Ballantrae Pursuant to the Ballantrae Acquisition Agreement, the Company will acquire all of the capital stock of Ballantrae in a merger of Ballantrae and a subsidiary of the Company in which Ballantrae will be the surviving corporation. The aggregate cost will be $49.2 million, subject to a working capital adjustment and including assumed debt. Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for 70% of Ballantrae's $37.6 million of net sales. The Company will exchange shares of its Common Stock with a value (at the initial public offering price in the Equity Offering) of approximately $19 million for the equity of Ballantrae and will repay approximately $30 million of Ballantrae's debt. The Common Stock of the Company received by Ballantrae's existing stockholders in the merger will be subject to resale restrictions under applicable securities laws. The merger is expected to be completed at or prior to the consummation of the Offerings. The Company will pay up to an aggregate of $ in respect of any dissenters' rights exercised by existing stockholders of Ballantrae. Any damages which the Company may suffer which result from a breach of the Ballantrae Acquisition Agreement will be subject to a $10 million cap and the 40

Company will only be able to recover approximately % and % of its damages from CVC and James R. Gerrity, respectively (in each case including their affiliates). The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History" and "Certain Transactions." Industry Overview In general, the Company's business is influenced by the underlying trends of the automotive industry. The Company's focus on expanding its remanufacturing capabilities, however, heightens the importance of the aftermarket. Aftermarket. The aftermarket consists of the production and sale of both new and remanufactured parts used in the maintenance and repair of automobiles, trucks and other vehicles. Remanufacturing is a process through which used components ("cores") are disassembled into their subcomponents, cleaned, inspected, tested, combined with new subcomponents and reassembled into finished products. A remanufactured product can be produced at lower cost than a comparable individually repaired unit due to effective salvage technology methods, high volume precision manufacturing techniques and rigorous inspection and testing procedures. The ability to procure cores is critical to the remanufacturing process. See "Business--Manufacturing and Facilities." Aftermarket parts are supplied principally through three distribution channels: (i) car and truck dealers that obtain parts either through an OEM parts organization (e.g., GM SPO, Ford Parts & Service, Chrysler Mopar, Navistar, etc.) or directly from an OEM-authorized remanufacturer; (ii) retail automotive parts chains and mass merchandisers; and (iii) wholesale distributors and jobbers who supply independent service stations, specialty and general repair shops, farm equipment dealers, car dealers and small retailers. The Company believes that the aftermarket has been and will continue to be impacted by the following trends: (i) the increasing number and average age of vehicles in use and the number of miles driven annually; (ii) the increasing demands of customers that their aftermarket suppliers meet high quality standards; (iii) the increasing use of remanufactured parts for OEM warranty and extended service programs; (iv) the growth and consolidation of large retail automotive parts chains; and (v) particularly with respect to many of the Company's products, the increasing engine output and durability demands related to the high temperatures at which engines operate. According to R. L. Polk, as of 1996, there were approximately 198 million cars and light trucks registered in the United States, as compared with 162 million cars and light trucks in 1986. The average age for cars and light trucks in 1996 was 8.5 years, as compared with an average car age of 7.9 years in 1986. The use of remanufactured components for warranty and extended service repairs has increased in recent years as OEMs have offered extended warranty and extended service coverage and dealers have begun to provide extended service plans and warranties on used vehicles. OEMs have sought to reduce warranty and extended service costs by using remanufactured components, which generally offer the same degree of quality and reliability as OEM products at a lower cost. This trend has resulted in aftermarket customers requiring higher quality standards for remanufactured products. Recently, large retail automotive parts chains offering a broad range of new and remanufactured products have experienced rapid growth at the expense of small, independent retail stores. The Company has significantly grown its sales to this channel and believes that further increasing its sales to retail chains offers a significant opportunity for growth. Retail chains generally prefer to deal with large, national suppliers capable of meeting their cost, quality, volume and service requirements. See "Business--Growth Strategy." OEM Market. The OEM market consists of the production and sale of new component parts for use in the manufacture of new vehicles. The OEM market includes two major classes of customers: (i) automobile and light truck manufacturers; and (ii) medium and heavy duty truck and engine manufacturers and other heavy duty vehicle manufacturers. The OEM market has been impacted by recent fundamental changes in the OEMs' sourcing strategies. OEMs are consolidating their supplier base, demanding that their suppliers provide technologically advanced product 41

lines, greater systems engineering support and management capabilities, just-in- time sequenced delivery and lower system costs. As a result, each OEM has selected its own preferred suppliers. OEMs are increasingly requiring that their preferred suppliers establish global production capabilities to meet their needs as they expand internationally and increase platform standardization across multiple markets. OEMs continue to outsource component manufacturing of non-strategic parts. Outsourcing has taken place in response to competitive pressures on OEMs to improve quality and reduce capital outlays, production costs, overhead and inventory levels. In addition, OEMs are increasingly purchasing integrated systems from suppliers who provide the design, engineering, manufacturing and project management support for a complete package of integrated products. By purchasing complete systems, OEMs are able to shift design, engineering and product management to fewer and more capable suppliers. Integrated systems suppliers are generally able to design, manufacture and deliver components at a lower cost than the OEMs due to (i) their lower labor costs and other manufacturing efficiencies, (ii) their ability to spread research and development and engineering costs over products provided to multiple OEMs and (iii) other economies of scale inherent in high volume manufacturing such as the ability to automate and leverage global purchasing capabilities. Products Aftermarket. The Company's aftermarket product line includes a diverse array of remanufactured and new products sold as replacement parts under the "Delco Remy" brand name or under a private-label brand name specified by the OEM or the automotive parts retailer. The Company remanufactures parts for both domestic and imported vehicles. Products remanufactured by the Company include starters, alternators, engines, fuel injectors, injection pumps and turbo chargers (fuel systems), transmissions, torque converters, water pumps, rack and pinions, power steering pumps and gears and clutches. The Company also remanufactures subcomponents, such as automotive armatures, rotors and solenoids, as well as component parts shipped in bulk ("kits") for future assembly. These subcomponents are either used internally in the remanufacturing process by the Company or sold to outside customers. OEM. The Company's starters are used in all cars and trucks manufactured by GM in North America (except Saturn and Geo). The Company manufactures two types of starters: straight drive starters and gear reduction starters. Since the beginning of 1994, the Company has been transitioning its production line from straight drive starters to more technologically advanced gear reduction starters. For the 1997 model year, the Company's gear reduction starters were used on 44% of GM's North American automotive platforms (other than Saturn and Geo). The balance of GM North American automotive platforms (other than Saturn and Geo) will be converted to the Company's gear reduction starters by the end of the 1998 model year, at which time the Company expects to discontinue OEM production of straight drive starters. The Company's gear reduction starters are globally competitive and offer greater output at lower weight than comparable straight drive designs. For example, the Company's principal PG-260 gear reduction starter offers the highest power to mass ratio in the industry, producing the same power at 7.7 pounds as a comparable straight drive design weighing 13.6 pounds. The Company has begun development of a small gear reduction starter that will enable the Company to offer its OEM customers an application on their world car platforms. Reduced component weight is important to OEMs, as total vehicle weight is a critical factor in each OEM's ability to achieve federal Corporate Average Fuel Economy standards (CAFEs). The Company manufactures a full line of heavy duty starters and alternators for use primarily with large diesel engines. The Company's starters and alternators are specified as part of the standard electrical system by most North American heavy duty truck and engine manufacturers. The Company's starters cover a broad range of torque and speed requirements. The Company manufactures a full line of alternators, some of which utilize premium design features that yield increased durability and a longer service life. Certain of the Company's automotive starters are also currently being produced under technology licenses by manufacturers in China and India, and by the Company's joint ventures in Mexico and Korea. The Company has recently developed several new products for heavy duty applications, including a high output, premium heavy duty brushless alternator for high vibration applications; a new large frame alternator designed to meet the increasing demands in the upper power ranges of new heavy duty vehicles; and a small heavy duty alternator for use in low output, high durability and severe environmental applications, which the Company 42

expects will be used principally for agricultural and construction vehicles. The Company's OEM customers and major truck fleet operators designate it as an electrical system supplier that provides value-added systems such as the "Road Gang." The Road Gang system includes a premium starter and brushless alternator produced by the Company and premium batteries produced by GM and offered by the Company under a long-term agreement with GM. Engineered as a package, these products provide increased performance, reliability and durability. Ballantrae's Tractech subsidiary produces traction control systems for use in construction, industrial and agricultural equipment and in medium duty trucks. The traction control systems business combines valuable product engineering skills with strong machining and fabrication capabilities to manufacture products with custom designed applications. Quality Standards. The Company is required to meet numerous quality standards in order to qualify as a supplier to major OEMs and their dealer networks, as well as certain automotive parts retailers. The Company has achieved significant recognition by its customers for its continuous commitment to quality. In July 1997, the Company received the prestigious Supplier of the Year award from GM, an award given to fewer than 1% of all GM suppliers. The Company's aftermarket operations that produce products for Ford have received the Q-1 rating, which is Ford's highest quality rating. Moreover, the Company is a Ford FAR in five of the seven Canadian provinces. The Company also has been awarded Navistar's highest quality rating for its engine remanufacturing operations. In addition, the Company has received quality awards from certain of its other customers, including Caterpillar, Cummins, OshKosh and Teledyne. Ford, Chrysler and GM have initiated quality standards (QS9000) applicable to suppliers such as the Company. International and domestic automobile and truck manufacturers developed the QS9000 standards to ensure that their suppliers meet consistent quality standards that can be independently audited. These quality standards, which are required by customers to be in place by December 1997, impose processes and procedures in addition to those in effect prior to December 1997. Management also believes that these standards may have the effect of accelerating consolidation in the remanufacturing industry, as smaller remanufacturers may be unable to meet or afford the cost of complying with these new quality standards. The Company has received QS9000 certification at nine of its manufacturing and remanufacturing facilities, and expects the balance to be certified by the end of fiscal 1998. Ballantrae's traction control systems unit has received several quality awards, has been designated a Caterpillar "Certified Supplier" in every year since 1985 and holds an ISO9002 certification. Engineering and Development. The Company's engineering staff works independently and with OEMs to design new products, improve performance and technical features of existing products and develop methods to lower manufacturing costs. The Company's engineering staff includes application engineers, manufacturing engineers and advanced engineers. Application engineers are assigned to various platforms or geographic regions to work directly with customers on product design changes and corrective actions. Manufacturing engineers are responsible for the planning, layout, design, equipment selection and global implementation of production capacity for the Company's domestic and foreign manufacturing facilities. Advanced engineers work in conjunction with the customer's forward planning or advanced powertrain engineers on product design and development for products with a five to ten year planning horizon. In support of its engineering efforts, the Company has formed technical alliances with a select number of engineering and technology firms to identify long-term engineering advances and opportunities. In January 1996, the Company entered into a joint development agreement with SatCon Technology Corporation with the goal of developing an alternator with substantially higher power output than the current generation of alternators. The Company has also formed technical alliances with EcoAir Corp. and Arthur D. Little to support the Company's advanced research and development of starters and alternators. Customers Aftermarket. The Company's principal aftermarket customers include OEM dealer networks of GM, Navistar, Ford, Freightliner, Caterpillar and PACCAR and leading automotive parts retain chains such as Auto Zone, Western Auto, Pep Boys, Advance Auto, O'Reilly Automotive and Discount Auto. The Company's products are also used for warranty replacement under procedures established by certain of the Company's OEM customers. 43

In connection with the GM Acquisition, the Company entered into a long-term agreement pursuant to which it designated GM, through GM SPO, as its exclusive distributor of "Delco Remy" brand remanufactured automotive and heavy duty starters and alternators within North America to specified customers, including certain GM dealers, direct GM accounts, certain warehouse distributors and, with respect to automotive products, certain retail chains. In consideration of its being granted the foregoing exclusive distribution rights, GM agreed to purchase from the Company 100% of its requirements for automotive starters and heavy duty starters and alternators for sale in the aftermarket and has further agreed not to sell any competitive products in the aftermarket channels specified above during the term of the distribution agreement. Sales to GM SPO under the distribution agreement accounted for approximately 24.2% of the Company's aftermarket 1997 pro forma net sales. With respect to heavy duty starters and alternators, the term of the current agreement will end on July 31, 1998. As to automotive starters, the agreement terminates on July 31, 2009. The agreement, with respect to either heavy duty or automotive products, may be terminated prior to the end of the applicable term (i) by mutual agreement of the parties, (ii) by either party upon a material breach by the other party, (iii) by the Company if GM fails to achieve certain goals and objectives for reasons other than a general decline in the economy and (iv) by GM to the extent the Company fails to meet certain quality standards. See "Risk Factors--Dependence on General Motors." Ballantrae's traction control systems are offered on an aftermarket basis for sport utility vehicles ("SUV") through independent wholesale distributors for installation by the end user after the original vehicle purchase. Aftermarket sales represent approximately 25% of Tractech's total sales. OEM. The Company's principal customers in its OEM automotive business are GM's North American Operations and various GM International affiliates, who collectively accounted for substantially all of the Company's OEM 1997 pro forma automotive starter sales, approximately 54.7% of total OEM 1997 pro forma net sales and approximately 29.7% of total 1997 pro forma net sales. The GM International affiliates to which the Company sells products include GM Brazil, GM Holden (Australia), GM Mexico and Isuzu. Beginning with the 2001 model year, the Company will also sell products to GM Europe. Remy Korea, a joint venture in which the Company has a 50% interest, sells automotive starters using the Company's technology to Daewoo Motors, Kia Motors, Asia Motors and Ssangyong Motors. The Company will also sell automotive starters to Opel in Europe and, through its licensee, to Daewoo Motors in India. Principal customers of the Company's heavy duty OEM business include Navistar, Freightliner, Cummins, Caterpillar, PACCAR, Detroit Diesel, GM, Ford, Mack and Volvo Trucks, with the top ten customers accounting for approximately 59% of heavy duty pro forma net sales in 1997. The Company has long-term agreements, with terms typically ranging from three to five years, to supply starters and alternators to GM, Navistar, Freightliner, PACCAR, Cummins, Volvo Trucks and Mack. In addition, the Company is the specified supplier of heavy duty starters and alternators for trucks manufactured for several major North American truck fleet operators, including Penske Truck Leasing, Ryder System, Inc., Yellow Freight System and J.B. Hunt Transport. Pursuant to long-term supply agreements, GM has agreed to purchase from the Company 100% of its North American automotive starter requirements (other than Saturn and Geo) and 100% of its U.S. and Canadian requirements for heavy duty starters and alternators, in each case with respect to the Company's existing product line as of August 1994. GM's commitments to purchase such products from the Company in the future are subject, however, to the Company remaining competitive as to technology, design and price. Nonetheless, GM may not terminate the automotive starter supply agreement for failure of the Company to be price, technology or design competitive prior to July 31, 2001. GM's obligations to purchase automotive starters and heavy duty starters and alternators from the Company terminate on July 31, 2004 and 2000, respectively, except for automotive products released in 1996 and 1997, for which GM's obligation will terminate on July 31, 2006 and 2007, respectively. GM may cancel either agreement in the event that 35% of the Company's voting shares become owned, directly or indirectly, by another manufacturer of passenger cars or light trucks. During the term of the relevant supply agreement, GM has granted the Company the right to bid on starter and alternator supply contracts for GM's operations worldwide. See "Risk Factors--Dependence on GM." Ballantrae's principal customers for traction control systems include OEMs of construction, industrial and agricultural equipment and medium duty trucks. Ballantrae's principal traction control systems customers include Caterpillar, John Deere, Eaton, Dana, Rockwell and Clark Hurth. 44

The Company employs its own direct sales force, which develops and maintains sales relationships with major North American truck fleet operators as well as its OEM customers worldwide. These sales efforts are supplemented by a network of field service engineers and product service engineers. Manufacturing and Facilities Aftermarket. The Company's aftermarket business has operations located principally in 33 production facilities and seven warehouses in the United States and Canada. In its remanufacturing operations, the Company obtains used starters, alternators, engines and related components, commonly known as cores, which are sorted by make and model and either placed into immediate production or stored until needed. During remanufacturing, the cores are completely disassembled into their component parts. Components which can be incorporated into the remanufactured product are thoroughly cleaned, tested and refinished. All components subject to major wear as well as those which cannot be remanufactured are replaced by new components. The unit is then reassembled into a finished product. Inspection and testing are conducted at various stages of the remanufacturing process, and each finished product is inspected and tested on equipment designed to simulate performance under operating conditions. The majority of the cores remanufactured by the Company are obtained from customers in exchange for remanufactured units and are credited against the purchase prices of these units. When the Company has an insufficient number of components from salvageable cores, the Company's remanufacturing operations may purchase new parts from the Company's OEM operations. Core prices fluctuate on the basis of several economic factors, including market availability and demand and core prices then being paid by other remanufacturers and brokers. OEM. The Company's OEM business has seven principal manufacturing operations, two in Meridian, Mississippi and five in Anderson, Indiana. The Company has announced its intention to close its two facilities in Meridian, Mississippi by the end of the 1998 fiscal year, including one facility leased from GM at the time of the GM Acquisition. The balance of the Company's OEM facilities are located in Anderson, Indiana. Two of the Anderson facilities are leased from GM and will be vacated by the end of 1999. The Company is operating three new focus factories and intends to have a total of five in operation by the end of 1999. This restructuring will provide a reduction of over 70% in square footage from the Company's existing plants to the focus factories due to streamlining of manufacturing processes, phasing out of certain manufacturing equipment and elimination of excess unutilized floor space or floor space used by GM in each of the existing facilities. The restructuring reserve does not include the startup costs the Company expects, based on its three prior focus factory startups, to incur in connection with the two new focus factories. The manufacturing process of the focus plants varies significantly from the traditional process flow of existing plants. The Company utilizes a flexible cell-based manufacturing approach to the production of all new and/or re-engineered product lines within the focus plants as contrasted with the existing vertically integrated, primarily synchronous process used in traditional factories. The cell-based manufacturing system provides flexibility by allowing efficient changes to the number of operations each operator performs and is capable of both low- and high-volume production runs. When compared to the more traditional, less flexible assembly line process, cell manufacturing allows the Company to match its production output better to customers' requirements while reducing required inventory levels and improving quality. The Company's focus plants generally produce one product line in a plant design based on cell-based, semi-automated manufacturing utilizing kaizen techniques. The focus plant process creates a team-based environment of involved workers who better understand and control the manufacturing process. In addition, the Company has worked with the Company's unions to reduce the number of job classifications so that workers can be shifted among various work areas as production demands dictate. The Company is presently expanding lean manufacturing techniques to its aftermarket facilities. Ballantrae's traction control systems manufacturing facilities are located in the Detroit suburb of Warren, Michigan, and in Sligo, Ireland. These facilities have used cellular manufacturing for more than seven years. The Company utilizes frequent communication meetings at all levels of manufacturing to provide training and instruction as well as to assure a cohesive, focused effort toward common goals. The Company encourages 45

employee involvement in all production activity and views such involvement as a key element toward the success of the Company. Competition Aftermarket. The aftermarket is highly fragmented and competitive. Competition is based primarily on quality of products, service, delivery, technical support and price. The Company's principal aftermarket competitors include Arrow, Automotive Parts Exchange (APE), Champion, Genuine Parts (Rayloc), Motorcar Parts & Accessories (MPA), Prestolite and Unit Parts. OEM. The automotive parts market is highly competitive. Competition is based primarily on quality of products, service, delivery, technical support and price. Most OEMs source parts from one or two suppliers. The Company competes with a number of companies who supply automobile manufacturers throughout the world. In the North American automotive market, the Company's principal competitors include Nippondenso, Valeo, Mitsubishi and Bosch. GM purchases automotive starters from the Company pursuant to its long-term supply agreement with the Company. See "Business--Customers." Chrysler has eliminated production of its own starters and currently purchases starters from independent suppliers. Ford continues to produce certain parts for the majority of its domestic and international applications and purchases the remainder from independent suppliers. The heavy duty parts market is characterized by one or two dominant suppliers in each major geographic region of the world. No competitor has a substantial share in all regions. In the North American heavy duty market, where the Company is the largest manufacturer, the Company's principal competitors include Prestolite, Nippondenso and Bosch. Employees As of July 31, 1997, the Company employed 4,949 people, 848 of whom were in management, engineering, supervision and administration and 4,101 of whom were hourly employees. Of the Company's hourly employees, 1,969 are represented by unions. In the United States, 1,485 of the Company's hourly workers are represented by the UAW under an agreement between the Company and the UAW, the applicable provisions of which were assumed by the Company in connection with the GM Acquisition. The Company and the UAW agreed to a new master agreement in March 1997 when the agreement that had been assumed by the Company expired. Wage and benefit increases under the new contract generally follow the same pattern of the prior agreement and continue to track the wages and benefits paid by GM and, as a result, the Company will experience higher labor costs in the future. In addition, grow-in provisions under the new agreement will require the Company to move lower wage and benefit employees to higher wage and benefit levels. There can be no assurance that the Company will be able to effect cost reductions or productivity improvements to offset such increased wage and benefit levels or that the Company's labor costs will not increase significantly, in which case the Company's competitive position and results of operations would be adversely affected. The agreement between the UAW and the Company expires on September 14, 2000 which will require negotiation of new agreements. As of July 31, 1997, 141 of the Company's 459 Canadian employees were represented by the Canadian Auto Workers and 97 were represented by the Metallurgists Unis d'Amerique. The agreements with these unions expire on November 8, 1999 and September 30, 1998, respectively, which will require negotiation of new agreements. As of July 31, 1997, approximately 246 of Autovill's 366 employees were affiliated with the Hungarian Steel Industry Workers Union. The agreement was signed July 17, 1996 and is perpetual, subject to termination upon three months' notice from either party. The Company's other facilities are primarily non-union. The Company is unaware of any current efforts to organize. There can be no assurance that there will not be any labor union efforts to organize employees at facilities that are not currently unionized. Since the GM Acquisition, the Company has not experienced any organized work stoppages. There can be no assurance, however, that any actions taken by the Company, including the current restructurings, will not adversely affect the Company's relations with its employees. At the present time, the Company believes that its relations with its employees are good. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--General." 46

Patents, Trademarks and Licenses Pursuant to a Trademark Agreement between the Company and GM, GM has granted the Company an exclusive license to use the "Delco Remy" trademark on and in connection with automotive starters and heavy duty starters and alternators until July 31, 2004, extendible indefinitely at the Company's option upon payment of a fixed $100,000 annual licensing fee to GM. The Company has also been granted a perpetual, royalty-free license to use the "Remy" trademark. The "Delco Remy" and "Remy" trademarks are registered in the United States, Canada and Mexico and in most major markets worldwide. GM has agreed with the Company that, upon the Company's request, GM will register the trademarks in any jurisdiction where they are not currently registered. The Company has also been granted an exclusive license to use the "Delco Remy" name as a tradename and corporate name worldwide until July 31, 2004 pursuant to a Tradename License Agreement between the Company and GM. In addition, GM has granted the Company a perpetual license to use the "Remy" name as a tradename and corporate name worldwide. The Company owns and has obtained licenses to various domestic and foreign patents and patent applications related to its products and processes. The patents expire at various times over the next 16 years. While these patents and patent applications in the aggregate are important to the Company's competitive position, no single patent or patent application is material to the Company. Raw Materials Principal raw materials for the Company's business include bare copper strap, insulated copper, aluminum castings, forgings, outer frames, nomex paper, steel coils, steel bars, copper tube, copper wire, flat steel, coil steel, bar steel, gray iron castings, ductile iron castings, copper cross-section coils, magnets, steel shafts, steel cores, steel wire and molding material. All materials are readily available from a number of suppliers, and management does not foresee any difficulty in obtaining adequate inventory supplies. The Company and GM have entered into a long-term worldwide purchasing support agreement that allows the Company to purchase copper wire and steel, which are used in the manufacture of starters sold to GM, at prices that the Company believes generally to be lower than those that would otherwise be obtainable by the Company. This agreement expires on July 31, 2004, or earlier, upon termination of the automotive and heavy duty supply OEM agreements between the Company and GM. The Company generally follows the North American industry practice of passing on to its customers the costs or benefits of fluctuation in copper and aluminum prices on an annual or semi-annual basis. See "Business--Customers." Backlog The majority of the Company's products are not on a backlog status. They are produced from readily available materials and have a relatively short manufacturing cycle. For products supplied by outside suppliers, the Company generally purchases products from more than one source. The Company expects to be capable of handling the anticipated 1998 sales volumes. Properties The world headquarters of the Company are located at 2902 Enterprise Drive, Anderson, Indiana 46013. The Company leases its headquarters. The following table sets forth certain information regarding manufacturing and certain other facilities operated by the Company as of August 31, 1997. The designation "F" indicates a focus plant. See "Business--Manufacturing and Facilities."
Location -------Anderson, IN Anderson, IN Anderson, IN Anderson, IN Anderson, IN OEM or Aftermarket ----------Headquarters OEM OEM OEM(F) OEM(F) Use --Office Manufacturing Manufacturing Manufacturing Manufacturing Approx. Sq. Ft. --------70,000 597,000 430,000 117,000 51,000 Owned/Lease Expiration -----------2000 2004 2004 2001 2001

47

Location -------Anderson, IN Anderson, IN Anderson, IN Anderson, IN Anderson, IN Bay Springs, MS Budapest, Hungary Chantilly, VA Edmonton, Canada Etobicoke, Canada Findlay, OH Franklin, IN Franklin, IN Franklin, IN Gallatin, TN Gallatin, TN Heidelberg, MS Heidelberg, MS Indianapolis, IN Kaleva, MI Mansfield, TX Marion, MI Memphis, TN Meridian, MS Meridian, MS Meridian, MS Meridian, MS Meridian, MS Mezokovesd, Hungary Mezokovesd, Hungary Peru, IN Peru, IN Raleigh, MS Raleigh, MS Raleigh, MS Reed City, MI Reed City, MI Reed City, MI Reed City, MI Reed City, MI San Luis Potosi, Mexico Sligo, Ireland St. Laurent, Canada Sylvarena, MS Taylorsville, MS Toledo, OH Toronto, Canada Warren, MI

OEM or Aftermarket ----------OEM(F) OEM OEM/Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket OEM OEM(F) Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket OEM/Aftermarket OEM OEM/Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket Aftermarket OEM/Aftermarket

Use --Manufacturing Manufacturing Testing Warehouse Warehouse Manufacturing Leased to 3rd Party Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Warehouse Office Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Warehouse Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Warehouse Manufacturing and Office Manufacturing Manufacturing Warehouse Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing and Office

Approx. Sq. Ft. --------36,695 33,500 15,000 20,220 50,220 73,000 55,709 120,000 141,300 114,120 6,400 48,400 16,625 15,580 20,000 20,000 45,000 5,000 5,500 82,000 43,000 59,400 7,500 2,400 15,000 319,000 68,000 12,000 175,598 8,612 30,000 14,111 43,000 75,000 8,000 92,000 34,000 26,000 7,350 90,000 37,000 53,400 17,000 1,300 27,000 4,500 36,778 100,049

Owned/Lease Expiration -----------2006 2007 2001 2000 2000 2003 Owned 2014 Owned 2002 Owned Owned Owned Owned Owned * 2003 2003 1999 2000 2000 2000 2002 2003 1998 2004 2000 2003 Owned Owned 2003 2003 2003 2003 Own 2000 2000 2000 1999 Owned** 2001 2018** 1997 * 2003 2000 1997 Owned**

48

Location -------Winchester, VA Winchester, VA Winnepeg, Canada

OEM or Aftermarket ----------Aftermarket Aftermarket Aftermarket

Use --Warehouse Office/Whse Manufacturing

Approx. Sq. Ft. --------55,000 55,000 38,000

Owned/Lease Expiration -----------2000 2000 Owned

* Leased on a month-to-month basis. ** Ballantrae facilities. Legal Proceedings From time to time, the Company is party to various legal actions in the normal course of its business. The Company believes it is not currently party to any litigation that, if adversely determined, would have a material adverse effect on the Company's business, financial condition and results of operations. Regulatory Matters The Company's facilities and operations are subject to a wide variety of federal, state, local and foreign environmental laws, regulations and ordinances, including those related to air emissions, wastewater discharges and chemical and hazardous waste management and disposal ("Environmental Laws"). The Company's operations also are governed by laws relating to workplace safety and worker health, primarily the Occupational Safety and Health Act, and foreign counterparts to such laws ("Employee Safety Laws"). The Company believes that its operations are in compliance in all material respects with current requirements under Environmental Laws and Employee Safety Laws, with the exception of certain matters of which the Company is aware, including: (i) failure to submit certain filings pursuant to the New Jersey Industrial Site Recovery Act ("ISRA") in connection with the closure of the Company's former Edison, New Jersey plant; (ii) air permits or registration requirements at certain facilities; and (iii) one isolated instance of noncompliance with import requirements of the Hazardous Materials Transportation Act (relating to shipment of lead-acid batteries) now under review by the United States Department of Transportation. The Company believes that any costs it may incur to resolve such matters will not be material. The nature of the Company's operations, however, exposes it to the risk of liabilities or claims with respect to environmental and worker health and safety matters. There can be no assurance that material costs will not be incurred in connection with such liabilities or claims. Based on the Company's experience to date, the Company believes that the future cost of compliance with existing environmental laws, regulations and ordinances (or liability for known environmental claims) will not have a material adverse effect on the Company's business, financial condition or results of operations. However, future events, such as changes in existing laws and regulations or their interpretation, may give rise to additional compliance costs or liabilities that could have a material adverse effect on the Company's business, financial condition or results of operations. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing laws, may require additional expenditures by the Company that may be material. Certain Environmental Laws hold current owners or operators of land or businesses liable for their own and for previous owners' or operators' releases of hazardous or toxic substances, materials or wastes, pollutants or contaminants, including petroleum and petroleum products ("Hazardous Substances"). Because of its operations, the long history of industrial uses at some of its facilities, the operations of predecessor owners or operators of certain of the businesses, and the use, production and release of Hazardous Substances at these sites, the Company is affected by such liability provisions of Environmental Laws. Various of the Company's facilities have experienced some level of regulatory scrutiny in the past and are or may be subject to further regulatory inspections, future requests for investigation or liability for past disposal practices. During the environmental due diligence performed in connection with the GM Acquisition, GM and the Company identified certain on-site pre-closing environmental conditions including the presence of certain Hazardous Substances in the soil at the Company's Meridian, Mississippi property and in the soil and groundwater at the Company's Anderson, Indiana property. GM has reported the presence of these substances in the groundwater to the United States Environmental Protection Agency ("EPA") and the Indiana Department of 49

Environmental Management ("IDEM") and has notified residents who live downgradient of the affected GM properties. GM conducted further investigation, which included the sampling of the residents' water wells and the installation of an additional well offsite, and is working with EPA to resolve this issue. Based on the Company's experience to date, the terms of the indemnification in the GM Acquisition agreement and GM's continuing performance in responding to these conditions, the Company does not believe that it will expend material costs in responding to these on-site environmental conditions. In connection with its acquisition of facilities and businesses from GM, Nabco, A&B Group, Autovill, Power Investments, and World Wide, the Company obtained various indemnities for certain claims related to on-site and off-site environmental conditions and violations of Environmental Laws which arose prior to such acquisitions. The environmental indemnities are subject to certain deductibles, caps, cost sharing and time limitations depending on the nature and timing of the environmental claim. The Comprehensive Environmental Response, Compensation, and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), provides for responses to and joint and several liability for releases of certain Hazardous Substances into the environment. The Company has received requests for information or notifications of potential liability from EPA under CERCLA for certain off-site locations. The Company has not incurred any significant costs relating to these matters, and based on the existence of certain indemnification agreements from its predecessors and their assumption of liabilities to date and other legal defenses, believes that it will not incur material costs in the future in responding to conditions at these sites. The Company's Meridian, Mississippi facility has been designated by EPA as requiring no further action under CERCLA and has since been "delisted" from the Comprehensive Environmental Response, Compensation, and Liability Information System ("CERCLIS") (a list of sites which may require investigation or remediation under CERCLA). Although this does not assure that expenditures would not be required under other federal and/or state programs, as a result of the indemnifications in the GM Acquisition agreement, the Company does not believe that it will expend material costs for this site under the CERCLA program or for any other environmental conditions at this site. The Resource Conservation and Recovery Act ("RCRA") and the regulations thereunder and similar state counterparts to this law regulate hazardous wastes. The Company's Anderson, Indiana facilities were once part of a larger industrial complex owned and operated by GM (the "GM Complex"). Since 1990 (when owned by GM), the GM Complex has been undergoing corrective action under RCRA. In connection with the RCRA corrective action requirements, GM is required to investigate various solid waste management units ("SWMUs") and areas of concern ("AOCs") identified in the federal and state RCRA permits. Some of these SWMUs and AOCs are located on portions of the Anderson, Indiana properties leased by the Company from GM and certain SWMUs are used by the Company. The costs of responding to releases, if any, from those SWMUs used by the Company would presumptively be borne by the Company. To date, no claims for any such liability have been made, and GM continues to respond to EPA and IDEM with respect to the investigation of these AOCs and SWMUs. Subject to the terms and conditions of GM's environmental indemnity provided in connection with the GM Acquisition, GM is indemnifying the Company with respect to certain of these areas. One of the Company's facilities in Franklin, Indiana is undergoing a RCRA site investigation and clean-up of volatile organic compounds ("VOCs") in the soil and groundwater pursuant to an EPA Administrative Order on Consent ("EPA Order") issued to both Franklin Power Products, one of the subsidiaries of the Company, and Amphenol Corporation, a prior owner of the property. Pursuant to the EPA Order, Franklin Power Products and Amphenol Corporation have jointly submitted corrective measures studies which have been approved by EPA, and the parties expect to enter into a new EPA Administrator Order on Consent in the near future setting forth the selected remedy (including further investigation). Amphenol indemnified Franklin Power Products for certain liabilities associated with the EPA Order and Amphenol has satisfied and continues to satisfy the requirements of the EPA Order. Based on the Company's experience to date and the indemnities from Amphenol and the sellers of Franklin Power Products to the Company, the Company believes that future costs associated with this site will not have a material adverse effect on the Company's results of operations, business or financial condition. The Company's Marion, Michigan facility was listed on Michigan's state list of sites pursuant to the Michigan version of CERCLA (the "Michigan SCL") in 1993 because of suspected releases of Hazardous Substances, primarily volatile organic compounds (mineral spirits), to the soils and groundwater at the facility. An 50

investigation conducted by Nabco prior to its acquisition by the Company determined that the levels of volatile organic compounds in the soils and groundwater are below the applicable state clean-up levels. Although the Company proposed no further action at this facility, the Michigan environmental authorities are requiring further investigation. Even if the Michigan environmental authorities were to require remedial action with respect to this site, the Company does not believe that it will expend material costs in connection with the conditions giving rise to this Michigan SCL. 51

MANAGEMENT Directors and Executive Officers The following table sets forth the name, age and position of each of the directors and senior officers of the Company. Each director of the Company will hold office until the next annual meeting of stockholders of the Company or until his successor has been elected and qualified. Officers of the Company and its subsidiaries serve at the discretion of their respective Boards of Directors.
Name ---Harold K. Sperlich (1)........... Thomas J. Snyder (2)............. David L. Harbert................. Susan E. Goldy................... Joseph P. Felicelli.............. M. Lawrence Parker............... Richard L. Stanley............... Roderick English................. Thomas R. Jennett................ Patrick Mobouck.................. John M. Mayfield................. Nicholas J. Bozich............... J. Michael Jarvis................ Richard L. Keister............... Ralph E. McGee................... E.H. Billig (1).................. Richard M. Cashin, Jr. (2)....... James R. Gerrity (2)............. Michael A. Delaney (1)........... Robert J. Schultz................ Age --67 53 55 43 51 49 41 45 45 43 43 53 53 51 59 70 44 56 43 67 Positions --------Chairman of the Board of Directors President, Chief Operating Officer and Director Executive Vice President and Chief Financial Officer Vice President and General Counsel Group Vice President, Aftermarket Senior Vice President, Quality & Heavy Duty Systems, Delco Remy America Senior Vice President, Automotive Systems Division, Delco Remy America Senior Vice President, Human Resources and Communications, Delco Remy America Senior Vice President and General Manager, Aftermarket Division Vice President-Managing Director, Europe President of A&B Group President of Nabco President of Power Investments President of World Wide President of Tractech Vice Chairman of the Board of Directors Director Director Director Director

(1) Member of the Compensation Committee of the Board of Directors. (2) Member of the Audit Committee of the Board of Directors. Harold K. Sperlich, Chairman of the Board of Directors. Mr. Sperlich has been Chairman of the Board of Directors since the Company's inception in 1994. Since retiring from Chrysler Corporation in 1988, having served as its President, Mr. Sperlich has served as a consultant to the automotive industry. Before joining Chrysler in 1977, Mr. Sperlich held several senior administrative and operating posts with Ford Motor Company. 52

Thomas J. Snyder, President, Chief Operating Officer and Director. Mr. Snyder has been President and Chief Operating Officer since the Company's inception in 1994. From 1962 to 1994, Mr. Snyder held several aftermarket and OEM executive positions with the Delco Remy Division of GM, most recently as Product Manager, Heavy Duty Systems. He is a member of the board of St. John's Health Systems and a Director of CLARK Material Handling Company. David L. Harbert, Executive Vice President and Chief Financial Officer. Mr. Harbert has been the Executive Vice President and Chief Financial Officer of the Company since October 1994. Before joining the Company, Mr. Harbert was Senior Vice President and Chief Financial Officer of Applied Power Inc. since 1992 and, prior to that, served as Vice President and Chief Financial Officer of System Software, Inc. since 1990. Susan E. Goldy, Esquire, Vice President and General Counsel. Ms. Goldy has been Vice President and General Counsel since February 1997. Before joining the Company, she was an associate, and since 1993, was a partner in the law firm of Dechert Price & Rhoads. Joseph P. Felicelli, Group Vice President, Aftermarket. Mr. Felicelli has been Group Vice President since September 1997. Prior to joining the Company, Mr. Felicelli served in various management positions for Cooper Industries. M. Lawrence Parker, Sr. Vice President, Quality and Heavy Duty Systems, Delco Remy America. Mr. Parker has been the Senior Vice President, Quality and Heavy Duty Systems since June 1995 and, prior to that, was Senior Vice President, Quality and Customer Satisfaction beginning with the Company's inception in 1994. Before joining the Company, Mr. Parker served in a number of executive positions at Ford Motor Company since 1967 and at Chrysler Corporation since 1984, most recently as Director, Corporate Quality Programs since 1991. Richard L. Stanley, Sr. Vice President, Automotive Systems Division, Delco Remy America. Mr. Stanley has been Senior Vice President, Automotive Systems since the Company's inception in 1994. Mr. Stanley joined the Delco Remy Division of GM in 1978, serving most recently as Director of Customer Programs since 1992 and as European Chief Engineer since 1988. Roderick English, Sr. Vice President, Human Resources and Communications, Delco Remy America. Mr. English has been Senior Vice President of Human Resources and Communications since the Company's inception in 1994. Mr. English joined the Delco Remy Division of GM in 1976 and became Plant Manager of plant 17 in 1993. Prior to that, Mr. English served as Divisional Manager of Labor Relations since 1989. John M. Mayfield, President of A&B Group. Mr. Mayfield has been President of A&B Group since its acquisition by the Company in March 1995. Mr. Mayfield joined A&B Group in 1988 as Controller and became its Operations Director in 1991. Nicholas J. Bozich, President, Nabco. Mr. Bozich has been President of Nabco since March, 1997. Before joining the Company, Mr. Bozich was with General Motors for 34 years in various managerial positions, most recently with the Saturn Division. J. Michael Jarvis, President, Power Investments. Mr. Jarvis has been President of Power Investments since its formation in 1983. Richard L. Keister, President, World Wide. Mr. Keister has been President of World Wide since its formation in 1976. Ralph F. McGee, President, Tractech. Mr. McGee started as Sales and Marketing Manager of TracTech in 1968. He was appointed President in 1980, a position he has held since then except for two years when he served in corporate level development positions for Titan Wheel, Inc. Thomas R. Jennett, Senior Vice President and General Manager, Aftermarket Division. Mr. Jennett joined the Company in October 1996. Prior to such time he held various management positions with Prestolite Electric Inc. since 1974, including President of the Aftermarket Division and the Leece-Neville Heavy Duty Division. Patrick Mobouck, Vice President-Managing Director-Europe and Vice President. Mr. Mobouck has been Vice President and General Manager Europe since August 1997. He has also been Chairman of Autovill since August 53

1997. Before joining the Company, Mr. Mobouck was with Monroe Auto Equipment since 1988, most recently as Managing Director-Europe, Middle East and Africa. E.H. Billig, Vice Chairman of the Board of Directors. Mr. Billig has been Vice Chairman of the Board of Directors since the Company's inception in 1994. He was former President and Chief Operating Officer of MascoTech Automotive Systems Group, Inc., where he continues to serve as Vice Chairman. He is also a director of Emco Limited, Titan Wheel International, Inc. and OEA, Inc. Richard M. Cashin, Jr., Director. Mr. Cashin has been a director since the Company's inception in 1994. Mr. Cashin has been President since 1994, and a Managing Director for more than the past five years, of CVC. In addition, Mr. Cashin serves as a director of Levitz Furniture Incorporated and Titan Wheel International Inc. James R. Gerrity, Director. Mr. Gerrity has been a director since the Company's inception in 1994. From 1986 to 1993, Mr. Gerrity was President and a director of Dyneer Corporation. Mr. Gerrity currently is a director of Palomar Technologies Corporation, Wescor Graphics, Inc. and Ballantrae Corporation. Michael A. Delaney, Director. Mr. Delaney has been a director since the Company's inception in 1994. Mr. Delaney has been a Vice President of CVC since 1989. From 1986 through 1989, he was Vice President of Citicorp Mergers and Acquisitions. Mr. Delaney is also a director of Sybron Chemicals, Inc., CVC Holdings, JAC Holdings, CORT Business Services, Inc., Palomar Technologies, Inc., Enterprise Media Inc., FF Holdings Corporation, SC Processing, Inc., Triumph Holdings, Inc. and AmeriSource Health Corporation. Robert J. Schultz, Director. Mr. Schultz became a director in 1997. Mr. Schultz retired as Vice Chairman and a member of the Board of Directors of GM in 1993. Mr. Schultz joined GM in 1955 and served as Group Executive of Chevrolet-Pontiac-GM of Canada and General Manager of GM's Delco Electronic's Division. Mr. Schultz is also a member of the Board of Trustees of California Institute of Technology and a director of OEA, Inc. and Texco Communications.
Director Compensation and Arrangements* Any outside director of the Company is paid an annual fee of $ service as a director of the Company, plus an additional fee of $ attendance at each meeting of the Board of Directors in excess of for for annually

and $ per telephonic meeting of the board of directors. [There are no fees paid for attendance at committee meetings.] Certain outside directors of the Company may also be entitled to receive stock options for Class A Common Stock pursuant to the stock option plan the Company intends to adopt prior to the consummation of the Offerings. See "Management--Stock Option Plan." CVC, certain members of management and other Existing Stockholders have entered into a Stockholders' Agreement whereby they have agreed to vote their shares in such a manner so as to elect the entire Board of Directors of the Company. See "Principal Stockholders--Stockholders' Agreement." 54 *To be completed by amendment

Executive Compensation* The following table sets forth, for the fiscal year ending July 31, 1997, certain information regarding the cash compensation paid by the Company, as well as certain other compensation paid or accrued for such year, to each of the executive officers of the Company named below, in all capacities in which they served:
Name and Principal Position Harold K. Sperlich Chairman of the Board Thomas J. Snyder President and Chief Operating Officer Salary Bonus Other Annual Compensation All Other Compensation

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

* Table to be completed by amendment. Stock Option Plan. The Company expects to adopt a stock option plan immediately prior to the consummation of the Offerings. 401(k) Plan. The Company established the Salaried 401(k) Savings Plan (the "401(k) Plan") to allow eligible employees to help meet their long-term savings needs. Except for eligible employees who transferred to DRA directly from GM and began immediate participation, generally all employees who are compensated on a salaried basis are eligible to participate in the 401(k) Plan after completing six months of continuous employment. The 401(k) Plan is a defined contribution, tax-qualified plan under section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), with employer and employee pre-tax contributions deductible by the Company for income tax purposes for the year contributed, and such contributions and earnings thereon are not taxable to employees until paid to them. An employee in the 401(k) Plan may elect to have from 1% to 15% of base salary contributed from pay to the 401(k) Plan on a pre-tax, after-tax, or combination of pre-tax and after-tax, basis, and receive a 25% matching contribution on the sum of the employee's pre-tax and after-tax contributions up to 6% of base salary. Except for certain GM employees who transferred employment to DRA, employees also receive a 1% of base salary contribution for their retiree medical care account under the 401(k) Plan. Under the Code, the total contributions allocated to an employee's accounts for a plan year cannot exceed the lesser of $30,000 or 25% of the employee's compensation, and the employee's pre-tax contributions are limited in a calendar year to $9,500 (subject to cost of living increases under the Code). Employees are immediately 100% vested in their 401(k) Plan benefits except for the matching and retiree medical care contributions, which vest after the earliest of five years of service, death, attaining age 65, or attaining an early retirement date under the Retirement Plan. Any forfeitures which may result under the 401(k) Plan are used to reduce future contributions of the companies. Employees generally may withdraw their vested benefits from the 401(k) Plan on termination of employment, retirement, or death, and may also under certain circumstances withdraw benefits while still employed (including certain financial hardship, plan loan and pre- and post-age 59 1/2, withdrawals). Until fully withdrawn, employees may direct the investment of their 401(k) Plan benefits among a broad range of investment funds. Retirement Plan. The Company established the Retirement Plan primarily to provide eligible employees with a monthly pension benefit after retirement for life. Except for eligible employees who transferred to DRA directly from GM and began immediate participation, generally all employees of the Company who are compensated on a salaried basis are eligible to participate in the Retirement Plan after completing one year of service and attaining 55

age 21. The Retirement Plan is a defined benefit, tax-qualified plan under section 401(a) of the Code, and contributions to the Plan generally are deductible by the companies for income tax purposes for the year contributed, and benefits are not taxable to employees until paid. The standard retirement benefit under the Retirement Plan is a monthly, single life annuity starting at age 65, equal to 1.25% of an employee's average monthly pay multiplied by the employee's years of service with the companies. Average monthly pay is generally based on the employee's 60-consecutive month highest average base pay during the ten-year period before retirement. The benefit for certain long-service GM employees who transferred to DRA, however, is not less than $60 times their years of service with the Company. Under the Code the annual benefit provided by the Retirement Plan cannot exceed the lesser of $125,000 or 100% of compensation (subject to certain further limitations under the Retirement Plan and Code). Eligible employees generally may retire on or after age 55 with 10 years of service, with their monthly Retirement Plan benefit actuarially reduced if payment actually starts prior to age 62. Employees who terminate with less than five years of service forfeit any benefits which they may have accrued, and such forfeitures are used to offset future contributions otherwise required to fund the Plan. Certain death and disability benefits also may be paid under the Retirement Plan. Supplemental Executive Retirement Plan. The Company established and maintains the Supplemental Executive Retirement Plan ("SERP") to provide additional retirement benefits to a select group of management who experience reductions in their 401(k) Plan and Retirement Plan benefits due to limitations imposed by the Code. The SERP is a non-qualified deferred compensation "top hat" plan with a defined benefit formula, is generally exempt from most of the federal pension laws applicable to tax-qualified deferred compensation plans, and SERP benefits are unsecured and paid from the general assets of the companies when due. The Delco Remy International, Inc. Executive Benefit Committee selects the group of eligible management employees and the date as of which each individual may participate. The benefit under the SERP is 2% of the employee's final plan compensation multiplied by the employee's years of service with the companies, with such benefit not less than 25% nor more than 50% of such final plan compensation, payable in quarterly installments over five years. The employee's final plan compensation for this purpose generally is the employee's base compensation (subject to certain adjustments and limitations) which is in excess of the applicable compensation limit in effect under Code Section 401(a)(17) (currently $160,000). The SERP benefit generally is payable when a participant terminates employment after completing five years of service or dies. However, the SERP benefit may be forfeited under certain circumstances, including termination for cause or engaging in prohibited competition. The following table sets forth the estimated annual benefits payable upon
retirement:* Remuneration ------------------------------Years of Service ---------------------------------------------

Executive Incentive Plan. The Company's executives participate in an Executive Incentive Plan by which they are entitled to receive certain percentages of their base compensation as a bonus if a designated target or objective is met. Designated targets related to earnings and/or cash flow are set at the beginning of each year, based on the

* To be completed by amendment. 56

prior year's results. The Executive Incentive Plan provides that if a target is exceeded, then any bonus payable under the plan is commensurately increased, subject to a cap. The Company expects to continue the Executive Incentive Plan and has established a Compensation Committee made up of non-management directors who will fix the target objectives for each executive for each year. Insurance and Indemnification The Company has obtained customary directors' and officers' insurance against certain liabilities such persons may incur on behalf of the Company. For a discussion of the limitations on liability of the Company's directors and the indemnification by the Company of such directors set forth in the Company's Restated Certificate of Incorporation, see "Description of Capital Stock--Limitation on Liability and Indemnification." Employment Agreements The Company has entered into an Employment Agreement with Thomas J. Snyder which provides for his employment until 1999. Mr. Snyder receives an annual base salary of $ * . The agreement provides that the executive may not engage in any business competitive with the Company while employed by the Company and for a period of one year thereafter. Compensation Committee Interlocks and Insider Participation The Compensation Committee of the Board of Directors during fiscal year 1997 was composed of Messrs. Delaney, Sperlich and Billig. Upon completion of the Offerings, the Compensation Committee will be composed of the same individuals.

*To be completed by amendment 57

PRINCIPAL STOCKHOLDERS The following table sets forth information as of October 1, 1997 with respect to shares of each class of Common Stock beneficially owned by (i) each person or group that is known to the Company to be the beneficial owner of more than 5% of each class of outstanding Common Stock, (ii) each director and senior officer of the Company and (iii) all directors and senior officers of the Company as a group. Unless otherwise specified, all shares are directly held. Each share of Class A Common Stock is convertible into one share of Class B Common Stock, and each share of Class B Common Stock is convertible into one share of Class A Common Stock. See "Description of Capital Stock." Class A Common Stock
Percent of Class Before Offerings and Transactions(1) --------------19.8% Percent of Class After Offerings and Transactions(1) -------------------

Beneficial Owner ---------------Citicorp Venture Capital Ltd.(3).................. 399 Park Avenue New York, NY 10043 MascoTech Automotive Systems Group, Inc........... 275 Rex Boulevard Auburn Hills, MI 48326 World Equity Partners, L.P........................ 399 Park Avenue New York, NY 10043 Harold K. Sperlich(5)............................. Delco Remy International, Inc. 2902 Enterprise Drive Anderson, IN 46013 Thomas J. Snyder.................................. Delco Remy International, Inc. 2902 Enterprise Drive Anderson, IN 46013 James R. Gerrity(6)............................... E.H. Billig(7).................................... Richard M. Cashin, Jr.(8)......................... Michael A. Delaney................................ Robert J. Schultz................................. All directors and senior officers as a group (19 persons)......................................

Amount of Ownership(1)(2) ---------------

30.7

17.0

10.2

5.1

3.1 3.1 2.2 * * 36.2

* Represents less than 1%. (1) After giving effect to the Stock Split to be effected in connection with the Transactions; does not include shares of Class B Common Stock convertible into Class A Common Stock. (2) Includes shares issuable upon exercise of the Warrants which are exercisable within 60 days of the stated date. (3) CVC owns beneficially approximately 47.5% of the shares of Common Stock outstanding. (4) Represents Warrants to acquire Class A Common Stock. 58

(5) Held as trustee under agreement dated February 4, 1985, as amended, with Harold K. Sperlich, as Settlor. (6) Held as trustee under Living Trust dated March 16, 1990. (7) Held by The Billig Family Limited Partnership. (8) Does not include shares beneficially held by CVC or World Equity Partners, L.P., which may be deemed to be beneficially owned by Messrs. Delaney and Cashin. Messrs. Delaney and Cashin disclaim beneficial ownership of shares held by CVC or World Equity Partners, L.P. Class B Common Stock
Beneficial Owner ---------------Citicorp Venture Capital Ltd.(2).......................................... 399 Park Avenue New York, NY 10043 CCT Partners I, L.P....................................................... 399 Park Avenue New York, NY 10043 Michael A. Delaney(3)..................................................... Richard M. Cashin, Jr.(3)................................................. All directors and senior officers as a group (19 persons)(2)........................................................... Amount of Ownership(1) -----------Percent of Class(1) ---------86.5%

10.0

* * *

* Represents less than 1%. (1) After giving effect to the Stock Split to be effected in connection with the Transactions; does not include shares of Class A Common Stock convertible into Class B Common Stock. (2) CVC owns beneficially approximately 47.5% of the shares of Common Stock outstanding. (3) Does not include shares held by CVC and CCT Partners I, L.P. which may be deemed to be beneficially owned by Messrs. Delaney and Cashin. Messrs. Delaney and Cashin disclaim beneficial ownership of such shares. Stockholders' Agreement In connection with the GM Acquisition, certain stockholders of the Company, including CVC, World Equity Partners, L.P. ("WEP"), MascoTech Automotive Systems Group, Inc. ("MascoTech"), Harold K. Sperlich, James R. Gerrity and the individuals named therein as management investors (the "Management Investors") (collectively the "Investors"), entered into a Securities Purchase and Holders Agreement (the "Stockholders' Agreement") for a ten-year term containing certain agreements among such stockholders with respect to the capital stock and corporate governance of the Company. The following is a summary description of the principal terms of the Stockholders' Agreement and is subject to and qualified in its entirety by reference to the Stockholders' Agreement, which has been filed as an exhibit to the Registration Statement which includes this Prospectus. Pursuant to the Stockholders' Agreement, the Investors agreed to vote their shares in favor of the Board of Directors of the Company being composed of six to nine directors as follows: Harold K. Sperlich (so long as he continues to serve as chairman of the Board of Directors); one individual designated by MascoTech; two individuals designated by CVC; James R. Gerrity (so long as he continues to serve as an officer or a consultant to the Company); and Thomas J. Snyder (so long as he continues to serve as President of the Company and, when he ceases to serve in such office, his successor in such office). CVC also has the right to nominate up to 3 independent directors. If CVC elects not to nominate any such nominees, no other persons will be nominated or elected to such independent director positions. So long as CVC or its affiliates own at least 5% of the outstanding shares of the Company's Common Stock, CVC also has the right pursuant to the Stockholders' Agreement to designate two observers to attend meetings of the Company's Board of Directors and committees thereof. The Investors have 59

agreed to vote their shares in favor of any proposal by CVC or MascoTech (a) to remove directors nominated by CVC or MascoTech or (b) to fill directorships vacated by directors nominated by CVC or MascoTech. Following the Equity Offering, the Investors will beneficially own over 50% of the outstanding shares of Class A Common Stock and, pursuant to the foregoing described provisions, will be able to elect the entire Board of Directors of the Company. The Stockholders' Agreement contains similar provisions regarding the control by the Investors of DRA and its Board of Directors. Each Investor has agreed in the Stockholders' Agreement not to vote in favor of any amendment or other modification to the Company's Restated Certificate of Incorporation or By-laws unless CVC votes in favor of such amendment or modification. CVC has agreed not to vote in favor of any such amendment that adversely affects MascoTech's right to designate one individual to the Company's Board of Directors. The Stockholders' Agreement contains certain provisions which restrict, with certain exceptions, the ability of the Investors from transferring any shares of Common Stock or warrants to purchase Common Stock unless such transfer is approved by Investors holding at least 40% of the outstanding Common Stock and otherwise complies with the terms of the Stockholders' Agreement. If the Board of Directors of the Company and holders of more than 50% of the shares of Common Stock then outstanding approve the sale of the Company (an "Approved Sale"), each Investor has agreed to consent to such sale and, if such sale includes the sale of stock, each Investor has agreed to sell all of such Investor's Common Stock on the terms and conditions approved by the Board of Directors and holders of a majority of the shares of Common Stock then outstanding. If the holders of at least 66% of the shares of Common Stock then outstanding approve the sale of the Company (a "Required Sale"), each Investor has agreed to consent to such sale and, if the sale is structured as a sale of stock, each Investor has agreed to sell all of such Investor's Common Stock on the terms and conditions approved by the holders of at least 66% of the shares of Common Stock then outstanding. CVC holds a right of first refusal to purchase MascoTech's shares in the event that MascoTech receives a bona fide offer to sell its shares. If CVC elects to purchase less than all of MascoTech's shares under CVC's right of first refusal, then the Company may be obligated to purchase the remainder of MascoTech's shares. The Stockholders' Agreement also provides for certain additional restrictions on transfer by Management Investors, including, subject to certain exemptions, the right of the Company to repurchase shares held by Management Investors upon termination of employment prior to July 31, 1999, at a formula price, and the grant of a right of first refusal in favor of the Company in the event a Management Investor elects to transfer such Management Investor's shares of Common Stock. Registration Rights Agreement In connection with the GM Acquisition, the Company entered into a Registration Rights Agreement with the Investors covering all of the shares of Common Stock held by the Investors ("Registration Rights Agreement"). The following description of the Registration Rights Agreement is subject to and qualified in its entirety by reference to the Registration Rights Agreement, which has been filed as an exhibit to the Registration Statement which includes this Prospectus. CVC and, upon consummation of the Equity Offering, WEP and WEP's permitted transferees have been granted the right one or more times to require the Company to file one or more registration statements with the Securities and Exchange Commission (the "Commission") registering the shares held by them. The Investors have been granted the right, subject to certain restrictions, to require the Company to include shares held by the Investors in any registration statements filed by the Company with the Commission subject to certain limited exceptions. The Company has agreed to pay certain expenses relating to any registration of shares effected pursuant to the Registration Rights Agreement and to indemnify the Investors against certain liabilities in connection with any such registration. Lock-Up Agreements In connection with the Equity Offering, the Investors and certain other stockholders have agreed, subject to certain exceptions, not to register for sale or offer, sell or transfer any shares of Common Stock for a period of 180 days after the date of the Equity Offering, without the prior written consent of Morgan Stanley & Co. Incorporated. This agreement covers all of the shares of Common Stock held by the Investors and approximately shares of Common Stock held by other stockholders. See "Underwriters." 60

CERTAIN TRANSACTIONS CVC and James R. Gerrity, each of whom is an existing stockholder of the Company, beneficially own approximately 71.9% and 15.0% of Ballantrae's issued and outstanding common stock, on a fully-diluted basis, respectively, and 74.7% and 10.4% of Ballantrae's issued and outstanding preferred stock, respectively. The Ballantrae Acquisition Agreement provides that CVC and Mr. Gerrity and their affiliates will receive in connection with the acquisition of Ballantrae and additional shares of the Company's Common Stock, respectively, based on an assumed offering price in the Equity Offering of $ per share of Class A Common Stock (the "Merger Consideration"); however such stock will be subject to certain restrictions against transfer under applicable securities laws. The Company believes that the Ballantrae Acquisition Agreement and in particular the Merger Consideration to be received by CVC and Mr. Gerrity and their affiliates are commercially reasonable. The Company's Board of Directors has received a fairness opinion from Salomon Brothers Inc. Messrs. Delaney, Gerrity and Cashin, directors of the Company, have served as directors of Ballantrae since its formation in 1996. See "Company History," "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest" and "Business--Acquisition of Ballantrae." The Company currently leases eight properties in Mississippi from entities controlled by family members of John M. Mayfield, President of A&B Group. These leases were entered into in connection with the acquisition of A&B Group by the Company in March 1995. All leases are triple net leases, five of which expire on March 31, 2003 and three of which expire on March 31, 2000, each subject to renewal. Aggregate annual rent payments for these leases for fiscal year 1997, not including tax and maintenance expenses constituting additional rent, equaled approximately $646,200. Mr. Richard L. Keister, President of World Wide, borrowed $90,000 from the Company to purchase 10,000 shares of Class A Common Stock from the Company in May 1997. Interest on the loan accrues at a rate of % and the loan is due . In 1997, Mr. Nicholas J. Bozich, President of Nabco, borrowed $15,000 and $80,000 from the Company to purchase 1,500 shares of Class A Common Stock and to purchase a home, respectively. Interest on the loans accrues at a rate of % and %, respectively, and the loans are due in and , respectively. The Company will exchange the Junior Subordinated Notes for shares of the Company's Class A Common Stock. The Junior Subordinated Notes were issued in an aggregate principal amount of $18.2 million to CVC, certain employees and former employees of CVC and MascoTech in connection with the GM Acquisition. The exchange ratio will be based upon the initial public offering price of the Class A Common Stock of the Company for the Equity Offering less underwriting discounts and commissions. DESCRIPTION OF CAPITAL STOCK The following description of the capital stock of the Company is subject to and qualified in its entirety by reference to the Company's Restated Certificate of Incorporation, which has been filed as an exhibit to the Registration Statement which includes this Prospectus. The Company may issue ,000,000 shares of Common Stock, divided into two classes consisting of ,000,000 shares of Class A Common Stock, par value $.01 per share, and ,000,000 shares of Class B Common Stock, par value $.01 per share. As of July 31, 1997, giving effect to the Transactions, there were shares of Class A Common Stock outstanding, held of record by holders, and shares of Class B Common Stock outstanding. In addition, Warrants to purchase shares of Class A Common Stock were issued and outstanding and shares of Class A Common Stock were available to be issued pursuant to the stock option plan which the Company expects to adopt prior to the consummation of the Offerings. Class A Common Stock Holders of Class A Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders and have no cumulative voting rights. Holders of Class A Common Stock do not have preemptive rights pursuant to the Restated Certificate of Incorporation. Holders of Class A Common 61

Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Company's Board of Directors out of legally available funds therefor; provided, however, that if dividends are declared that are payable in shares of Class A Common Stock or Class B Common Stock, dividends must be declared which are payable at the same rate on each class of Common Stock and the dividends payable in shares of Class A Common Stock must be paid to holders of Class A Common Stock and the dividends payable in shares of Class B Common Stock must be paid to holders of Class B Common Stock. All outstanding shares of Class A Common Stock are fully-paid and nonassessable. Shares of Class A Common Stock are convertible at any time at the election of the holder thereof into shares of Class B Common Stock on a one-for-one basis. Upon liquidation, dissolution or winding up of the Company, holders of Class A Common Stock, together with holders of Class B Common Stock, are entitled to a pro rata share of the distribution of assets remaining after the payment of debts and expenses and after payment of the liquidation preference accorded to the holders of any preferred stock of the Company which may be issued in the future. Each share of Class A Common Stock has the same rights, privileges and preferences as every other share of Class A Common Stock. Class B Common Stock The rights of holders of Class B Common Stock and holders of Class A Common Stock are identical and entitle the holders thereof to the same rights, privileges, benefits and notices, except as otherwise described herein. Holders of Class B Common Stock generally do not possess the right to vote on any matters to be voted upon by the stockholders of the Company, except as provided by law. Under Section 242(b)(2) of the Delaware General Corporation Law ("DGCL"), the holders of the Class B Common Stock shall be entitled to vote as a class upon any proposed amendment to the Company's Restated Certificate of Incorporation, if such amendment would increase or decrease the number of shares or the par value of the shares of such class, or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. Holders of Class B Common Stock may elect at any time to convert any and all of such shares into Class A Common Stock, on a share-for-share basis, to the extent the holder thereof is permitted pursuant to applicable law to hold the total number of shares of voting securities such holder would hold after giving effect to such conversion. Warrants On July 31, 1994, the Company issued to WEP warrants to purchase from the Company shares of the Company's Class A Common Stock for an exercise price of $. per share (the "Warrants"). The Warrants can be exercised in whole or in part at any time prior to July 31, 2004. The exercise price and the number of shares of Common Stock issuable upon exercise are subject to adjustment upon the occurrence of certain events. Dividends The holders of the Company's Class A Common Stock and Class B Common Stock are entitled to share ratably in dividends declared by the Board of Directors of the Company out of funds legally available therefor. The Company's ability to pay dividends is dependent on the ability of the Company's subsidiaries, including DRA, to pay dividends to the Company. The ability of the Company's subsidiaries to pay dividends and make other payments are subject to certain statutory, contractual and other restrictions. The terms of the Company's indebtedness, including the Senior Credit Facility, will restrict the payment of dividends by the Company. The Company does not expect to declare or pay cash dividends to holders of its Class A Common Stock or Class B Common Stock in the foreseeable future. Delaware Anti-Takeover Law Section 203 of the DGCL provides, with certain exceptions, that a Delaware corporation may not engage in certain business combinations with a person or affiliate or associate of such person who is an "interested stockholder" for a period of three years from the date such person became an interested stockholder unless: (i) the transaction resulting in the acquiring person's becoming an interested stockholders, or the business combination, is approved by the board of directors of the corporation before the person becomes an interested stockholder; (ii) the interested stockholder acquires at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (a) by persons who are directors and also officers and (b) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be 62

tendered in a tender or exchange offer; or (iii) on or after the date the person becomes an interested stockholder, the business combination is approved by the corporation's board of directors and by the holders of at least 66-2/3% of the corporation's outstanding voting stock at an annual or special meeting, excluding shares owned by the interested stockholders. An "interested stockholder" is defined as any person that is (x) the owner of 15% or more of the outstanding voting stock of the corporation or (y) an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder. As permitted by the DGCL, the Company has elected not to be governed by Section 203. Limitation of Liability and Indemnification As permitted by the DGCL, the Company's Restated Certificate of Incorporation provides that directors of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, relating to prohibited dividends or distributions or the repurchase or redemption of stock or (iv) for any transaction from which the director derives an improper personal benefit. In addition, the Company's bylaws provide for indemnification of the Company's officers and directors to the fullest extent permitted under Delaware law. Insofar as indemnification for liabilities arising under the Securities Act, may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Transfer Agent and Registrar The transfer agent and registrar for the Common Stock is American Stock Transfer and Trust Agency. DESCRIPTION OF INDEBTEDNESS The following is a summary of the material debt instruments of the Company and its subsidiaries which will remain outstanding following completion of the Offerings and the application of the net proceeds thereof. See "Use of Proceeds." To the extent such summary contains descriptions of credit documents, such descriptions do not purport to be complete and are subject to and qualified in their entirety by reference to such documents, which are filed as exhibits to the Registration Statement which includes this Prospectus. Senior Credit Facility General. The Company intends to enter into an amended and restated credit agreement with a syndicate of lenders led by Bank One, Indianapolis, N.A. ("Bank One") concurrently with the consummation of the Offerings, providing for up to $180 million of revolving credit availability (the "Senior Credit Facility"). Each of the Company's domestic operating subsidiaries (the "Senior Credit Obligors") will be parties to the Senior Credit Facility. The obligations under the Senior Credit Facility of each Senior Credit Obligor (the "Obligations") will be unconditionally guaranteed by each other Senior Credit Obligor and each of the Company and its domestic subsidiaries which are holding companies (the "Senior Credit Guaranties"). The Obligations will be secured by a first lien on substantially all the assets of the Company and its domestic subsidiaries, including a pledge of the stock of such subsidiaries. The Obligations and the Senior Credit Guaranties will rank pari passu with the Notes and will rank senior to all other indebtedness of the Company. Initially, the amount available to the Company for borrowing under the Senior Credit Facility (the "Commitment Amount") will be $180 million, which will be available for general corporate purposes (including acquisitions). Beginning with the thirteenth quarter following the date of the Senior Credit Facility, the Commitment Amount will decrease by $11.25 million at the end of each quarter until July 2003, at which time the Senior Credit Facility terminates. There is a sub-limit for letters of credit equal to the lesser of the Commitment Amount at the time of the issuance of a letter of credit and $30 million. 63

Interest Rates. Interest on outstanding borrowings under the Senior Credit Facility will be payable monthly and will accrue at an annual rate equal to either (i) the Prime Rate (as defined in the Senior Credit Facility) or (ii) the London Interbank Offered Rate plus the Applicable Spread (a "LIBOR-based Rate"), at the option of the Company. The Applicable Spread will be based upon the Company's trailing four quarter Ratio of Total Funded Debt to EBITDA (as defined in the Senior Credit Facility) as follows:
Ratio of Total Funded Debt to EBITDA --------------------------------------------------------4.00x or above........................................ 3.50-3.99............................................. 3.00-3.49............................................. 2.50-2.99............................................. Over LIBOR ------------------200 basis points 175 basis points 150 basis points 125 basis points

Maturity and Optional Prepayments. All borrowings under the Senior Credit Facility will mature on July 1, 2003, except that the aggregate principal amount outstanding may not exceed the Commitment Amount at any time. Borrowings under the Senior Credit Facility will be prepayable at any time without premium or penalty, except that any prepayment of a LIBOR-based Rate loan that is made prior to the end of the applicable interest period will be subject to reimbursement of breakage costs. Covenants. The Senior Credit Facility will contain certain customary covenants, including reporting and other affirmative covenants; financial covenants, including ratio of senior funded debt to EBITDA, ratio of funded debt to EBITDA, ratio of EBIT to cash interest, fixed charge coverage ratio, minimum current ratio and minimum net income excluding extraordinary items (each as defined in and calculated pursuant to the Senior Credit Facility); and negative covenants, including restrictions on incurrence of other indebtedness, payment of cash dividends and other distributions to stockholders, liens in favor of parties other than the lenders under the Senior Credit Facility, certain guaranties of obligations of or advances to others, sales of material assets not in the ordinary course of business, certain acquisitions of assets, making of certain investments and capital expenditures. Events of Default. The Senior Credit Facility will contain customary events of default including non-payment of principal, interest or fees; violation of covenants; inaccuracy of representations or warranties; cross-default to certain other indebtedness including the Notes; bankruptcy; a change of control of the Company or certain domestic subsidiaries; and any failure to apply proceeds of an underwritten public offering of equity securities of the Company as required by the Senior Credit Facility. Fees. The Company will pay, on a quarterly basis, a per annum fee on the unused Commitment Amount ranging from 3/20% to 1/2% based on certain financial ratios of the Company. Senior Notes The Notes to be offered in the Notes Offering will be in an aggregate principal amount of $130 million, will accrue interest at the rate of % per annum and are due , 2007. Interest on the Notes is payable in cash semi-annually. The Notes are fully and unconditionally guaranteed on a senior basis by each of the Company's Domestic Restricted Subsidiaries (as defined). The indenture governing the Notes contains certain covenants by the Company in favor of the holders of the Notes ("Senior Note Holders"), including but not limited to certain restrictions on the ability of the Company and certain of its subsidiaries to: (i) incur indebtedness, except for permitted indebtedness; (ii) pay dividends or purchase or redeem their stock or repay before maturity any obligation subordinate to the Notes; (iii) incur future restrictions on their ability to pay dividends and transfer assets; (iv) sell assets and capital stock of their subsidiaries; (v) engage in transactions with their affiliates; (vi) incur or permit to exist liens on their assets, except for permitted liens; and (vii) engage in mergers, consolidations or transfers of all or substantially all their assets. The Notes are effectively subordinate in right of payment to all senior secured indebtedness of the Company, including the Senior Credit Facility. The Notes are redeemable in whole or in part at the option of the Company at any time on or after , 2002, at a price beginning at % of the aggregate principal amount to be redeemed, declining ratably to 100% on and after , 2005, and up to 40% of the original principal amount of the Notes may be redeemed by the Company at any time prior to , 2000, with the proceeds of certain public equity offerings, at a price equal to % of such principal amount provided that at least 50% of the original principal amount of the Notes remains outstanding. Upon the occurrence of certain changes in control of the Company, each Senior Note Holder has the 64

right to require the Company to purchase all or a portion of such Senior Note Holder's notes at a price equal to 101% of the aggregate principal amount thereof. The failure of the Company and certain of its subsidiaries to pay certain indebtedness when due constitutes, among other things, an event of default under the Notes and can lead to the acceleration of the payment of the Notes. GM Contingent Purchase Price Note In connection with the GM Acquisition, DRA issued to GM a Contingent Purchase Price Note. The principal amount of the Contingent Purchase Price Note (the "Contingent Payment") is calculated by (A) multiplying five by (i) the three-year average EBIT (as defined) of the Company for the years ending December 31, 2001, 2002 and 2003 minus (ii) the average three-year Imputed Return (as defined) on Additional Investments (as defined) made after July 31, 1994 and on the Company's balance sheet at December 31, 2001, 2002 and 2003, (B) subtracting therefrom the Senior Obligations (as defined) outstanding on December 31, 2003 and (C) multiplying the result by the percentage obtained by dividing 100,000 (as adjusted for stock splits, reverse splits and stock dividends) by the total number of shares of all classes of Common Stock outstanding on a fully diluted basis as of the date of determination, excluding any shares issued subsequent to July 31, 1994 to the extent the proceeds therefrom have been accounted for as an Additional Investment. The Contingent Payment, if any, shall be paid in five equal consecutive annual installments commencing on July 31, 2004. No interest accrues on the Contingent Payment. The GM Contingent Purchase Price Note is subordinated in right of payment to the Senior Credit Facility pursuant to the terms of a Subordination Agreement by and among DRA and the lenders under the Senior Credit Facility (the "GM Subordination Agreement"). Pursuant to the terms of the GM Subordination Agreement, DRA may make payments of interest and principal on the GM Acquisition Note when due unless a representative of the lenders under the Senior Credit Facility gives a notice to GM that an event of default has occurred under the Senior Credit Facility (a "Suspension Notice"). GM may not receive any payments or take any legal action for the collection of the GM Contingent Purchase Note during the 179-day period following the receipt of a Suspension Notice (or such shorter period if such event of default under the Senior Credit Facility shall have been waived or cured). Senior Subordinated Notes In 1996, the Company issued to Salomon Brothers Inc and Smith Barney Inc. as initial purchasers an aggregate of $140 million aggregate principal amount of 10 5/8% Senior Subordinated Notes Due August 1, 2006 (the "Senior Subordinated Notes"). Interest on the Senior Subordinated Notes is payable in cash semi-annually. The Senior Subordinated Notes are fully and unconditionally guaranteed on a senior subordinated basis by each of the Company's Domestic Restricted Subsidiaries. The indenture governing the Senior Subordinated Notes contains certain covenants by the Company in favor of the holders of the Senior Subordinated Notes ("Senior Subordinated Note Holders"), including but not limited to certain restrictions on the ability of the Company and certain of its subsidiaries to: (i) incur indebtedness, except for permitted indebtedness; (ii) pay dividends or purchase or redeem their stock or repay before maturity any obligation subordinate to the Senior Subordinated Notes; (iii) incur future restrictions on their ability to pay dividends and transfer assets; (iv) sell assets and capital stock of their subsidiaries; (v) engage in transactions with their affiliates; (vi) incur or permit to exist liens on their assets, except for permitted liens; and (vii) engage in mergers, consolidations or transfers of all or substantially all their assets. The Senior Subordinated Notes are subordinate in right of payment to all senior indebtedness of the Company, including the Senior Credit Facility and the Notes being sold as part of the Notes Offering. The Senior Subordinated Notes are redeemable in whole or in part at the option of the Company at any time on or after August 1, 2001, at a price beginning at 105.313% of the aggregate principal amount to be redeemed, declining ratably to 100% on and after August 1, 2004, and up to 35% of the original principal amount of the Senior Subordinated Notes may be redeemed by the Company at any time prior to August 1, 1999, with the proceeds of certain public equity offerings, at a price equal to 110% of such principal amount provided that at least 50% of the original principal amount of the Senior Subordinated Notes remains outstanding. Upon the occurrence of certain changes in control of the Company, each Senior Subordinated Note Holder has the right to require the Company to purchase all or a portion of such Senior Subordinated Note Holder's notes at a price equal to 101% of the aggregate principal amount thereof. The failure of the Company and certain of its subsidiaries to pay certain indebtedness when due constitutes, among other things, an event of default under the Senior Subordinated Notes and can lead to the acceleration of the payment of the Senior Subordinated Notes. In connection with the initial placement of the Senior Subordinated Notes, the Company agreed, for the benefit of the Senior Subordinated Note Holders and at 65

the Company's expense, to file and cause to become effective an exchange offer or resale shelf registration statement with the Commission. If neither such registration statement is filed or declared effective by certain dates or certain other conditions are not satisfied, additional interest will accrue on the Senior Subordinated Notes. See Note 7 to the Consolidated Financial Statements included elsewhere in this Prospectus. 8% Subordinated Debenture of DRA In connection with the Offerings, DRA will issue to GM an 8% Subordinated Debenture in the principal amount of $17.9 million (the "8% Subordinated Debenture") in exchange for Series A 8% Preferred Stock of DRA held by GM. The 8% Subordinated Debenture will be due July 31, 2004 and will bear interest, payable in cash, at the rate of 8% per year. DRA will be able to prepay the 8% Subordinated Debenture at any time in whole or in part without premium or penalty. The 8% Subordinated Debenture will be subordinate in right of payment to the Senior Credit Facility, the Notes and the Senior Subordinated Notes. The 8% Subordinated Debenture will contain default provisions in the event that DRA fails to pay principal or interest on the 8% Subordinated Debenture when due or upon the occurrence of certain bankruptcy events. Ballantrae Subordinated Debt In 1996, Tractech issued a note in the original principal amount of $10 million in favor of Dyneer Corporation ("Dyneer") that matures on October 31, 2006 (the "Ballantrae Subordinated Debt"). The Ballantrae Subordinated Debt bears interest at a rate of 11% per annum. Tractech may prepay the Ballantrae Subordinated Debt at any time in whole or in part without premium or penalty. Tractech has the right to set-off $750,000 against the outstanding amount of the Ballantrae Subordinated Debt within thirty days of the entry of a final non-appealable order by a court of competent jurisdiction in certain patent litigation, if such order fails to grant Tractech the unfettered and exclusive right to make, manufacture, have made, market and sell the E-Z Locker line of differentials without geographic or other restrictions and without cash payments. The Company expects that Tractech will prepay with proceeds of the Offerings all of the outstanding principal amount of the Ballantrae Subordinated Debt except for $750,000. Tractech's obligations under the Ballantrae Subordinated Debt are guaranteed by Ballantrae, and the Ballantrae Subordinated Debt is subject to the Subordination Agreement dated as of October 24, 1996 among Tractech, Dyneer, Ballantrae and Bank One. 66

SHARES ELIGIBLE FOR FUTURE SALE Prior to this Offering, there has been no public market for the Class A Common Stock. No predictions can be made with respect to the effect, if any, that public sales of shares of the Class A Common Stock or the availability of shares for sale will have on the market price of the Class A Common Stock after this Offering. Sales of substantial amounts of the Class A Common Stock in the public market following this Offering, or the perception that sales may occur, could adversely affect the market price of the Class A Common Stock or the ability of the Company to raise capital through a sale of its equity securities. Upon completion of the Transactions, shares of the Company's Class A Common Stock will be outstanding (assuming no conversion of the Class B Common Stock). The shares of Class A Common Stock sold in the Offering ( shares if the Underwriters' over-allotment option is exercised in full) will be freely tradable without restriction or further registration under the Securities Act, unless acquired by an "affiliate" of the Company (an "affiliate" is defined in Rule 144 promulgated by the Commission under the Securities Act ("Rule 144"), generally as a person who by equity ownership or otherwise controls, or is controlled by, or is under common control with the Company). The remaining outstanding shares of Class A Common Stock of the Company will be "restricted securities" as defined in Rule 144 and may not be sold unless registered under the Securities Act or sold in accordance with an applicable exemption therefrom, such as Rule 144. In addition, up to shares of Class A Common Stock are issuable upon exercise of the Warrants and up to shares are expected to be issuable upon exercise of employee stock options. All such shares will also be restricted securities. In general, Rule 144 will permit an affiliate or a person who has held restricted shares for more than one year to sell within any three-month period a number of shares that does not exceed the greater of 1% of the then outstanding shares of Class A Common Stock or the average weekly trading volume of such stock during the four calendar weeks preceding such sale, provided that the Company has either filed certain periodic reports with the Commission or made publicly available certain information concerning itself and provided that such sales are made in normal "brokers' transaction" or in transactions directly with a "market maker" without the solicitation of buy orders by the brokers or such affiliates. A person who is deemed not to be an affiliate of the Company at any time during the three months preceding a sale and who has held restricted shares for more than two years may sell such shares under Rule 144 without regard to the volume limitations described above. Of the shares of Class A Common Stock not being sold in this Offering, shares have been owned by holders thereof for more than two years. Application has been made to list the Class A Common Stock on the New York Stock Exchange under the symbol "RMY." Sales of substantial amounts of Class A Common Stock in the public market under Rule 144 could have a depressing effect on the price of the Class A Common Stock. See "Principal Stockholders-- Registration Rights Agreement" and "--Underwriters." CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS The following is a general discussion of certain United States federal tax consequences of the acquisition, ownership, and disposition of the Class A Common Stock by an initial purchaser that, for United States federal income tax purposes, is not a "United States person" (a "Non-United States Holder"). This discussion is based upon currently existing provisions of the Code, existing and proposed regulations promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change, possibly retroactively. For purposes of this discussion, a "United States person" means a citizen or resident of the United States, a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States or of any political subdivision thereof, an estate or trust whose income is includible in gross income for United States federal income tax purposes regardless of its source or a person or entity otherwise subject to United States federal income tax on income from sources outside the United States. This discussion does not consider any specific facts or circumstances that may apply to a particular Non-United States Holder. Prospective investors are urged to consult their tax advisors regarding the United States federal tax consequences of acquiring, holding, and disposing of Class A Common Stock, as well as any tax consequences that may arise under the laws of any foreign, state, local, or other taxing jurisdiction. 67

Dividends Dividends on Class A Common Stock paid to a Non-United States Holder generally will be subject to withholding of United States federal income tax at the rate of 30%, unless the withholding rate is reduced under an applicable income tax treaty between the United States and the country of tax residence of the Non-United States Holder. The 30% withholding tax will not apply if the dividend is effectively connected with a trade or business conducted with the United States by the Non-United States Holder (or, alternatively, where an income tax treaty applies, if the dividend is effectively connected with a permanent establishment maintained within the United States by the Non-United States Holder), but, instead, the dividend will be subject to the United States federal income tax on net income that applies to United States persons (and, with respect to corporate holders, also may be subject to the branch profits tax). A Non-United States Holder may be required to satisfy certain certification requirements in order to claim treaty benefits or to otherwise claim a reduction of or exemption from withholding under the foregoing rules. A Non-United States Holders that is eligible for a reduced rate of U.S. withholding tax pursuant to a tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the United States Internal Revenue Service. Gain on Disposition A Non-United States Holder will generally not be subject to United States federal income tax on gain recognized on a sale, redemption, or other disposition of Class A Common Stock unless (i) the gain is effectively connected with the conduct of a trade or business within the United States by the Non-United States Holder, or (ii) in the case of a Non-United States Holder who is a nonresident alien individual and holds the Class A Common Stock as a capital asset, such holder is present in the United States for 183 or more days in the taxable year and certain other requirements are met. Also, special rules apply to Non-United States Holders if the Company is or becomes a "United States real property holding corporation" for United States federal income tax purposes. In general, gain on the disposition by a Non-United States Holder of interests in a United States real property holding corporation is subject to United States federal income tax. A corporation is generally a United States real property holding corporation if the fair market value of its United States real property interests equals or exceeds 50 percent of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade of business. The Company believes it is not currently, and is not likely to become, a United States real property holding corporation for United States federal income tax purposes. Federal Estate Taxes Class A Common Stock owned or treated as owned by an individual who is not a citizen or resident (as specifically defined for United States federal estate tax purposes) of the United States at the date of death, or Class A Common Stock subject to certain lifetime transfers made by such an individual, will be included in such individual's estate for United States federal estate tax purposes and may be subject to United States federal estate tax, unless an applicable estate tax treaty provides otherwise. Estates of nonresident aliens are generally allowed a credit that is equivalent to an exclusion of $60,000 of assets from the estate for United States federal estate tax purposes. Information Reporting and Backup Withholding The Company must report to the holders of the Class A Common Stock and to the Internal Revenue Service the amount of any dividends paid on Class A Common Stock in each calendar year and the amounts of tax withheld, if any, with respect to such payments. That information may also be made available to the tax authorities of the country in which a Non-United States Holder resides. Under temporary United States Treasury regulations, United States information reporting requirements and backup withholding tax will generally not apply to dividends paid on the Class A Common Stock to a Non-United States Holder. Payments by a United States office of a broker of the proceeds of a sale of the Class A Common Stock is subject to both backup withholding at a rate of 31% and information reporting unless the holder certifies its Non-United States Holder status under penalties of perjury or otherwise establishes an exemption. Information reporting requirements (but not backup withholding) will also apply to payments of the proceeds of sales of the Class A Common Stock by foreign offices of United States brokers, or foreign brokers with certain types of 68

relationships to the United States, unless the broker has documentary evidence in its records that the holder is a Non-United States Holder and certain other conditions are met, or the holder otherwise establishes an exemption. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be refunded or credited against the Non-United States Holder's United States federal income tax liability, provided that the required information is furnished to the Internal Revenue Service. These information reporting and backup withholding rules are under review by the United States Treasury and their application to the Class A Common Stock could be changed by future regulations. On April 22, 1996, the IRS issued proposed Treasury Regulations concerning the withholding of tax and reporting for certain amounts paid to non-resident individuals and foreign corporations. The proposed Treasury Regulations, if adopted in their present form, would generally be effective for payments made after December 31, 1997. Prospective investors should consult their tax advisors concerning the potential adoption of such proposed Treasury Regulations and the potential effect on their ownership of the Class A Common Stock. THE FOREGOING IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME TAX ASPECTS OF HOLDING CLASS A COMMON STOCK AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF THE HOLDER. UNDERWRITERS Under the terms and subject to conditions contained in an Underwriting Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters named below, for whom Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation and Salomon Brothers Inc are acting as Representatives (the "Representatives"), have severally agreed to purchase, and the Company has agreed to sell to them, severally, the respective number of shares of Class A Common Stock set forth opposite the names of such Underwriters below:
Name ---Morgan Stanley & Co. Incorporated........................ Credit Suisse First Boston Corporation................... Salomon Brothers Inc..................................... Total........................................... Number of Shares ----------------

---------------================

The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the shares of Class A Common Stock offered hereby are subject to the approval of certain legal matters by their counsel and to certain other conditions. The Underwriters are obligated to take and pay for all of the shares of Class A Common Stock offered hereby (other than those covered by the over-allotment option described below) if any such shares are taken. Each Underwriter has represented that it has not offered or sold, and has agreed not to offer or sell, any shares of the Class A Common Stock being sold in this Offering, directly or indirectly, in any province or territory of Canada or to, or for the benefit of, any resident of any province or territory of Canada in contravention of the securities laws thereof and has represented that any offer or sale of such shares in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer or sale is made. Each Underwriter has further agreed to send to any dealer who purchases from it any of such shares a notice stating in substance that, by purchasing such shares, such dealer represents and agrees that it has not offered or sold, and will not offer or sell, directly or indirectly, any of such shares in any province or territory of Canada or to, or for the benefit of, any resident of any province or territory of Canada in contravention of the securities laws thereof and that any offer or sale of such shares in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer or 69

sale is made, and that such dealer will deliver to any other dealer to whom it sells any of such shares a notice containing substantially the same statement as is contained in this sentence. The Underwriters initially propose to offer part of the shares of Class A Common Stock directly to the public at the public offering price set forth on the cover page hereof and part to certain dealers at a price that represents a concession not in excess of $ per share under the public offering price. Any Underwriter may allow, and such dealers may reallow, a concession not in excess of $ per share to other Underwriters or to certain other dealers. After the initial offering of the shares of Class A Common Stock, the offering price and other selling terms may from time to time be varied by the Representatives. The Company has granted to the Underwriters an option, exercisable for 30 days from the date of this Prospectus, to purchase up to an aggregate of additional shares of Class A Common Stock at the public offering price set forth on the cover page hereof, less underwriting discounts and commissions. The Underwriters may exercise such option to purchase solely for the purpose of covering over-allotments, if any. To the extent such option is exercised, each Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares as the number set forth next to such Underwriter's name in the preceding table bears to the total number of shares of Class A Common Stock set forth next to the names of all Underwriters in the preceding table. The Underwriters have informed the Company that they do not intend sales to discretionary accounts to exceed five percent of the total number of shares of Class A Common Stock offered by them. Application has been made to list the Class A Common Stock on the New York Stock Exchange under the symbol "RMY." The Company and each of the Company's current stockholders, directors, senior officers and warrantholders have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, they will not, during the period ending 180 days after the date of this Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other agreement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The restrictions described in this paragraph do not apply to (a) the shares of Class A Common Stock offered hereby, (b) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof, (c) any options granted or shares of Common Stock issued pursuant to existing benefit plans of the Company or (d) transactions by any person other than the Company in shares of Common Stock or other securities acquired in open market transactions after completion of the offering of the Class A Common Stock. In order to facilitate the offering of the Class A Common Stock, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Class A Common Stock. Specifically, the Underwriters may over-allot in connection with this Offering, creating a short position in the Class A Common Stock for their own account. In addition, to cover over-allotments or to stabilize the price of the Class A Common Stock, the Underwriters may bid for, and purchase, shares of Class A Common Stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the Class A Common Stock in this Offering, if the syndicate repurchases previously distributed Class A Common Stock in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the Class A Common Stock above independent market levels. The Underwriters are not required to engage in these activities, and may end any of these activities at any time. The Company and the Underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. The Representatives are also the underwriters in connection with the Notes Offering. Salomon Brothers Inc was the lead initial purchaser in connection with the Company's offering in 1996 of its Senior Subordinated Notes 70

and is providing certain financial advisory services to the Company in connection with the acquisition of Ballantrae, in each case for which Salomon Brothers Inc has received or will receive customary compensation. Pricing of this Offering Prior to this Offering, there has been no public market for the Class A Common Stock. The initial public offering price has been determined by negotiations among the Company and the Representatives of the Underwriters. Among the factors considered in determining the initial public offering price were the future prospects of the Company and its industry in general, sales, earnings and certain other financial and operating information of the Company in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to those of the Company. There can, however, be no assurance that the prices at which the Class A Common Stock will sell in the public market after this Offering will not be lower than the price at which it is sold by the Underwriters. LEGAL MATTERS The validity of the issuance of the shares of Class A Common Stock offered hereby will be passed upon for the Company by Dechert Price & Rhoads, Philadelphia, Pennsylvania. Certain matters in connection with this Offering will be passed upon for the Underwriters by Cravath, Swaine & Moore, New York, New York. EXPERTS The consolidated financial statements of Delco Remy International, Inc. as of July 31, 1997 and 1996, and for each of the three years in the period ended July 31, 1997, appearing in this Prospectus have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Commission a registration statement (the "Registration Statement") under the Securities Act with respect to the securities offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain items of which are omitted as permitted by the rules and regulations of the Commission. Statements made in this Prospectus as to the contents of any agreement or other document referred to herein are not necessarily complete, and reference is made to the copy of such agreement or other document filed as an exhibit or schedule to the Registration Statement and each such statement shall be deemed qualified in its entirety by such reference. For further information, reference is made to the Registration Statement and to the exhibits and schedules filed therewith, which are available for inspection without charge at the public reference facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W, Washington, D.C. 20549. Copies of the material containing this information may be obtained from the Commission upon payment of the prescribed fees. After consummation of this Offering, the Company will be subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, will be required to file proxy statements, reports and other information with the Commission. The Registration Statement, as well as any such report, proxy statement and other information filed by the Company with the Commission, may be inspected and copied at the public reference facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission maintains a web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The Company intends to furnish to its stockholders annual reports containing consolidated financial statements audited by an independent public accounting firm accompanied by an opinion expressed by such independent public accounting firm and quarterly reports for the first three quarters of each fiscal year containing 71

unaudited consolidated financial information in each case prepared in accordance with generally accepted accounting principles. 72

INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors....................................................................... Consolidated Statements of Operations for the years ended July 31, 1995, 1996 and 1997............... Consolidated Balance Sheets as of July 31, 1996 and 1997............................................. Consolidated Statements of Stockholders' Equity (Deficit) for the years ended July 31, 1995, 1996 and 1997........................................................................................ Consolidated Statements of Cash Flows for the years ended July 31, 1995, 1996 and 1997............... Notes to Consolidated Financial Statements........................................................... F-2 F-3 F-4 F-6 F-7 F-8

F-1

REPORT OF INDEPENDENT AUDITORS Board of Directors Delco Remy International, Inc. We have audited the accompanying consolidated balance sheets of Delco Remy International, Inc. as of July 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the three years in the period ended July 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Delco Remy International, Inc. at July 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1997, in conformity with generally accepted accounting principles. Indianapolis, Indiana September 5, 1997, except for "Share and Per Share Information" in Note 16, as to which the date is October ___, 1997 The foregoing report is in the form that will be signed upon the determination of the Stock Split as described in Note 16 to the consolidated financial statements. ERNST & YOUNG LLP F-2

DELCO REMY INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands)
For the Year Ended July 31 ----------------------------------------------1995 1996 1997 ------------------------------------$ 573,423 $ 636,852 $ 689,787 475,216 510,078 540,234 ------------------------------------98,207 126,774 149,553 61,206 77,994 89,098 -8,101 34,500 ------------------------------------37,001 40,679 25,955 -(18,432) ------------18,569 -7,846 1,397 ------------9,326 -(27,367) ------------13,312 259 5,741 1,516 ------------5,796 2,082 (38,774) ------------(10,737) 892 (3,014) 1,648 ------------(10,263)

Net sales....................................................... Cost of goods sold.............................................. Gross profit.................................................... Selling, engineering, and administrative expenses............... Restructuring charges........................................... Operating income................................................ Other income (expense): Gain on sale of building................................... Interest expense........................................... Income (loss) from continuing operations before income taxes (benefit), preferred dividend requirement of subsidiary and minority interest.......................................... Minority interest in income of subsidiaries..................... Income taxes (benefit).......................................... Preferred dividend requirement of subsidiary.................... Income (loss) from continuing operations........................ Discontinued operations: Loss from operations of discontinued businesses (less applicable income tax benefit of $1,582, $1,042 and $395, respectively)........................................... Loss on disposal of businesses (less applicable income tax benefit of $6,043 and $426)............................. Extraordinary item: Write-off of debt issuance costs (less applicable income tax benefit of $1,147).................................. Net income (loss)...............................................

2,363 --

1,573 9,064

808 874

Primary......................................................... Supplemental....................................................

--2,351 ------------------------------------$ 6,963 $ (4,841) $ (14,296) ============= ============= ============= 1997 Pro Forma Loss Per Share ----------------------------------------------From Before Continuing Extraordinary Net Operations Item Loss ------------------------------------$ $ $

See Accompanying Notes F-3

DELCO REMY INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
July 31 -----------------------------------1996 1997 ------------------------------

Assets: Current assets: Cash and cash equivalents................................... Trade accounts receivable (less allowance for doubtful accounts of $1,209 and $2,935, respectively)............ Other receivables........................................... Recoverable income taxes.................................... Inventories................................................. Deferred income taxes....................................... Other current assets........................................ Total current assets............................................. Property and equipment........................................... Less accumulated depreciation....................................

$

3,406

$

10,050

94,992 10,585 8,674 123,583 15,462 1,213 ---------------257,915 170,391 29,235 ---------------141,156 6,497 66,570 --2,944 ---------------$ 475,082 ================

110,184 10,487 2,889 164,417 21,474 4,643 --------------324,144 147,222 26,858 --------------120,364 8,803 86,612 25,279 3,119 2,248 --------------$ 570,569 ===============

Deferred financing costs......................................... Goodwill (less accumulated amortization of $4,758 and $7,289, respectively)............................................... Net assets held for disposal..................................... Investment in affiliate.......................................... Other assets..................................................... Total assets.....................................................

See Accompanying Notes F-4

DELCO REMY INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
July 31 --------------- -- --------------1996 1997 ----------------------------$ 81,207 4,026 5,541 11,005 32,683 9,652 --------------144,114 6,795 289,144 8,186 950 5,427 4,457 14,420 $ 88,578 3,107 37,377 3,324 35,949 507 --------------168,842 1,556 363,261 12,677 4,542 4,124 8,032 16,071

Liabilities and stockholders' equity (deficit): Current liabilities: Accounts payable................................................ Accrued interest payable........................................ Accrued restructuring charges................................... Liabilities related to discontinued operations.................. Other liabilities and accrued expenses.......................... Current portion of long-term debt............................... Total current liabilities............................................ Deferred income taxes................................................ Long-term debt, less current portion................................. Post-retirement benefits other than pensions......................... Accrued pension benefit.............................................. Other non-current liabilities........................................ Minority interest in subsidiary...................................... Redeemable exchangeable preferred stock of subsidiary................ Stockholders' equity (deficit): Common stock: Class A Shares (par value $.01; issued 517,727 in 1996 and Class B Shares (par value $.01; issued 385,523 in 1996 and

authorized 1,000,000; 525,477 in 1997).......... authorized 1,000,000; 1997).....................

5 4 1,798 2,122 (2,161) (179) --------------1,589 --------------$ 475,082 ===============

5 4 10,194 (12,174) (1,752) (4,813) --------------(8,536) --------------$ 570,569 ===============

Paid-in capital................................................. Retained earnings (deficit)..................................... Cumulative translation adjustment............................... Stock purchase plan............................................. Total stockholders' equity (deficit)................................. Total liabilities and stockholders' equity (deficit).................

See Accompanying Notes F-5

DELCO REMY INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (in thousands)
Class A Common Stock -----------Class B Common Stock ---------$ 4 --Paid-In Capital --------$ 1,572 241 ----------1,813 (15) ----------1,798 8,419 (23) -Retained Earnings (Deficit) ----------$ --6,963 Cumulative Stock Translation Purchase Adjustment Plan ----------- -----------$ ---$ (50) (124) -Total -----------$ 1,531 117 6,963

Initial capitalization at August 1, 1994............... $ 5 Issuance of common stock..... -Net income................... -Foreign currency translation adjustment................... ------------Balance at July 31, 1995..... Repurchase of common stock... Net loss..................... Foreign currency translation adjustment................... Balance at July 31, 1996..... Issuance of common stock..... Repurchase of common stock... Net loss..................... Foreign currency translation adjustment................... 5 --------------5 ----

----------4 ------------4 ----

-----------6,963 -(4,841) -----------2,122 --(14,296)

(181) ----------(181) --(1,980) ----------(2,161) ----

------------(174) (5) -------------(179) (4,653) 19 --

(181) ----------8,430 (20) (4,841) (1,980) ----------1,589 3,766 (4) (14,296)

----409 -409 -----------------------------------------------------------------------------------------$ 4 ========= $ 10,194 ========== $ (12,174) =========== $ (1,752) =========== $ (4,813) ============ $ (8,536) ===========

Balance at July 31, 1997..... $ 5 ===========

See Accompanying Notes F-6

DELCO REMY INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
For the Year Ended July 31 ------------ -- ------------ -- -----------1995 1996 1997 ---------------------------------$ 6,963 -14,533 -(3,580) 4,434 4,459 8,069 1,397 (49,320) (8,035) 49,613 (6,657) -45 -----------21,921 (62,010) (11,241) -------------(73,251) 31,918 (4,917) 118 -----------27,119 -----------------------(24,211) 25,689 -----------$ 1,478 ============ $ (4,841) -19,555 -(2,947) 3,752 (3,509) 7,867 1,516 (24,458) (25,720) 8,634 18,229 5,541 (4,303) -----------(684) (46,320) (32,741) -------------(79,061) 89,652 (8,842) (20) -----------80,790 -----------883 -----------1,928 1,478 -----------$ 3,406 ============ $ (14,296) 3,498 22,323 (2,082) (9,578) 4,491 3,592 7,949 1,648 (3,341) (10,245) (11,036) (4,538) 31,836 2,316 -----------22,537 (42,442) (31,888) (3,119) 3,362 -----------(74,087) 180,000 (126,200) 3,986 -----------57,786 -----------408 -----------6,644 3,406 -----------$ 10,050 ============

Operating activities: Net income (loss)............................................ Extraordinary item........................................... Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization........................... Gain on sale of building................................ Deferred income taxes................................... Post-retirement benefits other than pensions............ Accrued pension benefits................................ Non-cash interest expense............................... Preferred dividend requirement of subsidiary............ Changes in operating assets and liabilities, net of acquisitions: Accounts receivable................................. Inventories......................................... Accounts payable.................................... Other current assets and liabilities................ Accrued restructuring............................... Other non-current assets and liabilities, net....... Net cash provided by (used in) operating activities.......... Investing activities: Acquisitions, net of cash acquired........................... Purchase of property and equipment........................... Investment in affiliates..................................... Proceeds from sale of building............................... Net cash used in investing activities........................ Financing activities: Proceeds from issuances of long-term debt.................... Payments on long-term debt................................... Other financing activities................................... Net cash provided by financing activities.................... Effect of exchange rate changes on cash...................... Net (decrease) increase in cash and cash equivalents......... Cash and cash equivalents at beginning of year............... Cash and cash equivalents at end of year.....................

See Accompanying Notes F-7

DELCO REMY INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997 (dollars in thousands) 1. ORGANIZATION AND ACQUISITIONS Delco Remy America Acquisition On August 1, 1994, Delco Remy International, Inc. (the Company or DRI) through a wholly-owned subsidiary, Delco Remy America, Inc. (DRA), purchased substantially all of the assets, other than facilities, and assumed certain liabilities of specific business activities of the Delco Remy Division of General Motors Corporation (the GM Acquisition). The specific business activities purchased are engaged in the design, manufacture, remanufacture and sale of heavy duty starter motors and generators, automotive starter motors, and related components. The aggregate purchase price of the GM Acquisition of $155,665 (including fees and expenses) was accounted for as a purchase. The Company issued (i) common stock of $1,531, (ii) preferred stock of $11,507 and (iii) debt of $158,200 to fund the purchase and provide capital for general corporate purposes. The GM Acquisition resulted in the recording of approximately $17,600 of goodwill which is being amortized over 15 years. While the GM Acquisition was recorded based on the best estimates available, certain purchase price adjustments as of the August 1, 1994 purchase date have not been determined or agreed to by General Motors Corporation (GM) and DRI. The resolution of these items could result in a charge or credit to operations when finalized. The accompanying consolidated financial statements reflect the consolidated results of operations and cash flows for the Company subsequent to the GM Acquisition. The Company had no operations prior to August 1, 1994. GM is entitled to receive an additional contingent purchase payment which will be paid beginning in 2004 and will be based upon a percentage of average earnings of the Company in the three year period ending December 31, 2003 in excess of certain imputed earnings. Since the additional contingent purchase price, if any, is based upon future operations of the Company which cannot be determined at this time, no provision for such payment has been made in the accompanying consolidated financial statements. Concurrent with the GM Acquisition, the Company entered into certain supply agreements with GM whereby the Company will be the sole-source supplier to GM for component parts manufactured by the Company at the date of the GM Acquisition. The supply agreement for automotive starter motors has an initial term of ten years, while the supply agreement for heavy duty starter motors and generators has an initial term of six years. 1997 Acquisition On May 8, 1997, the Company, through a wholly-owned subsidiary, acquired 82.5% of the outstanding common stock of World Wide Automotive, Inc. (World Wide). World Wide is primarily an aftermarket supplier of light duty import starters and alternators, although it also has a small amount of heavy duty remanufacturing sales and domestic aftermarket sales. The remaining 17.5% interest in World Wide is owned by current management of World Wide. The aggregate purchase price was $40,842, including cash payments of $38,692 and the issuance of Class A Common Stock valued at $2,150. The World Wide acquisition was treated as a purchase for accounting purposes and is included in the consolidated financial statements of the Company beginning with the acquisition date. The World Wide acquisition resulted in goodwill of $21,301 which is being amortized over 35 years. 1996 Acquisition On February 6, 1996 the Company, through a wholly-owned subsidiary, acquired 82.5% of the outstanding common stock of Power Investments, Inc. and related companies (Power), a remanufacturer of diesel and gasoline engines, fuel systems, transmissions, alternators and starters for medium, heavy duty, and automotive applications. Power also remanufactures and distributes brakes, water pumps, power steering pumps and various other remanufactured truck parts and assemblies. Power has fifteen facilities located in the United States and Canada. The remaining 17.5% interest in Power is owned by current management of Power. F-8

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 The aggregate purchase price was $48,422 including cash payments of $23,385 and the issuance of $24,300 of 9.86% Power Investments Seller Notes. The Power acquisition was treated as a purchase for accounting purposes and is included in the consolidated financial statements of the Company beginning with the acquisition date. The Power acquisition resulted in goodwill of $16,267 which is being amortized over 35 years. 1995 Acquisitions In 1995, the Company made the following three acquisitions which were treated as purchases for accounting purposes and are included in the consolidated financial statements beginning with the respective acquisition date. Each respective purchase price was allocated to the assets acquired and liabilities assumed at their estimated fair values. The three acquisitions resulted in goodwill of $38,864 which is being amortized over 35 years. On January 6, 1995, the Company purchased all the stock of two related companies (collectively referred to as Nabco) for an aggregate cash purchase price of $27,600 and the issuance of 28,750 shares of DRI Class A Common Stock. Nabco remanufactures automotive starters and alternators. On March 31, 1995, the Company, through a newly formed subsidiary, purchased the shares of six related corporations (collectively referred to as A&B). The aggregate purchase price of $33,400 included cash payments of $29,900 and the issuance of $3,500 in 10% subordinated notes. The A&B acquisition was financed through additional borrowings under the Company's revolving loan and a new acquisition term loan of $15,000. A&B remanufactures heavy duty starters and alternators and related sub-components and parts. On April 13, 1995, the Company acquired, through a series of stock purchase transactions, approximately 97% interest in a Hungarian company (Autovill), a manufacturer of heavy duty starter motors and generators. The total purchase price was approximately $7,500 which included the assumption of certain Autovill liabilities of $4,100. Unaudited Pro Forma Results of Operations The unaudited pro forma consolidated results of operations, assuming the 1995, 1996 and 1997 acquisitions had been consummated as of the beginning of the preceding year, are as follows:
For the Year Ended July 31 ----------------------------------------------1995 1996 1997 ------------------------------------$ 666,604 $ 733,257 $ 738,802 49,464 13,929 11,566 47,644 5,445 (5,192) 28,115 (10,632) (14,665)

Revenues......................... Operating income................. Income (loss) from continuing operations....................... Net income (loss)................

The pro forma consolidated financial information does not purport to present what the Company's consolidated results of operations would actually have been if the operations were combined during the periods presented and is not intended to project future results or trends of operations. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation and Business Segment The consolidated financial statements include the accounts of DRI and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and engine-related components for automobiles, light and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors, alternators, engines, transmissions and fuel systems for the aftermarket and the original equipment manufacturer market, principally in North America but also in Europe, Latin America and Asia-Pacific. F-9

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 Use of Estimates Preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents includes all cash balances and highly liquid investments held primarily in repurchase agreements collateralized by U.S. Government securities with a maturity of ninety days or less when purchased. The carrying amount of cash equivalents approximates fair value. Concentrations of Credit Risk and Other Risks Substantially all of the Company's accounts receivable are due from customers in the original equipment and aftermarket automotive industries, both in the U.S. and internationally. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Credit losses are provided for in the financial statements and have been consistently within management's expectations. The Company invests its temporary cash in high credit quality financial institutions and investment grade short-term investments and limits the amount of credit exposure to any one entity. The percentage of the Company's labor force covered by a collective bargaining agreement (CBA) and covered by a CBA that will expire within one year is 48.0% and 2.4%, respectively. Inventories Inventories are carried at lower of cost or market determined on the first-in, first-out (FIFO) method. Raw materials also include supplies and repair parts which consist of material consumed in the manufacturing process but not directly incorporated into the finished products. Inventories at July 31, 1996 and 1997 consisted of the following:
July 31 ----------------------------------1996 1997 ---------------- ----------------$ 57,481 $ 84,583 32,790 20,168 33,312 59,666 ---------------- ----------------$ 123,583 $ 164,417 ================ =================

Raw material....................... Work in-process.................... Finished goods.....................

Property and Equipment Property and equipment are stated at cost. Depreciation is calculated primarily using the straight-line method over the estimated useful lives of the related assets (15 years for buildings and 3 to 15 years for machinery and equipment). Foreign Currency Translation Financial statements of foreign subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and at the average exchange rate for each year for revenue and expenses. Translation adjustments are recorded as a separate component of stockholders' equity. Foreign Exchange Contracts The Company enters into foreign exchange contracts to hedge certain foreign transactions. These contracts reduce currency risk from exchange rate movements. Gains and losses are deferred and accounted for as part of the underlying transactions. The contractual amount and related deferred gains and losses from these contracts are immaterial. Goodwill Goodwill represents the excess of purchase price over fair value of the net assets acquired and is being amortized by the straight-line method over 15 to 35 years. F-10

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 The carrying amount of goodwill is regularly reviewed for indicators of impairment in value, which in the view of management are other than temporary, including unexpected or adverse changes in the following: (i) the economic or competitive environments in which the Company operates; (ii) profitability analyses and (iii) cash flow analyses. If facts and circumstances suggest that a subsidiary's net assets are impaired, the Company assesses the fair value of the underlying business and reduces goodwill to an amount that results in the book value of the subsidiary approximating fair value. Investment in Affiliate Investment in affiliate represents the Company's equity investment in its Korean joint venture. This investment is accounted for using the equity method. Recognition of Revenue Substantially all of the Company's revenue is recognized at the time the product is shipped. The Company's remanufacturing operations obtain used diesel and gasoline engines, fuel systems, transmissions, starter motors and generators, commonly known as cores, from its customers as trade-ins. Net sales and cost of goods sold are reduced by $58,800, $70,000 and $113,100 for 1995, 1996 and 1997, respectively, to reflect the cost of cores returned for credit. Fair Value of Financial Instruments The Company's financial instruments generally consist of cash and cash equivalents, trade and other receivables, accounts payable, long-term debt and redeemable convertible preferred stock of subsidiary. The fair value of the Company's fixed rate debt was estimated using discounted cash flow analyses based upon the Company's current incremental borrowing rates. With the exception of the Senior Subordinated Notes, the carrying amounts of these financial instruments approximated their fair value at July 31, 1996 and 1997. At July 31, 1997, the Senior Subordinated Notes have a face value of $140.0 million and a fair value of $148.4 million. Reclassification Certain amounts in the 1995 and 1996 financial statements have been reclassified to conform to the 1997 presentation. Impact of Recently Issued Accounting Standards In February 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of warrants to purchase common stock will be excluded. The impact is expected to result in an increase in historical primary earnings (loss) per share for the years ended July 31, 1995, 1996 and 1997, of $ , $ and $ per share, respectively. The impact of Statement No. 128 on the calculation of fully diluted earnings per share for these years is not expected to be material. In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income, which is effective for years beginning after December 15, 1997, and will be adopted by the Company in 1998. The Statement establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The Statement will not have any impact on the results of operations or the financial position of the Company. In June 1997, the FASB issued Statement No. 131, Disclosures about Segments of an Enterprise and Related Information. The Statement changes the way public companies are required to report segment information in annual financial statements and in interim financial reports to stockholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. The Statement is effective for financial statements for fiscal years beginning after December 15, 1997, and the Company anticipates adopting the Statement in 1999. The Company is evaluating the impact that this Statement will have on its financial reporting. F-11

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 3. DISCONTINUED OPERATIONS Marine Corporation of America, Marine Drive Systems, and Powrbilt Products In July 1997, the Company adopted plans for the sale of the marine products business segment consisting of three non-core businesses. The Company plans to sell the net assets of Marine Corporation of America, Marine Drive Systems and Powrbilt Products (the 1997 Discontinued Businesses). These non-core businesses were acquired in February 1996 in conjunction with the acquisition of Power. A charge of $874 net of a tax benefit of $426 for operating losses expected during the disposal period was recorded. The Company does not anticipate a loss on the disposal of the net assets of the discontinued businesses. It is expected that the net assets of the businesses will be sold during fiscal 1998. Summary operating results of the 1997 Discontinued Businesses since their acquisition are as follows:
For the Year Ended July 31 -----------------------------1996 1997 -----------------------$ 5,624 $ 10,935 (328) (808)

Net sales............................ Net loss.............................

The net assets of the 1997 Discontinued Businesses included in the consolidated balance sheet are summarized as follows:
July 31, 1997 ----------$ 6,525 650 (1,848) ----------$ 5,327 ===========

Current assets..................................... Property and equipment, net........................ Current liabilities................................ Net assets.........................................

Powder Metal Forge In December 1995, the Company adopted plans for sale of its non-core powder metal forge business segment (PMF) and recorded an initial loss on disposal. A sale agreement was signed in December 1996 to transfer ownership of net assets of PMF. Terms of the sale agreement require the Company to continue PMF operations through a transition period in which the buyer will begin production at its facility. The Company expects the transition period to be completed by November 1997. The agreement requires the buyer to reimburse the Company for all losses incurred from operating the business after December 1997 if the transition has not been completed. PMF produces various engine components, primarily for GM, through a forging process. The Company recorded a charge of $9,064, net of tax benefit of $6,043, for losses on disposal of the business, operating losses expected during the transition period, and allocated interest expense. During the fiscal year ended July 31, 1997, the Company utilized $8,981 of the reserves for discontinued operations including a loss from operations of $2,171. At July 31, 1997, $2,024 of discontinued operations reserves remained on the balance sheet related to PMF. Summary operating results of the discontinued operation, excluding the loss on disposal are as follows for the years ended:
For the Year Ended July 31 ----------------------------1995 1996 ----------------------$ 6,505 $ 4,228 (2,363) (1,245)

Net sales.............................. Net loss...............................

Interest expense of $1,014 and $496 in 1995 and 1996, respectively, was allocated to discontinued operations of PMF based on the ratio of net assets discontinued to total net assets and debt of the Company. In addition, interest expense of $986 was allocated for the disposal period and is included in the 1996 loss on disposal of PMF. In 1997, $335 of interest expense was charged against the reserve. F-12

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 The net assets of PMF included in the consolidated balance sheet are summarized as follows:
July 31 1997 -----------$ 3,917 (610) -----------$ 3,307 ============

Current assets.................................. Current liabilities............................. Net assets......................................

4. RESTRUCTURING CHARGES In May 1997, the Company decided to restructure the manufacturing operations of DRA to utilize focus factory manufacturing concepts and to close the Company's operations in the old vertically-integrated factories that were leased from GM. These decisions resulted in the impairment of certain production assets with a carrying amount of $30,321 ($25,279 of which is property and equipment and $5,042 of which is related tooling and other supplies) which the Company plans to sell or otherwise dispose. The Company has estimated the loss on disposal including related costs at $26,260. In addition, the Company has estimated a cost of $8,240 for reducing its workforce through several transition programs. The results of operations for the products which will be discontinued are not separately identifiable. The restructuring reserve is expected to be utilized throughout 1998 and 1999. In December 1995, the Company decided to eliminate the production of certain parts and certain straight-drive starter motors for the original equipment market. In addition, the Company purchased new, more efficient equipment for use in the production of certain heavy duty alternators. These decisions resulted in the impairment of certain production equipment with a carrying amount of approximately $5,242, which the Company plans to sell or otherwise dispose. The Company has estimated the loss on disposal, including related costs, at $4,385. The results of operations for the parts and straight- drive starter motors for which production will be discontinued are not separately identifiable. In October 1995, the Company offered to certain eligible salaried employees a voluntary retirement transition program in conjunction with a similar plan offered by GM to its employees which allowed such employees special additional benefits not typically provided upon retirement. These additional benefits include salaried payments for six months and future supplemental payments under the salaried retirement plan. As a result, $3,716 was charged to operations in 1996. The following table summarizes the provisions and reserves for restructuring and non-recurring charges:
Termination Benefits ----------------Provision in 1996...................................... Payments and charges in 1996........................... Reserve at July 31, 1996............................... Provision in 1997...................................... Change in estimate..................................... Payments and charges in 1997........................... Reserve at July 31, 1997............................... $ 3,716 (1,665) ----------------2,051 Exit/Impairment Costs Total ------------------ -----------------$ 4,385 $ 8,101 (895) (2,560) ------------------ -----------------3,490 5,541

8,240 (1,230) (821) ----------------$ 8,240 =================

26,260 34,500 -(1,230) (613) (1,434) ------------------ -----------------$ 29,137 $ 37,377 ================== ==================

F-13

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 5. ALLOWANCE FOR DOUBTFUL ACCOUNTS The activity in the allowance for doubtful accounts is as follows:
For the Year Ended July 31 --------------------------------------------------------1995 1996 1997 ----------------------------------------------Balance at beginning of period.............................. Additions charged to costs and expenses..................... Acquisition of certain businesses........................... Uncollectible accounts written off, net of recoveries....... $ -119 102 (59) ---------------$ 162 ================ 162 1,091 308 (352) ----------------$ 1,209 ================= $ $ 1,209 3,774 324 (2,372) ----------------

$ 2,935 ================

6. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
July 31 -------------------------------1996 1997 --------------------------$ 12,213 $ 5,895 13,931 21,434 144,247 119,893 --------------------------$ 170,391 $ 147,222 ============== ==============

Land and buildings....................... Buildings under capital leases........... Machinery and equipment..................

7. LONG-TERM DEBT Borrowings under long-term debt arrangements consists of the following:
July 31 -------------------------------------1996 1997 --------------------------------48,530 54,235 -24,300 75,000 -55,224 3,500 22,619 1,141 14,247 ----------------298,796 9,652 ----------------$289,144 ================= $ $ --34,963 8,300 75,000 140,000 59,155 3,500 25,211 -17,639 ----------------363,768 507 ----------------$ 363,261 =================

Senior credit facility: Revolving loans.............................. Term loans................................... Revolving acquisition loans.................. Power seller notes............................... World note....................................... Senior subordinated notes........................ GM acquisition note.............................. A & B seller notes............................... Junior subordinated notes........................ Hungarian bank loans............................. Other, including capital lease obligations....... Less current portion.............................

Senior Credit Facility Pursuant to the senior credit facility, revolving credit loans of $150,000 are available for general purposes, of which up to $85,000 is available for acquisitions. The senior credit facility provides for quarterly payments of $9,400 beginning in the year 1999. The Company has the option of paying an interest rate of one bank's prime or a LIBOR-based rate. The weighted average interest on amounts outstanding at July 31, 1997 was 8.02%. The senior credit facility contains various covenants which include, among other things: (i) limitations on additional borrowings and encumbrances; (ii) the maintenance of certain financial ratios and compliance with certain financial tests and limitations; (iii) limitations on cash dividends paid; (iv) limitations on investments and capital expenditures; and (v) limitations on leases and sales of assets. F-14

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 The senior credit facility is collateralized by a lien on substantially all assets of the Company and its domestic subsidiaries and by all the capital stock of such subsidiaries held by the Company or any such other subsidiary. Power Seller Notes The Power Seller Notes are due February 6, 2001. Interest, at a rate of 9.86% per annum, is payable monthly for the current month. The notes may be prepaid without premium or penalty after August 6, 1997. The Power Seller Notes are secured by letters of credit issued under the senior credit facility. World Note The World Note, due on July 31, 2003, is payable to an affiliate of a stockholder and bears interest at a rate of 10.5% per annum, payable semiannually. On any three interest payment dates, the Company may elect to pay up to 50% of the unpaid accrued interest by issuing additional notes to the holder of the World Note. At the option of the Company, prepayment of the loan balance may be made at repayment amounts ranging from 103% in 1997 to 100% of principal after August 1, 2000. Upon a change in control, certain asset sales, casualty events or a public offering (all as defined in the debt agreement), the holders have the right, but not the obligation, to require mandatory redemption of the debt, without premium or penalty. The World Note agreement contains certain covenants which are similar to the provisions of the senior credit facility. The World noteholder has agreed to subordinate its right to receive payments to the senior credit facility lenders. DRI and its domestic subsidiaries have guaranteed the payment of principal and interest on the World Note. Senior Subordinated Notes On August 2, 1996, the Company issued $140 million of 10 5/8% Senior Subordinated Notes due August 1, 2006 (the Senior Subordinated Notes). The proceeds from the Senior Subordinated Notes were $135.8 million (net of issuance costs). The proceeds were used as follows: (i) to repay all outstanding indebtedness under the Senior Credit Facility, plus accrued and unpaid interest thereon, (ii) $16,000 was used to prepay one of the Power Seller Notes, plus accrued and unpaid interest thereon, and (iii) the remaining net proceeds were invested temporarily in short-term interest bearing obligations. The Company recorded an extraordinary loss in 1997 of $2,351, net of tax benefit of $1,147, related to deferred financing costs associated with the payoff of the Senior Credit Facility. The Senior Subordinated Notes are unsecured senior subordinated obligations of the Company and are subordinated in right of payment to the prior payment in full of all existing and future senior indebtedness, pari passu with all present and future senior subordinated indebtedness and senior to all present and future subordinated indebtedness of the Company or the relevant subsidiary guarantors, as defined in the indenture. The Senior Subordinated Notes will also be effectively subordinated to any secured indebtedness to the extent of the value of the assets securing such indebtedness. The Senior Subordinated Notes are redeemable at the option of the Company, in whole or in part, after August 1, 2001, at the redemption prices set forth in the note agreement plus accrued and unpaid interest, if any, to the redemption date. In addition, at any time prior to August 1, 1999, the Company may redeem, at its option, up to an aggregate amount of 35% of the original principal amount of the Senior Subordinated Notes with the proceeds of one or more public equity offerings at a redemption price of 110% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the original aggregate principal amount of the notes remains outstanding after each such redemption. Upon the occurrence of a change of control (as defined), each holder of the Senior Subordinated Notes will have the right to require the Company to purchase all or a portion of such holder's notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. The indenture pursuant to which the Senior Subordinated Notes were issued contains certain covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to (i) incur additional indebtedness, (ii) pay dividends or make other distributions with respect to capital stock (as defined) of the Company and its restricted subsidiaries, (iii) sell assets of the Company or its restricted subsidiaries, (iv) issue or sell restricted subsidiary stock, (v) enter into certain transactions with affiliates, (vi) create certain liens, (vii) enter F-15

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 into certain mergers and consolidations and (viii) incur indebtedness which is subordinate to senior indebtedness and senior to the Senior Subordinated Notes. Pursuant to a registration agreement among the Company and the initial purchasers, the Company will commence an exchange offer pursuant to an effective registration statement or cause the Notes to be registered under the Securities Act pursuant to a resale shelf registration statement. If an exchange offer registration statement is not (i) filed by October 31, 1997 or (ii) declared effective by December 31, 1997, or (iii) if an exchange offer is not consummated or a resale shelf registration statement is not declared effective by January 31, 1998, special interest will accrue initially at the rate of .25% per annum increasing to a maximum rate of 1% per annum, payable semi-annually until such time as an exchange offer is consummated or a resale shelf registration is declared effective. GM Acquisition Note In connection with the GM Acquisition, DRA issued to GM a subordinated note in the principal amount of $45,000 due 2004. Interest accrues semiannually at a rate of 11.5% per annum and is added to the unpaid principal balance in amounts ranging from 60% of the accruing interest in 1997 to 20% in 1999. Beginning in 2000, interest is payable semiannually in cash. A&B Seller Notes In connection with the A&B acquisition, a subsidiary of DRI issued subordinated notes in the principal amount of $3,500 due 2002. Interest is payable semiannually at 10% per annum. The notes are subordinated to the senior credit facility, senior subordinated debt, and the World Note. The notes may be prepaid at any time without penalty. Junior Subordinated Notes DRI issued $18,200 in an initial principal amount of Junior Subordinated Notes to two investors, who are also holders of the Company's common stock. Interest on the junior subordinated notes accrues semiannually at 11% and is payable entirely in additional principal, through 2004, when the entire balance is due and payable. Capital Lease Obligations In 1996 the Company entered into an aggregate of $13,931 of new capital leases with respect to three manufacturing facilities and its world headquarters building. The leases have 15 year terms with options to renew for additional periods. These leases have been capitalized using interest rates ranging from 12.5% to 14.2%. The carrying value of assets under capital leases was $15,870 at July 31, 1997. Other Total cash interest paid for 1995, 1996 and 1997 was $7,738, $19,895 and $31,744, respectively. The following is the required principal payments of long-term debt and capitalized leases:
1998............................. 1999............................. 2000............................. 2001............................. 2002............................. Thereafter....................... $ 507 721 817 9,366 844 351,513 ---------------$ 363,768 ================

8. EMPLOYEE BENEFIT PLANS Agreements with GM In connection with the GM Acquisition, the Company and GM agreed to allocate the responsibility for employee pension benefits and post-retirement health care and life insurance on a pro-rata basis between DRA and GM. The allocation is primarily determined upon years of service with DRA and aggregate years of service with DRA and GM. In addition, GM has agreed to retain complete responsibility for all pension and post-retirement F-16

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 benefit costs for salaried and hourly employees who retired from DRA before August 1, 1996 and October 1, 1996, respectively. Effective August 1, 1994, DRA established hourly and salaried pension and post-retirement health care and life insurance plans which are similar to the respective GM plans. Pension Plans DRA has defined benefit pension plans covering substantially all employees. The plan covering salaried employees provides benefits that are based upon years of service and final estimated average compensation. Benefits for hourly employees are based on stated amounts for each year of service. DRA's funding policy is to contribute amounts to provide the plans with sufficient assets to meet future benefit payment requirements consistent with actuarial determinations of the funding requirements of federal laws. DRA made contributions of $6,454 and $1,085 to the plans in 1996 and 1997, respectively. No contributions were made in 1995. Plan assets are primarily invested in mutual funds which invest in both debt and equity instruments. The components of net periodic pension cost for the plans are as follows:
For the Year Ended July 31 ---------------------------------------------------------1995 1996 1997 ----------------------------------------------$ 4,435 $ 2,935 $ 3,163 2 293 544 -51 (2,180) 22 (316) 1,512 --1,633 ----------------------------------------------$ 4,459 $ 2,963 $ 4,672 ================ ================ =================

Service cost - benefits earned during the period......... Interest costs on projected benefit obligation........... Actual (gain) loss on assets............................. Net amortization and deferral............................ Special charge for early retirement...................... Net periodic pension cost................................

In 1997, the Company offered retirement incentives to salaried employees. The program liability of $1,633 was included with the restructuring charge. The following table sets forth the funded status for DRA's defined benefit pension plans. [OBJECT OMITTED]
July 31 ---------------------------------1996 1997 ----------------------------5,988 489 --------------$ 6,477 =============== $ 7,021 (6,406) --------------615 (37) 372 --------------$ 950 =============== $ 11,375 1,318 --------------$ 12,693 =============== $ 13,540 (9,664) --------------3,876 (911) 1,577 --------------$ 4,542 =============== $

Actuarial present value of accumulated pension benefit obligation: Vested........................................................ Nonvested..................................................... Accumulated benefit obligation..................................... Projected benefit obligation....................................... Plan assets at fair value.......................................... Projected benefit obligation in excess of fair value of plan assets................................................... Prior service cost not yet recognized.............................. Unrecognized net gain.............................................. Pension liability recognized in the balance sheet..................

The measurement of the July 31, 1996 and 1997 projected benefit obligation was based upon a discount rate of 7.75%. The expected compensation growth rate is 5% for salaried employees. The expected rate of return on plan assets is 10%. Defined Contribution Plans Various subsidiaries of the Company sponsor voluntary savings plans for eligible salaried and hourly employees. These plans allow participants to make contributions pursuant to section 401(k) of the Internal Revenue F-17

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) Code. Certain of these plans have Company matching contribution provisions. Charges to operations were $452, $686 and $532 for 1995, 1996 and 1997,respectively. Profit Sharing Plans DRA sponsors profit sharing plans covering substantially all of its employees. Distributions are determined based upon formulas established by management and are made annually. Profit sharing expense for 1995, 1996 and 1997 was $1,700, $1,300 and $1,400, respectively. Post-Retirement Health Care and Life Insurance Plans DRA maintains hourly and salaried benefit plans that provide post-retirement health care and life insurance to retirees and eligible dependents. The benefits are payable for life, although DRA retains the right to modify or terminate the plans providing these benefits. The salaried plan is contributory, with additional cost sharing features such as deductibles and co-payments. Salaried employees who were not GM employees prior to 1992 are not eligible for the above described post-retirement benefits. It is DRA's policy to fund these benefits as claims are incurred. The following table sets forth the status of DRA's post-retirement benefit plans.
July 31 ------------------------------------1996 1997 -------------------------------$ 148 6,960 ---------------7,108 1,078 ---------------$ 8,186 ================ 160 11,459 ----------------11,619 1,058 ----------------$ 12,677 ================= $

Accumulated post-retirement benefit obligation: Fully eligible active participants...................... Active participants not yet fully eligible.............. Unrecognized net gain................................... Post-retirement benefit liability.......................

The components of post-retirement benefit expense are as follows:
For the Year Ended July 31 ----------------------------------------------------------1995 1996 1997 -----------------------------------------------$ 4,114 $ 3,557 $ 3,959 320 254 551 (59) (19) -----------------------------------------------$ 4,434 $ 3,752 $ 4,491 ================= ================= ================

Service Cost.......................................... Interest Cost......................................... Amortization of gain..................................

Measurement of the accumulated post-retirement benefit obligation was based on an 8.3% annual rate of increase in the cost of covered health care benefits. The rate was assumed to decrease ratably to 5.5% through 2002 and remain level at that rate thereafter. The discount rate used in determining the accumulated post-retirement benefit obligation was 7.75%. An increase of 1% in assumed health care cost trend rates would increase the accumulated post-retirement benefit obligation as of July 31, 1997 by 25.8% and the net periodic cost for 1997 would be increased by 28.6%. 9. STOCKHOLDERS' EQUITY AND REDEEMABLE EXCHANGEABLE PREFERRED STOCK OF DRA All shares of Class A Common Stock and Class B Common Stock are identical and will entitle the holders thereof to the same rights and privileges, provided that except as otherwise required by law, the holders of Class B common stock shall have no voting rights. Each share of Class A stock is convertible into one share of Class B stock and each share of Class B stock is convertible into one share of Class A stock. Pursuant to a Stockholders Agreement dated July 29, 1994, the Company issued 470,590 shares of Class A Common Stock and 319,410 shares of Class B Common Stock for an aggregate of $1,581. In addition, 28,750 shares of Class A common stock were issued in connection with the Nabco acquisition. On October 21, 1994, the Company approved a private placement memorandum whereby the Company is authorized to offer for sale to certain members of management of DRA up to 95,000 shares of Class A Common Stock. As of July 31, 1997, 90,000 shares were outstanding F-18

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 pursuant to the private placement at a price approximating book value. Shares issued pursuant to this plan generally vest over three years. During 1997, 26,750 shares were sold for $6,079 less than the deemed fair market value. As a result, compensation expense of $1,616 was recorded during the current year and the balance of the unearned compensation of $4,463 will be amortized over the remaining vesting period The stockholder notes receivable of $179 and $350 at July 31, 1996 and 1997, respectively, were issued in connection with the sale of Class A Common Stock and are payable in 1999 through 2002 together with interest at 9.25% accrued interest per annum. The members of DRA management who are stockholders of the Company are subject to agreements that impose certain restrictions and grant rights on their ownership and transfer of Company stock. During the first three years after issuance, stockholders are generally prohibited from transferring shares of common stock of the Company owned by them. The Company further has the right to repurchase such stock at amounts described in the respective agreements when the management investor is no longer employed by DRA. Warrants In connection with the issuance of the Junior Subordinated Notes, DRI issued warrants to purchase 100,000 shares of DRI Class A Common Stock at a price of $.02 per share. The warrants can be exercised, in whole or in part, at any time through June 31, 2004. Redeemable Exchangeable Preferred Stock of DRA In connection with the GM Acquisition, DRA issued 15,000 shares of Class A Preferred Stock (par value $.01 per share and liquidation preference $1,000 per share) to GM (DRA Preferred Stock). The provisions of the preferred stock call for a cumulative cash dividend equal to $80 per share (8%). For financial statement purposes the preferred stock has been discounted to approximately $11,500 to reflect fair value at the issuance date based upon an 11.5% dividend rate. The excess of the preference amount over the carrying value of the DRA Preferred Stock is being accreted through August 1, 2004, at which time the DRA Preferred Stock must be redeemed by DRA at $1,000 per share plus accrued and unpaid dividends. At the option of DRA, the DRA Preferred Stock may be redeemed at a price per share equal to $1,000 plus accrued and unpaid dividends. In addition, the DRA Preferred Stock may be exchanged, at the option of DRA, in whole or in part, for 8% subordinated debentures to be issued by DRA at $1,000 per share plus accrued and unpaid dividends. Dividends which accrue but remain unpaid for one year accrue additional dividends at the rate of 8%. The carrying value of the DRA Preferred Stock includes unpaid and accrued dividends of $3,896 as of July 31, 1997. 10. INCOME TAXES The following is a summary of the components of the provision for income taxes (benefit) of continuing operations:
For the Year Ended July 31 ---------------------------------------------------1995 1996 1997 ------------------------------------------$ 9,529 1,927 61 --------------11,517 (3,021) (650) ---------------$ 7,846 =============== $ 5,969 916 131 --------------7,016 $ 3,220 2,019 977 --------------6,216

Current: Federal................................. State and Local......................... Foreign................................. Deferred: Federal................................. State and Local......................... Foreign.................................

(1,240) (35) ---------------$ 5,741 ===============

(8,615) (960) 345 --------------$ (3,014) ===============

F-19

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 Income (loss) from continuing operations before income taxes (benefit), preferred dividend requirement of subsidiary and minority interest was taxed in the following jurisdictions:
For the Year Ended July 31 ---------------------------------------------------1995 1996 1997 ------------------------------------------$ 18,198 $ 10,104 $ (15,640) 371 3,208 4,903 ------------------------------------------$ 18,569 $ 13,312 $ (10,737) =============== =============== ===============

Domestic................................... Foreign....................................

A reconciliation of income taxes at the United States federal statutory rate to the effective income tax rate follows:
For the Year Ended July 31 ------------------------------------------------------1995 1996 1997 --------------------------------------------35.0% 35.0% 35.0% 4.5 4.3 (7.7) --6.0 2.7 3.8 6.8 --------------------------------------------42.2% =============== 43.1% ================ 28.1% ================

Federal statutory income tax rate.......................... State and local income taxes- net of federal tax benefit... Compensation expense....................................... Other items................................................ Effective income tax rate..................................

State and local income taxes include provisions for Indiana and Michigan which do not provide proportional benefit in loss years. The following is a summary of the significant components of the Company's deferred tax assets and liabilities:
July 31 ---------------------------------1996 1997 ----------------------------$ -7,385 2,165 2,665 1,380 4,352 -1,244 3,054 --------------22,245 Deferred tax liabilities: Depreciation...................................... Discount on exchangeable securities............... Other............................................. (11,275) (1,381) (922) --------------(13,578) --------------Net deferred tax asset................................. $ 8,667 =============== 4,424 7,157 7,196 3,207 8,480 774 789 1,488 2,835 --------------36,350 (13,475) (1,336) (1,621) --------------(16,432) --------------$ 19,918 =============== $

Deferred tax assets: Restructuring..................................... Employee benefits................................. Inventories....................................... Warranty.......................................... Asset impairment.................................. Discontinued operations........................... Non-compete agreements............................ Alternative minimum tax credits................... Other.............................................

The Company's alternative minimum tax credit may be carried forward indefinitely. Income tax payments, including state taxes, for 1995, 1996 and 1997 were $8,900, $14,000 and $5,600, respectively. No provision has been made for United States federal and state or foreign taxes that may result from future remittances of undistributed earnings of foreign subsidiaries ($9,336 at July 31, 1997) because it is expected that F-20

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 such earnings will be reinvested in these foreign operations indefinitely. It is not practical to estimate the amount of taxes that might be payable on the eventual remittances of such earnings. 11. TRANSACTIONS WITH GM The Company and GM have entered into several transactions and agreements related to their respective businesses. In addition to the transactions disclosed elsewhere in the accompanying consolidated financial statements and related notes, the Company entered into the following transactions with GM:
For the Year Ended July 31 ----------------------------------------------1995 1996 1997 ------------------------------------$ 338,356 $ 298,084 $ 301,328 205,874 112,372 97,934

Sales....................................... Material purchases and costs for services...

In addition, the Company had the following balances with GM:
July 31 -----------------------------1996 1997 ------------------------$ 27,391 $ 30,286 9,807 4,886 10,752 7,644

Trade accounts receivable............................. Other receivables..................................... Accounts payable......................................

12. LEASE COMMITMENTS The Company occupies space and uses certain equipment under lease arrangements. Rent expense was $959, $3,208 and $4,004 for 1995, 1996 and 1997, respectively. Rental commitments at July 31, 1997 for long-term non-cancelable operating leases were as follows for the year ending:
1998.......................................... 1999.......................................... 2000.......................................... 2001.......................................... 2002.......................................... Thereafter.................................... $ 4,581 3,855 2,649 1,449 1,387 1,784 ============= $ 15,705 =============

13. COMMITMENTS AND CONTINGENCIES The Company is party to various legal actions and administrative proceedings and subject to various claims arising in the ordinary course of business. The Company believes that the disposition of these matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company. F-21

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 14. GEOGRAPHICAL INFORMATION The Company operates predominantly in a single industry as a designer, manufacturer, remanufacturer, and distributor of electrical and other engine related components, including starter motors and alternators for automobiles, trucks, and other heavy duty vehicles. The Company is a multi-national corporation with operations in many countries including the United States, Canada, Mexico, Hungary, Germany, Korea and the Netherlands. Sales, operating profits and identifiable assets of Canadian, European and other foreign locations are those sales, operating profits and assets related to the operations in those locations. Geographical information is shown below:
For the Year Ended July 31 --------------------------------------------------1995 1996 1997 -----------------------------------------584,859 -5,090 -(16,526) -------------$ 573,423 ============== 36,544 -457 --------------$ 37,001 ============== 310,292 -11,523 --------------321,815 65,096 (64,384) ============== $ 322,527 ============== $ $ $ $ 657,782 26,815 15,975 -(63,720) --------------$ 636,852 =============== $ 684,790 47,240 14,487 7,052 (63,782) --------------$ 689,787 =============== 23,196 2,341 784 (366) --------------$ 25,955 =============== $ 474,991 31,197 13,105 16,303 --------------535,596 192,458 (157,485) =============== $ 570,569 =============== $

Net sales: United States........................................ Canada............................................... Europe............................................... Other foreign........................................ Eliminate intercompany sales......................... Total net sales...................................... Operating income: United States........................................ Canada............................................... Europe............................................... Other foreign........................................ Total operating income............................... Identifiable assets: United States........................................ Canada............................................... Europe............................................... Other foreign........................................ Total identifiable assets............................ Corporate assets..................................... Elimination.......................................... Total assets.....................................

36,751 2,319 1,609 ---------------$ 40,679 =============== 427,847 29,959 10,138 ---------------467,944 119,339 (112,201) =============== $ 475,082 =============== $

$

15. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR SUBSIDIARIES The Company conducts a significant portion of its business through subsidiaries. The Senior Notes referred to in Note 16 below are unconditionally guaranteed, jointly and severally, by certain direct and indirect subsidiaries (the Subsidiary Guarantors). Certain of the Company's subsidiaries do not guarantee the Senior Notes (the Non-Guarantor Subsidiaries). The claims of creditors of Non-Guarantor Subsidiaries have priority over the rights of the Company to receive dividends or distributions from such subsidiaries. Presented below is condensed consolidating financial information for the Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries at July 31, 1997 and 1996 and for the years ended July 31, 1997, 1996 and 1995. The equity method has been used by the Company with respect to investments in subsidiaries. The equity method has been used by Subsidiary Guarantors with respect to investments in Non-Guarantor Subsidiaries. Separate financial statements for Subsidiary Guarantors are not presented based on management's determination that they do not provide additional information that is material to investors. F-22

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 The following table sets forth the Guarantor and direct Non-Guarantor Subsidiaries:
Guarantor Subsidiaries ------------------------------------------Delco Remy America, Inc. Remy International, Inc. Reman Holdings, Inc. Nabco, Inc. The A&B Group, Inc. A&B Enterprises, Inc. Dalex, Inc. A&B Cores, Inc. R&L Tool Company, Inc. MCA, Inc. of Mississippi Power Investments, Inc. Franklin Power Products, Inc. International Fuel Systems, Inc. Marine Drive Systems, Inc. Marine Corporation of America Powrbilt Products, Inc. World Wide Automotive, Inc. Non-Guarantor Subsidiaries ----------------------------------------------Autovill RT Ltd. Power Investments Canada Ltd. Remy UK Limited Delco Remy International (Europe) GmbH Remy India Holdings, Inc. Remy Mauritius Ltd. Remy Korea Holdings, Inc. 681287 Alberta Ltd. Publitech, Inc. World Wide Automotive Distributors, Inc. Autovill Holdings, Inc.

F-23

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997
Condensed Consolidating Balance Sheet July 31, 1997 ----------------------------------------------------------------------------Delco Remy International Inc. Non(Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated -------------- --------------------------------------------------------------

Assets: Current assets: Cash and cash equivalents........ Trade accounts receivable........ Affiliate accounts receivable, net............... Other receivables................ Recoverable income taxes......... Inventories...................... Deferred income taxes............ Other current assets............. Total current assets.................. Property and equipment................ Less accumulated depreciation......... $

---

$

1,504 99,745

$

8,546 10,439

$

---

$

10,050 110,184

-33,409 -9,605 -2,889 -145,035 4,315 17,159 -4,163 -------------- -------------4,315 313,509

2 882 -19,382 -480 -------------39,731 13,433 4,492 -------------8,941 -10,175 --1,758 -------------$ 60,605 ==============

(33,411)(a) ------------------(33,411) -----------------

-10,487 2,889 164,417 21,474 4,643 -------------324,144 147,222 26,858 -------------120,364

20 133,769 13 22,353 -------------- -------------7 111,416

Deferred financing costs.............. Goodwill, net......................... Net assets held for disposal.......... Investment in affiliates.............. Other assets.......................... Total assets..........................

5,148 3,655 -76,437 -25,279 171,614 -1,953 (1,463) -------------- -------------$ 183,037 $ 528,833 ============== ==============

-8,803 -86,612 -25,279 (168,495)(b)(c) 3,119 -2,248 -------------- -------------$(201,906) $ 570,569 ============== ==============

(a) Eliminations of intercompany receivables and payables. (b) Elimination of investments in subsidiaries. (c) Elimination of investments in subsidiaries' earnings. F-24

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997
Condensed Consolidating Balance Sheet July 31, 1997 -----------------------------------------------------------------------------Delco Remy International Inc. Non(Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated -------------- -------------- -------------- -------------- --------------

Liabilities and stockholders' equity (deficit): Current liabilities: Accounts payable................. Affiliate accounts payable....... Accrued interest payable......... Accrued restructuring charges.... Liabilities related to discontinued operations.......... Other liabilities and accrued expenses......................... Current portion of long-term debt............................. Total current liabilities............. Deferred income taxes................. Long-term debt, less current portion.. Post-retirement benefits other than pensions......................... Accrued pension benefit............... Other non-current liabilities......... Minority interest in subsidiary....... Redeemable exchangeable preferred stock of subsidiary.............. Stockholders' equity (deficit): Common stock: Class A Shares.............. Class B Shares.............. Paid-in capital.................. Subsidiary investment............ Retained earnings (deficit)...... Cumulative translation adjustment....................... Stock purchase plan.............. Total stockholders' equity (deficit)........................ Total liabilities and stockholders' equity (deficit)................. $

195 15,684 ---(11,076)

$

82,585 6,152 3,107 37,377 3,324 41,034

$

5,798 11,575 ---5,991

$

-$ (33,411)(a) -----

88,578 -3,107 37,377 3,324 35,949

--------------4,803 10,631 173,511 --876 ---

506 -------------174,085 (9,114) 189,669 12,677 4,542 3,231 6,504 16,071

1 -------------23,365 39 81 --17 1,528 --

--------------(33,411) --------

507 -------------168,842 1,556 363,261 12,677 4,542 4,124 8,032 16,071

5 4 10,194 -(12,174) -(4,813) -----------(6,784) -----------$ 183,037 ==============

---127,665 3,503 ---------------131,168 -------------$ 528,833 ==============

---31,970 5,357 (1,752) --------------35,575 -------------$ 60,605 ==============

---(159,635)(b) (8,860)(c) ---------------(168,495) --------------

5 4 10,194 -(12,174) (1,752) (4,813) -------------(8,536) --------------

$ (201,906) $ 570,569 ==============================

(a) Eliminations of intercompany receivables and payables. (b) Elimination of investments in subsidiaries. (c) Elimination of investments in subsidiaries' earnings. F-25

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997
Condensed Consolidating Statement of Operations For the Year Ended July 31, 1997 -----------------------------------------------------------------------------Delco Remy International Inc. Non(Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated -------------- -------------- -------------- -------------- -------------Net sales............................. -$ 684,790 $ 68,779 $(63,782)(a) $ 689,787 Cost of goods sold.................... -548,875 55,141 (63,782)(a) 540,234 -------------- -------------- -------------- -------------- -------------Gross profit.......................... -135,915 13,638 -149,553 Selling, engineering, and administrative expenses.......... Restructuring charges................. Operating (loss) income............... Other income (expense): Gain on sale of building......... Interest expense................. (Loss) income from continuing operations before income tax (benefit), preferred dividend requirement of subsidiary, and minority interest................ Minority interest in income of subsidiaries..................... Equity in earnings of subsidiaries.... Income taxes (benefit)................ Preferred dividend requirement of subsidiary....................... (Loss) income from continuing operations....................... Discontinued operations: Loss from operations of discontinued businesses (less applicable income tax benefit)... Loss on disposal of businesses (less applicable income tax benefit)......................... Extraordinary item: Write-off of debt issuance costs (less applicable income tax benefit)......................... Net (loss) income..................... 6,325 --------------(6,325) -(18,815) -------------71,933 34,500 -------------29,482 -(19,997) -------------10,840 --------------2,798 2,082 38 --------------------------------------------89,098 34,500 -------------25,955 2,082 (38,774) --------------

(25,140) -1,821 (9,023) --------------(14,296)

9,485 921 -4,042 --------------4,522

4,918 (29) -1,967 --------------2,980

--(1,821)(b) -1,648(c) -------------(3,469)

(10,737) 892 -(3,014) 1,648 -------------(10,263)

--

808

--

--

808

--

874

--

--

874

--------------$ (14,296) ==============

2,351 -------------$ 489 ==============

--------------$ 2,980 ==============

--------------$ (3,469) ==============

2,351 -------------$ (14,296) ==============

(a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income (loss) from consolidated subsidiaries. (c) Recording of preferred dividend requirement of subsidiary. F-26

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 Condensed Consolidating Statement of Cash Flows
For the Year Ended July 31, 1997 -----------------------------------------------------------------------------Delco Remy International Inc. Non(Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated -------------- -------------- -------------- -------------- -------------$ (14,296) 375 $ 489 3,123 $ 2,980 -$(3,469)(a) -$ (14,296) 3,498

Operating Activities: Net (loss) income..................... Extraordinary item.................... Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization.... Gain on sale of building......... Equity in earnings of subsidiary. Deferred income taxes............ Post-retirement benefits other than pensions.................... Accrued pension benefits......... Non-cash interest expense........ Preferred dividend requirement of subsidiary....................... Changes in operating assets and liabilities, net of acquisitions: Accounts receivable.......... Inventories.................. Accounts payable............. Intercompany accounts........ Other current assets and liabilities.................. Accrued restructuring........ Other non-current assets and liabilities, net............. Net cash (used in) provided by operating activities............. Investing activities: Acquisition, net of cash acquired..... Purchase of property and equipment.... Investment in affiliates.............. Proceeds from sale of building........ Net cash (used in) provided by investing activities............. Financing activities: Proceeds from issuances of long-term debt............................. Payments on long-term debt............ Other financing activities............ Net cash provided by (used in) financing activities............. Effect of exchange rate changes on cash Net (decrease) increase in cash and cash equivalents................. Cash and cash equivalents at beginning of year.......................... Cash and cash equivalents at end of year.............................

1,629 -(1,821) 7,864 --3,337 ---(67) (74,450) (8,727) -(12,209) -------------(98,365) (45,284) -(3,119) --------------(48,403)

19,942 --(17,481) 4,491 3,592 4,612 -(1,715) (4,950) (10,970) 65,730 995 31,836 16,180 -------------115,874 135 (27,025) ---------------(26,890)

752 (2,082) -39 ----(1,626) (5,295) 1 8,720 3,194 -(1,655) -------------5,028 2,707 (4,863) -3,362 -------------1,206

--1,821(a) ----1,648(b) ----------------------------------------

22,323 (2,082) -(9,578) 4,491 3,592 7,949 1,648 (3,341) (10,245) (11,036) -(4,538) 31,836 2,316 -------------22,537 (42,442) (31,888) (3,119) 3,362 -------------(74,087)

162,700 (16,000) --------------146,700 --------------(68) 68 -------------$ -==============

17,300 (110,200) 3,986 -------------(88,914) --------------70 1,434 -------------$ 1,504 ==============

-----------------408 -------------6,642 1,904 -------------$ 8,546 ==============

----------------------------------------------$ -==============

180,000 (126,200) 3,986 -------------57,786 408 -------------6,644 3,406 -------------$ 10,050 ==============

(a) Elimination of equity in earnings of subsidiary. (b) Recording of preferred dividend requirement of subsidiary. F-27

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 Condensed Consolidating Balance Sheet
July 31, 1996 -------------------------------------------------------------------------------Delco Remy International Inc. Non(Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated -------------- ----------------------------------------------------------------(in thousands)

Assets: Current assets: Cash and cash equivalents........ Trade accounts receivable, net... Affiliate accounts receivable.... Other receivables................ Recoverable income taxes......... Inventories...................... Deferred income taxes............ Other current assets............. Total current assets.................. Property and equipment................ Less accumulated depreciation.........

68 $ 1,434 -87,161 -80,650 -10,265 825 7,013 -111,631 1,548 13,914 -790 -------------- -------------2,441 312,858

$

1,904 7,831 -320 836 11,952 -423 -------------23,266 7,408 1,028 -------------6,380 -8,396 -2,055 -------------$ 40,097 ==============

$

--(80,650)(a) ---------------------(80,650) ---------------------(119,240)(b)(c) -----------------$(199,890) =================

$

3,406 94,992 -10,585 8,674 123,583 15,462 1,213 -------------257,915 170,391 29,235 -------------141,156 6,497 66,570 -2,944 -------------$ 475,082 ==============

$

20 162,963 -28,207 -------------- -------------20 134,756

Deferred financing costs.............. Goodwill, net......................... Investment in affiliate............... Other assets.......................... Total assets..........................

481 6,016 -58,174 119,240 -544 345 -------------- -------------$ 122,726 $ 512,149 ============== ==============

F-28

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 Condensed Consolidating Balance Sheet
July 31, 1996 -----------------------------------------------------------------------------Delco Remy International Inc. Non(Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated -------------- -------------- -------------- -------------- --------------

Liabilities and stockholders' equity (deficit): Current liabilities: Accounts payable................. Affiliate accounts payable....... Accrued interest payable......... Accrued restructuring charges.... Liabilities related to discontinued operations.......... Other liabilities and accrued expenses......................... Current portion of long-term debt............................. Total current liabilities........ Deferred income taxes................. Long-term debt, less current portion.. Post-retirement benefits other than pensions......................... Accrued pension benefit............... Other non-current liabilities......... Minority interest in subsidiary....... Redeemable exchangeable preferred stock of subsidiary.............. Stockholders' equity (deficit): Common stock: Class A Shares.............. Class B Shares.............. Paid-in capital.................. Subsidiary investment............ Retained earnings (deficit)...... Cumulative translation adjustment....................... Notes receivable from stockholders..................... Total stockholders' equity (deficit)........................ Total liabilities and stockholders' equity (deficit).................

$

262 73,322 ---(1,524)

$

75,509 4,968 4,026 5,541 11,005 31,151

$

5,436 2,360 ---3,056

$

-(80,650)(a) -----

$

81,207 -4,026 5,541 11,005 32,683

--------------72,060 -46,919 --(3) ---

8,511 -------------140,711 6,795 242,225 8,186 950 2,582 4,457 14,420

1,141 -------------11,993 ----2,848 ---

--------------(80,650) --------

9,652 -------------144,114 6,795 289,144 8,186 950 5,427 4,457 14,420

5 4 1,798 -2,122 -(179) -------------3,750 -------------$ 122,726 ==============

---87,161 4,662 ---------------91,823 -------------$ 512,149 ==============

---25,040 2,377 (2,161) --------------25,256 -------------$ 40,097 ==============

---(112,201)(b) (7,039)(c) ---------------(119,240) -------------$(199,890) ==============

5 4 1,798 -2,122 (2,161) (179) -------------1,589 -------------$ 475,082 ==============

(a) Elimination of intercompany receivables and payables. (b) Elimination of investments in subsidiaries. (c) Elimination of investments in subsidiaries' earnings. F-29

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 Condensed Consolidating Statement of Operations
For the Year Ended July 31, 1996 -----------------------------------------------------------------------------Delco Remy International Inc. Non(Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated -------------- -------------- -------------- -------------- -------------$ -$ 657,782 $ 42,790 $(63,720)(a) $ 636,852 -541,363 32,435 (63,720)(a) 510,078 -------------- -------------- -------------- -------------- --------------1,923 --------------(1,923) (4,503) -------------116,419 69,644 8,101 -------------38,674 (22,477) -------------10,355 6,427 --------------3,928 (387) --------------------------------------------126,774 77,994 8,101 -------------40,679 (27,367) --------------

Net sales............................. Cost of goods sold.................... Gross profit.......................... Selling, engineering, and administrative expenses.......... Restructuring charges................. Operating (loss) income............... Interest expense...................... (Loss) income from continuing operations before income taxes (benefit), preferred dividend requirement of subsidiary and minority interest................ Minority interest in income of subsidiary....................... Equity in earnings of subsidiary...... Income taxes (benefit)................ Preferred dividend requirement of subsidiary....................... (Loss) income from continuing operations....................... Discontinued operations: Loss from operations of discontinued businesses (less applicable income tax benefit)... Loss on disposal of businesses (less applicable income tax benefit)......................... Net (loss) income.....................

(6,426) -(1,904) (3,489) --------------(4,841)

16,197 --8,014 --------------8,183

3,541 259 -1,216 --------------2,066

--1,904(b) -1,516(c) -------------388

13,312 259 -5,741 1,516 -------------5,796

--

1,573

--

--

1,573

--------------$ (4,841) ==============

9,064 -------------$ (2,454) ==============

--------------$ 2,066 ==============

--------------$ 388 ==============

9,064 -------------$ (4,841) ==============

(a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income (loss) from consolidated subsidiaries. (c) Recording of preferred dividend requirement of subsidiary. F-30

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 Condensed Consolidating Statement of Cash Flows
For the Year Ended July 31, 1996 -----------------------------------------------------------------------------Delco Remy NonInternational Subsidiary Guarantor Inc. Guarantors Subsidiaries Eliminations Consolidated -------------- -------------- -------------- -------------- -------------(in thousands) $ (4,841) $ (2,454) $ 2,066 $ 388 $ (4,841)

Operating Activities: Net (loss) income..................... Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization.... Equity in earnings of subsidiary. Deferred income taxes............ Post-retirement benefits other than pensions.................... Accrued pension benefits......... Non-cash interest expense........ Preferred dividend requirement of subsidiary....................... Changes in operating assets and liabilities, net of acquisitions: Accounts receivable.......... Inventories.................. Accounts payable............. Intercompany accounts........ Other current assets and liabilities.................. Accrued restructuring........ Other non-current assets and liabilities, net............. Net cash provided by (used in) operating activities............. Investing activities: Acquisition, net of cash acquired..... Purchase of property and equipment.... Net cash used in investing activities. Financing activities: Proceeds from issuances of long-term debt............................. Payments on long-term debt............ Other financing activities............ Net cash provided by (used in) financing activities............. Effect of exchange rate changes on cash.......................... Net (decrease) increase in cash and cash equivalents................. Cash and cash equivalents at beginning of year.......................... Cash and cash equivalents at end of year.............................

-1,904 (620) --2,333 ---262 27,650 (2,679) -(1,148) -------------22,861 (47,685) (1) -------------(47,686)

18,569 -(3,328) 3,752 (3,509) 5,534 -(24,724) (27,048) 7,339 (29,070) 21,702 5,541 1,248 -------------(26,448) 1,365 (32,740) -------------(31,375)

986 -1,001 ----266 1,328 1,033 1,420 (794) -(4,403) -------------2,903 -----------------

-(1,904)(a) ----1,516(b) --------------------------------------

19,555 -(2,947) 3,752 (3,509) 7,867 1,516 (24,458) (25,720) 8,634 -18,229 5,541 (4,303) -------------(684) (46,320) (32,741) -------------(79,061)

24,300 ---------------24,300 --------------(525) 593 -------------$ 68 ==============

65,352 (6,466) (20) -------------58,866 --------------1,043 391 -------------$ 1,434 ==============

-(2,376) --------------(2,376) 883 -------------1,410 494 -------------$ 1,904 ==============

----------------------------------------------$ -==============

89,652 (8,842) (20) -------------80,790 883 -------------1,928 1,478 -------------$ 3,406 ==============

(a) Elimination of investment in affiliates earnings. (b) Elimination of preferred dividend requirement of subsidiary. F-31

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 Condensed Consolidating Statement of Operations
For the Year Ended July 31, 1995 -----------------------------------------------------------------------------Delco Remy International Inc. Non(Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated -------------- -------------- -------------- -------------- -------------$ -$ 584,859 $ 5,090 $(16,526)(a) $ 573,423 -488,406 3,336 (16,526)(a) 475,216 -------------- -------------- -------------- -------------- --------------825 -------------(825) (2,083) -------------96,453 59,084 -------------37,369 (16,263) -------------1,754 1,297 -------------457 (86) -------------------------------------------98,207 61,206 -------------37,001 (18,432) --------------

Net sales............................. Cost of goods sold.................... Gross profit.......................... Selling, engineering, and administrative expenses.......... Operating (loss) income............... Interest expense...................... (Loss) income from continuing operations before income taxes (benefit), preferred dividend requirement of subsidiary, and minority interest................ Equity in earnings of subsidiary...... Income taxes (benefit)................ Preferred dividend requirement of subsidiary....................... Income (loss) from continuing operations....................... Discontinued operations: Loss from operations of discontinued businesses (less applicable income tax benefit)... Net income (loss).....................

(2,908) 8,943 (928) --------------6,963

21,106 -8,713 --------------12,393

371 -61 --------------310

-(8,943)(b) -1,397(c) -------------(10,340)

18,569 -7,846 1,397 -------------9,326

--------------$ 6,963 ==============

2,363 -------------$ 10,030 ==============

--------------$ 310 ==============

--------------$(10,340) ==============

2,363 -------------$ 6,963 ==============

(a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income (loss) from consolidated subsidiaries. (c) Recording of preferred dividend requirement of subsidiary. F-32

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997
Condensed Consolidating Statement of Cash Flows For the Year Ended July 31, 1995 -----------------------------------------------------------------------------Delco Remy NonInternational Subsidiary Guarantor Inc. Guarantors Subsidiaries Eliminations Consolidated -------------- -------------- -------------- -------------------------$ 6,963 $ 10,030 $ 310 $ (10,340)(a)(b) $ 6,963

Operating Activities: Net income (loss)..................... Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization.... Equity in earnings of subsidiary. Deferred income taxes............ Post-retirement benefits other than pensions.................... Accrued pension benefits......... Non-cash interest expense........ Preferred dividend requirement of subsidiary....................... Changes in operating assets and liabilities, net of acquisitions: Accounts receivable.......... Inventories.................. Accounts payable............. Intercompany accounts........ Other current assets and liabilities.................. Other non-current assets and liabilities, net............. Net cash provided by (used in) operating activities............. Investing activities: Acquisitions, net of cash acquired.... Purchase of property and equipment.... Net cash (used in) provided by investing activities............. Financing activities: Proceeds from issuances of long-term debt............................. Payments on long-term debt............ Other financing activities............ Net cash (used in) provided by financing activities............. Net increase (decrease) in cash and cash equivalents................. Cash and cash equivalents at beginning of year.......................... Cash and cash equivalents at end of year.............................

-(8,943) (927) --2,086 ----62,733 330 3,578 -------------65,820 (64,429) (19) -------------(64,448)

14,491 -(2,653) 4,434 4,459 5,983 -(49,270) (7,212) 48,862 (63,674) (6,450) (3,797) -------------(44,797) 1,824 (11,129) -------------(9,305)

42 ------(50) (823) 751 941 (537) 264 -------------898 595 (93) -------------502

-8,943(a) ----1,397(b) -------------------------------------

14,533 -(3,580) 4,434 4,459 8,069 1,397 (49,320) (8,035) 49,613 -(6,657) 45 -------------21,921 (62,010) (11,241) -------------(73,251)

-(848) --------------(848) -------------524 69 -------------$ 593 ==============

31,918 (3,163) 118 -------------28,873 -------------(25,229) 25,620 -------------$ 391 ==============

-(906) --------------(906) -------------494 --------------$ 494 ==============

---------------------------------------------$ -==============

31,918 (4,917) 118 -------------27,119 -------------(24,211) 25,689 -------------$ 1,478 ==============

(a) Elimination of investment in affiliate earnings. (b) Recording of preferred dividend requirement of subsidiary. F-33

DELCO REMY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) July 31, 1997 16. SUBSEQUENT EVENTS Offerings In October 1997, the Company filed Registration Statements to offer approximately $60,000 of Class A Common Stock ($69,000 if the Underwriters' over-allotment option is exercised in full) and $130,000 of % Senior Notes Due 2007 (the Senior Notes). Net proceeds to the Company from such Offerings, after deduction of associated expenses, are expected to be approximately $181,000. Planned Acquisition On October , 1997, the Company entered into the Ballantrae Acquisition Agreement to acquire all of the capital stock of Ballantrae (the Planned Acquisition) for $49,200 (including assumed debt). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty original equipment manufacturers and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately % of Ballantrae's $37,600 of net sales. The Company will exchange shares of its Common Stock with a value (at the initial public offering price in the Equity Offering) of approximately $19,000 for the equity of Ballantrae and will repay approximately $30,000 of Ballantrae's debt. The acquisition is expected to be completed at or prior to the consummation of the Offerings. Recapitalization In connection with the above-mentioned Offerings and Planned Acquisition, the Company plans to complete several transactions pursuant to which the Company's outstanding debt and preferred stock will be restructured (the Recapitalization). Significant components of the Recapitalization, together with the applicable accounting effects, will be as follows: The payment in full of the World Note. The early extinguishment of the World Note will result in a write-off of the unamortized debt issue costs of $1,350, net of income taxes, which will be accounted for as an extraordinary loss on this transaction. The payment in full of the GM Acquisition Note. The exchange of the Junior Subordinated Notes for shares of Class A Common Stock. The exchange of the outstanding shares of 8% preferred stock of DRA to an 8% subordinated debenture of DRA. The payment in full of $11,800 principal amount of subordinated notes payable to certain former stockholders of A&B Group and Power. The amendment of the senior credit facility in connection with the consummation of the Offerings. Payment of Ballantrae debt assumed in the Planned Acquisition. Share and Per Share Information On October , 1997, the Company authorized a -to-one stock split. All share and per share amounts have been adjusted to reflect this split. The primary loss per share is based on the weighted average number of shares of common stock and common stock equivalents outstanding during the year, adjusted to reflect all common stock issued within one year prior to the initial public offering of common stock as if those shares issued had been outstanding for the entire year. The supplemental loss per share is based on the weighted average number of shares of common stock and common stock equivalents used in the primary loss per share calculation, retroactively adjusted to reflect the assumed exchange of the Junior Subordinated Notes, the issuance of the Common Stock and Senior Notes in the Offerings and the repayment of certain debt with the proceeds of the Offerings. Historical earnings (loss) per share for 1995, 1996 and 1997 are $ , $( ) and $( ), respectively. F-34

[LOGO OF DELCO REMY INTERNATIONAL APPEARS HERE]

PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution.
SEC Registration Fee....................................... NASD Filing Fee............................................ NYSE Filing Fee............................................ Blue Sky Fees and Expenses................................. Legal Fees and Expenses.................................... Accounting Fees and Expenses............................... Registrar and Transfer Agent Fees.......................... Printing and Engraving Expenses............................ Miscellaneous.............................................. Total...................................................... $20,910 7,400 * * * * * * * -------* ========

* To be completed by amendment. Each amount set forth above, except the SEC registration fee, the NASD filing fee and NYSE filing fee, is estimated. Item 14. Indemnification of Directors and Officers. As permitted by the Delaware Law, the Company's Certificate of Incorporation provides that directors of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts of omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, relating to prohibited dividends or distributions or the repurchase or redemption of stock, or (iv) for any transaction from which the director derives an improper personal benefit. In addition, the Company's By-laws provide for indemnification of the Company's officers and directors to the fullest extent permitted under Delaware law. Section 145 of the Delaware Law provides that a corporation may indemnify any persons, including officers and directors, who were or are, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as an officer, director, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, for criminal proceedings, had no reasonable cause to believe that his conduct was unlawful. A Delaware corporation may indemnify officers and directors in an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses that such officer or director actually and reasonably incurred. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. The Underwriting Agreement provides for indemnification by the Underwriters of the registrant and its directors, officers and controlling persons for certain liabilities, including liabilities arising under the Securities Act of 1933, as amended. II-1

The directors and officers of the registrant are insured against certain liabilities under the registrant's directors' and officers' liability insurance. Item 15. Recent Sales of Unregistered Securities. 1. Securities Sold. 10 5/8% Senior Subordinated Notes due 2006 (the "Senior Subordinated Notes") (a) Underwriters and Other Purchasers. No underwriters were involved in the offering of the Senior Subordinated Notes. The Initial Purchasers were Salomon Brothers Inc and Smith Barney Inc. (b) Consideration. The Initial Purchasers paid the Company $135,800,000 for the Senior Subordinated Notes. (c) Exemption from Registration Claimed. The Senior Subordinated Notes were sold pursuant to Section 4(2) of the Securities Act of 1933, as amended. 2. Securities Sold. Class A Common Stock, par value $.01 per share. (a) Underwriters and Other Purchasers. No underwriters were involved in the offering of the Class A Common Stock. The Class A Common Stock was sold to 45 employees of the Company and its subsidiaries ("Management Investors") over the past three years. (b) Consideration. The Management Investors paid an aggregate of $203,054 in cash and notes in an aggregate principal amount of $580,602. (c) Exemption from Registration Claimed. The Class A Common Stock was sold pursuant to Section 4(2) of the Securities Act of 1933, as amended. Item 16. Exhibits and Financial Statement Schedules. (a) Exhibits The following exhibits are filed herewith unless otherwise indicated:
Exhibit Number -----1.1* 3.1* 3.2* 4.1* 5.1* 10.1 10.2 10.3 10.4 10.5 10.6 10.7* 10.8 10.9 10.10* 10.11* Description -----------

Underwriting Agreement Certificate of Incorporation of the Company, as amended By-laws of the Company Specimen Class A Common Stock Certificate Opinion of Dechert Price & Rhoads, counsel to the Company Light Duty Starter Motor Supply Agreement, dated July 31, 1994, by and between Delco Remy America, Inc. ("DRA") and General Motors Corporation ("GM") Heavy Duty Component Supply Agreement, dated July 31, 1994, by and between DRA and GM Distribution and Supply Agreement, dated July 31, 1994, by and between DRA and GM Trademark License, dated July 31, 1994, by and among DRA, DR International, Inc. and GM Tradename License Agreement, dated July 31, 1994, by and among DRA, DR International, Inc. and GM Partnership Agreement of Delco Remy Mexico S. de R.L. de C.V., dated April 17, 1997 Joint Venture Agreement, dated , by and between Remy Korea Holdings, Inc. and S.C. Kim Securities Purchase and Holders Agreement, dated July 29, 1994, by and among the Company, CVC, WEP, MascoTech, Harold K. Sperlich, James R. Gerrity and the individuals named therein as Management Investors Registration Rights Agreement, dated July 29, 1994, by and among the Company, CVC, WEP, MascoTech, Harold K. Sperlich, James R. Gerrity and the individuals named therein as Management Investors Employment Agreement, dated July 31, 1994, by and between Delco Remy International, Inc. and Thomas J. Snyder Fourth Amended and Restated Financing Agreement, dated as of , 1997, among the Company, certain of the Company's subsidiaries signatories thereto and Bank One, Indianapolis, National Association

II-2

10.12 10.13* 10.14 10.15* 11.1* 12.1 21.1* 23.1 23.2 24.1

Indenture, dated as of August 1, 1996, among the Company, certain of the Company's subsidiaries signatories thereto and National City Bank of Indiana, as trustee 8% Subordinated Debenture of DRA, due July 31, 2004 in favor of GM Contingent Purchase Price Note of DRA, in favor of GM, dated July 31, 1994 Agreement and Plan of Merger, dated October , 1997, among the Company, Ballantrae, a subsidiary of the Company and the Stockholders of Ballantrae Statement re Computation of Earnings per Share Statement re Computation of Ratios Subsidiaries of Registrant Consent of Ernst & Young (see page II-4) Consent of Dechert Price & Rhoads included in Exhibit 5.1 Power of Attorney included on Signature Page

* To be filed by amendment. (b) Financial Statement Schedules: None Item 17. Undertakings. (a) The undersigned registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrant hereby undertakes that: (1) For purposes of determining the liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3

Consent of Independent Accountants We consent to the reference to our firm under the captions "Experts" and "Selected Consolidated Historical Financial Data" and to the use of our reports dated September 5, 1997 (except for "Share and Per Share Information" in Note 16 as to which the date is October , 1997), in the Registration Statement on Form S-1 and related Prospectus of Delco Remy International, Inc. for the registration of its Common Stock. October , 1997 The foregoing consent is in the form that will be signed upon the determination of the stock split as described in Note 16 to the consolidated financial statements. ERNST & YOUNG LLP II-4

SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson and State of Indiana on October 9, 1997. DELCO REMY INTERNATIONAL, INC. By: HAROLD K. SPERLICH HAROLD K. SPERLICH Chairman KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Thomas J. Snyder and Susan E. Goldy and each of them such person's true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
HAROLD K. SPERLICH ----------------------------------------Harold K. Sperlich DAVID L. HARBERT ----------------------------------------David L. Harbert ----------------------------------------E. H. Billig RICHARD M. CASHIN, JR. ----------------------------------------Richard M. Cashin, Jr. MICHAEL A. DELANEY ----------------------------------------Michael A. Delaney JAMES R. GERRITY ----------------------------------------James R. Gerrity ROBERT J. SCHULTZ ----------------------------------------Robert J. Schultz THOMAS J. SNYDER ----------------------------------------Thomas J. Snyder Chairman (principal executive officer) and Director Executive Vice President and Chief Financial Officer (principal financial and principal accounting officer) Director October 9, 1997

October 9, 1997

Director

October 9, 1997

Director

October 9, 1997

Director

October 9, 1997

Director

October 9, 1997

Director

October 9, 1997

II-5

Exhibit 10.1 LIGHT DUTY STARTER MOTORS* COMPONENT SUPPLY AGREEMENT THIS COMPONENT SUPPLY AGREEMENT ("Agreement") is entered into July 31, 1994, by DRA, Inc. ("DRA"), a company organized under the laws of the State of Delaware, and General Motors Corporation, a company organized under the laws of the State of Delaware ("GM"). INTRODUCTION This Agreement is entered with reference to the following facts: A. DRA, DR International, Inc. ("DRI") and GM have entered into the Asset Purchase Agreement dated July 13, 1994, (the "Asset Purchase Agreement"), pursuant to which DRA will purchase from GM certain of the assets, and will assume certain of the liabilities, of the Delco Remy Heavy Duty Starter Motors and Generators business ("HDO"), the Delco Remy Powder Metal Forge business ("PMF"), the Delco Remy Light Duty Starter Motors business ("LDO"), the Delco Remy Light Duty Starter Motors Remanufacturing business ("LDO Reman") and the Delco Remy Heavy Duty Starter Motors and Generators Remanufacturing business ("HDO Reman" and collectively with HDO, LDO, PMF and LDO Reman, the "Businesses") of the Delco Remy Division of GM (together with any successor unit of GM, the "Delco Remy Division"). B. In connection with the transactions contemplated by the Asset Purchase Agreement, GM and DRA desire to establish a mutually beneficial and efficient long-term arrangement for the purchase and sale of certain motor vehicle components and to cooperate with each other to achieve certain commercial objectives. Accordingly, DRA desires to sell to GM, and GM desires to purchase from DRA, certain motor vehicle components upon the terms and conditions stated herein. * Portions of this Exhibit 10.1 were omitted and filed separately with the Secretary of the Securities and Exchange Commission (the "Commission") pursuant to an application for confidential treatment filed with the Commission pursuant to Rule 406 under the Securities Act of 1933. Such portions are marked by the word "Redacted."

C. DRI has formed DRA to own and operate the Businesses. The investors in DRI and GM intend that DRA will be a supplier of GM for an extended period, subject to DRA's competitive performance in technology, quality, service and price as set forth herein. DRA acknowledges GM's normal expectation that component suppliers will deliver a minimum net cost reduction of three percent (3%) each year. GM acknowledges that DRA will need several years to achieve satisfactory financial performance. Both GM and DRA acknowledge that the best way to achieve their goals is by establishing a cooperative, ongoing relationship. D. DRA understands that components sold under this Agreement must be competitive with regard to components available to GM from other suppliers to GM, and as set forth herein, that GM intends to continue to seek information regarding products of other suppliers, including information regarding quality, technology, service, and price. NOW, THEREFORE, in consideration of the mutual promises contained herein and intending to be legally bound, DRA and GM hereby agree as follows: ARTICLE 1 - PURCHASE AND SUPPLY COMMITMENTS 1.1(a) Commitment for GM Requirements: For the term of this Agreement, subject to paragraph 1 .2(d)(iii) of this Agreement, DRA agrees to sell and GM agrees to purchase one hundred percent (100%) of GM's production and current production model service requirements for Components in the United States and Canada, except for GEO and Saturn production requirements as of the date hereof. This Agreement also applies to GM's requirements for those production and current production model service Components presently produced by DRA's Mexican licensee, GCI, or any successor to GCI. Additionally, DRA agrees, and commits through its purchase offer, to capacitize its operations to the full extent of GM's requirements for such Components; and shall not rebill GM for the cost of any tooling or equipment transferred pursuant to the Asset Purchase Agreement or otherwise related to the PG-260 program, other than those expenditures 2

specifically designated on Annex C as eligible for rebill. The parties acknowledge and agree with respect to such rebills, however, that a material change by GM in either the volume or the timing of the PG-260 program's scheduled capacitization from that as of the Closing may require the modification of the above rebill provision, by mutual agreement of the parties. To the extent that GM purchases any Components indirectly (e.g., incorporated into a subassembly purchased from a sub-assembler for use as original equipment), GM shall require such sub-assembler to comply with this Article 1.1. For purposes of this Agreement, the term "Components" shall mean any one or more of the motor vehicle light duty starter motors listed and specifically designated as Category A - Straight Drive Models or Category B - Planetary Gear Models, in the Supply Schedule attached hereto as Annex "A", plus any subsequent light duty starter motors specifically designated as "replacements" for those models listed in Annex "A", which are required by GM for use as original equipment or service parts between the effective date of this Agreement and July 31, 2004, provided, however, that "Components" shall not include (i) remanufactured motor vehicle light duty starter motors and parts and sub- assemblies, and (ii) motor vehicle light duty starter motors and parts and assemblies for past model service. 1.1(b) Issuance of Purchase Orders: GM will place all orders hereunder in accordance with GM's customary practices, as the same may be revised from time to time. 1.2 Prices and Adjustments (a) Initial Prices: The unit prices for the Components as of the effective date of this Agreement are stated in the Supply Schedule (Annex "A"). GM and DRA understand the current prices listed in Annex A are market competitive as of Fall 1993. In addition, the parties agree that GM's standard non-ferrous metals price adjustment policies will apply throughout the term of this Agreement. 3

(b) Cost Reduction Programs: (i) DRA and GM shall use their best efforts to identify and implement productivity and other improvements to reduce DRA's cost of producing the Components. Beginning in the second model year after DRA's transition out of GM (i.e. beginning August 1, 1995) (the "Second Model Year") with regard to "Category A" Components and the third model year after such transition (i.e. beginning August 1, 1996) (the "Third Model Year") with regard to "Category B" Components, and each model year thereafter during the term of this Agreement, DRA shall retain fifty percent (50%) of the amount of the "Cost Savings" (as such term is defined below) achieved in the most recent model year ended and fifty percent (50%) of the Cost Savings shall be passed on to GM by means of additional price reductions on Components; provided, however, that DRA shall retain 100% of the Cost Savings resulting from the "right sizing" (the related reduction of hourly personnel and elimination of all associated employee benefit costs as described in Section 7.13 of the Asset Purchase Agreement) of DRA's business as contemplated in DRA's business plan for the LDO business. All calculations pursuant to this Paragraph 1.2(b)(i) shall be done at a plant level for each Component. For purposes of this Agreement, the term "Cost Savings" shall mean the net reduction, if any, in the full manufacturing cost to produce one unit of a Component (taking into account all labor, material and plant burden (including depreciation and amortization)) at the end of a model year from the full manufacturing cost to produce one unit of a Component at the beginning of a model year, calculated utilizing a consistent accounting procedure agreed upon by the parties whereby all of DRA's costs are allocated on a part number basis which reflects the true full manufacturing cost to produce one unit of the Component. The parties shall agree upon a mutually acceptable measuring device for calculating the cost savings no later than six (6) months prior to the commencement of the second model year taking into account DRA's need to protect the confidentiality of the cost information and GM's need to verify the information. (ii) In addition, GM will make available to DRA, and DRA will participate in good faith in, all productivity improvement programs generally available to suppliers to 4

GM, including but not limited to PICOS workshops and creativity teams. Each party will bear its respective costs arising from participation in such activities. (c) Prices and Adjustments for Prior Model Service Parts: Pricing with regard to prior model service parts which have not yet become prior model as of the Closing Date and which are not otherwise listed on Exhibit B to the Distribution and Supply Agreement between GM and DRA of even date herewith (the "Distribution and Supply Agreement") will be determined on an initial basis by the pricing of such Component pursuant to this Agreement immediately before that Component becomes prior model. Thereafter, adjustments to pricing for prior model service parts will be determined by adjustments to the price at which GM's Service Parts Operations Division provides such Component to its customers, in the manner provided for in the Distribution and Supply Agreement. (d) Global Sourcing: (i) GM may periodically undertake global sourcing studies with regard to the Components at any time during the term of this Agreement. GM agrees to solicit such information from qualified suppliers only, and in the context of both substantive volume (e.g., 1 million units) and an extended time frame, in order to assure that the information received represents achievable benchmarks. GM agrees to inform DRA on a timely basis of its issuance of any such requests. (ii) If GM informs DRA prior to July 31, 2001 that the unit price of a Component is not competitive with the market-based price determined by such a global sourcing study, GM and DRA will cooperate in good faith to determine why DRA's price is not competitive . Promptly thereafter, DRA will prepare a plan including specific interim goals and target dates for reducing DRA's price to the market-based competitive price. With the assistance of GM, DRA will use its best efforts to achieve maximum productivity and cost reduction improvements, including but not limited to changing types of suppliers of materials and incurring reasonable developmental expenses and capital investments, and beginning in the 5

Second Model Year for "Category A" Components and the Third Model Year for "Category B" Components, fifty percent (50%) of resulting cost reductions, if any, will reduce prices pursuant to paragraph 1.2(b) of this Agreement. However, prior to July 31, 2001, GM shall not purchase Components from other suppliers because of price. (iii) After July 31, 2001 the Components must be competitive in terms of price, technology and design with similar products which may be available to GM. Should GM receive a quotation which meets the criteria of (i) above, and which, in the case of quotations received from current GM suppliers, is comparable to current prices being charged GM by such suppliers, GM, to the maximum extent and detail possible without breaching any legal or contractual obligations to such third party, shall advise DRA in writing of the area(s) (i.e. price, technology and/or design) in which the other product(s) offered in such quotation are more competitive. DRA shall have sixty (60) days within which to notify GM that it shall sell the affected Component(s) at the competitive price, with substantially comparable technology and/or design as the case may be. It is agreed by the parties that the effective date(s) for such price reduction(s) and/or improvement(s) in technology and/or design shall be the date(s) at which the other supplier is able to supply the competing component(s). It is further agreed by the parties that should DRA elect to meet the competing offer, its price reduction(s) and/or improvement(s) in technology and/or design shall not be limited to only the quantities set forth in the competing offer but rather to all affected Components being supplied by DRA hereunder. (iv) Should DRA fail to notify GM within the sixty (60) day time period set forth in (iii) above, or should DRA notify GM that it will not meet the competing offer, GM may terminate its purchase(s) of the affected Component(s) hereunder and thereafter purchase the Component(s) from the other source. 1.3 Service Manuals and Technical Support: During the term of this Agreement, DRA shall provide to GM at no additional cost all necessary service and technical support information and materials related to the Components (regardless of format, i.e. text, 6

graphics, audio, video, etc.) including but not limited to service manuals, service bulletins, training materials, product bulletins and product information booklets; provided however, that such services and support shall be reasonably consistent with that supplied by the Delco Remy Division prior to the Closing Date. ARTICLE 2 - PURCHASE ORDER TERMS AND CONDITIONS 2.1 Purchase Orders: Attached hereto as Annex "B" is the standard form of purchase order customarily utilized by GM with its suppliers as of the date of this Agreement. All purchase orders issued by GM and accepted by DRA pursuant to this Agreement shall utilize such standard form purchase order and shall be governed by its terms and conditions; provided, however, that Paragraphs 11, 12, 13, 15, 22, 23, 31 and the last sentence of Paragraph 14 therein shall be deleted and may not be invoked or exercised by either party with respect to any purchase orders issued and accepted under this Agreement; provided further that notwithstanding the provisions contained in Paragraph 2 of the form of purchase order, the payment terms to DRA for all Components sold hereunder shall be net 10th, 25th Prox., F.O.B. DRA - Anderson, Indiana or F.O.B. DRA - Meridian, Mississippi, as the case may be. Additionally, the parties agree with regard to Paragraph 14 of the form of purchase order that the word "reconstruct" in sub- paragraph (c) therein shall not be interpreted to mean remanufacture. 2.2 Order of Precedence: The terms and conditions of such purchase orders shall be construed as cumulative and supplemental to those set forth herein; provided, however, that to the extent of any conflicts between the provisions of any purchase order and those of this Agreement, the terms of this Agreement shall govern. 7

ARTICLE 3 - TERM OF AGREEMENT AND GROUNDS FOR EARLIER TERMINATION 3.1 Term of Agreement: The term of this Agreement shall be through July 31, 2004, unless terminated earlier pursuant to Article 3.2. 3.2 Grounds for Termination: Either party may terminate this Agreement in any of the following events: (i) the other party materially breaches this Agreement; (ii) the other party becomes insolvent or enters bankruptcy, receivership, liquidation, debtor initiated composition of creditors, dissolution, or similar proceeding; or (iii) a significant portion of the assets of the other party necessary for the performance of this Agreement becomes subject to attachment, embargo, or expropriation. Additionally, this Agreement may be terminated by GM in the event thirty-five percent (35%) of the voting shares of DRI or DRA become owned or controlled, directly or indirectly, by a manufacturer of fully assembled passenger cars and/or light duty trucks. For purposes of this Section, the percentage ownership in DRI or DRA voting shares which is deemed to be owned or controlled directly or indirectly by an entity (the "Parent") owning voting shares in an entity other than DRI or DRA (as the case may be) (the "Affiliate"), shall be determined by multiplying the Parent's percentage ownership of voting shares in the Affiliate by the percentage ownership or control, direct or indirect, that the Affiliate has in either DRI or DRA. Similarly, the foregoing shall also apply to any additional levels of either the Parent's or the Affiliate's subsidiaries or affiliates. In all cases, however, ownership or control, directly or indirectly, of more than fifty percent (50%) of the voting shares of an entity will be deemed to be direct or indirect ownership or control of one hundred percent (100%) of the voting shares of that entity. 3.3 Termination Procedure: A party intending to terminate this Agreement shall first notify the other party of the grounds for the intended termination. In the event the other party fails to remedy such grounds for termination within thirty (30) days after the date of 8

such notice, then the terminating party may terminate this Agreement effective immediately upon notice to the other party without the need for any judicial action. 3.4 Reservation of Rights: The provisions of this Article are without prejudice to any other rights or remedies either party may have by reason of the default of the other party. ARTICLE 4- TECHNOLOGY, DESIGN AND QUALITY 4.1 Quality Control: DRA will institute and maintain a quality control and inspection system which incorporates A.I.A.G. Standards, General Quality Standards, Targets for Excellence, and other GM policies generally applicable to suppliers. 4.2 Technology and Design, Through July 31, 2001, DRA will use its best efforts to provide Components which are equivalent in terms of technology and design to similar parts available at a substantially equivalent price. If GM informs DRA that, in the reasonable opinion of GM, the technology or design of a Component is not equivalent (giving additional relevant information as available for disclosure by GM) to another available product, DRA will submit within one hundred twenty (120) days a comprehensive business plan as to how it will attempt to provide Components with equivalent or superior technology or design. 4.3 Quality / Warranty Provisions (a) Warranty on Components: Components supplied hereunder shall conform to the warranty set forth in Paragraph 9 ("Warranty") of GM's purchase order terms and conditions. Should Components fail to conform to such Warranty, DRA (with assistance from GM as appropriate) shall immediately develop a comprehensive corrective action plan. However, should DRA fail to implement the corrective action plan, or should DRA fail to remedy or cure the default/breach within one hundred eighty (180) days, GM, at its option, may immediately terminate its purchase of the affected Component(s). This right of 9

termination shall be cumulative and additional to those set forth in Section 3.2. Notwithstanding the foregoing, during the term of this Agreement, DRA shall not have any financial responsibility whatsoever to GM for vehicle warranty, except to the extent, if any, and subject to Section 4.3(b) below, that such financial responsibility derives from any service fix, recall or campaign (safety or otherwise). (b) Service Fix. Recall and Safety Campaigns: DRA will promptly notify GM of any defects, when such defects come to the attention of DRA, which might be the basis of a recall, service fix or campaign (safety or otherwise) for which GM might be responsible. Notwithstanding the last sentence of paragraph (a) above: (i) GM will pay 100% of the cost of any service fix, recall or campaign (safety or otherwise) that is undertaken for all Components actually manufactured by GM through the date of this Agreement, and (ii) for a period of four (4) years from the date of this Agreement, GM shall also pay 100% of the cost of any service fix, recall or campaign (safety or otherwise) involving Components manufactured after the date of this Agreement for which the Component design, engineering or manufacturing process in use as of the date of this Agreement is a contributing cause, or for which a GM prescribed application, design, engineering or manufacturing process is a contributing cause. (c) Inventory: If either party becomes aware of or discovers the existence of any defect or nonconformity in any Components that are enroute to or in the parts inventory of GM (other than parts inventory that was enroute to or in the parts inventory of GM as of the Closing Date), it shall notify the other. In such event, DRA shall, as the case may be, either absorb or reimburse GM for all direct costs and expenses incurred on the repair, modification or replacement of such items. 4.4 GM Use of Technical Information: Upon the request of GM, and solely for the purpose of quality, reliability and durability testing/evaluation of the Components, DRA will deliver to GM all information relating to the development and manufacture of any and all Components in sufficient detail to permit evaluation of the Components by GM or its 10

designated supplier of testing service(s), provided that such supplier is not a direct competitor of DRA. Such information may include drawings; parts lists; process and material specifications; product software and mask works; purchasing specifications; tool and labor routings; inspection processes; assurance and reliability projections; process capability studies; test reports; and failure mode and analysis studies. Such information will be updated by DRA to show changes in any Components or their manufacture. GM will use such information exclusively for evaluation of the Components. It is agreed by the parties, however, that "Component Interface Materials" (as such items are described in Section 3.2.10 of the Asset Purchase Agreement) are or shall be the property of GM and consequently not subject to the restrictions set forth in this Agreement or in any others between the parties. ARTICLE 5 - GENERAL PROVISIONS 5.1 No Agency: This Agreement does not constitute either party the agent or legal representative of the other party. Neither party is authorized to create any obligation on behalf of the other party. 5.2 Advertising: DRA will not, without first obtaining the written consent of GM, in any manner advertise or publish the fact that DRA has contracted to furnish the Components to GM, or use any trademarks or tradenames of GM in DRA's or DRI's advertising or promotional materials; provided, however, that the foregoing restriction shall not apply to advertisements or publications (i) reasonably necessary under applicable securities laws or regulations in the event of a public offering of DRI or of DRA securities; (ii) necessary for obtaining financing by DRA or DRI; or (iii) permitted under the Asset Purchase Agreement, the Tradename License Agreement or the Trademark License Agreement. 11

5.3 Notices: Any notice under this Agreement shall be in writing (letter, telex, facsimile, or telegram) and shall be effective when received by the addressee at its address indicated below. (a) Notices sent to DRA shall be addressed as follows: Delco Remy America, Inc. 2405 Columbus Avenue Anderson, Indiana 46018 Attn: Chief Financial Officer (b) Notices sent to GM shall be addressed as follows:
AC Delco Systems Division 4800 S. Saginaw Street Flint, MI 48501 Attn: Finance Director GM Worldwide Purchasing NAO Headquarters Building 1-8 30400 Mound Road Warren, MI 48090-9015 Attn: Executive Director - Electrical

(c) The parties by notice hereunder may designate other addresses to which notices shall be sent. 5.4 Amendments: No amendment to this Agreement shall be binding upon either party unless it is in writing and is signed by the other party. 5.5 Successors and Assignment. This Agreement shall be binding upon and inure to the benefit of GM and DRA and their respective successors and assigns. No party to this Agreement may assign this Agreement or any of its rights, interests or obligations hereunder without the prior written consent of the other party; provided, however, that DRA may (a) without the prior written consent of GM assign this Agreement and any or all of its rights, interests and obligations hereunder to one or more of its Affiliates (as defined in the Asset Purchase Agreement), provided that, notwithstanding such assignment DRA shall remain liable for all of its obligations hereunder and (b) upon receipt of GM's consent (which will not be unreasonably withheld), assign this Agreement and its rights, interests and obligations hereunder to (i) a transferee of all or substantially all of the assets of any or all of the 12

Businesses, or (ii) any successor to any or all of the Businesses, in each case, insofar as such rights, interests and obligations relate to or affect the assets or Businesses so transferred or as to which such assignee has become a successor, provided that GM shall take into consideration in granting its consent the following: (A) that such transferee or successor is not less creditworthy than DRA as of the Closing Date, (B) such transferee or successor executes a written acknowledgement of its assumption of DRA's obligations to GM under this Agreement, (C) that such transferee or successor is not an original equipment manufacturer of fully assembled passenger cars and/or light duty trucks, (D) if such transferee or successor is a then current supplier to GM, such transferee or successor shall be in good standing and have demonstrated manufacturing expertise, (E) if such transferee or successor is a manufacturer but is not then a current supplier to GM, such transferee or successor shall not have been terminated as a supplier by GM for reasons other than failure to be price competitive and shall have a reputation for large-scale, quality manufacturing and reliable performance of contracts. 5.6 Law and Jurisdiction: This Agreement shall be governed by the laws of the State of New York without regard to the principles of conflict of laws thereof. Each party consents, for purposes of enforcing this Agreement, to personal jurisdiction, service of process, and venue in any state or federal court within the State of New York having jurisdiction over the subject matter. 5.7 Entire Agreement: This Agreement constitutes the entire agreement of the parties hereto regarding the subject matter hereof, and supersedes any and all prior or contemporaneous oral and written agreements between the parties relating to the subject matter of this Agreement. 13

IN WITNESS WHEREOF, GM and DRA have caused this Agreement to be executed by their duly authorized representatives on the day and year first written above. DRA, INC. GENERAL MOTORS CORPORATION
By: /s/ James R. Gerrity ---------------------Title: Executive V.P. ---------------------/s/ Charles A. Cotten --------------------Title: Attorney in fact --------------------By:

14

ANNEX A UNIT PRICES AS OF EFFECTIVE DATE [Redacted]

ANNEX B
[ ] ------------------------------------------------------------[LOGO OF DELCO REMY APPEARS HERE] Division of General Motors Corporation Anderson, Indiana 46018 -------------------------------D Purchase Order No. A T DRD E -------------------------------[ ] [ ] -------------------------------S Delco Remy H I P T O -------------------------------[] AUTOMOTIVE COMPONENTS GROUP [] DELCO REMY DIVISION [] DISBURSEMENT ANALYSIS DEPT.

------------------------------V E N D

O [] P.O. BOX [ ] R [] PONTIAC, MI [ ]
-----------------------------------------------------------------------------------------------------------------------------------[ ] QUANTITY [ ] [ ]. [ ] ARTICLES AND DESCRIPTION [ ] PRICE [ ] ------------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------------[ ] -----------------------------------------------------------------------------------------------------------------------------------[ ] -----------------------------------------------------------------------------------------------------------------------------------[ ] -----------------------------------------------------------------------------------------------------------------------------------[ [ [ [ [ [ [ [ [ [ [ [ [ ] ] ] ] ] ] ] ] ] ] ] ] ]

BUYER PHONE PURCHASING MANAGER PLEASE ADDRESS ALL CORRESPONDENCE TO THE ATTENTION OF THE BUYER [ ] Light Duty Starter Motors Component Supply Agreement Annex B Page 1 of 5 Pages [COPY IN BRACKETS ILLEGIBLE ON ORIGINAL]

PURCHASE ORDER TERMS AND CONDITIONS 1. ACCEPTANCE: Seller has read and understands this order and agrees that Sellers written acceptance or commencement of any work or service under this order shall constitute Seller,s acceptance of these terms and conditions only. All terms and conditions proposed by Seller which are different from or in addition to this order are unacceptable to Buyer, are expressly rejected by Buyer and shall not become a part of this order. Any modifications to this order shall be made in accordance with Paragraph 31. 2. SHIPPING. BILLING AND FLSA CERTIFICATION: Seller agrees: (a) to properly pack, mark and ship goods in accordance with the requirements of Buyer and in [ ] carriers in a manner to secure lowest transportation cost; (b) to route shipments in accordance with instructions from Buyer's Traffic Department; (c) to make no charge for handling, packaging, storage, transportation or [ ] of goods unless otherwise stated, in this order; (d) to provide with each shipment packing slips with Buyers order number marked thereon; (e) to properly mark each package with this order number, the factory, [ ], and [ ] number, and where multiple packages comprise a single shipment to consecutively number each package; and (f) to promptly forward the original bill of lading or other shipping receipt for each shipment in accordance with Buyer's instructions. Seller will include bills of lading or other shipping receipts correct classification identification of the goods shipped in accordance with Buyer's instructions and carrier's requirements. The marks on each package and identification of the goods on packing slips, bills of lading and invoices shall be sufficient to enable Buyer to easily identify the goods purchased. Seller further agrees: (a) to promptly render, after delivery of goods or performance of services, correct and complete invoices to Buyer; and (b) to accept payment by check or at Buyer's discretion, other cash equivalent (including electronic transfer of funds). Seller's invoice must include a certification that all goods were produced in compliance with the applicable requirements of section 6, 7 and 12 of the Fair Labor Standards Act, as amended and of regulations and orders of the United States Department of Labor issued in connection therewith. The payment date is set forth on the face side of this order, or if not stated, shall be on the 25th day of the month following Buyer's receipt of a proper invoice (except as may otherwise be agreed upon by Buyer and Seller in connection with a program providing for electronic funds transfer). Time for payment shall not begin until correct and complete invoices are received, and Seller's cash discount privileges to Buyer shall be extended until such time as payment is due. Buyer may withhold payment pending receipt of evidence, if such form and detail as Buyer may direct, of the absence of any liens, encumbrances and claims on the goods or services under this order. 3. DELIVERY SCHEDULES: Deliveries shall be made both in quantities and at times specified in Buyer's schedules. Buyer shall not be required to make payment for goods delivered to Buyer which are in excess of quantities specified in Buyer's delivery schedules. Buyer may change the rate of scheduled shipments or direct temporary suspension of scheduled shipments, neither of which shall entitle Seller to a modification of the price for goods or services covered by this order. For orders of goods where quantities and/or delivery schedules are not specified, Seller shall deliver goods in such quantities and times as Buyer may direct in subsequent releases. 4. PREMIUM SHIPMENTS: If Seller's acts or omissions result in Seller's failure to meet Buyer's delivery requirements and Buyer requires a more expeditious method of transportation for the goods than the transportation method originally specified by Buyer, Seller shall, at Buyer's action: (i) promptly reimburse Buyer the difference in cost between the more expeditious method and the original method; (ii) allow Buyer to reduce its payment of Seller's invoices by such difference, or (iii) ship the goods as expeditiously as possible at Seller's expense and invoice Buyer for the amount which Buyer would have paid for normal shipment. 5. CHANGES: Buyer reserves the right at any time to direct changes, or cause Seller to make changes, to drawings and specifications of the goods or to otherwise change the scope of the work covered by this order, including work with respect to such matters as inspection, testing or quality control, and Seller agrees to promptly make such changes: any difference in price or time for performance resulting from such changes shall be equitably adjusted by Buyer after receipt of [ ] in such form and detail as Buyer may direct. Any changes to this order shall be made in accordance with Paragraph 31. 6. INSPECTION: Seller agrees that Buyer shall have the right to enter Seller's facility at reasonable times to inspect the facility, goods, materials and any property of Buyer covered by this order. Buyer's inspection of the goods, whether during manufacture prior to delivery or within a reasonable time after delivery, shall not constitute acceptance of any work-in-process or finished goods. 7. NONCONFORMING GOODS: To the extent Buyer rejects goods as nonconforming, the quantities under this order will automatically be reduced unless Buyer otherwise notifies Seller. Seller will not replace quantities so reduced without a new order or schedule from Buyer. Nonconforming goods will be held by Buyer for disposition in accordance with Seller's instructions at Seller's risk. Seller's failure to provide written instructions within ten (10) days, or such shorter period as may be commercially reasonable under the circumstances, after notice or nonconformity shall entitle Buyer, at Buyer's option, to charge Seller for storage and handling, or to dispose of the goods without liability to Seller. Payment for nonconforming goods shall not constitute an acceptance thereof, limit or impair Buyer's right to assert any legal or equitable remedy, or relieve Seller's responsibility for Patent defects. 8. FORCE MAJEURE: Any delay or failure of either party to perform its obligations hereunder shall be excused if, and to the extent that it is caused by an event or occurrence beyond the reasonable control of the party and without its fault or negligence, such as, by way of example and not by way of limitation, acts of God, actions by any governmental authority (whether valid or invalid), fires, floods, windstorms, explosions, riots, natural disasters, wars, sabotage, labor problems (including lockouts, strikes and slowdowns), inability to obtain power, material, labor, equipment or transportation, or court injunction or order; provided that written notice of such delay (including the anticipated duration of the delay) shall be given by the affected party to the other party within ten (10) days. During the period of such delay or failure to

perform by Seller, Buyer, at its option, may purchase goods from other sources and reduce its schedules to Seller by such quantities, without liability to Seller, or have Seller provide the goods from other sources in quantities and at times requested by Buyer and at the price set forth in this order. If requested by the Buyer, Seller shall, within ten (10) days of such request, provide adequate assurances that the delay shall not exceed thirty (30) days, if the delay lasts more than thirty (30) days or Seller does not provide adequate assurance that the delay will cease within thirty (30) days. Buyer may immediately cancel the order without liability. [COPY IN BRACKETS ILLEGIBLE ON ORIGINAL]

9. WARRANTY: Seller expressly warrants that all goods or services covered by this order will conform to the specifications, drawings, samples, or descriptions furnished to or by Buyer and will be merchantable of good material and workmanship and free from defect. In addition, Seller acknowledges that Seller knows of Buyers intended use and expressly warrants that all goods covered by this order which have been selected, designed, manufactured, or assembled by Seller, based upon Buyers stated use will be fit and sufficient for the particular purpose intended by Buyer. 10. INGREDIENTS DISCLOSURE AND SPECIAL WARNINGS AND INSTRUCTIONS: Requested by Buyer, Seller shall promptly furnish to Buyer in such form and detail as Buyer may direct: (a) a list of all ingredients in the goods purchased hereunder: (b) the amount of one or more ingredients, and (c) information concerning any changes in or additions to such ingredients. Prior to and with the shipment of the goods purchased hereunder, Seller agrees to furnish to Buyer sufficient warning and notice in writing (including appropriate labels on goods, containers and packing) of any hazardous material which is an ingredient or a part of any of the goods, together with such special handling instructions as may be necessary to advise carriers. Buyer, and their respective employees [ ] to exercise [ ] [ ] of care and precaution which will best prevent bodily injury or property damage in the handling, transportation, processing, use, or disposal of the goods, containers and packing shipped to Buyer. 11. INSOLVENCY: Buyer may immediately cancel this order without liability to Seller in the event of the happening of any of the following or any comparable event: (a) insolvency of the Seller: (b) filing of a voluntary petition in bankruptcy by the Seller: (c) filing of any involuntary petition in bankruptcy against Seller: (d) appointment of a receiver or trustee for Seller: (e) or execution of an assignment for the benefit of creditors by Seller, provided that such petition appointment or assignment is not vacated or nullified within fifteen (15) days of such event. 12. CANCELLATION FOR BREACH: Buyer reserves the right to cancel all or any part of this order, without liability to Seller, if Seller: (a) repudiates or breaches any of the terms of this order, including Seller's warranties: (b) fails to perform services or deliver goods as specified by Buyer; or (c) fails to make progress so as to endanger timely and proper completion of services or delivery of goods; and does not correct such failure or breach within ten (10) days (or such shorter period of time if commercially reasonable under the circumstances) after receipt of written notice from Buyer specifying such failure or breach. 13. TERMINATION: In addition to any other rights of Buyer to cancel or terminate this order. Buyer may at its option immediately terminate all or any part of this order, at any time and for any reason, by giving written notice to Seller. Upon such termination, Buyer shall pay to Seller the following amounts without duplication; (a) the order price for all goods ar services which have been completed in accordance with this order and not previously paid for; and (b) the actual costs of work-in-process and raw materials incurred by Seller in furnishing the goods or services under this order to the extent such costs are reasonable in amount and are properly allocable or apportionable under generally accepted accounting principals to the terminated portion of this order; less, however, the reasonable value or cost (whichever is higher) of any goods or materials used or sold by Seller with Buyer's written consent, and the cost of damage or destroyed goods or material. Buyer will make no payments for finished goods, work-in-process or raw materials fabricated or procured by Seller in amounts in excess of those authorized in delivery releases nor for any undelivered goods which are in Seller's standard stock or which are readily marketable. Payments made under this Paragraph shall not exceed the aggregate price payable by Buyer for furnished goods which would be produced by Seller under delivery or release schedules outstanding at the date of termination. Except as provided in this Paragraph, Buyer shall not be liable for and shall not be required to make payments to Seller, directly or on account of claims by Seller's subcontractors, for loss or anticipated profit, unabsorbed overhead, interest on claims, product development and engineering costs, facilities and equipment rearrangement costs or rental, unamortized depreciation costs, and general and administrative burden charges from termination of this order. Within sixty (60) days from the effective date of termination, Seller shall submit a comprehensive termination claim to Buyer, with sufficient supporting data to permit Buyer's audit, and shall thereafter promptly furnish such supplemental and supporting information as Buyer shall request. Buyer or its agents, shall have the right to audit and examine all books, records, facilities, work, material, inventories, and other items relating to any termination claim of Seller. 14. INTELLECTUAL PROPERTY: Seller agrees; (a) to defend, xxx harmless and indemnify Buyer, its successors and customers against all claims, demands, losses, suits, damages, liability and expenses (including reasonable attorney fees) arising out of any suit, xxxx or action for actual or alleged direct or contributory infringement of, or inducement to infringe, any United States or foreign patent, trademark, copyright or mask work right by reason of the manufacture, use or sale of the goods or services ordered, including infringement arising out of compliance with specifications furnished by Buyer, or for actual or alleged misuse or misappropriation of a trade secret resulting directly or indirectly from Seller's actions; (b) to waive any claim against Buyer under the Uniform Commerical Code or otherwise, including any hold harmless or similar claim, in any way related to a claim asserted against Seller or Buyer for patent, trademark, copyright or mask work right infringement or the like, including claims arising out of compliance with specifications furnished by Buyer; and (c) to grant Buyer a worldwide, nonexclusive, [ ], irrevocable license to repair and have repaired, to reconstruct and have reconstructed the goods ordered hereunder. Seller assigns to Buyer all right, title and interest in and to all trademarks, copyrights and mask work rights in any material created for Buyer under this order.

[COPY IN BRACKETS ILLEGIBLE ON ORIGINAL]

15. TECHNICAL INFORMATION DISCLOSED TO BUYER: Seller agrees not to assert any claim (other than a claim for patent infringement) with respect to any technical information which Seller shall have disclosed or may hereafter disclose to Buyer in connection with the goods or services covered by this order. 16. INDEMNIFICATION: Seller performs any work on Buyer's premises or utilizes the property of Buyer, whether on or off Buyer's premises. Seller shall indemnify and hold Buyer harmless from and against any liability claims, demands or expenses (including reasonable attorney fees) for damages to the property of or injuries (including death) to Buyer, its employees or any other person arising from or in connection with Seller's performance of work or use of Buyer's property except for such liability claim or demand arising out of the sole negligence of Buyer. 17. INSURANCE: Seller shall maintain insurance coverage in amounts not less than the following: (a) Workers Compensation Statutory Limits for the state or states [ ] is to be performed for evidence [ ] authority to self-insure); (b) Employer's Liability -- $250,000: (c) Comprehensive General Liability (including Products Completed Operations and Blanket Contractual Liability) -- $1,000,000 per person. $1,000,000 per occurrence Personal Injury and $1,000,000 per occurrence Property Damage or $1,000,000 per occurrence Personal Injury and Property Damage combined single limit and (d) Automobile Liability (including owned, non-owned and hired vehicles) -- $1,000,000 per person. $1,000,000 per occurrence Personal Injury and $1,000,000 per occurrence Property Damage, or $1,000,000 per occurrence Personal Injury and Property Damage combined single limit. At Buyer's request, Seller shall furnish to Buyer certificates of insurance setting forth the amount(s) of coverage, policy number(s) and date(s) of expiration for insurance maintained by Seller and if further requested by Buyer, such certificates will provide that Buyer shall receive thirty (30) days prior written notification from the insurer of any termination or reduction in the amount or scope of coverages. Seller's purchase of appropriate insurance coverage or the furnishing of certificates of insurance shall not release Seller of its obligations or liabilities under this order. In the event of Seller's breach of this provision, Buyer shall have the right to cancel the undelivered portion of any goods or services covered by this order and shall not be required to make further payments except for conforming goods delivered or services rendered prior to cancellation. 18. TOOLS: Unless otherwise agreed to by Buyer, Seller at its own expense shall furnish, keep in good condition, and replace when necessary all tools, jigs, dies, gauges, fixtures, molds and patterns ("Tools") necessary for the production of the goods. The cost or changes to the Tools necessary to make design and specification changes authorized by Buyer shall be paid for by Buyer. Seller shall insure the Tools with full fire and extended coverage insurance for the replacement value thereof. Seller grants Buyer an irrevocable option to take possession c; and title to the Tools that are special for the production of the goods upon payment to Seller of the book value thereof less any amounts which Buyer has previously paid to Seller for the cost of such Tools; provided, however, that this option shall not apply if such Tools are used to produce goods that are the standard stock of Seller or if a substantial quantity of like goods are being sold by Seller to others. 19. BAILED PROPERTY: All supplies, materials, tools, jigs, dies, gauges, fixtures, molds, patterns, equipment and other items furnished by Buyer either directly or indirectly, to Seller to perform this order, or for which Seller has been reimbursed by Buyer shall be and remain the property of Buyer. Seller shall bear the risk of loss of and damage to Buyer's property, Buyer's property shall at all times be properly housed and maintained by Seller; shall not be used by Seller for any purpose other than the performance of this order; shall be deemed to be personalty; shall be conspicuously marked "Property of General Motors Corporation" by Seller; shall not be commingled with the property of Seller or with that of a third person; and shall not be moved form Seller's premises without Buyer's prior written approval. Upon the request of Buyer, such property shall be immediately released to Buyer or delivered to Buyer by Seller, either (i) F.O.B. transport equipment at Seller's plant, properly packed and marked in accordance with the requirements of the carrier selected by Buyer to transport such property, or (ii) to any location designated by Buyer, in which event Buyer shall pay to Seller the reasonable cost of delivering such property to such location. Buyer shall have the right to enter onto Seller's premises at all reasonable times to inspect such property and Seller's records with respect thereto. 20. REMEDIES: The rights and remedies reserved to Buyer in this order shall be cumulative, and additional to all other or further remedies provided in law or equity. 21. DUTY DRAWBACK RIGHTS: This order includes all related customs, duty and import drawback rights, if any, (including rights developed by substitution and rights which may be acquired from Seller's suppliers) which Seller can transfer to Buyer. Seller agrees to inform Buyer of the existence of any such rights and upon request to supply such documents as may be required to obtain such drawback.

[COPY IN BRACKETS ILLEGIBLE ON ORIGINALS]

SETOFF: In addition to any [ ] provided by [ ] amounts due Seller shall be considered [ ] Indebtedness of Seller to General Motors Corporation and its subsidiaries; and General Motors Corporation may deduct any amounts due or to become due from Seller to General Motors Corporation and its subsidiaries from any sums due to or to become due from General Motors Corporation to Seller. ADVERTISING: Seller shall not without first obtaining the written consent of Buyer, in any manner, advertise or publish the fact that Seller has contracted to furnish Buyer the goods or service herein ordered. [ ] any trademarks or tradenames of Buyer in Seller's advertising or promotional materials, in the event of Buyer's breach of this provision. Buyer shall have the right to cancel the undelivered portion of any goods or [ ] covered by this order and shall not be required to make further payments except for conforming goods [ ] or services rendered prior to cancellation. GOVERNMENT COMPLIANCE. Seller agrees to comply with a federal, state and local laws. Executive [ ], rules, regulations and ordinances which may be applicable to Seller's performance or its obligations under this order. EQUAL OPPORTUNITY AND AFFIRMATIVE ACTION: This order incorporates by reference: (a) all provisions of 41 C.F.R. 60-1.4, as amended, pertaining to the equal opportunity clause in government contracts. [ ] provisions of 41 C.F.R. 60-250, as amended, pertaining to affirmative action for disabled veterans of [ ] Vietnam Era: and (c) all provisions of 41 C.F.R. 60-741, as amended, pertaining to affirmative action for handicapped workers. Seller certifies that it is in compliance with all applicable provisions of 41 C.F.R. 60-1, including but not limited to: (a) developing and presently having in full force and effect a written affirmative action compliance program for each of its establishments as required by 41 C.F.R. 60-1.40, as amended: (b) [ ] EEO-1 Reports as required by 41 C.F.R. 60-1.7, as amended, and (c) neither maintaining segregated [ ] nor permitting its employes to perform services at segregated facilities as prohibited by 41 C.F.R. [ ], as amended. Buyer requests that Seller adopt and implement a policy to extend employment opportunities to qualified applicants and employees on a equal basis regardless of an individual's age, race, color, religion or national origin. NO IMPLIED WAIVER: The failure of either party at any time to require performance by the other party by provision of this order shall in no way affect the right to require such performance at any time [ ] nor shall the waiver of either party of a breach of any provision of this order constitute a waiver of any proceeding breach of the same or any other provision. NON-ASSIGNMENT: Seller may not assign or delegate its obligations under this order without Buyer's written consent. RELATIONSHIP OF PARTIES: Seller and Buyer are independent contracting parties and nothing in this order shall make either party the agent or legal representatives of the other for any purpose whatsoever, nor [ ] it grant either party any authority to assume or to create any obligation on behalf of or in the name of the [ ]. GOVERNING LAW: This order is to be construed according to the laws of the state from which this order [ ] as shown by the address of Buyer on the face side of this order. SEVERABILITY: If any term of this order is invalid or unenforceable under any statute, regulation, ordinance, executive order or other rule of law, such term shall be deemed reformed and deleted, but only to the extent necessary to comply with such statute, regulation, ordinance, order of rule, and the remaining provisions of this order shall remain in full force and effect. ENTIRE AGREEMENT: This order together with the attachments, exhibits, or supplements, specifically referenced in this order, constitutes the entire agreement between Seller and Buyer with respect to the matter pertained herein and supersedes all prior oral or written representations and agreements. This order may only be modified by a purchase order amendment alteration issued by Buyer. [COPY IN BRACKETS ILLEGIBLE ON ORIGINAL]

Exhibit 10.2 HEAVY DUTY* COMPONENT SUPPLY AGREEMENT THIS COMPONENT SUPPLY AGREEMENT ("Agreement") is entered into July 31, 1994, by DRA, Inc. ("DRA"), a company organized under the laws of the State of Delaware, and General Motors Corporation, a company organized under the laws of the State of Delaware ("GM"). INTRODUCTION This Agreement is entered with reference to the following facts: A. DRA, DR International, Inc. ("DRI") and GM have entered into the Asset Purchase Agreement dated July 13, 1994, (the "Asset Purchase Agreement"), pursuant to which DRA will purchase from GM certain of the assets, and will assume certain of the liabilities, of the Delco Remy Heavy Duty Starter Motors and Generators business ("HDO"), the Delco Remy Light Duty Starter Motors business ("LDO"), the Delco Remy Powder Metal Forge Business ("PMF"), the Delco Remy Heavy Duty Starter Motors and Generators Remanufacturing Business ("HDO Reman") and the Delco Remy Light Duty Starter Motors Remanufacturing business ("LDO Reman" and collectively with HDO, LDO, PMF, and HDO Reman, the "Businesses") of the Delco Remy Division of GM (together with any successor unit of GM, the "Delco Remy Division"). B. In connection with the transactions contemplated by the Asset Purchase Agreement, GM and DRA desire to establish a mutually beneficial and efficient long-term arrangement for the purchase and sale of certain motor vehicle components and to cooperate with each other to achieve certain commercial objectives. Accordingly, DRA desires to sell to GM, and GM desires to purchase from DRA, certain motor vehicle components upon the terms and conditions stated herein. *Portions of this Exhibit 10.2 were omitted and filed separately with the Secretary of the Securities and Exchange Commission (the "Commission") pursuant to an application for confidential treatment filed with the Commission pursuant to Rule 406 under the Securities Act of 1933. Such portions are marked by the word "Redacted."

C. DRI has formed DRA to own and operate the Businesses. The investors in DRI and GM intend that DRA will be a supplier of GM for an extended period, subject to DRA's competitive performance in technology, quality, service and price as set forth herein. DRA acknowledges GM's normal expectation that component suppliers will deliver a minimum net cost reduction of three percent (3%) each year. GM acknowledges that DRA will need several years to achieve satisfactory financial performance. Both GM and DRA acknowledge that the best way to achieve their goals is by establishing a cooperative, ongoing relationship. D. DRA understands that components sold under this Agreement must be competitive with regard to components available to GM from other suppliers to GM, and as set forth herein, that GM intends to continue to seek information regarding products of other suppliers, including information regarding quality, technology, service, and price. NOW, THEREFORE, in consideration of the mutual promises contained herein and intending to be legally bound, DRA and GM hereby agree as follows: ARTICLE 1 - PURCHASE AND SUPPLY COMMITMENTS
1.1 (a) Commitment for GM Requirements: For the term of this Agreement, -----------------------------subject to paragraphs 1.2(d)(iii) and 1.2(e) of this Agreement, DRA agrees to sell and GM agrees to purchase one hundred percent (100%) of GM's production and current production model service requirements for Components in the United States and Canada. Additionally, DRA agrees, and commits through its purchase offer, to capacitize its operations to the full extent of GM's requirements for such Components; and shall not rebill GM for the cost of any tooling or equipment transferred pursuant to the Asset Purchase Agreement. Separate provisions will be negotiated for service parts currently distributed by AC Delco and/or GM Service Parts Operations. To the extent that GM purchases any Components indirectly (e.g., incorporated into a sub-assembly 2

purchased from a sub-assembler for use as original equipment), GM shall require such sub-assembler to comply with this Article 1.1 For purposes of this Agreement, the term "Components" shall mean any one or more of the motor vehicle components listed in the Supply Schedule attached hereto as Annex "A", plus any other new or replacement component which is required by GM for use as original equipment or service parts between the effective date of this Agreement and July 31, 1997, provided, however, that "Components" shall not include (i) remanufactured motor vehicle heavy duty starter motors and parts and sub-assemblies, and (ii) motor vehicle heavy duty starter motors and parts and assemblies for past model service. (b) Issuance of Purchase Orders: GM will place all orders hereunder in --------------------------accordance with GM's customary practices, as the same may be revised from time to time.

1.2 Price and Adjustments (a) Initial Prices: The unit prices for the Components as of the effective date of this Agreement are stated in the Supply Schedule (Annex "A"). GM and DRA understand the current prices listed in Annex A are market competitive as of Fall 1993. In addition, the parties agree that GM's standard non-ferrous metals price adjustment policies will apply throughout the term of this Agreement. (b) Cost Reduction Programs: (i) DRA and GM shall use their best efforts to identify and implement productivity and other improvements to reduce DRA's cost of producing the Components. Beginning in the second model year after DRA's transition out of GM (i.e. beginning August 1, 1995) (the "Second Model Year"), and each 3

model year thereafter during the term of this Agreement, DRA shall retain fifty percent (50%) of the amount of the "Cost Savings" (as such term is defined below) achieved in the most recent model year ended and fifty percent (50%) of the Cost Savings shall be passed on to GM by means of additional price reductions on Components; provided, however, that DRA shall retain 100% of the Cost Savings resulting from the "right sizing" (the related reduction of hourly personnel and elimination of all associated employee benefit cost as described in Section 7.13 of the Asset Purchase Agreement) of DRA's business as contemplated in DRA's business plan for the HDO business. All calculations pursuant to this Paragraph 1.2(b)(i) shall be done at a plant level or each Component. For purposes of this Agreement, the term "Cost Savings" shall mean the net reduction, if any, in the full manufacturing cost to produce one unit of a Component (taking into account all labor, material and plant burden (including depreciation and amortization)) at the end of a model year from the full manufacturing cost to produce one unit of a Component at the beginning of a model year, calculated utilizing a consistent accounting procedure agreed upon by the parties whereby all of DRA's costs are allocated on a part number basis which reflects the true full manufacturing cost to produce one unit of the Component. The parties shall agree upon a mutually acceptable measuring device for calculating the cost savings no later than six (6) months prior to the commencement of the second year taking into account DRA's need to protect the confidentiality of the cost information and GM's need to verify the information. (ii) In addition, GM will make available to DRA, and DRA will participate in good faith in, all productivity improvement programs generally available to suppliers to GM, including but not limited to PICOS workshops and creativity teams. Each party will bear its respective costs arising from participation in such activities. 4

(c) Prices and Adjustments for Prior Model Service Parts: Pricing with regard to prior model service parts which have not yet become prior model as of the Closing Date and which are not otherwise listed on Exhibit B to the Distribution and Supply Agreement between GM and DRA of even date herewith (the "Distribution and Supply Agreement") will be determined on an initial basis by the pricing of such Component pursuant to this Agreement immediately before that Component becomes prior model. Thereafter, adjustments to pricing for prior model service parts will be determined by adjustments to the price at which GM's Service Parts Operations Division provides such Component to its customers, in the manner provided for in the Distribution and Supply Agreement. (d) Global Sourcing: (i) GM may periodically undertake global sourcing studies with regard to the Components at any time during the term of this Agreement. GM agrees to solicit such information from qualified suppliers only, and in the context of both substantive volume and an extended time frame, in order to assure that the information received represents achievable benchmarks. GM agrees to inform DRA on a timely basis of its issuance of any such requests. (ii) If GM informs DRA prior to July 31, 1997, that the unit price of a Component is not competitive with the market-based price determined by such a global sourcing study, GM and DRA will cooperate in good faith to determine why DRA's price is not competitive. Promptly thereafter, DRA will prepare a plan including specific interim goals and target dates for reducing DRA's price to the market-based competitive price. With the assistance of GM, DRA will use its best efforts to achieve maximum productivity and cost reduction improvements, including but not limited to changing types of suppliers of materials and incurring reasonable developmental expenses and 5

capital investments, and beginning in the Second Model Year, fifty percent (50%) of any resulting cost reductions, if any, will reduce prices pursuant to paragraph 1.2(b) of this Agreement. However, prior to July 31, 1997, GM shall not purchase Components from other suppliers because of price. (iii) After July 31, 1997, the Components must competitive in terms of price, technology and design with similar products which may be available to GM. Should GM receive a quotation which meets the criteria of (i) above, and which, in the case of quotations received from current GM suppliers, is comparable to current prices being charged GM by such suppliers, GM, to the maximum extent and detail possible without breaching any legal or contractual obligations to such third party, shall advise DRA in writing of the area(s) (i.e., price, technology and/or design) in which the other product(s) offered in such quotation are more competitive. DRA shall have sixty (60) days within which to notify GM that it shall sell the affected Components(s) at the competitive price, with substantially comparable technology and/or design as the case may be. It is agreed by the parties that the effective date(s) for such price reductions(s) and/or improvement(s) in technology and/or design shall be the date(s) at which the other supplier is able to supply the competing component(s). It is further agreed by the parties that should DRA elect to meet the competing offer, its price reduction(s) and/or improvement(s) in technology and/or design shall not be limited to only the quantities set forth in the competing offer but rather to all affected Components being supplied by DRA hereunder. (iv) Should DRA fail to notify GM within the sixty (60) day time period set forth in (iii) above, or should DRA notify GM that it will not meet the competing offer, GM may terminate its purchase(s) of the affected Component(s) hereunder and thereafter purchase the Component(s) from the other source. 6

(e) GM and DRA agree that within 120 days of the closing of the transactions contemplated by the Asset Purchase Agreement, GM will globally source the 28MT Component to establish the market competitive price for such component. DRA will have the right of last refusal to continue supplying GM's production and service requirements for the 28MT Component at the newly established market competitive price. Any required price adjustment hereunder will be effective immediately. 1.3 Service Manuals and Technical Support: During the term of this Agreement, DRA shall provide to GM at no additional cost all necessary service and technical support information and materials related to the Components (regardless of format, i.e. text, graphics, audio, video, etc.) including but not limited to service manuals, service bulletins, training materials, product bulletins and product information booklets; provided however, that such services and support shall be reasonably consistent with that supplied by the Delco Remy Division prior to the Closing Date. ARTICLE 2 - PURCHASE ORDER TERMS AND CONDITIONS: 2.1 Purchase Orders: Attached hereto as Annex "B" is the standard form of purchase order customarily offered by GM to its suppliers as of the date of this Agreement. All purchase orders issued by GM and accepted by DRA pursuant to this Agreement shall utilize such standard form purchase order and shall be governed by its terms and conditions, provided, however, that Paragraphs 11, 12, 13, 15, 22, 23, 31 and the last sentence of Paragraph 14 therein shall be deleted and may not be invoked or exercised by either party with respect to any purchase orders issued and accepted under this Agreement; and provided further that notwithstanding the provisions contained in Paragraph 2 of the form of purchase order, the payment terms to DRA for all Components sold hereunder shall be net 10th, 25th Prox, F.O.B. DRA - Anderson, Indiana. Additionally, the parties agree with regard to Paragraph 14 of the form of

purchase order that the word "reconstruct" in sub-paragraph (c) therein shall not be interpreted to mean remanufacture. 2.2 Order of Precedence: The terms and conditions of such purchase orders shall be construed as cumulative and supplemental to those set forth herein; provided, however, that to the extent of any conflicts between the provisions of any purchase order and those of this Agreement, the terms of this Agreement shall govern. ARTICLE 3 - TERM OF AGREEMENT AND GROUNDS FOR EARLIER TERMINATION 3.1 Term of Agreement: The term of this Agreement shall be through July 31, 2000 unless terminated earlier pursuant to Article 3.2 or 3.3. 3.2 General Grounds for Termination: Either party may terminate this Agreement in any of the following events: (i) the other party materially breaches this Agreement; (ii) the other party becomes insolvent or enters bankruptcy, receivership, liquidation, debtor initiated composition of creditors, dissolution, or similar proceeding; or (iii) a significant portion of the assets of the other party necessary for the performance of this Agreement becomes subject to attachment, embargo, or expropriation. 3.3 Special Grounds for Termination: In addition to its rights under the preceding paragraph, GM may terminate this Agreement in the event that thirty-five percent (35%) of the voting shares of DRI or DRA become owned or controlled, directly or indirectly, by a manufacturer of fully assembled passenger cars and/or light duty trucks. For purposes of this Section, the percentage ownership in DRI or DRA voting shares which is deemed to be owned or controlled directly or indirectly by an entity (the "Parent") owning voting shares in an entity other than DRI or DRA (as the case may be) (the "Affiliate"), shall be determined by multiplying the Parent's percentage ownership of voting shares in the Affiliate by the percentage ownership or control, direct or indirect, that the Affiliate has in either DRI or DRA. Similarly, the 8

foregoing shall also apply to any additional levels of either the Parent's or the Affiliate's subsidiaries or affiliates. In all cases, however, ownership or control, directly or indirectly, of more than fifty percent (50%) of the voting shares of any entity will be deemed to be direct or indirect ownership or control of one hundred percent (100%) of the voting shares of that entity. 3.4 Termination Procedure: A party intending to terminate this Agreement shall first notify the other party of the grounds for the intended termination. In the event the other party fails to remedy such grounds for termination within thirty (30) days after the date of such notice, then the terminating party may terminate this Agreement effective immediately upon notice to the other party without the need for any judicial action. 3.5 Reservation of Rights: The provisions of this Article are without prejudice to any other rights or remedies either party may have be reason of the default of the other party. ARTICLE 4 - TECHNOLOGY, DESIGN AND QUALITY 4.1 Quality Control: DRA will institute and maintain a quality control and inspection system which incorporates A.I.A.G. Standards, General Quality Standards, Targets for Excellence, and other GM policies generally applicable to suppliers. 4.2 Technology and Design: Through July 31, 1997, DRA will use its best efforts to provide Components which are equivalent in terms of technology and design to similar parts available at a substantially equivalent price. If GM informs DRA that, in the reasonable opinion of GM, the technology or design of a Component is not equivalent (giving additional relevant information as available for disclosure by GM) to another available product, DRA will submit within one hundred (120) days of comprehensive 9

business plan as to how it will attempt to provide Components with equivalent or superior technology or design. 4.3 Quality/Warranty Provisions: (a) Warranty on Components: Components supplied hereunder shall confirm to the warranty set forth in Paragraph 9 ("Warranty") of GM's purchase order terms and conditions. Should Components fail to conform to such Warranty, DRA (with assistance from GM as appropriate) shall immediately develop a comprehensive corrective action plan. However, should DRA fail to implement the corrective action plan or should DRA fail to remedy or cure the default/breach within one hundred (180) days, GM, at its option, may immediately terminate its purchase of the affected Component(s). This right of termination shall be cumulative and additional to those set forth in Sections 3.2 and 3.3. Notwithstanding the foregoing, during the term of this Agreement, DRA shall not have any financial responsibility whatsoever to GM for vehicle warranty, except to the extent, if any, and subject to Section 4.3(b) below, that such financial responsibility derives from any recall, service fix, or campaign (safety and otherwise) b. Service Fix, Recall and Safety Campaigns: DRA will promptly notify GM of any defects, when such defects come to the attention of DRA, which might be the basis of a recall, service fix or campaign (safety or otherwise) for which GM might be responsible. Notwithstanding the last sentence of paragraph (a) above: (i) GM will pay 100% of the cost of any service fix, recall or campaign (safety or otherwise) that is undertaken for all Components actually manufactured by GM through the date of this Agreement, and (ii) for a period of four (4) years from the date of this Agreement GM shall also pay 100% of the cost of any service fix, recall or campaign (safety or otherwise) involving Components manufactured after the date of this Agreement for 10

which the Component design, engineering or manufacturing process in use as of the date of this Agreement is a contributing cause, or for which a GM prescribed application, design, engineering or manufacturing process is a contributing cause. (c) Inventory: If either party becomes aware of or discovers the existence of any defect or nonconformity in any Components that are enroute to or in the parts inventory of GM (other than parts inventory that was enroute to or in the parts inventory of GM as of the Closing Date), it shall notify the other. In such event, DRA shall, as the case may be, either absorb or reimburse GM for all direct costs and expenses incurred on the repair, modification or replacement of such items. 4.4 GM Use of Technical Information: Upon the request of GM, and solely for the purpose of quality, reliability, and durability testing/evaluation of the Components, DRA will deliver to GM all information relating to the development and manufacture of any and all Components in sufficient detail to permit evaluation of the Components by GM or its designated supplier of testing service(s), provided that such supplier is not a direct competitor of DRA. Such information may include drawings; parts lists; process and material specifications; product software and mask works; purchasing specifications; tool and labor routings; inspection processes; assurance and reliability projections; process capability studies; test reports; and failure mode and analysis studies. Such information will be updated by DRA to show changes in any Components or their manufacture. GM will use such information exclusively for evaluation of the Components. It is agreed by the parties, however, that "Component Interface Materials" (as such items are described in Section 3.2.10 of the Asset Purchase Agreement) are or shall be the property of GM and consequently not subject to the restrictions set forth in this Agreement or in any other between the parties. 11

ARTICLE 5 - GENERAL PROVISIONS 5.1 No Agency: This Agreement does not constitute either party the agent or legal representative of other party. Neither party is authorized to create any obligation on behalf of the other party. 5.2 Advertising: DRA will not, without first obtaining the written consent of GM, if any manner advertise or publish the fact that DRA has contracted to furnish the Components to GM, or use any trademarks or tradenames of GM in DRA's or DRI's advertising or promotional materials; provided, however, that the foregoing restriction shall not apply to advertisements or publications (i) reasonably necessary under applicable securities laws or regulations in the event of a public offering of DRI or of DRA securities; (ii) necessary for obtaining financing by DRA or DRI; or (iii) permitted under the Asset Purchase Agreement, the Tradename License Agreement or the Trademark License Agreement. 5.3 Notices: Any notice under this Agreement shall be in writing (letter, telex, facsimile, or telegram) and shall be effective when received by the addressee at its address indicated below. (a) Notice sent to DRA shall be addressed as follows: Delco Remy America, Inc. 2405 Columbus Avenue Anderson, Indiana 46018 Attn: Chief Financial Officer (b) Notice sent to GM shall be addressed as follows:
AC Delco Systems Division 4800 S. Saginaw Street Flint, MI 48501 Attn: Finance Director GM Worldwide Purchasing NAO Headquarters Building 1-8 30400 Mound Road Warren, MI 48090-9015 Attn: Executive Director - Electrical

12

(c) The parties by notice hereunder may designate other addresses to which notices shall be sent. 5.4 Amendments: No amendment to this Agreement shall be binding upon either party unless it is in writing and is signed by the other party. 5.5 Assignment: This Agreement shall be binding upon and inure to the benefit of GM and DRA and their respective successors and assigns. No party to this Agreement may assign this Agreement or any of its rights, interests or obligations hereunder without the prior written consent of the other party; provided, however, that DRA may (a) without the prior written consent of GM assign this Agreement and any or all of its rights, interests and obligations hereunder to one or more of its Affiliates (as defined in the Asset Purchase Agreement), provided that, notwithstanding such assignment DRA shall remain liable for all of its obligations hereunder and (b) upon receipt of GM's consent (which will not be unreasonably withheld), assign this Agreement and its rights, interests and obligations hereunder to (i) a transferee of all or substantially all of the assets of any or all of the Businesses, or (ii) any successor to any or all of the Businesses, in each case, insofar as such rights, interests and obligations relate to or affect the assets or Businesses so transfered or as to which such assignee has become a successor, provided that GM shall take into consideration in granting its consent the following: (A) that such transferee or successor is not less creditworthy than DRA as of the Closing Date, (B) such transferee or successor executes a written acknowledgement of its assumption of DRA's obligations to GM under this Agreement, (C) that such transferee or successor is not an original equipment manufacturer of fully assembled passenger cars and/or light duty trucks, (D) if such transferee or successor is a then current supplier to GM, such transferee or successor shall be in good standing and have demonstrated manufacturing expertise, (E) if such transferee or successor is a manufacturer but is not then a current supplier to GM, such transferee or successor shall have not been terminated as a supplier by 13

GM for reasons other than failure to be price competitive and shall have a reputation of large-scale, quality manufacturing and reliable performance of contracts. 5.6 Law and Jurisdiction: This Agreement shall be governed by the laws of the State of New York without regard to the principles of conflict of laws thereof. Each party consents, for purposes of enforcing this Agreement, to personal jurisdiction, service of process, and venue in any state or federal court within the State of New York having jurisdiction over the subject matter. 5.7 Entire Agreement: This Agreement constitutes the entire agreement of the parties hereto regarding the subject matter hereof, and supersedes any and all prior or contemporaneous oral and written agreements between the parties relating to the subject matter of this Agreement. IN WITNESS WHEREOF, GM and DRA have caused this Agreement to be executed by their duly authorized representatives on the day and year first written above.
DRA, INC. By: /s/ James R. Gerrity --------------------------Title: Executive V.P. -----------------------GENERAL MOTORS CORPORATION By: /s/ Charles A. Cotten -----------------------Title: Attorney in fact ---------------------

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ANNEX A UNIT PRICES AS OF EFFECTIVE DATE [Redacted]

ANNEX B
[ ] ------------------------------------------------------------[LOGO OF DELCO REMY APPEARS HERE] Division of General Motors Corporation Anderson, Indiana 46018 -------------------------------D Purchase Order No. A T DRD E -------------------------------[ ] [ ] -------------------------------S Delco Remy H I P T O -------------------------------[ AUTOMOTIVE COMPONENTS GROUP DELCO REMY DIVISION DISBURSEMENT ANALYSIS DEPT. P.O. BOX [ ] ] PONTIAC, MI [ ] --------------------------------

------------------------------V E N D O R -------------------------------

-----------------------------------------------------------------------------------------------------------------------------------[ ] QUANTITY [ ] OR [ . ] ARTICLES AND DESCRIPTION [ ] PRICE [ ] ------------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------------[ ] -----------------------------------------------------------------------------------------------------------------------------------[ ] -----------------------------------------------------------------------------------------------------------------------------------[ ] ------------------------------------------------------------------------------------------------------------------------------------

[] [] [] [] [] [] [] [] [] [] [] [] [] BUYER PHONE PURCHASING MANAGER PLEASE ADDRESS ALL CORRESPONDENCE TO THE ATTENTION OF THE BUYER [ ] Light Duty Starter Motors Component Supply Agreement Annex B Page 1 of 5 Pages [COPY IN BRACKETS ILLEGIBLE ON ORIGINAL]

PURCHASE ORDER TERMS AND CONDITIONS 1. ACCEPTANCE: Seller has read and understands this order and agrees that Sellers written acceptance or commencement of any work or service under this order shall constitute Seller,s acceptance of these terms and conditions only. All terms and conditions proposed by Seller which are different from or in addition to this order are unacceptable to Buyer, are expressly rejected by Buyer and shall not become a part of this order. Any modifications to this order shall be made in accordance with Paragraph 31. 2. SHIPPING. BILLING AND FLSA CERTIFICATION: Seller agrees: (a) to properly pack, mark and ship goods in accordance with the requirements of Buyer and in [ ] carriers in a manner to secure lowest transportation cost; (b) to route shipments in accordance with instructions from Buyer's Traffic Department; (c) to make no charge for handling, packaging, storage, transportation or [ ] of goods unless otherwise stated, in this order; (d) to provide with each shipment packing slips with Buyers order number marked thereon; (e) to properly mark each package with this order number, the factory, [ ], and [ ] number, and where multiple packages comprise a single shipment to consecutively number each package; and (f) to promptly forward the original bill of lading or other shipping receipt for each shipment in accordance with Buyer's instructions. Seller will include bills of lading or other shipping receipts correct classification identification of the goods shipped in accordance with Buyer's instructions and carrier's requirements. The marks on each package and identification of the goods on packing slips, bills of lading and invoices shall be sufficient to enable Buyer to easily identify the goods purchased. Seller further agrees: (a) to promptly render, after delivery of goods or performance of services, correct and complete invoices to Buyer; and (b) to accept payment by check or at Buyer's discretion, other cash equivalent (including electronic transfer of funds). Seller's invoice must include a certification that all goods were produced in compliance with the applicable requirements of section 6, 7 and 12 of the Fair Labor Standards Act, as amended and of regulations and orders of the United States Department of Labor issued in connection therewith. The payment date is set forth on the face side of this order, or if not stated, shall be on the 25th day of the month following Buyer's receipt of a proper invoice (except as may otherwise be agreed upon by Buyer and Seller in connection with a program providing for electronic funds transfer). Time for payment shall not begin until correct and complete invoices are received, and Seller's cash discount privileges to Buyer shall be extended until such time as payment is due. Buyer may withhold payment pending receipt of evidence, if such form and detail as Buyer may direct, of the absence of any liens, encumbrances and claims on the goods or services under this order. 3. DELIVERY SCHEDULES: Deliveries shall be made both in quantities and at times specified in Buyer's schedules. Buyer shall not be required to make payment for goods delivered to Buyer which are in excess of quantities specified in Buyer's delivery schedules. Buyer may change the rate of scheduled shipments or direct temporary suspension of scheduled shipments, neither of which shall entitle Seller to a modification of the price for goods or services covered by this order. For orders of goods where quantities and/or delivery schedules are not specified, Seller shall deliver goods in such quantities and times as Buyer may direct in subsequent releases. 4. PREMIUM SHIPMENTS: If Seller's acts or omissions result in Seller's failure to meet Buyer's delivery requirements and Buyer requires a more expeditious method of transportation for the goods than the transportation method originally specified by Buyer, Seller shall, at Buyer's action: (i) promptly reimburse Buyer the difference in cost between the more expeditious method and the original method; (ii) allow Buyer to reduce its payment of Seller's invoices by such difference, or (iii) ship the goods as expeditiously as possible at Seller's expense and invoice Buyer for the amount which Buyer would have paid for normal shipment. 5. CHANGES: Buyer reserves the right at any time to direct changes, or cause Seller to make changes, to drawings and specifications of the goods or to otherwise change the scope of the work covered by this order, including work with respect to such matters as inspection, testing or quality control, and Seller agrees to promptly make such changes: any difference in price or time for performance resulting from such changes shall be equitably adjusted by Buyer after receipt of [ ] in such form and detail as Buyer may direct. Any changes to this order shall be made in accordance with Paragraph 31. 6. INSPECTION: Seller agrees that Buyer shall have the right to enter Seller's facility at reasonable times to inspect the facility, goods, materials and any property of Buyer covered by this order. Buyer's inspection of the goods, whether during manufacture prior to delivery or within a reasonable time after delivery, shall not constitute acceptance of any work-in-process or finished goods. 7. NONCONFORMING GOODS: To the extent Buyer rejects goods as nonconforming, the quantities under this order will automatically be reduced unless Buyer otherwise notifies Seller. Seller will not replace quantities so reduced without a new order or schedule from Buyer. Nonconforming goods will be held by Buyer for disposition in accordance with Seller's instructions at Seller's risk. Seller's failure to provide written instructions within ten (10) days, or such shorter period as may be commercially reasonable under the circumstances, after notice or nonconformity shall entitle Buyer, at Buyer's option, to charge Seller for storage and handling, or to dispose of the goods without liability to Seller. Payment for nonconforming goods shall not constitute an acceptance thereof, limit or impair Buyer's right to assert any legal or equitable remedy, or relieve Seller's responsibility for Patent defects. 8. FORCE MAJEURE: Any delay or failure of either party to perform its obligations hereunder shall be excused if, and to the extent that it is caused by an event or occurrence beyond the reasonable control of the party and without its fault or negligence, such as, by way of example and not by way of limitation, acts of God, actions by any governmental authority (whether valid or invalid), fires, floods, windstorms, explosions, riots, natural disasters, wars, sabotage, labor problems (including lockouts, strikes and slowdowns), inability to obtain power, material, labor, equipment or transportation, or court injunction or order; provided that written notice of such delay (including the anticipated duration of the delay) shall be given by the affected party to the other party within ten (10) days. During the period of such delay or failure to

perform by Seller, Buyer, at its option, may purchase goods from other sources and reduce its schedules to Seller by such quantities, without liability to Seller, or have Seller provide the goods from other sources in quantities and at times requested by Buyer and at the price set forth in this order. If requested by the Buyer, Seller shall, within ten (10) days of such request, provide adequate assurances that the delay shall not exceed thirty (30) days, if the delay lasts more than thirty (30) days or Seller does not provide adequate assurance that the delay will cease within thirty (30) days. Buyer may immediately cancel the order without liability. [COPY IN BRACKETS ILLEGIBLE ON ORIGINAL]

9. WARRANTY: Seller expressly warrants that all goods or services covered by this order will conform to the specifications, drawings, samples, or descriptions furnished to or by Buyer and will be merchantable of good material and workmanship and free from defect. In addition, Seller acknowledges that Seller knows of Buyers intended use and expressly warrants that all goods covered by this order which have been selected, designed, manufactured, or assembled by Seller, based upon Buyers stated use will be fit and sufficient for the particular purpose intended by Buyer. 10. INGREDIENTS DISCLOSURE AND SPECIAL WARNINGS AND INSTRUCTIONS: Requested by Buyer, Seller shall promptly furnish to Buyer in such form and detail as Buyer may direct: (a) a list of all ingredients in the goods purchased hereunder: (b) the amount of one or more ingredients, and (c) information concerning any changes in or additions to such ingredients. Prior to and with the shipment of the goods purchased hereunder, Seller agrees to furnish to Buyer sufficient warning and notice in writing (including appropriate labels on goods, containers and packing) of any hazardous material which is an ingredient or a part of any of the goods, together with such special handling instructions as may be necessary to advise carriers. Buyer, and their respective employees [ ] to exercise [ ] [ ] of care and precaution which will best prevent bodily injury or property damage in the handling, transportation, processing, use, or disposal of the goods, containers and packing shipped to Buyer. 11. INSOLVENCY: Buyer may immediately cancel this order without liability to Seller in the event of the happening of any of the following or any comparable event: (a) insolvency of the Seller: (b) filing of a voluntary petition in bankruptcy by the Seller: (c) filing of any involuntary petition in bankruptcy against Seller: (d) appointment of a receiver or trustee for Seller: (e) or execution of an assignment for the benefit of creditors by Seller, provided that such petition appointment or assignment is not vacated or nullified within fifteen (15) days of such event. 12. CANCELLATION FOR BREACH: Buyer reserves the right to cancel all or any part of this order, without liability to Seller, if Seller: (a) repudiates or breaches any of the terms of this order, including Seller's warranties: (b) fails to perform services or deliver goods as specified by Buyer; or (c) fails to make progress so as to endanger timely and proper completion of services or delivery of goods; and does not correct such failure or breach within ten (10) days (or such shorter period of time if commercially reasonable under the circumstances) after receipt of written notice from Buyer specifying such failure or breach. 13. TERMINATION: In addition to any other rights of Buyer to cancel or terminate this order. Buyer may at its option immediately terminate all or any part of this order, at any time and for any reason, by giving written notice to Seller. Upon such termination, Buyer shall pay to Seller the following amounts without duplication; (a) the order price for all goods ar services which have been completed in accordance with this order and not previously paid for; and (b) the actual costs of work-in-process and raw materials incurred by Seller in furnishing the goods or services under this order to the extent such costs are reasonable in amount and are properly allocable or apportionable under generally accepted accounting principals to the terminated portion of this order; less, however, the reasonable value or cost (whichever is higher) of any goods or materials used or sold by Seller with Buyer's written consent, and the cost of damage or destroyed goods or material. Buyer will make no payments for finished goods, work-in-process or raw materials fabricated or procured by Seller in amounts in excess of those authorized in delivery releases nor for any undelivered goods which are in Seller's standard stock or which are readily marketable. Payments made under this Paragraph shall not exceed the aggregate price payable by Buyer for furnished goods which would be produced by Seller under delivery or release schedules outstanding at the date of termination. Except as provided in this Paragraph, Buyer shall not be liable for and shall not be required to make payments to Seller, directly or on account of claims by Seller's subcontractors, for loss or anticipated profit, unabsorbed overhead, interest on claims, product development and engineering costs, facilities and equipment rearrangement costs or rental, unamortized depreciation costs, and general and administrative burden charges from termination of this order. Within sixty (60) days from the effective date of termination, Seller shall submit a comprehensive termination claim to Buyer, with sufficient supporting data to permit Buyer's audit, and shall thereafter promptly furnish such supplemental and supporting information as Buyer shall request. Buyer or its agents, shall have the right to audit and examine all books, records, facilities, work, material, inventories, and other items relating to any termination claim of Seller. 14. INTELLECTUAL PROPERTY: Seller agrees; (a) to defend, xxx harmless and indemnify Buyer, its successors and customers against all claims, demands, losses, suits, damages, liability and expenses (including reasonable attorney fees) arising out of any suit, xxxx or action for actual or alleged direct or contributory infringement of, or inducement to infringe, any United States or foreign patent, trademark, copyright or mask work right by reason of the manufacture, use or sale of the goods or services ordered, including infringement arising out of compliance with specifications furnished by Buyer, or for actual or alleged misuse or misappropriation of a trade secret resulting directly or indirectly from Seller's actions; (b) to waive any claim against Buyer under the Uniform Commerical Code or otherwise, including any hold harmless or similar claim, in any way related to a claim asserted against Seller or Buyer for patent, trademark, copyright or mask work right infringement or the like, including claims arising out of compliance with specifications furnished by Buyer; and (c) to grant Buyer a worldwide, nonexclusive, [ ] [ ], irrevocable license to repair and have repaired, to reconstruct and have reconstructed the goods ordered hereunder. Seller assigns to Buyer all right, title and interest in and to all trademarks, copyrights and mask work rights in any material created for Buyer under this order.

[COPY IN BRACKETS ILLEGIBLE ON ORIGINAL]

15. TECHNICAL INFORMATION DISCLOSED TO BUYER: Seller agrees not to assert any claim (other than a claim for patent infringement) with respect to any technical information which Seller shall have disclosed or may hereafter disclose to Buyer in connection with the goods or services covered by this order. 16. INDEMNIFICATION: Seller performs any work on Buyer's premises or utilizes the property of Buyer, whether on or off Buyer's premises. Seller shall indemnify and hold Buyer harmless from and against any liability claims, demands or expenses (including reasonable attorney fees) for damages to the property of or injuries (including death) to Buyer, its employees or any other person arising from or in connection with Seller's performance of work or use of Buyer's property except for such liability claim or demand arising out of the sole negligence of Buyer. 17. INSURANCE: Seller shall maintain insurance coverage in amounts not less than the following: (a) Workers Compensation Statutory Limits for the state or states [ ] is to be performed for evidence [ ] authority to self-insure); (b) Employer's Liability -- $250,000: (c) Comprehensive General Liability (including Products Completed Operations and Blanket Contractual Liability) -- $1,000,000 per person. $1,000,000 per occurrence Personal Injury and $1,000,000 per occurrence Property Damage or $1,000,000 per occurrence Personal Injury and Property Damage combined single limit and (d) Automobile Liability (including owned, non-owned and hired vehicles) -- $1,000,000 per person. $1,000,000 per occurrence Personal Injury and $1,000,000 per occurrence Property Damage, or $1,000,000 per occurrence Personal Injury and Property Damage combined single limit. At Buyer's request, Seller shall furnish to Buyer certificates of insurance setting forth the amount(s) of coverage, policy number(s) and date(s) of expiration for insurance maintained by Seller and if further requested by Buyer, such certificates will provide that Buyer shall receive thirty (30) days prior written notification from the insurer of any termination or reduction in the amount or scope of coverages. Seller's purchase of appropriate insurance coverage or the furnishing of certificates of insurance shall not release Seller of its obligations or liabilities under this order. In the event of Seller's breach of this provision, Buyer shall have the right to cancel the undelivered portion of any goods or services covered by this order and shall not be required to make further payments except for conforming goods delivered or services rendered prior to cancellation. 18. TOOLS: Unless otherwise agreed to by Buyer, Seller at its own expense shall furnish, keep in good condition, and replace when necessary all tools, jigs, dies, gauges, fixtures, molds and patterns ("Tools") necessary for the production of the goods. The cost or changes to the Tools necessary to make design and specification changes authorized by Buyer shall be paid for by Buyer. Seller shall insure the Tools with full fire and extended coverage insurance for the replacement value thereof. Seller grants Buyer an irrevocable option to take possession c; and title to the Tools that are special for the production of the goods upon payment to Seller of the book value thereof less any amounts which Buyer has previously paid to Seller for the cost of such Tools; provided, however, that this option shall not apply if such Tools are used to produce goods that are the standard stock of Seller or if a substantial quantity of like goods are being sold by Seller to others. 19. BAILED PROPERTY: All supplies, materials, tools, jigs, dies, gauges, fixtures, molds, patterns, equipment and other items furnished by Buyer either directly or indirectly, to Seller to perform this order, or for which Seller has been reimbursed by Buyer shall be and remain the property of Buyer. Seller shall bear the risk of loss of and damage to Buyer's property, Buyer's property shall at all times be properly housed and maintained by Seller; shall not be used by Seller for any purpose other than the performance of this order; shall be deemed to be personalty; shall be conspicuously marked "Property of General Motors Corporation" by Seller; shall not be commingled with the property of Seller or with that of a third person; and shall not be moved form Seller's premises without Buyer's prior written approval. Upon the request of Buyer, such property shall be immediately released to Buyer or delivered to Buyer by Seller, either (i) F.O.B. transport equipment at Seller's plant, properly packed and marked in accordance with the requirements of the carrier selected by Buyer to transport such property, or (ii) to any location designated by Buyer, in which event Buyer shall pay to Seller the reasonable cost of delivering such property to such location. Buyer shall have the right to enter onto Seller's premises at all reasonable times to inspect such property and Seller's records with respect thereto. 20. REMEDIES: The rights and remedies reserved to Buyer in this order shall be cumulative, and additional to all other or further remedies provided in law or equity. 21. DUTY DRAWBACK RIGHTS: This order includes all related customs, duty and import drawback rights, if any, (including rights developed by substitution and rights which may be acquired from Seller's suppliers) which Seller can transfer to Buyer. Seller agrees to inform Buyer of the existence of any such rights and upon request to supply such documents as may be required to obtain such drawback.

[COPY IN BRACKETS ILLEGIBLE ON ORIGINAL]

SETOFF: In addition to any [ ] provided by [ ] amounts due Seller shall be considered [ ] Indebtedness of Seller to General Motors Corporation and its subsidiaries; and General Motors Corporation may deduct any amounts due or to become due from Seller to General Motors Corporation and its subsidiaries from any sums due to or to become due from General Motors Corporation to Seller. ADVERTISING: Seller shall not without first obtaining the written consent of Buyer, in any manner, advertise or publish the fact that Seller has contracted to furnish Buyer the goods or service herein ordered. [ ] any trademarks or tradenames of Buyer in Seller's advertising or promotional materials, in the event of Buyer's breach of this provision. Buyer shall have the right to cancel the undelivered portion of any goods or [ ] covered by this order and shall not be required to make further payments except for conforming goods [ ] or services rendered prior to cancellation. GOVERNMENT COMPLIANCE. Seller agrees to comply with a federal, state and local laws. Executive [ ], rules, regulations and ordinances which may be applicable to Seller's performance or its obligations under this order. EQUAL OPPORTUNITY AND AFFIRMATIVE ACTION: This order incorporates by reference: (a) all provisions of 41 C.F.R. 60-1.4, as amended, pertaining to the equal opportunity clause in government contracts. [ ] provisions of 41 C.F.R. 60-250, as amended, pertaining to affirmative action for disabled veterans of [ ] Vietnam Era: and (c) all provisions of 41 C.F.R. 60-741, as amended, pertaining to affirmative action for handicapped workers. Seller certifies that it is in compliance with all applicable provisions of 41 C.F.R. 60-1, including but not limited to: (a) developing and presently having in full force and effect a written affirmative action compliance program for each of its establishments as required by 41 C.F.R. 60-1.40, as amended: (b) [ ] EEO-1 Reports as required by 41 C.F.R. 60-1.7, as amended, and (c) neither maintaining segregated [ ] nor permitting its employes to perform services at segregated facilities as prohibited by 41 C.F.R. [ ], as amended. Buyer requests that Seller adopt and implement a policy to extend employment opportunities to qualified applicants and employees on a equal basis regardless of an individual's age, race, color, religion or national origin. NO IMPLIED WAIVER: The failure of either party at any time to require performance by the other party by provision of this order shall in no way affect the right to require such performance at any time [ ] nor shall the waiver of either party of a breach of any provision of this order constitute a waiver of any proceeding breach of the same or any other provision. NON-ASSIGNMENT: Seller may not assign or delegate its obligations under this order without Buyer's written consent. RELATIONSHIP OF PARTIES: Seller and Buyer are independent contracting parties and nothing in this order shall make either party the agent or legal representatives of the other for any purpose whatsoever, nor [ ] it grant either party any authority to assume or to create any obligation on behalf of or in the name of the [ ]. GOVERNING LAW: This order is to be construed according to the laws of the state from which this order [ ] as shown by the address of Buyer on the face side of this order. SEVERABILITY: If any term of this order is invalid or unenforceable under any statute, regulation, ordinance, executive order or other rule of law, such term shall be deemed reformed and deleted, but only to the extent necessary to comply with such statute, regulation, ordinance, order of rule, and the remaining provisions of this order shall remain in full force and effect. ENTIRE AGREEMENT: This order together with the attachments, exhibits, or supplements, specifically referenced in this order, constitutes the entire agreement between Seller and Buyer with respect to the matter pertained herein and supersedes all prior oral or written representations and agreements. This order may only be modified by a purchase order amendment alteration issued by Buyer. [COPY IN BRACKETS ILLIGIBLE ON ORIGINAL]

Exhibit 10.3 DISTRIBUTION AND SUPPLY AGREEMENT* DRA, INC. This Agreement is entered into July 31, 1994, by DRA, Inc., a company organized under the laws of the State of Delaware ("DRA"), and General Motors Corporation, a company organized under the laws of the State of Delaware ("GM"), through its Service Parts Operations ("SPO"). INTRODUCTION This Agreement is entered into with reference to the following facts: A. DR International, Inc. ("DRI"), DRA and GM have entered into the Asset Purchase Agreement dated July 13, 1994, ("Asset Purchase Agreement"), pursuant to which DRA will purchase from GM certain of the assets, and will assume certain of the liabilities, of the Delco Remy Heavy Duty Starter Motors and Generators business ("HDO"), the Delco Remy Heavy Duty Starter Motors and Generators Remanufacturing business ("HDO Reman"), the Delco Remy Light Duty Starter Motors business ("LDO"), the Delco Remy Light Duty Starter Motors Remanufacturing business ("LD Reman") and the Powder Metal Forge business ("PMF" and collectively with HDO, HDO Reman, LD Reman and LDO, the "Businesses") of the Delco Remy Division of GM (together with any successor unit of GM, the "Delco Remy Division"). B. Following Closing under the Asset Purchase Agreement, DRA will own and operate that portion of the operations of Delco Remy Division which supplied heavy duty starter motors and generators, and light duty starter motors to SPO for distribution in the United States and Canada. The purpose of this Agreement is to set forth the terms and conditions under which DRA will supply such products to SPO (including to SPO through Delco Remy Division or another GM operation). Capitalized terms used but * Portions of this Exhibit 10.3 were omitted and filed separately with the Secretary of the Securities and Exchange Commission (the"Commission") pursuant to an application for confidential treatment filed with the Commission pursuant to Rule 406 under the Securities Act of 1933. Such portions are marked by the word "Redacted."

not otherwise defined herein shall have the meanings ascribed to them in the Asset Purchase Agreement. NOW, THEREFORE, in consideration of the mutual promises contained herein and intending to be legally bound, DRA and GM hereby agree as follows: I. GRANT 1.1 Exclusive Distributor For LDO Branded Products. DRA hereby appoints GM to be DRA's exclusive distributor of LDO Branded Products, as hereinafter defined, within the Territory, as hereinafter defined (the "LDO Branded Territory"). Subject to the terms of this Agreement, including Section 1.5 hereof, for so long as this Agreement remains in effect DRA shall not, and shall not authorize any other party to, offer or sell LDO Branded Products within the Territory. 1.2 Exclusive Distributor for LDO Unbranded Products. DRA hereby appoints GM to be DRA's exclusive distributor of LDO Unbranded Products, as hereinafter defined, within the Territory only to those customers specified on Exhibit A attached hereto (the "LDO Unbranded Territory"). Subject to the terms of this Agreement, including Section 1.5 hereof, for so long as this Agreement remains in effect DRA shall not, and shall not authorize any other party to, offer or sell LDO Unbranded Products within the LDO Unbranded Territory. 1.3 Exclusive Distributor For HDO Branded and HDO Unbranded Products To SPO Customers. DRA hereby appoints GM to be DRA's exclusive distributor of HDO Branded Products and HDO Unbranded Products, each as hereinafter defined, within the Territory to those GM authorized dealers and wholesale distributors ("WDs") as are being serviced by SPO as of the Closing Date under the Asset Purchase Agreement and such additional dealers and WDs as may be requested by GM from time to time and consented to by DRA, which consent shall not be unreasonably withheld (the "HDO Territory"). Subject 2

to the terms of this Agreement, including Section 1.5 hereof, for so long as this Agreement remains in effect DRA shall not, and shall not authorize any other party to, offer or sell HDO Products to those GM authorized dealers or WDs as are being serviced by SPO as of the Closing Date under the Asset Purchase Agreement. 1.4 Products Defined. For purposes of this Agreement: (i) "LDO Branded Products" shall mean those light duty starter motors that carry the trademark "Delco Remy" or other trademark owned and specified by GM (other than "Remy") and their associated service parts, components and assemblies and any replacements therefor, (ii) "LDO Unbranded Products" shall mean those light duty starter motors and their associated service parts, components and assemblies and any replacements therefor other than those which are branded "Delco Remy" or other trademark owned and specified by GM (other than "Remy"); (iii) "HDO Branded Products" shall mean those heavy duty starter motors and generators that carry the trademark "Delco Remy" or other trademark owned and specified by GM (other than "Remy"), and their associated service parts, components and assemblies and any replacements therefor described in Exhibit B; and (iv) "HDO Unbranded Products" shall mean those heavy duty starter motors and generators and their associated service parts, components and assemblies and any replacements therefor other than those which are branded "Delco Remy" or other trademark owned and specified by GM (other than "Remy"); provided, however, that the terms defined in clauses (i), (ii), (iii), and (iv) respectively, shall not include such products (a) supplied as original equipment to original equipment manufacturers ("OEMs") or (b) distributed by DRA and/or such OEMs other than GM to service the aftermarket for such other OEMs. LDO Branded Products and LDO Unbranded Products are sometimes referred to herein together as "LDO Products." Similarly, HDO Branded Products and HDO Unbranded Products are sometimes referred to herein together as "HDO Products". 1.5 Other Distribution. GM presently solicits sales from, and distributes LDO Branded Products and HDO Branded Products to GM dealers, WDs, and other accounts, and it is the intent of the parties hereunder that such LDO Branded Products distribution and HDO 3

Branded Products distribution will conform to separate templates to be promptly agreed upon by the parties. Prior to Closing under the Asset Purchase Agreement, GM's Delco Remy Division had responsibility for distribution of HDO Branded Products to other than GM dealers, WDs, and other types of accounts currently served by SPO, and it is the intent of the parties hereunder that such distribution will be continued by DRA consistent with past practice. Except as expressly set forth in this Agreement, nothing herein shall prohibit DRA's solicitations of sales and distribution of LDO Branded Products, LDO Unbranded Products, HDO Branded Products or HDO Unbranded Products. 1.6 Territory Defined. For purposes of this Agreement, the term "Territory" shall mean the 50 United States plus the District of Columbia, and Canada. Notwithstanding the foregoing, GM shall have the nonexclusive right to sell HDO and LDO Products purchased from DRA pursuant to this Agreement to GM authorized dealers and wholesale distributors located outside the Territory who are being serviced by SPO. II. DUTIES OF DRA AND GM 2.1 Best Efforts; Good Name. GM shall use its best effort to aggressively market the LDO Products and HDO Branded Products within the applicable Territory in accordance with the terms of this Agreement and as DRA may direct from time to time. In the process of pursuing these efforts, GM shall, and shall instruct its employees and other representatives to, conduct itself and themselves in a manner consistent with professional and accepted business standards and practices consistent with the good name of GM, Delco Remy and DRA. 2.2 Staff and Personnel. GM shall employ and maintain sufficient qualified staff and sales personnel to meet its obligations hereunder. 4

2.3 Qualification To Do Business. GM shall make such filings and take such action as may be required to qualify to do business under all applicable state and local laws in order to perform the services contemplated by this Agreement. 2.4 Price and Terms of Sales: Warranty: Royalties. (a) GM shall have the absolute right to establish the prices, charges, terms and conditions governing the sale of LDO Branded Products, LDO Unbranded Products sold to the customers listed on Exhibit A and HDO Products under this Agreement, within each applicable Territory but agrees to consult with and reasonably consider the advice of DRA regarding such prices, charges, terms and conditions. In each case, GM shall give DRA prompt written notice of its prices to its customers consistent with the provisions of Section 3.2 of this Agreement. Included within GM's responsibility under this paragraph and at GM's sole cost and expense shall be the scope and application of any warranty accompanying GM's resale of LDO Products and HDO Branded Products, and the administration of such warranties and any other liabilities associated with such warranty. (b) Direct Sales of Certain LDO Unbranded Products by DRA. DRA shall have the absolute right to establish the prices, charges, terms and conditions governing the sale of LDO Unbranded Products sold by DRA and DRA shall give prompt written notice to GM prior to DRA's notice to such customers, but in no event less than thirty (30) days prior to such prices becoming effective. To the extent DRA sells LDO Unbranded Products to customers in the Territory excluding GM or its Affiliates, DRA shall pay to GM a royalty equal to 3% of the Net Sales Price for all sales of LDO Unbranded Products to such customers. For purposes of this Agreement, "Affiliate" shall mean any other company or partnership in which GM owns, directly or indirectly, more than fifty percent (50%) of the outstanding capital stock or other equity interest. The "Net Sales Price" shall be the gross sales price as reflected on DRA's invoice before adding thereto transportation, insurance and similar charges and any sales, use, gross receipts or similar taxes charged to the customer on the invoice, but after deducting incentive, quantity or distribution channel discounts reflected on the invoice (but not after deducting any cash or early payment discounts). The aggregate 5

royalty due GM for all sales in the immediately preceding calendar month shall be paid net 30 days. (c) Mutual Cooperation. DRA shall provide to GM documentation sufficient to support the calculation of royalties due GM pursuant to Section 2.4(b) above. Should such documentation prove to be unsatisfactory, in GM's reasonable discretion, the parties shall mutually cooperate in a review of DRA's books and records to confirm the amount of such royalties; provided, however, that the review of such books and records shall be strictly limited only to those necessary to confirm the royalty amount. 2.5 Advertising. During the term of this Agreement GM will pay and be solely responsible for advertising and promotion of LDO Branded Products and HDO Branded Products in the applicable Territory in a manner and to a level reasonably consistent with past practice. 2.6 Customer Inquiries. GM shall handle to appropriate conclusion all customer inquiries regarding LDO Products and HDO Branded Products sold by GM; however, DRA will provide assistance with such customer inquiries as reasonably appropriate. 2.7 Expenses. All expenses incurred by GM in connection with this Agreement and the performance of GM duties and responsibilities hereunder shall be the responsibility of GM. 2.8 Product Engineering. DRA shall provide product engineering and production control support for LDO Products and HDO Branded Products at DRA's expense. 2.9 Cooperation. GM and DRA will cooperate to monitor and assess activities hereunder in a common effort to increase efficiencies and effectiveness in the distribution and supply of LDO Products and HDO Branded Products pursuant to this Agreement. 6

III. SUPPLY ARRANGEMENTS BETWEEN THE PARTIES 3.1 Purchase and Supply Commitment. The provisions of Section 1.1 and Article II of each of the Light Duty Starter Motors Component Supply Agreement, and the Heavy Duty Component Supply Agreement (which are Ancillary Agreements under the Asset Purchase Agreement) are incorporated herein by this reference and apply to SPO's respective purchases of LDO Products and service parts and HDO Branded Products from DRA as though each of the LDO Products and HDO Branded Products were called "Components" under such Light Duty Starter Motors Component Supply Agreement and Heavy Duty Component Supply Agreement; provided, however, that (i) to the extent of any conflict between the sections of such supply agreements incorporated herein and this Agreement, the provisions of this Agreement shall govern, and (ii) the price provisions governing the purchase of products hereunder by GM shall be as set forth in Section 3.2 below. 3.2 Purchase Price of LDO and HDO Branded Products. The initial prices for LDO Products and HDO Branded Products to be sold to GM hereunder shall be those set forth on Exhibit B attached hereto which Exhibit also sets forth the current sales prices charged by GM to its customers for such products. From and after the date hereof and during the term of this Agreement, the prices at which DRA shall sell LDO Products or HDO Branded Products, as applicable, to GM shall be increased proportionately (based on the percentage increase in price) to the extent GM increases its selling prices to its customers of LDO Products or HDO Branded Products, as applicable. In the event of a price increase by GM, GM shall give DRA prompt written notice of such increase prior to GM's notifying its customers of such increase, but in no event less than ninety (90) days prior to such increase taking effect, unless otherwise mutually agreed by the parties. The increase in DRA's selling price shall be effective simultaneously with GM's price increase. In the event GM determines to decrease its selling price to its customers of LDO Products or HDO Products, during the first seven (7) years of this Agreement, GM shall notify DRA of such intended decrease on a timely basis, but in all cases prior to GM's notice 7

to its customers. In the event the GM proposed price decrease (or series of related price decreases) affects or includes 50% or more of the annual dollar sales volume (as determined by the prior year's actual sales volume) of any one or more of the Product Families (as defined below), DRA will determine and shall notify GM, within 15 days of receipt of notice of such decrease, whether or not it will decrease its prices on the affected Products to GM proportionately (based on the percentage decrease in price) to GM's decrease in prices to its customers. To the extent DRA agrees to a price decrease, such decrease shall be effective simultaneously with the effective date of GM's price decrease. If DRA elects not to decrease its prices to GM (a "Price Decrease Deferral"), then DRA shall not subsequently be permitted to increase its prices to GM pursuant to this Section 3.2 unless and until the Deferred Amount (as defined below) equals zero. Similarly, should a Deferred Amount still exist at the end of the first seven (7) years of this Agreement, such amount shall carryover to future years as a prohibition on DRA's ability to increase its prices to GM pursuant to Section 3.2 above, until the Deferred Amount is reduced to zero. Notwithstanding the foregoing, DRA will decrease its prices to GM proportionately (based on the percentage decrease in price) with GM's decrease in prices to its customers at the time during the term of this Agreement, with respect to any single production model or part number, any GM proposed price decrease (or series of related price decreases) that does not affect or include 50% or more of the annual dollar sales volume (as determined by the prior year's actual sales volume) of any Product Family, or any GM proposed price decrease whatsoever during the term of this Agreement which has an effective date subsequent to the seventh anniversary of this Agreement. "Product Family" means the individual groupings of products as designated by the product codes described on Exhibit C hereto. "Deferred Amount" shall mean, at any time, (i) the cumulative aggregate dollar amount of Price Decrease Deferrals multiplied by 1.25, less (ii) the cumulative aggregate dollar amount of price increases which DRA would have otherwise been entitled to based on GM price increases had a Deferred Amount balance not existed, in each instance, since the last date (a "Reset Date") the Deferred Amount was zero (that is, it is understood that the 8

Deferred Amount shall never be reduced to a negative number and following any Reset Date, the accumulation of Price Decrease Deferrals and such price increases pursuant to (i) and (ii) above shall be started over when another Price Decrease Deferral occurs). Except as may otherwise be mutually agreed, the foregoing pricing provisions shall also apply to all service parts, including past model service parts products, and remanufactured products sold hereunder; provided that the initial prices for service parts (as well as past model service parts and remanufactured products) shall be such prices as established on Exhibit B. Prices for LDO Unbranded Products sold within the LDO Unbranded Territory and billed by GM or its Affiliates directly to customers shall be no higher than the lowest Net Sales Price (adjusted where applicable for any changes in terms and conditions of sale and applicable "meet competition" market differentials) at which DRA is then selling such Unbranded LDO Products to its customers in the applicable territory, less three percent (3%). Pricing outside the applicable territories for LDO Unbranded Products and HDO Unbranded Products, related to North American Product Programs and billed by GM or its Affiliates directly to customers shall be no higher than the lowest Net Sales Price (adjusted where applicable for any changes in terms and conditions of sale and applicable market differentials) at which DRA is then selling such Products to its customers in the same country, less three percent (3%). IV. TERM; TERMINATION; NON-COMPETE 4.1 Term, Termination. As to HDO Branded Products and HDO Unbranded Products, this Agreement shall remain in effect for three (3) years from the date hereof and shall be automatically extended for up to twelve (12) additional successive one-year terms without further action by GM or DRA unless DRA shall have given GM written notice of DRA's decision not to renew this Agreement as to HDO Branded Products beyond the then 9

current one-year term, which notice shall be delivered to GM at least 12 months prior to the initial three (3) year term or the then current termination date. As to LDO Products, this Agreement shall remain in effect for fifteen (15) years from the date hereof; provided, however, that this Agreement may be terminated as to HDO Branded Products, or as to LDO Products, prior to the completion of the applicable term in any of the following events: (i) By mutual agreement of the parties. (ii) Either party may terminate this Agreement if the other party materially breaches it. (iii) By DRA as to HDO Branded Products or LDO Products, as applicable, if DRA gives written notice to GM within 30 days following each anniversary date of this Agreement if GM substantially fails to achieve the goals and objectives set forth in the HDO Product and LDO Product templates for reasons other than a general decline in the economy. Any termination under this provision, however, shall be effective as of the next anniversary date of this Agreement, following receipt of such notice. (iv) By GM to the extent DRA fails to meet the quality parameters set forth below: (a) for O.E.M and service parts (non-remanufactured) components which are subject to either the Light Duty Starter Motors Component Supply Agreement or the Heavy Duty Component Supply Agreement between GM and DRA, the quality standards set forth therein; (b) for past model service parts (non- remanufactured) components which are not subject to either the Light Duty Starter Motors Component Supply Agreement or the Heavy Duty Component Supply Agreement, the quality standards established with regard to such Components before they became past model; and (3) for remanufactured components, the quality standards currently in place by GM at the execution of this Agreement with respect to such remanufactured components. 10

4.2 Termination Procedure. A party intending to terminate this Agreement under Section 4.1 (ii) or (iv) above shall first notify the other party in writing of the grounds for the intended termination. In the event the other party fails to remedy such grounds for termination within ninety (90) days after the date of receipt of such notice, then the terminating party may terminate this Agreement effective immediately upon written notice to the other party without the need for any judicial action. 4.3 Reservation of Rights. The provisions of this Article are without prejudice to any other rights or remedies either party may have by reason of the default of the other party. 4.4 Effect of Termination. Notwithstanding anything to the contrary contained in Section 12.11 of the Asset Purchase Agreement, in the event this Agreement or a specified portion thereof is terminated (i) by GM pursuant to Section 4.1(ii) or Section 4.1 (iv) above, then GM shall be permitted to purchase comparable substitute products from other sources and may distribute such substitute products within the applicable Territory but only to the extent such specific products are not being sufficiently supplied by DRA; or (ii) by DRA pursuant to Section 4.1 (iii) above with respect to HDO Branded Products or LDO Products, as the case may be, then GM shall be permitted to purchase comparable substitute HDO products (if this Agreement is terminated as to HDO Products) or LDO products (if this Agreement is terminated by LDO Products) from other sources and may distribute such substitute HDO or LDO products within the applicable Territory but only to the extent such specific products are not being sufficiently supplied by DRA; or (iii) due to DRA's election to not renew or extend the term of this Agreement with respect to HDO Branded Products pursuant to Section 4.1 above, then GM 11

shall be permitted to purchase comparable substitute HDO products from other sources and may distribute such substitute HDO products within the HDO Branded Territory. Upon the occurrence of any of the foregoing, GM shall be permitted to distribute the applicable products described above under any GM trademark which is not otherwise licensed to DRA, and GM shall have, for a period of two (2) years following such termination, the absolute right to acquire from DRA (under the same terms and conditions provided by this Agreement had there been no termination) LDO Branded Products and HDO Branded Products for distribution to GM authorized dealers and wholesale distributors. 4.5 Non-Compete. Except as provided in Section 4.4 to this Agreement above, for the term of this Agreement, GM shall not offer or sell any goods which are competitive with, the same as, or similar to any of the LDO Products or HDO Products, or promote or advertise any such goods within the Territory without DRA's prior written consent; provided, however, that in any case where a supplier other than DRA is the O.E.M. supplier to GM of LDO Products, HDO Products or other comparable substitute products, then GM shall be permitted to purchase and distribute service parts for such LDO Products, HDO Products or other comparable or substitute products from such other suppliers, without limitation. V. QUARTERLY REVIEW SPO and DRA shall schedule on a quarterly basis a meeting of appropriate SPO and DRA personnel to review the performance and expectations hereunder and relevant product plans. 12

VI. GENERAL PROVISIONS 6.1 No Agency. This Agreement does not constitute either party the agent or legal representative of the other party. Neither party is authorized to create any obligation on behalf of the other party. 6.2 Notices. Any notice under this Agreement shall be in writing (letter, telex, facsimile, or telegram) and shall be effective when received by the addressee at its address indicated below. (a) Notice sent to DRA shall be addressed as follows: Delco Remy America, Inc. 2405 Columbus Ave. Anderson, Indiana 46018 Attention: Chief Financial Officer (b) Notice sent to GM shall be addressed as follows:
AC Delco Systems Division 4800 S. Saginaw Street Flint, Michigan 48501 Attn: Finance Director GM Service Parts Operation 6060 West Bristol Road Flint, Michigan 48554 Attn: General Director of Finance

(c) Either party by written notice to the other party may designate other addresses to which notices shall be sent. 6.3 Amendments. No amendment to this Agreement shall be binding upon either party unless it is in writing and is signed by the other party. 6.4 Successors and Assignment. This Agreement shall be binding upon and inure to the benefit of GM and DRA and their respective successors and assigns. No party to this Agreement may assign this Agreement or any of its rights, interests or obligations hereunder without the prior written consent of the other party; provided, however, that DRA may (a) without the prior written consent of GM assign this Agreement and any or all of its 13

rights, interests and obligations hereunder to one or more of its Affiliates (as defined in the Asset Purchase Agreement), provided that, notwithstanding such assignment DRA shall remain liable for all of its obligations hereunder, and (b) upon receipt of GM's consent (which will not be unreasonably withheld), assign this Agreement and its rights, interests and obligations hereunder to (i) a transferee of all or substantially all of the assets of any or all of the Businesses, in each case, insofar as such rights, interests and obligations relate to or affect the assets or Businesses so transferred or as to which such assignee has become a successor, provided that GM shall take into consideration in granting its consent the following: (A) that such transferee or successor is not less creditworthy than DRA as of the Closing Date, (B) such transferee or successor executes a written acknowledgement of its assumption of DRA's obligations to GM under this Agreement, (C) that such transferee or successor is not an original equipment manufacturer of fully assembled passenger cars and/or light duty trucks, (D) if such transferee or successor is a then current supplier to GM, such transferee or successor shall be in good standing and have demonstrated manufacturing expertise, (E) if such transferee or successor is a manufacturer but is not then a current supplier to GM, such transferee or successor shall not have been terminated as a supplier by GM for reasons other than failure to be price competitive and shall have a reputation for large- scale, quality manufacturing and reliable performance of contracts. 6.5 Law and Jurisdiction. This Agreement shall be governed by the laws of the State of New York without regard to the principles of conflict or laws thereof. Each party consents, for purposes of enforcing this Agreement, to personal jurisdiction, service of process, and venue in any state or federal court within the State of New York having jurisdiction over the subject matter. 6.6 Counterparts. This Agreement may be executed in counterparts, and each counterpart will be deemed to be an original instrument, provided that all such counterparts together will constitute only one agreement. 14

6.7 Headings. The headings preceding the text of the sections and subsections hereof are inserted solely for convenience of reference, and will not constitute a part of this Agreement, nor will they affect its meaning, construction or effect. 6.8 Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto regarding the subject matter hereof, and supersedes any and all prior or contemporaneous oral or written agreements between the parties relating to the subject matter of this Agreement. IN WITNESS WHEREOF, GM and DRA have caused this Agreement to be executed by their duly authorized representatives on the day and year first written above.
DRA, Inc. General Motors Corporation

By: /s/ James R. Gerrity -------------------------------Executive V.P.

By: /s/ Charles A. Cotten ---------------------------------

15

EXHIBIT A CUSTOMER LIST OF LDO UNBRANDED PRODUCTS GM Dealers Direct Accounts (AC-Delco Wholesale Distributors and Mass Merchandiser Distributors) Trak Auto Zone Western Auto Carquest Auto Value AAAD Mass Merchandiser Distributor (MMD) A Mass Merchandiser Distributor is an entity whose primary function is selling automotive replacement parts and accessories of the general type marketed by AC-Delco to mass merchandiser retailers. The mass merchandiser distributor warehouses, distributes and provides pre-sale services, including seeding, pre-ticketing, inventory control, detailing, product display arrangement, and advertisement assistance to mass merchandisers. Mass Merchandiser Distributors (MMD) are to be distinguished from Mass Merchandisers (MM) which are defined below. Mass Merchandiser (MM) A Mass Merchandiser is an entity (regional, national or international in scope), whose primary function is the wholesale purchase and retail sale of commodities. Merchandise is generally sold through retail outlets (owned or franchised) direct to the customer. Mass Merchandisers are retailers in one of the following categories: - Traditional and discount department stores - Specialty discount automotive chains - Supermarkets and discount drug stores - Home and auto stores - Hardware stores - Catalog outlets and other large retailers. Distribution and Supply Agreement Exhibit A

EXHIBIT B LDO PRODUCTS AND HDO BRANDED PRODUCTS AND INITIAL PRICES [Redacted] Distribution and Supply Agreement Exhibit B

Exhibit 10.4 TRADEMARK LICENSE AGREEMENT This TRADEMARK LICENSE AGREEMENT ("License") is made and entered into July 31, 1994, by and among DRA, Inc., a company organized under the laws of the State of Delaware ("DRA"), DR International, Inc., a company organized under the laws of the State of Delaware ("DRI" and, together with DRA, the "Licensee"), and General Motors Corporation, through its Delco Remy Division, a corporation organized under the laws of the State of Delaware ("GM"). WITNESSETH WHEREAS, GM, DRI and DRA have entered into the Asset Purchase Agreement dated July 13, 1994 (the "Asset Purchase Agreement") under which DRA has acquired (the "Acquisition") certain assets and assumed certain liabilities of the Delco Remy Division. WHEREAS, DRI and DRA desire to acquire, and GM is willing to grant, a license to use certain trademarks and tradenames of Delco Remy Division world- wide. NOW THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, for themselves and their successors and assigns, agree as follows: 1. DEFINITIONS The following terms have the meaning ascribed to them herein: Businesses. The term "Businesses" shall mean the production, distribution, sale and servicing of heavy duty starter motors and generators ("Heavy Duty Starter Motors Business"), remanufactured heavy duty starter motors and generators ("HD Reman Business"), light duty starter motors ("Light Duty

Starter Motor Business"), remanufactured light duty starter motors ("LD Reman Business"), and powder metal forge ("PMF Business"). Closing. The term "Closing" has the meaning ascribed to it in the Asset Purchase Agreement. Component Supply Agreements. The term "Component Supply Agreements" means the Heavy Duty Component Supply Agreement, Light Duty Component Supply Agreement, Powder Metal Forge Component Supply Agreement and Distribution and Supply Agreement between DRA and GM included among the Ancillary Agreements to the Asset Purchase Agreement. Delco Remy Trademarks. "Delco Remy Trademarks" means "DELCO REMY", "DELCO REMY AMERICA", "DELCOTRON" (with regard to heavy duty generators only), the "DELCO REMY AMERICA logo" as set forth in Exhibit A, and such other logotypes containing "Delco Remy" as DRA or DRI may adopt (subject to GM's written consent not to be unreasonably delayed or withheld) and use during the term of this license as provided herein. Delco Remy Tradenames. The term "Delco Remy Tradenames" shall mean "Delco Remy America" and/or "Delco Remy International". Effective Date. The term "Effective Date" means the date of this Agreement. Product Liability Insurance. The term "Product Liability Insurance" means insurance maintained by Licensee in accordance with Paragraph 5 hereof. 2

Products. The term "Products" means the products manufactured by the Businesses as of the date of the signing of this License and any replacements and extensions thereof. Quality Standards. The term "Quality Standards" has the meaning described in Paragraph 6(a) herein. Remy Trademarks. "Remy Trademarks" means "REMY", "REMY AMERICA", "REMY INTERNATIONAL", and such logotypes as Licensee may adopt containing "REMY", "REMY AMERICA" or "REMY INTERNATIONAL". Remy Tradenames. "Remy Tradenames" means "REMY AMERICA" and "REMY INTERNATIONAL." Territory. GM and Licensee have agreed that Licensee shall be entitled to use the Delco Remy Trademarks world-wide. However, the term "Territory" shall mean initially the United States (its territories and possessions including, without limitation, Puerto Rico and the U.S. Virgin Islands), Mexico, Canada, and such other countries set forth on Exhibit B, as may be expanded as provided in Paragraph 4(e) herein. Trademarks. "Trademarks" means the "Delco Remy Trademarks", the "Remy Trademarks," and any other term that GM authorizes as provided herein for use as a trademark. Tradenames. The term "Tradenames" shall mean the Delco Remy Tradenames and the Remy Tradenames. 3

Tradename License Agreement. The term "Tradename License Agreement" shall mean the Tradename License Agreement among GM, DRA and DRI. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Asset Purchase Agreement. 2. GRANT OF LICENSE (a) Authorization For Products. Subject to the terms and conditions of this License, GM hereby grants to Licensee and Licensee hereby accepts, an exclusive, royalty free license to use (i) the Trademarks on and in connection with existing Products finished goods inventory as of the Closing, (ii) the Trademarks in the form and manner specified by GM and/or approved by GM under this Agreement on and in connection with new and replacement Products made by or for Licensee developed for supply to GM pursuant to the Component Supply Agreements; (iii) the Trademarks on and in connection with Products and replacement and extension Products made by or for Licensee not supplied to GM, and (iv) the Remy Trademarks on and in connection with other products. (b) The grant shall include the manufacture (including the right to have made), advertising, promotion, distribution, service and sale of such Products in the Territory by or for Licensee as provided herein. (c) Term and Royalty. The initial term ("Initial Term") of the license of the Delco Remy Trademarks hereby granted shall commence on the Effective Date, and shall continue for ten (10) years unless otherwise terminated as provided herein. Upon expiration of the Initial Term, this Agreement shall continue indefinitely on the same terms except that Licensee agrees to pay an annual license fee of one hundred thousand dollars ($100,000) payable upon the date of continuation and each anniversary date thereof. The license of the Remy Trademarks hereby granted shall commence on the Effective Date, shall 4

be perpetual, fully-paid, and royalty-free, and may be freely assigned, mortgaged, sublicensed or encumbered, subject, however, to the covenants in Paragraph 2(f) of this Agreement. (d) Limitations to Licensee's Rights. Except as provided in the Manufacturers Representative Agreement, Licensee shall not use the Delco Remy Trademarks directly or indirectly on or in connection with, or in relation to, any product except Products. Licensee shall not combine the Trademarks with any other trademark without the express written authorization of GM, provided, however, that Licensee may use the Trademarks together with other trademarks, service marks, and tradenames including without limitation "ROAD GANG" and other marks for specific products. Licensee shall not make trademark use of the Trademarks or any confusingly similar forms of, variation on, or alternative spelling of the term "DELCO", "GM", "GENERAL MOTORS", or "DELCO REMY DIVISION", except as provided in this Agreement or pursuant to Paragraph 8 of this Agreement. No other right or license is granted hereby by implication or otherwise under any other mark, trademark, service mark or trade name of GM. Nothing in this Paragraph (d) shall be interpreted to limit or expand upon the rights granted Licensee to use the Tradenames under the Tradename License Agreement. (e) GM shall not use, and will not directly or indirectly authorize or permit any third party to use the Trademarks or logotypes created by Licensee (or any confusingly similar form of variation on, or alternative spelling thereof), directly or indirectly on or in connection with or in relation to Products. (f) Notwithstanding the other provisions of this Agreement, neither Licensee nor its sublicensees, assigns, or affiliates may use the Remy Trademarks directly or indirectly on or in connection with or in relation to (i) batteries at any time after the Closing Date or (ii) for 10 years after the Closing Date for any other product manufactured by the Delco Remy Division on the Closing Date and not acquired by DRA. 5

3. GOODWILL Licensee recognizes the value of the goodwill associated with the Trademarks and acknowledges that, except for assignments pursuant to Paragraph 8 of this Agreement, the Trademarks, and all rights therein and the goodwill pertaining thereto, belong exclusively to GM and that the Trademarks have acquired secondary meaning in the mind of the public in association with GM. Notwithstanding anything to the contrary expressed in this License, Licensee shall not acquire, be deemed to have acquired and shall not claim any rights to the Trademarks other than the rights granted by GM under this License or pursuant to Paragraph 8 of this Agreement. 4. GM'S TITLE AND PROTECTION OF GM'S RIGHTS (a) GM's Representations. GM represents and warrants that in the Territory: (i) it is the sole and exclusive owner of all right, title and interest in and to the Trademarks and various U.S. and foreign registrations for use on and in connection with Products; (ii) it has the power to grant the rights and licenses granted to Licensee herein and has not granted rights and licenses to the Trademarks to any person other than Licensee hereunder with respect to Products; (iii) it has not abandoned the Trademarks; (iv) the aforementioned registrations have not been adjudged or declared invalid by any court in any jurisdiction; (v) such trademark registrations are not, as of the date of this License, the subject of any claim, litigation or U.S. Patent and Trademark Office proceeding; (vi) it is not aware of any rights of any third party which would be infringed by Licensee's use of the Trademarks as authorized herein; and (vi) it is not aware of any rights of any third party which would be infringed by Licensee's use of the Trademarks on or in connection with Products outside the initial Territory. (b) Conduct of Licensee. Licensee agrees that it will not knowingly do or suffer to be done during the Term or any renewal period of this License any act or 6

thing that will materially impair the rights of GM in and to the Trademarks then licensed hereunder. GM hereby agrees to indemnify and defend Licensee and undertakes to hold it harmless against any claims or suits to the extent that such claim or suit arises out of the exploitation and use by Licensee of the Trademarks as authorized in this License with respect to Products, provided that the claim or suit arises in the Territory and prompt notice is given to GM of any such claim or suit and provided further that GM shall have the option to undertake and conduct, at GM's expense, the defense of any suit brought and that no settlement of any such claim or suit is made without prior written consent of GM (which consent shall not be unreasonably delayed or withheld). Licensee shall participate in such defense, at its own expense, to protect its interests. GM shall keep Licensee informed on all material developments throughout the progress of any such defense, and GM shall not, without Licensee's prior approval, which approval shall not be unreasonably withheld, enter into any consent, settlement, or other agreement which materially diminishes or restricts Licensee's rights under this License or places any material restrictions or conditions upon Licensee's use of the Trademarks with respect to Products. (c) Assistance. Licensee agrees to assist GM to the extent reasonably necessary in the procurement of any protection or to protect any of GM's rights in and to the Trademarks for Products. To this end, GM may commence or prosecute, at GM's expense, any claims or suits in its own name, in the name of Licensee or may join Licensee as a party thereto provided that GM indemnifies and defends and holds Licensee harmless from any claims, suits or counterclaims resulting therefrom. Each party shall promptly notify the other in writing of any material infringement or imitation by others of the Trademarks on goods the same as or similar to the Products covered by this License which may come to such party's attention. The parties shall promptly consult with each other and use their best efforts to agree upon a course of action to be taken with respect to such infringement, provided, however, that, 7

GM shall have the sole right to determine whether or not it takes any action on account of any such infringement or imitation. If GM decides not to take action, Licensee may then take action in its own name and at its expense and discretion and may join GM as a party to the extent necessary, provided that Licensee indemnifies and defends and holds GM harmless from any claims, suits, or counterclaims resulting therefrom. (d) No Registration. Except as otherwise provided in this Agreement, Licensee shall not attempt to register the Trademarks, the term "DELCO", or any formative thereof, alone or as part of its own trademark, nor shall Licensee use or attempt to register any marks which are likely to be confusingly similar to or constitute a colorable imitation of the Trademarks. (e) Registration and Registered User. GM shall seek and maintain in GM's name registrations of the Trademarks in the Territory for those Products which Licensee sells or intends to sell in the Territory. GM shall pay the initial cost for registration of the Delco Remy Trademarks in the Territory and for the recordal or registration of this License, any related agreements and of Licensee as a registered user. In addition, Licensee may request that GM register and maintain the Remy Trademarks for such products in such countries as Licensee deems necessary or desirable, for which Licensee will reimburse GM for its out-of-pocket costs. In the event that Licensee desires to market Products bearing Delco Remy Trademarks in any country not then included in the Territory, Licensee shall first promptly notify GM so appropriate trademark applications can be filed by GM before any marketing of such products shall commence; provided that GM shall instruct the filing of any application within thirty (30) days after receipt of the notice to GM. Licensee agrees to cooperate with GM in having Licensee recorded as a registered user where GM in its sole discretion deems that such recordal is necessary. Licensee agrees to pay the out-of-pocket costs incurred by GM for the registration and recordal in any country which Licensee has requested to add to the Territory, and for the maintenance and renewal of other registrations and recordals, provided that 8

GM gives Licensee 6 months prior notice of the deadlines for such maintenance and renewal and in countries where there is no actual or contemplated use the option of declining to maintain or renew such registrations or recordals. Each party shall furnish the other with all reasonably requested information and documentation (including the execution and delivery of any appropriate and accurate affidavits, declarations, oaths and other documentation) to assist the other in obtaining or maintaining trademark registrations or other forms of intellectual property protection and registrations and in any litigation or administrative proceeding related thereto. (f) No Assignment. It is agreed that nothing contained in this License shall be construed as an assignment or grant to Licensee of any right, title or interest in or to the Trademarks, it being understood that all rights relating thereto are reserved by GM, except for (i) the License to Licensee of the right to use and utilize the Trademarks only as specifically and expressly provided in this License and (2) the assignment to Licensee of the trademarks and tradenames under the Asset Purchase Agreement and pursuant to Paragraph 8 of this Agreement. 5. INDEMNIFICATION BY LICENSEE AND PRODUCT LIABILITY INSURANCE Licensee agrees that it will obtain as of the Closing, at its own expense, Product Liability Insurance from a recognized insurance company which is qualified to do business in the State of Indiana, providing adequate protection (in the minimum amount of five million dollars ($5,000,000) per occurrence) for GM (as well as Licensee) against any product liability claims related to the Products. As proof of such insurance, a certificate of Product Liability Insurance, naming GM as an additional insured party (and setting forth the amount of insurance, the policy number, the date of expiration and including a provision requiring that GM be given thirty (30) days written notice prior to termination, reduction or modification of such insurance 9

coverage) shall be submitted to GM by Licensee within thirty (30) days after the execution of this License. Upon modification thereof, Licensee shall furnish promptly to GM a copy of the modified certificate of Product Liability Insurance. Licensee's procurement of Product Liability Insurance or furnishing to GM a certificate therefor shall not relieve Licensee of its obligation or liabilities under this License. 6. QUALITY CONTROL (a) Quality Standards. GM acknowledges that the Products currently manufactured by its Delco Remy Division meets its high standards for quality. Licensee acknowledges that if the Products it manufactures after the Closing were to be of inferior quality in design, material or workmanship, the substantial goodwill that GM has built up and now possesses in the Trademarks would be impaired. Accordingly, it is an essential condition of this License, and Licensee hereby covenants and agrees: (i) that the overall quality of the Products covered by this License, and any use or depiction of the Delco Remy Trademarks in connection therewith, shall continue to meet or exceed the overall standard and quality as those manufactured by or for the Delco Remy Division as of the Closing; and (ii) that products bearing the Delco Remy Trademarks or Remy Trademarks will be manufactured, imported, promoted, sold, distributed and exploited in all material respects in accordance with all applicable and material federal, state and local laws and regulations. In addition, if any Product sold by Licensee to GM under the Component Supply Agreements is resourced by GM because of Licensee's breach of the quality requirements of such agreement, then Licensee will not thereafter use the Delco Remy Trademarks to promote that particular Product for sale in the same application as original equipment or new service parts. All products sold bearing the Remy Trademarks under this License will be of merchantable quality as defined in the Uniform Commercial Code. 10

(b) Reporting and Inspection. In order to verify that Licensee is continuing to maintain the Quality Standards as required under this License, at GM's reasonable request Licensee shall deliver to GM or its designee sample Products bearing the Delco Remy Trademarks and products bearing the Remy Trademarks, together with information relating to the design, specification, manufacture and reliability of products including but not limited to those supplied to GM pursuant to the Component Supply Agreements. This requirement shall survive the termination of such Component Supply Agreements. (c) Advertising. Licensee shall provide GM at any time, at GM's reasonable request but not more than three times per year, a representative sampling of all current or proposed tags, labels, identification plates, packaging, advertising copy, brochures, catalogs, marketing and promotional materials, bearing the Delco Remy Trademarks not previously provided pursuant to this provision (individually or collectively, the "Material") for GM's review of: (i) the manner in which the Delco Remy Trademarks are used and depicted; (ii) conformity to the Quality Standards; and (iii) the notices required in Paragraph 7 below. GM shall use its best efforts to respond with any reasonable objections thereto in writing within fourteen (14) days, and the parties will use their best efforts to resolve in good faith such objections. If GM shall fail, however, to object in writing within thirty (30) days after receipt of the Material, it shall be deemed to have consented to Licensee's use of the Material. Such consent by GM shall not constitute a waiver of Licensee's other duties under this License. 7. TRADEMARK AND LICENSE NOTICES Licensee agrees that, on or before six (6) months after the Effective Date and throughout the Term of this License, it will cause to appear where practical or appropriate when a Delco Remy Trademark is used (a) on all advertising, promotional 11

and point-of-sale materials (including, without limitation, brochures and catalogs) used by Licensee in connection with the Products; and (b) within the bulk shipment of any large quantity of Products shipped in bulk to an end user, a notice that the term "DELCO REMY" is a registered trademark of GM ("Trademark Notice") and a notice that the Delco Remy Trademarks are being used by Licensee pursuant to this License from GM ("License Notice"), unless other notice is authorized by GM or is necessary or desirable under the law or practice of the country. The Trademark Notice shall consist substantially of the following: "DELCO REMY is a registered trademark of General Motors Corporation used under license." All advertising and promotional materials bearing a Delco Remy Trademark used by Licensee in connection with the Products shall contain the foregoing notice, unless other notice is authorized by GM or is necessary or desirable under the law or practice of the country. 8. RIGHT TO ACQUIRE REMY TRADEMARKS GM will, within 30 days after Licensee's written request, transfer and assign, or cause to be transferred and assigned, to a Licensee or its designee the right, title and interest to the Remy Trademarks in such country or countries as Licensee may designate, to the extent that such transfer and assignment is permissible under applicable law, together with all assignments and other documents necessary to effect such transfer and all records relating to the registration of such marks. Licensee's use of the Remy Trademarks after any such transfer will remain subject to Licensee's covenants under Paragraph 2(f) of this Agreement. Licensee will bear the expense of preparing and recording such documents and assignments as well as all out-of-pocket legal costs, taxes, and fees related thereto. Licensee may exercise its right to cause GM to transfer the Remy Trademarks from time to time in such countries as its chooses until it has acquired all right, title and interest to the Remy Trademarks in all countries. To the extent necessary, the parties will enter into such consent agreement as is appropriate under the laws of each such country to ensure the protection of the Remy Trademarks as to Licensee and the Delco Remy Trademarks as to GM. 12

Contemporaneous with each such transfer and assignment, GM will, to the extent requested by Licensee in writing, voluntarily partially cancel, abandon, relinquish or limit any of its or its affiliates' rights to and registrations of Delco Remy Trademarks in such country or countries with respect to Products, provided, however, that Licensee will not thereafter sell Products in such country or countries under the Delco Remy Trademarks if registration with respect to Products would be required there. Nothing herein will limit GM's ability to use, license, register, or maintain registrations for the Delco Remy Trademarks on or in connection with, or in relation to, any product or service of the Delco Remy Division as of the Closing Date other than the Products. With respect to each country in which Licensee has been assigned the Remy Trademarks, as of the effective date of any such assignment the Remy Trademarks will no longer be subject to this License in such country, the definition of the term "Trademarks" in this Agreement will exclude the Remy Trademarks as to such country, and Licensee's covenants and acknowledgements in Paragraphs 2(d), 3 and 4 with respect to the Delco Remy Trademarks will not be interpreted to limit or restrict Licensee's use of or rights to the Remy Tradenames as to such country, provided, however, that such changes will not alter Licensee's covenants under Paragraph 2(f) of this Agreement. 9. TERMINATION (a) Bankruptcy. If Licensee: (i) files a voluntary petition for an order of relief in bankruptcy; (ii) is adjudicated a bankrupt; (iii) has an involuntary petition in bankruptcy filed against it which remains unstayed or undismissed for sixty (60) days following the filing thereof; (iv) makes an assignment for the benefit of its creditors or pursuant to any bankruptcy law; or (v) has a liquidating receiver appointed for it or for its business, the License hereby granted shall automatically terminate without any notice being necessary. (b) Breach. If either party shall commit a material breach of any of its obligations under this License, the non-breaching party shall have the right to terminate 13

this License upon ninety (90) days prior written notice ("Notice Of Termination"), and such Notice Of Termination shall become effective unless the breaching party shall have substantially remedied the breach within the ninety (90) day period, which may be extended an additional ninety (90) days if requested in writing by the breaching party and the breaching party is working in good faith to fully remedy such breach. 10. DISPOSAL OF STOCK UPON EXPIRATION OR TERMINATION After expiration or termination of this License under the provisions of Paragraph 9, Licensee may dispose of Products bearing Trademarks which were manufactured prior to the time of expiration or termination. Licensee shall in no event manufacture, promote, assemble, sell, exploit or dispose of any Product bearing Trademarks after termination of this License, where such termination was based on the material departure by Licensee from the Quality Standards required by Paragraph 6(a) of this License. 11. EFFECT OF EXPIRATION OR TERMINATION Upon and after the expiration or termination of this License, the license granted to Licensee hereunder shall forthwith revert to GM, except as provided in Paragraph 10, and Licensee shall execute any instruments reasonably requested by GM, at GM's expense, to accomplish or confirm the foregoing, provided, however, that such expiration or termination shall not in any way diminish, limit, revoke, or cause any reversion of, Licensee's rights to the trademarks and tradenames transferred and assigned under the Asset Purchase Agreement or pursuant to Paragraph 8 of this Agreement. 14

12. REMEDIES (a) No Waiver. The resort by either party to any remedies referred to herein shall not be construed as a waiver of any other rights or remedies to which such party is entitled under this License or otherwise. (b) Remedies Cumulative. All rights and remedies of a party hereto whether evidenced hereby or arising as a result of any other contract, agreement, instrument or law shall be cumulative and may be exercised singularly or concurrently. 13. NOTICES All communications, notices and exchanges of information contemplated herein, or required or permitted to be given under this License, must be in writing and will be deemed effective when delivered in person or on the third business day after the day on which such notice is mailed by the highest class of regular mail to the following addresses:
If to GM: AC Delco Systems Division 4800 S. Saginaw Street Flint, Michigan 48501 Attention: Finance Director Fax: (810) 257-5526 General Motors Corporation Office of General Counsel 3031 West Grand Boulevard P. O. Box 33122 Detroit, Michigan 48232-5122 Attention: Trademark Counsel Delco Remy America, Inc. 2405 Columbus Avenue Anderson, Indiana 46018 Attention: Chief Financial Officer Fax: (317) 646-3531

with a copy to:

If to Licensee:

15

DR International, Inc. 275 Rex Boulevard Auburn Hills, Michigan 48326 Attention: Harold K. Sperlich Fax: (810) 852-7286 with a copy to: Dechert Price & Rhoads 4000 Bell Atlantic Rower 1717 Arch Street Philadelphia, Pennsylvania 19103 Attention: G. Daniel O'Donnell, Esquire Fax: (215) 994-2222

14. RELATIONSHIP BETWEEN GM AND LICENSEE Nothing in this License shall be construed to place the parties in a relationship whereby either shall be considered to be the agent of the other for any purpose whatsoever. Neither party is authorized to bind the other party or to enter into any contract or assume any obligation for the other. Any such unauthorized act will be null and void as to the party for which such obligations were assumed. Nothing in this License shall be construed to establish a relationship of partners or joint venturers between GM and Licensee. Each party is individually responsible only for its own obligations, duties and promises as set out in this License. 15. ASSIGNMENT OR SUBLICENSE With the exception of the license of the Remy Trademarks and Licensee's rights under Paragraph 8, this License and each part hereof and all rights and duties hereunder are personal to Licensee and shall not, without the prior written consent of GM, be assigned, mortgaged, sublicensed or otherwise encumbered by Licensee or by operation of law. If Licensee determines that it needs to enter into a sublicense or joint license with respect to the Delco Remy Trademarks, it should make such request in writing to GM. Such request should state the name and address of the company for which the sublicense or joint license is sought, a description of such company and 16

sufficient financial information with respect to such company which will enable GM to satisfy itself as to financial health and standing of such company. Licensee must also set forth the Products for which a sublicense or joint license is sought, the intended customers and why it believes a sublicense or joint license is necessary and what steps will be taken to protect the trademarks and assure the quality of the Products involved. Notwithstanding the foregoing, GM may assign this License without first obtaining Licensee's written consent to any wholly owned subsidiary company of GM, and Licensee may assign this License as part of an internal reorganization or to the successor of all or substantially all of its business. 16. NO WAIVER, ENTIRE AGREEMENT None of the terms of this License can be waived or modified except by an express agreement in writing signed by all of the parties. There are no representations, promises, warranties, covenants or undertakings other than those contained in this License and Exhibits hereto, and the Asset Purchase Agreement, which represent the entire understanding of the parties hereto relating to the subject matter thereof. The failure of either party hereto to enforce, or the delay by either party in enforcing, any of its rights under this License shall not be deemed a continuing waiver or a modification thereof, and either party may, within the time provided by applicable law, commence appropriate legal proceedings to enforce any or all of such rights. No person, firm, group or corporation other than Licensee and GM shall be deemed to have acquired any rights by reason of anything contained in this License. 17. MISCELLANEOUS (a) Controlling Law. This License shall be considered as having been entered into in the State of New York, without giving effect to the principles of conflict of laws, and shall be construed and interpreted in accordance with the laws of that State. 17

(b) Service of Process. Service of process shall be effective if mailed pursuant to Paragraph 13 hereof. (c) Singular Shall Include Plural. Whenever required by the context, the singular shall include the plural, and the plural the singular, and the masculine shall include the feminine and neuter. (d) Severability. The provisions of this License shall be severable, and if any provision of this License shall be held or declared to be illegal, invalid, or unenforceable in any jurisdiction, such illegality, invalidity or unenforceability shall not affect any other provision hereof or the interpretation and effect of this License as to any other jurisdiction, and the remainder of this License, disregarding such illegal, invalid or unenforceable provision shall continue in full force and effect as though such illegal, invalid, or unenforceable provision had not been contained herein. (e) Headings. Headings or titles to Paragraphs or subparagraphs in this License are for the convenience of reference only and shall not affect the meaning or interpretation of this License or any part hereof. (f) No Modifications. This License may not be released, discharged, abandoned, changed or modified in any manner except in an instrument signed by each of the parties hereto. (g) No Strict Construction. The language used in this License shall be deemed to be language chosen by all parties hereto to express their mutual intent, and no rule of strict construction against either party shall apply to any term or condition of this License. 18

(h) Signature Representation. Each person who signs this License on behalf of a party hereto represents and warrants that he has the proper authority to execute this License on such party's behalf. IN WITNESS WHEREOF, GM and DRA have caused this Agreement to be executed by their duly authorized representatives on the day and year first written above. GENERAL MOTORS CORPORATION
BY: /s/ Charles A. Cotten ----------------------------NAME: Charles A. Cotten --------------------------TITLE: Attorney in fact ---------------------------

DR INTERNATIONAL, INC.
BY: /s/ James R. Gerrity ----------------------------NAME: James R. Gerrity --------------------------TITLE: Executive V.P. ---------------------------

DRA, Inc.
/s/ James R. Gerrity ----------------------------NAME: James R. Gerrity --------------------------TITLE: Executive V.P. --------------------------BY:

19

EXHIBIT A DELCO REMY AMERICA LOGO [LOGO OF DELCO REMY APPEARS HERE] PMS #185 and Black 4-20-94 Trademark License Agreement Exhibit A

EXHIBIT B LICENSED TERRITORIES
TERRITORY --------Algeria Argentina Australia Austria Bangladesh Benelux Bolivia Bophuthatswana Botswana Brazil Canada Chile Colombia Costa Rica Czech Republic Denmark Ecuador Egypt El Salvador Fiji Islands Finland France Germany Ghana Greece Hong Kong Hungary Iceland India Indonesia Iran Ireland Israel Italy Japan Korea Kuwait Lesotho Mexico TERRITORY --------Morocco Namibia New Zealand Nicaragua Nigeria Norway O.A.P.I. Pakistan Papua New Guinea Paraguay People's Republic of China Peru Poland Portugal Russia Saudi Arabia Singapore South Africa Spain Sri Lanka Sudan Swaziland Sweden Switzerland Syria Taiwan Tanganyika Thailand Transkei Turkey Ukraine United Arab Emirates United Kingdom United States Uruguay Venda Venezuela Western Samoa Zambia

Trademark License Agreement Exhibit B

Exhibit 10.5 TRADENAME LICENSE AGREEMENT This TRADENAME LICENSE AGREEMENT ("License") is made and entered into July 31.1994, by and among DRA, Inc., a company organized under the laws of the State of Delaware ("DRA"), DR International, Inc., a company organized under the laws of the State of Delaware ("DRI" and together with DRA, the "Licensee"), and General Motors Corporation, through its Delco Remy Division (together with any successor thereto, the "Delco Remy Division"), a corporation organized under the laws of the State of Delaware ("GM"). WITNESSETH WHEREAS, GM, DRI and DRA have entered into the Asset Purchase Agreement, dated July 13, 1994 (the "Asset Purchase Agreement") under which DRA has acquired (The "Acquisition") certain assets and assumed certain liabilities of the Delco Remy Division. WHEREAS, DRI and DRA desire to acquire, and GM is willing to grant, a license to use certain tradenames of Delco Remy Division. NOW THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, for themselves and their successors and assigns, agree as follows: 1. DEFINITIONS The following terms have the meaning ascribed to them herein: Businesses. The term "Businesses" shall mean the production, distribution, sale and servicing of heavy duty starter motors and generators ("Heavy Duty Starter Motors Business"), remanufactured heavy duty starter motors and generators ("HD Reman Business"), light duty starter motors ("Light Duty

Starter Motor Business"), remanufactured light duty starter motors ("LD Reman Business"), and powder metal forge ("PMF Business"). Closing. The term "Closing" has the meaning ascribed in the Asset Purchase Agreement. Component Supply Agreements. The term "Component Supply Agreements" means the Heavy Duty Component Supply Agreement, Light Duty Component Supply Agreement, Powder Metal Forge Component Supply Agreement, and Distribution and Supply Agreement between DRA and GM included among the Ancillary Agreements to the Asset Purchase Agreement. Delco Remy Trademarks. "Delco Remy Trademarks" means "DELCO REMY", "DELCO REMY AMERICA", "DELCOTRON" (with regard to heavy duty generators only), the "DELCO REMY AMERICA logo" as set forth in Exhibit A, and such other logo types containing "Delco Remy" as DRA or DRI may adopt (subject to GM's written consent not to be unreasonably delayed or withheld) and use during the term of this License as provided herein. Delco Remy Tradenames. The term "Delco Remy Tradenames" shall mean "Delco Remy America" and/or "Delco Remy International". Effective Date. The term "Effective Date" means the date of this Agreement. Product Liability Insurance. The term "Product Liability Insurance" means insurance maintained by Licensee in accordance with Paragraph 7 hereof. 2

Products. The term "Products" means the products manufactured by the Businesses as of the date of the signing of this License and any replacements and extensions thereof. Remy Trademarks. "Remy Trademarks" means "REMY", "REMY AMERICA", "REMY INTERNATIONAL", and such logotypes as Licensee may adopt containing "REMY", "REMY AMERICA", or "REMY INTERNATIONAL". Remy Tradenames. "Remy Tradenames" means "REMY AMERICA" and "REMY INTERNATIONAL." Territory. Licensee shall be entitled to use the Tradenames world-wide. Trademarks. "Trademarks" means the "DELCO REMY Trademarks", the "Remy Trademarks", and any other term that GM authorizes as provided herein or in the Trademark License Agreement for use as a trademark. Tradenames. The term "Tradenames" shall mean the "Delco Remy Tradenames" and the "Remy Tradenames." Trademark License Agreement. The term "Trademark License Agreement" shall mean the Trademark License Agreement between GM and DRA. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Asset Purchase Agreement. 3

2. TRADENAME (a) Grant. GM specifically approves of and grants Licensee an exclusive, royalty free license to use the Tradenames in the Territory during the term of the License as defined in 3(c). Licensee may display the Tradename(s) in the logo type shown in Exhibit A and such other logo types containing "Delco Remy" or "Remy" as DRA may adopt (any such logotype being subject to GM's written consent not to be unreasonably delayed or withheld), but Licensee will not display the Tradename(s) in any other logo, without prior written approval of GM. (b) Sole Use. Licensee agrees that its use of the Tradenames as its company name(s) and tradename(s) is with the permission of GM. 3. SCOPE OF USE (a) Use. Subject to the terms and conditions of this License, Licensee may use the Tradename(s) in association with its business. (b) The grant shall include all typical uses such as letterhead, business cards, signage as well as the advertising, promotion, distribution, service and sale of its products in the Territory by or for Licensee except as provided herein, and shall include use as a corporate name as well as a tradename. (c) Term. The term of the License with respect to the Delco Remy Tradenames hereby granted shall commence on the Effective Date, and, unless extended by mutual agreement, shall continue until the earlier to occur of (i) ten years after the Closing Date, (ii) any sale of all or substantially all of the assets of DRA to any party other than the Citicorp Venture Capital, Ltd., CIT Group/Business Credit, Inc., World Equity Partners, L.P., MascoTech, Harold K. Sperlich, Thomas J. Snyder and/or James R. Gerrity, or (iii) termination of this License as provided herein. The license of the Remy Tradenames hereby granted shall commence on the Effective Date, shall be perpetual, fully-paid, and 4

royalty-free, and may be freely assigned, mortgaged, sublicensed or encumbered, subject, however, to the covenants in Paragraph 3(d) of this Agreement. (d) Limitations to Licensee's Rights. Licensee shall not use the Delco Remy Tradename physically on any product or packaging except the licensed Products or as set forth in the Trademark License Agreement. Except as contemplated by the Manufacturers Representative Agreement and the Distribution and Supply Agreement, Licensee shall not use the Delco Remy Tradenames directly or indirectly on or in connection with, or in relation to, batteries or any other product or business of the Delco Remy Division not acquired by Licensee. Licensee shall not combine the Tradenames with any other trademark or tradename without the express written authorization of GM, provided, however, that Licensee may use the Tradenames together with other tradenames, trademarks and service marks. Licensee shall not make tradename or corporate name use of the Tradenames or any confusingly similar form of, variation on, or alternative spelling of "DELCO" except as provided herein. (e) Notwithstanding the other provisions of this Agreement, and except as contemplated by the Manufacturers Representative Agreement and the Distribution and Supply Agreement, neither Licensee nor its sublicensees, assigns, or affiliates may use the Remy Tradenames directly or indirectly on or in connection with or in relation to (i) batteries at any time after the Closing Date or (ii) for 10 years after the Closing Date for any other product manufactured by the Delco Remy Division on the Closing Date and not acquired by DRA. 5

4. RIGHTS RETAINED Nothing in this License shall be construed to prevent GM from itself using, prior to an assignment pursuant to Paragraph 9 of this Agreement, "Delco Remy Division" as a tradename with regard to and in connection with batteries or any other product or business of the Delco Remy Division not acquired by Licensee as of the Closing Date except that GM will not use, and will not directly or indirectly authorize or permit any third party to use, the Tradenames or any confusingly similar form of, variation on, or alternative spelling of any Tradename. 5. GOODWILL Licensee recognizes the value of the goodwill associated with the Tradenames and acknowledges that, except for assignments pursuant to Paragraph 9 of this Agreement, the Tradenames, and all rights therein and the goodwill pertaining thereto, belong exclusively to GM and that the Tradenames have acquired secondary meaning in the mind of the public in relation to GM. Notwithstanding anything to the contrary expressed in this License, Licensee shall not acquire, be deemed to have acquired and shall not claim any rights to the Tradenames other than the rights granted by GM under this License or pursuant to Paragraph 9 of this Agreement. 6. GM'S TITLE AND PROTECTION OF GM'S RIGHTS (a) GM's Representations. GM represents and warrants that in the Territory: (i) it is the sole and exclusive owner of all right, title and interest in and to the Tradenames for use in connection with the Businesses; (ii) it has the power to grant the rights and licenses granted to Licensee herein and has not granted such rights and licenses to any other person with regard to Products; (iii) it is not aware of any rights of any third party which would be infringed by 6

Licensee's use of the Tradenames in relation to the Businesses as authorized herein. (b) Conduct of Licensee. Licensee agrees that it will not do or suffer to be done during the Term or any renewal period of this License any act or thing that will impair in any way the rights of GM in and to the Tradenames then licensed hereunder. GM hereby agrees to indemnify Licensee and undertakes to hold it harmless against any claims or suits to the extent that such claim or suit arises out of the exploitation and use by Licensee of the Tradenames as authorized in this License, provided that the claim or suit arises in the Territory and prompt notice is given to GM of any such claim or suit and provided, further, that GM shall have the option to undertake and conduct, at GM's expense, the defense of any suit brought and that no settlement of any such claim or suit is made without prior written consent of GM (which consent shall not be unreasonably delayed or withheld). Licensee shall participate in such defense, at its own expense, to protect its interest. GM shall keep Licensee informed of all material developments throughout the progress of any such defense, and GM shall not, without Licensee's prior approval (which approval shall not be unreasonably delayed or withheld), enter into any consent, settlement, or other agreement which materially diminishes or restricts Licensee's rights under this License or places any material restrictions or conditions upon Licensee's use of the Tradenames. (c) No Assignment. It is agreed that nothing contained in this License shall be construed as an assignment or grant to Licensee of any right, title or interest in or to the Tradenames, it being understood that all rights relating thereto are reserved by GM, except for (i) the License to Licensee of the right to use and utilize the Tradenames only as specifically and expressly provided in this License and (ii) the assignment to Licensee of the trademarks and tradenames under the Asset Purchase Agreement and pursuant to Paragraph 9 of this Agreement. 7

7. INDEMNIFICATION BY LICENSEE AND PRODUCT LIABILITY INSURANCE Licensee agrees that it will obtain as of the Closing, at its own expense, Product Liability Insurance from a recognized insurance company which is qualified to do business in the State of Indiana, providing adequate protection (in the minimum amount of five million dollars ($5,000,000) per occurrence) for GM (as well as Licensee) against any product liability claims related to the Products. As proof of such insurance, a certificate of Product Liability Insurance, naming GM as an additional insured party (and setting forth the amount of insurance, the policy number, the date of expiration and including a provision requiring that GM be given thirty (30) days written notice prior to termination, reduction or modification of such insurance coverage) shall be submitted to GM by Licensee within thirty (30) days after the execution of this License. Upon modification thereof, Licensee shall furnish promptly to GM a copy of the modified certificate of Product Liability Insurance. Licensee's procurement of Product Liability Insurance or furnishing to GM a certificate therefor shall not relieve Licensee of its obligation or liabilities under this License. 8. CONDUCT OF BUSINESS (a) Standard of Conduct. GM acknowledges that the overall manner in which business is being conducted by its Delco Remy Division meets its high standards. So as not to impair the substantial goodwill that GM has built up and now possesses in the Tradenames it is an essential condition of this License, and Licensee hereby covenants and agrees: (i) that the overall manner in which the business will be conducted under this License, and any use of the Delco Remy Tradenames in connection therewith, shall meet or exceed the standard as that of the Delco Remy Division as of the Closing; (ii) that business will be conducted in all material respects in accordance with all applicable and material federal, state and local laws and regulations; and (iii) 8

that the activities of Licensee hereunder shall not reflect adversely in any material respect upon the good name and reputation of GM. (b) Advertising. Licensee shall provide GM at any time, at GM's reasonable request but not more than three times per year, a representative sampling of all current or proposed tags, labels, identification plates, packaging, advertising copy, business cards, letterhead, brochures, catalogs, and marketing and promotional materials bearing the Delco Remy Tradenames not previously provided pursuant to this provision (individually or collectively, the "Material") for GM's review of the manner in which the Delco Remy Tradenames are used and depicted in a manner consistent with this Agreement. GM shall use its best efforts to respond with any objections as to content thereto in writing within fourteen (14) days and the parties will use their best efforts to resolve in good faith such objections. If GM shall fail, however, to object in writing within thirty (30) days after receipt of the Material, it shall be deemed to have consented to Licensee's use of the Material. Such consent by GM shall not constitute a waiver of Licensee's other duties under this License. 9. RIGHT TO ACQUIRE REMY TRADENAMES GM will, within 30 days after Licensee's written request, transfer and assign, or cause to be transferred and assigned, to Licensee or its designee the right, title and interest to the Remy Tradenames in such country or countries as Licensee may designate, together with all assignments and other documents necessary to effect such transfer. Licensee will bear the expense of preparing and recording such documents and assignments as well as all out-of-pocket legal costs, taxes, and fees related thereto. Licensee may exercise its right to cause GM to transfer the Remy Tradenames from time to time in such countries as it chooses until it has acquired all right, title and interest to the Remy Tradenames in all countries. To the extent necessary, the parties will enter into such consent agreement as is appropriate under the laws of each such country to ensure the protection of the Remy Tradenames as to Licensee and the 9

Delco Remy Tradenames as to GM. Contemporaneous with each such transfer and assignment, GM will, to the extent requested by Licensee in writing, voluntarily partially abandon, relinquish or limit any of its or its affiliates' rights to and registrations of Delco Remy Tradenames in such country or countries with respect to the Businesses. Nothing herein will limit GM's ability to use, license, or seek tradename registration of the Delco Remy Tradenames in connection with businesses of the Delco Remy Division as of the Closing Date other than the Businesses. With respect to each country in which Licensee has been assigned the Remy Tradenames, as of the effective date of any such assignment the Remy Tradenames will no longer be subject to this License in such country, the definition of the term "Tradenames" in this Agreement will exclude the Remy Tradenames as to such country, and Licensee's covenants and acknowledgements in Paragraphs 3(d) and 5 with respect to the Delco Remy Tradenames will not be interpreted to limit or restrict Licensee's use of or rights to the Remy Tradenames as to such country. 10. TERMINATION (a) Bankruptcy. If Licensee: (i) files a voluntary petition for an order for relief in bankruptcy; (ii) is adjudicated a bankrupt; (iii) has an involuntary petition in bankruptcy filed against it which remains unstayed or undismissed for sixty (60) days following the filing thereof; (iv) makes an assignment for the benefit of its creditors or pursuant to any bankruptcy law; or (v) has a liquidating receiver appointed for it or for its business, the License hereby granted shall automatically terminate without any notice being necessary. (b) Breach. If either party shall commit a material breach of any of its obligations under this License, the non-breaching party shall have the right to terminate this License upon ninety (90) days written notice ("Notice Of Termination"), and such Notice Of Termination shall become effective unless the breaching party shall have substantially remedied the breach within the ninety (90) day period, which may be extended an additional ninety (90) days if requested in 10

writing by the breaching party and the breaching party is working in good faith to fully remedy such breach. 11. EFFECT OF EXPIRATION OR TERMINATION Upon and after the expiration or termination of this License, the license granted to Licensee hereunder shall forthwith revert to GM, and Licensee shall execute any instruments reasonably requested by GM, at GM's expense, to accomplish or confirm the foregoing, provided, however, that such expiration or termination shall not in any way diminish, limit, revoke, or cause any reversion of, Licensee's rights to the trademarks and tradenames transferred and assigned under the Asset Purchase Agreement or pursuant to Paragraph 9 of this Agreement. 12. REMEDIES (a) No Waiver. The resort by either party to any remedies referred to herein shall not be construed as a waiver of any other rights or remedies to which such party is entitled under this License or otherwise. (b) Remedies Cumulative. All rights and remedies of a party hereto whether evidenced hereby or arising as a result of any other contract, agreement, instrument or law shall be cumulative and may be exercised singularly or concurrently. 13. NOTICES All communications, notices and exchanges of information contemplated herein, or required or permitted to be given under this License, must be in writing and will be deemed effective when delivered in person or on the third business day after the day on which such notice is mailed by the highest class of regular mail to the following addresses: 11

If to GM:

AC Delco Systems Division 4800 S. Saginaw Street Flint, Michigan 48501 Attention: Finance Director Fax: (810) 257-5526 General Motors Corporation Office of General Counsel 3031 West Grand Boulevard P. O. Box 33122 Detroit, Michigan 48232-5122 Attention: Trademark Counsel Delco Remy America, Inc. 2405 Columbus Avenue Anderson, Indiana 46018 Attention: Chief Financial Officer Fax: (317) 646-3531 DR International, Inc. 275 Rex Boulevard Auburn Hills, Michigan 48326 Attention: Harold K. Sperlich Fax: (810) 852-7286

with a copy to:

If to Licensee:

with a copy to:

Dechert Price & Rhoads 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, Pennsylvania 19103 Attention: G. Daniel O'Donnell, Esquire Fax: (215) 994-2222

14. RELATIONSHIP BETWEEN GM AND LICENSEE Nothing in this License shall be construed to place the parties in a relationship whereby either shall be considered to be the agent of the other for any purpose whatsoever. Neither party is authorized to bind the other party or to enter into any contract or assume any obligation for the other. Any such unauthorized act will be null and void as to the party for which such obligations were assumed. Nothing in 12

this License shall be construed to establish a relationship of partners or joint venturers between GM and Licensee. Each party is individually responsible only for its own obligations, duties and promises as set out in this License. 15. ASSIGNMENT OR SUBLICENSE With the exception of the license of the Remy Tradenames and Licensee's rights under Paragraph 9, this License and each part hereof and all rights and duties hereunder are personal to Licensee and shall not, without the prior written consent of GM, be assigned, mortgaged, sublicensed or otherwise encumbered by Licensee or by operation of law. Notwithstanding the foregoing, GM may assign this License without first obtaining Licensee's written consent to any wholly owned subsidiary company of GM. 16. NO WAIVER, ENTIRE AGREEMENT None of the terms of this License can be waived or modified except by an express agreement in writing signed by all of the parties. There are no representations, promises, warranties, covenants or undertakings other than those contained in this License and Exhibits hereto, or the Asset Purchase Agreement, which represent the entire understanding of the parties hereto relating to the subject matter thereof. The failure of either party hereto to enforce, or the delay by either party in enforcing, any of its rights under this License shall not be deemed a continuing waiver or a modification thereof, and either party may, within the time provided by applicable law, commence appropriate legal proceedings to enforce any or all of such rights. No person, firm, group or corporation other than Licensee and GM shall be deemed to have acquired any rights by reason of anything contained in this License. 13

17. MISCELLANEOUS (a) Controlling Law. This License shall be considered as having been entered into in the State of New York, without giving effect to the principles of conflict of laws, and shall be construed and interpreted in accordance with the laws of that State. (b) Service of Process. Service of process shall be effective if mailed pursuant to Paragraph 13 hereof. (c) Singular Shall Include Plural. Whenever required by the context, the singular shall include the plural, and the plural the singular, and the masculine shall include the feminine and neuter. (d) Severability. The provisions of this License shall be severable, and if any provision of this License shall be held or declared to be illegal, invalid, or unenforceable in any jurisdiction, such illegality, invalidity or unenforceability shall not affect any other provision hereof or the interpretation and effect of this License as to any other jurisdiction, and the remainder of this License, disregarding such illegal, invalid or unenforceable provision shall continue in full force and effect as though such illegal, invalid, or unenforceable provision had not been contained herein. (e) Headings. Headings or titles to Paragraphs or subparagraphs in this License are for the convenience of reference only and shall not affect the meaning or interpretation of this License or any part hereof. (f) No Modifications. This License may not be released, discharged, abandoned, changed or modified in any manner except in an instrument signed by each of the parties hereto. (g) No Strict Construction. The language used in this License shall be deemed to be language chosen by all parties hereto to express their mutual intent, and no rule of strict construction against either party shall apply to any term or condition of this License. 14

(h) Signature Representation. Each person who signs the License on behalf of a party hereto represents and warrants that he has the proper authority to execute this License of such party's behalf. IN WITNESS WHEREOF, GM and DRA have caused this Agreement to be executed by their duly authorized representatives on the day and year first written above. DRA, INC. DELCO REMY DIVISION GENERAL MOTORS CORPORATION
BY: /s/ James R. Gerrity -----------------------------NAME: James R. Gerrity ---------------------------TITLE: Executive V.P. --------------------------BY: /s/ Charles A. Cotten -------------------------------NAME: Charles A. Cotten -----------------------------TITLE: Attorney in fact -----------------------------

DR INTERNATIONAL, INC.
BY: /s/ James R. Gerrity -----------------------------NAME: James R. Gerrity ---------------------------TITLE: Executive V.P. ---------------------------

15

EXHIBIT A DELCO REMY AMERICA LOGO [LOGO OF DELCO REMY APPEARS HERE] Tradename License Agreement Exhibit A

Exhibit 10.6 PARTNERSHIP AGREEMENT OF DELCO REMY MEXICO, S. de R.L. de C.V. dated as of April 17 , 1997 between REMY MEXICO HOLDINGS, S. de R.L. de C.V. and GCID AUTOPARTES, S.A. de C.V.

TABLE OF CONTENTS
ARTICLE I DEFINITIONS.................................................. ----------Section 1.1 Definitions......................................... ----------"Additional Contribution"........................................ "Additional Equity Contribution"................................. "Affiliate"...................................................... "Amended Bylaws"................................................. "Annual Limit"................................................... "Applicable Law"................................................. "Bylaws"......................................................... "Board".......................................................... "Closing"........................................................ "Closing Date"................................................... "Company"........................................................ "Company's Business"............................................. "Corporate Part.................................................. "Covered Investment"............................................. "Debt Contribution".............................................. "DR Asset Purchase Agreement".................................... "DRA"............................................................ "DRI"............................................................ "DRI Receivables"................................................ "DRI Senior Bank Debt Rate"...................................... "DR Service Agreement"........................................... "EBIT"........................................................... "Equipment Lease"................................................ "Equity Contribution"............................................ "Fix Rate"....................................................... "Governmental Authority"......................................... "Initial Bylaws"................................................. "Initial Equity Contribution".................................... "Initial Partners"............................................... "JF"............................................................. "JF Asset Purchase Agreement".................................... "JV Equity Contribution"......................................... "JV Partners".................................................... "Lease Agreement"................................................ "Licensed Products".............................................. "Lien"........................................................... "Majority Interest".............................................. Page 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 5 5

i

"Material Adverse Effect".......................................... "Material Breach".................................................. "Mexican GAAP"..................................................... "Mexican Peso"..................................................... "Noncompetition Agreements"........................................ "Officer".......................................................... "Partner".......................................................... "Partner's Premium Capital"........................................ "Partner's Social Capital"......................................... "PCo."............................................................. "Percentage"....................................................... "Person"........................................................... "Premium Capital".................................................. "Related Agreements"............................................... "Required Interest"................................................ "RII".............................................................. "RII Corporate Part Sale Agreement"................................ "SCE".............................................................. "SD License"....................................................... "SD Motors"........................................................ "Senior Officer"................................................... "Service Agreement"................................................ "Social Capital"................................................... "Supply and Sales Agreement"....................................... "Termination Agreement"............................................ "TIA Agreement".................................................... "Total Social Capital"............................................. "Trademark Agreement".............................................. "US Dollar"........................................................ "US GAAP".......................................................... "US Independent Accountants".......................................

5 6 6 6 6 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9

Section 1.2 Other Definitions.................................... 9 ARTICLE II ORGANIZATION............................................... 10
Section 2.1 Section 2.2 Section 2.3 Section 2.4 Section 2.5 Section 2.6 Section 2.7 Establishment of Partnership;.............................. ----------------------------Bylaws; Conflict with Partnership Agreement................ ------------------------------------------Principal Offices.......................................... ----------------Capitalization............................................. -------------Subscriptions and JV Equity Contributions.................. ----------------------------------------Additional Contributions................................... -----------------------Cash Contributions......................................... -----------------ii 10 10 10 11 11 12 15

Section 2.8 Section 2.9 ARTICLE III Section 3.1 Section 3.2 ARTICLE IV Section 4.1 Section 4.2 Section 4.3 Section 4.4 Section 4.5 Section 4.6 ARTICLE V Section 5.1 Section 5.2 Section 5.3 Section 5.4 Section 5.5 ARTICLE VI Section 6.1 Section 6.2 Section 6.3 Section 6.4 ARTICLE VII Section 7.1 Section 7.2 ARTICLE VIII Section 8.1 Section 8.2 ARTICLE IX Section 9.1 Section 9.2 Section 9.3

Organizational and Other Costs............................. -----------------------------Bank Financing............................................. -------------PURPOSES; TERM OF COMPANY.................................. ------------------------Purposes................................................... -------Term....................................................... ---PARTNERS................................................... -------Partner Meetings........................................... ---------------Voting..................................................... -----Ouorum..................................................... -----Action by Written Consent.................................. ------------------------Other Activities........................................... ---------------Hiring of Employees........................................ ------------------BOARD OF MANAGERS.......................................... ----------------Number..................................................... -----Meetings of the Board...................................... --------------------Powers..................................................... -----Ouorum..................................................... -----Voting; Action by Written Consent.......................... --------------------------------OFFICERS................................................... -------Officers................................................... -------Powers..................................................... -----Other Employment of Officers............................... ---------------------------General Manager as Administrator-Manager................... ---------------------------------------LIABILITY AND INDEMNIFICATION.............................. ----------------------------Liability.................................................. --------Indemnification............................................ --------------ACCOUNTING AND DIVIDENDS................................... -----------------------Books; Auditor; Financial Statements; Fiscal Year.......... ------------------------------------------------Dividend Policy............................................ --------------TRANSFER OF CORPORATE PARTS; RIGHT OF FIRST REFUSAL........ --------------------------------------------------Prior Consent.............................................. ------------Right of First Refusal..................................... ---------------------Transferees; New Partners.................................. ------------------------iii

15 16 16 16 17 17 17 17 20 20 20 21 21 21 22 22 22 23 23 23 23 24 24 24 24 24 25 25 26 27 27 27 28

Section 9.4 ARTICLE X Section 10.1 Section 10.2 Section 10.3 Section 10.4 Section 10.5

Costs...................................................... ----PUT AND CALL RIGHTS OF THE PARTNERS........................ ----------------------------------Put Right.................................................. --------Call Right................................................. ---------Computation of Purchase Price.............................. ----------------------------Payment.................................................... ------Put/Call Rights If JF Investor Owns Less Than 10%.......... -------------------------------------------------

28 28 28 28 29 30 31

ARTICLE XI ADDITIONAL COVENANTS....................................... 32
Section 11.1 The Closing................................................ ----------Section 11.2 Operating Policy........................................... ---------------Section 11.3 Payment of DRI Receivables................................. -------------------------Section 11.4 Consent to Assignment of SD License........................ ----------------------------------Section 11.5 Debt Policy................................................ ----------Section 11.6 Liens on Corporate Part of JF Investor..................... -------------------------------------Section 11.7 Prior Actions of SCE, Etc.................................. ------------------------Section 11.8 Company Employees.......................................... ----------------32 33 33 33 33 34 34 34

ARTICLE XII DISPUTE RESOLUTION......................................... 34
Section 12.1 Notice Regarding Dispute................................... -----------------------Section 12.2 Referral to Senior Executive Officers...................... ------------------------------------Section 12.3 Arbitration................................................ ----------Section 12.4 No Limitation of Remedies.................................. ------------------------34 35 35 36

ARTICLE XIII TERMINATION FOR MATERIAL BREACH, ETC. ..................... 36
Section 13.1 Termination................................................ ----------Section 13.2 Put and Call Rights Prior to Termination................... ---------------------------------------Section 13.3 Effect of Termination...................................... --------------------36 37 37

ARTICLE XIV REPRESENTATIONS AND WARRANTIES............................. 38
Section 14.1 Investment Representations................................. -------------------------Section 14.2 Representations and Warranties of DR Investor.............. --------------------------------------------Section 14.3 Representations and Warranties of JF Investor.............. --------------------------------------------38 38 39

ARTICLE XV MISCELLANEOUS.............................................. 40
Section 15.1 Public Announcements, Etc.................................. ------------------------Section 15.2 Confidentiality............................................ --------------Section 15.3 Relationship of the Parties................................ --------------------------40 41 41

iv

Section 15.4 Section 15.5 Section 15.6 Section 15.7 Section 15.8 Section 15.9 Section 15.10 Section 15.11 Section 15.12 Section 15.13 Section 15.14

Agreement for Further Execution.......................... ------------------------------Notices.................................................. ------Amendments; No Waivers................................... ---------------------Successors and Assigns................................... ---------------------Governing Law; Consent to Jurisdiction................... -------------------------------------Illegality and Severability.............................. --------------------------Specific Performance..................................... -------------------Captions................................................. -------Counterparts; Effectiveness.............................. --------------------------Entire Agreement......................................... ---------------Setoff................................................... ------

41 42 43 43 43 43 44 44 44 44 44

v

List of Schedules and Exhibits
Schedule 1 Schedule 2 Schedule 3 Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit A B C D E F-1 to F-5 G H I J K L M N 0 P Licensed Products SD Motors Consents Amended Bylaws DR Asset Purchase Agreement DR Service Agreement Equipment Lease Lease Agreement Noncompetition Agreements RII Corporate Part Sale Agreement Service Agreement Supply and Sales Agreement Termination Agreement TIA Agreement Trademark Agreement Statement of Initial Capitalization Form of Subordinated Note Promissory Note - Put Notice Promissory Note - Call Notice

vi

PARTNERSHIP AGREEMENT OF DELCO REMY MEXICO. S. de R.L. de C.V. A Mexican Company THIS PARTNERSHIP AGREEMENT (this "Partnership Agreement") is made and entered into as of the __________ day of ________________, 1997, by and between REMY MEXICO HOLDINGS, S. de R.L. de C.V., a Mexican company whose address is c/o Delco Remy International, Inc., 2902 Enterprise Drive, Anderson, IN 46013, U.S.A. ("DR Investor") and GCID AUTOPARTES, S.A. de C.V., a Mexican corporation whose address is EJE 128 No. 190, Zona Industrial Del Potosi, 78090 San Luis Potosi, S.L.P., Mexico ("JF Investor"), to join together to establish Delco Remy Mexico, S. de R.L. de C.V. as a joint venture between them for the purposes and upon the terms and conditions set forth in this Partnership Agreement. ARTICLE I DEFINITIONS Section 1.1 Definitions. Whenever used in this Partnership Agreement, the following terms shall have the meanings respectively assigned to them in this Article I. Additional Contribution: "Additional Contribution" shall mean either a Debt Contribution or an Additional Equity Contribution. Additional Equity Contribution: "Additional Equity Contribution" shall mean any Equity Contribution other than an Initial Equity Contribution or a JV Equity Contribution. Affiliate: "Affiliate" of any Person shall mean any Person directly or indirectly controlling, controlled by, or under common control with, such Person. As used in the definition of Affiliate, "controlling" (including, with its correlative meanings, "controlled by" and "under common control with") means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities,

partnership or other ownership interests, by contract or otherwise). For the purposes of this Partnership Agreement, the Company shall not be deemed to be an "Affiliate" of DR Investor, JF Investor, or any of their respective other Affiliates, and none of such Persons shall be deemed to be "Affiliates" of the Company. Amended Bylaws: "Amended Bylaws" shall mean the amended and restated Bylaws adopted by the corresponding Partners' Meeting pursuant to this Partnership Agreement, which shall be substantially in the form of Exhibit A. Annual Limit: "Annual Limit" shall mean the maximum aggregate amount of Additional Contributions which the Board shall have the right to require of the Partners (in the aggregate) in any relevant Fiscal Year. The Annual Limit for all Partners taken together in Fiscal Year 1997 shall be US $0.00 and shall be US$ 2,000,000 in each Fiscal Year from 1998 through and including 2001 (subject to the rights and limitations on carrying unused amounts forward from preceding Fiscal Years set forth in the first sentence of Section 2.6(a)). The JV Equity Contributions shall not count toward the 1997 Annual Limit. There is no Annual Limit for any Fiscal Year after the 2001 Fiscal Year. Applicable Law: "Applicable Law" shall mean, with respect to any Person or matter, any Mexican, US or other national, federal, territorial, state or local statute, law, treaty, ordinance, rule, administrative action, regulation, order, writ, injunction, judgment, decree or other requirement of any Governmental Authority applicable to such Person or matter or any of such Person's properties, assets, officers, directors, administrator-managers, employees, consultants or agents (in connection with such officer's, director's, administrator-manager's, employee's, consultant's or agent's activities on behalf of such Person). Bylaws: "Bylaws" shall mean the Bylaws of the Company, as they may be amended from time to time in accordance with their terms . Board: "Board" shall mean the Board of Managers of the Company. 2

Closing: "Closing" shall mean the consummation of the transactions contemplated by this Partnership Agreement through the occurrence of the actions specified in Section 11.1. Closing Date: "Closing Date" shall mean the date on which the Closing occurs. Company: "Company" shall mean Delco Remy Mexico, S. de R.L. de C.V., a Mexican sociedad de responsabilidad limitada de capital variable. Company's Business: "Company's Business" shall mean the business of the Company as described in Section 3.1. Corporate Part: "Corporate Part" shall mean, as to any Partner, (i) such Partner's participation in the equity of the Company, including but not limited to such Partner's rights to receive dividends and distributions of the Company pursuant to this Partnership Agreement, the Bylaws and Applicable Law; (ii) such Partner's rights to participate in the governance of the Company and vote in the Partners' meetings of the Company and (iii) all other rights of a Partner in the Company set forth in this Partnership Agreement, the Bylaws and Applicable Law. Covered Investment: "Covered Investment" shall mean an investment (whether used for the purchase of property, plant or equipment or for working capital purposes) made by the Company in a specific, separate and identifiable project or line of business and made for the purpose of yielding an incremental return (the "Return") to the Company, unless such investment is (i) made for general working capital purposes or (ii) a capital expenditure incurred in the usual course of business that is not intended to yield a separate and identifiable Return (such as capital expenditures for routine maintenance and replacements and capital expenditures made for the purpose of compliance with Applicable Laws). Debt Contribution: "Debt Contribution" shall mean any loan extended by any Partner or its Affiliates to the Company after the date of this Partnership Agreement. Each Debt Contribution, by its terms, shall be US Dollar denominated and shall be subordinate to all Senior Debt (as deferred in Exhibit N) of the Company. 3

DR Asset Purchase Agreement: "DR Asset Purchase Agreement" shall mean the Asset Purchase Agreement dated as of the Closing Date between DRA and the Company in substantially the form of Exhibit B. DRA: "DRA" shall mean Delco Remy America, Inc., a Delaware corporation. On the date of this Partnership Agreement, DRA is a wholly-owned subsidiary of DRI. DRI: "DRI" shall mean Delco Remy International, Inc., a Delaware corporation. On the date of this Partnership Agreement, DRI is the indirect parent of DR Investor. DRI Receivables: "DRI Receivables" shall mean all accounts receivable of DRI and its Affiliates owing from SCE and/or its Affiliates as at the Closing Date. DRI Senior Bank Debt Rate: "DRI Senior Bank Debt Rate" shall mean the lowest interest rate available on the date of determination under any senior bank term loan facility of DRI then outstanding (whether or not any funds have then currently been drawn under such facility), as such rate is certified by DRI. If there is no such credit facility in existence on the date of determination, the DRI Senior Bank Debt Rate shall be the rate estimated by DRI in good faith to be the lowest rate of interest at which a US-based bank would lend US Dollars to DRI on the date of determination under a fully-secured senior term loan facility, as such rate is certified by DRI. DR Service Agreement: "DR Service Agreement" shall mean the DR Service Agreement dated as of the Closing Date between the Company and Remy Mexico Services, S. de R.L. de C.V., in substantially the form of Exhibit C. EBIT: "EBIT" shall mean, for any Fiscal Year or any other period, net income (or loss) as reflected on the Company's audited financial statements stated in US dollars for such period and based on US GAAP; plus (or minus) to the extent deducted (added) in the determination of such net income (or loss) (a) the income tax expense (benefit) for such period, (b) all interest expense (net of 4

any interest income) for such period, (c) all items of extraordinary expense (income) for such period, (d) any loss (gains) resulting from the sale or other disposition of assets other than the sale of inventory in the normal course of business, (e) depreciation in excess of straight-line depreciation as determined in accordance with US GAAP and (f) all currency translation adjustments. Equipment Lease: "Equipment Lease" shall mean the Equipment Lease, Sublicense and Subcontract dated as of the Closing Date between SCE and the Company, in substantially the form of Exhibit D. Equity Contribution: "Equity Contribution" shall mean any contribution to the Company by a Partner which represents or is evidenced by an equity security of or equity interest in the Company. Fix Rate: "Fix Rate" shall mean, for a given day, the conversion rate of Mexican Pesos into US Dollars published by Banco de Mexico in the Diario Oficial de la Federacion on such day or most recently prior to such day; provided, however, that if at any time Banco de Mexico ceases publication of such conversion rate, the Partners shall thereafter accept and use such other comparable statistics relative to US Dollar/Mexican Peso exchange rates as shall be computed and published by a comparable source to be selected by mutual agreement of the Partners. Governmental Authority: "Governmental Authority" shall mean any Mexican, US or other national, federal, territorial, state or local governmental authority, quasi-governmental authority, instrumentality, court, commission or tribunal or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing. Initial Bylaws: "Initial Bylaws" shall mean the Bylaws of the Company in effect on the date of formation of the Company. 5

Initial Equity Contribution: "Initial Equity Contribution" shall mean any of (i) the MP $49,500 Equity Contribution made by DR Investor on formation of the Company or (ii) the MP $500 Equity Contribution made by RII on formation of the Company. Initial Partners: "Initial Partners" shall mean DR Investor and RII JF: "JF" shall mean Jose de la Fuente, an individual whose address, for the purposes of this Partnership Agreement and the Related Agreements, is 12454 Breckenridge Drive, Dallas, TX 75230. JF Asset Purchase Agreement: "JF Asset Purchase Agreement" shall mean the Asset Purchase Agreement attached as an exhibit to the Equipment Lease. JV Equity Contribution: "JV Equity Contribution" shall mean any Equity Contribution made pursuant to Section 2.5. JV Partners: "JV Partners" shall mean DR Investor and JF Investor. Lease Agreement: "Lease Agreement" shall mean the Lease Agreement dated as of the Closing Date between the Company and SCE in substantially the form of Exhibit E. Licensed Products: "Licensed Products" are the products which, on the date of this Partnership Agreement, are manufactured or sourced by DRA and/or its Affiliates under the designations set forth on Schedule 1. Lien: "Lien" shall mean any lien, attachment, pledge, conditional sale agreement or other title retention agreement, lease, security agreement, security interest or other encumbrance or similar right of any nature. Majority Interest: "Majority Interest" shall mean greater than fifty percent (50%) of the total votes cast. Material Adverse Effect: "Material Adverse Effect" shall mean, with respect to any event, occurrence or condition, or series 6

of events, occurrences or conditions, a material adverse effect on the operations, property, earnings, prospects or financial condition of the affected Person taken as a whole. Material Breach: "Material Breach" shall mean the breach by a Partner of this Partnership Agreement which breach, if not cured, would have a Material Adverse Effect on the Company or the non-breaching Partner. A Material Breach shall not exist for purposes of this definition unless the non-breaching Partner has given written notice of such breach to the breaching Partner and the Partner in material breach fails to cure the subject breach within 60 days of the receipt of such notice. Mexican GAAP: "Mexican GAAP" shall mean Mexican generally accepted accounting principles consistently applied. Mexican Peso: "Mexican Peso" or "MP $" shall mean lawful money of the United Mexican States. Noncompetition Agreements: "Noncompetition Agreements" shall mean the Noncompetition Agreements dated as of the Closing Date between SCE, JF, JF Investor, PCo. or Guillermo Guerra, on the one hand, and the Company and DRA on the other hand, in substantially the forms of Exhibits F-1 through F-5. Non-Productive Investment: "Non-Productive Investment" shall mean either debt (including Debt Contributions) that was taken down, or cash of the Company that was utilized, for any Covered Investment which (i) involves the expenditure of more than US $500,000, as measured by the total amount of capital requested in the applicable capital authorization request prepared by the Company in the normal course with respect to a request for, and approval of, capital expenditures pursuant to the Company's policies and procedures in effect from time to time (the "Capital Authorization") for such project; and 7

(ii) (x) during any twelve-month period within the Applicable Years, was not projected in the Capital Authorization to yield an annual pre-tax, preinterest Return of 20% or more and (y) such indebtedness has been designated by the JF Investor as Non-Productive Investment in accordance with Section 4.2(e). Officer: "Officer" shall mean any Senior Officer or any individual approved by the Senior Officers to act as an officer of the Company in accordance with the Bylaws and this Partnership Agreement. Partner: "Partner" shall mean any Person who holds legal title to any Corporate Part, as determined by and in accordance with this Partnership Agreement, the Bylaws and Applicable Law. Partner's Premium Capital: "Partner's Premium Capital" shall mean, as to any Partner, the sum of the portions of all the Equity Contributions of such Partner and its predecessors allocated to Premium Capital. Partner's Social Capital: "Partner's Social Capital" shall mean, as to any Partner, the sum of the portions of all the Equity Contributions of such Partner and its predecessors allocated to Social Capital. PCo.: "PCO." shall mean GCI Services, S.A. de C.V., a Mexican corporation and an Affiliate of SCE, JF and JF Investor. Percentage: "Percentage" shall mean, as to any Partner, a fraction (expressed as a percentage) determined by dividing such Partner's Social Capital by the Total Social Capital. Immediately following the Closing, DR Investor's Percentage shall be 76% and JF Investor's Percentage shall be 24%. Person. "Person" shall mean a natural person, partnership (whether general or limited) , limited liability company, trust, estate, association, corporation, custodian, nominee or any other individual or entity in its own or any representative capacity. 8

Premium Capital: "Premium Capital" shall mean that portion of each Equity Contribution not allocated to Social Capital. None of the Initial Equity Contributions or the JV Equity Contributions shall be allocated to Premium Capital. Related Agreements: "Related Agreements" shall mean the DR Service Agreement, the DR Asset Purchase Agreement, the Equipment Lease, the Lease Agreement, the Noncompetition Agreements, the RII Corporate Part Sale Agreement, the Service Agreement, the Supply and Sales Agreement, the Termination Agreement, the TIA Agreement and the Trademark Agreement. The JF Asset Purchase Agreement shall become a Related Agreement on the date it is executed and delivered by the parties thereto and the Closing defined therein occurs. Required Interest: "Required Interest" shall mean ninety percent (90%) or more of the total votes of the Partners. RII: "RII" shall mean Remy International, Inc., a Delaware corporation and an Affiliate of DRI and DR Investor. RII Corporate Part Sale Agreement: "RII Corporate Part Sale Agreement" shall mean the Corporate Part Purchase and Sale Agreement dated as of the Closing Date among RII and JF Investor, in substantially the form of Exhibit G. SCE: "SCE" shall mean Sistemas y Componentes Electricos, S.A. de C.V., a Mexican corporation and an Affiliate of JF Investor, JF and PCo. SD License: "SD License" shall mean that portion of the license agreement dated May 16, 1991 between General Motors Corporation (as predecessor to DRA) pursuant to which SCE has historically and/or is currently producing SD Motors in Mexico; and all other rights and obligations of SCE (or its successors and assigns) under such license agreement shall be unaffected by this Agreement and the Related Agreements. SD Motors: "SD Motors" means the SD Series starter motors and related sub-assemblies as listed on Schedule 2. 9

Senior Officer: "Senior Officer" shall mean any individual approved by the Board or the Partners' Meeting to act as the General Manager, Chief Financial Officer or any other officer of the Company in accordance with the Bylaws and this Partnership Agreement. Service Agreement: "Service Agreement" shall mean the Service Agreement dated as of the Closing Date between PCo. and the Company, in substantially the form of Exhibit H. Social Capital: "Social Capital" shall mean the portion of each Equity Contribution used to determine voting rights of the Partners and the Percentages of the Partners. One hundred percent (100%) of the Initial Equity Contributions and the JV Equity Contributions shall be allocated to Social Capital. Supply and Sales Agreement: "Supply and Sales Agreement" shall mean the Supply and Sales Agreement dated as of the Closing Date between DRA and the Company, in substantially the form of Exhibit I. Termination Agreement: "Termination Agreement" shall mean the Termination Agreement dated as of the Closing Date among DR Investor, the Company, SCE, JF, JF Investor and PCo. in substantially the form of Exhibit J. TIA Agreement: "TIA Agreement" shall mean the Technology License, Technical Information and Assistance Agreement dated as of the Closing Date among DRA, the Company and PCO., in substantially the form of Exhibit K. Total Social Capital: "Total Social Capital" shall mean, at any time, the aggregate of the portions of all Equity Contributions allocated to Social Capital. Trademark Agreement: "Trademark Agreement" shall mean the Trademark and Trade Name Sublicense Agreement dated as of the Closing Date among DRA, the Company and PCO., in substantially the form of Exhibit L. US Dollar: "US Dollar" or "US $" shall mean lawful money of the United States of America. 10

US GAAP: "US GAAP" shall mean United States generally accepted accounting principles consistently applied. US Independent Accountants: "US Independent Accountants" means the independent accounting firm that audits the set of the Company's books and records maintained in accordance with US GAAP. On the date of this Partnership Agreement, Ernst & Young are the US Independent Accountants. Section 1.2 Other Definitions. The following terms shall have the meanings assigned to such terms in the following Sections:
Terms ----Applicable Years Average EBIT Breaching Partner Buyout Notice Call Notice Call Price Corporate Part Transfer Current Quarter Determination Date DR Investor Equity Value Fiscal Year Initial Company Products Interested Party JF Investor Make-Up Capital Nonparticipating Partner Offer Offer Response Notice Offered Debt/Equity Ratio Paid-In Capital Participating Partner Partnership Agreement Premium Capital Portion Put Notice Put Price Quarterly Partner Meetings ROFR Period Sections -------10.3 10.3 13.2 13.2 10.2 10.3 9.2 8.2 10.3 Introduction 10.3 8.1(c) 3.1(a) 4.5(a) Introduction 2.6(a) 2.6(a) 2.6(a) 2.6(a) 2.6(a) 8.2 2.6(a) Introduction 2.6(a) 10.1 10.3 4.1 9.2

11

Social Capital Portion Subordinated Note Subscribed Equity Terminating Partner Transfer Transferring Partner Unsubscribed Equity

2.6(a) 2.6(a) 2.6(a) 13.2 9.1 9.2 2.6(a)

ARTICLE II ORGANIZATION Section 2.1 Establishment of Partnership;. The Partners hereby enter into this Partnership Agreement for the purpose of setting forth their rights and obligations as Partners of the Company. Section 2.2 Bylaws; Conflict with Partnership Agreement. On the Closing Date, or as soon thereafter as is practicable, the JV Partners shall cause the Amended Bylaws to be filed of record in the offices of the Registro Publico de Comercio in San Luis Potosi in accordance with Mexican law. In the event that the Bylaws contain provisions which conflict with any provision of this Partnership Agreement, the Partners agree that the provisions of this Partnership Agreement shall govern and, to the extent consistent with Mexican law, they shall amend the Bylaws to eliminate such conflict. To the extent that any provisions of this Partnership Agreement which control over provisions of the Bylaws are inconsistent with Mexican law, Section 15.9 of this Partnership Agreement shall be applicable. Each Partner shall execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with this Partnership Agreement that are necessary or appropriate to qualify, continue and terminate the existence of the Company in all such jurisdictions in which the Company may conduct business. Section 2.3 Principal Offices. The principal executive offices of the Company shall be in the metropolitan area of San Luis Potosi, SLP, Mexico or such other location as the Board shall designate. As required and as permitted by the Board, branch offices and facilities or agencies may be established in any place inside or outside of Mexico. 12

Section 2.4 Capitalization. (a) The Total Social Capital of the Company shall be variable. The fixed capital of the Company shall be Fifty Thousand Mexican Pesos (MP $50,000), which on the date of formation of the Company was fully subscribed and paid by the Initial Partners. The variable part of the capital of the Company shall be unlimited. Following the consummation of the RII Corporate Part Sale Agreement, the Total Social Capital shall be reallocated to the JV Partners in accordance with their Percentages set forth in Section 2.5. (b) The corporate capital of the Company shall be divided into Corporate Parts. Each Partner shall have one, and only one, Corporate Part, but the Percentage of each Partner shall vary as set forth herein. The Partner's Social Capital and Partner's Premium Capital are subcomponents of the Corporate Part, to be used as described herein. In the event a Partner makes an Additional Equity Contribution, or acquires all or a fraction of the Corporate Part of another Partner pursuant to Section 2.6, Article X or Section 13.2, the contributing or acquiring Partner's Corporate Part, Percentage, Partner's Social Capital and Partner's Premium Capital shall be increased and the non- contributing or non-acquiring Partner's Percentage shall be decreased as described in such Section or Article. Ownership of Corporate Parts for all purposes shall be determined solely by reference to the Company's corporate registry, and any certificate which the Company may issue shall not constitute such Corporate Part or proof of ownership thereof. Section 2.5 Subscriptions and JV Equity Contributions. (a) JF Investor shall subscribe for a capital increase resulting in a Corporate Part bearing a Percentage of twenty-three and 99/100 percent (23.9999%) and to which shall be credited Twelve Million Three Hundred Twenty Thousand and Sixty Eight (12,320,068) votes, and shall pay as an Equity Contribution of One Million Five Hundred Sixty Thousand US Dollars (US $1,560,000), minus Five Hundred Mexican Pesos (MP $500) for such Corporate Part. One hundred percent (100%) of such Equity Contribution shall be credited to Social Capital. Such payment shall be made in cash, or by check, in US Dollars in two parts and shall be converted to the Mexican Peso equivalent by reference to the Fix Rate effective for the date of payment. JF Investor shall pay Five Hundred Sixty Thousand US Dollars (US $560,000), minus 13

Five Hundred Mexican Pesos (MP $500) on the Closing Date and shall pay One Million US Dollars (US $1,000,000) on the fourth business day (in San Luis Potosi, Mexico) after the Closing Date. Following JF Investor's purchase of the Corporate Part of RII pursuant to the RII Corporate Part Sale Agreement and after making the Equity Contribution described above, JF Investor shall have a Corporate Part bearing a Percentage of twenty-four percent (24%), to which shall be credited Twelve Million Three Hundred Twenty Thousand Five Hundred and Sixty Eight (12,320,568) votes. (b) DR Investor shall subscribe for a capital increase which, when aggregated with DR Investor's Initial Equity Contribution, will result in a Corporate Part bearing a Percentage of seventy-six percent (76%) and to which shall be credited Thirty-Nine Million Fifteen Thousand One Hundred Thirty-Two (39,015,132) votes, and shall pay as an Equity Contribution Four Million Nine Hundred Forty Thousand US Dollars (US $4,940,000), minus Forty-nine Thousand Five Hundred Mexican Pesos (MP $49,500) for such Corporate Part. One hundred percent (100%) of such Equity Contribution shall be credited to Social Capital. Such payment shall be made in cash, in US Dollars in two parts and shall be converted to the Mexican Peso equivalent by reference to the Fix Rate effective for the date of payment. DR Investor shall pay One Million Seven Hundred Seventy-seven Thousand Three Hundred Thirty-three US Dollars (US $1,773,333), minus Forty-nine Thousand Five Hundred Mexican Pesos (MP $49,500), on the Closing Date and shall pay Three Million One Hundred Sixty-six Thousand Six Hundred Sixty-seven US Dollars (US $3,166,667) on the fourth business day (in San Luis Potosi, Mexico) after the Closing Date. (c) For reference purposes only, attached to this Partnership Agreement as Exhibit M is a "Statement of Initial Capitalization," which summarizes (both in US Dollar and Mexican Peso terms) the JV Equity Contributions and Initial Equity Contributions made by or allocated to the JV Partners. Section 2.6 Additional Contributions. The Partners acknowledge that the Company may require Additional Contributions. Such determination shall be made by the Board acting in good faith, based on the Company's forecasted working capital and fixed capital requirements. All Additional Equity Contributions shall be denominated in Mexican Pesos. Partners may designate their Affiliates or, in the case of Affiliates who are natural persons, spouses, parents (including step-parents) , children (including 14

step-children), grandchildren and siblings (including half-siblings and step- siblings), to make Debt Contributions, provided such designation has been approved in advance in writing by the other Partner, which approval shall not be unreasonably withheld. Subject to (a) below, at any time on or after January 1, 1998, the Board shall have the right to call upon the Partners to make certain mandatory Additional Contributions; provided, however, that except for Equity Contributions which comprise a part of such mandatory Additional Contributions, the Company may not issue any equity interests or securities, or interests or obligations convertible or exchangeable into or for or redeemable for equity interests or securities, without the prior written consent of all Partners. Under no circumstances shall Debt Contributions carry any voting rights in the Partners' meeting or other governing bodies of the Company or be convertible into or exchangeable for or redeemable for any rights, securities or interests possessing such voting rights. (a) The aggregate of all such mandatory Additional Contributions in any given Fiscal Year shall not exceed the Annual Limit, if any, applicable to the relevant Fiscal Year, unless agreed to by the Partners pursuant to the provisions contained in Section 4.2(b) (i); provided, however that to the extent an Annual Limit is not contributed to the Company by the Partners during the relevant Fiscal Year, the unused amount of such Annual Limit shall be carried forward and added to the Annual Limit for the next Fiscal Year; and provided further, that, such restated Annual Limit for the next Fiscal Year shall in no event exceed US $4.0 million. Mandatory Additional Contributions, to the extent actually received, shall be counted against Annual Limits as of the 120th day after the date of the relevant Offer (defined below) , and any conversion necessary from Mexican Pesos to US Dollars for the purpose of counting such Additional Contribution against the Annual Limit shall be made by reference to the Fix Rate last published before the 120th day after the date of the relevant Offer. The Board shall satisfy the requirements for additional capital (to the extent that such additional capital is not provided by external financing) by calling a Partners' Meeting to resolve to make Debt Contributions and/or Equity Contributions in such amounts and at such times as the Board shall deem appropriate; provided, however, that all Additional Contributions shall be Equity Contributions unless the Board, with the affirmative vote of at least one administrator-manager proposed by JF Investor, resolves to offer 15

debt securities in addition to equity interests. Notwithstanding the foregoing proviso, the affirmative vote of an administrator-manager proposed by JF Investor shall not be required for the Board to approve Debt Contributions exclusively from DR Investor and/or its Affiliates which are in excess of the then applicable Annual Limit. Whenever the Board determines that Additional Contributions are necessary (and regardless of whether such Additional Contributions are in excess of or within the Annual Limits) , the Company shall first offer (the "Offer"), at a Partners' Meeting, to each of the Partners the opportunity to invest in additional equity (through Equity Contributions) , subordinated Partner debt (through Debt Contributions made pursuant to promissory notes (each, a "Subordinated Note") in substantially the form of the promissory note attached to this Partnership Agreement as Exhibit N) or a combination of such debt and equity of the Company, in such debt/equity proportions and having such terms as shall be determined by the Board in accordance with this Section; provided, however, that (i) the relative ratio of debt securities and equity interests so offered (the "Offered Debt/Equity Ratio") and all terms and conditions of all such securities and interests shall be the same for all Partners, and (ii) the sum of debt securities and equity interests so offered to each Partner shall be proportional to each Partner's Percentage, and (iii) with respect to the equity portion of the Additional Contribution, the Offer shall specify the part of the Additional Equity Contribution offered to each Partner to be credited to Social Capital and Premium Capital. The part of the aggregate Additional Equity Contribution to be credited to Total Social Capital (the "Social Capital Portion") shall be determined as of the date of the Offer by the following formula: (1) dividing the Total Social Capital as of the date immediately preceding the Offer by the greater of (x) 150% of the book value of the Company determined as at the end of the latest fiscal quarter before the date of the Offer and (y) the Equity Value of the Company (determined as of the date of the Offer) and (2) multiplying such fraction (which shall in no case be greater than 1.0) by the aggregate Additional Equity Contribution. The part of such Social Capital Portion to be offered to each Partner shall be determined by multiplying such Partner's existing Percentage by the Social Capital Portion. The portion of the Additional Equity Contribution not allocated to Social Capital shall be allocated to Premium Capital (the "Premium Capital Portion"), and the part of such Premium Capital Portion to be offered to each Partner shall be determined by multiplying such Partner's existing Percentage by the 16

Premium Capital Portion. If, at the date of an Offer, (A) the Company has been in existence for less than two Fiscal Years but at least one Fiscal Year, the Equity Value determined pursuant to the preceding sentence shall be calculated by reference to the Company's EBIT for the completed Fiscal Year or (B) the Company has not been in existence for one full Fiscal Year, the Equity Value determined pursuant to the preceding sentence shall be calculated by annualizing the Company's EBIT for the period from the date of its constitution to the end of the last full calendar month prior to the date of the Offer. Each Partner shall have the option of subscribing for all, a portion of or none of the Additional Contributions included in the Offer, but in any event, only in the same ratio of debt and equity as in the Offered Debt/Equity Ratio and in the same ratio of Social Capital to Premium Capital as specified in the Offer. Each Partner shall respond to an Offer in written form (an "Offer Response Notice") not more than 30 days following the date of the Offer and shall be given 120 days following the date of the Offer to fund its subscription of the portion of the Offer accepted in the Offer Response Notice. If a Partner (the "Nonparticipating Partner") does not timely send its Offer Response Notice or fund its subscription in accordance with the immediately preceding sentence, (the portion of its offered debt and/or equity not subscribed or paid for being called the "Make-Up Capital" and the Additional Equity Contributions, if any, that are subscribed and paid for pursuant to a partial subscription called the "Subscribed Equity"), the other Partner (the "Participating Partner") shall have the option, but not the obligation, to provide all or any part of the Make-Up Capital. The Participating Partner who exercises this option shall have the right, so long as it has also subscribed to and funded all of the debt securities and made the Additional Equity Contributions offered to it in the Offer, to provide the Make-Up Capital to the Company by subscribing to all or any portion of the Additional Equity Contributions then being offered to the Nonparticipating Partner in excess of the Nonparticipating Partner's Subscribed Equity (the "Unsubscribed Equity") and the unsubscribed or subscribed but subsequently unfunded debt securities being offered to the Nonparticipating Partner in the same proportion as the Offered Debt/Equity Ratio (and ratio of Social Capital to Premium Capital) or in a higher ratio of debt to equity (but not in a lower ratio of debt to equity than the Offered Debt/Equity Ratio) , than the Offered Debt/Equity Ratio, with a resulting increase in the Percentage, Social Capital and Premium Capital of the Participating 17

Partner, and a resulting decrease in the Percentage of the Nonparticipating Partner. (b) Notwithstanding and in addition to the provisions of 2.6(a) above, and subject to the provisions of Section 4.2(b)(i), DR Investor and/or its Affiliates shall have the absolute right to fund capital requirements (as determined in good faith by the Board) in excess of the Annual Limits through Debt Contributions. Each such Debt Contribution shall be evidenced by a Promissory Note in substantially the form of Exhibit N. Such Debt Contributions shall bear a rate of interest which is equal to the DRI Senior Bank Debt Rate in effect on the date of the Debt Contribution; provided, however, assuming one or both of the following are higher than the DRI Senior Bank Debt Rate in effect on the date of the Debt Contribution, the applicable rate of interest (fixed as of the date of the Debt Contribution) shall equal the higher of (A) the highest interest rate then applicable to US Dollar denominated third party bank debt of the Company outstanding to US-based banks and (B) the rate of interest then applicable for US Dollar denominated loans extended by Bancomext S.N.C. to the Company. Section 2.7 Cash Contributions. The cash payments of the Partners required by Sections 2.5 and 2.6 shall be made by depositing the required amount either by check or by wire transfer of immediately available funds in the account established in the name of the Company at Bank One, Indianapolis, NA, or any other bank to be agreed upon, in an amount in the name of the Company and in accordance with the certification to be processed by the stated bank as required by the Bylaws of the Company. Section 2.8 Organizational and Other Costs. Within 90 days after Closing, the Company shall pay or cause to be paid (or refunded to the party which first incurred them) notary fees, legal fees and filing costs incurred in connection with the registration of the Company and preparation of the Initial Bylaws, Amended Bylaws and other formation documents (other than this Partnership Agreement) and any notary fees, legal fees and filing costs incurred in connection with the notarization and/or registration of any Related Agreements. Costs and expenses incurred by the Initial Partners, the JV Partners or their respective Affiliates in connection with the negotiation and preparation of this Partnership Agreement and the Related Agreements, including, by way of example, 18

outside counsel expenses and the expenses of accounting consultants, shall be for the account of, and paid when due by, the Person incurring such costs and expenses. Section 2.9 Bank Financing. To the extent any of the Company's working capital, fixed asset capital, or other financial requirements are satisfied by borrowing by the Company from any bank or other financial institution, no Partner shall be obligated to guarantee or provide any other financial support of any or all of such debt incurred by the Company. ARTICLE III PURPOSES; TERM OF COMPANY Section 3.1 Purposes. The purpose of the Company shall include but not be limited to (the "Company's Business") : (a) manufacture, assembly and sale of automotive and heavy duty starting motors and alternators and related sub-assemblies and components, including (i) the Licensed Products, which the Company shall produce and sell to original equipment and aftermarket customers, including DRI and its Affiliates, (ii) the SD Motors ((i) and (ii) together, the "Initial Company Products"), and (iii) such other products as the Board may authorize; and (b) marketing of Initial Company Products and such other products as DR Investor may, in its sole discretion, select within Mexico and such other countries as DR Investor may, in its sole discretion, select. Notwithstanding (a) and (b) above, the Company shall notify JF Investor in writing not more than thirty (30) days prior to the Company's commencement of manufacturing, assembly, and/or sale of any product other than the Initial Company Products pursuant to (a) above or prior to the marketing of any product in any new country pursuant to (b) above. If JF Investor advises DR Investor and the Company in writing within such thirty (30) day period that the Company's manufacturing, sale, assembly and/or marketing of such product would constitute a material violation of a covenant or agreement between a third party that is not an Affiliate of JF, on the one hand, and JF Investor or any of its 19

Affiliates, on the other hand, or if such manufacture, assembly, sale and/or marketing of such product in such country would cause SCE, PCo., JF, JF Investor or Guillermo Guerra to be in breach of any of the Noncompetition Agreements, approval of the manufacture, sale, assembly and/or marketing of such product in such country shall require the affirmative vote of all of the votes of all of the Partners. In its notice, JF Investor shall identify, to DR Investor's reasonable satisfaction, the specific covenant and agreement which would be violated. In furtherance of the Company's Business, the Company shall have all of the powers granted to a limited liability company of variable capital under the laws of Mexico. Section 3.2 Term. The Company as constituted in this Partnership Agreement shall continue for ninety-nine (99) years from the date of its constitution, unless earlier dissolved or terminated pursuant to Applicable Law. ARTICLE IV PARTNERS Section 4.1 Partner Meetings. The Partners shall hold a meeting within 60 days after the end of each fiscal quarter, at the corporate domicile and at such time as the Chairman (or, in his absence, the Vice Chairman) shall determine; provided, however, that the Partners' meeting to be held after the end of a Fiscal Year shall be held within 120 days of the end of such Fiscal Year (collectively, the "Quarterly Partner Meetings"). Other meetings of the Partners may be called by the Chairman or one or more Partners having the right to cast at least 20% of the total votes of the Partners, and shall be held at the Company's corporate domicile at such times as may be specified in such call. Notice of the time of each meeting of the Partners shall be given to each Partner by the Person or Persons calling such meeting. Such notice shall specify the purpose or purposes of the meeting and shall be provided at least fifteen (15) days in advance of the meeting. The giving of notice shall be deemed to have been waived by any Partner who shall participate in such meeting and may be waived, in a writing, by any Partner either before or after such meeting. In the absence of the Chairman at a meeting of the Partners the Vice 20

Chairman shall assume the responsibilities of the Chairman. In the absence of the Chairman and the Vice Chairman, one of those administrator-managers present and proposed by DR Investor shall be elected to preside over that meeting. The secretary of the Board shall act as secretary of the Partners' meeting and, in his or her absence, the Partners shall appoint an alternate secretary of the meeting. The Chairman shall appoint one of the Partners or its representative to serve as examiner. The Company shall have a registry for the minutes of Partners' meetings. The minutes of each Partners' meeting shall be entered into such registry and shall be signed by at least the Persons acting as chairman and secretary and the Partners' representatives attending such meeting. Section 4.2 Voting. (a) Each Partner shall have one vote for each NP $1 of such Partner's Social Capital. Except as set forth below or as required by Applicable Law, all resolutions by the Partners shall require an affirmative vote of a Majority Interest. (b) The following matters shall require an affirmative vote of a Required Interest: (i) any call for Additional Contributions in any Fiscal Year in excess of the Annual Limit for such Fiscal Year; provided, however, that only a Majority Interest shall be required in the circumstance where only a Debt Contribution is proposed and only DR Investor (and/or its Affiliates) agrees to make the full amount of such Debt Contribution in excess of the Annual Limit; and (ii) a change of the business activities of the Company from that described in Section 3.1(a) (i) and (ii) and the business activities as to any other products. (c) The following matters shall require the affirmative vote of all the votes of all the Partners: (i) any amendment of, waiver of any of the material requirements of or modification to any of the Related Agreements or any exhibit or schedule thereto (including, without limitation, any material modification of Schedules 1 and 2 of the Supply and Sales Agreement, which relate to prices of certain products, and the Non-Price Competitive Features (as that term is defined in the Supply 21

and Sales Agreement) of all products sold thereunder) or any of the Subordinated Notes; (ii) any release by the Company of the liability of any Partner, administrator-manager or Officer to the Company, other than the release contained in Article VII; (iii) any capitalization of any debt of the Company (including Debt Contributions), any conversion, exchange or redemption of debt (including Debt Contributions) for or into equity interests or securities in the Company or (except for equity interests or securities issued as part of any mandatory Additional Contribution), any issuance of any interests or obligations convertible or exchangeable into or for or redeemable for equity interests or securities, or, except as specifically provided for in this Agreement, any increase, decrease or other modification of the equity capital structure of the Company; (iv) approval or modification of the annual plan and budget of the Company; provided, however, that as to modifications to the annual plan and budget, each of the partners covenants and agrees to refrain from using its veto power under this Section 4.2(c) (iv) or declining to attend a meeting or to vote for the purpose of denying the other rights specifically negotiated for the Partners or the Company in this Partnership Agreement, the Bylaws and the Related Agreements; (v) approval of the manufacturing, assembly, sale and/or marketing of any product other than the Initial Company Products or the marketing of any product in a new country following the Company's receipt of a notice from JF Investor pursuant to the second paragraph of Section 3.1 that such manufacturing, assembly, sale and/or marketing would constitute a material violation of a covenant or agreement between a third party that is not an Affiliate of JF, on the one hand, and JF Investor or any of its Affiliates, on the other hand or would cause SCE, PCo., JF, JF Investor or Guillermo Guerra to be in breach of any of the Noncompetition Agreements; (vi) approval of any Covered Investment which has a projected annual pre-tax, pre-interest Return (as defined within the definition of Covered Investment) on investment of less than 22

twenty percent (20%) for any twelve-month period ending after December 31, 1998; (vii) any amendment of or modification to the Bylaws; and (viii) approval of any Transfer of all or any part of any Corporate Part and approval of the admission of new Partners. Notwithstanding anything to the contrary set forth in Article 72 of the General Law of Commercial Companies of Mexico, an affirmative vote of all the votes of all the Partners shall be required to override the rights of Partners to subscribe to new equity in proportion to their Percentages granted pursuant to Section 2.6 of this Partnership Agreement or the corresponding provisions of the Bylaws, but this Section has no effect on the rights of Partners to acquire Unsubscribed Equity pursuant to Section 2.6(a) or the rights of the Partners under Section 2.6(b). (d) The requirements in (b) above for an affirmative vote of a Required Interest and in (c) above for the affirmative vote of all the votes of all the Partners shall apply at any meeting held on any first or subsequent calls. All of the matters requiring the affirmative vote of a Required Interest or all the votes of all the Partners are exclusively the responsibility of the Partners' meeting and the Board shall not have any authority with respect thereto. (e) All Capital Authorizations shall be approved by the Partners and not the Board. Before the Partners approve any Capital Authorization for a Covered Investment during the time JF Investor or any of its Affiliates hold a Corporate Part which involves the expenditure of more than US $500,000 (as measured by the total amount of capital requested in such Capital Authorization), and if such Covered Investment is not projected to yield an annual pre-tax, pre-interest Return of 20% or more for any twelve-month period ending after December 31, 1998, the Officers and Board shall provide JF Investor (or such other Affiliate) details of such Capital Authorization in writing. Within 14 days after the receipt of such notice, JF Investor shall have the right to give notice in writing to the Company and DR Investor that any debt (including Debt Contributions) or cash utilized to fund such 23

Covered Investment would be considered to be Non-Productive Investment by JF Investor. If, after receipt of such notice, the Company proceeds with the Covered Investment, then any debt or cash utilized to fund such Covered Investment shall be eligible to be classified as Non-Productive Investment pursuant to the definition thereof. It is agreed upon by the Partners that upon the receipt of a notice designating debt or cash related to a Covered Investment as Non-Productive Investment, the Company shall not be under any obligation to approve such Covered Investment or make the related investment. Section 4.3 Quorum. The quorum for any Partners' meetings shall be the presence (in person or by proxy) of (a) the Partners having the right to cast at least ninety percent (90%) of the total votes of the Partners, on the first call for such Partners' meeting or (b) Partners having the right to cast at least fifty percent (50%) of the total votes of the Partners, on any subsequent call for such Partners' meeting. In the event that a quorum is not present, the person presiding over the meeting as specified in Section 4.1 shall adjourn the meeting and reschedule the meeting for a day not less than fifteen (15) days from the original scheduled meeting date. Notice of meetings of the Partners shall be given in accordance with the provisions of Section 15.5. Section 4.4 Action by Written Consent. Any action permitted or required by Applicable Law or this Partnership Agreement to be taken at a meeting of the Partners may be taken without a meeting if a consent in writing, setting forth the action to be taken, is signed by all Partners. Such consent shall have the same force and effect as an affirmative vote at a meeting and may be stated as such in any document or instrument filed with the appropriate Governmental Authorities. Section 4.5 Other Activities. (a) Except as otherwise set forth in this Partnership Agreement or any Related Agreement (including, without limitation, the Noncompetition Agreements), any Partner (the "Interested Party") may engage in or possess an interest in other business ventures of any nature or description, independently or with others, whether presently existing or hereafter created, and neither the Company nor any Partner other than the Interested Party shall have any rights in or to such independent ventures or the income or profits derived therefrom. 24

(b) Subject to Section 4.2(c) of this Partnership Agreement and the provisions of any other Related Agreement, the Company may transact business with the Partners, their Affiliates and their respective administrator-managers, officers, employees and agents; provided, that the terms of those transactions are determined in good faith by the Board to be substantially comparable to or more advantageous to the Company than those the Company could obtain from unrelated third parties. Section 4.6 Hiring of Employees. Notwithstanding anything to the contrary set forth in this Partnership Agreement or any of the Related Agreements, except for offers by the Company and/or its controlled Affiliates expressly permitted pursuant to the terms of the Service Agreement or the Termination Agreement, neither the Company and/or its controlled Affiliates, DR Investor nor any Affiliate of DR Investor shall hire, solicit or attempt to entice away from JF Investor, SCE or PCo., or any of their Affiliates, any individual who is, has agreed to be or within one year of such hiring, solicitation or enticement has been employed or retained by such party, nor shall any other company or entity, retained by the Company, which employs any such individual use such individual in providing services to the Company. DR Investor shall cause the Company and its controlled Affiliates and DR Investor's Affiliates to comply with the terms of this Section 4.6. Notwithstanding the termination of the Service Agreement or the Termination Agreement, or the exercise of any Put Right or Call Right hereunder or under the Bylaws, the covenants contained in this Section 4.6 shall continue to apply to the Company and its controlled Affiliates and to DR Investor and its Affiliates following a termination of this Partnership Agreement for a period of two (2) years from the date of such termination. ARTICLE V BOARD OF MANAGERS Section 5.1 Number. The Board shall consist of six active and six alternate administrator-managers. JF Investor shall have the right to propose two active and two alternate administrator-managers and DR Investor shall have the right to propose four active administrator-managers, including the Chairman and Vice Chairman, and four alternate administrator-managers; 25

provided, however, that if JF Investor's Percentage ever exceeds fifty percent (50%), (a) DR Investor shall cause two active and two alternate administrator- managers proposed by it to resign and shall vote in favor of any Persons proposed by JF Investor to fill such vacancies and (b) for so long as JF Investor's Percentage exceeds fifty percent (50%), JF Investor shall have the right to propose four active and four alternate administrator-managers and DR Investor shall have the right to propose two active and two alternate administrator-managers. Each Partner shall cast all its votes for the active and alternate administrator-managers proposed by the other Partner. No member of the Board may be removed without the affirmative vote of the Partner that proposed such member. Each Partner shall cast all its votes in favor of the removal of any member of the Board if the Partner who appointed such member so votes. Each Partner shall cast all its votes in favor of any replacement member of the Board proposed by the Partner who proposed the departing member. No alternate administrator-manager shall have the right to vote in meetings or call meetings of the Board unless he/she is serving in the place of an active administrator- manager. Alternate administrator-managers may only serve in the place of active administrator-managers proposed by the same Partner that proposed the alternate administrator-manager. At the first Board meeting after the end of a Fiscal Year, the Board shall elect a Secretary, who need not be an administrator- manager or Partner, and who shall serve until his or her successor shall be elected and qualified. Section 5.2 Meetings of the Board. The Board shall meet at least four times in each Fiscal Year at such time and place as it shall determine. To the extent feasible as determined by the Board, such ordinary meetings shall be held on the same date and the same location as the Quarterly Partner Meetings. Other meetings of the Board may be called by the Chairman, the Secretary or any two (2) active administrator-managers (or their alternates), and shall be held at such times and places, in Mexico or the United States, as may be specified in such call. Notice of the time and place of each meeting of the Board shall be given to each administrator-manager by the Person or Persons calling such meeting. Such notice shall specify the purpose or purposes of the meeting and shall be provided on at least fifteen (15) days advance notice. The giving of notice shall be deemed to have been waived by any administrator-manager who shall participate in such meeting and may be waived, in a writing, by any administrator-manager 26

either before or after such meeting. In the absence of the Chairman at a meeting of the administrator-managers the Vice Chairman shall assume the responsibilities of the Chairman. In the absence of the Chairman and the Vice Chairman, one of those administrator-managers present and proposed by DR Investor shall be elected to preside over that meeting. The Secretary shall keep the minutes of the meeting and, if the Secretary does not attend a meeting, then any person appointed by a majority vote of the Board shall act as Secretary. The Company shall have a registry for Board meetings. The minutes of each Board meeting shall be entered into such registry and shall be signed by at least the Persons acting as chairman and secretary. Section 5.3 Powers. The Board shall have all the necessary powers and privileges to administer the Company and perform its functions except (a) for the privileges that are reserved to the Partners according to the provisions of this Partnership Agreement and the Bylaws and (b) as limited by Applicable Laws. Section 5.4 Quorum. A quorum for a meeting of the Board shall be four (4) active administrator-managers (or any alternate administrator-manager serving as an active administrator-manager in the absence of such active administrator-manager). In the event that a quorum is not present, a majority of the administrator-managers then present shall adjourn the meeting and reschedule the meeting on a second call for a day not less than fifteen (15) days from the original scheduled meeting date. The presence of four (4) active administrator- managers (or any alternate administrator-manager serving as an active administrator-manager in the absence of such active administrator-manager) at the rescheduled meeting shall constitute a quorum. Notice of meetings of the Board shall be given in accordance with the provisions of Section 15.5. Section 5.5 Voting; Action by Written Consent. Except as described in Section 2.6(a), resolutions or other actions of the Board shall be effective if affirmatively voted by a majority of the voting administrator-managers present. Each active administrator-manager (including the Chairman and Vice Chairman) or any alternate administrator-manager serving as an active administrator-manager in the absence of such active administrator-manager shall have a single vote. Any action permitted or required 27

by Applicable Law, the Bylaws or this Partnership Agreement to be taken at a meeting of the Board may be taken without a meeting if a consent in writing, setting forth the action to be taken, is signed by all active administrator- managers (or alternate administrator-managers in their absence). Such consent shall have the same force and effect as an affirmative vote at a meeting and may be stated as such in any document or instrument filed with the appropriate Governmental Authorities. ARTICLE VI OFFICERS Section 6.1 Officers. The Board shall appoint a General Manager and a Chief Financial Officer of the Company who each shall be elected by a majority vote of the Board upon the nomination of DR Investor and shall oversee the day-to-day operation of the Company. The General Manager and Chief Financial Officer may be the same individual. The Board may establish additional Officers for the Company in its discretion and may delegate such authority to the Senior Officers in whole or in part. Section 6.2 Powers. All Officers of the Company shall exercise their powers and duties in accordance with the Bylaws, the resolutions of the Partners and the Board and Applicable Law. The General Manager shall have full and complete authority and responsibility for the administration and management of the Company's Business, in addition to those duties, responsibilities and powers ordinary and necessary to his/her position. The Chief Financial Officer shall have such powers and responsibilities as may be delegated to him from time to time by the Board. All other Officers of the Company shall have such powers and responsibilities as may be delegated to them from time to time by the Board and the General Manager. During the first 12 months from the date of the Company's constitution, the Company shall not employ any Officers other than the Operations Director (who may be hired by the Company at any time after December 31, 1998), the General Manager and the Chief Financial Officer. Through December 31, 1998, Guillermo Guerra shall perform the function of General Manager, on a full-time or part-time basis under the Service Agreement, in lieu of the Company directly employing a General Manager. 28

Section 6.3 Other Employment of Officers. Unless otherwise set forth in an employment agreement between the Company and the Officer, each Officer, while an employee of the Company, may continue his/her labor relationship with DR Investor or JF Investor or their Affiliates, particularly towards maintaining his/her pension, medical, and other social security benefits. Section 6.4 General Manager as Administrator-Manager. DR Investor may name the General Manager to serve as one of its appointees to the Board. ARTICLE VII LIABILITY AND INDEMNIFICATION Section 7.1 Liability. Neither the Partners nor any administrator- manager nor Officer of the Company shall be liable, responsible or otherwise accountable to the Company or to any Partner for any acts or omissions in good faith performed or omitted by him/her/it or on his/her/its behalf in furtherance of the interests of the Company and within the scope of such Partner's, administrator-manager's or Officer's authority hereunder, unless such acts or omissions were fraudulent, in bad faith or a result of wanton or willful misconduct or gross negligence by such Partner, administrator-manager or Officer. Section 7.2 Indemnification. The Company shall indemnify, defend and hold harmless each Partner, administrator-manager, and Officer of the Company against any loss, expense, damage, claim, liability, obligations, judgment or injury suffered or sustained by him/her/it by reason of any act, omission or alleged act or omission by him/her/it arising out of his/her/its activities on behalf of the Company or in furtherance of the interests of the Company, including, without limitation, any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses incurred in connection with the defense of any actual or threatened actions, proceedings or claims, all costs of which shall be charged to and paid by the Company as incurred; provided, however, that the acts, omissions or alleged acts or omissions upon which such actual or threatened actions, proceedings or claims are based were performed or omitted in good faith and were not fraudulent, in bad faith or a result of wanton and willful 29

misconduct or gross negligence by such Partner, administrator-manager, or Officer. The agreement above to indemnify, defend and hold harmless shall survive termination of this Partnership Agreement. ARTICLE VIII ACCOUNTING AND DIVIDENDS Section 8.1 Books; Auditor; Financial Statements; Fiscal Year. (a) The Company shall establish and maintain an accounting system which conforms to all requirements of Mexican law. The Company shall maintain or cause to be maintained proper and complete books and records in which shall be entered fully and accurately all transactions and other matters relating to the Company's Business in the detail and completeness customary and usual for businesses of the type engaged in by the Company, and as is necessary to comply with the reporting requirements of this Section 8.1. The Company shall keep and prepare its financial statements on the accrual basis, and shall prepare two sets of financial statements, one in accordance with Mexican GAAP and one in accordance with US GAAP (and the Company will ensure that it maintains such books as are necessary to prepare US GAAP financial statements, including using whatever functional currency is required for US GAAP purposes). The US GAAP financial statements shall be prepared for the Company by the US Independent Accountants or under the management and overall supervision of the Chief Financial Officer. (b) The Company's auditor shall be Ernst & Young, or any other independent public accountants selected by the Board. The fact that such independent public accountants may audit the financial statements of one or more of the Partners or their Affiliates shall not disqualify such accountants from serving as the Company's auditor. (c) The fiscal year of the Company and its taxable year (the "Fiscal Year") shall be the calendar year (or, if applicable, that shorter period within the calendar year during which the Company had legal existence) or such other fiscal year as selected by the Board and permitted by Applicable Law. 30

(d) Promptly after the Closing Date, the Board shall cause to be prepared and distributed to each Partner an opening balance sheet of the Company as of the Closing Date. The opening balance sheet shall reflect the provisions of this Partnership Agreement and shall be prepared in accordance with both Mexican and US GAAP. (e) During such time as JF Investor or any Affiliate of JF Investor is a Partner, but subject, if the Service Agreement remains in full force and effect, to PCo.'s prompt performance of the related services under the Service Agreement which are necessary to prepare such financial statements, the Company shall prepare and distribute to JF Investor unaudited quarterly financial statements within 60 days following the end of each fiscal quarter, and audited annual financial statements prepared in accordance with US GAAP and Mexican GAAP, together with an opinion of the Company's auditors in the case of the audited annual financial statements, within 120 days following the end of each Fiscal Year. (f) The Company shall keep at its principal executive office such books and records as may be required by Mexican law and such other books and records as are customary and usual for businesses of the type engaged in by the Company, and as are necessary for the Company to prepare and receive an unqualified audit opinion thereon, financial statements prepared in accordance with US GAAP and Mexican GAAP. (g) Each Partner or its duly authorized representatives shall have the right, during normal business hours and in accordance with Mexican law, to inspect and copy the Company's books and records at the requesting Partner's sole cost and expense. Section 8.2 Dividend Policy. The declaration of dividends shall be considered by the Partners on a quarterly basis at each Quarterly Partners Meeting. Any dividends declared at a Partners' meeting shall be paid within 15 days after such meeting. In the event that the Company's financial statements for the most recent fiscal quarter then ended reflect positive after-tax net income for such period (the "Current Quarter"), the Partners shall take such actions as shall be necessary to declare and cause the Company to make a dividend distribution; provided that the declaration and payment of such dividend is permissible under Applicable Law, that the Company has sufficient cash on hand to pay 31

such dividend and that no additional debt shall be incurred in order to make the distribution (and the Partners shall cause the administrator-managers proposed by them to seek to ensure that such pre-conditions to the payment of dividends are met, including postponing a prepayment of debt of the Company which would be prejudicial to such distribution); and provided, further, that subject to the above proviso and compliance with the requirements of Applicable Law, the amount of any distribution to be declared and paid shall equal the lesser of; (i) 20% of the Paid-In Capital (as defined below), or (ii) 30% of the applicable Dividend Income Base, where the Dividend Income Base for the Current Quarter is the amount of cumulative Fiscal Year-to-date positive net income after-tax (stated in US Dollars applying US GAAP), if any, as at the end of the Current Quarter, which has not been included in the Dividend Income Base for any preceding quarter, if any, in the current Fiscal Year with respect to which quarter a dividend was actually paid by the Company. Declaration and payment of any additional dividends over the aforementioned limitation shall be considered by the Partners after giving priority to the fixed and working capital needs and other financial requirements of the Company. As used herein, "Paid-In Capital" shall mean the aggregate of all Equity Contributions, but not including any outside bank debt or Debt Contributions. ARTICLE IX TRANSFER OF CORPORATE PARTS; RIGHT OF FIRST REFUSAL Section 9.1 Prior Consent. Except in connection with a put or call under Article X, neither Partner shall, without the affirmative vote of all of the votes of all of the Partners, sell, assign, exchange, transfer, encumber, gift, pledge, enter into any voting trust or other arrangement with respect to the transfer of voting rights or other beneficial interest in its Corporate Part, or otherwise seek to transfer or place a Lien on (collectively, "Transfer") any right, title or interest in its Corporate Part at any time; provided, however that DR Investor may pledge its Corporate Part as collateral security if such is required by any master credit agreement of DRI or DRA; and provided, further, that if at any time DR Investor sends a Call Notice or receives a Put Notice, DR Investor shall have the right to transfer a portion of its Corporate Part to an Affiliate of DR Investor at any time prior 32

to, or simultaneously with, DR Investor's purchase of JF Investor's Corporate Part. Section 9.2 Right of First Refusal. If DR Investor has consented to a Transfer pursuant to Section 9.1, DR Investor or its designee shall have a right of first refusal with respect to such Transfer by JF Investor or any other partner (other than DR Investor) (collectively, a "Transferring Partner") which would result in a change in the equity ownership and/or in the right to vote at a Partners' Meeting (a "Corporate Part Transfer"). In the event a Transferring Partner wishes to effect a Corporate Part Transfer, the Transferring Partner must obtain a written, binding Corporate Part Transfer offer from a bona fide third party, and provide written notice to DR Investor of the terms (including the price to be paid) of the proposed Corporate Part Transfer. DR Investor shall have the right, for 45 days after receipt of such written notice from the Transferring Partner (the "ROFR Period"), to purchase from the Transferring Partner all of the portion of the Corporate Part subject to the Corporate Part Transfer at the same price and on substantially the same terms as in the contemplated Corporate Part Transfer. If DR Investor declines to purchase all of such portion of the Corporate Part, then the Transferring Partner shall have the right for 120 days after the earlier of (i) receipt of DR Investor's notice that it will not purchase such portion of the Corporate Part or (ii) expiration of the ROFR Period, to Transfer such portion of the Corporate Part to the third party at the same price and on the terms specified in the Corporate Part Transfer notice. If such portion of the Corporate Part is not sold to the third party within the 120-day period specified in the preceding sentence, any future Transfer thereof shall be subject to the right of refusal set forth in this Section 9.2. Section 9.3 Transferees; New Partners. This Partnership Agreement shall be binding on any transferee of a Corporate Part, including but not limited to, one who acquires a Corporate Part as contemplated by the penultimate sentence of Section 9.2 and any Person to whom a new Corporate Part is issued. Failure of a transferee or purchaser of a new Corporate Part to execute a joinder to this Partnership Agreement shall cause the Transfer or issuance to be null and void. Section 9.4 Costs. The Partner effecting a Corporate Part Transfer under this Article IX and any Person becoming a 33

Partner in connection therewith shall pay or reimburse the Company and be jointly and severally liable for, all reasonable costs incurred by the Company in connection with the Corporate Part Transfer (including, without limitation, any reasonable legal fees incurred in connection with the review and/or consideration of the implications thereof under Applicable Laws) on or before the tenth day after the receipt by the Person of the Company's invoice for the amount due. ARTICLE X PUT AND CALL RIGHTS OF THE PARTNERS Section 10.1 Put Right. At any time after January 1, 2000 and prior to the receipt of a Call Notice (as defined below), JF Investor shall be entitled, in its sole discretion, by giving 60 days prior written notice (the "Put Notice") to DR Investor, to require DR Investor to purchase all (but not less than all) of JF Investor's Corporate Part at the Put Price as determined pursuant to Section 10.3. Once the Put Notice has been delivered by JF Investor to DR Investor, such notice shall be irrevocable and may not be cancelled, delayed or amended in any respect without DR Investor's written consent (which consent may be given or withheld in DR Investor's sole discretion). Section 10.2 Call Right. DR Investor shall be entitled, in its sole discretion, at any time after January 1, 2002, by giving 60 days prior written notice (the "Call Notice") to JF Investor to purchase all (but not less than all) of JF Investor's Corporate Part at the Call Price determined pursuant to Section 10.3. Once the Call Notice has been delivered by DR Investor to JF Investor, such notice shall be irrevocable and may not be cancelled, delayed or amended in any respect without JF Investor's written consent (which consent may be given or withheld in JF Investor's sole discretion). DR Investor shall attach to the Call Notice a certificate, signed by the Chief Financial Officer of DRI, which states that, in the six months prior to the date of the Call Notice, the Company has not engaged in any activities or transactions outside of the ordinary course of its business which had or would have any adverse effect on the Call Price, other than those activities or transactions which were approved by JF Investor (whether through the approval of the annual plan and budget, in a 34

resolution of the Partners or a resolution of the administrator-managers which received the affirmative vote of the administrator-managers proposed by JF Investor or otherwise), and that the Company has taken no action within such period that was specifically intended to reduce the Call Price. Receipt of the certificate referenced above shall be a precondition to JF Investor's obligation to tender its Corporate Part. Section 10.3 Computation of Purchase Price. Promptly after receipt of a Put Notice or a Call Notice, as the case may be, DR Investor shall cause the Company to determine the Put Price or Call Price, as the case may be, as follows. The "Call Price" shall be an amount, determined and stated in US Dollars, equal to (i) the greater of (A) 150% of the book value of the Company determined as at the end of the latest fiscal quarter before the date of the Call Notice and (B) the. Equity Value of the Company (as defined below), multiplied by (ii) JF Investor's Percentage. The "Put Price" shall be equal to ninety-nine and one-half percent (99 1/2%) of the Call Price. If JF Investor has made an Additional Equity Contribution in the same calendar quarter as the date of the Put Notice or Call Notice or in the same calendar quarter as the date of the closing of the sale of JF Investor's Corporate Part, the amount of such Additional Equity Contribution shall be added into the Put Price or Call Price (as the case may be) . The amount of such Additional Equity Contribution shall be paid (pursuant to the provisions of Section 10.4(c)) on the date of the closing of the sale of JF Investor's Corporate Part, and the remainder of the Put Price or Call Price shall be paid as set forth in Section 10.4. The US Independent Accountants shall make the determinations of the book value and the Equity Value of the Company from the applicable financial statements of the Company prepared in accordance with US GAAP. The "Equity Value" of the Company shall be an amount, determined for purposes of this Article X as of the date of the Put Notice or Call Notice (the "Determination Date"), equal to (a) an amount determined by multiplying the Average EBIT (as defined below) times 5; (b) less, subject to (c) below, the total amount of all short term and long term debt, including all Debt Contributions determined as at the Determination Date; (c) plus the amount of any Non-Productive Investments, if any, determined as at the Determination Date; (d) plus the amount of the cash balances and the fair market value of marketable securities, if any, of the Company (excluding an amount equal to the Purchase Price (as defined in the Equipment Lease) and all Interest (as defined in the 35

Equipment Lease) earned thereon if the Purchase Price and the Interest have not been paid at such time), as at the Determination Date; all converted (where applicable) to US Dollars using the Fix Rate in effect for the Determination Date. The "Average EBIT" shall be the sum of the average of the EBIT for the two most recently completed Fiscal Years (the "Applicable Years") prior to the date of the Put Notice or the Call Notice, as the case may be. If there is a Material Breach by either Partner which has a material effect on EBIT (whether materially positive or materially negative) in any Fiscal Year used in the calculation of Average EBIT, the Partners shall cooperate in good faith to quantify such material effect and recalculate Average EBIT by making appropriate adjustments. Section 10.4 Payment. The Put Price or Call Price so computed shall be paid to JF Investor as follows: (a) the Put Price (less any Additional Equity Contribution returned to JF Investor pursuant to Section 10.3) shall be evidenced by one or more promissory notes in substantially the form of Exhibit O and shall be payable in 5 equal annual installments with the first installment payable in US Dollars at the closing of the sale of JF Investor's Corporate Part and 4 subsequent installments, together with interest thereon at the DRI Senior Bank Debt Rate in effect on the date of the closing (and, in the case of late payments, the DRI Senior Bank Debt Rate in effect on the date of the closing plus 2.5 percentage points), payable on each of the 1st, 2nd, 3rd and 4th anniversaries of the date of closing of the sale of JF Investor's Corporate Part. (b) the Call Price (less any Additional Equity Contribution returned to JF Investor pursuant to Section 10.3) shall be paid in US Dollars in cash 20% at closing of the sale of JF Investor's Corporate Part, and the deferred portion of such purchase price shall be evidenced by one or more promissory notes in substantially the form of Exhibit P providing that the principal of such promissory note(s), together with interest on the remaining balance thereof at the DRI Senior Bank Debt Rate in effect on the date of the closing (and, in the case of late payments, the DRI Senior Bank Debt Rate in effect on the date of the closing plus 2.5 percentage points), shall be payable 40% on the date which is 6 months after closing of the sale of JF Investor's Corporate Part 36

and 40% on the date which is 12 months after closing of the sale of JF Investor's Corporate Part. (c) Payments in respect of the Put Price or Call Price shall be made in US Dollars or Mexican Pesos, at JF Investors choice pursuant to written instructions sent to DR Investor not less than thirty (30) days prior to any due date (and subject to the restrictions of Applicable Laws) . Also subject to the restrictions of Applicable Law, if JF Investor instructs DR Investor to make payments in US Dollars, JF Investor shall also have the right to specify in its notice to make payment to a bank account either in the United States or in Mexico. In the case of payment in Mexican Pesos, such payment shall be converted from US Dollars to Mexican Pesos by reference to the Fix Rate last published before the date of payment. (d) (i) If the Company has a tax-paid retained earnings account ("CUFIN") at the time of the closing of the sale of JF Investor's Corporate Part, JF Investor shall have the right to instruct DR Investor to cause the Company to declare and pay a dividend on such date (of which JF Investor will receive a portion equal to its Percentage immediately prior to the sale of JF Investor's Corporate Part) equal to the amount of the Company's tax-paid retained earnings. If the amount paid to JF Investor as a dividend from the Company's CUFIN account exceeds the aggregate of (x) the Additional Equity Contribution if any, due to JF Investor pursuant to Section 10.3 plus (y) the cash amount payable to JF Investor pursuant to (a) or (b) above at the time of the closing of the sale of JF Investor's Corporate Part, on such date, JF Investor shall lend such excess to DR Investor. Such lent amounts shall reduce the amounts owed from DR Investor pursuant to (a) or (b) above on a dollarfor-dollar basis and shall be incorporated in the promissory note attached as Exhibit O or Exhibit P, as the case may be. (ii) Notwithstanding the foregoing, DR Investor shall only be required to comply with JF Investor's instruction if it receives a legal opinion, reasonably satisfactory to DR Investor, rendered by counsel reasonably acceptable to DR Investor, to the effect that the declaration and payment of such a dividend will not, in itself, result in or give rise to any liabilities under Applicable Law to DR Investor or the Company which are different in any adverse way from those which would have existed if 37

DR Investor paid the full amounts required to be paid on the closing date of the sale of JF Investor's Corporate Part pursuant to (a) or (b) above and do not violate any Applicable Laws (although DR Investor and the Company acknowledge that this procedure will deplete the CUFIN account of the Company). JF Investor shall bear the cost of such legal opinion. (e) DR Investor shall cause all outstanding Debt Contributions from JF Investor, together with all unpaid accrued interest thereon, to be repaid in cash in US dollars in full at the closing of the sale of JF Investor's Corporate Part. Section 10.5 Put/Call Rights If JF Investor Owns Less Than 10%. If at any time during the existence of the Company, the Corporate Part held by JF Investor bears a Percentage of less than 10%: (i) JF Investor shall be entitled, in its sole discretion, by giving a Put Notice to DR Investor, to require DR Investor to purchase all (but not less than all) of JF Investor's Corporate Part at the Put Price as determined pursuant to Section 10.3 and (ii) DR Investor, shall be entitled, in its sole discretion, by giving a Call Notice to JF Investor, to purchase all (but not less than all) of JF Investor's Corporate Part at the Call Price as determined pursuant to Section 10.3. For the purposes of this Section 10.5, if, at the date of a Put Notice or Call Notice, (A) the Company has been in existence for less than two Fiscal Years but at least one Fiscal Year, the Equity Value determined pursuant to Section 10.3 shall be calculated by reference to the Company's EBIT for the completed Fiscal Year or (B) the Company has not been in existence for one full Fiscal Year, the Equity Value determined pursuant to Section 10.3 shall be calculated by annualizing the Company's EBIT for the period from the date of its constitution to the end of the last full calendar month prior to the date of the Put Notice or Call Notice. If the Corporate Part of JF Investor is to be purchased pursuant to a Call Notice, DR Investor shall also provide the certificate of the Chief Financial Officer of DRI described in Section 10.2. Once a Put Notice or Call Notice has been delivered by the relevant party pursuant to this Section 10.5, such notice shall be irrevocable and may not be cancelled, delayed or amended in any respect without the other Partner's written consent (which consent may be a given or withheld in such other Partner's sole discretion). The Put Price or Call Price shall be paid in the manner set forth in Section 10.4. 38

ARTICLE XI ADDITIONAL COVENANTS Section 11.1 The Closing. The following actions shall be taken and events shall occur at the Closing: (a) each JV Partner shall, and shall cause its Affiliates and the Company to, execute and deliver each Related Agreement (other than the JF Asset Purchase Agreement) to which it or they are parties and all other documents, instruments and certificates required pursuant to the terms hereof and thereof; (b) the "Closing" shall occur under the DR Asset Purchase Agreement; (c) the JV Partners shall provide the Company with the funds forming the JV Equity Contributions in accordance with this Partnership Agreement; (d) the Company shall record the ownership of the Corporate Parts of the JV Partners in accordance with Section 2.5; (e) the JV Partners shall cause the increase of the Total Social Capital of the Company to reflect the JV Equity Contributions and shall cause the appointment of all administrator-managers and Officers of the Company in accordance with this Partnership Agreement and the Amended Bylaws; and (f) JF Investor shall deliver evidence satisfactory to DR Investor that there are no Liens on the Corporate Part to be issued to JF Investor in connection with the transactions contemplated hereby, nor is there any reasonable likelihood that any such Liens will attach to such Corporate Part in the future. On the Closing Date or as soon thereafter as is practicable, the JV Partners shall cause the Amended Bylaws to be filed with the Registro Publico de Comercio in San Luis Potosi. Section 11.2 Operating Policy. The Partners shall use their best efforts to have the Company conduct its business in accordance with the highest business ethics and standards, and in full compliance with all Applicable Laws. 39

Section 11.3 Payment of DRI Receivables. The DRI Receivables shall be purchased by the Company on the Closing Date pursuant to the DR Asset Purchase Agreement. JF Investor agrees to cause SCE to pay the DRI Receivables promptly to the Company as they become due according to their terms. DR Investor shall cooperate, and shall cause the Company to cooperate, in all reasonable ways with SCE and JF Investor regarding the method of payment, including causing the Company to draw any existing letters of credit securing payment of the DRI Receivables. Section 11.4 Consent to Assignment of SD License. SCE's rights under the SD License shall be sublicensed to the Company by SCE on the Closing Date pursuant to the Equipment Lease and shall be assigned to the Company if the "Closing" occurs under the JF Asset Purchase Agreement. DR Investor shall ensure that DRA has consented in writing to SCE's sublicense and assignment of the SD License to the Company. DR Investor represents and warrants to JF Investor that the SD License has been validly assigned by General Motors Corporation to DRA and that, insofar as DR Investor is aware, there is nothing which prohibits SCE's sublicense or assignment of the SD License to the Company. Section 11.5 Debt Policy. DR Investor shall cause the Company to use all reasonable efforts to maximize third party bank borrowing so as to minimize the amount of Additional Contributions required to be made by the Partners. Except as may be approved pursuant to Section 4.2, DR Investor shall cause the Company only to incur third party bank financing in the form of debt and not equity interests or securities or obligations convertible into or redeemable for equity interests or securities. Furthermore, it is agreed by the Partners that no Partner shall be obligated to guarantee any bank debt. Section 11.6 Liens on Corporate Part of JF Investor. JF Investor covenants not to grant or permit to exist any Liens on the Corporate Part owned by it at any time during the term of this Partnership Agreement. Section 11.7 Prior Actions of SCE. Etc. JF Investor represents and warrants to DR Investor that none of DRI nor any of its Affiliates nor any of their respective officers and directors will incur any liability in connection with the consummation of the transactions contemplated by this Partnership Agreement or the 40

Related Agreements to any third party with whom SCE, JF or their Affiliates, representatives or agents have had discussions regarding the establishment of a joint venture or the sale of equity in SCE or its Affiliates, which liability arises out of such discussions or agreements to which SCE, JF, their Affiliates, representatives or agents are parties. JF Investor agrees to indemnify, defend and hold harmless each of DRI, its Affiliates and their respective officers and directors from any action by or against liabilities to such third parties, including legal and other expenses incurred in connection with the defense of such claims. Section 11.8 Company Employees. DR Investor shall cause the Officers to consult with JF Investor and obtain advice from JF Investor concerning the Company's hiring, directly or indirectly, of any employees. Such consultation shall be conducted for the purpose of determining each such Person's past relationships with JF Investor and its Affiliates, whether or not in JF Investor's opinion the presence of such Person would be disruptive in the workplace and whether or not JF Investor is aware of any prior criminal activity or other misconduct of such Person. If the Company wishes to hire any Person to perform direct labor for the manufacture of the Company's products, other than a Person who was an employee of PCo. immediately prior to the proposed date of hiring, DR Investor shall cause the Company to obtain the prior approval of the labor union then representing the employees of the Company (and, if the Service Agreement is in effect, the labor union then representing the employees of Pco.). ARTICLE XII DISPUTE RESOLUTION Section 12.1 Notice Regarding Dispute. If there is a dispute between the Partners relating to whether a Material Breach has occurred, any Partner may give written notice to the other Partner requesting to discuss actions which might be taken to resolve such dispute. No proposed actions are required to be set forth in such notice. The Partners shall, commencing promptly after such notice shall have been given, discuss such actions in good faith. During such discussions, any Partner may propose for discussion any action which it believes might be so taken. 41

Section 12.2 Referral to Senior Executive Officers. If the Partners shall have discussed actions which might be taken to resolve a dispute pursuant to Section 12.1 and shall have failed to agree upon such actions within 30 days after notice shall have been given pursuant to Section 12.1, a Partner may at any time within 15 days after the expiration of such 30-day period give written notice to the other Partner, requesting that the respective senior executive officers of the Partners (the President of DRI, on behalf of DR Investor; and JF, on behalf of JF Investor) and the General Manager of the Company, on behalf of the Company, discuss such actions. Within 30 days after receipt of such notice, the receiving Partner shall submit to the other parties a written response. The notice and the response shall include a statement of each Partner's position, to the extent applicable, and a summary of arguments supporting that position. The Partners shall, commencing promptly after such notice and response shall have been given, cause such senior executive officers to meet at a mutually acceptable time and place (within 15 days after delivery of the disputing Partner's notice), and thereafter as often as they reasonably deem necessary, to discuss such actions and to attempt to resolve the dispute. During such discussions, a senior executive officer may propose for discussion any action which such senior executive officer believes might be so taken and such senior executive officers may consult with counsel, accountants and other experts. Such senior executive officers shall utilize their best commercial efforts to resolve the dispute. Section 12.3 Arbitration. Any dispute relating to the execution, delivery, performance or interpretation of this Agreement or whether a Material Breach has occurred which remains unresolved following completion of the process provided in Sections 12.1 and 12.2 shall be settled and finally determined by binding arbitration in Chicago, Illinois or any other location as the Partners may agree, by three arbitrators, in accordance with the Commercial Arbitration Rules then obtaining of the American Arbitration Association. The arbitral tribunal may hold pre-hearing conferences or adopt other procedures, including reasonable discovery. The right to reasonable examination of opposing witnesses in oral hearing shall not be denied. Each party shall bear its own costs of presenting or defending its position in the arbitration. The award of the arbitral tribunal rendered therein shall specify the findings of fact of the arbitrators and the reasons for such award, with reference to and reliance on relevant 42

law as provided for in Section 15.8 hereof. Any such award shall be final and binding on each and all of the parties thereto and the Partners, and judgment may be entered thereon in any court having jurisdiction thereof. The language of the arbitration shall be English. Section 12.4 No Limitation of Remedies. Notwithstanding the foregoing, the initiation of the dispute resolution procedures set forth in Sections 12.1 through 12.3 above shall not limit the rights and remedies of the parties to the other Related Agreements (including, without limitation, DR Investor's and the Company's rights and remedies under the Termination Agreement) or pursuant to the Bylaws; provided, however, that the foregoing shall not limit the parties' agreement to use arbitration as a final dispute resolution mechanism under this Agreement pursuant to Section 12.3. ARTICLE XIII TERMINATION FOR MATERIAL BREACH, ETC. Section 13.1 Termination. (a) This Partnership Agreement may be terminated by any Partner, subject to Section 13.2, by giving 90 days' notice to the other Partner if the other Partner is in Material Breach. Notwithstanding anything to the contrary set forth herein, the decision of a Partner not to subscribe to all or any part of an Additional Contribution (whether relating to the contents of an Offer, to Unsubscribed Equity, to Unsubscribed Debt or otherwise) shall not be deemed a Material Breach. (b) This Partnership Agreement shall automatically be terminated: (i) upon the written consent of the Partners; (ii) upon the Transfer of all or substantially all of the assets of the Company (other than through a mortgage, pledge, grant of security interest or other financing encumbrance approved by the Board); or (iii) if (A) any Partner (1) makes an assignment for the benefit of creditors; (2) files a voluntary petition in 43

bankruptcy or suspension of payment ("suspension de pagos") ; (3) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy, insolvency or suspension de pagos proceedings; (4) files a petition or answer seeking for itself any arrangement, composition, readjustment, liquidation, dissolution, suspension de pagos or similar relief under any statute, law or regulation; (5) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of the type described in clauses (1) through (4) above; (6) seeks, consents to, or acquiesces in the appointment of a receiver or liquidator of itself or of all or any substantial part of its properties; or (7) is generally unable, on an ongoing basis, to pay its debts as they become due; (B) the other Partner sends a notice to such Partner terminating this Partnership Agreement; and (C) thirty (30) days pass after the date of such notice. Section 13.2 Put and Call Rights Prior to Termination. If either Partner gives notice that it elects to terminate this Partnership Agreement pursuant to Section 13.1(a), such Partner (the "Terminating Partner") shall have the right, in addition to any other remedy that may be available, to send a notice (the "Buyout Notice") to the other Partner (the "Breaching Partner") stating that it will exercise a put right (if the Terminating Partner is JF Investor) or a call right (if the Terminating Partner is DR Investor) with respect to the Corporate Part of JF Investor on the date which is ten (10) days after the date of the Buyout Notice. The price paid by DR Investor for the Corporate Part of JF Investor shall be the Call Price (if DR Investor is the Terminating Partner) or Put Price (if JF Investor is the Terminating Partner), as calculated in accordance with Section 10.3, treating a Buyout Notice sent by JF Investor pursuant hereto as a Put Notice and a Buyout Notice sent by DR Investor pursuant hereto as a Call Notice; provided, however, that the 60-day notice periods specified in Sections 10.1 and 10.2 shall be shortened to 10 days for the purposes of this Section 13.2 and payment shall be in cash on the date of purchase if JF Investor is the Terminating Partner. If, on the date of the Buyout Notice, (A) the Company has been in existence for less than two Fiscal Years but at least one Fiscal Year, in lieu of Average EBIT, the Call Price or Put Price, as the case may be, shall be determined by reference to the Company's EBIT for the completed Fiscal Year, or (B) the Company has not been in 44

existence for one full Fiscal Year, in lieu of Average EBIT, the Call Price or Put Price, as the case may be, shall be determined by reference to an annualized calculation of the Company's EBIT for the period from the date of its constitution to the end of the last full calendar month prior to the date of the Buyout Notice. In addition to the purchase of the Corporate Part of JF Investor, and simultaneously with the purchase of the Corporate Part of JF Investor, the Company shall pay, and DR Investor shall cause the Company to pay, to JF Investor the full amount of Debt Contributions (including, without limitation, principal and accrued but unpaid interest) then outstanding from JF Investor to the Company. Section 13.3 Effect of Termination. If this Partnership Agreement is terminated, the Partners shall have no further obligations hereunder, except with respect to those provisions hereof which by their terms or this Section are intended to survive termination of this Partnership Agreement, including, without limitation, any unfulfilled obligations arising pursuant to Article XII or Section 9.4 and the obligations relating to public announcements and confidentiality provided for in Sections 15.1 and 15.2, respectively. The Breaching Partner shall cooperate in all reasonable ways requested by the Terminating Partner to permit the Terminating Partner to continue the Company, including through the amendment of the Bylaws, in the event the Breaching Partner ceases to be a Partner of the Company pursuant to Section 13.2. ARTICLE XIV REPRESENTATIONS AND WARRANTIES Section 14.1 Investment Representations. (a) Each Partner represents and warrants to the Company and to each other Partner that it has acquired its Corporate Part in the Company for its own account, for investment purposes only and not with a view to the distribution thereof, except to the extent provided in or contemplated by this Partnership Agreement. (b) Each Partner recognizes that (i) the interests in the Company have not been registered under the United States Securities Act of 1933, as amended (the "1933 Act"), in reliance upon an exemption from such registration and agrees that it will 45

not sell, offer for sale, transfer, pledge or hypothecate its Corporate Part (A) in the absence of an effective registration statement covering such Corporate Part under the 1933 Act, unless such sale, offer of sale, transfer, pledge or hypothecation is exempt from registration and (B) except in compliance with all applicable provisions of this Partnership Agreement and (ii) the restrictions on Transfers imposed by this Partnership Agreement may severely affect the liquidity of an investment in its Corporate Part. Section 14.2 Representations and Warranties of DR Investor. DR Investor represents, warrants and covenants to JF Investor as follows: (a) Organization: Qualification. DR Investor is a sociedad de responsabilidad limitada de capital variable duly organized and validly existing under the laws of Mexico. DR Investor has all requisite corporate power and authority to own, lease and operate its properties and assets as now owned, leased and operated and to carry on its business as and where presently being conducted. (b) Authorization and Enforceability. DR Investor has the full corporate power and authority to make, execute, deliver and perform this Partnership Agreement, and the execution, delivery and performance of this Partnership Agreement by DR Investor has been duly authorized by all necessary corporate action, including, if necessary, partner approval. This Partnership Agreement has been duly executed and delivered by DR Investor and this Partnership Agreement constitutes the legal, valid and binding obligation of DR Investor enforceable in accordance with its terms. (c) No Violation of Laws or Agreements. The execution and delivery of this Partnership Agreement do not, and the consummation of the transactions contemplated by this Partnership Agreement and the compliance with the terms, conditions and provisions of this Partnership Agreement by DR Investor will not, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien upon any of the business, assets or properties of DR Investor under, any provision of (i) its articles of 46

incorporation, bylaws or other corporate documents, or (ii) any note, bond, mortgage, indenture, deed of trust, license, lease, contract, commitment, agreement or arrangement to which DR Investor is a party, or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to DR Investor or the business, assets or properties of DR Investor. (d) Consents. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or authority, is required to be obtained or made, by or with respect to, DR Investor in connection with the execution and delivery of this Partnership Agreement or the consummation by DR Investor of the transactions contemplated hereby. (e) Board of Managers Approval. The formation of the Company and the transactions contemplated by this Partnership Agreement have been approved by the board of managers of DR Investor. Section 14.3 Representations and Warranties of JF Investor. JF Investor represents, warrants and covenants to DR Investor as follows: (a) Organization: Qualification. JF Investor is a sociedad anonima de capital variable duly organized and validly existing under the laws of Mexico. JF Investor has all requisite corporate power and authority to own, lease and operate its properties and assets as now owned, leased and operated and to carry on its business as and where presently being conducted. (b) Authorization and Enforceability. JF Investor has full corporate power and authority to make, execute, deliver and perform this Partnership Agreement, and the execution, delivery and performance of this Partnership Agreement by JF Investor has been duly authorized by all necessary corporate action, including, if necessary, shareholder approval. This Partnership Agreement has been duly executed and delivered by JF Investor, and this Partnership Agreement constitutes the legal, valid and binding obligation of JF Investor enforceable in accordance with its terms. (c) No Violation of Laws or Agreements. The execution and delivery of this Partnership Agreement do not, and the 47

consummation of the transactions contemplated by this Partnership Agreement and the compliance with the terms, conditions and provisions of this Partnership Agreement by JF Investor will not, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien upon any of the business, assets or properties of JF Investor, JF, SCE or PCo. under, any provision of (i) such Person's bylaws or other corporate documents, or (ii) any note, bond, mortgage, indenture, deed of trust, license, lease, contract, commitment, agreement or arrangement to which such Person is a party, or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to such Person or the business, assets, or properties of such Person. (d) Consents. Other than as set forth on Schedule 3, no consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or Governmental Authority, is required to be obtained or made, by or with respect to, JF Investor, JF, SCE or PCo. in connection with the execution and delivery of this Partnership Agreement or the consummation by JF Investor of the transactions contemplated hereby. (e) Board of Directors Approval. The formation of the Company and the transactions contemplated by this Partnership Agreement have been approved by all necessary corporate action. ARTICLE XV MISCELLANEOUS Section 15.1 Public Announcements, Etc. The Partners shall consult with each other before issuing any press release or making any public announcement with respect to this Partnership Agreement or the constitution of the Company and, except as may be required by Applicable Law or any national or international securities exchange, shall not issue any such press release or make any such public announcement without the consent of all Partners; provided, however, after the date of this Partnership Agreement, the Partners and their officers and Affiliates shall not be prohibited by this Section 15.1 from providing to third parties 48

general, informal, unwritten information which is not confidential information concerning the Company and the Company's Business. Notwithstanding the foregoing, no provision of this Partnership Agreement shall relieve any Partner from any of the obligations under Section 15.2. Section 15.2 Confidentiality. Each Partner agrees that it will not, and will cause each of its Affiliates, the Company and all of its and their agents, employees, officers and/or directors not to, at any time reveal to any Person or use in any way detrimental to the other Partner or the Company or the business of the other Partner or the Company any of their non-public, confidential or proprietary information received from them in connection with this Partnership Agreement, the Related Agreements and/or the transactions contemplated thereby, other than such information that (a) is generally available to the public (other than as a result of a disclosure by such Person in violation of this Partnership Agreement or any other agreement to which such Person is a party), (b) is available to such Person on a non-confidential basis from a source (including any Partner, as the case may be) that is not prohibited from disclosing such information to such Person or (c) after notice and an opportunity to contest, such Person is required to disclose under Applicable Law or under subpoena or other process of laws. Notwithstanding the foregoing, each Partner and its Affiliates shall have the right to disclose any information which may be disclosed under the express terms of the Service Agreement, as such information pertains to the term of the Lease Agreement. Section 15.3 Relationship of the Parties. This Partnership Agreement shall not constitute the appointment of any Partner as the legal representative or agent of any other Partner. No party to this Partnership Agreement shall have any right or authority to assume, create or incur any liability or any obligation of any kind, express or implied, against or in the name of or on behalf of any other party to this Partnership Agreement. Except as may be specifically provided in this Partnership Agreement or any other Related Agreement, neither the Company nor either Partner shall assume or be responsible for any liability or obligation of any nature of, or any liability or obligation that arises from any act or omission to act of, any other Partner however or whenever arising. 49

Section 15.4 Agreement for Further Execution. At any time or times upon the request of the Board or any Partner, each Partner agrees to sign and swear to any certificate, any amendment to or cancellation of such certificate, acknowledge similar certificates or affidavits or certificates of fictitious firm name or the like (and any amendments or cancellations thereof) required by the laws of Mexico, or any other jurisdiction in which the Company does, or proposes to do, business; provided that such certificate, amendment, cancellation or affidavit is consistent with the terms of this Partnership Agreement and the Related Agreements. This Section 15.4 shall not prejudice or affect the rights of the Partners to approve certain amendments to this Partnership Agreement pursuant to Section 15.6. Section 15.5 Notices. Any notice, demand, election or communication required, permitted or desired to be given between the Partners hereunder shall be in writing and shall be personally delivered or shall be sent by prepaid registered mail, return receipt requested, or by commercial courier service, or electronic facsimile (but in the latter instance, also by prepaid registered mail, return receipt requested, or by commercial courier service). Notices, demands, elections or communications shall be deemed received on the first to occur of the following: (i) when personally delivered; (ii) when actually received; or (iii) when sent by commercial courier service, four (4) days following the deposit thereof with such service. Notices, demands, elections or communications shall be addressed as follows (or to any other address which the relevant party may designate to the others by written notice): if to DR Investor or any administrator-manager proposed by DR Investor: Remy Mexico Holdings, S. de R.L. de C.V. c/o Delco Remy International, Inc. 2902 Enterprise Drive Anderson, IN 46013 U.S.A. Attention: Robert Padgett Telecopy: 317-778-6454 50

with a copy to:

Dechert Price & Rhoads 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, PA 19103-2793 Attention: G. Daniel O'Donnell

Telecopy: 215-994-2222 if to JF Investor or any administratormanager proposed by JF Investor: GCID Autopartes, S.A. de C.V.

EJE 128 No. 190 Zona Industrial Del Potosi 78090 San Luis Potosi, S.L.P. Mexico Attention: Guillermo Guerra Telecopy: 52-48-240-298
with a copy to: Little, Pedersen, Fankhauser & Cox 901 Main Street, Suite 5050 Dallas, TX 75202 U.S.A. Attention: Fred C. Pedersen, Esq. Telecopy: 214-573-2323 Delco Remy Mexico, S. de R.L. de C.V. EJE 128 No. 190 Zona Industrial del Potosi 78090 San Luis Potosi, S.L.P. Mexico Attention: General Manager

if to the Company:

Telecopy: 52-48-240-298 with a copy to both Partners. Section 15.6 Amendments: No Waivers. (a) Any provision of this Partnership Agreement (including the definitions of any terms set forth herein and/or any schedule or exhibit hereto) may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by all the Partners, or in the case of a waiver, by the party against whom the waiver is to be effective. 51

(b) No failure or delay by any party in exercising any right, power or privilege under this Partnership Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in this Partnership Agreement shall be cumulative and not exclusive of any rights or remedies provided by law. Section 15.7 Successors and Assigns. Subject to the other provisions hereof, the provisions of this Partnership Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns. No party to this Partnership Agreement may assign its rights or obligations hereunder, without the written consent of the other, except as specifically set forth herein or where such assignment is made in connection with a Transfer of a Corporate Part in accordance herewith. Section 15.8 Governing Law; Consent to Jurisdiction. In accordance with Section 5-1401 of the General Obligations Law of the State of New York, this Partnership Agreement shall be governed by the laws of the State of New York, USA, without giving effect to the provisions, policies or principles thereof relating to conflict of laws. Section 15.9 Illegality and Severability. If application of any one or more of the provisions of this Partnership Agreement shall be unlawful under Applicable Law, then the Partners shall attempt in good faith to make such alternative arrangements as may be legally permissible and which carry out as nearly as practicable the terms of this Partnership Agreement. Should any portion of this Partnership Agreement be deemed unenforceable by an arbitral tribunal or a court of competent jurisdiction, the remaining portion hereof shall remain unaffected and be interpreted as if such unenforceable portions were initially deleted. Section 15.10 Specific Performance. The Partners agree that immediate and irreparable damage would occur in the event any provision of this Partnership Agreement was not performed in accordance with the terms hereof and that the parties shall be 52

entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. Section 15.11 Captions. The captions in this Partnership Agreement are included for convenience or reference only and shall be ignored in the construction or interpretation hereof. Section 15.12 Counterparts; Effectiveness. This Partnership Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and to this Partnership Agreement were upon the same instrument. This Partnership Agreement shall become effective when each party to this Partnership Agreement shall have received a counterpart hereof signed by the other party to this Partnership Agreement. Section 15.13 Entire Agreement. This Partnership Agreement, the Bylaws and the Related Agreements (and any other agreements contemplated hereby or thereby) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof or thereof (including, without limitation, the Memorandum of Understanding among DRI, SCE and JF dated May 31, 1996). No representation, inducement, promise, understanding, condition or warranty not set forth in this Partnership Agreement has been made or relied upon by any party to this Partnership Agreement. This Partnership Agreement is not intended to confer upon any Person other than the parties and the Company any rights or remedies hereunder. This Section shall not apply to either party's obligations to pay money. Section 15.14 Setoff. To the extent DR Investor or the Company and/or their respective successors ("DRI Entities") suffer or incur any direct out-of-pocket damages (but not any consequential, special or exemplary damages or damages for lost sales or loss of reputation or goodwill) ("Direct Damages") as a result of or arising out of a breach by JF Investor of any of the covenants contained in this Partnership Agreement, the DRI Entities may withhold and set off any such Direct Damages against any payments due to JF Investor under this Partnership Agreement and up to thirty percent (30%) of each payment due to JF Investor, PCo. 53

and SCE under any other agreement between any DRI Entity, on the one hand, and JF Investor, SCE or PCo. on the other hand, including, without limitation, the Bylaws and any Related Agreement. In addition, to the extent any money damages are awarded by an arbitral tribunal or a court of competent jurisdiction to any DRI Entity for a breach by JF Investor of any of the covenants contained in this Partnership Agreement, the DRI Entities may satisfy such award by withholding and offsetting against such damages any payments due to JF Investor under this Partnership Agreement and up to thirty percent (30%) of each payment due to JF Investor, PCo. or SCE under any other agreement between any DRI Entity, on the one hand, and JF Investor, SCE or PCo. on the other hand, including, without limitation, the Bylaws and any Related Agreement, to the extent not already withheld and offset pursuant to the preceding sentence. Notwithstanding anything to the contrary set forth in this Partnership Agreement, the DRI Entities may not withhold or offset against Direct Damages or awarded money damages any payments made in respect of the Put. Price, Call Price, dividends payable to JF Investor (or its permitted successors) pursuant to this Partnership Agreement or the Bylaws or the Purchase Price (as defined in the JF Asset Purchase Agreement). No DRI Entity shall be required to use any remedy set forth in this section, and the DRI Entities may pursue any other methods permitted by law (subject to Section 12.3, specifying arbitration as the final dispute resolution mechanism with respect to this Partnership Agreement) to recover such Direct Damages or other damages at any time until they receive the full amount of the such damages. The rights granted pursuant to this Section shall not affect in any way the rights of the DRI Entities to pursue the other remedies set forth in this Partnership Agreement. DR Investor shall provide JF Investor with written notice at the time of exercise by DR Investor or any DR Entity of any of their rights under this Section, specifying the amount withheld or setoff and the amount and kind of Direct Damages or awarded money damages to which such withholding or setoff relates. 54

IN WITNESS WHEREOF, the parties have hereunto set their hands as of the day and year first above written. PARTNERS: REMY MEXICO HOLDINGS, S. de R.L. de C.V.
By: /s/ C. Robert Pudgett -------------------------------------Name: C. Robert Pudgett Title: Legal Representative

GCID AUTOPARTS, S.A. de C.V.
By: /s/ [SIGNATURE APPEARS HERE] -------------------------------------Name: [COPY ILLEGIBLE] Title: Legal Representative

55

CONSENT Each of the undersigned parties consents to and agrees to be bound by the provisions of Section 15.14 of the preceding Partnership Agreement. The provisions of Section 15.8 of the preceding Partnership Agreement shall apply to this consent. SISTEMAS y COMPONENTES ELECTRICOS, S.A. de C.V. By: Name: [COPY ILLEGIBLE] Title: Legal Representative GCI SERVICES, S.A. de C.V.
By: /s/ [SIGNATURE APPEARS HERE] -------------------------------------Name: [COPY ILLEGIBLE] Title: Legal Representative

56

GUARANTY The undersigned party (the "Guarantor") unconditionally guarantees the performance of all obligations of Remy Mexico Holdings, S. de R.L. de C.V., its indirect wholly-owned subsidiary, and its permitted successors and assigns ("DR Investor"), under that certain Partnership Agreement (herein so called) dated as of April 17, 1997, by and between DR Investor and GCID Autopartes, S.A. de C.V. ("JF Investor"), to each of the parties to whom such obligations are or may be owed; provided, however, that Guarantor does not guarantee any debt or other obligations of the Company (as the "Company" is defined in the Partnership Agreement.), including, but not limited to, any bank debt (whether principal or interest) owed by the Company, Debt Contributions (whether principal or interest) (as defined in the Partnership Agreement) owed by the Company to any of the Partners, debt (whether principal or interest) owed by the Company arising from the put and call provisions of the Partnership Agreement or the Company's payment of dividends (whether declared or not). Such guaranty is irrevocable until such obligations are performed in full irrespective of (i) any modifications of or amendments to the Partnership Agreement, (ii) the bankruptcy or insolvency of DR Investor, (iii) any change in the time, manner or place of performance of all or any of the obligations of DR Investor guaranteed hereby or (iv) any release or amendment or waiver of or consent to departure from all or any of the obligations of DR Investor guaranteed hereby. Guarantor waives all requirements for notice or demand which may lawfully be waived in the State of New York. This Guaranty is an absolute, continuing, guaranty of performance and not a guaranty of collection; no beneficiary of this Guaranty shall be required to sue or exhaust any remedies against DR Investor prior to making a demand hereunder. In accordance with Section 5-1401 of the General Obligations Law of the State of New York, this Guaranty shall be governed by the laws of the State of New York, USA, without giving effect to the provisions, policies or principles thereof relating to conflict of laws. Guarantor further agrees to pay to each beneficiary of this Guaranty any and all reasonable costs and expenses (including court costs and reasonable attorneys' fees) incurred by such beneficiary in the preservation or enforcement of its rights and remedies hereunder, provided that it is ultimately

determined (by the parties, and arbitral tribunal, a court or otherwise) that such beneficiary is entitled to payment by Guarantor. DELCO REMY INTERNATIONAL, INC.
By: /s/ Thomas J. Snyder -------------------------------------Name: Thomas J. Snyder Title: President and Chief Operating Officer

SCHEDULE l Licensed Products ----------------l 2. 3. 4. 5. 6. 7. 28 PG 21 37 41 42 PG MT Starting Motor Assembly 260 FI Starting Motor Assembly SI Alternator Assembly MT Starting Motor Assembly MT Starting Motor Assembly MT Starting Motor Assembly 260 F2 Brush Plate Assembly

The "Licensed Products" shall also include products sold under different designations after the date of this Partnership Agreement if such products are intended by DRA to be replacements for the products currently sold under the designations listed above and if such products are Evolutionary Improvements (as defined in the TIA Agreement) of the products currently sold under the designations listed above. Once established as a "Licensed Product," a product shall remain a "Licensed Product" even if DRA changes the designation under which it is sold. 50

SCHEDULE 2 SD Motors and Sub-Assemblies
(a) Final Assemblies Part ---SD260 SD210 SD255 SD255 SD205 SD200 SD250 SD200 SD200 SD200 SD200 Part Number ----------10455013 10455053 10455065 10455067 10455069 10455016 10455024 10455019 10455021 10455049 10455055

Current Current Current Current Current

The final assemblies shall also include products sold under different part numbers after the date of this Partnership Agreement if such products are intended by DRA to be replacements for the final assemblies currently sold under the part numbers listed above and if such products are substantially the same as the final assemblies currently sold under the part numbers listed above. Once established as an "SD Motor," a final assembly shall remain an "SD Motor" even if DRA changes the part number under which it is sold. (b) Sub-Assemblies Brush Plate Assembly Drive Assembly Frame & Field Assembly 2 51

SCHEDULE 3 Consents None.

Exhibit 10.8 SECURITIES PURCHASE AND HOLDERS AGREEMENT SECURITIES PURCHASE AND HOLDERS AGREEMENT, dated July 29, 1994 (the "Agreement"), by and among DR INTERNATIONAL, INC., a Delaware corporation (the "Company"), CITICORP VENTURE CAPITAL LTD., a New York corporation ("CVC"), WORLD EQUITY PARTNERS, L.P., a Delaware limited partnership ("WEP"), MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC., a Michigan corporation ("Masco"), HAROLD K. SPERLICH ("Sperlich"), JAMES R. GERRITY ("Gerrity") and the individuals listed on Schedule I hereto as "Management Investors" (the "Management Investors"). CVC, WEP and Masco are sometimes referred to hereinafter individually as an "Institutional Investor" and together as the "Institutional Investors"; and CVC, WEP, Masco, Gerrity, Sperlich and the Management Investors are sometimes referred to hereinafter individually as an "Investor" and collectively as the "Investors." Background A. Following the Closing (as hereinafter defined) hereunder, the Company will acquire (the "Acquisition") through its subsidiary DRA, Inc., a Delaware corporation ("DRA"), substantially all of the assets of the heavy duty starter motors and generators business, the remanufacturing heavy duty starter motors and generators business, the light duty starter motors business, the remanufacturing light duty starter motors business and the powder metal forge business of the Delco Remy Division of General Motors Corporation ("GM") (collectively, the "Businesses") pursuant to an Asset Purchase Agreement, dated July 13, 1994 (the "Asset Purchase Agreement"), among GM, the Company and DRA. B. The Company, which as of the date hereof has not issued any securities, desires to sell, and (i) each of CVC, Masco, Gerrity and Sperlich desires to purchase, the number of shares of the Company's Class A Common Stock, par value $.01 per share ("Class A Common Stock"), and Class B Common Stock, par value $.01 per share ("Class B Common Stock") (collectively hereinafter referred to as the "Common Stock" or "Shares"), set forth opposite their respective names on Exhibit A attached hereto and (ii) each of CVC and Masco desires to purchase the principal amount of the Company's 11% Junior Subordinated Notes due July 31, 2004 (the "Debentures"), set forth opposite their respective names on Exhibit A attached hereto.

C. WEP has acquired a warrant ("the Warrant") exercisable for 100,000 shares of Class A Common Stock pursuant to the Warrant Agreement of even date herewith between the Company and WEP. D. The Management Investors will be employed by the Company and/or DRA upon consummation of the Acquisition. The Board of Directors of the Company wishes to grant the opportunity to the Management Investors to make an investment in the Company, and thereby to acquire an increased personal and proprietary interest in the Company's success and progress through the purchase of securities pursuant to this Agreement. E. Each of the Management Investors desires to purchase the number of shares of Class A Common Stock set forth opposite his or her name on Exhibit A attached hereto. F. As used herein, the term "Securities" shall mean the Debentures, the Warrant (including shares of Common Stock to be issued upon exercise thereof) and the Common Stock held by any party hereto, including shares of Common Stock and all other securities of the Company (or a successor to the Company) received on account of ownership of the Common Stock, including all securities issued in connection with any merger, consolidation, stock dividend, stock distribution, stock split, reverse stock split, stock combination, recapitalization, reclassification, subdivision, conversion or similar transaction in respect thereof. G. The Investors and the Company wish to set forth certain agreements regarding their future relationships and their rights and obligations with respect to the Securities. Terms In consideration of the mutual covenants contained herein and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I PURCHASE OF SECURITIES 1.1 Sale and Purchase of Common Stock and Debentures. Subject to the terms and conditions set forth herein, at the Closing the Company will issue and sell (a) to each of the -2-

Investors (other than WEP) the number of shares of Common Stock set forth opposite such Investor's name on Exhibit A and (b) to each of CVC and Masco the principal amount of Debentures set forth opposite such Institutional Investor's name on Exhibit A. The purchase price for the Common Stock shall be $2.00 per share; and the purchase price for the Debentures sold pursuant to this Agreement shall be 100% of the principal amount thereof. 1.2 Closing; Termination. The closing (the "Closing") of the purchase and sale of the Common Stock and Debentures will take place on July 29, 1994 or at such other time or on such other date as may be agreed by the parties hereto (the "Closing date"). At the Closing, the Company will deliver (a) to each Investor (other than WEP), certificates evidencing the number of Shares to be purchased by such Investor and (b) to CVC and Masco, the Debentures, in each case registered in such Investor's name, against payment of the purchase price therefor in cash, by certified or bank cashier's check or by federal wire transfer of immediately available funds, with confirmed receipt or, in the case of each Management Investor, against payment of a portion of the purchase price therefor (equal to the aggregate par value of the Shares to be issued) in cash and the balance by delivery of a promissory note (the "Promissory Note") substantially in the form of Exhibit B hereto in the principal amount set forth opposite such Management Investor's name on Exhibit A. In the event that the Closing under the Asset Purchase Agreement does not occur on or prior to August 15, 1994, this Agreement will terminate and be of no further force and effect, all amounts paid by each Investor (other than WEP) pursuant to this Agreement for the Common Stock and the Debentures shall be returned to such Investor upon surrender to the Company of the Common Stock and Debentures held by him, her or it, and there shall be no further liability on the part of any party hereto except for breaches of this Agreement prior to the time of such termination. 1.3 Conditions to Certain Investor's Obligations. The obligation of each Investor (other than WEP) to purchase and pay for the Common Stock and Debentures at the Closing is subject to the satisfaction on or prior to the Closing Date of the following conditions: (a) The representations and warranties of the Company set forth in Article II shall be true and correct in all material respects on and as of the Closing Date as though then made, and all covenants of the Company set forth in Article II required to be -3-

performed on or prior to the Closing shall have been performed in all material respects. (b) The Company's Certificate of Incorporation and Bylaws shall be substantially in the forms of Exhibits C-1 and C-2, respectively. (c) The Company shall have delivered to each of the Investors certificates for the Common Stock and the Debentures required pursuant to Section 1.1. (d) No preliminary or permanent injunction or order, decree or ruling of any nature issued by any court or governmental agency of competent jurisdiction, nor any statute, rule, regulation or executive order promulgated or enacted by any United States federal, state or local governmental authority, shall be in effect, that would prevent the consummation of the transactions contemplated by this Agreement or the Asset Purchase Agreement. (e) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not violate the Company's Certificate of Incorporation or Bylaws, any applicable laws or orders, regulations, rules or requirements of a court, public body or authority by which the Company is bound. (g) All corporate and other proceedings, if any, taken or to be taken by the Company in connection with the transactions contemplated hereby to be consummated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Investors (other than WEP), and the Investors (other than WEP) shall have received from the Company all such counterpart originals or certified or other copies of such documents as they may reasonably request. 1.4 Conditions to the Company's Obligations. The obligations of the Company to issue and sell the Common Stock to each Investor (other than WEP) and the Debentures to CVC and Masco as set forth herein at the Closing are subject to the satisfaction on or prior to the Closing of the following conditions: (a) The representations and warranties of each Investor set forth in Article III shall be true and correct in all material respects at and as of the Closing Date as though then made, and all covenants of each Investor required to be performed at or prior to the Closing shall have been performed in all material respects. -4-

(b) The conditions set forth in paragraph (d) of Section 1.3 shall have been satisfied, and the Investor shall have purchased or shall simultaneously purchase the Securities set forth opposite its name on Exhibit A. (c) All corporate and other proceedings, if any, taken or to be taken by Investors in connection with the transactions contemplated hereby to be consummated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Company, and the Company shall have received from each Investor all such counterpart originals or certified or other copies of such documents as it may reasonably request. (d) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not violate any applicable laws or orders, regulations, rules or requirements of a court, public body or authority by which the Investor is bound. (e) The Investors shall have paid or shall pay concurrently the purchase prices required of them pursuant to this Article I. ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY 2.1 Representations and Warranties of the Company. The Company represents and warrants to, and covenants and agrees with, each of the Investors as follows: (a) The Company is a corporation validly existing and in good standing under the laws of the State of Delaware. (b) The Company has full corporate power and corporate authority to make, execute, deliver and perform this Agreement and to carry out all of the transactions provided for herein. (c) The Company has taken such corporate action as is necessary or appropriate to enable it to perform its obligations hereunder, including, but not limited to, the issuance and sale of the Common Stock and the Debentures to be issued by it, and this Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with terms hereof. -5-

(d) The Shares when issued in compliance with the provisions of this Agreement will be validly issued, fully paid and non-assessable. (e) The Debentures when issued in compliance with the provisions of this Agreement will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. (f) Prior to the date hereof, the Company has not (i) incurred any liabilities or obligations; (ii) engaged in any business or activities of any kind whatsoever; (iii) entered into any agreement or arrangements with any person or entity, or (iv) been subject to or bound by any obligation or undertaking, except in each case as incurred in connection with its incorporation, capitalization or the negotiation and consummation of the transactions contemplated by this Agreement and the Asset Purchase Agreement including, but not limited to, the financing relating to the Acquisition. (g) As of the Closing, the authorized capital stock of the Company will consist of (i) 1,000,000 shares of Class A Common Stock, of which the number of shares reflected in Exhibit A will be issued and outstanding immediately after the Closing and (ii) 1,000,000 shares of Class B Common Stock, of which the number of shares reflected in Exhibit A will be issued and outstanding immediately after the Closing. Except for the Warrant and as otherwise set fourth herein, as of the Closing Date, there will be no rights, subscriptions, warrants, options, conversion rights, or agreements of the kind outstanding to purchase from the Company, or otherwise require the Company to issue, any shares of capital stock of the Company or securities or obligations of any kind convertible into or exchangeable for any shares of capital stock of the Company; the Company will not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock; and the Shares will constitute all of the outstanding shares of the Company's capital stock. -6-

ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH INVESTOR 3.1 Representations, Warranties and Covenants of Each Investor. Each of the Investors severally represents and warrants to, and covenants and agrees with, the Company that: (a) Such Investor has full legal right, power and authority (including the due authorization by all necessary corporate action) to enter into this Agreement and to perform such Investor's obligations hereunder without the need for the consent of any person, and this Agreement has been duly authorized, executed and delivered and constitutes the legal, valid and binding obligation of such Investor enforceable against such Investor in accordance with the terms hereof. (b) The Securities are being acquired by such Investor for investment, and not with a view to any distribution thereof that would violate the Securities Act of 1933, as amended (the "Securities Act"), or the applicable state securities laws of any state; and such Investor will not distribute the Securities in violation of the Securities Act or the applicable securities laws of any state. (c) Such Investor understands the Securities have not been registered under the Securities Act or the securities laws of any state and must be held indefinitely unless subsequently registered under the Securities Act and applicable state securities laws or unless an exemption from such registration becomes or is available. (d) Such Investor is financially able to hold the Securities for long-term investment, believes that the nature and amount of the Securities being purchased are consistent with such Investor's overall investment program and financial position, and recognizes that there are substantial risks involved in the purchase of the Securities. (e) Such Investor confirms that (i) such Investor is familiar with the proposed business of the Company and DRA, (ii) such Investor has had the opportunity to ask questions of the officers and directors of the Company and DRA and to obtain (and that such Investor has received to its satisfaction) such information about the business and financial condition of the -7-

Company and DRA as it has reasonably requested, and (iii) such Investor, either alone or with such Investor's representative (as defined in Rule 501(h) promulgated under the Securities Act), if any, has such knowledge and experience in financial and business matters that such Investor is capable of evaluating the merits and risks of the prospective investment in the Securities. 3.2 Legend. The Debentures, the Warrant and the certificates representing the Shares shall bear the following legend in addition to any other legend required under applicable law: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR STATE SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE TERMS AND CONDITIONS OF A SECURITIES PURCHASE AND HOLDERS AGREEMENT BY AND AMONG THE COMPANY AND THE HOLDERS SPECIFIED THEREIN, A COPY OF WHICH AGREEMENTS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES IS SUBJECT TO THE TERMS OF SUCH AGREEMENT AND THE SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH. 3.3 Management Investor Representations and Warranties. Each Management Investor severally represents and warrants to the Company that: (a) such Management Investor has full legal right, power and authority to enter into the promissory Note and to perform such Management Investor's obligations thereunder without the need for the consent of any other person; and the Promissory Note issued by him or her has been duly executed and delivered by him or her and constitutes the legal, valid and binding obligation of such management Investor in accordance with the terms thereof; (b) such Management Investor's residence, business address, business and residence telephone numbers and social -8-

security number are as set forth below his or her signature to this Agreement; and (c) in formulating a decision to enter into this Agreement, such Management Investor has relied solely upon an independent investigation of the Company's and DRA's business and upon consultations with his or her legal and financial advisers with respect to this Agreement and the nature of his or her investment; and that in entering into this Agreement no reliance was placed upon any representations or warranties other than those contained in this Agreement. 3.4 Representations and Warranties of Certain Investors Other than the Management Investors. (a) CVC, Masco, Gerrity and Sperlich each severally represent and warrant to, and covenant and agree with, the Company that each of CVC, Masco, Gerrity and Sperlich qualifies as an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act, and has such knowledge and experience in financial and business matters that each of CVC, Masco, Gerrity and Sperlich is capable of evaluating the merits and risks of its purchase of the Securities. (b) The execution, delivery and performance of this Agreement by each of CVC, Masco, Gerrity and Sperlich do not contravene or violate any laws, rules or regulations applicable to him or it. 3.5 Restrictions on Transfers of Securities. The following restrictions on Transfer shall apply to all Shares owned by any Investor: (a) No Investor or Permitted Transferee (except a Permitted Transferee by virtue of Section 3.5(b)(iv) hereof) shall Transfer (other than in connection with a redemption or purchase by the Company) any Securities other than to a person or entity approved in advance in writing by the holders of at least forty percent (40%) of the outstanding Common Stock (including shares held by the transferor) so long as such Transfer complies with the provisions of Article IV, this Section 3.5, and, in addition, in the case of Management Investors, Article VI of this Agreement; provided, however, that such advance written approval shall not be required with respect to a Transfer of Securities pursuant to and in compliance with Section 4.7. Any purported Transfer in -9-

violation of this Agreement shall be null and void and of no force and effect and the purported transferee shall have no rights or privileges in or with respect to the Company. As used herein, "Transfer" includes the making of any sale, exchange, assignment, hypothecation, gift, security interest, Pledge or other encumbrance, or any contract therefor, any voting trust or other agreement or arrangement with respect to the transfer of voting rights or any other beneficial interest in any of the Securities, the creation of any other claim thereto or any other transfer or disposition whatsoever, whether voluntary or involuntary, affecting the right, title, interest or possession in or to such Securities. Prior to any proposed Transfer of any Securities the holder thereof shall give written notice to the Company describing the manner and circumstances of the proposed Transfer accompanied by a written opinion of legal counsel, addressed to the Company and the transfer agent, if other than the Company, and reasonably satisfactory in form and substance to each addressee, to the effect that the proposed Transfer of the Securities may be effected without registration under the Securities Act and applicable state securities laws. Each certificate evidencing the Securities transferred shall bear the legends set forth in Section 3.2, except that such certificate shall not bear such legend if the opinion of counsel referred to above is to the further effect that such legend is not required in order to establish compliance with any provison of the Securities Act or applicable state securities laws. Nothing in this Section 3.5(a) shall prevent the Transfer, free of any restrictions under this Agreement, of Securities by an Investor or a Permitted Transferee to one or more of its Permitted Transferees, or to the Company; provided, however, that each such Investor or Permitted Transferee (except a Permitted Transferee by virtue of Section 3.5(b)(iv) hereof) shall take such Securities subject to and be fully bound by the terms of this Agreement applicable to it with the same effect as if it were a party hereto; and provided, further, that (i) no entity or person (other than a Permitted Transferee by virtue of Section 3.5(b)(iv) hereof) shall be a Permitted Transferee unless such transferee executes a joinder to this Agreement satisfactory in form and substance to the Company, and (ii) no Transfer shall be effected except in compliance with the registration requirements of the Securities Act or pursuant to an available exemption therefrom. - 10 -

(b) As used herein, "Permitted Transferee" shall mean: (i) in the case of any Investor or Permitted Transferee who is a natural person, his spouse or children or grandchildren (in each case, natural or adopted), any trust for his benefit or the benefit of his spouse or children or grandchildren (in each case, natural or adopted), or any corporation or partnership in which the direct and beneficial owner of all of the equity interest is such individual Investor or Permitted Transferee or his spouse or children or grandchildren (in each case, natural or adopted) (or any trust for the benefit of such persons); (ii) in the case of any Investor or Permitted Transferee who is, in each case, a natural person, the heirs, executors, administrators or personal representatives upon the death of such Investor or Permitted Transferee or upon the incompetency or disability of such Investor or Permitted Transferee for purposes of the protection and management of his assets; (iii) in the case of an Investor or Permitted Transferee who is not a natural person, any Affiliate (as hereinafter defined) of such Investor; (iv) in the case of any Investor or Permitted Transferee, any person or other entity if such person or other entity takes such Securities pursuant to a sale in connection with a public offering under the Securities Act or following a public offering in open market transactions or under Rule 144 under the Securities Act; (v) in the case of CVC, any of its employees, officers or directors; (vi) in the case of Masco and its Permitted Transferees, MascoTech Corporation, a Delaware corporation ("MC"), and any corporation in which MC owns, directly or indirectly through one or more intermediaries, one hundred percent (100%) of the outstanding capital stock of such corporation; and (vii) in the case of WEP, a distribution of Securities to its limited partners. (c) As used herein, "Affiliate" means with respect to any person other than Masco or its Permitted Transferees, a corporation in which such person owns, directly or indirectly - 11 -

through one or more intermediaries, fifty percent (50%) or more of the outstanding capital stock of such corporation. 3.6 Notation. A notation will be made in the appropriate transfer records of the Company with respect to the restriction on transfer of the Securities referred to in this Agreement. ARTICLE IV OTHER COVENANTS AND REPRESENTATIONS 4.1 Observers' Rights. So long as CVC or its Affiliates own at least 5% of the Common Stock outstanding, if no employee of CVC or its Affiliates is a member of the Company's Board of Directors, CVC shall have the right to designate two observers (the "Observers") to attend meetings of the Company's Board of Directors and committees thereof. If at least one employee of CVC is a member of the Company's Board of Directors, CVC shall have the right to designate one Observer to attend meetings of the Company's Board of Directors and committees thereof. The Observers shall not have the right to vote on any matter presented to the Board of Directors or any committee thereof. The Company shall give each Observer written notice of each meeting of the Board of Directors and committees thereof at the same time and in the same manner as the members of the Board of Directors or such committee receive notice of such meetings, and the Company shall permit each Observer to attend as an observer all meetings of its Board of Directors and committees thereof. Each Observer shall be entitled to receive all written materials and other information given to the directors in connection with such meetings at the same time such materials and information are given to the directors, and each Observer shall keep such materials and information confidential. If the Company proposes to take any action by written consent in lieu of a meeting of its Board of Directors or a committee thereof, the Company shall give written notice thereof to each Observer prior to the effective date of such consent. The Company shall provide to each Observer all written materials and other information given to the directors in connection with such action by written consent at the same time such materials and information are given to the directors, and each Observer shall keep such materials and information confidential. The Company shall pay the reasonable out-of-pocket expenses of each Observer incurred in connection with attending such meetings. 4.2 Financial Statements and Other Information. So long as any Institutional Investor, Gerrity or Sperlich, as the case may - 12 -

be, owns any of the Securities, the Company shall deliver to such Institutional Investor, Gerrity and Sperlich: (a) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, consolidated balance sheets of the Company and its subsidiaries as of the end of such period, and consolidated statements of income and cash flows of the Company and its subsidiaries for the period then ended prepared in conformity with generally accepted accounting principles applied on a consistent basis, except as otherwise noted therein, and subject to the absence of footnotes and to year-end adjustments; and (b) as soon as available and in any event within 90 days after the end of each fiscal year of the Company, a consolidated and consolidating balance sheet of the Company and its subsidiaries as of the end of such year, and consolidated and consolidating statements of income and cash flows of the Company and its subsidiaries for the year then ended prepared in conformity with generally accepted accounting principles applied on a consistent basis, except as otherwise noted therein, together with an auditor's report thereon of a firm of established national reputation. 4.3 Regulatory Compliance Cooperation. So long as CVC or its Affiliates beneficially own any of the Securities, before the Company redeems, purchases or otherwise acquires, directly or indirectly, or converts or takes any action with respect to the voting rights of, any shares of any class of its capital stock or any securities convertible into or exchangeable for any shares of any class of its capital stock, the Company shall give CVC thirty (30) days prior written notice of such pending action. Upon the written request of CVC made within thirty (30) days after its receipt of any such notice, stating that after giving effect to such action CVC would have a Regulatory Problem (as described below), the Company will defer taking such action for such period (not to extend beyond ninety (90) days after CVC's receipt of the Company's original notice) as CVC requests to permit it and its Affiliates to reduce the quantity of Securities held by it and its Affiliates in order to avoid the Regulatory Problem. In addition, the Company will not be a party to any merger, consolidation, recapitalization or other transaction pursuant to which CVC would be required to take any voting securities or any securities convertible into voting securities, which might reasonably be expected to cause CVC to have a Regulatory Problem. For purposes of this paragraph, a person will be deemed to have a "Regulatory -13-

Problem" when such person and such person's Affiliates would own, control or have power over a greater quantity of securities of any kind issued by the Company than are permitted to be owned under any requirement of any governmental authority applicable to such person. 4.4 Sale of the Company. (a) If the Board of Directors and holders of at least fifty percent (50%) of the Company's Common Stock then outstanding approve the sale of the Company to a person (whether by merger, consolidation, sale of all or substantially all of its assets or sale of all of the outstanding capital stock) (an "Approved Sale"), each Investor and Permitted Transferee will consent to, vote for, and raise no objections against, and waive dissenters and appraisal rights (if any) with respect to, the Approved Sale, and if the Approved Sale is structured as a sale of stock, each Investor and Permitted Transferee will agree to sell and will be permitted to sell all of such Investor's and Permitted Transferee's Common Stock on the terms and conditions approved by the Board of Directors and the holders of a majority of the Common Stock then outstanding. Each Investor and Permitted Transferee will take all necessary and desirable actions in connection with the consummation of an Approved Sale. (b) The obligations of each of the Investors with respect to an Approved Sale are subject to the satisfaction of the conditions that: (i) upon the consummation of the Approved Sale all of the Investors and Permitted Transferees will receive the same form and amount of consideration per share of Common Stock, or if any holder of Common Stock is given an option as to the form and amount of consideration to be received, all Investors and Permmitted Transferees will be given the same option; and (ii) the terms of sale shall not include any indemnification, guaranty or the similar undertaking of the Investor (other than undertakings of Management Investors in respect of continued employment) that (A) is not made or given pro rata with other Investors on the basis of share ownership or (B) could result in liability to such Investor that is in excess of the fair market value on the consideration to be received by such Investor in the Approved Sale. 4.5 Tag-Along (a) (i) On or after the "Tag-Along Date" (as defined), except as otherwise provided in Section 4.5(a)(v), no "Seller" (as hereinafter defined) shall sell any Common Stock in -14-

any transaction or series of related transactions unless all "Holders" (as hereinafter defined) are offered an equal opportunity to participate in such transaction or transactions on a pro-rata basis and on identical terms (including price and type of consideration paid). As used in this Section 4.5, "Tag-Along Date" means, as to each Institutional Investor, the date on which such Institutional Investor and its corporate Affiliates own, or would own as a result of a sale of Common Stock or Warrant, as the case may be, less than 20% of the outstanding Common Stock of the Company; "Seller" shall mean the Institutional Investors and their respective corporate Affiliates; and "Holders" shall mean the Investors and their Permitted Transferees. (ii) Prior to any sale of Common Stock or Warrant subject to these provisions, the Seller shall notify the Company in writing of the proposed sale. Such notice (the "Seller's Notice") shall set forth: (A) the number of shares of Common Stock subject to the proposed sale; (B) the name and address of the proposed purchaser; and (C) the proposed amount of consideration and terms and conditions of payment offered by such proposed purchaser. The Company shall promptly, and in any event within 15 days, mail or cause to be mailed the Seller's Notice to each Holder. A Holder may exercise the tag-along right by delivery of a written notice (the "Tag-Along Notice") to the Seller within 15 days of the date the Company mailed or caused to be mailed the Seller's Notice. The Tag-Along Notice shall state the number of shares of Common Stock that the Holder proposes to include in the proposed sale, If no Tag-Along Notice is received during the 15-day period referred to above, the Seller shall have the right for a 120-day period to effect the proposed sale of shares of Common Stock or Warrant, as the case may be, on terms and conditions no more favorable than those stated in the notice and in accordance with the provisions of this Section 4.5. (iii) Notwithstanding anything to the contrary, a Seller may make any of the following sales without offering the Holders the opportunity to participate: (a) sales by a Seller to any Affiliate or Permitted Transferee, provided that the proposed purchase (except a Permitted Transferee by virtue of Section 3.5(b)(iv) hereof) agrees in writing to be bound by the provisions of this Agreement; (b) sales pursuant to an effective registration statement under the Securities Act; (c) sales pursuant to an Approved Sale or a Required Sale; and (d) sales by Masco pursuant to Section 4.7. -15-

(iv) Each Investor acknowledges for itself and its transferees that CVC may grant in the future tag-along rights to other holders of Common Stock and such holders will (a) have substantially the same opportunity to participate in sales by CVC as provided to the parties hereto, and (b) be included in the calculation of the pro rata basis upon which Holders may participate in a sale. (v) The tag-along obligations of the Sellers and the rights of the Holders with respect thereto provided under this Section 4.5 shall terminate upon the earlier of (a) such time as at least 10% of the outstanding shares of Common Stock shall have been sold publicly pursuant to an effective registration statement under the Securities Act and (b) as to each Institutional Investor, the day after the date on which such Institutional Investor and its corporate Affiliates own less than 10% of the Common Stock. (vi) Notwithstanding the requirements of this Section 4.5, a Seller may sell Common Stock at any time without complying with the requirements of Section 4.5 (a)(ii) so long as the Seller deposits into escrow with an independent third party at the time of sale that amount of the consideration received in the sale equal to the "Escrow Amount." The "Escrow Amount" shall equal that amount of consideration as all the Holders would have been entitled to receive if they had the opportunity to participate in the sale on a pro rata basis, determined as if each Holder (A) delivered a Tag-Along Notice to the Seller in the time period set forth in Section 4.5(a)(ii) and (B) proposed to include all of its shares of Common Stock in the sale. No later than the date of the sale, the Seller shall notify the Company in writing of the proposed sale. Such notice (the "Escrow Notice") shall set forth the information required in the Seller's Notice, and in addition, such notice shall state the name of the escrow agent and, if the consideration (in whole or in part) for the sale was cash, then the account number of the escrow account. The Company shall promptly, and in any event within 10 days, mail or cause to be mailed the Escrow Notice to each Holder. A Holder may exercise the tag-along right by delivery to the Seller, within 15 days of the date the Company mailed or caused to be mailed the Escrow Notice, of (i) a written notice specifying the number of shares of Common Stock it proposes to sell, and (ii) the certificates for such Common Stock, with stock powers duly endorsed in blank. -16-

Promptly after the expiration of the 15th day after the Company has mailed or caused to be mailed the Escrow Notice, (A) the Seller shall purchase that number of shares of Common Stock as Seller would have been required to include in the sale had Seller complied with the provisions of Section 4.5(a)(ii), (B) all shares of Common Stock not required to be purchased by Seller shall be returned to the Holders thereof, and (C) all remaining funds and other consideration held in escrow shall be released to Seller. If Seller received consideration other than cash in its sale, Seller shall purchase the shares of Common Stock tendering by paying to the Holders non-cash consideration and cash in the same proportion as received by Seller in the sale. 4.6 Take-Along Rights. (a) If the holders of at least sixty-six percent (66%) of the Company's Common Stock then outstanding approve the sale of the Company to a person or entity (whether by merger, consolidation, sale of all or substantially all of its assets or sale of all of the outstanding capital stock) (a "Required Sale"), each Investor and Permitted Transferee will consent to, vote for and raise no objections against, waive dissenters and appraisal rights (if any) with respect to, the Required Sale of the Company, and if the Required Sale of the Company is structured as a sale of stock, each Investor and Permitted Transferee will agree to sell and will be permitted to sell all of such Investor's and Permitted Transferee's Common Stock on the terms and conditions approved by the holders of at least sixty-six percent (66%) of the Common Stock then outstanding. Each Investor and Permitted Transferee will take all necessary and desirable actions in connection with the consummation of a Required Sale of the Company. (b) The obligations of each of the Investors with respect to the Required Sale of the Company are subject to the satisfaction of the conditions that: (i) upon the consummation of the Required Sale all of the Investors and Permitted Transferees will receive the same form and amount of consideration per share of Common Stock, or if any holder of Common Stock is given an option as to the form and amount of consideration to be received, all Investors and Permitted Transferees will be given the same option; and (ii) the terms of sale shall not include any indemnification, guaranty or the similar undertaking of the Investor (other than undertakings of Management Investors in respect of continued employment) that (A) is not made or given pro rata with other Investors on the basis of share ownership or (B) could result in liability to such Investor that is in excess of the fair market - 17 -

value of the consideration to be received by such Investor in the Required Sale. 4.7 Right of First Refusal on Transfer of Common Stock owned by Masco. (a) Right of First Refusal. In the event that at any time after the occurrence of a Masco Divestiture Condition (as hereinafter defined), Masco (or its Permitted Transferees) receives a bona fide offer (a "Transfer Offer") to purchase any or all of the Common Stock (the "Transfer Shares") then owned by Masco (or its Permitted Transferees) from any person (the "Offeror") which Masco (or its Permitted Transferees) wishes to accept, then Masco (and its Permitted Transferees) shall give CVC written notice thereof ("Transfer Notice"), which Transfer Notice shall state in reasonable detail all material terms of such proposed sale or other transfer, the identity of the proposed purchaser or other transferee, the price or other consideration for which the Common Stock is proposed to be sold or transferred, and the number of shares of Common Stock to be sold or transferred, and shall also contain an irrevocable offer to sell the Transfer Shares to CVC at the price and on the terms contained in the Transfer Offer. After its receipt of the Transfer Notice, CVC (and/or its designee(s)) shall have the right and option to purchase any or all of the Transfer Shares at the price and on the terms of the Transfer Offer set forth in the Transfer Notice; provided that if CVC purchases less than all of the Transfer Shares, the Company must purchase the remaining Transfer Shares. Within thirty (30) days after receipt of the Transfer Notice, CVC shall notify Masco (or its Permitted Transferees) whether or not it wishes to purchase the Transfer Shares and, if so, indicating the number of Transfer Shares desired to be purchased. The closing of the purchase and sale shall be held at the place and date established by CVC, which in no event shall be earlier than five (5) business days or later than fifteen (15) days from the date on which CVC gives notice of its election to purchase the Transfer Shares. In the event that CVC (or its designee(s)) does not elect to purchase all such Transfer Shares, Masco (or its Permitted Transferees) shall give notice of such failure to the Company, and the Company shall thereupon have the right and option to purchase in the aggregate all, but not less than all, of the Transfer Shares not being purchased by CVC (or its designee(s)) and may give notice to Masco (or its Transferees) of such intention at any time not later than fifteen (15) days after the date on which such notice is sent by Masco (or its Permitted Transferees) to the Company. The - 18 -

Company's notice shall indicate the number of Transfer Shares that the Company desires to purchase. The closing of the purchase and sale of the Transfer Shares pursuant of any such option exercise shall be held at the principal office of the Company on a date to be established by the Company in its notice to Masco in response to the Transfer Notice, which in no event shall be earlier than five (5) business days or later than fifteen (15) days from the date of such notice. (b) Failure to Exercise Right of First Refusal. In the event neither CVC nor the Company exercises the purchase option provided for in Section 4.7(a), the, subject to the other provisions of this Agreement, for a period of sixty (60) days, the Transfer Shares may be sold or transferred by or on behalf of Masco (or its Permitted Transferees) to the transferee(s) specified in the Transfer Notice at a price not less than the price per share of Common Stock specified therein and otherwise on terms no less favorable to Masco and no more favorable to the transferees than those contained in the Transfer Notice. Any Transfer Shares not sold during such 60-day period shall be subject to the provisions of this Agreement. (c) Masco Divestiture Condition. A "Masco Divestiture Condition" shall exist if Masco concludes in good faith upon the written advice of independent outside antitrust counsel that Masco's continued investment in the Company would present an unacceptable risk of noncompliance with applicable antitrust law or impose unacceptable constraints on Masco's then current and then proposed business activities under applicable antitrust law. (d) Applicability to Other Securities. This Section 4.7 shall be equally applicable to Securities held by Masco other than Common Stock in the event such other Securities are the subject of any such Transfer Offer. ARTICLE V CORPORATE ACTIONS 5.1 Certificate of Incorporation and Bylaws. Each Investor has reviewed the Certificates of Incorporation and Bylaws of each of the Company and DRA in the forms attached hereto as Exhibits C-1, C-2, C-3 and C-4, respectively, and hereby approves and ratifies the same. - 19 -

5.2 Directors and Voting Agreements. Each Investor and Permitted Transferee agrees that it shall take, at any time and from time to time, all action necessary (including voting the Class A Common Stock owned by him, her or it, calling special meetings of stockholders and executing and delivering written consents) to ensure that the Board of Directors of the Company is composed at all times of six to nine persons as follows: Sperlich (so long as he continues to serve as Chairman of the Board of Directors of the Company); one individual designated by Masco who shall initially be E. H. Billig; two individuals designated by CVC; Gerrity (so long as he continues to serve as an officer of or a consultant to the Company); Thomas J. Snyder (so long as he continues to serve as President of the Company, and when he ceases to serve in such office, his successor in such office); and up to three independent directors, who shall be designated by CVC (to the extent permitted by applicable law as determined by CVC in its sole discretion), subject to the right of the holders of a majority of the outstanding shares of Class A Common Stock (including any shares of Class A Common Stock held by CVC) to veto the election of any such independent director, provided, that in the event that CVC concludes that it is unable to designate, or elects not to designate for any reason, one or more of such independent directors or the election of any such independent director is not approved by the holders of a majority of the outstanding shares of Class A Common Stock, such directorship(s) shall not be filled by the remaining members of the Company's Board of Directors but shall remain vacant until the election of a director designated by CVC to fill such vacancy in accordance with this Section 5.2. 5.3 Right to Remove Certain of the Company's Directors. Each of CVC and Masco, as the case may be, may request that any director designated by it be removed (with or without cause) by written notice to the other Investors, and, in any such event, each Investor shall promptly consent in writing or vote or cause to be voted all shares of Class A Common Stock now or hereafter owned or controlled by it for the removal of such person as a director. In the event any person ceases to be a director, such person shall also cease to be a member of any committee of the Board of Directors of the Company. 5.4 Right to Fill Certain Vacancies in Company's Board. In the event that a vacancy is created on the Company's Board of Directors at any time by the death, disability, retirement, resignation or removal (with or without cause) of a director designated by CVC or Masco, as the case may be, or if otherwise there shall exist or occur any vacancy on the Company's Board of - 20 -

Directors in a directorship subject to designation by CVC or Masco, as the case may be, such vacancy shall not be filled by the remaining members of the Company's Board of Directors but each Investor hereby agrees promptly to consent in writing or vote or cause to be voted all shares of Class A Common Stock now or hereafter owned or controlled by it to elect that individual designated to fill such vacancy and serve as a director, as shall be designated by CVC or Masco, as the case may be. 5.5 Directors of DRA and Voting Agreements. The Company shall take, and each of the Investors agrees that it shall cause the Company to take, at any time and from time to time, all action necessary (including voting all shares of common stock of DRA owned by the Company, calling special meetings of stockholders and executing and delivering written consents) to ensure that the Board of Directors of DRA is composed at all times of six to nine persons as follows: Sperlich (so long as he continues to serve as Chairman of the Board of Directors of the Company and DRA); one individual designated by Masco who shall initially be E. H. Billig; two individuals designated by CVC; Gerrity (so long as he continues to serve as an officer of or a consultant to the Company); Thomas J. Snyder (so long as he continues to serve as President of DRA, and when he ceases to serve in such office, his successor in such office); and up to three independent directors, who shall be designated by CVC (to the extent permitted by applicable law as determined by CVC in its sole discretion), subject to the right of the holders of a majority of the outstanding shares of Class A Common Stock (including shares of Class A Common Stock held by CVC) to vote the election of any such independent director to the Board of Directors of DRA, provided, that in the event that CVC concludes that it is unable to designate, or elects not to designate for any reason, one or more of such independent directors or the election of any such independent director is not approved by the holders of a majority of the outstanding shares of Class A Common Stock, such directorship(s) shall not be filled by the remaining members of DRA's Board of Directors but shall remain vacant until the election of a director designated by CVC to fill such vacancy in accordance with this Section 5.5. 5.6. Right to Remove Certain DRA Directors. Each of CVC and Masco, as the case may be, may request that any director designated by it to serve on the Board of Directors of DRA be removed (with or without cause) by written notice to the Company and, in such event, the Company shall promptly consent in writing or vote or cause to be voted all shares of common stock of DRA now or hereafter owned or controlled by the Company for the removal of - 21 -

such person as a director. In the event any person ceases to be a director, such person shall also cease to be a member of any committee of the Board of Directors of DRA. 5.7 Right to Fill Certain Vacancies in DRA's Board. In the event that a vacancy is created on the Board of Directors of DRA at any time by the death, disability, retirement, resignation or removal (with or without cause) of a director designated by CVC or Masco, as the case may be, or if otherwise there shall exist or occur any vacancy on the Board of Directors of DRA in the directorship subject to designation by CVC or Masco, as the case may be, such vacancy shall not be filled by the remaining members of DRA's Board of Directors but the Company shall promptly consent in writing or vote or cause to be voted all shares of common stock of DRA now or hereafter owned or controlled by it to elect that individual designated to fill such vacancy and serve as a director, as shall be designated by CVC or Masco, as the case may be. 5.8 Amendment of Certificate and Bylaws. Each Investor agrees that it shall not consent in writing or vote or cause to be voted any shares of Common Stock now or hereafter owned or controlled by it in favor of any amendment, repeal, modification, alteration or rescission of, or the adoption of any provision in the Company's Certificate of Incorporation or Bylaws inconsistent with this Agreement unless CVC consents in writing to such action or votes or cause to be voted all of the shares of Common Stock held by it in favor of such action; provided that CVC shall not consent to any amendment which would adversely affect Masco's right to designate a director to the Company's Board of Directors or remove, or fill any vacancy created with respect to, any director designated by Masco as set forth in Sections 5.2, 5.3, and 5.4 of this Agreement. The Company hereby agrees that it shall not consent in writing or vote or cause to be voted any shares of common stock of DRA held by the Company in favor of any amendment, repeal, modification, alteration or rescission of, or the adoption of any provision in DRA's Certificate of Incorporation or Bylaws inconsistent with this Agreement unless the directors of the Company designated by CVC consent in writing to, or vote in favor of, such action; provided that such directors shall not consent to any amendment which would adversely affect Masco's rights to designate a director to DRA's Board of Directors or remove, or fill any vacancy created with respect to, any director designated by Masco as set forth in Section 5.5, 5.6 and 5.7 of this Agreement. 5.9 Termination of Voting Agreements. The voting agreements in Section 5.2, 5.3, 5.4, 5.5, 5.6, 5.7 and 5.9 shall - 22 -

terminate ten (10) years from the date of this Agreement unless extended in the manner provided in Section 218 of General Corporation Law of the State of Delaware. 5.10 Officers. Each Investor approves the election of the following officers of the Company, together with such other officers as may be elected or appointed by the Company or its Board of Directors:
Name ---Harold K. Sperlich James R. Gerrity Position -------Chairman Executive Vice President Chief Financial Officer and Treasurer President and Chief Operating Officer Vice President, Controller and Secretary

Thomas J. Snyder David E. Stoll

ARTICLE VI ADDITIONAL RESTRICTIONS OF TRANSFERS OF SECURITIES HELD BY MANAGEMENT INVESTORS 6.1 Certain Definitions. The terms defined below shall have the following meanings when used in this Article VI: (a) "Company" means the Company and all other entities in which the Company from time to time owns, directly or indirectly, fifty percent (50%) or more of the stock or assets. (b) "Cause", when used in connection with the termination of a Management Investor's employment with the Company, means the Management Investor's (i) act or acts of dishonesty, moral turpitude or criminality, (ii) failure to perform his duties as an employee as reasonably determined by the Board of Directors of the Company acting in good faith after reasonable notice to such employee by the Board of Directors of the Company and, if so recommended by the Board of Directors, after such employee has not cured such failure after 30 days opportunity to do so, or (iii) willful or deliberate violations of his obligations to the Company - 23 -

(whether such obligations are designated by the Board of Directors or are set forth in an employment agreement) that result in injury to the Company. (c) "Public Offering" means a successfully completed firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act in respect of the offer and sale of shares of Common Stock for the account of the Company resulting in aggregate net proceeds to the Company and any stockholder selling shares of Common Stock in such offering of not less than $20,000,000. (d) "Securities" means any and all of the Shares and all other securities of the Company (or a successor to the Company) received on account of ownership of the Shares, including any and all securities issued in connection with any merger, consolidation, stock dividend, stock distribution, stock split, reverse stock split, stock combination, recapitalization, reclassification, subdivision, conversion or similar transaction in respect thereof. 6.2 Restrictions on Transfer. In addition to the restrictions imposed by Section 3.5, and notwithstanding anything to the contrary contained herein, no Management Investor shall effect a Transfer of any Securities prior to the fifth anniversary of the Closing Date other than (i) pursuant to Section 4.4 in connection with an Approved Sale, (ii) pursuant to Section 4.5 in connection with the exercise of "Tag-Along Rights", (iii) pursuant to Section 4.6 in connection with a Required Sale, (iv) pursuant to Section 6.3 in connection with the Purchase Option (as hereinafter defined), (v) with the consent of the Company (as evidenced by a resolution duly adopted by at least a majority of the non-employee members of the Company's Board of Directors), (vi) to a Permitted Transferee of the Management Investor in question or (vii) in connection with a Public Offering in which such Management Investor is permitted to participate. In exercising the consent and approval provided for in clause (v), the Company may employ its sole discretion in evaluating the nature of the proposed transferee and the Company may impose such conditions on Transfer as it deems appropriate in its sole discretion, including, but not limited to, requirements that the transferee be an employee of the Company or DRA and that the transferee purchase the Management Investor's Securities as a "Management Investor" subject to the restrictions of this Article VI. In the event any Transfer is authorized pursuant to clause (v) to an employee of the Company as a "Management Investor," such employee shall execute an agreement, in form and substance satisfactory to the Company, pursuant to which - 24 -

such employee shall agree to be bound by the terms and conditions of this Agreement, and such other provisions as the Company may determine, and upon such execution such employee shall be entitled to the benefit of such provisions hereof and such other provisions as the Company determines and are set forth in such agreement. Any purported Transfer in violation of this Agreement shall be null and void and of no force and effect and the purported transferees shall have not rights or privileges in or with respect to the Company. Notwithstanding the foregoing provisions, each Management Investor agrees that he will not effect a Transfer of any Securities prior to the lapse of such period of time following acquisition thereof as may be required to comply with applicable state securities laws. For the purposes of this Agreement, the "Permitted Transferees" of a Management Investor shall be (1) the executors, administrators, heirs and distributees of the Management Investor or her or his transferees to whom the Common Stock are Transferred by will or the laws of descent and distribution on account of death, (2) the Management Investor's spouse or children or grandchildren (in each case, natural or adopted) and (3) a trust the beneficiaries of which, a corporation the stockholders and directors of which, or a partnership the limited and general partners of which include only the Management Investor, her or his spouse or her or his children or grandchildren (in each case, natural or adopted); provided, that, as a condition to Transfer to any Permitted Transferee such permitted Transferee shall agree, in writing and in form and substance reasonably satisfactory to the Company, to become bound, and thereby shall become bound, by all the terms of this Agreement applicable to the Management Investor transferring such Securities. The Termination Date (as hereinafter defined) for a permitted Transferee shall be the Termination Date with respect to the Management Investor who first acquired the Common Stock held by such Permitted Transferee pursuant to this Agreement. 6.3 Purchase Option. (a) General Terms. In the event that on or prior to the fifth anniversary of the Closing Date, any Management Investor shall cease to be employed by the Company or DRA for any reason (including, but not limited to, death, temporary or permanent disability, retirement at age 65 or more under the Company's or DRA's normal retirement policies, resignation or termination by the Company or DRA, as the case may be, with or without Cause), other than by reason of a leave of absence approved by the Company or DRA, as the case may be such Management Investor (or his heirs, - 25 -

executors, administrators, transferees, successors or assigns) shall give prompt notice to the Company of such termination (except in the case of termination by the Company with or without Cause), and the Company, or one or more designee(s) selected by a majority of the members of the Board of Directors, shall have the right and option at any time within 90 days after the later of the effective date of such termination of employment (the "Termination Date") or the date of the Company's receipt of the aforesaid notice, to purchase from such Management Investor, or his heirs, executors, administrators, transferees, successors or assigns, as the case may be, any or all of the Securities then owned by such Management Investor (and his Permitted Transferees) at a purchase price equal to the Option Purchase Price (as hereinafter defined). The Company or its designee(s) shall give notice to the terminated Management Investor (or his heirs, executors, administrators, transferees, successors or assigns) of its intention to purchase Securities at any time not later than 90 days after the Termination Date. (The right of the Company and its designee(s) set forth in this Section 6.3 to purchase a terminated Management Investor's Securities is hereinafter referred to as the "Purchase Option"). As a condition to purchasing a Management Investor's Securities pursuant to this Section 6.3, any designee(s) selected by the Board of Directors must agree in writing to assume the Company's obligations under Section 6.3(a)(iii). A designee's agreement to assume such obligation will relieve the Company of its obligations under Section 6.3(a)(iii) with regard to the particular terminated Management Investor and such Management Investor shall thereafter have no recourse against the Company under Section 6.3(a)(iii). (i) Exercise of Purchase Option. The Purchase Option shall be exercised by written notice to the terminated Management Investor (or his heirs, executors, administrators, transferees, successors or assigns) signed by an officer of the Company on behalf of the Company or by its designee(s), as the case may be. Such notice shall set forth the number of shares of Common Stock desired to be purchased and shall set forth a time and place of closing which shall be no earlier than 10 days and no later than 60 days after the date such notice is sent. At such closing, the seller shall deliver the certificates evidencing the number of shares of Common Stock to be purchased by the Company and/or its designee(s), accompanied by stock powers duly endorsed in blank or duly executed instruments of transfer, and any other documents that are necessary to transfer to the Company and/or its designee(s) good title to such of the Securities to be transferred, free and clear of all pledges, security interests, liens, charges, encumbrances, equities, claims and options of whatever nature other - 26 -

than those imposed under this Agreement, and concurrently with such delivery, the Company and/or its designee(s) shall deliver to the seller the full amount of the Option Purchase Price for such Securities in cash by certified or bank cashier's check. (ii) Option Purchase Price. Subject to Section 6.3(a)(iv) below, if the Management Investor shall be terminated by the Company without Cause or shall cease to be employed by the Company or DRA by reason of death, normal retirement at age 65 or more under the Company's or DRA's normal retirement policies, or temporary or permanent disability, the "Option Purchase Price" for the Common Stock to be purchased from such Management Investor pursuant to the Purchase Option (such number of shares of Common Stock being the "Purchase Number") shall equal the price calculated as set forth in the table below opposite the applicable Termination Date of such Management Investor:
If the Termination Date Occurs: -----------------------------On or prior to the first anniversary of the Closing Date After the first anniversary of the Closing Date, and on or prior to the second anniversary of the Closing Date Option Purchase Price -------------Adjusted Cost Price multiplied by the Purchase Number Adjusted Cost Price multiplied by 80% of the Purchase Number, plus Adjusted Book Value Price multiplied by 20% of the Purchase Number Adjusted Cost Price multiplied by 60% of the Purchase Number, plus Adjusted Book Value Price multiplied by 40% of the Purchase Number Adjusted Cost Price multiplied by 40% of the Purchase Number, plus Adjusted Book Value Price multiplied by 60% of the Purchase Number

After the second anniversary of of the Closing Date, and on or prior to the third anniversary of the Closing Date After the third anniversary of the Closing Date, and on or prior to the fourth anniversary of the Closing Date

- 27 -

After the fourth anniversary of the Closing Date and on or prior to the fifth anniversary of the Closing Date

Adjusted Cost Price multiplied by 20% of the Purchase Number, plus Adjusted Book Value Price multiplied by 80% of the Purchase Number

Notwithstanding anything to the contrary contained herein, (A) if the Management Investor shall cease to be employed by the Company or DRA for any reason other than those set forth in the first sentence of this Section 6.3(a)(ii) (including, but not limited to, termination for Cause), the Option Purchase Price for all shares of Company Stock to be purchased from the Management Investor (and his Permitted Transferees) pursuant to the Purchase Option shall equal the Adjusted Cost Price multiplied by the Purchase Number; and (B) in connection with the exercise of any Purchase Option pursuant to Section 6.3, the Company may deduct from the Option Purchase Price paid to any Management Investor the aggregate amount of the outstanding principal and accrued but unpaid interest due on any Promissory Note of such Management Investor to the Company. As used herein: (A) "Adjusted Cost Price" for each share of Common Stock means the original purchase price per share for the Management Investors Common Stock as set forth in Section 1.1 (including any shares of Common Stock which have been converted into other shares of capital stock of the Company, and adjusted for any stock dividend payable upon, or subdivision or combination of, the Common Stock); and (B) "Adjusted Book Value Price" for each share means the consolidated net worth of the Company per common share (adjusted to reflect the pro forma exercise in full of any dilutive securities, regardless of whether such securities are exercisable at the time or would otherwise satisfy any requirements under generally accepted accounting principles as they relate to the determination of "dilutive securities") reflected in the Company's consolidated financial statements as of the end of the fiscal quarter immediately preceding the Termination Date (as hereinafter defined); provided, however, that in reflecting the pro forma exercise of dilutive securities no amount shall be added to the consolidated net worth of the Company on account of the assumed exercise of dilutive securities that is in excess, on a per share basis, of the consolidated net worth per share of the Company - 28 -

calculated without regard to the exercise of any dilutive securities; and provided, further, that if any of the Common Stock is traded on a national securities exchange or reported on the National Association of Securities Dealers, Inc. Automated Quotation System, then the "Adjusted Book Value Price" shall equal for each Common Stock the closing price per common share on such exchange or as so reported on the Management Investor's Termination Date. (iii) Adjustments to Options Purchase Price. If the Company its designee exercises the Purchase Option with respect to any or all of the Common Stock of any Management Investor whose employment with the Company was terminated by the Company without Cause (the "Called Shares"), and if within twelve months after the closing pursuant to such exercise of the Purchase Option by the Company or its designee: (A) the Company is merged into, consolidated with or otherwise combined with or acquired by another person or entity, or there is a liquidation of the Company, or there is a Public Offering (a "Subsequent Offering") of the Company's Common Stock pursuant to an effective registration statement under the Securities Act in which other Management Investors participate as selling stockholders (other than (1) a Special Registration Statement (as hereinafter defined) or (2) a registration statement relating to a Unit Offering (as hereinafter defined)), and (B) the per share consideration received by the stockholders of the Company in such transaction, or the per share net proceeds received by the Management Investors for the Company's Common Stock in the Subsequent Offering, as the case may be (in each case after being adjusted downward to reflect what the per share consideration or per share net offering proceeds, as the case may be, would have been had the Shares of such termination Management Investor purchased by the Company or its designee pursuant to the Purchase Option been outstanding on the date of the closing of such transaction or Subsequent Offering) exceeds the Adjusted Book Value Price used in calculating the Option Purchase Price pursuant to the exercise of the Purchase Option, - 29 -

then such Management Investor shall be entitled to receive from the Company or its designee an amount per share equal to such excess multiplied by the applicable Adjusted Book Value Price Percentage (as hereinafter defined) within 30 days after the closing of any such transaction or Subsequent Offering. As used herein: "Special Registration Statement" means (i) a registration statement on Forms S-8 or S-4 or any similar or successor form or any other registration statement relating to an exchange offer or an offering of securities solely to the Company's employees or security holders or (ii) a registration statement registering a Unit Offering; and "Unit Offering" shall mean a Public Offering of a combination of debt and equity securities of the Company in which (i) not more than 10% of the gross proceeds received from the sale of such securities is attributed to such equity securities, and (ii) after giving effect to such offering, the Company does not have a class of equity securities required to be registered under the Securities Exchange Act of 1934, as amended. (iv) Sale in Public Offering. Shares sold in a Public Offering will be sold free of the restrictions contained in this Article VI, but this Article VI shall continue to apply in accordance with its terms to all Common Stock not sold in such offering. If less than all of a management Investor's shares of Common Stock are sold in such an offering, for purposes of any subsequent calculation hereunder of the Option Purchase Price, the Option Purchase Price shall equal: (a) the Adjusted Cost Price multiplied by the product of the Adjusted Cost Price Percentage and the Adjusted Purchase Number (as hereinafter defined), plus (b) the Adjusted Book Value Price multiplied by the product of the Adjusted Book Value Price Percentage and the Adjusted Purchase Number, less (c) the product of the Publicly-Sold stock (as hereinafter defined) and the Adjusted Book Value Price, where: (w) "Publicly-Sold Stock" means the total number of shares of Common Stock previously sold by the respective Management Investor in a public offering, (x) "Adjusted Purchase Number" means the sum of the Purchase Number and the Publicly-Sold Stock, (y) "Adjusted Book Value Price Percentage" means 20% multiplied by the number of full years elapsed since the Closing Date, and (z) "Adjusted Cost Price Percentage" means 100% minus the Adjusted Book Value Price Percentage. Notwithstanding the foregoing, the Option Purchase Price at all times shall equal -30-

or exceed the product of the Adjusted Cost Price and the Purchase Number. (b) Company's Right of First Refusal. In the event that, on or prior to the fifth anniversary of the Closing Date, (i) a Management Investor is no longer employed by the Company; (ii) the Company or its designee has declined to exercise the Purchase Option with respect to any of such Management Investor's Common Stock; and (iii) the Management Investor thereafter proposes to sell any or all of such Common Stock to a third party in a bona fide transaction, the Management Investor may not Transfer such Common Stock without first offering to sell such Common Stock to the Company pursuant to this Section 6.3(b). The Management Investor shall deliver a written notice (a "Sale Notice") to the Company describing in reasonable detail the Securities being offered, the name of the offeree, the purchase price requested and all other material terms of the proposed Transfer. Upon receipt of the Sale Notice, the Company, or a designee selected by a majority of the non-employee members of the Board of Directors of the Company, shall have the right and option to purchase all or any portion of the Securities being offered at the price and on the terms of the proposed Transfer set forth in the Sale Notice. Within 30 days after receipt of the Sale Notice, the Company shall notify such Management Investor whether or not it wishes to purchase any or all of the offered Securities. If the Company elects to purchase any of the offered Securities, the closing of the purchase and sale of such Securities shall be held at the place and on the date established by the Company in its notice to the Management Investor in response to the Sale Notice, which in no event shall be less than 10 or more than 60 days from the date of such notice. In the event that the Company does not elect to purchase all the offered Securities, the Management Investor may, subject to the other provisions of this Agreement, Transfer the remaining offered Securities to the offeree specified in the Sale Notice at a price no less than the price specified in the Sale Notice and on other terms no more favorable to the transferee(s) thereof than specified in the Sale Notice during the 180-day period immediately following the last date on which the Company could have elected to purchase the offered Securities. Any such Securities not transferred within such 180-day period will be subject to the provisions of this Section 6.3(b) upon subsequent Transfer. - 31 -

6.4 Involuntary Transfers. In the event that the Securities owned by any Management Investor shall be subject to sale or other Transfer (the date of such sale or transfer shall hereinafter be referred to as the "Transfer Date") prior to the fifth anniversary of the Closing Date by reason of (i) bankruptcy or insolvency proceedings, whether voluntary or involuntary, or (ii) distraint, levy, executive or other involuntary Transfer, then such Management Investor shall give the Company written notice thereof promptly upon the occurrence of such event stating the terms of such proposed Transfer, the identity of the proposed transferee, the price or other consideration, if readily determinable, for which the Securities are proposed to be transferred, and the number of shares of Common Stock to be transferred. After its receipt of such notice or, failing such receipt, after the Company otherwise obtains actual knowledge of such a proposed Transfer, the Company, or a designee selected by a majority of the non-employee members of the Board of Directors of the Company, shall have the right and option to purchase all, but not less than all of such Securities which right shall be exercised by written notice given by the Company to such proposed transferor within 60 days following the Company's receipt of such notice or, failing such receipt, the Company's obtaining actual knowledge of such proposed Transfer. Any purchase pursuant to this Section 6.4 shall be at the price and on the terms applicable to such proposed Transfer. If the nature of the event giving rise to such involuntary Transfer is such that no readily determinable consideration is to be paid for the Transfer of the Securities, the price to be paid by the Company shall be the Option Purchase Price that would have been applicable hereunder had the Management Investor incurred a Termination Date as of the date of such proposed Transfer for the Securities. The closing of the purchase and sale of Securities shall be held at the place and the date to be established by the Company, which in no event shall be less than 10 or more than 60 days from the date on which the Company gives notice of its election to purchase the Securities. At such closing, the Management Investor shall deliver the certificates evidencing the number of shares of Common Stock to be purchased by the Company, accompanied by stock powers duly endorsed in blank or duly executed instruments of transfer, and any other documents that are necessary to transfer to the Company good title to such of the securities to be transferred, free and clear of all pledges, security interests, liens, charges, encumbrances, equities, claims and options of whatever nature other than those imposed under this Agreement, and concurrently with such delivery, the Company shall deliver to the Management Investor the full amount of the purchase - 32 -

price for such Securities in cash by certified or bank cashier's check. 6.5 Proceeds Upon Sale of the Company. Each Management Investor agrees, subject solely to the condition set forth in the last sentence of this Section 6.5, that a portion of the proceeds of any sale of Common Stock pursuant to Article IV equal to (x) multiplied by (y) (such portion being the "Escrow Amount"), where (x) equals (i) the aggregate of the after-tax total amount of such proceeds and all after-tax proceeds received by such Management Investor upon sales of Shares pursuant to Article IV less (ii) (A) the Adjusted Cost Price multiplied by all Shares owned by such Management Investor and (B) the aggregate amount of the outstanding principal and accrued but unpaid interest due on any Promissory Note of such Management Investor to the Company for such shares of Common Stock, and (y) 100% on or prior to the first anniversary of the Closing Date and thereafter the then applicable Adjusted Cost Price Percentage, shall not be paid to such Management Investor and shall instead be deposited into a trust for the exclusive benefit of the Management Investors, unless and until there is an event of forfeiture related to such Management Investor (as hereinafter defined), in which case the funds subject to such forfeiture shall be paid to the Company. Such trust shall be established in accordance with such agreements and instruments as shall be reasonably required by the Board of Directors of the Company and shall permit the trustee thereunder to invest the funds of such trust in such manner, consistent with such trustee's fiduciary obligations, as such trustee shall reasonably determine. The trust agreement shall provide that the assets of any successor to the Company. Upon the occurrence of each date on which a subsequent adjustment of the Adjusted Cost Price Percentage would have occurred, the trustee shall distribute to each Management Investor the amount which thereupon becomes distributable based on such reduced percentage; provided, however, that in the event that the employment of the Management Investor is terminated by the Company or its successor without Cause or by reason of death, disability or retirement at age 65 or more under the Company's or DRA's normal retirement policies, the trustee shall promptly pay all remaining funds held for the account of such Management Investor, together with interest accrued thereon, to such Management Investor, or to his heirs, administrators, or estate. In the event that the Management Investor shall cease to be employed by the Company or its successor or a subsidiary thereof (other than by reason of an approved leave of absence) for any - 33 -

reason other than death, disability or retirement at age 65 or more under the Company's or DRA's normal retirement policies or termination by the Company or a subsidiary thereof without Cause, all interest of the Management Investor in such funds shall immediately terminate. A Management Investor shall not be bound by the provisions of this Section 6.5 unless the purchaser or purchasers agree in writing to continue such Management Investor's employment through the period ending on the fifth anniversary of the Closing Date (or, if earlier, on the date which is eighteen months after the closing of such sale) on terms and conditions at least as favorable, in the aggregate, to the Management Investor as the terms and conditions of his employment prior to the sale. 6.6 Purchaser Representative. If the Company or any Investor enters into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities and Exchange Commission under the Securities Act may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), each Management Investor will, at the request of the Company, appoint a purchaser representative (as such term is defined in Rule 501 (h) promulgated by the Securities and Exchange Commission under the Securities Act) reasonably acceptable to the Company. If any Management Investor appoints the purchaser representative designated by the Company, the Company will pay the fees of such purchaser representative, but if any Management Investor declines to appoint the purchaser representative designated by the Company such Management Investor will appoint another purchaser representative (reasonably acceptable to the Company), and such Management Investor will be responsible for the fees of the purchaser representative so appointed. 6.7 Section 83 (b) Elections. Each Management Investor shall make the election to include in his income, in the year he purchases the Common Stock, the excess, if any, of the fair market value of the Common Stock at that time over $2.00 per share, pursuant to Section 83 (b) of the Internal Revenue Code of 1986, as amended, in the manner and within the time period specified by the regulations promulgated thereunder. - 34 -

ARTICLE VII REGISTRATION RIGHTS The Investors shall have registration rights with respect to the Shares as set forth in the Registration Rights Agreement attached hereto as Exhibit D. Each of the Investors agree not to effect any public sale or distribution of any securities of the Company during the periods specified in the Registration Rights Agreement, except as permitted by the Registration Rights Agreement, and each such Investor agrees to be bound by the rights of priority to participate in offerings as set forth therein. ARTICLE VIII MISCELLANEOUS 8.1 Amendment and Modification. This Agreement may be amended or modified, or any provision hereof may be waived, provided that such amendment or waiver is set forth in a writing executed by (i) the Company, (ii) CVC (so long as CVC and its Affiliates own in the aggregate at least 25% of the outstanding Common Stock on a fully diluted basis) and (iii) the holders of a majority of the outstanding Common Stock on a fully diluted basis (including Shares owned by CVC and its Affiliates); provided, however that the provisions of this Agreement which are for the express benefit of Masco cannot be amended, modified or waived, unless Masco also executes such amendment or waiver. No course of dealing between or among any persons having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement of any rights or obligations of any person under or by reason of this Agreement. 8.2 Survival of Representations and Warranties. All representations, warranties, covenants and agreements set forth in this Agreement will survive the execution and delivery of this Agreement and the Closing Date and the consummation of the transactions contemplated hereby, regardless of any investigation made by an Investor or on its behalf. 8.3 Successors and Assigns; Entire Agreement. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns and executors, administrators and heirs. This Agreement sets forth the entire agreement and - 35 -

understanding among the parties as to the subject matter hereof and merges and supersedes all prior discussions and understandings of any and every nature among them. 8.4 Separability. In the event that any provision of this Agreement or the application of any provision hereof is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall not be affected except to the extent necessary to delete such illegal, invalid or unenforceable provision unless that provision held invalid shall substantially impair the benefits of the remaining portions of this Agreement. 8.5 Notices. All notices provided for or permitted hereunder shall be made in writing by hand-delivery, registered or certified first-class mail, telex, telecopier or air courier guaranteeing overnight delivery to the other party at the following addresses (or at such other address as shall be given in writing by any party to the others): If to the Company to: DR International, Inc. 275 Rex Boulevard Auburn Hills, MI 48326 Attention: Harold K. Sperlich with required copies to: If to CVC, to: Citicorp Venture Capital Ltd. 399 Park Avenue Sixth Floor New York, New York 10043 Attention: Richard M. Cashin, Jr., Vice President - 36 -

with a required copy to: Dechert Price & Rhoads 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, PA 19103 Attention: G. Daniel O'Donnell, Esquire If to WEP, to: World Equity Partners, L.P. 399 Park Avenue New York, NY 10043 Attention: Byron L. Knief with a required copy to: Kirkland & Ellis 153 East 53rd Street New York, NY 10022-4675 Attention: Kirk A. Radke, Esquire If to Masco, to: MascoTech Automotive Systems Group, Inc. 275 Rex Boulevard Auburn Hills, MI 48326 Attention: E. H. Billig with a required copy to: Masco Corporation 21001 Van Borne Road Taylor, MI 48180 Attention: General Counsel If to Sperlich, to: Harold K. Sperlich 3333 West Shore Drive Orchard Lake, MI 48324 - 37 -

If to Gerrity, to: James R. Gerrity 9938 E. Bayview Drive Scottsdale, AZ 85258 If to the Management Investors or any of them, to their addresses as listed in the books of the Company. All such notices shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. 8.6 Governing Law. The validity, performance, construction and effect of this Agreement shall be governed by and construed in accordance with the internal law of Delaware, without giving effect to principles of conflicts of law. 8.7 Headings. The headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement, nor shall they affect their meaning, construction or effect. 8.8 Counterparts. This Agreement may be executed in two or more counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same instrument. 8.9 Further Assurances. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby. 8.10 Termination. Unless sooner terminated in accordance with its terms, this Agreement shall terminate on the tenth anniversary of the Closing Date. 8.11 Remedies. In the event of a breach or a threatened breach by any party to this Agreement of its obligations under this Agreement, any party injured or to be injured by such breach, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific - 38 -

performance of its rights under this Agreement. The parties agree that the provisions of this Agreement shall be specifically enforceable, it being agreed by the parties that the remedy at law, including monetary damages, for breach of such provision will be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. 8.12 Party No Longer Owning Securities. If a party hereto ceases to own any Securities, such party will no longer be deemed to be an Investor or Management Investor for purposes of this Agreement. 8.13 No Effect on Employment. Nothing herein contained shall confer on any Management Investor the right to remain in the employ of the Company or any of its subsidiaries or Affiliates. 8.14 Pronouns. Whenever the context may require, any pronouns used herein shall be deemed also to include the corresponding neuter, masculine and feminine forms. - 39 -

IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase and Holders Agreement the day and year first above written. DR INTERNATIONAL, INC.
By: /s/ James R. Gerrity --------------------------------Its: Executive V.P. --------------------------------

CITICORP VENTURE CAPITAL LTD. By: Its: WORLD EQUITY PARTNERS, L.P. By: Its: MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC. By: Its:

Harold K. Sperlich
/s/ James R. Gerrity -----------------------------------James R. Gerrity

IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase and Holders Agreement the day and year first above written. DR INTERNATIONAL, INC. By: Its: CITICORP VENTURE CAPITAL LTD.
By: /s/ [SIGNATURE APPEARS HERE] --------------------------------Its: MO --------------------------------

WORLD EQUITY PARTNERS, L.P. By: Its: MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC. By: Its:

Harold K. Sperlich
/s/ -----------------------------------James R. Gerrity

IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase and Holders Agreement the day and year first above written. DR INTERNATIONAL, INC. By: Its: CITICORP VENTURE CAPITAL LTD. By: Its: WORLD EQUITY PARTNERS, L.P.
By: /s/ [SIGNATURE APPEARS HERE] --------------------------------Its: Sr. Vice President --------------------------------

MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC. By: Its:

Harold K. Sperlich
/s/ -----------------------------------James R. Gerrity

IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase and Holders Agreement the day and year first above written. DR INTERNATIONAL, INC. By: Its: CITICORP VENTURE CAPITAL LTD. By: Its: WORLD EQUITY PARTNERS, L.P. By: Its: MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC.
By: /s/ [SIGNATURE APPEARS HERE] --------------------------------Its: Vice President --------------------------------

Harold K. Sperlich
/s/ -----------------------------------James R. Gerrity

IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase and Holders Agreement the day and year first above written. DR INTERNATIONAL, INC. By: Its: CITICORP VENTURE CAPITAL LTD. By: Its: WORLD EQUITY PARTNERS, L.P. By: Its: MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC. By: Its:
/s/ Harold K. Sperlich -----------------------------------Harold K. Sperlich /s/ -----------------------------------James R. Gerrity

MANAGEMENT INVESTORS:
/s/ Thomas J. Snyder ----------------------------------Thomas J. Snyder 984 North 500 West Anderson, IN 46011

Social Security Number: 313 44 0970 Tel. 317 642 2996 (H) 317 646 2939 (O)

Schedule I Management Investors Thomas J. Synder

EXHIBIT A DR INTERNATIONAL, INC. (ON A FULLY DILUTED BASIS AS OF JULY 31, 1994)
Total Shares of Percentage Shares of Percentage Shares of Common of Total Shares Class A of Class A Class B Stock of Common Common Common Common Name Outstanding Stock Stock Stock Stock -----------------------------------------------------------------------------------------------------------------------------------Citicorp Venture Capital, Ltd. 550,000 55.0% 432,350 49.0% 117,650 MascoTech Automotive Systems Group, Inc. World Equity Partners, L.P. * Harold K. Sperlich James R. Gerrity Thomas J. Snyder Management Investors ** TOTAL 150,000 100,000 50,000 15,000 25,000 110,000 ----------1,000,000 15.0% 10.0% 5.0% 1.5% 2.5% 11.0% ----------100.00% 150,000 100,000 50,000 15,000 25,000 110,000 ----------882,350 17.0% 11.3% 5.7% 1.7% 2.8% 12.5% ----------100.0% ----------------117,650

Principal Percentage Amount of Purchase Purchase Price of Class B 11% Junior Price of of Junior Total Common Subordinated Common Subordinated Purchase Name Stock Notes Stock Notes Price Paid -----------------------------------------------------------------------------------------------------------------------------------Citicorp Venture Capital, Ltd. 100.0% $14,300,000 $1,100,000 $14,300,000 $15,400,000 MascoTech Automotive Systems Group, Inc. World Equity Partners, L.P. * Harold K. Sperlich James R. Gerrity Thomas J. Snyder Management Investors ** TOTAL ----------------100.0% $ 3,900,000 ---------------$18,200,000 300,000 -100,000 30,000 50,000 *** 220,000 ----------$1,800,000 3,900,000 ---------------$18,200,000 4,200,000 -100,000 30,000 50,000 220,000 ----------$20,000,000

* Warrant issued to World Equity Partners, L.P., pursuant to Warrant Agreement dated July 29, 1994. ** Shares to be held by Management Investors will be purchased following the Closing. *** Purchase price paid as follows: $250 in cash and a promissory note in the principle amount of $49,750

Exhibit B PROMISSORY NOTE $ July __, 1994 FOR VALUE RECEIVE, _______________________ ("Borrower"), hereby promises to pay to the order of DR INTERNATIONAL, INC., a Delaware corporation ("Holder"), the principal sum of _____________________ DOLLARS ($_________) (the "Principal Amount"), on ___________________, 1999, together with interest accrued thereon the date of payment. The Borrower shall pay to the holder hereof interest from the date hereof on the outstanding principal balance hereunder at the rate of nine and one quarter percent (9.25%) per annum. Interest shall be calculated on the basis of a 365-day year for the actual number of days elapsed and shall be payable on the last day of each Yearly Period (as hereinafter defined) during the term hereof. To the extent that interest for any Yearly Period or portion thereof is not paid on the last day of such Yearly Period, such interest shall become part of the Principal Amount effective such last day of such Yearly Period. As used herein, the term "Yearly Period" means each successive twelve-month period, beginning on the date hereof and ending on the first anniversary of the date hereof and continuing to each successive anniversary thereafter, during which the Principal Amount remains outstanding. Payment shall be made at such place as the holder may designate. All payments hereunder shall be made in immediately available funds in lawful money of the United States of America. This Note represents a full recourse obligation of the Borrower. All or any portion of the Principal Amount evidenced by this Note may be prepaid at any time without premium or penalty. Except as set forth in the next sentence, the obligations of the Borrower and the rights of the Holder under this Note shall be absolute and shall not be subject to any counterclaim, set-off, deduction or defense. Notwithstanding anything to the contrary contained herein, Holder shall be entitled to apply twenty-five percent (25%) of the pre-tax amount of any and all bonus payments awarded by the Company to the Borrower (other than any bonus payment awarded on the Closing Date under the Asset Purchase Agreement, dated July 13, 1994, among General Motors Corporation, the Company and DRA, Inc.) to

reduce the aggregate amount of the outstanding principal accrued and unpaid interest thereon due under this Note. The Borrower hereby waives presentment, notice of dishonor and protest in respect hereof. In the event of default under this Note, the Holder shall have all rights and remedies provided at law and in equity. All costs and expenses of collection, including attorneys fees shall be added to and become part of the Principal Amount of this Note and shall be collectible as part of such Principal Amount. No interest or other amount shall be payable in excess of the maximum permissible rate under applicable law and any interest or other amount which is paid in excess of such maximum rate shall be deemed to be a payment of principal hereunder. This Note may not be changed, modified or terminated orally, but only by an agreement in writing signed by the party sought to be charged. This Note shall be governed by, and construed in accordance with, the laws of the State of [Indiana] [Mississippi], without giving effect to the principles of conflict of laws thereof. If any term or provision of the Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby. This Note shall be binding upon the successors and assigns of the Borrower and shall inure to the benefit of the Holder and its successors and assigns. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Securities Purchase and Holders Agreement, dated July 29, 1994, among Holder, Citicorp Venture Capital Ltd., World Equity Partners, L.P., Mascotech Automotive Systems, Group, Inc. and the other signatories thereto. [Management Investor]

Exhibit 10.9 REGISTRATION RIGHTS AGREEMENT FOR COMMON STOCK Dated July 29, 1994 by and among DR INTERNATIONAL, INC., CITICORP VENTURE CAPITAL LTD., WORLD EQUITY PARTNERS, L.P., MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC., HAROLD K. SPERLICH, JAMES R. GERRITY and THE MANAGEMENT INVESTORS LISTED ON SCHEDULE A

REGISTRATION RIGHTS AGREEMENT FOR COMMON STOCK This Registration Rights Agreement for Common Stock (the "Agreement") is made and entered into July 29, 1994, by and among DR International, Inc., a Delaware corporation (the "Company"), Citicorp Venture Capital Ltd., a New York corporation ("CVC"), World Equity Partners, L.P., a Delaware limited partnership ("WEP"), MascoTech Automotive Systems Group, Inc., a Michigan corporation ("Masco"), Harold K. Sperlich ("Sperlich"), James R. Gerrity ("Gerrity") and the management investors (the "Management Investors") listed on Schedule A hereto. CVC, WEP, Masco, Sperlich, Gerrity and the Management Investors are sometimes referred to herein collectively as the "Investors" and each individually as the "Investor". This Agreement is made pursuant to the Securities Purchase and Holders Agreement (as hereinafter defined). In order to induce the Investors to enter into the Securities Purchase and Holders Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. The parties hereby agree as follows: 1. Definitions As used in this Agreement, the following capitalized terms shall have the following meanings: "Commission" means the Securities and Exchange Commission. "Closing Date" means the date of this Agreement. "Common Stock" means the Class A Common Stock, par value $.O1 per share, of the Company, including shares of Class A Common Stock issuable upon the conversion of shares of Class B Common Stock, par value $.01 per share, and shares of Class A Common Stock issuable upon the exercise of the Warrant, and as adjusted for any stock dividend or distribution payable thereon or stock split, reverse stock split, recapitalization, reclassification, reorganization, exchange, subdivision or combination thereof. "Demand Registration" has the meaning set forth is Section 4(a) of this Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.

"Person" means an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" means the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus. "Purchase Agreement" means the Asset Purchase Agreement dated July 13, 1994 among General Motors Corporation, the Company and DRA, Inc. "Registration Expenses" means the costs and expenses of all registrations and qualifications under the Securities Act, and of all other actions the Company is required to take in order to effect the registration of Registrable Securities under the Securities Act pursuant to this Agreement (including all federal and state registration and filing fees, printing expenses, fees and disbursements of counsel for the Company and the fees and expenses of the Company's independent public accountants (including the expenses of any special audit and "cold comfort" letters required by or incident to such registration)) other than the costs and expenses of any Investors whose Registrable Securities are to be registered pursuant to this Agreement comprising underwriters' commissions, brokerage fees, transfer taxes or the fees and expenses of any accountants or other representatives retained by any Investor. "Registration Statement" means any registration statement of the Company which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement. "Registrable Securities" has the meaning set forth in Section 2 of this Agreement. "Securities Act" means the Securities Act of 1933, as amended from time to time. -2-

"Securities Purchase and Holders Agreement" means the Securities Purchase and Holders Agreement dated July 29, 1994 among the Company, CVC, WEP, Masco, Gerrity, Sperlich and the other signatories thereto. "Special Registration Statement" means (i) a registration statement on Forms S-8 or S-4 or any similar or successor form or any other registration statement relating to an exchange offer or an offering of securities solely to the Company's employees or security holders or (ii) a registration statement registering a Unit Offering. "Unit Offering" means a public offering of a combination of debt and equity securities of the Company in which (i) not more than 20% of the gross proceeds received for the sale of such securities is attributed to such equity securities, and (ii) after giving effect to such offering, the Company does not have a class of equity securities required to be registered under the Exchange Act. "underwritten registration or underwritten offering" means a registration in which securities of the Company are sold to an underwriter for reoffering to the public. "Warrant" means the warrant exercisable for shares of Class A Common Stock of the Company issued pursuant to the Warrant Agreement dated the date hereof between WEP and the Company. 2. Registrable Securities. The securities entitled to the benefits of this Agreement are the Registrable Securities. As used herein, "Registrable Securities" means the shares of Common Stock that are issued (or issuable) and outstanding on the date hereof and the shares of Common Stock that become issued (or issuable) and outstanding after the date hereof; provided, however, that shares of Common Stock issued to Management Investors shall be deemed to be Registrable Securities only to the extent such shares are eligible for repurchase by the Company at the Adjusted Book Value Price (as defined in the Securities Purchase and Holders Agreement) pursuant to Section 6.3 of the Securities Purchase and Holders Agreement; and provided, further, that each such share of Common Stock shall cease to be a Registrable Security when (i) it has been effectively registered under the Securities Act and disposed of in accordance with the registration statement covering it; (ii) it is distributed to the public pursuant to Rule 144 (or any similar provisions then in force) under the Securities Act; or (iii) it has otherwise been transferred and a new certificate or other evidence of ownership for it not bearing a legend as set -3-

forth in Section 3.2 of the Securities Purchase and Holders Agreement (or other legend of similar import) and not subject to any stop transfer order has been delivered by or on behalf of the Company and no other restriction on transfer exists under the Securities Act. 3. Incidental Registration. (a) Right to Include Common Stock. If the Company at any time proposes to register any of its Common Stock under the Securities Act (other than on a Special Registration Statement), whether or not for sale for its own account, it will each such time give at least 30 days prior written notice to all holders of Registrable Securities of its intention to file a registration statement under the Securities Act and of such holders' rights under this Section 3. Upon the written request of any such holders of Registrable Securities made prior to the proposed filing date (which request shall specify the intended method of disposition thereof), the Company will effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the holders thereof (an "Incidental Registration"), to the extent required to permit the public disposition (in accordance with such intended methods thereof) of the Registrable Securities to be so registered; provided, that (i) if, any time after giving written notice of its intention to register shares of Common Stock and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register the Company's Common Stock, the Company shall give written notice of such determination to each holder of Registrable Securities and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith); (ii) if a registration requested pursuant to this Section 3 shall involve an underwritten public offering, any holder of Registrable Securities requesting to be included in such registration may elect, in writing at least 30 days prior to the effective date of the registration statement filed in connection with such registration, not to register such securities in connection with such registration; and (iii) if, at any time after the 180-day or shorter period specified in Section 3 (b), the sale of the securities has not been completed, the Company may withdraw from the registration on a pro rata basis (based on the number of Registrable Securities requested by each holder of Registrable Securities to be so registered) the Registrable Securities which the Company has been requested to register and which have not been sold. -4-

(b) Priority in Incidental Registrations. If a registration pursuant to Section 3(a) involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the total number of shares of Common Stock to be included in such registration, including the Registrable Securities requested to be included pursuant to this Section 3, exceeds the maximum number of shares of Common Stock specified by the managing underwriter that may be distributed without adversely affecting the price, timing or distribution of such shares of Common Stock, then the Company shall include in such registration only such maximum number of Registrable Securities which, in the reasonable opinion of such underwriter or underwriters, can be sold in the following order of priority: (i) first, all of the shares of Common Stock that the Company proposes to sell for its own account, if any, (ii) second, all of the shares of Common Stock being registered by holder(s) of Registrable Securities pursuant to a Demand Registration (as hereinafter defined), and (iii) third, the Registrable Securities of the holder(s) of Registrable Securities requested to be included in such Incidental Registration. To the extent that shares of Common Stock to be included in the Incidental Registration must be allocated among the holders(s) of Registrable Securities pursuant to clause (iii) above, such shares shall be allocated pro rata among the holders(s) of Registrable Securities based on the number of shares of Common Stock that such holders(s) of Registrable Securities shall have requested to be included therein; provided, however, that (other than with respect to holders of Registrable Securities that are entitled to make a Demand Registration Request (as hereinafter defined)) if an Incidental Registration is an underwritten offering, the managing underwriter or underwriters may select shares for inclusion in such Incidental Registration on a basis other than a pro rata basis if, in the reasonable opinion of such underwriter or underwriters, selection on such other basis would be material to the success of the offering. (c) Expenses. The Company will pay all Registration Expenses in connection with any registration of Registrable Securities requested pursuant to this Section 3. (d) Liability for Delay. The Company shall not be held responsible for any delay in the filing or processing of a registration statement which includes any Registrable Securities due to requests by holders of Registrable Securities pursuant to this Section 3 nor for any delay in requesting the effectiveness of such registration statement if the Company advises the holders of Registrable Securities participating in such registration in -5-

writing that, in the opinion of its Board of Directors, such delay is warranted by market conditions or business considerations. (e) Participation in Underwritten Registrations. No holder of Registrable Securities may participate in any underwritten registration hereunder unless such holder (i) agrees to sell his or its Common Stock on the basis provided in any underwriting arrangements approved by the persons who have selected the underwriter and (ii) accurately completes in a timely manner and executes all questionnaires, powers of attorney, underwriting agreements and other documents customarily required under the terms of such underwriting arrangements. 4. Demand Registration (a) Right to Demand Registration. Subject to Section 4(b) below, CVC and the holders of a majority of the Registrable Securities (the "WEP Shares") held by WEP on the date hereof (the "WEP Holders") shall be entitled to make a written request ("Demand Registration Request") to the Company for registration with the Commission under and in accordance with the provisions of the Securities Act of all or part of the Registrable Securities owned by it (a "Demand Registration") (which Demand Registration Request shall specify the intended number of Registrable Securities to be disposed of by such holder and the intended method of disposition thereof); provided, that (i) the Company may, if the Board of Directors so determines in the exercise of its reasonable judgment that due to a pending or contemplated acquisition or disposition or public offering it would be inadvisable to effect such Demand Registration at such time, defer such Demand Registration for a single period not to exceed 180 days, and (ii) if the Company elects not to effect the Demand Registration pursuant to the terms of this sentence, no Demand Registration shall be deemed to have occurred for purposes of this Agreement. Within 10 days after receipt of the Demand Registration Request, the Company will serve written notice (the "Notice") of such Demand Registration Request to all holders of Registrable Securities and, subject to paragraph (c) below, the Company will include in such registration all Registrable Securities of such holders with respect to which the Company has received written requests for inclusion therein from such holders within fifteen (15) business days after the receipt by the applicable holder of the Notice. All requests made pursuant to this paragraph 4(a) will specify the aggregate number of the Registrable Securities to be registered and will also specify the intended methods of disposition thereof. -6-

(b) Number of Demand Registrations. CVC shall be entitled to make one or more Demand Registration Requests at any time and from time to time. The holders of a majority of the WEP Shares shall be entitled to make one Demand Registration Request at any time after the earlier to occur of (i) the sixth anniversary of the date of this Agreement or (ii) the date on which an initial public offering of the Common Stock is consummated; provided that immediately prior to the effective date of the registration statement relating to such Demand Registration, the WEP Holders shall have exercised the Warrant, or portion thereof, held by it for such shares of Common Stock that are subject to the Demand Registration Request in accordance with the terms of such Warrant. The Registration Expenses shall be borne by the Company. In the case of a Demand Registration Request made by the WEP Holders, such Demand Registration shall not be counted as a Demand Registration hereunder (i) until such Demand Registration has been declared effective and maintained continuously effective for a period of at least six months or such shorter period when all Registrable Securities included therein have been sold in accordance with such Demand Registration and (ii) unless the WEP Holders are able to register and sell at least ninety percent (90%) of the WEP Shares initially requested to be included in such Demand Registration. (c) Priority on Demand Registration. If any of the Registrable Securities proposed to be registered pursuant to a Demand Registration are to be sold in a firm commitment underwritten offering and the managing underwriter or underwriters of a Demand Registration advise the Company and the holders of such Registrable Securities in writing that in its or their reasonable opinion the number of shares of Common Stock proposed to be sold in such Demand Registration exceeds the maximum number of shares specified by the managing underwriter that may be distributed without adversely affecting the price, timing or distribution of the Common Stock, the Company shall include in such registration only such maximum number of Registrable Securities which, in the reasonable opinion of such underwriter or underwriters can be sold in the following order of priority: (i) first, the Registrable Securities requested to be included in such Demand Registration held by the party requesting such Demand Registration (provided that, in the case of a Demand Registration Request made by the WEP Holders, such amount shall be allocated among the WEP Holders on a pro rata basis based upon the number of Registrable Securities requested to be included by such WEP Holders in such Demand Registration); (ii) second, shares of Common Stock to be offered by the Company in such Demand Registration; and (iii) third, shares of Common Stock held by other holders requested to be included in such Demand Registration, provided that such amount shall be allocated -7-

among such other holders on a pro rata basis based upon their respective percentage of ownership of the total number of shares of Common Stock then outstanding. 5. Registration Procedures. If and whenever the Company is required to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement, the Company will, as expeditiously as possible: (a) prepare and file with the Commission a registration statement with respect to such Registrable Securities, and use its best efforts to cause such registration statement to become effective, provided, however, that the Company may discontinue any registration of its securities which is being effected pursuant to Sections 3 or 4 herein at any time prior to the effective date of the registration statement relating thereto; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than 180 days or such shorter period which will terminate when all Registrable Securities covered by such registration statement have been sold (but not before the expiration of the 90-day period referred to in Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable) and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; (c) furnish to each seller of such Registrable Securities such number of copies of such registration statement and of each such amendment and supplement thereof (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and summary prospectus), in conformity with the requirements of the Securities Act, and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities by such seller; (d) use its best efforts to register or qualify such Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each seller shall request, and do any and all other acts and things which may be necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable -8-

Securities owned by such seller; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject or subject itself to general taxation in any jurisdiction where it is not then so subject; (e) immediately notify each seller of any Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Act within the appropriate period mentioned in clause (b) of this Section 5, of the Company becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and within ten days prepare and furnish to all sellers a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (f) use its best efforts to list such Registrable Securities on any securities exchange on which the Common Stock is then listed, if such Registrable Securities are not already so listed and if such listing is then permitted under the rules of such exchange, and provide an independent transfer agent and registrar for such Registrable Securities covered by such registration statement not later than the effective date of such registration statement; (g) furnish to each seller of Registrable Securities covered by such registration statement a signed counterpart, addressed to such seller (and the underwriters, if any) of: (i) an opinion of counsel for the Company, dated the effective date of such registration statement (or, if such registration involves an underwritten public offering, dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to the sellers of not less than 50% of such -9-

Registrable Securities (and the managing underwriter, if any); and (ii) a "comfort" letter, dated the effective date of such registration statement (or, if such registration involves an underwritten public offering, dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement, covering such matters with respect to such registration statement as are customarily covered in accountants' letters delivered to the underwriters in underwritten offerings of securities as may reasonably be requested by the sellers of not less than 50% of such Registrable Securities (and the managing underwriter, if any); and (h) make available for inspection by any seller of such Registrable Securities covered by such registration statement, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such seller or any such underwriter (individually, an "Inspector" and collectively, the "Inspectors"), all pertinent financial and other records, pertinent corporate documents and properties of the Company as shall be reasonably necessary to enable them to exercise their due diligence responsibility (collectively, the "Records"), and cause all of the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; provided that any Records that are designated by the Company in writing as confidential shall be kept confidential by the Inspectors unless (A) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (B) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or by any regulatory authority having jurisdiction. Each Investor agrees that non-public information obtained by it as a result of such Inspections shall be deemed confidential and acknowledges its obligations under the Federal securities laws not to trade any securities of the Company on the basis of material non-public information. The Company may require each seller of Registrable Securities as to which any registration is being effected promptly to furnish to the Company such information regarding the distribution of such Registrable Securities as may be legally - 10 -

required. Such information shall be furnished in writing and shall state that it is being furnished for use in the registration statement. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in clause (e) of this Section 5, such holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by clause (e) of this Section 5, and, if so directed by the Company, such holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of the Company's notice. In the event the Company shall give any such notice, the period mentioned in clause (b) of this Section 5 shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to clause (e) of this Section 5 and including the date when each seller of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by clause (e) of this Section 5. To the extent not inconsistent with applicable law, each holder of Registrable Securities whose Common Stock is included in a registration statement hereunder, if requested by the managing underwriter or underwriters for such registration, agrees not to effect any public sale or distribution of Registrable Securities, including a sale pursuant to Rule 144 (or any similar provision then in force) under the Securities Act, during the fifteen business days prior to, and during the ninety-day period (or such shorter period as may be agreed to by such holders) beginning on, the effective date of a demand registration statement. 6. Indemnification. (a) Indemnification by the Company. The Company hereby agrees to indemnify and hold harmless each holder of Registrable Securities which shall have been registered under the Securities Act, and such holder's officers, directors and agents and each other Person, if any, who controls such holder within the meaning of the Securities Act and each other Person (including underwriters) who participates in the offering of such Registrable Securities against any losses, claims, damages, liabilities, - 11 -

reasonable attorneys' fees, costs or expenses (collectively, the "Damages"), joint or several, to which such holder or controlling Person or participating Person may become subject under the Securities Act or otherwise, insofar as such Damages (or proceedings in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact made by the Company or its agents contained in any registration statement under which such Registrable Securities are registered under the Securities Act, in any preliminary prospectus or final prospectus contained therein, or in any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such holder of Registrable Securities or such controlling Person or participating Person in connection with investigating or defending any such Damages or proceeding; provided, however, that the Company will not be liable in any such case to the extent that any such Damages arise out of or are based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, said preliminary or final prospectus or said amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such holder or such controlling or participating Person, as the case may be, specifically for use in the preparation thereof; or (ii) an untrue statement or alleged untrue statement, omission or alleged omission in a prospectus if such untrue statement or alleged untrue statement, omission or alleged omission is corrected in an amendment or supplement to the prospectus which amendment or supplement is delivered to such holder in a timely manner and such holder thereafter fails to deliver such prospectus as so amended or supplemented prior to or concurrently with the sale of such Registrable Securities to the Person asserting such Damages. (b) Indemnification by the Holders of Registrable Securities Which Are Registered. It shall be a condition of the Company's obligations under this Agreement to effect any registration under the Securities Act that there shall have been delivered to the Company an agreement or agreements duly executed by each holder of Registrable Securities to be so registered, whereby such holder agrees to indemnify and hold harmless the Company, its directors, officers and agents and each other Person, if any, which controls the Company within the meaning of the Securities Act against any Damages, joint or several, to which the Company, or such other Person or such Person controlling the Company may become subject under the Securities Act or otherwise, but only to the extent that such Damages (or proceedings in respect - 12 -

thereof) arise out of or are based upon any untrue statements or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such Registrable Securities are registered under the Securities Act, in any preliminary prospectus or final prospectus contained therein or in any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, which, in each such case, has been made in or omitted from such registration statement, said preliminary or final prospectus or said amendment or supplement in reliance upon, and in conformity with, written information furnished to the Company by such holder of Registrable Securities specifically for use in the preparation thereof. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above, with respect to information with to such Persons so furnished in writing by such Persons specifically for inclusion in any prospectus or registration statement. (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 6; and (ii) unless the indemnified party has been advised by its counsel that a conflict of interest exists between such indemnified and indemnifying parties under applicable standards of professional responsibility, with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Whether or not such defense is assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). No indemnifying party will consent to the entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation; provided, however, that no indemnifying party will consent to the entry of any judgment or enter into any settlement (other than for the payment of money only) without the consent of the indemnified party (which consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of the claim, will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the - 13 -

reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. (d) Contribution. If for any reason the indemnification provided for in the preceding Sections 6 (a) or 6 (b) is unavailable to an indemnified party in respect of any Damages referred to therein, the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such Damages in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that in no event shall the liability of any selling holder of Registrable Securities hereunder be greater in amount than the difference between the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such contribution obligation and all amounts previously contributed by such holder with respect to such Damages. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of fraudulent misrepresentation. 7. Hold-Back Agreements (a) Restrictions on Public Sale by Holder of Registrable Securities. Each holder of Registrable Securities whose Registrable Securities are eligible for inclusion in a Registration Statement filed pursuant to Sections 3 or 4 agrees, if requested by the managing underwriter or underwriters in an underwritten offering of any Registrable Securities, not to effect any public sale or distribution of Registrable Securities, including a sale pursuant to Rule 144 (or any similar provision then in force) under the Securities Act (except as part of such underwritten registration), during the 10-day period prior to, and during the 90-day period (or such shorter period as may be agreed - 14 -

to by the parties hereto) beginning on the effective date of such Registration Statement, to the extent timely notified in writing by the Company or the managing underwriter or underwriters. The foregoing provisions shall not apply to any holder of Registrable Securities if such holder is prevented by applicable statute or regulation from entering into any such agreement; provided, however, that any such holder shall undertake, in its request to participate in any such underwritten offering, not to effect any public sale or distribution of Registrable Securities (except as part of such underwritten registration) during such period unless it has provided 45 days prior written notice of such sale or distribution to the managing underwriter or underwriter. (b) Restrictions on Public Sale by the Company and Others. The Company agrees (i) not to effect any public sale or distribution of any of its Common Stock for its own account during the 10-day period prior to, and during the 90-day period beginning on, the effective date of a Registration Statement filed pursuant to Sections 3 or 4 (except as part of a Special Registration Statement), and (ii) use reasonable efforts to cause each holder of Common Stock purchased from the Company at any time after the date of this Agreement (other than in a registered public offering) to agree not to effect any public sale or distribution of any such securities during such period, including a sale pursuant to Rule 144 under the Securities Act (except as part of such underwritten registration, if permitted). 8. Underwritten Registration If any of the Registrable Securities covered by any Incidental Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Company and, in the case of a Demand Registration, approved by CVC. Notwithstanding anything herein to the contrary, no Person may participate in any underwritten registration hereunder unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwritten arrangements approved by the Persons entitled hereunder to approve such arrangement and (b) accurately completes and executes all questionnaires, powers of attorney, indemnities, custody agreements, underwriting agreements and other documents required under the terms of such underwriting arrangements. - 15 -

9. Miscellaneous (a) Amendment and Modification. This Agreement may be amended or modified, or any provision hereof may be waived, provided that such amendment or waiver is set forth in a writing executed by (i) the Company, (ii) CVC (so long as CVC and its Affiliates own in the aggregate at least 25% of the outstanding Common Stock on a fully diluted basis), (iii) the holders of a majority of the shares of the Registrable Securities of the other Investors, (iv) in the case of any amendment which materially and adversely affects any Investor differently from any other Investor, such Investor and (v) in the case of an amendment which materially and adversely affects any rights of the WEP Holders in connection with the Demand Registration Request of the WEP Holders, the holders of a majority of the WEP Shares. No course of dealing between or among any persons having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement. (b) Survival of Representations and Warranties. All representations, warranties, covenants and agreements set forth in this Agreement will survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, regardless of any investigation made by an Investor or on its behalf. (c) Succe