10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark one)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from       to

Commission file number: 333-107219

United Components, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	04-3759857
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
14601 Highway 41 North
Evansville, Indiana	47725
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:
(812) 867-4156

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
None

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
	(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

     The Registrant had 1,000 shares outstanding of its $0.01 par value common stock as of March 30, 2009, none of which were held by non-affiliates.

Documents Incorporated by Reference: None

TABLE OF CONTENTS

		Page
Part I
Item 1.	Business		3
Item 1A.	Risk Factors		10
Item 1B.	Unresolved Staff Comments		19
Item 2.	Properties		20
Item 3.	Legal Proceedings		21
Item 4.	Submission of Matters to a Vote of Security Holders		23
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		23
Item 6.	Selected Financial Data		24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		43
Item 8.	Financial Statements and Supplementary Data		45
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		95
Item 9A(T).	Controls and Procedures		95
Item 9B.	Other Information		96
Part III
Item 10.	Directors, Executive Officers and Corporate Governance		96
Item 11.	Executive Compensation		98
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		107
Item 13.	Certain Relationships and Related Transactions, and Director Independence		109
Item 14.	Principal Accounting Fees and Services		109
Part IV
Item 15.	Exhibits, Financial Statement Schedules		110
Signatures			115

2

PART I

ITEM 1. BUSINESS

Overview

     United Components, Inc. (“UCI”, the “Company”, or “we”) was incorporated on April 16, 2003, and on June 20, 2003, we purchased all of our operating units from UIS, Inc., and UIS Industries, Inc. (together “UIS”). For more information regarding the purchase of our operations, see “The Acquisition and Ownership” section, which immediately follows this overview.

     Prior to June 20, 2003, our operations comprised the vehicle parts businesses of UIS. Beginning with the purchase of Airtex Products in 1958, UIS continued acquisitions in the automotive industry over the following four decades, resulting in the acquisitions of Wells Manufacturing, Champion Laboratories, Neapco, Flexible Lamps and Pioneer. Over the years, UIS achieved growth in these businesses through increased parts offerings and domestic and international expansion. In 2006 we acquired ASC Industries, Inc. (“ASC”) and sold Neapco,Inc., Pioneer, Inc. and Flexible Lamps Ltd.

     We are a leading supplier to the vehicle replacement parts market, or the aftermarket, with top three market positions in each of our product lines. We supply a broad range of filtration, fuel, cooling and engine management products to the automotive, trucking, industrial, construction, agricultural, marine and mining vehicle markets. Over 87% of our 2008 net sales were made to a diverse aftermarket customer base that includes some of the largest and fastest growing companies servicing the aftermarket.

     We have one of the most comprehensive product lines in the aftermarket, offering approximately 43,000 part numbers. We believe the breadth of our offerings in each of our product lines, combined with our extensive global manufacturing, sourcing and distribution capabilities, product innovations, diverse customer base and reputation for quality and service, make us a leader in our industry.

     We design, develop, manufacture and distribute an extensive range of vehicle replacement parts across our four product lines:

• Filtration Products: oil, air, fuel, hydraulic, transmission, cabin air and industrial filters and PCV valves.

• Fuel Products: fuel pump assemblies, electric fuel pumps, mechanical fuel pumps and fuel pump strainers.

• Cooling Products: water pumps, fan clutches and other products.

• Engine Management Products: caps and rotors, emission controls, sensors, ignition controls, coils and switches.

     We believe that the majority of our sales tend to track the overall growth of the aftermarket. Sales in the automotive aftermarket (excluding tires) have grown at an average annual rate of approximately 3.9% from 1998 through 2007, with the lowest year of growth in 1998 of approximately 2.1%. However, 2008 has been estimated to have grown by only 1.5%.

     A key metric in measuring aftermarket performance is miles driven. The more frequently a vehicle is used (driven) the greater the need for regular maintenance and repair. In 2008, The US Department of Transportation reported the first annual decrease in miles driven since 1980 (-3.6%). Despite this decrease in 2008, we believe that the aftermarket will continue to grow as a result of increases in the average age of vehicles, average number of miles driven per year by passenger cars, number of vehicles registered in the United States and number of licensed drivers. Because we primarily supply the aftermarket, our sales do not correlate strongly with annual vehicle production.

     We have significant expertise in global manufacturing and sourcing, particularly in China, due to our acquisition of ASC. We believe that the consolidation of our historical water pump facilities into ASC’s existing facilities, combined with our low-cost China manufacturing and sourcing capability positions us to realize meaningful cost savings over the next few years.

     Through our emphasis on high order fill rates, customer service, product quality and competitive pricing, we have developed long-standing relationships with our customers, including leading aftermarket companies such as Advance Stores Company, Inc. (Advance Auto Parts), AutoZone, Inc. (AutoZone), Aftermarket Auto Parts Alliance (Alliance), AIM/CMB Marketing, Automotive Distribution Network (Network), Auto Parts Associates, Inc.(APA), Auto Parts Professionals, CARQUEST Corporation (CARQUEST), Independent Warehouse Distributors (IWD), National Pronto Association (Pronto), TruStar, MDSA, Inc. (Mighty), O’Reilly Automotive, Inc. (O’Reilly), UAP, Inc., a wholly owned subsidiary of Genuine Parts Company (NAPA), and Valvoline Company, a division of Ashland Inc. (Valvoline), as well as a diverse group of original equipment manufacturers, or OEMs, such as DaimlerChrysler Corporation (DaimlerChrysler), Ford Motor Company, Inc. (Ford), General Motors Corporation (GM), Harley-Davidson, Inc. (Harley-Davidson), Mercury Marine Division of Brunswick Corporation (Mercury Marine) and Volkswagen of America, Inc. (Volkswagen).

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The Acquisition and Ownership

     On June 20, 2003, we purchased the vehicle parts businesses of UIS, consisting of all of the issued and outstanding common stock or other equity interests of Champion Laboratories, Inc., Wells Manufacturing Corporation, Neapco, Inc., Pioneer, Inc., Wells Manufacturing Canada Limited, UIS Industries Ltd. (which was the owner of 100% of the capital stock of Flexible Lamps, Ltd. and Airtex Products Ltd.), Airtex Products S.A., Airtex Products, Inc., (currently Airtex Mfg., Inc.), Talleres Mecanicos Montserrat S.A. de C.V., Brummer Seal de Mexico, S.A. de C.V., Brummer Mexicana en Puebla, S. A. de C.V., Automotive Accessory Co. Ltd and Airtex Products, LLC, predecessors to the entities that now own the assets of the Airtex business. We refer to this transaction as the “Acquisition.”

     The purchase price paid was $808 million, plus transaction fees. The Acquisition was financed through a combination of debt and $260 million in cash contributed to us as equity by our parent, UCI Acquisition Holdings, Inc. through contributions from Carlyle Partners III, L.P. and CP III Coinvestment, L.P. We are an indirect wholly-owned subsidiary of UCI Holdco, Inc. (“UCI Holdco”). We and UCI Holdco are corporations formed at the direction of The Carlyle Group, which we refer to as Carlyle. UCI Holdco has $295.1 million of Floating Rate Senior PIK Notes (the “Holdco Notes”) outstanding. While UCI has no direct obligation under the Holdco Notes, UCI is the sole source of cash generation for UCI Holdco. The Holdco Notes do not appear on our balance sheet and the related interest expense is not included in our income statement.

Our Industry

     According to the 2009 Automotive Aftermarket Factbook (the “AAIA Report”), the U.S. automotive aftermarket (excluding tires) is large and fragmented, with an estimated $188 billion of aggregate sales in 2007. The vehicle replacement parts industry contains numerous suppliers and is characterized by one or two key competitors in each product line. We believe that customers within the aftermarket industry are increasingly focused on consolidating their supplier base, and therefore place a premium on suppliers with customized service and consistent and timely availability and delivery of products. Our industry is also characterized by relatively high barriers to entry, which include the need for significant start-up capital expenditures, initial part number breadth within a product line, proven product quality, distribution infrastructure and long-standing customer relationships.

     The vehicle parts industry is comprised of five main sales channels: the retail sales channel, the traditional sales channel, the heavy-duty sales channel, the original equipment service, or OES, sales channel and the OEM sales channel. The retail, traditional, heavy-duty and OES sales channels together comprise the aftermarket, which has significantly different characteristics than the OEM sales channel. While product sales for use by OEMs are one-time sales for the production of new vehicles and are therefore tied to fluctuations in annual vehicle production volumes, product sales in the aftermarket are repeat sales of replacement parts for the entire base of vehicles on the road and are less susceptible to changes in production volumes for new cars.

     Within the five main sales channels, the U.S. automotive aftermarket is primarily organized around two groups of end-users: the DIY, or do-it-yourself, group and the DIFM, or do-it-for-me, group. The DIY group, which is supplied primarily through the retail channel (e.g., Advance Auto Parts, AutoZone, O’Reilly and Wal-Mart), represented approximately 21% of industry-wide aftermarket sales in 2008, and consists of consumers who prefer to do various repairs on their vehicles themselves. The DIFM group is supplied primarily through the traditional channel (e.g., CARQUEST, NAPA, Alliance and Network) and the OES channel, which represented approximately 79% of industry-wide aftermarket sales in 2008, and consists of car dealers, repair shops, service stations and independent installers who perform the work for the consumer.

According to the AAIA Report, the automotive aftermarket (excluding tires) has grown at an annual average rate of 3.9% from 1998-2007. This growth in aftermarket sales has been primarily driven by:

     Increase in miles driven. The demand for the majority of aftermarket products is tied to the regular replacement cycle or the natural wearing cycle of a vehicle part and, in turn, is heavily influenced by actual miles a vehicle is driven. Over the past decade, miles driven has had an average annual growth rate of 0.9%. Since 1970, miles driven has decreased only four times, 1974 (-1.4%); 1979 (-1.2%); 1980 (-.05%); and 2008 (-3.6%). Although miles driven decreased in 2008, that figure is 9.5% higher than miles driven ten years ago. We expect that miles driven per vehicle will recover over time and begin to increase and, as a result, the need for automotive component replacement parts will also increase.

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     Growing base of vehicles and registrants. From 1998 to 2007, the number of registered passenger cars and light trucks, or light vehicles (defined as vehicles with gross vehicle weight of less than 14,000 lbs.), increased by approximately 22.3% and the number of licensed drivers increased by approximately 11%. With more than 240 million light vehicles currently on the road, we expect there will be an increasing need for replacement parts and general maintenance.

     Aging vehicle population. From 1997 to 2007, the average age of passenger cars in use grew from 8.7 years to 10.4 years. The significant increase in the average age for passenger cars is expected to drive growth for aftermarket services due to the large number of vehicles entering the prime age for aftermarket maintenance (six to 12 years old).

Our Strategy

     Our strategic objective is to achieve profitable growth and maximize return on invested capital by:

     Focusing on Key Product Lines. By divesting three non-core operations, we have concentrated our focus on our four core product lines. In addition, our strategic acquisition of ASC increased our market share in water pumps, and we believe it has improved our cost structure through more efficient sourcing and manufacturing processes.

     Improving Global Sourcing and Manufacturing. We continually seek to lower our overall product costs by improving our sourcing and manufacturing processes. Through our acquisition of ASC, we have obtained proven global sourcing capabilities and a China manufacturing platform. We have completed the process of integrating our existing water pump business with ASC, which we expect will result in significant operational savings. We believe we have additional opportunities for meaningful cost savings by leveraging our China manufacturing and sourcing expertise across our other product lines.

     Continuing to Grow Market Share. We will continue to focus on increasing our market share and driving growth in each of our product lines by strengthening our existing customer relationships, expanding our sales force and entering new markets. As a result of these efforts we have expanded our product lines with AutoZone and won business with CARQUEST and Exxon Mobil, and continue to expand our share of our engine management business in the traditional channel. We continue to strengthen our position in the heavy duty channel and believe that this channel continues to provide one of our best opportunities for growth. Also, we have increased our focus on international markets with the formation of trading companies in Mexico and China.

     Implementing Cost Reduction Initiatives. We have pursued and will continue to pursue opportunities to optimize our resources and reduce manufacturing costs through various initiatives. We have consolidated several of our distribution and manufacturing facilities since 2003 in order to maximize capacity utilization. We have implemented inventory management systems at our filtration products and fuel products facilities in order to reduce inventory while increasing our order fill rates. We are also utilizing centralized procurement for common raw material purchases across all of our plants in North America. We believe these and other initiatives will result in significant cost savings.

Our Products

     We have an extensive line of product offerings made up of over 43,000 part numbers, which fall into four primary categories: filtration products, fuel products, cooling products and engine management products. Set forth below is a description of our products and their respective percentages of 2008 net sales:

	Percent of
Products	2008 Net Sales	Description
Filtration Products	41.5%	Oil, air, fuel, hydraulic, transmission, cabin air and industrial filters and PCV valves
Fuel Products	24.8%	Fuel pump assemblies, electric fuel pumps, mechanical fuel pumps and fuel pump strainers
Cooling Products	17.5%	Water pumps, fan clutches and other products
Engine Management Products	16.2%	Caps, rotors, emission controls, sensors, ignition controls, coils and switches

Filtration Products

     We are a leading designer and manufacturer of a broad range of filtration products for the automotive, trucking, construction, mining, agriculture and marine industries, as well as other industrial markets. We distribute to both the aftermarket and OEMs. Our primary aftermarket competitors include Honeywell Consumer Products Group (FRAM), Bosch/Mann+Hummel (Purolator) and The Affinia Group (Wix). Our primary heavy duty competitors include Cummins, Donaldson and Clarcor.

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     We are one of the leading global manufacturers of private label filter products. Our filtration product offering consists of approximately 4,900 part numbers and includes oil filters, air filters, fuel filters, transmission filters, cabin air filters, PCV valves, hydraulic filters, fuel dispensing filters and fuel/water separators. Set forth below is a description of our filtration products:

• Oil Filters: Designed to filter engine oil and withstand operating pressures of 40 to 60 PSI at 250° F to 300° F;

• Air Filters: Designed to filter the air that enters the engine combustion chamber;

• Fuel Filters: Designed to filter the fuel immediately prior to its injection into the engine; and

• Other Filters: Includes cabin air filters, transmission filters, hydraulic filters, PCV valves and industrial filters.

Fuel Products

     We are a leading designer and manufacturer of a broad range of fuel systems. Our fuel systems are distributed to both the aftermarket and OEMs under the Airtex and Master Parts brand names and some private labels. Our primary fuel pump competitor is Federal-Mogul (Carter). Set forth below is a description of our fuel system products:

• Fuel Pumps: Serve the essential role of moving fuel from the fuel tank into the engine, with approximately 1,250 fuel pumps for carbureted and fuel-injected applications; and

• Fuel Pump Assemblies: Provide for easier, and therefore faster, installation and allow the technician to charge a similar fee for a repair that is less time-intensive than replacing an individual fuel pump. We manufacture all three types of in-tank assemblies: hangers, senders and modules with approximately 650 in-tank fuel pump assemblies.

Cooling Products

     We are a leading designer and manufacturer of a broad range of cooling systems. Our cooling systems products are distributed to both the aftermarket and OEMs under the Airtex, ASC and Master Parts brand names and some private labels. The acquisition of ASC, previously our primary water pump competitor, has significantly enhanced our water pump business. Currently, our primary water pump competitor is GMB North America, Inc. Set forth below is a description of our cooling systems products:

• Water Pumps: Serve the essential role of dissipating excess heat from the engine with approximately 1,350 distinct types of water pumps; and

• Other: Includes industrial components and other products with a selection of approximately 1,450 other part numbers.

Engine Management Products

     We design and manufacture a broad line of engine management components distributed to both the aftermarket and OEMs under the Wells and Airtex Engine Management brand names. We believe that we have one of the industry’s most comprehensive lines of highly engineered engine management system components for use in a broad range of vehicle platforms. Additionally, our engine management components offerings allow us to distribute specialty or “hard-to-find” products to the aftermarket and OEM channels.

     Engine management components include distributor caps and rotors, ignition coils, electronic controls, sensors, emissions components, solenoids, switches, voltage regulators and wire sets. These products are primarily used to regulate the ignition, emissions and fuel management functions of the engine and determine vehicle performance. Replacement rates for these products are higher for vehicles that have reached the primary repair age range of six to 12 years old. Our product offering in this category consists of approximately 34,000 part numbers. Primary competitors for engine management products include Standard Motor Products, AC Delco, Delphi, and Bosch.

6

Our Sales Channels and Customers

     Our sales are diversified between the automotive aftermarket sales channels (comprised of the retail, traditional, heavy-duty and OES sales channels of distribution) and the OEM sales channel, which enables us to capture demand throughout the life cycle of the vehicle. In the early part of a vehicle’s life, the OES channel services a significant percentage of aftermarket vehicle maintenance and repair volume. However, as vehicles age and their warranties expire, consumers increasingly rely on the retail or traditional channels for vehicle maintenance.

The Aftermarket

     We estimate that over 87% of our 2008 net sales were to the aftermarket, which is subdivided into four primary channels: retail, traditional, heavy-duty and OES.

     The retail channel represented approximately 44% of our 2008 net sales. The retail channel is our largest channel and has historically provided us with a steadily increasing revenue stream. As retailers become increasingly focused on consolidating their supplier base, we believe that our broad product offering, product quality and customer service make us increasingly valuable to these customers. One of our longest standing customers is AutoZone, which we have been supplying since the opening of their first store in 1979. We believe that we are one of the few suppliers in the industry that can provide AutoZone with the levels of quality, customer service and product breadth that AutoZone requires, which is substantiated by our receipt of multiple awards from AutoZone since 1994, including the “Extra Miler” Award 2007 and 2008, Vendor of the Year Award 2008, and “Whatever it Takes to do the Job Right” Award 2008. In addition to AutoZone, other awards include O’Reilly Vendor of the Year 2006 and Advance Auto Parts Vendor of the Year 2005.

     The traditional channel is composed of established warehouses and installers and represented approximately 24% of our 2008 net sales. The traditional channel is important to us because it is the primary source of products for professional mechanics, or the DIFM market. We have many long-standing relationships with leading customers in the traditional channel, such as CARQUEST and NAPA, for whom we have supplied products for over 20 years. We believe that our strong position in this channel allows us to capitalize on the growth of the traditional channel within the aftermarket. We believe that professional mechanics place a premium on the quality of a product, and unlike the retail channel, end users in this channel require manufacturers to provide a high level of individual customer service, including field support and product breadth and depth. Awards from customers in the traditional channel include: CARQUEST Vendor of the Year Award 2005; NAPA Excellence in Shipping Performance 2005; Automotive Distribution Network Preferred Vendor Award 2005; Aftermarket Auto Parts Alliance “Gold Level Supplier for Outstanding Shipping Performance 2007”; and Aftermarket Auto Parts Alliance “Outstanding Private Label Vendor 2006”.

     The traditional channel also includes installers such as quick lubes, tire dealers and full service gas stations. Almost all of our sales to installers consist of filtration products, which are supplied to the national and regional service chains through distributors such as Valvoline, Firestone and Mighty. Installers require “Just-In-Time” availability, ability to meet competitive price points and product breadth and depth.

     We believe the large and highly fragmented heavy-duty aftermarket channel, which accounted for approximately 10% of our 2008 net sales, provides us with one of our best opportunities for growth. We believe heavy-duty truck owners tend to be less price-sensitive and more diligent about maintenance of their vehicles than vehicle owners in other markets, as idle vehicles typically represent lost revenue potential for heavy-duty truck owners. As a result, we believe that heavy-duty trucks are more likely to have consistent routine maintenance performed with high quality parts. We believe we have developed a well-recognized brand presence in this channel through our Luber-finer brand of filtration products.

     The OES channel is comprised of a diverse mix of dealership service bays in the automotive, truck, motorcycle and watercraft vehicle markets, and represented approximately 9% of our 2008 net sales. A substantial majority of our OES 2008 net sales were derived from sales of filtration products. Our position in this channel allows us to capitalize on vehicle maintenance in the early years of a vehicle’s life, when the vehicle is under warranty and the consumer typically returns to the dealer for routine maintenance. Our most significant OES channel customers include service parts operations associated with companies such as GM, Ford and Chrysler.

7

Original Equipment Manufacturers

     Although the OEM channel comprised only approximately 8% of our 2008 net sales, it is an important sales channel to us because OEM affiliations have a direct impact on our aftermarket credibility. We believe aftermarket customers show a preference for products that were utilized in original equipment. We sell products to a diverse mix of OEMs, enabling us to capitalize on a number of different opportunities and market shifts. Our OEM products are sold to end users within each of the following categories:

• Automotive: Chrysler, Ford, GM, Remy, Siemens and Volkswagen

• Recreational Equipment: Onan and Polaris

• Heavy-duty Truck: Caterpillar, Freightliner, GM and Parker Hannifin

• Agriculture: John Deere and Kubota

• Marine: Mercury Marine and Sierra Supply

• Lawn and Garden: Briggs and Stratton, John Deere and Kohler

• Motorcycle: Harley-Davidson and Kawasaki

Customers

     We distribute our products primarily in North America and Europe to customers across several sales channels, including the retail, traditional, installer and OES aftermarket channels and OEMs of automotive, trucking, agricultural, marine, mining and construction equipment. We have maintained long-standing relationships with our customers and have been servicing many for well over a decade. Some of our most significant customers include AutoZone, GM, CARQUEST, Ford, Valvoline and Advance Auto Parts. Sales to AutoZone were approximately 29% of our total net sales in 2008 and 28% of our total net sales in 2007. Our customers include:

• Retail: Advance Auto Parts, AutoZone, CSK and O’Reilly

• Traditional: Alliance, Network, CARQUEST and NAPA

• Installer: Firestone, Mighty, Service Champ and Valvoline

• OES: Ford, GM Service Parts Organization and Saturn

• OEM: Ford, Chrysler, GM, Remy and Siemens

• Heavy Duty: Caterpillar, Freightliner, Mr. Lube and Parker Hannifin

Sales and Marketing

     We market our products predominantly throughout North America and Europe. In 2007, we completed water pump sales to our first customer in China. To effectively address the requirements of our customers and end users, our sales people are primarily organized by product category and secondarily by sales channel. During 2006, we combined the individual in-house sales forces in the traditional channel into one sales force and also established a new export sales force. Generally, we are increasing our focus on international markets and believe there are opportunities for growth in selected areas. For financial information concerning geographic distribution of our net sales, see Note 19 to our audited consolidated financial statements included in this report.

     We use both direct sales representatives and independent manufacturers’ representatives to market and sell our products. The number of sales personnel varies within each sales group. Each sales group is uniquely qualified to sell their particular products and to focus on the requirements of their particular market. We believe that the market positions we hold with respect to certain of our products are, in part, related to the specialization of our sales groups.

8

Operations

     Our operational strategy is to pursue operational excellence at all of our facilities. This initiative encompasses a lean enterprise strategy, the goals of which include improvement in inventory management, customer delivery, plant utilization and cost structure. The foundation for this is lean manufacturing, which targets the elimination of waste from every business process.

     We have already made substantial progress in the implementation of lean manufacturing and have received related benefits. We plan to continue our emphasis on lean manufacturing and, where appropriate, to expand its use at all of our plants. We have expanded our global manufacturing and sourcing capabilities through the ASC acquisition, adding two manufacturing facilities and an engineering and procurement office. In order to reduce costs and maximize capacity utilization, we have consolidated several of our distribution and manufacturing facilities since 2003.

     In addition, we will continue to examine each of our logistics and distribution systems with an objective of developing an integrated system that fully meets customer requirements, eliminates redundancies, lowers costs and minimizes inventories and cycle times.

Suppliers and Raw Materials

     We purchase various components and raw materials for use in our manufacturing processes. We also purchase finished parts for resale. In 2008, we sourced purchases from approximately 1,200 suppliers. Our raw materials include steel and other commodities, such as aluminum, iron, plastic and other petrochemical products, packaging material and media, for which global demand has been high, resulting in price increases and/or surcharges. While we have been, and expect to continue to be able to obtain sufficient quantities of these raw materials to satisfy our needs, in some cases we have been required to pay significantly higher prices, and in the future we may be required to pay higher prices and/or have difficulty procuring these raw materials.

     Some of our purchasing is accomplished through a centralized purchasing group, which enables us to leverage the buying power of the Company. We also are beginning to leverage our ASC China sourcing expertise across our product lines. We believe that centralized procurement and increased global sourcing represent attractive opportunities to lower the cost of our purchased materials.

Trademarks and Patents

     We rely on a combination of patents, trademarks, copyright and trade secret protection, employee and third-party non-disclosure agreements, license arrangements and domain name registrations to protect our intellectual property. We sell many of our products under a number of registered trademarks, which we believe are widely recognized in the sales channels we serve. No single patent, trademark or trade name is material to our business as a whole.

Employees

     As of December 31, 2008, we had approximately 4,900 employees, with union affiliations and collective bargaining agreements at two of our businesses, representing approximately 9% of our workforce. Management considers our labor relations to be good and our labor rates competitive. Since 1984, we have had one minor three-day work stoppage at a Fairfield, Illinois plant in August 2004. The work stoppage did not result in any material change in capacity or operations at the plant or the business as a whole.

Environmental and Health and Safety Matters

     We are subject to a variety of federal, state, local and foreign environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances or wastes and the cleanup of contaminated sites. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities. We are also subject to the U.S. Occupational Health and Safety Act and similar state and foreign laws. We believe that we are in substantial compliance with all applicable material laws and regulations in the United States. Historically, our costs of achieving and maintaining compliance with environmental and health and safety requirements have not been material to our operations.

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     We have been identified as a potentially responsible party for contamination at two sites. One of these sites is a former facility in Edison, New Jersey, where a state agency has ordered us to continue with the monitoring and investigation of chlorinated solvent contamination. We have informed the agency that this contamination was caused by another party at a neighboring facility and have initiated a lawsuit against that party for damages and to compel it to take responsibility for any further investigation or remediation. The second site is a previously owned site in Solano County, California. At the request of the regional water board, we are investigating and analyzing the nature and extent of the contamination and are conducting some remediation. Based on currently available information, management believes that the cost of the ultimate outcome of these environmental matters will not exceed the amounts accrued at December 31, 2008 by a material amount, if at all.

ITEM 1A. RISK FACTORS

We wish to caution the reader that the following important risk factors, and those risk factors described elsewhere in this report or our other Securities and Exchange Commission filings, could cause our actual results to differ materially from those stated in forward-looking statements contained in this document and elsewhere.

The Company may be adversely affected by the current economic environment.

As a result of the credit market crisis, dramatic increases in energy costs and other challenges currently affecting economic conditions in the United States and other parts of the world, customers may delay or cancel plans to purchase our products. In addition, some of our customers are likely to experience serious cash flow problems and, as a result, may find it difficult to obtain financing, if financing is available at all. If our customers are not successful in generating sufficient revenue or securing alternate financing arrangements, they may be unable to pay, or may delay payment of, the amounts that they owe us. Any inability of current or potential customers to pay us for our products may adversely affect our cash flow, the timing of our revenue recognition and the amount of revenue.

Further, some of our vendors are likely to experience serious cash flow problems and, as a result, may find it difficult to obtain financing, if financing is available at all. If our vendors are not successful in generating sufficient revenue or securing alternate financing arrangements, they may no longer be able to supply goods and services to us. In that event, we would need to find alternate sources of these goods and services, and there is no assurance that we would be able to find such alternate sources on favorable terms, if at all. Any such disruption in our supply chain could adversely affect our ability to manufacture and deliver our products on a timely basis, and thereby adversely affect our results of operations.

If economic conditions in the United States and other key markets deteriorate further or do not show improvement, we believe that we may experience material adverse impacts to our business and operating results.

Our relationship with AutoZone creates risks associated with a concentrated net sales source.

     We generate a large percentage of our sales from our business with AutoZone, but we cannot assure you that AutoZone will continue to purchase from us. Sales to AutoZone accounted for approximately 29% of our total net sales in fiscal 2008 and 28% of our total net sales in 2007, respectively. Several of our competitors are likely to pursue business opportunities with this customer and threaten our current position. If we fail to maintain this relationship, our net sales will be significantly diminished. Even if we maintain our relationship, our net sales concentration as a result of this relationship increases the potential impact to our business that could result from any changes in the economic terms of this relationship. Any change in the terms of our sales to this customer could have a material impact on our financial position and results of operations.

If the automotive aftermarket adopts more expansive return policies or practices such as extended payment terms, our cash flow and results of operations could be harmed.

     We are subject to returns from customers, some of which may manage their excess inventory through returns. In line with industry practices, arrangements with customers typically include provisions that permit them to return specified levels of their purchases. Returns have historically represented approximately 3% to 5% of our sales. If returns from our customers significantly increase, our profitability may be adversely affected. In addition, some customers in the automotive aftermarket are pursuing ways to shift their costs of working capital, including extending payment terms. To the extent customers extend payment terms, our cash flow may be adversely affected.

As a supplier to the automotive industry, we face certain risks due to the nature of the automotive business.

     As a supplier of automotive products, our sales and our profitability could be negatively impacted by changes in the operations, products, business models, parts-sourcing requirements, financial condition, market share or consumer financing and rebate programs of our automotive customers. In addition, demand for our automotive products is linked to consumer demand for automobiles, which has been, and may continue to be, adversely impacted by the continuing uncertain economic environment.

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Our business could be adversely affected if GM and/or Chrysler filed for bankruptcy or were unable to comply with the terms of the Secured Term Loan Facility provided by the U.S. Treasury and any additional requirements of the Troubled Asset Relief Program (TARP).

     In the fourth quarter of 2008, both GM and Chrysler publicly announced that they would not be able to meet near-term working capital requirements without additional private funding, which seemed unlikely based on the distress in the credit markets, or assistance from the federal government. Both GM and Chrysler secured financing commitments by entering into loan agreements with the U.S. Treasury and began borrowing under those agreements in the fourth quarter of 2008. These loan agreements are conditioned upon submitting viable plans of reorganization and sustainability to the President of the United States in the first quarter of 2009. On February 17, 2009, both companies submitted their viability plans and are required to provide a progress report of their viability plan by March 31, 2009. If the U.S. government does not approve of the submitted plans, it may accelerate the repayment of the loans provided to either or both companies.

     Even if the U.S. government allows the loans provided to GM and Chrysler to remain outstanding, it is not certain that the loans will be sufficient to meet their working capital requirements in 2009 or future periods. As part of their viability plans, both companies have requested additional funding from the U.S. government to cover near-term liquidity requirements. It is possible that additional funding, public or private, would not be available to meet these needs.

     We sell products to both GM and Chrysler and GM is a significant customer of ours. If either GM or Chrysler is unable to continue operations, we could suffer unfavorable consequences, such as payment delays, inability to collect trade and other accounts receivable, price reductions, production volume declines or the failure to honor contractual commitments including sourcing decisions and financial obligations.

The current economic environment and adverse credit market conditions may significantly affect our ability to meet liquidity needs and access to capital.

     The capital and credit markets have been experiencing extreme volatility and disruption for more than 12 months. In recent months, the volatility and disruption have reached unprecedented levels. The markets have exerted downward pressure on the availability of liquidity and credit capacity for many issuers. While currently these conditions have not materially impaired our ability to operate our business, there can be no assurance that there will not be a further deterioration in financial markets and confidence in major economies, which could increase the cost of financing.

     We need liquidity to pay our operating expenses, interest on our debt and capital expenditures. Without sufficient liquidity, we will be forced to curtail our operations, and our business will suffer. Our primary sources of liquidity are cash flow from operations and borrowings under our existing revolving credit facility, which terminates in June 2009. We are currently in negotiations to extend or replace our revolving credit facility; however, in the current environment, we cannot be assured that our revolving credit facility will be available for borrowing, or that we will be able to replace the revolving credit facility upon its expiration in June 2009. In the event that we are unable to access or replace our revolving credit facility, we may have to seek additional financing, the availability of which will depend on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to the financial services industry, our credit ratings and credit capacity. In addition, our customers or lenders could develop a negative perception of our long- or short-term financial prospects if the level of our business activity decreased due to a market downturn.

      Factoring of customer trade accounts receivable is a significant part of our liquidity. Subject to certain limitations, UCI’s credit agreement for its senior credit facility permits sales of and liens on receivables, which are being sold pursuant to factoring arrangements. At December 31, 2008, we had factoring relationships with six banks. The terms of these relationships are such that the banks are not obligated to factor any amount of receivables. Because of the current challenging capital markets, it is possible that these banks may not have the capacity or willingness to fund these factoring arrangements at the levels they have in the past, or at all.

Our lean manufacturing and other cost saving plans may not be effective.

     Since our formation, our strategy has included goals such as improvement of inventory management and customer delivery and plant and distribution facility consolidation. While we have and will continue to implement these strategies, there can be no assurance that we will be able to do so successfully or that we will realize the projected benefits of these and other cost saving plans. If we are unable to realize these anticipated cost reductions, our financial health may be adversely affected. Moreover, our continued implementation of cost saving plans and facilities integration may disrupt our operations and performance.

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It may be difficult for us to recruit and retain the types of highly-skilled employees we need to remain competitive.

     Our continued success will also depend on our ability to recruit, retain and motivate highly skilled sales, marketing and engineering personnel. Competition for persons in our industry is intense, and we may not be able to successfully recruit, train or retain qualified personnel. If we fail to retain and recruit the necessary personnel, our business and our ability to obtain new customers and retain existing customers, develop new products and provide acceptable levels of customer service could suffer. We have entered into employment agreements with certain of our key personnel. However, we cannot assure you that these individuals will stay with us. If any of these persons were to leave our company, it could be difficult to replace him or her, and our business could be harmed.

We may be subject to work stoppages at our facilities, or our customers may be subjected to work stoppages, either of which could negatively impact the profitability of our business.

     As of December 31, 2008, we had approximately 4,900 employees, with union affiliations and collective bargaining agreements at two of our businesses, representing approximately 9% of our workforce. Other than a three-day work stoppage at a Fairfield, Illinois plant in August 2004, we have not had a labor stoppage since 1984. Although we believe that our relations with our employees are currently good, if our unionized workers were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations, which could interfere with our ability to deliver products on a timely basis and could have other negative effects, such as decreased productivity and increased labor costs. In addition, many of our direct and indirect customers have unionized work forces. Strikes, work stoppages or slowdowns experienced by these customers or their other suppliers could result in slowdowns or closings of assembly plants that use our products. Organizations responsible for shipping our products may also be impacted by occasional strikes. Any interruption in the delivery of our products could reduce demand for our products and could have a material adverse effect on us.

We are subject to increasing pricing pressure from import activity, particularly from Asia.

     Price competition from automotive aftermarket manufacturers, particularly based in Asia and other locations with lower production costs, have historically played a role and may play an increasing role in the aftermarket channels in which we compete. Pricing pressures have historically been more prevalent with respect to our filter products than our other products. While aftermarket manufacturers in these locations have historically competed primarily in markets for less technologically advanced products and manufactured a limited number of products, they are expanding their manufacturing capabilities to move toward producing a broad range of lower cost, higher quality products and provide an expanded product offering. Partially in response to these pressures, we opened two new factories in China in 2008. In the future, competitors in Asia may be able to effectively compete in our premium markets and produce a wider range of products, which may force us to move additional manufacturing capacity offshore and/or lower our prices, reducing our margins and/or decreasing our net sales.

Increased crude oil and energy prices and overall economic conditions could reduce global demand for and use of automobiles, which could have an adverse effect on our profitability.

      Material increases in the price of crude oil have, historically, been a contributing factor to the periodic reduction in the global demand for and use of automobiles. A significant increase in the price of crude oil could reduce global demand for and use of automobiles and shift customer demand away from larger cars and light trucks (including SUVs), which we believe have more frequent replacement intervals for our products, which could have an adverse effect on our profitability. For example, historic highs in crude oil prices and corresponding historic highs in gasoline prices at the pump in 2008 impacted consumers’ driving habits. In addition, particularly in the latter part of 2008, consumers’s driving habits have been impacted by deteriorating economic conditions. Federal Highway Administration statistics indicate that miles driven in the United States for the year 2008 were 3.6% lower than for 2007. If total miles driven continue to decrease and consumers extend the mileage interval for routine maintenance, we could experience a decline in demand for our products due to a reduction in the need for replacement parts. Further, as higher gasoline prices and economic conditions result in a reduction in discretionary spending for auto repair by the end users of our products, our results of operations could be impacted.

Environmental regulations may impose significant environmental compliance costs and liabilities on us.

     We are subject to many environmental laws and regulations. Compliance with these laws and regulations is costly. We have incurred and expect to continue to incur significant costs to maintain or achieve compliance with applicable environmental laws and regulations. Moreover, if these environmental laws and regulations become more stringent in the future, we could incur additional costs. Our failure to comply with applicable environmental laws and regulations and permit requirements could result in civil or criminal fines, penalties or enforcement actions, third-party claims for property damage and personal injury, requirements to clean up property or to pay for the costs of cleanup or regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, including the installation of pollution control equipment or remedial actions.

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     Some environmental laws and regulations impose liability for contamination on present and former owners, operators or users of facilities and sites without regard to causation or knowledge of contamination. We have been identified as a potentially responsible party for contamination at two sites, for which management believes it has made adequate reserves. See “Business — Environmental and Health and Safety Matters.” In addition, we occasionally evaluate various alternatives with respect to our facilities, including possible dispositions or closings. Investigations undertaken in connection with these activities may lead to discoveries of contamination that must be remediated, and closings of facilities may trigger remediation requirements that are not applicable to operating facilities. We may also face lawsuits brought by third parties that either allege property damage or personal injury as a result of, or seek reimbursement for costs associated with, such contamination.

We could face potential product liability claims relating to products we manufacture or distribute.

     We face a business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in injury or other adverse effects. We currently maintain product liability insurance coverage, but we cannot assure you that we will be able to obtain such insurance on acceptable terms in the future, if at all, or that any such insurance will provide adequate coverage against potential claims. Product liability claims can be expensive to defend and can divert the attention of management and other personnel for long periods of time, regardless of the ultimate outcome. An unsuccessful product liability defense could have a material adverse effect on our business, financial condition, results of operations or prospects. In addition, our business depends on the strong brand reputation we have developed. In the event that our reputation is damaged, we may face difficulty in maintaining our pricing positions with respect to some of our products or have reduced demand for our products, which could negatively impact our net sales and profitability.

We are subject to class action lawsuits alleging conspiracy violations of Section 1 of the Sherman Act, 15 U.S.C. § 1 and state law, related to aftermarket oil, air, fuel and transmission filters and lawsuits alleging violations of the Canadian Competition Act. If the plaintiffs in these lawsuits against us are successful, our financial condition, results of operations and liquidity, as well as our reputation may be materially and adversely affected.

     United Components, Inc.’s wholly owned subsidiary, Champion Laboratories, Inc. (“Champion”), has been named as one of multiple defendants in two consolidated amended complaints alleging conspiracy violations of Section 1 of the Sherman Act, 15 U.S.C. § 1 and state law, related to aftermarket oil, air, fuel and transmission filters. The complaints are styled as putative class actions. One asserts claims on behalf of a putative class of direct filter purchasers and the other asserts claims on behalf of a putative class of indirect filter purchases. Both complaints seek damages, including statutory treble damages, an injunction against future violations, costs and attorney’s fees. Champion and United Components have both been named in a similar lawsuit filed by the Gasoline and Automotive Service Dealers of America (“GASDA”) trade association. The GASDA complaint seeks an injunction, costs and attorney’s fees. Champion, but not United Components, was also named as one of five defendants in a putative class action filed in Quebec, Canada. This action alleges conspiracy violations of the Canadian Competition Act and violations of the obligation to act in good faith (contrary to art. 6 of the Civil Code of Quebec) related to the sale of aftermarket filters. The plaintiff seeks compensatory damages against the five defendants in the amount of $5 million and $1 million in punitive damages. Champion, but not United Components, was also named as one of 14 defendants in a putative class action filed in Ontario, Canada. This action alleges civil conspiracy, intentional interference with economic interests, and conspiracy violations under the Canadian Competition Act related to the sale of aftermarket filters. The plaintiff seeks $150 million in general damage against the 14 defendants and $15 million in punitive damages. The Antitrust Division of the Department of Justice (DOJ) and Office of the Attorney General for the State of Florida are also investigating the allegations raised in these suits and certain current and former employees of the defendants, including Champion, have testified pursuant to DOJ subpoenas. We are fully cooperating with the DOJ and Florida Attorney General investigation.

     We intend to vigorously defend against these claims. However, the outcome of these class actions, like other litigation proceedings, is uncertain. Also, litigation and other steps taken to defend these lawsuits can be costly, and we may incur substantial costs and expenses in doing so. Multidistrict litigation is particularly complex and can extend for a protracted time, which can substantially increase the cost of such litigation. The defense of these lawsuits is also expected to divert the efforts and attention of some of our key management and personnel from the normal business operations of our company. As a result, our defense of this litigation, regardless of its eventual outcome, will likely be costly and time consuming. If the plaintiffs in these lawsuits against us are successful, it may result in substantial monetary damages, which could have a material adverse effect on our business, financial condition, results of operations, and liquidity as well as our reputation.

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Increases in our raw materials and component costs or the loss of a number of our suppliers could adversely affect our financial health.

      We depend on third parties for the raw materials and components used in our manufacturing processes. We generally purchase our materials on the open market. However, in certain situations we have found it advantageous to enter into long-term contracts for certain commodities purchases. One of our primary raw materials is steel, for which global demand has been high and for which we have been required to pay significantly higher prices since early in 2004. In addition, we are subject to increasing costs of other raw materials, including aluminum, iron, plastic and other petrochemical products, packaging materials, media and other raw materials. The prices of these commodities have fluctuated significantly in recent years and such volatility in the prices of these commodities could increase the costs of manufacturing our products and providing our services. We may not be able to pass on these costs to our customers and this could have a material adverse effect on our financial condition, results of operations or cash flows. While we currently maintain alternative sources for steel and other raw materials, our business is subject to the risk of additional price fluctuations and periodic delays in the delivery of our raw materials. Any such price fluctuations or delays, if material, could harm our profitability or operations. In addition, the loss of a substantial number of suppliers could result in material cost increases or reduce our production capacity. We are also significantly affected by the cost of natural gas used for fuel and the cost of electricity. Natural gas and electricity prices have historically been volatile.

      We monitor sources of supply to attempt to assure that adequate raw materials and other supplies needed in manufacturing processes are available. However, we do not typically enter into hedge transactions to reduce our exposure to price risks and cannot assure you that we will be successful in passing on these attendant costs if these risks were to materialize. In addition, if we are unable to continue to purchase our required quantities of raw materials on commercially reasonable terms, or at all, or if we are unable to maintain or enter into purchasing contracts for commodities, our operations could be disrupted or our profitability could be adversely impacted.

We face competition in our markets.

     We operate in some very competitive markets, and we compete against numerous different types of businesses. Although we have significant market positions in each of our product lines within the aftermarket, we cannot assure you that we will be able to maintain our current market share. In the OEM sales channel, some of our competitors have achieved substantially greater market penetration in many of the product lines which we offer. Competition is based on a number of considerations, including product performance, quality of client service and support, timely delivery and price. Our customers increasingly demand a broad product range, and we must continue to develop our expertise in order to manufacture and market these products successfully. To remain competitive, we will need to invest continuously in manufacturing, working capital, customer service and support, marketing and our distribution networks. We cannot assure you that we will have sufficient resources to continue to make such investments or that we will maintain our competitive position within each of the markets we serve. As a result of competition, we have experienced pricing pressure. There can be no guarantee that this downward price pressure will not continue, and we may be forced to adjust the prices of some of our products to stay competitive, or not compete at all in some markets, possibly giving rise to revenue loss.

If we are unable to meet future capital requirements, our business may be adversely affected.

     We periodically make capital investments to, among other things, maintain and upgrade our facilities and enhance our production processes. As we grow, we may have to incur capital expenditures. Historically, we have been able to fund these expenditures through cash flow from operations and borrowings under our senior credit facilities. However, our senior credit facilities contain limitations that could affect our ability to fund our future capital expenditures and other capital requirements. In addition, as discussed above, our revolving credit facility terminates in June 2009, and there is no assurance that we will be able to replace it. We cannot assure you that we will have, or be able to obtain, adequate funds to make all necessary capital expenditures when required, or that the amount of future capital expenditures will not be materially in excess of our anticipated or current expenditures. If we are unable to make necessary capital expenditures, our product line may become dated, our productivity may be decreased and the quality of our products may be adversely affected, which, in turn, could reduce our net sales and profitability.

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The introduction of new and improved products and services poses a potential threat to the aftermarket for automotive parts.

     Improvements in technology and product quality are extending the longevity of automotive parts and delaying aftermarket sales. In particular, the introduction of oil change indicators and the use of synthetic motor oils may extend oil filter replacement cycles. The introduction of electric, fuel cell and hybrid automobiles may pose a long-term risk to our business because these vehicles are unlikely to utilize many of our primary product lines. The introduction of new and improved service initiatives by OEMs also poses a risk to our market share in the vehicle replacement parts market. In particular, we face market share risk from general automakers, which have introduced increased warranty and maintenance service initiatives, which are gaining popularity. These service initiatives have the potential to decrease the demand on aftermarket sales of our products in the traditional and retail sales channels.

We are subject to risks associated with changing manufacturing techniques, which could place us at a competitive disadvantage.

     The successful implementation of our business strategy requires us to continuously evolve our existing products and introduce new products to meet customers’ needs in the industries we serve and want to serve. Our products are characterized by stringent performance and specification requirements that mandate a high degree of manufacturing and engineering expertise. If we fail to meet these requirements, our business could be at risk. We believe that our customers rigorously evaluate their suppliers on the basis of a number of factors, including:

• product quality;

• technical expertise and development capability;

• new product innovation;

• reliability and timeliness of delivery;

• price competitiveness;

• product design capability;

• manufacturing expertise;

• operational flexibility;

• customer service; and

• overall management.

     Our success will depend on our ability to continue to meet our customers’ changing specifications with respect to these criteria. We cannot assure you that we will be able to address technological advances or introduce new products that may be necessary to remain competitive within our businesses. Furthermore, we cannot assure you that we can adequately protect any of our own technological developments to produce a sustainable competitive advantage.

Our international operations are subject to uncertainties that could affect our operating results.

     Our business is subject to certain risks associated with doing business internationally. The net sales of our foreign subsidiaries represented approximately 8% of our total net sales for the year ended December 31, 2008. In addition, we operate seven manufacturing facilities outside of the United States. Accordingly, our future results could be harmed by a variety of factors, including:

• fluctuations in currency exchange rates;

• geopolitical instability;

• exchange controls;

• compliance with U.S. Department of Commerce export controls;

• tariffs or other trade protection measures and import or export licensing requirements;

• potentially negative consequences from changes in tax laws;

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• interest rates;

• unexpected changes in regulatory requirements;

• differing labor regulations;

• requirements relating to withholding taxes on remittances and other payments by subsidiaries;

• restrictions on our ability to own or operate subsidiaries, make investments or acquire new businesses in these jurisdictions;

• restrictions on our ability to repatriate dividends from our subsidiaries; and

• exposure to liabilities under the U.S. Foreign Corrupt Practices Act.

     As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. However, any of these factors could adversely affect our international operations and, consequently, our operating results.

We could be materially adversely affected by changes or imbalances in currency exchange and other rates.

      As a result of increased international production and sourcing of components and completed parts for resale, we are exposed to risks related to the effects of changes in foreign currency exchange rates, principally exchange rates between the U.S. dollar and the Chinese yuan. The currency exchange rate from Chinese yuan to U.S. dollars has historically been stable, in large part due to the economic policies of the Chinese government. However, there are no assurances that this currency exchange rate will continue to be as stable in the future. The U.S. government has stated that the Chinese government should reduce its influence over the currency exchange rate and let market conditions control. Less influence by the Chinese government will most likely result in the Chinese yuan strengthening against the U.S. dollar. Since June 30, 2007, the dollar has weakened against the Chinese yuan by approximately 11%, of which approximately 7% of this increase has occurred since December 31, 2007. This increase in the Chinese yuan against the dollar means that we will have to pay more in U.S. dollars for our purchases from China. If we are unable to negotiate commensurate price decreases from our Chinese suppliers, these higher prices would eventually translate into higher costs of sales. In that event, we would attempt to obtain corresponding price increases from our customers, but there are no assurances that we would be successful.

      Our Mexican operations source a significant amount of inventory from the United States. During the three month period ending December 31, 2008, the U.S. dollar strengthened against the Mexican peso by approximately 28%, and strengthened an additional 3% for the period from January 1, 2009 through March 18, 2009. A strengthening U.S. dollar against the Mexican peso means that our Mexican operations must pay more in pesos to obtain inventory from the United States, which translates into higher cost of sales for the Mexican operations. We are attempting to obtain price increases from our customers for the products sold by our Mexican operations, but there are no assurances that we will be successful.

Our intellectual property may be misappropriated or subject to claims of infringement.

     We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret protection, as well as licensing agreements and third-party nondisclosure and assignment agreements. We cannot assure you that any of our applications for protection of our intellectual property rights will be approved or that others will not infringe or challenge our intellectual property rights. We also may rely on unpatented proprietary technology. It is possible that our competitors will independently develop the same or similar technology or otherwise obtain access to our unpatented technology. To protect our trade secrets and other proprietary information, we require employees, consultants and advisors to maintain the confidentiality of our trade secrets and proprietary information. We cannot assure you that these measures will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure. If we are unable to maintain the proprietary nature of our technologies, our ability to sustain margins on some or all of our products may be affected, which could reduce our sales and profitability. In addition, from time to time, we pursue and are pursued in potential litigation relating to the protection of certain intellectual property rights, including with respect to some of our more profitable products.

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An impairment in the carrying value of goodwill or other assets could negatively affect our consolidated results of operations and net worth.

     Pursuant to accounting principles generally accepted in the United States, we are required to annually assess our goodwill, intangibles and other long-lived assets to determine if they are impaired. In addition, interim reviews must be performed whenever events or changes in circumstances indicate that impairment may have occurred. If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or other intangible assets and the implied fair value of the goodwill or other intangible assets in the period the determination is made. Disruptions to our business, end market conditions, protracted economic weakness and unexpected significant declines in operating results may result in charges for goodwill and other asset impairments. We assess the potential impairment of goodwill on an annual basis, as well as when interim events or changes in circumstances indicate that the carrying value may not be recoverable. We assess definite lived intangible assets when events or changes in circumstances indicate that the carrying value may not be recoverable. Our annual goodwill impairment test resulted in no goodwill impairment. Although our analysis regarding the fair value of goodwill indicates that it exceeds its carrying value, materially different assumptions regarding the future performance of our businesses could result in goodwill impairment losses.

Our substantial indebtedness could adversely affect our financial health.

     As of December 31, 2008, we had total indebtedness of $446.4 million (not including intercompany indebtedness) and additional available borrowings of $36.1 million under our senior credit facilities. In addition, as of that date our parent, UCI Holdco, had indebtedness of $295.1 million, which indebtedness does not require any cash interest payments until 2011. While UCI has no direct obligation under the Holdco Notes, UCI is the sole source of cash generation for UCI Holdco. The Holdco Notes do not appear on our balance sheet and the related interest expense is not included in our income statement.

     Our substantial indebtedness could have important consequences to you. For example, it could:

• make it more difficult for us to satisfy our obligations with respect to the Holdco Notes;

• require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund acquisitions, working capital, capital expenditures, research and development efforts and other general corporate purposes;

• increase our vulnerability to and limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• expose us to the risk of increased interest rates as borrowings under the senior credit facilities will be subject to variable rates of interest;

• place us at a competitive disadvantage compared to our competitors that have less debt; and

• limit our ability to borrow additional funds.

     In addition, the indentures governing the senior subordinated notes and the Holdco Notes, as well as the agreement governing our senior credit facilities, contain financial and other restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debts.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

     Our cash interest expense for fiscal year 2008 was $33.4 million. Our ability to make payments on and to refinance our indebtedness, and to fund planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

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     We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness, including our senior credit facilities and senior subordinated notes, or to fund our other liquidity needs. In such circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances. We cannot assure you that any such actions, if necessary, could be effected on commercially reasonable terms or at all. In addition, the indentures governing the senior subordinated notes and the Holdco Notes and the agreement governing the senior credit facilities limit our ability to sell assets and will also restrict the use of proceeds from any such sale. Furthermore, our senior credit facilities are secured by substantially all of our assets. Therefore, we may not be able to sell assets quickly enough or for sufficient amounts to enable us to meet our debt service obligations.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial financial leverage.

     We and our subsidiaries may be able to incur substantial additional indebtedness in the future because the terms of the indentures governing the senior subordinated notes and the Holdco Notes and the agreement governing the senior credit facilities do not fully prohibit us or our subsidiaries from doing so. As of December 31, 2008, as adjusted for the pay down of the revolving credit borrowings to zero, subject to covenant compliance and certain conditions, the senior credit facilities permitted borrowing up to an additional $65.6 million. Any of those additional borrowings would be structurally senior to the Holdco Notes and the subsidiary guarantees. If new debt is added to our and our subsidiaries’ current debt levels, the related risks that we and they now face could intensify.

Restrictive covenants in the indenture governing our debt may restrict our ability to pursue our business strategies.

     The indentures governing the senior subordinated notes and the Holdco Notes and the agreement governing our senior credit facility limit our ability and the ability of our restricted subsidiaries, among other things, to:

• incur additional indebtedness;

• sell assets, including capital stock of restricted subsidiaries;

• agree to payment restrictions affecting our restricted subsidiaries;

• consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

• enter into transactions with our affiliates;

• incur liens; and

• designate any of our subsidiaries as unrestricted subsidiaries.

     In addition, as of the end of any given quarter, our senior credit facilities require us to maintain a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio, covering the previous four quarters, through the term of the senior credit facilities. At December 31, 2008, UCI was required to maintain a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio of 4.75 to 1 and 2.5 to 1, respectively. These ratio requirements change quarterly under the terms of our senior credit facilities. Our ability to comply with these ratios may be affected by events beyond our control.

     The restrictions contained in the indentures governing the senior subordinated notes and the Holdco Notes and the agreement governing the senior credit facilities could limit our ability to plan for or react to market conditions, meet capital needs or make acquisitions or otherwise restrict our activities or business plans.

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     The breach of any of these covenants or restrictions could result in a default under the indentures governing the senior subordinated notes and the Holdco Notes and the agreement governing our senior credit facilities. An event of default under either or both of these indentures or the senior credit facilities would permit some of our lenders to declare all amounts borrowed from them to be due and payable. An event of default under either of these indentures or the senior credit facilities would likely result in a cross default under either or both of the other instruments. If we are unable to repay debt, lenders having secured obligations could proceed against the collateral securing that debt. In addition, if any of our other indebtedness is accelerated, we may be unable to make interest payments on the Holdco Notes and repay the principal amount of the notes.

We are controlled by Carlyle, whose interests in our business may be different than yours.

      As of December 31, 2008, Carlyle Partners III, L.P. and CP III Coinvestment, L.P., both of which are affiliates of Carlyle, owned 90.9% of the equity of Holdco, which owns all of our common stock, through its wholly-owned subsidiary, UCI Acquisition Holdings, Inc. and are able to control our affairs in all cases. Our entire board has been designated by the affiliates of Carlyle and a majority of the board is associated with Carlyle. In addition, the affiliates of Carlyle control the appointment of our management, the entering into of mergers, sales of substantially all of our assets and other extraordinary transactions. The interests of Carlyle and its affiliates could conflict with yours. In addition, Carlyle or its affiliates may in the future own businesses that directly compete with ours.

ITEM 1B. UNRESOLVED STAFF COMMENTS

     Not applicable.

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ITEM 2. PROPERTIES

     We currently maintain 21 manufacturing facilities, 15 of which are located in North America, 2 in Europe and 4 in China. In addition, we maintain 24 distribution and warehouse facilities. Listed below are the locations of our principal manufacturing facilities:

	Location	Owned/Leased	Square Footage		Products Manufactured
North America	Albion, Illinois I	Owned		270,972	Spin-on Oil Filters; Heavy-duty Lube Filters; Micro Glass Elements
	Albion, Illinois II	Owned		53,262	Spin-on Oil Filters; Poly Panel Air Filters
	Albion, Illinois III	Owned		49,672	Heavy-duty Lube Units; Round Air Filters
	Albion, Illinois IV	Owned		101,320	Heavy-duty Air Filters; Radial Air Filters; Automotive Conical and Radial Air Filters
	Shelby Township, Michigan	Leased		30,393	Auto Fuel Filters
	West Salem, Illinois	Owned		216,829	Heavy-duty Lube Filters; Spin-on Oil Filters
	York, South Carolina	Owned		188,672	Auto Spin-on Oil Filters
	Fairfield, Illinois I	Owned		148,067	Electric and Mechanical Fuel Pump Components
	Fairfield, Illinois II	Owned		418,811	Electric Fuel Pump Assemblies and Components; Mechanical Fuel Pumps and Components;
	Fairfield, Illinois III	Leased		65,280	Electric Fuel Pumps and Components; Strainers
	North Canton, Ohio	Leased**		210,000	Water Pump Assemblies
	Fond du Lac, Wisconsin I	Owned		187,750	Distributor Caps and Rotors
	Fond du Lac, Wisconsin II	Owned		36,000	Electronic Controls; Sensors; Voltage Regulators
	Puebla, Mexico	Owned		118,299	Gray Iron Foundry Castings; Water Pump Seal Assemblies; Water Outlets; Water Pump Assemblies and Components
	Reynosa, Mexico	Owned		107,500	Coils; Distributor Caps and Rotors; Sensors; Solenoids; Switches and Wire Sets; 5,000 square feet utilized for Fuel Products
Europe	Mansfield Park, United Kingdom	Leased		100,000	Radial Seal Air Filters; Poly Panel Air Filters; Heavy-duty Air Filters; Dust Collection Filters
	Zaragoza, Spain	Owned		34,408	Water Pump Assemblies; Gray Iron Foundry Castings; Water Pump Seal Assemblies; Water Outlets; Water Pump Assemblies and Components
China	Tianjin, China	Land leased/Building owned		162,000	Water Pump Components
	TEDA, China	Leased		60,000	Fuel Pump Components
	Wujiang, China	Leased		35,000	Light-duty Panel Air Filters
	Yanzhou, China	Owned/Leased*		241,278/134,326	Water Pump Components

*	Owned/Leased by joint venture in which we have 51% ownership.
**	Leased from a related party.

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ITEM 3. LEGAL PROCEEDINGS

               As of March 15, 2009, United Components, Inc. and its wholly owned subsidiary, Champion, were named as two of multiple defendants in 23 complaints originally filed in the District of Connecticut, the District of New Jersey, the Middle District of Tennessee and the Northern District of Illinois alleging conspiracy violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, related to aftermarket oil, air, fuel and transmission filters. T.D.S. Co. v. Champion Labs. et al. (D. Conn., filed April 8, 2008); Barjan, LLC v. Champion Labs et al. (D. Conn., filed April 10, 2008); Bruene v. Champion Labs. et al. (D. Conn., filed April 8, 2008); S&E Quick Lube Distrib., Inc. v. Champion Labs. et al. (D. Conn., filed March 31, 2008); Flash Sales, Inc. v. Champion Labs. et al. (D. Conn., filed April 4, 2008); The Parts Plus Group, Inc. v. Champion Labs. et al. (D. Conn., filed April 28, 2008); Ward’s Auto Painting & Body Works, Inc. v. Champion Labs. et al. (D. Conn., filed April 29, 2008); G.W.C. Distributors, Inc. v. Champion Laboratories, Inc. et al. (D. Conn., filed May 19, 2008); A&L Systems, Inc. v. Champion Laboratories, Inc. et al. (D. Conn., filed May 28, 2008); Aaron Dunham v. Champion Laboratories, Inc. et al. (D. Conn., filed June 17, 2008); Auto Pro, LLC v. Champion Laboratories, Inc. et al. (D. Conn., filed June 17, 2008); JDL Corp. v. Champion Laboratories, Inc. et al. (D. Conn., filed July 1, 2008); Associate Jobbers Warehouse Inc. v. Champion Laboratories, Inc. et al. (D. Conn., filed July 28, 2008); Friedson v. Champion Laboratories, Inc. et al. (D. Conn., filed July 28, 2008); Colburn v. Champion Laboratories, Inc. et al. (D. Conn., filed July 28, 2008); Lown v. Champion Laboratories, Inc. et al. (D. Conn., filed July 28, 2008); Boardman v. Champion Laboratories, Inc. et al. (D. Conn., filed August 14, 2008); Central Warehouse Sales Corp. v. Champion Labs. et al. (D.N.J., filed April 29, 2008); All American Plazas of New Jersey, Inc. v. Honeywell International Inc. et al. (D.N.J., filed May 7, 2008); Werner Aero Services v. Champion Labs. et al. (M.D. Tenn., filed May 9, 2008); Pawnee/S.A.E. Warehouse, Inc. v. Champion Laboratories, Inc. et al. (N.D. Ill., filed May 14, 2008); S.A.E. Warehouse, Inc. v. Champion Laboratories, Inc. et al. (N.D. Ill., filed May 14, 2008); Monroe Motor Products Corp. v. Champion Laboratories, Inc. et al. (N.D. Ill., filed May 22, 2008). Flash Sales, S&E Quick Lube, Bruene, Central Warehouse, Pawnee/S.A.E., S.A.E., All American and Monroe Motor also named The Carlyle Group as a defendant, but those plaintiffs voluntarily dismissed Carlyle from each of those actions without prejudice. Champion, but not United Components, was also named as a defendant in 13 virtually identical actions originally filed in the Northern and Southern Districts of Illinois, and the District of New Jersey. Lovett Auto & Tractor Parts, Inc. v. Champion Labs. et al. (N.D. Ill., filed April 10, 2008); Neptune Warehouse Distributors, Inc. v. Champion Labs. et al. (N.D. Ill., filed April 23, 2008); Hovis Auto Supply, Inc. v. Robert Bosch LLC et al. (N.D. Ill., filed May 19, 2008); Ace Quick Lube v. Champion Laboratories Inc. et al. (N.D. Ill., filed August 27, 2008); Manasek Auto Parts, Inc. v. Champion Labs. et al. (S.D. Ill., filed April 23, 2008); Big T Inc. v. Champion Labs. et al. (S.D. Ill., filed May 6, 2008); Gemini of Westmont, inc. v. Champion Laboratories, Inc. et al. (D. Conn., filed May 12, 2008); Cal’s Auto Service, Inc. v. Champion Laboratories, Inc. et al. (S.D. Ill., filed May 14, 2008); WWD Parts, Inc., d/b/a Parts For Imports v. Champion Laboratories, Inc. et al. (S.D. Ill., filed May 15, 2008); Muralt’s, Inc. v. Champion Laboratories, Inc. et al. (S.D. Ill., filed May 27, 2008); G&H Import Auto Inc. v. Champion Laboratories, Inc. et al. (S.D. Ill., filed May 29, 2008); Mike’s Inc. v Champion Laboratories, Inc. et al. (S.D. Ill., filed June 2, 2008); Worldwide Equipment, Inc. v. Honeywell Int’l et al. (D.N.J., filed May 9, 2008). All of these complaints are styled as putative class actions on behalf of all persons and entities that purchased aftermarket filters in the U.S. directly from the defendants, or any of their predecessors, parents, subsidiaries or affiliates, at any time during the period from January 1, 1999 to the present. Each case seeks damages, including statutory treble damages, an injunction against future violations, costs and attorney’s fees.

               United Components and Champion were also named as two of multiple defendants in 17 similar complaints originally filed in the District of Connecticut, the Northern District of California, the Northern District of Illinois and the Southern District of New York by plaintiffs who claim to be indirect purchasers of aftermarket filters. Packard Automotive, Inc. v. Honeywell International Inc. et al., (D. Conn., filed April 21, 2008); Doll et al. v. Champion Labs. et al. (D. Conn., filed May 9, 2008); Austin v. Honeywell Int’l et al. (D. Conn., filed May 8, 2008); Gasoline and Automotive Service Dealers of America, Inc. v. Champion Laboratories, Inc. et al. (D. Conn., filed May 12, 2008); David Stoll v. Honeywell International, Inc. et al. (D. Conn., filed May 19, 2008); Jerry Vandiver v. Champion Laboratories, Inc. et al. (D. Conn., filed June 3, 2008); Bettendorf Transfer & Excavating, Inc. v. Champion Laboratories, Inc. et al. (D. Conn., filed June 16, 2008); Ponce v. Honeywell International Inc. et al. (N.D. Ca., filed May 28, 2008); G.S.G. Excavating v. Honeywell International Inc. et al. (N.D. Ca., filed June 20, 2008); Gertha Wilkerson v. Honeywell International, Inc. et al. (N.D. Ca., filed July 3, 2008); Bobbi Cooper v. Honeywell International, Inc. et al. (N.D. Ca., filed July 3, 2008); Bay Area Truck Services v. Champion Laboratories, Inc. et al. (N.D. Ca., filed June 26, 2008); Robert A. Nilsen v. Champion Laboratories, Inc. et al., (S.D.N.Y., filed July 23, 2008); Ehrhardt et al. v. Champion Laboratories, Inc. et al. (N.D. Ill., filed July 28, 2008); Faircloth v. Champion Laboratories, Inc. et al. (N.D. Ill., filed August 25, 2008); Carpenter et al. v. Honeywell Int’l Inc. et al. (N.D. Ill., filed September 12, 2008); Warner et al. v. Honeywell Int’l Inc. et al. (N.D. Ill., filed September 22, 2008). Austin and G.S.G. Excavating also named The Carlyle Group as a defendant, but the plaintiffs in both of those actions voluntarily dismissed Carlyle without prejudice. Champion, but not United Components, was also named in 3 similar actions originally filed in the Eastern District of Tennessee, the Northern District of Illinois and the Southern District of California. Bethea et al. v. Champion Labs. et al. (E.D. Tenn., filed April 25, 2008); Mark Moynahan v. Champion Laboratories, Inc. et al. (N.D. Ill., filed June 2, 2008); Sepher Torabi d/b/a/ Protec Auto v. Champion Laboratories, Inc. et al. (S.D. Ca., filed July 25, 2008). These complaints allege conspiracy violations of Section 1 of the Sherman Act and/or violations of state antitrust, consumer protection and unfair competition law. They are styled as putative class actions on behalf of all persons or entities who acquired indirectly aftermarket filters manufactured and/or distributed by one or more of the defendants, their agents or entities under their control, at any time between January 1, 1999 and the present; with the exception of Austin, David Stoll and Bay Area, which each allege a class period from January 1, 2002 to the present, and Bettendorf, which alleges a class period from the “earliest legal permissible date” to the present. The complaints seek damages, including statutory treble damages, an injunction against future violations, disgorgement of profits, costs and attorney’s fees.

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               On August 18, 2008, the Judicial Panel on Multidistrict Litigation (“JPML”) issued an order transferring the U.S. direct and indirect purchaser aftermarket filters cases to the Northern District of Illinois for coordinated and consolidated pretrial proceedings before the Honorable Robert W. Gettleman pursuant to 28 U.S.C. § 1407. On November 26, 2008, all of the direct purchaser plaintiffs filed a Consolidated Amended Complaint. This complaint names Champion as one of multiple defendants, but it does not name United Components. The complaint is styled as a putative class action and alleges conspiracy violations of Section 1 of the Sherman Act. The direct purchaser plaintiffs seek damages, including statutory treble damages, an injunction against future violations, costs and attorney’s fees. On February 2, 2009, Champion filed its answer to the direct purchasers’ Consolidated Amended Complaint.

               On December 1, 2008, all of the indirect purchaser plaintiffs, except Gasoline and Automotive Service Dealers of America (“GASDA”), filed a Consolidated Indirect Purchaser Complaint. This complaint names Champion as one of multiple defendants, but it does not name United Components. The complaint is styled as a putative class action and alleges conspiracy violations of Section 1 of the Sherman Act and violations of state antitrust, consumer protection and unfair competition law. The indirect purchaser plaintiffs seek damages, including statutory treble damages, penalties and punitive damages where available, an injunction against future violations, disgorgement of profits, costs and attorney’s fees. On February 2, 2009, Champion and the other defendants jointly filed a motion to dismiss the Consolidated Indirect Purchaser Complaint. On that same date, Champion, United Components and the other defendants jointly filed a motion to dismiss the GASDA complaint.

               Pursuant to a stipulated agreement between the parties, all defendants produced limited initial discovery on January 30, 2009. The Court has ordered that all further discovery shall be stayed until after it rules on the motions to dismiss.

               On January 12, 2009, Champion, but not United Components, was named as one of ten defendants in a related action filed in the Superior Court of California, for the County of Los Angeles on behalf of a purported class of direct and indirect purchasers of aftermarket filters. Peerali v. Champion Laboratories, Inc. et al., No. BC405424. On March 5, 2009, one of the defendants filed a notice of removal to the U.S. District Court for the Central District of California, and then subsequently requested that the JPML transfer this case to the Northern District of Illinois for coordinated pre-trial proceedings.

                Champion, but not United Components, was also named as one of five defendants in a class action filed in Quebec, Canada. Jean-Paul Perrault v. Champion Labs. et al. (filed April 25, 2008). This action alleges conspiracy violations under the Canadian Competition Act and violations of the obligation to act in good faith (contrary to art. 6 of the Civil Code of Quebec) related to the sale of aftermarket filters. The plaintiff seeks joint and several liability against the five defendants in the amount of $5.0 million in compensatory damages and $1.0 million in punitive damages. The plaintiff is seeking authorization to have the matter proceed as a class proceeding, which motion has not yet been ruled on.

               Champion, but not United Components, was also named as one of 14 defendants in a class action filed on May 21, 2008, in Ontario, Canada (Urlin Rent A Car Ltd. v. Champion Laboratories, Inc. et al). This action alleges civil conspiracy, intentional interference with economic interests, and conspiracy violations under the Canadian Competition Act related to the sale of aftermarket filters. The plaintiff seeks joint and several liability against the 14 defendants in the amount of $150 million in general damages and $15 million in punitive damages. The plaintiff is also seeking authorization to have the matter proceed as a class proceeding, which motion has not yet been ruled on.

               The Antitrust Division of the Department of Justice (DOJ) is also investigating the allegations raised in these suits and certain current and former employees of the defendants, including Champion, have testified pursuant to subpoenas. We are fully cooperating with the DOJ investigation.

               On July 30, 2008, the Office of the Attorney General for the State of Florida issued Antitrust Civil Investigative Demands to Champion and UCI requesting documents and information related to the sale of oil, air, fuel and transmission filters. We are cooperating with the Attorney General’s requests.

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               We intend to vigorously defend against these claims.

                From time to time, we may be involved in other disputes or litigation relating to claims arising out of our operations. However, we are not currently a party to any other material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the fourth quarter ended December 31, 2008.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) Market Information

     No trading market for our common stock currently exists.

(b) Holders

     As of March 26, 2009, our parent, UCI Acquisition Holdings, Inc. was the sole holder of our common stock.

(c) Dividends

     In December 2006, we paid a special cash dividend of approximately $96 per share on our common stock. Prior to that time, we did not pay dividends since the date of our incorporation on April 16, 2003. It is our current policy to retain earnings to repay debt and finance our operations. In addition, our credit facility and indenture significantly restrict the payment of dividends on common stock.

(d) Securities Authorized for Issuance under Equity Compensation Plans

     None of our securities are offered under any compensation plans. For a description of the stock option plan granting options for the purchase of securities of UCI Holdco, see “Item 11. Executive Compensation.”

(e) Stock Performance Graph

     None.

(f) Recent Sales of Unregistered Securities

     None.

(g) Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

     None.

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ITEM 6. SELECTED FINANCIAL DATA

     The selected financial data have been derived from UCI’s financial statements. The financial data as of December 31, 2008 and 2007 and for each of the years in the three-year period ended December 31, 2008 have been derived from the audited financial statements included in this Form 10-K. We derived the balance sheet data as of December 31, 2006, 2005 and 2004 and the statement of income data for the 2005 and 2004 years from audited financial statements that are not included herein. The data for the periods from January 1, 2004 to March 31, 2004 are based on a preliminary allocation of the Acquisition purchase price. Data for periods after March 31, 2004 are based on the final allocation of the Acquisition purchase price. The data also includes the results of operations of ASC beginning on May 25, 2006, the date of the acquisition of ASC by the Company. The operating results of the Company’s driveline components and specialty distribution operations, which were sold on June 30, 2006, and the Company’s lighting systems operation, which was sold on November 30, 2006, are presented as discontinued operations for all periods presented. The amounts are presented in millions of dollars.

	Year			Year			Year			Year			Year
	ended			ended			ended			ended			ended
	Dec. 31, 2008			Dec. 31, 2007			Dec. 31, 2006			Dec. 31, 2005			Dec. 31, 2004
Statement of Income Data:
Net sales (1)	$	880.4		$	969.8		$	906.1		$	812.7		$	834.3
Cost of sales (2) (3)		702.5			748.8			728.6			657.9			653.1
Gross profit		177.9			221.0			177.5			154.8			181.2
Operating expenses:
Selling and warehousing		62.9			61.2			60.0			57.3			57.0
General and administrative		49.3			49.2			42.6			37.9			34.6
Amortization of acquired intangible assets		6.3			7.0			6.7			5.9			6.8
Costs of integration of water pump operations and resulting asset impairment losses (3)		2.4			0.7			7.0			—			—
Costs of closing facilities and consolidating operations and gain on sale of assets (4)		—			(1.5	)		6.4			—			—
Asset impairments and other costs (5)		0.5			3.6			—			21.5			—
Operating income		56.5			100.8			54.8			32.2			82.8
Interest expense, net		(34.2	)		(40.7	)		(43.3	)		(36.1	)		(35.9	)
Write-off of deferred financing costs (6)		—			—			(2.6	)		—			—
Other expense, net		(4.7	)		(4.7	)		(2.1	)		(3.2	)		(2.0	)
Income (loss) before income taxes		17.6			55.4			6.8			(7.1	)		44.9
Income tax expense		7.7			20.0			0.7			0.5			17.8
Net income (loss) from continuing operations		9.9			35.4			6.1			(7.6	)		27.1
Net income from discontinued operations, net of tax		—			—			2.1			3.1			3.7
Gain (loss) on sale of discontinued operations, net of tax		—			2.7			(16.9	)		—			—
Net income (loss)	$	9.9		$	38.1		$	(8.7	)	$	(4.5	)	$	30.8

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	UCI Consolidated
	Year			Year			Year			Year			Year
	ended			ended			ended			ended			ended
	Dec. 31, 2008			Dec. 31, 2007			Dec. 31, 2006			Dec. 31, 2005			Dec. 31, 2004
	(in millions)
Balance Sheet Data:
Cash and cash equivalents	$	46.6		$	41.4		$	31.5		$	23.7		$	11.3
Working capital — continuing operations		295.6			281.8			281.0			254.7			264.8
Working capital — discontinued operations		—			—			—			56.5			43.3
Total assets		999.8			999.5			1,002.5			984.8			966.9
Debt (including current maturities)		443.6			438.4			500.6			442.5			456.9
Total shareholder’s equity		260.1			295.8			244.8			280.3			287.9
Other Data:
Net cash provided by operating activities of continuing operations	$	32.4		$	93.1		$	73.9		$	57.1		$	65.4
Net cash (used in) provided by operating activities of discontinued operations		—			—			(1.5	)		5.7			12.9
Net cash used in investing activities of continuing operations		(31.5	)		(19.0	)		(79.7	)		(26.5	)		(44.9	)
Net cash used in investing activities of discontinued operations		—			—			(2.9	)		(5.3	)		(5.9	)
Net cash provided by (used in) financing activities of continuing operations		4.6			(64.1	)		15.7			(15.7	)		(63.0	)

(1)	Sales in 2005 have been reduced by a $14.0 million change in estimated warranty reserve requirements. Sales in 2008 have been reduced by a special $6.7 million warranty provision related to unusually high warranty returns related to one category of parts.
(2)	Includes $9.8 million in 2006 for the sale of inventory written up to market from historical cost per U.S. GAAP (Accounting Principles Generally Accepted in the United States) rules for accounting for the acquisition of ASC.
(3)	Cost of sales in 2007 and 2006 include $4.7 million and $3.9 million, respectively, of costs incurred in connection with the integration of the Company’s pre-ASC Acquisition water pump operations with the operations of ASC.
	The remaining $0.7 million of water pump integration costs in 2007 and $7.0 million in 2006 are included in “Costs of integration of water pump operations and resulting asset impairment losses.”
(4)	2006 includes asset write-downs and severance and other costs in connection with the closures of the Company’s Canadian fuel pump facility and Mexican filter manufacturing facility. 2007 includes a gain on the sale of land and building.
(5)	Includes impairments of property and equipment of a foreign entity, a trademark and software, and a write-down of assets related to the abandonment of a foreign subsidiary.
(6)	Write-off of unamortized deferred financing costs related to the Company’s previously outstanding debt, which was replaced in connection with the establishment of the Company’s new credit facility on May 25, 2006.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion of our financial condition and results of operations must be read together with the “Item 1. Business” section of this Form 10-K and the financial statements included herein.

Forward-Looking Statements

In this Annual Report on Form 10-K, United Components, Inc. makes some “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. These statements are included throughout this report on Form 10-K and relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “continue,” and other similar terms and phrases, including references to assumptions.

These forward-looking statements are based on UCI’s expectations and beliefs concerning future events affecting UCI. They are subject to uncertainties and factors relating to UCI’s operations and business environment, all of which are difficult to predict and many of which are beyond UCI’s control. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. They can be affected by inaccurate assumptions we make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this report will be important in determining future results. UCI cautions the reader that these uncertainties and factors, including those discussed in Item 1A of this Annual Report on Form 10-K and in other SEC filings, could cause UCI’s actual results to differ materially from those stated in the forward-looking statements.

Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any deviations will not be material. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Annual Report on Form 10-K or any other SEC filings to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Overview

Sales. We are among North America’s largest and most diversified companies servicing the vehicle replacement parts market, or the aftermarket. We supply a broad range of filtration products, fuel and cooling systems, and engine management systems to the automotive, trucking, marine, mining, construction, agricultural and industrial vehicle markets. We estimate that over 87% of our net sales in 2008 were made in the aftermarket, to a diverse customer base that includes some of the largest and fastest growing companies servicing the aftermarket. Sales in the aftermarket, excluding tires, have grown at an average annual rate of approximately 3.9% from 1998 through 2007, with the lowest year of growth in 1998 of approximately 2.1%. However, 2008 has been estimated to have grown by only 1.5%.

Because most of our sales are to the aftermarket, we believe that our sales are primarily driven by the number of vehicles on the road, the average age of those vehicles, the average number of miles driven per year, the mix of light trucks to passenger cars on the road and the relative strength of our sales channels. Historically, our sales have not been materially adversely affected by market cyclicality, as we believe that our aftermarket sales are less dependent on economic conditions than our sales to OEMs, due to the generally non-discretionary nature of vehicle maintenance and repair. While many vehicle maintenance and repair expenses are non-discretionary in nature, high gasoline prices and difficult economic conditions can lead to a reduction in miles driven, which then results in increased time intervals for routine maintenance and vehicle parts lasting longer before needing replacement. Historic highs in crude oil prices experienced in 2008 and corresponding historic highs in retail gasoline prices at the pump impacted consumers’ driving habits. In addition, we believe consumers’ driving habits have been impacted by the deteriorating economic conditions.

A key metric in measuring aftermarket performance is miles driven. In 2008, the U.S. Department of Transportation reported a decrease in miles driven of 3.6% (equaling 108 billion fewer miles). This decrease is the first annual decrease in miles driven since 1980. The high gasoline prices and general economic conditions, in addition to reducing miles driven, have also resulted in consumers extending the mileage interval for routine maintenance, reducing demand for our products. We believe that these conditions adversely affected our sales during the second half of 2008. While retail gasoline prices have fallen significantly from the historic highs experienced at the beginning of the third quarter of 2008, general economic conditions have continued to worsen. As long as these conditions persist, our sales may continue to be adversely affected.

26

Management believes that we have leading market positions in our primary product lines. We continue to expand our product and service offerings to meet the needs of our customers. We believe that a key competitive advantage is that we offer one of the most comprehensive lines of products in the vehicle replacement parts market, consisting of over 43,000 parts. This product breadth, along with our extensive manufacturing and distribution capabilities, product innovation, and reputation for quality and service, makes us a leader in our industry.

However, it is also important to note that in 2008, 2007 and 2006, approximately 29%, 28% and 24%, respectively, of our total net sales were derived from our business with AutoZone. Our failure to maintain a healthy relationship with AutoZone stores would result in a significant decrease in our net sales. Even if we maintain our relationship, this sales concentration with one customer increases the potential impact to our business that could result from any changes in the economic terms of this relationship. Historically, we sold a small number of products under an AutoZone program called Pay-on-Scan. Under this program, we retained title to the product at AutoZone locations, and we recorded sales for the product when an AutoZone customer purchased it. In the second quarter of 2007, AutoZone and UCI terminated the Pay-on-Scan program for these products. Accordingly, sales of these products are now recorded when received by AutoZone. We do not expect this change to have a material effect on our on-going financial results. As part of the termination of the Pay-on-Scan program, AutoZone purchased all of the products at its locations that were previously under the Pay-on-Scan program. In the second quarter of 2007, we recorded $12.1 million of sales for these products.

Cost of sales. Cost of sales includes all costs of manufacturing required to bring a product to a ready-for-sale condition. Such costs include direct and indirect materials (net of vendor consideration), direct and indirect labor costs (including pension, postretirement and other fringe benefits), supplies, utilities, freight, depreciation, insurance, information technology costs and other costs. Cost of sales also includes all costs to procure, package and ship products that we purchase and resell. The two largest components of our cost of sales are labor and steel.

Since early in 2004, global demand for steel has been high and has resulted in supplier-imposed price increases and/or surcharges for this raw material. During much of 2008, the cost of other commodities, including aluminum, iron, plastic and other petrochemical products, packaging materials and media, increased significantly compared to 2007. Energy costs also increased significantly during this period. These higher costs affected the prices we paid for raw materials and for purchased component parts and finished products. Most recently, general market prices for these commodities have decreased in reaction to general economic conditions and current uncertainties regarding short-term demand. However, we believe that the long-term trend will be toward higher costs for these commodities. While we have been, and expect to continue to be, able to obtain sufficient quantities of these commodities to satisfy our needs, increased demand from current levels for these commodities could result in price increases and may make procurement more difficult in the future. Due to our inventory being on the first-in, first-out (FIFO) method, a time lag of approximately three months exists from the time we experience cost increases until these increases flow through cost of sales.

In addition to the adverse impact of increasing commodities and energy costs, we are also being adversely affected by changes in foreign currency exchange rates, primarily relating to the Chinese yuan and Mexican peso. In 2008, we sourced approximately $70 million of components from China. During the period June 30, 2007 through June 30, 2008, the U.S. dollar weakened against the Chinese yuan by approximately 11%, with most of this decline occurring from December 31, 2007 through June 30, 2008. A weakening U.S. dollar means that we must pay more U.S. dollars to obtain components from China, which equates to higher costs. Since June 30, 2008 the U.S. dollar has remained stable against the Chinese yuan.

Our Mexican operations source a significant amount of inventory from the United States. In 2008, our Mexican operations sourced approximately $11.7 million from the United States. During the period September 30, 2008 through December 31, 2008, the U.S. dollar strengthened against the Mexican peso by approximately 28% and strengthened an additional 3% through March 18, 2009. A strengthening U.S. dollar against the Mexican peso means that our Mexican operations must pay more pesos to obtain inventory from the United States.

In the year ended December 31, 2008, we estimate the adverse pre-tax effect of higher commodities and energy costs and changes in currency exchange rates, net of the mitigation efforts set forth below, was $8.8 million when compared to 2007. Most recently, general market prices for certain of the commodities used in our operations, excluding certain steel products, have decreased in reaction to general economic conditions and current uncertainties regarding short-term demand. Due to our inventory being on the FIFO method, a time lag of approximately three months exists from the time we experience cost decreases until these increases flow through cost of sales. In the near term, we will continue to be adversely effected by the high costs of commodities in our inventory.

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Generally, we attempt to mitigate the effects of these cost increases and currency changes via a combination of design changes, material substitution, global resourcing efforts and increases in the selling prices for our products. With respect to pricing, it should be noted that, while the terms of supplier and customer contracts and special pricing arrangements can vary, generally a time lag exists between when we incur increased costs and when we might recoup or offset them through increased pricing. This time lag typically spans a fiscal quarter or more, depending on the specific situation. During 2008, we secured customer price increases that offset a portion of the cost increase we experienced in 2008. We continue to pursue efforts to mitigate the effects of any cost increases; however, there are no assurances that we will be entirely successful. To the extent that we are unsuccessful, our profit margins will be adversely affected. Because of uncertainties regarding future commodities and energy prices, and the success of our mitigation efforts, it is difficult to estimate the impact of commodities and energy costs on 2009 and beyond. However, we currently expect the adverse effect in 2009 to be much less significant than that experienced in 2008. This forecast is based on assumptions regarding the future cost of commodities and our ability to mitigate these costs. Actual events could vary significantly from our assumptions. Consequently, the actual effect could be significantly different than our forecast.

Selling and warehousing expenses. Selling and warehousing expenses primarily include sales and marketing, warehousing and distribution costs. Our major cost elements include salaries and wages, pension and fringe benefits, depreciation, advertising and information technology costs.

General and administrative expenses. General and administrative expenses primarily include executive, accounting and administrative personnel salaries and fringe benefits, professional fees, pension benefits, insurance, provision for doubtful accounts, rent and information technology costs.

Critical Accounting Policies and Estimates

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. We evaluate our estimates and judgments on an on-going basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate, and different assumptions or estimates about the future could change our reported results.

We believe the following accounting policies are the most critical in that they significantly affect our financial statements, and they require our most significant estimates and complex judgments.

Inventory. We record inventory at the lower of cost or market. Cost is principally determined using standard cost or average cost, which approximates the first-in, first-out method. Estimated market value is based on assumptions for future demand and related pricing. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.

Revenue recognition. We record sales when title transfers to the customer, the sale price is fixed and determinable, and the collection of the related accounts receivable is reasonably assured. In the case of sales to the aftermarket, we recognize revenue when these conditions are met for our direct customers, which are the aftermarket retailers and distributors.

Where we have sales rebate programs with some of our customers, we estimate amounts due under these sales rebate programs when the sales are recorded. Net sales relating to any particular shipment are based upon the amounts invoiced for the shipped goods less estimated future rebate payments. These estimates are based upon our historical experience, current trends and our expectations regarding future experience. Revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

Additionally, we have agreements with our customers that provide for sales discounts, marketing allowances, return allowances and performance incentives. Any discount, allowance or incentive is treated as a reduction to sales, based on estimates of the criteria that give rise to the discount, allowance or incentive, such as sales volume and marketing spending. We routinely review these criteria and our estimating process and make adjustments as facts and circumstances change. Historically, we have not found material differences between our estimates and actual results.

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In order to obtain exclusive contracts with certain customers, we may incur up-front costs or assume the cost of returns of products sold by the previous supplier. These costs are capitalized and amortized over the life of the contract. The amortized amounts are recorded as a reduction of sales.

New business changeover costs also can include the costs related to removing a new customer’s inventory and replacing it with UCI inventory, commonly referred to as a “stocklift.” Stocklift costs are recorded as a reduction to revenue when incurred.

Product returns. Our customers have the right to return parts that have failed within warranty time periods. Our customers also have the right, in varying degrees, to return excess quantities of product. Credits for parts returned under warranty and parts returned because of customer excess quantities are estimated and recorded at the time of the related sales. These estimates are based on historical experience, current trends and UCI’s expectations regarding future experience. Revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Any significant increase in the amount of product returns above historical levels could have a material adverse effect on our financial results.

Impairment of intangible assets. Goodwill is subject to annual review unless conditions arise that require a more frequent evaluation. The review for impairment is based on a two-step accounting test. The first step is to compare the estimated fair value with the recorded net book value (including the goodwill). If the estimated fair value is higher than the recorded net book value, no impairment is deemed to exist and no further testing is required. If, however, the estimated fair value is below the recorded net book value, then a second step must be performed to determine the goodwill impairment required, if any. In this second step, the estimated fair value from the first step is used as the purchase price in a hypothetical acquisition. Purchase business combination accounting rules are followed to determine a hypothetical purchase price allocation to the reporting unit’s assets and liabilities. The residual amount of goodwill that results from this hypothetical purchase price allocation is compared to the recorded amount of goodwill, and the recorded amount is written down to the hypothetical amount, if lower.

We perform our annual goodwill impairment review in the fourth quarter of each year using discounted future cash flows. The process of evaluating the potential impairment of goodwill is subjective because it requires the use of estimates and assumptions as to future cash flows of the company, discount rates commensurate with the risks involved in the assets, future economic and market conditions, competition, customer relations, pricing, raw material costs, production costs, selling, general and administrative costs, and income and other taxes. Although we base cash flow forecasts on assumptions that are consistent with plans and estimates we use to manage our company, there is significant judgment in determining the cash flows.

Trademarks with indefinite lives are tested for impairment on an annual basis in the fourth quarter, unless conditions arise that would require a more frequent evaluation. In assessing the recoverability of these assets, projections regarding estimated discounted future cash flows and other factors are made to determine if impairment has occurred. If we conclude that there has been impairment, we will write down the carrying value of the asset to its fair value. In 2008, we recorded a trademark impairment loss of $0.5 million. In 2007, we recorded a trademark impairment loss of $3.6 million. See Note 11 to the financial statements included in this Form 10-K.

Each year, UCI evaluates those trademarks with indefinite lives to determine whether events and circumstances continue to support the indefinite useful lives. Other than the impaired trademarks mentioned above, UCI has concluded that events and circumstances continue to support the indefinite lives of these trademarks.

Retirement benefits. Pension obligations are actuarially determined and are affected by assumptions including discount rate, life expectancy, annual compensation increases and the expected rate of return on plan assets. Changes in the discount rate, and differences between actual results and assumptions, will affect the amount of pension expense we recognize in future periods.

Postretirement health obligations are actuarially determined and are based on assumptions including discount rate, life expectancy and health care cost trends. Changes in the discount rate, and differences between actual results and assumptions, will affect the amount of expense we recognize in future periods.

Insurance reserves. Our insurance for workers’ compensation, automobile, product and general liability include high deductibles (less than $1 million) for which we are responsible. Deductibles for which we are responsible are recorded in accrued expenses. Estimates of such losses involve substantial uncertainties including litigation trends, the severity of reported claims and incurred but not yet reported claims. External actuaries are used to assist us in estimating these losses.

Environmental expenditures. Our expenditures for environmental matters fall into two categories. The first category is routine compliance with applicable laws and regulations related to the protection of the environment. The costs of such compliance are based on actual charges and do not require significant estimates.

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The second category of expenditures is for matters related to investigation and remediation of contaminated sites. The impact of this type of expenditure requires significant estimates by management. The estimated cost of the ultimate outcome of these matters is included as a liability in UCI’s December 31, 2008 balance sheet. This estimate is based on all currently available information, including input from outside legal and environmental professionals, and numerous assumptions. Management believes that the ultimate outcome of these matters will not exceed the $2.6 million accrued at December 31, 2008 by a material amount, if at all. However, because all investigation and site analysis has not yet been completed and because of the inherent uncertainty in such environmental matters and related litigation, there can be no assurance that the ultimate outcome of these matters will not be significantly different than our estimates.

Results of Operations

     The following table was derived from UCI’s consolidated income statements for the years ended December 31, 2008, 2007 and 2006. The amounts are presented in millions of dollars.

	2008			2007			2006
Net sales	$	880.4		$	969.8		$	906.1
Cost of sales		702.5			748.8			728.6
Gross profit		177.9			221.0			177.5
Operating expenses
Selling and warehousing		62.9			61.2			60.0
General and administrative		49.3			49.2			42.6
Amortization of acquired intangible assets		6.3			7.0			6.7
Costs of integration of water pump operations and resulting asset impairment losses		2.4			0.7			7.0
Costs of closing facilities and consolidating operations and gain from sale of assets		—			(1.5	)		6.4
Trademark impairment loss		0.5			3.6			—
Operating income		56.5			100.8			54.8
Other expense
Interest expense, net		(34.2	)		(40.7	)		(43.3	)
Write-off of deferred financing costs		—			—			(2.6	)
Management fee expense		(2.0	)		(2.0	)		(2.0	)
Miscellaneous, net		(2.7	)		(2.7	)		(0.1	)
Income before income taxes		17.6			55.4			6.8
Income tax expense		7.7			20.0			0.7
Net income from continuing operations		9.9			35.4			6.1
Discontinued operations
Net income from discontinued operations, net of tax		—			—			2.1
Gain (loss) on sale of discontinued operations, net of tax		—			2.7			(16.9	)
Net income (loss)	$	9.9		$	38.1		$	(8.7	)

Acquisition and Sales of Operations

On May 25, 2006, we acquired ASC. The amounts presented in the table above and discussed below include the results of ASC from the May 25, 2006 ASC acquisition date (the “ASC Acquisition Date”).

On June 30, 2006, we sold our driveline components operation and our specialty distribution operation. On November 30, 2006, we sold our lighting systems operation. The results of the driveline components, specialty distribution and lighting systems operations are reported as discontinued operations in the table above. Except where specifically referred to as discontinued operations, the amounts and comparisons discussed below address only continuing operations and, therefore, exclude the results of the operations that were sold.

Year Ended December 31, 2008 compared with Year Ended December 31, 2007

Net sales. Net sales of $880.4 million in 2008 declined $89.4 million, or 9.2%, compared to net sales of $969.8 million in 2007. The 2007 sales included $12.1 million of sales to AutoZone in connection with the termination of the Pay-on-Scan program for certain UCI products. Sales in 2008 were reduced by a $6.7 million loss provision resulting from the unusually high level of warranty returns related to a category of parts. In connection with obtaining new business, sales were reduced by $7.8 million in 2008 and $7.5 million in 2007. These reductions were the result of accepting returns of the inventory of our customers’ previous suppliers in connection with securing new business with our customers.

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Excluding the $12.1 million of 2007 sales associated with the termination of the Pay-on-Scan program, the 2008 $6.7 million warranty loss provision, and the effects of obtaining new business from both periods, sales were 7.3% lower in 2008 compared to 2007. This 7.3% decrease includes lower sales to all of our market channels. Automotive aftermarket sales that comprise approximately 87% of our sales were down approximately 7.7% compared to 2007. Within the automotive aftermarket channel, our traditional channel sales were down approximately 10.0% while retail channel sales were down approximately 2.5%. We believe the larger decline in the traditional sales channel is reflective of a shift to the retail channel as (i) consumers shift away from do-it-for-me to do-it-yourself and (ii) retail outlets expand their sales to commercial accounts. OEM sales, which comprise only 8% of our sales, decreased approximately 26.0% compared to 2007 due to the significant downturn in the automotive industry. We believe that the sales decline was due primarily to general economic conditions in the United States, including the impact of record gasoline prices on miles driven and consumers’ spending habits.

Gross profit. Gross profit, as reported, was $177.9 million for 2008 and $221.0 million for 2007. Both periods included special items which are presented in the following table along with a comparison of adjusted gross profit after excluding such special items. Adjusted gross profit is a non-GAAP financial measurement of our performance. This non-GAAP measure is not in accordance with, nor is it a substitute for, GAAP measures. It is intended to supplement our presentation of our financial results that are prepared in accordance with GAAP. We use adjusted gross profit as presented to evaluate and manage UCI’s operations internally. You are encouraged to evaluate each adjustment and whether you consider each to be appropriate.

	2008		2007
	(in millions)
Gross profit, as reported	$	177.9	$	221.0
Add back special items:
Nonrecurring provision for warranty costs		6.7		—
Water pump integration costs		—		5.5
New business changeover and sales commitment costs		7.8		5.2
Facilities consolidation and severance costs		0.1		0.3
Costs to establish additional manufacturing in China		3.1		0.7
Resolution of pre-acquisition matters		—		(0.9	)
Reserve for resolution of disputed non-trade receivables		—		0.8
	$	195.6	$	232.6

The “Nonrecurring provision for warranty costs” in 2008 related to an unusually high level of warranty returns related to one category of parts. When these parts are subjected to certain conditions, they experience a higher than normal failure rate. As a result of the higher than normal failure rate, a $6.7 million warranty loss provision was recorded in 2008. We have modified the design of these parts to eliminate this issue.

The 2007 $5.5 million of “water pump integration costs” relate to the integration of the ASC water pump operation and the water pump operation that we owned before we acquired ASC. In 2007, we completed the integration, closed our previously owned factory, and transferred production to ASC. These costs include (i) costs and operating inefficiencies caused by the wind-down of our previously owned factory, (ii) transportation and other costs directly related to completing the integration, and (iii) a write-off of component parts that could not be used after production was transitioned to the ASC product design. The 2007 amount also included $0.8 million of costs incurred to minimize the write-off of component parts that would not be usable when production was transitioned to the ASC product design.

The 2008 $7.8 million and the 2007 $5.2 million of “new business changeover and sales commitment costs” were up-front costs incurred to obtain new business and to extend existing long-term sales commitments.

The 2008 $3.1 million and 2007 $0.7 million of “costs to establish additional manufacturing in China” related to start-up costs establishing two new factories in China.

Excluding the special items, adjusted gross profit decreased to $195.6 million in 2008 from $232.6 million in 2007, and the related gross margin percentage decreased to 21.9% in 2008 from 23.8% in 2007. The gross margin percentage is based on sales before the effects of obtaining new business and deducting the $6.7 million warranty loss provision in 2008, which are discussed in the net sales comparison above.

When comparing 2008 and 2007 gross profit excluding the special items, lower sales volume in 2008 was the largest factor in our gross profit decline. The 2008 results were also adversely affected by the impact of significantly higher energy and commodity costs and currency fluctuations, which were previously discussed in this Management’s Discussion and Analysis. Inflation-driven wage increases and higher warranty expense also contributed to the lower profits in the 2008 period compared to 2007. Partially offsetting these adverse effects were the benefits of our ongoing manufacturing cost reduction initiatives.

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Selling and warehousing expenses. Selling and warehousing expenses were $62.9 million in 2008, $1.7 million higher than 2007. The increase included additional upfront costs associated with new business with an existing customer and the addition of sales and marketing personnel in targeted areas. The increase also included the effects of inflation on employee related and other costs. The effect of lower sales volume partially offset these increases. Selling and warehousing expenses were 7.1% of sales in 2008 and 6.3% in 2007.

General and administrative expenses. General and administrative expenses were $49.3 million in 2008 and $49.2 million in 2007. 2008 included $4.0 million of costs incurred in connection with our antitrust litigation (discussed in Item 3 and in Note 17 to the financial statements included in this Form 10-K), inflation driven cost increases, $1.3 million higher expense for the cost of litigation and settlement of disputed matters, $2.2 million higher bad debt expense and $0.4 million of severance costs resulting from employee lay-offs. These cost increases were offset by lower employee bonus expense and $2.6 million lower stock option related costs.

Costs of integration of water pump operations and resulting asset impairment losses. See Note 3 to the financial statements included in this Form 10-K.

Costs of closing facilities and consolidating operations and gain from sale of assets. See Note 5 to the financial statements included in this Form 10-K.

Trademark impairment loss. See Note 11 to the financial statements included in this Form 10-K.

Interest expense, net. Net interest expense was $6.5 million lower in 2008 compared to 2007. This reduction was due to lower debt levels and lower interest rates in 2008. Also, accelerated amortization of deferred financing costs associated with the voluntary prepayments of debt was $0.5 million higher in 2007.

Income tax expense. Income tax expense was $12.3 million lower in 2008 as compared to 2007 due to lower pre-tax income in 2008. For reasons why the effective tax rates in both years differ from statutory rates, see the table in Note 15 to the financial statements included in this Form 10-K, which reconciles income taxes computed at the U.S. federal statutory rate to income tax expense.

Gain on sale of discontinued operations, net of tax. See Note 4 to the financial statements included in this Form 10-K.

Net income. Due to the factors described above, we reported net income of $9.9 million in 2008 compared to $38.1 million in 2007.

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Year Ended December 31, 2007 Compared with Year Ended December 31, 2006

     Net sales. Net sales increased $63.7 million, or 7.0%, to $969.8 million in 2007 compared to $906.1 million in 2006. $50.3 million of the increase was due to the inclusion of ASC’s results for all of 2007, whereas 2006 results included ASC’s results only for the period after the ASC Acquisition Date. The 2007 ASC sales included $12.1 million of sales to AutoZone in connection with the termination of the Pay-on-Scan program for certain UCI products. In connection with obtaining new business, sales were reduced in 2007 by $7.5 million due to the acceptance of returns of the inventory of our customers’ previous supplier. Also in connection with obtaining new business, sales increased by $1.8 million in 2006 due to the initial stocking of an additional product line at an existing customer, partially offset by the cost of accepting returns of the inventory of our customers’ previous suppliers, plus up-front payments to obtain long-term sales commitments.

Excluding the impact of including ASC’s results for all of 2007, versus only part of 2006, and excluding from both years the effects of obtaining new business and extending existing long-term sales commitments discussed above, sales were 2.5% higher in 2007 compared to 2006. This 2.5% increase includes higher sales to the retail, heavy duty and OES channels in the 2007 period, partially offset by lower sales to the traditional and OEM channels.

     Gross profit. Gross profit, as reported, was $221.0 million for 2007 and $177.5 million for 2006. Both years included special items, which are presented in the following table along with a comparison of adjusted gross profit after excluding such special items. Adjusted gross profit is a non-GAAP financial measurement of our performance. This non-GAAP measure is not in accordance with, nor is it a substitute for, GAAP measures. It is intended to supplement our presentation of our financial results that are prepared in accordance with GAAP. We use adjusted gross profit as presented to evaluate and manage UCI’s operations internally. You are encouraged to evaluate each adjustment and whether you consider each to be appropriate.

	2007			2006
	(in millions)
Gross profit, as reported	$	221.0		$	177.5
Add back special items:
Non-cash ASC Acquisition-related charges		—			9.8
Water pump integration costs		5.5			3.9
New business changeover and sales commitment costs		5.2			3.7
Facilities consolidation and severance costs		0.3			1.0
Costs to establish additional manufacturing in China		0.7			—
Resolution of pre-acquisition matters		(0.9	)		—
Reserve for resolution of disputed non-trade receivables		0.8			—
	$	232.6		$	195.9

The $9.8 million “non-cash ASC Acquisition-related charges” in 2006 consisted of the sales, after the ASC Acquisition Date, of ASC inventory that was written up from historical cost to fair market value as part of the preliminary allocation of the ASC Acquisition purchase price. This write-up is required by U.S. GAAP, as it applies to accounting for acquisitions. When this inventory was sold, the $9.8 million difference between historical cost and fair market value was charged to cost of sales, thereby reducing reported gross profit.

The 2007 $5.5 million and the 2006 $3.9 million of “water pump integration costs” related to the integration of the ASC water pump operation and the water pump operation that we owned before we acquired ASC. In 2007, we completed the integration, closed our previously owned factory and transferred production to ASC. These costs include (i) costs and operating inefficiencies caused by the wind-down of our previously owned factory, (ii) transportation and other costs directly related to completing the integration, and (iii) a write-off of component parts that could not be used after production was transitioned to the ASC product design. The 2007 amount also included $0.8 million of costs incurred to minimize the write-off of component parts that would not be usable when production was transitioned to the ASC product design.

The 2007 $5.2 million and the 2006 $3.7 million of “new business changeover and sales commitment costs” were up-front costs incurred to obtain new business and to extend existing long-term sales commitments.

Excluding the special items, adjusted gross profit increased to $232.6 million in 2007 from $195.9 million in 2006, and the related gross margin percentage increased to 23.8% in 2007 from 21.6% in 2006. (The gross margin percentages are based on sales before the effects of obtaining new business and extending existing long-term sales commitments, which are discussed in the net sales comparison above.)

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Higher sales volume in 2007 was a major factor in our gross profit increase. The 2007 gross profit was also favorably impacted by lower warranty expense in 2007 and benefits from our facilities consolidations and other manufacturing cost reduction initiatives. These benefits were partially offset by the cost of inflation-driven wage increases and higher raw material costs.

     Selling and warehousing expenses. Selling and warehousing expenses were $61.2 million in 2007, $1.2 million higher than in 2006. The inclusion of ASC for all of 2007, versus only part of 2006, increased expenses by $2.3 million. The 2007 increase also included the effects of inflation on employee-related and other operating costs. These increases were partially offset by cost reductions due to 2006 facility consolidations and headcount reductions made possible by a 2006 investment in system enhancements. Selling and warehousing expenses were 6.3% of sales in 2007 and 6.6% of sales in 2006.

     General and administrative expenses. General and administrative expenses were $49.2 million in 2007, $6.6 million higher than in 2006. $2.0 million of this increase was due to the inclusion of ASC for all of 2007, versus only part of 2006. 2007 also includes (i) inflation-driven cost increases, (ii) additional costs for Sarbanes-Oxley compliance, (iii) $0.4 million of costs incurred in connection with the establishment of two new factories in China, and (iv) $1.8 million higher employee stock option based compensation expense. 2006 included a $0.5 million gain on the sale of the Company’s airplane. There is no comparable gain in 2007.

Of the $1.8 million increase in the stock option related expense, $1.5 million was due to accelerated vesting resulting from stock option plan changes. Earlier vesting affects when stock option expense is recognized, but does not affect the ultimate total expense. Consequently, accelerating the vesting results in recording more of the total expense this year and less in later years.

     Costs of integration of water pump operations and resulting asset impairment losses. See Note 3 to the financial statements included in this Form 10-K.

     Costs of closing facilities and consolidating operations and gain from sale of assets. See Note 5 to the financial statements included in this Form 10-K.

     Trademark impairment loss. See Note 11 to the financial statements included in this Form 10-K.

     Interest expense, net. Net interest expense was $2.6 million lower in 2007 compared to 2006. The reduction was primarily due to lower debt levels, which more than offset the adverse effect of higher interest rates.

     Write-off of deferred financing costs. See Note 14 to the financial statements included in this Form 10-K.

     Miscellaneous, net. Miscellaneous, net was a loss of $2.7 million in 2007 compared to a loss of $0.1 million in 2006. The 2007 increase is primarily attributable to $1.9 million of higher costs related to our sales of accounts receivable.

     Income tax expense. Income tax expense was $19.3 million higher in 2007 than it was in 2006. The primary reason for the increase is higher pre-tax profits in 2007. For reasons why the effective tax rates in both years differ from statutory rates, see the table in Note 15 to the financial statements in this Form 10-K, which reconciles income taxes computed at the U.S. federal statutory rate to income tax expense.

     Net income from continuing operations. Due to the factors described above, we reported net income from continuing operations of $35.4 million for 2007 and $6.1 million for 2006.

     Discontinued operations. In 2006, net income from discontinued operations was $2.1 million, and the net loss on the sale of discontinued operations was $16.9 million. In 2007 we recorded a $2.7 million gain relating to the 2006 sale of our lighting systems operation. (See Note 4 to the financial statements included in this Form 10-K).

     Net income (loss). Due to the factors described above, we reported net income of $38.1 million in 2007 compared to a net loss of $8.7 million in 2006.

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Liquidity and Capital Resources

          Historical Cash Flows

Net cash provided by operating activities. Net cash provided by operating activities in 2008 was $32.4 million. Profits, before deducting depreciation and amortization, and other non-cash items, generated $52.9 million. An increase in accounts receivable and inventory resulted in the use of cash of $9.5 million and $19.1 million, respectively. The increase in accounts receivable was primarily due to increased days sales outstanding as a result of increased accounts receivable dating terms with certain customers, partially offset by lower sales in the latter half of 2008. Factored accounts receivable totaled $80.1 million and $81.1 million at December 31, 2008 and 2007, respectively. The increase in inventory was due to (i) lower than expected sales in the fourth quarter of 2008, (ii) higher inventory levels to support new business wins that began to ship in the first quarter of 2009, (iii) higher raw material costs resulting from the significant increases experienced in commodity costs in 2008 and (iv) increased production related to the ramp up of our Chinese operations. An increase in accounts payable resulted in a generation of cash of $3.0 million. An increase in amounts due to Holdco had a $6.2 million positive effect on cash. Changes in all other assets and liabilities netted to a $1.1 million use of cash. This amount included income tax refunds resulting from the carryback of 2006 operating losses to 2004, partially offset by employee-related accrued liabilities, including annual employee bonus and profit sharing payments, due to headcount reductions and the lower operating performance in 2008 as compared to 2007.

Net cash used in investing activities. Historically, net cash used in investing activities has been for capital expenditures, including routine expenditures for equipment replacement and efficiency improvements, offset by proceeds from the disposition of property, plant and equipment. Capital expenditures for the years ended December 31, 2008, 2007 and 2006 were $31.9 million, $29.7 million and $22.8 million, respectively. The 2008 and 2007 amounts included $3.6 million and $1.7 million, respectively, for our two new factories in China.

In 2007, we received $6.6 million, net of fees and expenses, from the sale of the land and building of the Mexican filtration operation that was closed in 2006. Also in 2007, we received $2.2 million, net of fees and expenses, of additional proceeds from the 2006 sale of our lighting systems operations.

In 2006, we used $123.6 million, net of cash acquired, to purchase ASC. Also in 2006, we received $65.2 million from the sale of our driveline components, specialty distribution and lighting systems operations.

Net cash provided by / used in financing activities. Net cash provided by financing activities in 2008 was $4.6 million. Net cash used in financing activities in 2007 was $64.1 million, while net cash provided by financing activities in 2006 was $15.7 million.

In 2008, we borrowed $20.0 million under our revolving credit line to increase our short-term liquidity in light of the current challenging capital markets. The remainder of our borrowings of $8.0 million during 2008 were short-term borrowings payable to foreign credit institutions. Borrowings of $20.8 million during 2007 consisted solely of short-term borrowings payable to foreign credit institutions. In 2006, we borrowed $113.0 million to fund a portion of the ASC acquisition price.

In 2008, 2007 and 2006, we used cash on hand to voluntarily repay $10.0 million, $65.0 million and $65.0 million, respectively, of our term loan. Additionally during 2008 and 2007, our Spanish and Chinese subsidiaries repaid short-term notes borrowings to foreign credit institutions in the amount of $12.9 million and $19.3 million, respectively.

In December 2006, we paid a special cash dividend of $35.3 million on our common stock. Prior to that time, we did not pay dividends since the date of our incorporation on April 16, 2003. It is our current policy to retain earnings to repay debt and finance our operations. In addition, our senior credit facility and indenture significantly restrict the payment of dividends on common stock. Also in 2006, shareholder equity contributions totaled $8.5 million consisting of rollover equity of $8.3 million in connection with the ASC Acquisition and stock option exercises.

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          Current Debt Capitalization and Scheduled Maturities

At December 31, 2008 and 2007, we had $46.6 million and $41.4 million of cash, respectively. Outstanding debt was as follows (in millions):

	December 31,
	2008			2007
Short-term borrowing	$	5.2		$	10.1
Revolving credit line borrowing		20.0			—
Capital lease obligations		1.2			1.8
Term loan		190.0			200.0
Senior subordinated notes		230.0			230.0
Amount of debt requiring repayment		446.4			441.9
Unamortized debt discount		(2.8	)		(3.5	)
	$	443.6		$	438.4

Short-term borrowings are routine short-term borrowings by our foreign operations.

Because of the prepayments of the term loan discussed previously, we do not have any required repayments of the senior credit facility term loans until December 2011. Our $230.0 million senior subordinated notes are due in 2013.

In addition to the debt discussed above, our parent, UCI Holdco, has $295.1 million in Floating Rate Senior PIK Notes (the “Holdco Notes”) outstanding at December 31, 2008. The Holdco Notes do not appear on our balance sheet and the related interest expense is not included in our income statement. While UCI has no direct obligation under the Holdco Notes, UCI is the sole source of cash generation for UCI Holdco. The interest on the Holdco Notes is payable “in kind” until December 2011, so no cash interest is payable until after that date. Accordingly, the Holdco Notes will not have any material effect on the cash flow or liquidity of UCI until after that date. In addition, the covenants contained in the Holdco Notes indenture are substantially the same as those contained in the senior subordinated notes indenture, so we expect that the Holdco Notes will have no effect on the current operations of UCI.

Below is a schedule of required future debt repayments. The 2009 amount consists primarily of the repayment of our revolving credit line borrowings upon the maturity of the revolving credit facility in June 2009 and routine short-term borrowings by our foreign operations. The amounts are presented in millions of dollars.

2009	$	25.5
2010		0.2
2011		45.2
2012		145.2
2013		230.1
Thereafter		0.2
	$	446.4

The terms of UCI’s senior credit facility permit UCI to repurchase from time to time up to $75 million in aggregate principal amount of senior subordinated notes. As of March 30, 2009, we had not repurchased any of the senior subordinated notes, although we or Holdco may, under appropriate market conditions, do so in the future through cash purchases or exchange offers, in open market, privately negotiated or other transactions. Similarly, we or Holdco may from time to time seek to repurchase or retire the Holdco Notes. We will evaluate any such transactions in light of then-existing market conditions, taking into account contractual restrictions, our current liquidity and prospects for future access to capital. The amounts involved may be material.

Our significant debt service obligation is an important factor when assessing UCI’s liquidity and capital resources. At our December 31, 2008 debt level and borrowing rates, annual interest expense, including amortization of deferred financing costs and debt discount, is approximately $32.9 million. An increase of 0.25 percentage points (25 basis points) on our variable interest rate debt would increase our annual interest cost by $0.5 million.

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          Covenant Compliance

Our senior credit facilities require us to maintain certain financial covenants and require mandatory prepayments under certain events as defined in the agreement. Also, the facilities include certain negative covenants restricting or limiting our ability to, among other things: declare dividends or redeem stock; prepay certain debt; make loans or investments; guarantee or incur additional debt; make capital expenditures; engage in acquisitions or other business combinations; sell assets, and alter our business. In addition, the senior credit facility contains the following financial covenants: a maximum leverage ratio and a minimum interest coverage ratio. The financial covenants are calculated on a trailing four consecutive quarters basis. As of December 31, 2008, we were in compliance with all of these covenants.

Our covenant compliance levels and ratios for the quarter ended December 31, 2008 are as follows:

	Covenant
	Compliance Level
	for the
	Quarter Ended			Actual
	December 31, 2008			Ratios
Minimum Adjusted EBITDA to interest expense ratio		2.50	x	3.45	x
Maximum total debt to Adjusted EBITDA ratio		4.75	x	3.93	x

The minimum interest coverage ratio and maximum leverage ratio levels become increasingly more restrictive over time. The senior credit facility provides for a minimum Adjusted EBITDA to interest expense ratio and a maximum total debt to Adjusted EBITDA ratio as set forth opposite the corresponding fiscal quarter.

	Minimum
	Adjusted	Maximum
	EBITDA to	Total Debt to
	Interest	Adjusted
	Expense	EBITDA
	Covenant	Covenant
	Compliance	Compliance
	Level	Level
Quarter ending March 31, 2009	2.60x	4.60x
Quarter ending June 30, 2009	2.65x	4.50x
Quarter ending September 30, 2009	2.75x	4.40x
Quarter ending December 31, 2009	2.80x	4.10x
Quarter ending March 31, 2010	3.00x	3.75x
Quarter ending June 30, 2010	3.00x	3.75x
Quarter ending September 30, 2010 and thereafter	3.00x	3.50x

Adjusted EBITDA is used to determine our compliance with many of the covenants contained in our senior credit facilities. Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and other adjustments permitted by our lenders in calculating covenant compliance under our senior credit facility.

We believe that the inclusion of debt covenant related adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors to demonstrate compliance with our financing covenants.

A breach of covenants in our senior credit facilities that are tied to ratios based on Adjusted EBITDA could result in a default under those facilities and the lenders could elect to declare all amounts borrowed due and payable. Any such acceleration would also result in a default under our senior subordinated notes.

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EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP (Accounting Principles Generally Accepted in the United States) and do not purport to be alternatives to net income as a measure of operating performance. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management’s discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements.

The following table reconciles net income to EBITDA and Adjusted EBITDA (dollars in millions):

	Year ended
	Dec. 31, 2008
Net income	$	9.9
Interest, net of minority interest		34.2
Income tax expense		7.9
Depreciation, net of minority interest		27.3
Amortization		9.0
EBITDA		88.3
Special items:
Cost of integration of water pump operations and the resulting asset impairment losses		2.4
Facilities consolidation & severance costs		0.4
Trademark impairment loss		0.5
Cost of defending class action litigation		4.0
One-time warranty expense		6.7
New business changeover cost and sales commitment costs		5.0
Establishment of new facilities in China		3.6
Non-cash charges (stock options expense)		0.8
Management fee		2.0
Adjusted EBITDA	$	113.7

          Management’s Action Plan and Outlook

Our primary sources of liquidity currently are cash on hand, cash flow from operations, accounts receivable factoring arrangements and borrowings under our existing revolving credit facility, which terminates in June 2009.

          Revolving Credit Facility

Lehman Brothers Commercial Paper Inc. (“Lehman”), the administrative agent under UCI’s senior credit facility and one of the syndication banks that fund senior UCI revolving credit borrowings, filed for protection under Chapter 11 of the U.S. Bankruptcy Code on October 5, 2008. Of our total $75.0 million revolving credit line, Lehman’s commitment is $9.5 million. In September 2008, we borrowed $20.0 million under our revolving credit facility, and Lehman did not fund its pro rata share. Because of the bankruptcy filing, we are evaluating our options as to the administrative agent under our credit facility, and we are conducting our cash management based on the presumption that Lehman will not fund any of Lehman’s $9.5 million commitment under our revolving credit line.

At December 31, 2008, revolving credit borrowings were $20.0 million and $9.4 million of revolving credit borrowing capacity had been used to support outstanding letters of credit related to our insurance programs. Excluding Lehman’s $9.5 million commitment, we had $36.1 million of unused borrowing capacity at December 31, 2008. We are currently in negotiations to extend or replace our revolving credit facility; however, in the current environment, we cannot be assured that our revolving credit facility will be available for borrowing, or that we will be able to extend or replace the revolving credit facility upon its expiration in June 2009. We are conducting our cash management under the presumption that will be unable to replace the revolving credit facility upon its expiration. Therefore, our ability to make scheduled payments of principal or interest on, or to refinance, our indebtedness or to fund planned capital expenditures will depend on our ability to generate cash from operations in the future and from factoring arrangements. Such cash generation is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

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          Accounts Receivable Factoring

Factoring of customer trade accounts receivable is a significant part of our liquidity. Subject to certain limitations, UCI’s credit agreement for its senior credit facility permits sales of and liens on receivables, which are being sold pursuant to factoring arrangements. At December 31, 2008, we had factoring relationships with six banks. The terms of these relationships are such that the banks are not obligated to factor any amount of receivables. Because of the current challenging capital markets, it is possible that these banks may not have the capacity or willingness to fund these factoring arrangements at the levels they have in the past, or at all.

We sold approximately $197.9 million of receivables in 2008 and approximately $126.8 million in 2007. If receivables had not been factored, $80.1 million and $81.1 million of additional receivables would have been outstanding at December 31, 2008 and December 31, 2007, respectively. If we had not factored these receivables, we would have had to finance these receivables in some other way, including borrowings against our revolving credit line and reducing cash on hand. Our short term cash projections assume a significant increase over the $80.1 million of factored accounts receivable at December 31, 2008 based upon expected growth in business with certain customers.

          Short-Term Liquidity Outlook

We have implemented a number of measures to improve the level of cash generated by our operations in order to increase our liquidity. Specific actions taken include activities to align our cost structure with our customers’ spending and current market conditions. These restructuring activities include:

• Employment cost savings — We have implemented hourly and salaried workforce reductions across all overhead and selling, general and administrative cost centers to align staffing levels with current business levels. At December 31, 2008, we had approximately 4,900 employees as compared to approximately 5,200 at December 31, 2007. Actions taken subsequent to December 31, 2008 have further reduced headcounts by an additional 200. Additionally, we have implemented wage freezes, suspended certain matching contributions to defined contribution and profit sharing plans and other cost reduction activities.

• Additional cost savings — We have critically evaluated overall overhead and selling, general and administrative discretionary spending and have instituted “zero-board” discretionary spending, requiring additional approvals for all such spending across the Company.

2007 and 2008 capital spending levels were higher than 2009 estimated spending levels. 2007 and 2008 spending levels included $5.3 million for our two new facilities in China which are substantially complete, as well as funds to support other strategic initiatives. As part of our plans to conserve cash, 2009 capital spending will be limited to expenditures necessary to maintain current operations and projects that have payback periods generally no longer than six months. 2009 capital expenditures are expected to be in the range of $15.0 million to $20.0 million.

Additionally, we have implemented initiatives to reduce our investment in working capital. These reductions are expected to be achieved through focus on inventory reductions and initiatives related to accounts payable.

Based on our forecasts, we believe that cash flow from operations and available cash will be adequate to service debt, including the repayment of revolving credit borrowings upon the termination of our existing credit facility in June 2009, meet liquidity needs and fund necessary capital expenditures for the next twelve months.

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          Long-Term Liquidity Outlook

As presently structured, UCI would be the sole source of cash for the payment of cash interest on the Holdco Notes beginning in 2012, and we can give no assurance that the cash for those interest payments will be available. In the future, we may also need to refinance all or a portion of the principal amount of the senior subordinated notes and/or senior credit facility borrowings, on or prior to maturity. If refinancing is necessary, there can be no assurance that we will be able to secure such financing on acceptable terms, or at all.

Contractual Obligations

     The following table is a summary of contractual cash obligations at December 31, 2008 (in millions):

	Payments Due by Period
	Less Than						More Than
	1 Year		1-3 Years		3-5 Years		5 Years		Total
Debt repayments (excluding interest) (1)	$	25.5	$	45.4	$	375.3	$	0.2	$	446.4
Interest payments (2)		30.4		59.9		33.9	See (2) below			124.2
Estimated pension funding (3)		5.8		20.0		26.0	See (3) below			51.8
Other postretirement benefit payments (4)		0.8		1.5		1.6	See (4) below			3.9
Operating leases		5.5		8.9		7.2		10.1		31.7
Purchase obligations (5)		43.8		—		—		—		43.8
Management fee (6)		2.0		4.0		4.0	See (6) below			10.0
Unrecognized tax benefits (7)
Employment agreements		0.5		—		—		—		0.5
Total contractual cash obligations	$	114.3	$	139.7	$	448.0	$	10.3	$	712.3

(1)	Does not include the $295.1 million of Holdco Notes outstanding. See Note 14 to the financial statements included in this Form 10-K.
(2)	Estimated interest payments are based on the assumption that (i) December 31, 2008 interest rates will prevail throughout all future periods, (ii) debt is repaid on its due date, and (iii) no new debt is issued. Interest payments beyond year 5 are less than $0.1 million. Nevertheless, estimated interest payments were excluded from the table after year 5.
(3)	Estimated pension funding is based on the current composition of pension plans and current actuarial assumptions. Pension funding will continue beyond year 5. Nevertheless, estimated pension funding is excluded from the table after year 5. See Note 16 to the financial statements included in this Form 10-K for the funding status of the Company’s pension plans at December 31, 2008.
(4)	Estimated benefit payments are based on current actuarial assumptions. Benefit payments will continue beyond year 5. Nevertheless, estimated payments are excluded from the table after year 5. See Note 16 to the financial statements included in this Form 10-K for the funding status of the Company’s other postretirement benefit plans at December 31, 2008.
(5)	Included in the purchase obligations is $4.4 million related to property, plant and equipment. The remainder is for materials, supplies and services routinely used in the Company’s normal operations.
(6)	The management fee is excluded from the table after year 5. The management fee is expected to continue at an annual rate of $2.0 million as long as the ownership of the Company does not change.
(7)	Possible payments of $4.1 million related to unrecognized tax benefits are not included in the table because management cannot make reasonable reliable estimates of when cash settlement will occur, if ever. These unrecognized tax benefits are discussed in Note 15 to the financial statements included in this Form 10-K.

Commitments and Contingencies

Environmental

UCI is subject to a variety of federal, state, local and foreign environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances or wastes, and the cleanup of contaminated sites. UCI has been identified as a potentially responsible party for contamination at two sites. One of these sites is a former facility in Edison, New Jersey, where a state agency has ordered UCI to continue with the monitoring and investigation of chlorinated solvent contamination. UCI has informed the agency that this contamination was caused by another party at a neighboring facility and has initiated a lawsuit against that party for damages and to compel it to take responsibility for any further investigation or remediation. The lawsuit has proceeded to trial, which is expected to be completed in the first quarter of 2009, although it is uncertain when a decision will be rendered. The second site is a previously owned site in Solano County, California, where UCI, at the request of the regional water board, is investigating and analyzing the nature and extent of the contamination and is conducting some remediation. Based on currently available information, management believes that the cost of the ultimate outcome of these environmental matters will not exceed the $1.9 million accrued at December 31, 2008 by a material amount, if at all. However, because all investigation and analysis has not yet been completed, and because of the inherent uncertainty in such environmental matters and in the outcome of litigation, such as the New Jersey litigation, it is reasonably possible that the ultimate outcome of these matters could have a material adverse effect on results for a single quarter.

In addition to the two matters discussed above, UCI has been named as a potentially responsible party at a site in Calvert City, Kentucky. UCI estimates settlement costs at $0.1 million for this site. Also, UCI is involved in regulated remediation at two of its manufacturing sites. The combined cost of the remediation is $0.6 million. The majority of the $0.7 million will be spent in the next two years. To date, the expenditures related to these three sites have been immaterial.

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Antitrust Litigation

As of March 15, 2009, United Components, Inc. and its wholly owned subsidiary, Champion, were named as two of multiple defendants in 23 complaints originally filed in the District of Connecticut, the District of New Jersey, the Middle District of Tennessee and the Northern District of Illinois alleging conspiracy violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, related to aftermarket oil, air, fuel and transmission filters. Eight of these complaints also named The Carlyle Group as a defendant, but those plaintiffs voluntarily dismissed Carlyle from each of those actions without prejudice. Champion, but not United Components, was also named as a defendant in 13 virtually identical actions originally filed in the Northern and Southern Districts of Illinois, and the District of New Jersey. All of these complaints are styled as putative class actions on behalf of all persons and entities that purchased aftermarket filters in the U.S. directly from the defendants, or any of their predecessors, parents, subsidiaries or affiliates, at any time during the period from January 1, 1999 to the present. Each case seeks damages, including statutory treble damages, an injunction against future violations, costs and attorney’s fees.

United Components and Champion were also named as two of multiple defendants in 17 similar complaints originally filed in the District of Connecticut, the Northern District of California, the Northern District of Illinois and the Southern District of New York by plaintiffs who claim to be indirect purchasers of aftermarket filters. Two of these complaints also named The Carlyle Group as a defendant, but the plaintiffs in both of those actions voluntarily dismissed Carlyle without prejudice. Champion, but not United Components, was also named in 3 similar actions originally filed in the Eastern District of Tennessee, the Northern District of Illinois and the Southern District of California. These complaints allege conspiracy violations of Section 1 of the Sherman Act and/or violations of state antitrust, consumer protection and unfair competition law. They are styled as putative class actions on behalf of all persons or entities who acquired indirectly aftermarket filters manufactured and/or distributed by one or more of the defendants, their agents or entities under their control, at any time between January 1, 1999 and the present; with the exception of three complaints which each allege a class period from January 1, 2002 to the present, and one complaint which alleges a class period from the “earliest legal permissible date” to the present. The complaints seek damages, including statutory treble damages, an injunction against future violations, disgorgement of profits, costs and attorney’s fees.

On August 18, 2008, the Judicial Panel on Multidistrict Litigation (“JPML”) issued an order transferring the U.S. direct and indirect purchaser aftermarket filters cases to the Northern District of Illinois for coordinated and consolidated pretrial proceedings before the Honorable Robert W. Gettleman pursuant to 28 U.S.C. § 1407. On November 26, 2008, all of the direct purchaser plaintiffs filed a Consolidated Amended Complaint. This complaint names Champion as one of multiple defendants, but it does not name United Components. The complaint is styled as a putative class action and alleges conspiracy violations of Section 1 of the Sherman Act. The direct purchaser plaintiffs seek damages, including statutory treble damages, an injunction against future violations, costs and attorney’s fees. On February 2, 2009, Champion filed its answer to the direct purchasers’ Consolidated Amended Complaint.

On December 1, 2008, all of the indirect purchaser plaintiffs, except Gasoline and Automotive Service Dealers of America (“GASDA”), filed a Consolidated Indirect Purchaser Complaint. This complaint names Champion as one of multiple defendants, but it does not name United Components. The complaint is styled as a putative class action and alleges conspiracy violations of Section 1 of the Sherman Act and violations of state antitrust, consumer protection and unfair competition law. The indirect purchaser plaintiffs seek damages, including statutory treble damages, penalties and punitive damages where available, an injunction against future violations, disgorgement of profits, costs and attorney’s fees. On February 2, 2009, Champion and the other defendants jointly filed a motion to dismiss the Consolidated Indirect Purchaser Complaint. On that same date, Champion, United Components and the other defendants jointly filed a motion to dismiss the GASDA complaint. Pursuant to a stipulated agreement between the parties, all defendants produced limited initial discovery on January 30, 2009. The Court has ordered that all further discovery shall be stayed until after it rules on the motions to dismiss.

On January 12, 2009, Champion, but not United Components, was named as one of ten defendants in a related action filed in the Superior Court of California, for the County of Los Angeles on behalf of a purported class of direct and indirect purchasers of aftermarket filters. On March 5, 2009, one of the defendants filed a notice of removal to the U.S. District Court for the Central District of California, and then subsequently requested that the JPML transfer this case to the Northern District of Illinois for coordinated pre-trial proceedings.

Champion, but not United Components, was also named as one of five defendants in a class action filed in Quebec, Canada. This action alleges conspiracy violations under the Canadian Competition Act and violations of the obligation to act in good faith (contrary to art. 6 of the Civil Code of Quebec) related to the sale of aftermarket filters. The plaintiff seeks joint and several liability against the five defendants in the amount of $5.0 million in compensatory damages and $1.0 million in punitive damages. The plaintiff is seeking authorization to have the matter proceed as a class proceeding, which motion has not yet been ruled on.

Champion, but not United Components, was also named as one of 14 defendants in a class action filed on May 21, 2008, in Ontario, Canada. This action alleges civil conspiracy, intentional interference with economic interests, and conspiracy violations under the Canadian Competition Act related to the sale of aftermarket filters. The plaintiff seeks joint and several liability against the 14 defendants in the amount of $150 million in general damages and $15 million in punitive damages. The plaintiff is also seeking authorization to have the matter proceed as a class proceeding, which motion has not yet been ruled on. The Antitrust Division of the Department of Justice (DOJ) is also investigating the allegations raised in these suits and certain current and former employees of the defendants, including Champion, have testified pursuant to subpoenas. We are fully cooperating with the DOJ investigation.

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On July 30, 2008, the Office of the Attorney General for the State of Florida issued Antitrust Civil Investigative Demands to Champion and UCI requesting documents and information related to the sale of oil, air, fuel and transmission filters. We are cooperating with the Attorney General’s requests.

We intend to vigorously defend against these claims. It is too soon to assess the possible outcome of these proceedings. No amounts, other than ongoing defense costs, have been recorded in the financial statements for these matters.

Value-added Tax Receivable

UCI’s Mexican operation has outstanding receivables denominated in Mexican pesos in the amount of $3.3 million from the Mexican Department of Finance and Public Credit. The receivables relate to refunds of Mexican value-added tax, to which UCI believes it is entitled in the ordinary course of business. The local Mexican tax authorities have rejected UCI’s claims for these refunds, and the company has commenced litigation in the regional federal administrative and tax courts in Monterrey to order the local tax authorities to process these refunds.

Other Litigation

UCI is subject to various other contingencies, including routine legal proceedings and claims arising out of the normal course of business. These proceedings primarily involve commercial claims, product liability claims, personal injury claims and workers’ compensation claims. The outcome of these lawsuits, legal proceedings and claims cannot be predicted with certainty. Nevertheless, UCI believes that the outcome of any currently existing proceedings, even if determined adversely, would not have a material adverse effect on UCI’s financial condition or results of operations.

Recent Accounting Pronouncements

On January 1, 2007, UCI adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 “Accounting for Uncertainty in Income Taxes.” The effect was immaterial to UCI’s financial statements.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 (i) defines fair value, (ii) establishes a framework for measuring fair value in generally accepted accounting principles, and (iii) expands disclosures about fair value measurements. For certain nonfinancial assets and liabilities, adoption of SFAS No. 157 is not required until 2009, and UCI has not adopted for those certain nonfinancial assets and liabilities. Adoption of SFAS No. 157 in 2009 for those certain nonfinancial assets and liabilities is not expected to have a significant effect on UCI’s financial statements. For assets and liabilities other than those certain nonfinancial assets and liabilities, UCI adopted SFAS No. 157 on January 1, 2008. Adoption of this portion of SFAS No. 157 did not have a material impact on UCI’s financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities— Including an Amendment of SFAS No. 115.” SFAS No. 159 permits companies to choose to measure certain financial instruments and other items at fair value. UCI did not choose the fair value measurement options permitted by SFAS No. 159 for any of its assets and liabilities. Therefore, adoption of SFAS No. 159 did not impact UCI’s financial statements.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations.” SFAS No. 141R will replace SFAS No. 141 and provides new rules for accounting for the acquisition of a business. This statement is effective for fiscal years beginning after December 15, 2008. Generally, the effects of SFAS No. 141R will depend on the occurrence of future acquisitions, if any, by UCI.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” an amendment of ARB No. 51, which will be adopted on January 1, 2009. This standard will change the name of “Minority Interest” to “Noncontrolling Interest.” This standard will also change the accounting and reporting related to noncontrolling interests in a consolidated subsidiary. After adoption, noncontrolling interests, ($2.5 million and $3.3 million at December 31, 2008 and 2007, respectively) will be classified as shareholder’s equity, a change from its current classification with long-term liabilities. Losses attributable to minority interests ($0.9 million, $0.1 million, and $0.8 million for 2008, 2007 and 2006, respectively), will be included in net income, although such losses will be deducted to arrive at net income attributable to UCI.

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In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133.” SFAS No. 161 changes disclosure requirements for derivative instruments and hedging activities. Entities will be required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. This statement is effective for fiscal years beginning after November 15, 2008. UCI has not evaluated the potential impact of this statement on its financial statements.

In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, “Determination of the Useful Life of Intangible Assets,” to provide guidance for determining the useful life of recognized intangible assets and to improve consistency between the period of expected cash flows used to measure the fair value of a recognized intangible asset and the useful life of the intangible asset as determined under Statement 142. The FSP requires that an entity consider its own historical experience in renewing or extending similar arrangements. However, the entity must adjust that experience based on entity-specific factors under FASB Statement 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 is effective for fiscal years and interim periods that begin after November 15, 2008. UCI has periodically purchased recognized intangible assets. The adoption of FSP FAS 142-3 is not expected to have a material effect on UCI’s financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” This statement identifies the sources of accounting principles and the framework, or hierarchy, for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. This statement is effective November 15, 2008. SFAS No. 162 is not expected to have a significant effect on UCI’s financial statements.

In December 2008, the FASB issued FASB Staff Position (FSP) FAS 140-4, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities,” to provide additional disclosures about transfers of financial assets. The disclosures required by FSP 140-4 are intended to provide more transparency to financial statement users about a transferor’s continuing interest involvement with transferred financial assets and an enterprise’s involvement with variable interest entities and qualifying special purpose entities. FSP FAS 140-4 is effective for fiscal years and interim periods that begin after December 15, 2008. UCI has agreements to sell undivided interests in certain of its receivables with factoring companies, which in turn have the right to sell an undivided interest to a financial institution or other third party. However, UCI retains no rights or interest, and has no obligations, with respect to the sold receivables. UCI does not service the receivables after the sales. As such, FSP FAS 140-4 is not expected to have a significant effect on UCI’s financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our exposure to market risk consists of foreign currency exchange rate fluctuations and changes in interest rates.

Foreign Currency Exposure

     Currency translation. As a result of international operating activities, we are exposed to risks associated with changes in foreign exchange rates, principally exchange rates between the U.S. dollar and the Mexican peso, British pound and the Chinese yuan. The results of operations of our foreign subsidiaries are translated into U.S. dollars at the average exchange rates for each relevant period, except for our Chinese subsidiaries where cost of sales is translated primarily at historical exchange rates. This translation has no impact on our cash flow. However, as foreign exchange rates change, there are changes to the U.S. dollar equivalent of sales and expenses denominated in foreign currencies. In 2008, approximately 8% of our net sales were made by our foreign subsidiaries. Their combined net income was not material. While these results, as measured in U.S. dollars, are subject to foreign exchange rate fluctuations, we do not consider the related risk to be material to our financial condition or results of operations.

     Except for the Chinese subsidiaries, the balance sheets of foreign subsidiaries are translated into U.S. dollars at the closing exchange rates as of the relevant balance sheet date. Any adjustments resulting from the translation are recorded in accumulated other comprehensive income (loss) on our statement of shareholder’s equity. For our Chinese subsidiaries, non-monetary assets and liabilities are translated into U.S. dollars at historical rates and monetary assets and liabilities are translated into U.S. dollars at the closing exchange rate as of the relevant balance sheet date. Adjustments resulting from the translation of the balance sheets of our Chinese subsidiaries are recorded in our income statement.

43

Currency transactions. Currency transaction exposure arises where actual sales and purchases are made by a business or company in a currency other than its own functional currency. In 2009, we expect to source approximately $70 million of components from China. The currency exchange rate from Chinese yuan to U.S. dollars has been stable, in large part due to the economic policies of the Chinese government. However, the Chinese government has reduced its influence over the currency exchange rate, and let market conditions control to a greater extent. As a result, during the period from June 30, 2007 through June 30, 2008, the Chinese yuan strengthened against the U.S. dollar by approximately 11%. Less influence by the Chinese government will most likely result in the Chinese yuan continuing to strengthening against the U.S. dollar. A weakening U.S. dollar means that we must pay more U.S. dollars to obtain components from China, which equates to higher cost of sales. If we are unable to negotiate commensurate price decreases from our Chinese suppliers, these higher prices would eventually translate into higher cost of sales. In that event we would attempt to obtain corresponding price increases from our customers, but there are no assurances that we would be successful.

Our Mexican operations source a significant amount of inventory from the United States. During the period September 30, 2008 through December 31, 2008, the U.S. dollar strengthened against the Mexican peso by approximately 28% and has further strengthened by approximately 3% from January 1, 2009 through March 18, 2009. A strengthening U.S. dollar against the Mexican peso means that our Mexican operations must pay more pesos to obtain inventory from the United States. These higher prices translate into higher cost of sales for our Mexican operations. We are attempting to obtain corresponding price increases from our customers served by our Mexican operations, but there are no assurances that we will be successful.

We will continue to monitor our transaction exposure to currency rate changes and may enter into currency forward and option contracts to limit the exposure, as appropriate. Gains and losses on contracts are deferred until the transaction being hedged is finalized. As of December 31, 2008, we had no foreign currency contracts outstanding. We do not engage in any speculative activities.

Interest Rate Risk

In connection with our senior credit facilities, we entered into interest rate swap agreements in August 2005. These agreements effectively converted $80 million of variable rate debt to fixed rate debt for the two years ended August 2007, and converted $40 million for the 12-month period ended August 2008. The variable component of the interest rate on borrowings under the senior credit facilities was based on LIBOR. Under the swap agreements, we paid 4.4% and received the then current LIBOR on $80 million through August 2007, and we paid 4.4% and received the then current LIBOR on $40 million for the 12-month period ending August 2008.

UCI did not replace the interest rate swap that expired in August 2008, and at this time does not intend to replace it.

We utilize, and we will continue to utilize, sensitivity analyses to assess the potential effect of our variable rate debt. If variable interest rates were to increase by 0.25% per annum, the net impact would be a decrease of approximately $0.3 million of our net income and cash flow.

Treasury Policy

     Our treasury policy seeks to ensure that adequate financial resources are available for the development of our businesses while managing our currency and interest rate risks. Our policy is to not engage in speculative transactions. Our policies with respect to the major areas of our treasury activity are set forth above.

44

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		46
Consolidated Financial Statements
Consolidated Balance Sheets		47
Consolidated Income Statements		48
Consolidated Statements of Cash Flows		49
Consolidated Statements of Changes in Shareholder’s Equity		50
Notes to Consolidated Financial Statements		51

45

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder
United Components, Inc. and subsidiaries

We have audited the accompanying consolidated balance sheets of United Components, Inc. and subsidiaries (the “Company”) (a Delaware corporation) as of December 31, 2008 and 2007, and the related consolidated statements of income, shareholder’s equity and cash flows for each of the three years in the period ended December 31, 2008. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial position of United Components, Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 15, the Company changed its method of accounting for uncertain tax positions in 2007 due to the adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes. Further, as discussed in Note 16, the Company changed its method of accounting for pension and other postretirement benefits in 2007 due to the adoption of FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Post-Retirement Plans: an amendment of FASB Statement No. 87, 88, 106 and 132(R). Also as discussed in Note 20, the Company changed its method of accounting for share-based compensation in 2006 due to the adoption of FASB Statement No. 123(R), Share-Based Payment.

/s/ GRANT THORNTON LLP

Cincinnati, Ohio
March 30, 2009

46

United Components, Inc.

Consolidated Balance Sheets

(in thousands)

	December 31,
	2008			2007
Assets
Current assets
Cash and cash equivalents	$	46,612		$	41,440
Accounts receivable, net		261,624			253,904
Inventories, net		159,444			142,621
Deferred tax assets		24,245			22,837
Other current assets		19,452			29,306
Total current assets		511,377			490,108
Property, plant and equipment, net		167,906			167,812
Goodwill		241,461			241,461
Other intangible assets, net		74,606			83,594
Deferred financing costs, net		2,649			3,701
Pension and other assets		1,823			11,478
Assets held for sale		—			1,300
Total assets	$	999,822		$	999,454
Liabilities and shareholder’s equity
Current liabilities
Accounts payable	$	104,416		$	102,553
Short-term borrowings		25,199			10,134
Current maturities of long-term debt		422			479
Accrued expenses and other current liabilities		85,730			95,169
Total current liabilities		215,767			208,335
Long-term debt, less current maturities		418,025			427,815
Pension and other postretirement liabilities		79,832			22,871
Deferred tax liabilities		3,560			27,338
Due to UCI Holdco		17,535			11,330
Minority interest		2,490			3,308
Other long-term liabilities		2,540			2,638
Total liabilities		739,749			703,635
Contingencies — Note 17
Shareholder’s equity
Common stock		—			—
Additional paid in capital		278,430			277,741
Retained earnings		21,243			11,316
Accumulated other comprehensive income (loss)		(39,600	)		6,762
Total shareholder’s equity		260,073			295,819
Total liabilities and shareholder’s equity	$	999,822		$	999,454

The accompanying notes are an integral part of these statements.

47

United Components, Inc.

Consolidated Income Statements

(in thousands)

	Year ended December 31,
	2008			2007			2006
Net sales	$	880,441		$	969,782		$	906,050
Cost of sales		702,522			748,822			728,511
Gross profit		177,919			220,960			177,539
Operating (expenses) income
Selling and warehousing		(62,906	)		(61,146	)		(60,047	)
General and administrative		(49,320	)		(49,239	)		(42,636	)
Amortization of acquired intangible assets		(6,349	)		(7,000	)		(6,651	)
Costs of integration of water pump operations and resulting asset impairment losses (Note 3)		(2,380	)		(696	)		(6,981	)
Costs of closing facilities and consolidating operations and gain from sale of assets (Note 5)		—			1,498			(6,364	)
Trademark impairment loss (Note 11)		(500	)		(3,600	)		—
Operating income		56,464			100,777			54,860
Other expense
Interest expense, net		(34,192	)		(40,706	)		(43,262	)
Write-off of deferred financing costs (Note 14)		—			—			(2,625	)
Management fee expense		(2,000	)		(2,000	)		(2,000	)
Miscellaneous, net		(2,689	)		(2,739	)		(137	)
Income before income taxes		17,583			55,332			6,836
Income tax expense		(7,656	)		(19,953	)		(694	)
Net income from continuing operations		9,927			35,379			6,142
Discontinued operations (Note 4)
Net income from discontinued operations, net of tax		—			—			2,061
Gain (loss) on sale of discontinued operations, net of tax		—			2,707			(16,877	)
		—			2,707			(14,816	)
Net income (loss)	$	9,927		$	38,086		$	(8,674	)

The accompanying notes are an integral part of these statements.

48

United Components, Inc.

Consolidated Statements of Cash Flows

(in thousands)

	Year ended December 31,
	2008			2007			2006
Cash flows from operating activities of continuing operations:
Net income (loss)	$	9,927		$	38,086		$	(8,674	)
Less:
Net income from discontinued operations, net of tax		—			—			2,061
Gain (loss) on sale of discontinued operations, net of tax		—			2,707			(16,877	)
Net income from continuing operations		9,927			35,379			6,142
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of other intangible assets		36,970			35,308			35,334
Amortization of deferred financing costs and debt issuance costs		1,684			2,083			2,510
Deferred income taxes		796			12,883			(2,188	)
Gain on sale of Mexican land and building		—			(1,716	)		—
Non-cash write off of deferred financing costs		—			—			2,625
Non-cash asset write-downs described in Notes 3 and 5		—			—			7,542
Trademark impairment loss		500			3,600			—
Other non-cash, net		2,978			3,232			3,051
Changes in operating assets and liabilities
Accounts receivable		(9,538	)		(24,908	)		3,033
Inventories		(19,088	)		15,403			27,041
Other current assets		9,513			304			(7,325	)
Accounts payable		2,955			9,833			(11,999	)
Accrued expenses and other current liabilities		(9,414	)		(2,501	)		1,804
Other assets		252			(2,152	)		4,530
Due to UCI Holdco		6,205			11,330			—
Other long-term liabilities		(1,317	)		(4,948	)		1,803
Net cash provided by operating activities of continuing operations		32,423			93,130			73,903
Cash flows from investing activities of continuing operations:
Proceeds from sale of Mexican land and building		—			6,637			—
Purchase price of the ASC acquisition, net of cash acquired		—			—			(123,634	)
Proceeds from sale of discontinued operations, net of transaction costs and cash sold		—			2,202			65,177
Capital expenditures		(31,940	)		(29,687	)		(22,846	)
Proceeds from sale of property, plant and equipment		421			1,836			1,611
Net cash used in investing activities of continuing operations		(31,519	)		(19,012	)		(79,692	)
Cash flows from financing activities of continuing operations:
Issuance of debt		27,993			20,760			113,000
Financing fees		—			—			(3,636	)
Debt repayments		(23,407	)		(84,884	)		(66,853	)
Dividend paid to UCI Holdco		—			—			(35,305	)
Shareholder’s equity contributions		—			—			8,515
Net cash provided by (used in) financing activities of continuing operations		4,586			(64,124	)		15,721
Discontinued operations:
Net cash used in operating activities of discontinued operations		—			—			(1,472	)
Net cash used in investing activities of discontinued operations		—			—			(2,864	)
Effect of exchange rate changes on cash of discontinued operations		—			—			(341	)
Effect of exchange rate changes on cash		(318	)		(77	)		86
Net increase in cash and cash equivalents		5,172			9,917			5,341
Cash and cash equivalents at beginning of year		41,440			31,523			26,182
Cash and cash equivalents of continuing operations at end of year	$	46,612		$	41,440		$	31,523

The accompanying notes are an integral part of these statements.

49

United Components, Inc.

Consolidated Statements of Changes in Shareholder’s Equity

(in thousands)

									Accumulated
			Additional			Retained			Other			Total
	Common		Paid In			Earnings			Comprehensive			Shareholder’s			Comprehensive
	Stock		Capital			(Deficit)			Income (Loss)			Equity			Income (Loss)
Balance at January 1, 2006	$	—	$	263,636		$	17,546		$	(836	)	$	280,346
Additions to paid in capital				8,515									8,515
Dividend paid to UCI Holdco, Inc.							(35,305	)					(35,305	)
Recognition of stock based compensation expense				1,598									1,598
Cumulative effect adjustment due to the adoption of SFAS No. 158										(2,425	)		(2,425	)
Comprehensive loss
Net loss							(8,674	)					(8,674	)	$	(8,674	)
Other comprehensive income
Interest rate swaps (after $(87) of income tax)										146			146			146
Foreign currency (after $66 of income tax)										278			278			278
Pension and OPEB liability (after $(187) of income tax)										303			303			303
Total comprehensive loss															$	(7,947	)
Balance at December 31, 2006	$	—	$	273,749		$	(26,433	)	$	(2,534	)	$	244,782
Balance at January 1, 2007	$	—	$	273,749		$	(26,433	)	$	(2,534	)	$	244,782
Effect of adopting FIN 48							(337	)					(337	)
Recognition of stock based compensation expense				3,445									3,445
Tax effect of exercise of UCI Holdco stock options				547									547
Comprehensive income
Net income							38,086						38,086		$	38,086
Other comprehensive income
Interest rate swaps (after $293 of income tax)										(478	)		(478	)		(478	)
Foreign currency (after $68 of income tax)										845			845			845
Pension and OPEB liability (after $(5,565) of income tax)										8,929			8,929			8,929
Total comprehensive income															$	47,382
Balance at December 31, 2007	$	—	$	277,741		$	11,316		$	6,762		$	295,819
Balance at January 1, 2008	$	—	$	277,741		$	11,316		$	6,762		$	295,819
Recognition of stock based compensation expense				833									833
Tax effect of exercise of UCI Holdco stock options				(144	)								(144	)
Comprehensive loss
Net income							9,927						9,927		$	9,927
Other comprehensive income
Interest rate swaps (after $3 of income tax)										4			4			4
Foreign currency (after $(134) of income tax)										(4,357	)		(4,357	)		(4,357	)
Pension and OPEB liability (after $25,994 of income tax)										(42,009	)		(42,009	)		(42,009	)
Total comprehensive loss															$	(36,435	)
Balance at December 31, 2008	$	—	$	278,430		$	21,243		$	(39,600	)	$	260,073

The accompanying notes are an integral part of these statements.

50

United Components, Inc.

Notes to Consolidated Financial Statements

NOTE 1 — GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

United Components, Inc. (“UCI”) is an indirect wholly-owned subsidiary of UCI Holdco, Inc. (“Holdco”). Holdco and UCI are corporations formed at the direction of The Carlyle Group. At December 31, 2008, affiliates of The Carlyle Group owned 90.9% of Holdco’s common stock, and the remainder was owned by certain current and former members of UCI’s senior management and board of directors. At December 31, 2008, Holdco had $295.1 million of Floating Rate Senior PIK Notes (the “Holdco Notes”) outstanding. While UCI has no direct obligation under the Holdco Notes, UCI is the sole source of cash generation for UCI Holdco. The Holdco Notes do not appear on UCI’s balance sheet and the related interest expense is not included in UCI’s income statement. See Note 14.

On May 25, 2006, UCI acquired ASC Industries, Inc. See Note 2.

On June 30, 2006, UCI sold its driveline components operation and its specialty distribution operation. See Note 4.

On November 30, 2006, UCI sold its lighting systems operation. See Note 4.

UCI operates through its subsidiaries. UCI manufactures and distributes vehicle parts, primarily servicing the vehicle replacement parts market in North America and Europe.

In these notes to the financial statements, the term “UCI” refers to United Components, Inc. and its subsidiaries and the term “United Components” refers to United Components, Inc. without its subsidiaries.

A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of UCI, its wholly-owned subsidiaries and a 51% owned joint venture. All significant intercompany accounts and transactions have been eliminated.

Revenue Recognition

UCI records sales when title has transferred to the customer, the sales price is fixed and determinable, and the collection of the related accounts receivable is reasonably assured. In the case of sales to the aftermarket, UCI recognizes revenue when the above conditions are met for its direct customers, which are the aftermarket retailers and distributors.

Provisions for estimated sales returns, allowances and warranty costs are recorded when the sales are recorded. Sales returns, allowances and warranty costs are estimated based upon historical experience, current trends, and UCI’s expectations regarding future experience. Adjustments to such returns, allowances, and warranty costs are made as new information becomes available.

In order to obtain exclusive contracts with certain customers, we may incur up-front costs or assume the cost of returns of products sold by the previous supplier. These costs are capitalized and amortized over the life of the contract. The amortized amounts are recorded as a reduction of sales.

New business changeover costs also can include the costs related to removing a new customer’s inventory and replacing it with UCI inventory, commonly referred to as a “stocklift.” Stocklift costs are recorded as a reduction to revenue when incurred.

Cash Equivalents

Certificates of deposit, commercial paper, and other highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.

51

United Components, Inc.
Notes to Consolidated Financial Statements

Allowance for Doubtful Accounts

UCI generally does not require collateral for its trade accounts receivable. Accounts receivable have been reduced by an allowance for amounts that may become uncollectible in the future. These allowances are established based on a combination of write-off history, aging analysis, and specific account evaluations. When a receivable balance is known to be uncollectible, it is written off against the allowance for doubtful accounts.

Inventories

Inventories are stated at the lower of cost or market. Cost is principally determined using standard or average cost, which approximates the first-in, first-out method. Inventories are reduced by an allowance for excess and obsolete inventories, based on UCI’s review of on-hand inventories. The expense of inventory write-downs is included in cost of sales.

Depreciation and Amortization

Depreciation of property, plant and equipment is provided on a straight-line basis, over the estimated service lives of the assets. Leasehold improvements are amortized over the shorter of their service life or the remaining term of the lease.

Major renewals and improvements of property, plant and equipment are capitalized, and repairs and maintenance costs are expensed as incurred. Repairs and maintenance expenses for the years ended December 31, 2008, 2007 and 2006 were $6.1 million, $5.7 million, and $5.8 million, respectively.

Most of UCI’s trademarks have indefinite lives and are not amortized; instead they are subject to impairment evaluations. Trademarks with finite lives and other intangible assets are amortized over their useful lives on an accelerated or straight-line basis commensurate with the expected benefits received from such intangible assets.

Goodwill and Trademarks with Indefinite Lives

Goodwill is subject to annual review unless conditions arise that require a more frequent evaluation. The review for impairment is based on a two-step accounting test. The first step is to compare the estimated fair value of UCI with the recorded net book value (including the goodwill). If the estimated fair value is higher than the recorded net book value, no impairment is deemed to exist and no further testing is required. If, however, the estimated fair value is below the recorded net book value, then a second step must be performed to determine the goodwill impairment required, if any. In this second step, the estimated fair value from the first step is used as the purchase price in a hypothetical acquisition. Purchase business combination accounting rules are followed to determine a hypothetical purchase price allocation to the reporting unit’s assets and liabilities. The residual amount of goodwill that results from this hypothetical purchase price allocation is compared to the recorded amount of goodwill, and the recorded amount is written down to the hypothetical amount, if lower.

We perform our annual goodwill impairment review in the fourth quarter of each year using discounted future cash flows of the Company’s one reporting unit. Management retained the services of an independent valuation company in order to assist in evaluating the estimated fair value of the company. The process of evaluating the potential impairment of goodwill is subjective because it requires the use of estimates and assumptions as to future cash flows of the company and discount rates commensurate with the risks involved in the assets. Although we base cash flow forecasts on assumptions that are consistent with plans and estimates we use to manage our company, there is significant judgment in determining the cash flows. After determining the fair values of our company as of December 31, 2008, it was determined that no impairment existed.

Trademarks with indefinite lives are tested for impairment on an annual basis in the fourth quarter, unless conditions arise that would require a more frequent evaluation. In assessing the recoverability of these assets, projections regarding estimated discounted future cash flows and other factors are made to determine if an impairment has occurred. If UCI concludes that there has been an impairment, UCI will write down the carrying value of the asset to its fair value. In 2008 and 2007, UCI recorded trademark impairment losses of $0.5 million and $3.6 million, respectively.

52

United Components, Inc.
Notes to Consolidated Financial Statements

Each year, UCI evaluates those trademarks with indefinite lives to determine whether events and circumstances continue to support the indefinite useful lives. Other than the impaired trademark mentioned above, UCI has concluded that events and circumstances continue to support the indefinite lives of these trademarks.

Impairment of Long-Lived Assets, other than Goodwill and Trademarks with Indefinite Lives and Long-Lived Assets to be Disposed of

UCI evaluates all of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of such long-lived assets is measured by a comparison of the carrying amount of the asset to the future undiscounted net cash flows that are expected to be generated by the asset. If the carrying amount exceeds the expected undiscounted future cash flows, the asset is considered to be impaired. If an asset is considered to be impaired, it is written down to fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. See Notes 3, 5 and 11 for impairment losses recorded in 2008, 2007 and 2006.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets are also recognized for operating losses and tax credit carryforwards. UCI establishes valuation allowances against operating losses and tax credit carryforwards when the ability to fully utilize these benefits is determined to be uncertain. Deferred tax assets and liabilities are measured using enacted tax rates applicable in the years in which they are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax law is recognized in income in the period that includes the enactment date.

UCI records a liability for uncertain tax positions where management concludes that the likelihood of sustaining such positions upon examination by taxing authorities is less than “more likely than not”. UCI also records any interest and penalties related to these unrecognized tax benefits as a component of “Income tax expense.”

Foreign Currency Translation

Chinese operations — The functional currency of our Chinese operations is the U.S. dollar. Income statements of these operations are translated into U.S. dollars at the average exchange rates for each relevant period, except for cost of sales, which is translated primarily at historical exchange rates. Non-monetary assets and liabilities are translated into U.S. dollars at historical rates, and monetary assets and liabilities are translated at the closing exchange rate as of the applicable balance sheet date. Adjustments resulting from the translation of the balance sheet are recorded in the income statement.

All other foreign operations — The functional currency for all other foreign operations is their local currency. Income statements of these operations are translated into U.S. dollars using the average exchange rates during the applicable period. Assets and liabilities of these operations are translated into U.S. dollars using the exchange rates in effect at the applicable balance sheet date. Resulting cumulative translation adjustments are recorded as a component of shareholder’s equity in “Accumulated other comprehensive income (loss).”

Foreign Currency Transactions

Transaction foreign exchange gains and losses are included in “Cost of sales” in the income statement. The net foreign exchange gains (losses) were $(2.6) million, $0.5 million and $0.7 million for the years ended December 31, 2008, 2007 and 2006, respectively.

53

United Components, Inc.
Notes to Consolidated Financial Statements

Reporting of Comprehensive Income (Loss)

Comprehensive income (loss) includes (i) net income (loss), (ii) the cumulative effect of translating balance sheets of certain foreign subsidiaries to U.S. dollars, (iii) the effect of adjusting interest rate swaps to market, and (iv) the recognition of pension liabilities. The last three are not included in the income statement and are reflected as adjustments to shareholder’s equity.

Financial Statement Presentation

The following provides a description of certain items that appear in the income statement:

Net sales includes gross sales less deductions for incentive rebate programs, product returns, allowances and discounts. Shipping and handling fees that are billed to customers are classified as revenues.

Cost of sales includes all costs required to bring a product to a ready-for-sale condition. Such costs include direct and indirect materials (net of vendor consideration), direct and indirect labor costs (including pension, postretirement and other fringe benefits), supplies, utilities, depreciation, insurance, information technology costs, shipping and other costs. Cost of sales also includes the procurement, packaging, and shipping of products purchased for resale.

Selling and warehousing expenses includes costs of selling and marketing, warehousing, technical services and distribution. The major cost elements for this line item include salaries and wages (including pension, postretirement and other fringe benefits), freight, depreciation, advertising and information technology costs.

Advertising is expensed as incurred. Advertising expense for the years ended December 31, 2008, 2007 and 2006 was $2.9 million, $2.9 million, and $3.8 million, respectively.

General and administrative expenses includes the costs of executive, accounting and administrative personnel (including pension, postretirement and other fringe benefits), professional fees, insurance, provisions for doubtful accounts, rent and information technology costs.

Stock-Based Compensation

UCI Holdco adopted a stock option plan in 2003. In December 2008, the Board of Directors of UCI Holdco approved the adoption of an amended and restated equity incentive plan that represented a complete amendment, restatement and continuation of the previous stock option plan. The amended and restated equity incentive plan permits the granting of options to purchase shares of common stock of UCI Holdco to UCI’s employees, directors, and consultants, as well as the granting of restricted shares of UCI Holdco common stock.

In January 2006, UCI adopted SFAS No. 123R, “Share-Based Payments.” UCI elected the modified prospective method of adoption under which prior periods are not revised.

Environmental Liabilities

UCI accrues for environmental investigation, remediation and penalty costs when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The liability is determined on an undiscounted cash flow basis and is not reduced for potential claims for recovery. Claims for recovery are recognized as agreements are reached with third parties. Environmental expenditures are capitalized if they mitigate or prevent future contamination or if they improve the environmental safety or efficiency of the existing assets. All other environmental costs are expensed as incurred. Environmental cost estimates may include expenses for remediation of identified sites, long term monitoring, payments for claims, administrative expenses, and expenses for ongoing evaluations and litigation. The liability is adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available.

54

United Components, Inc.
Notes to Consolidated Financial Statements

Insurance Reserves

UCI’s insurance for workers’ compensation, automobile, product and general liability includes high deductibles for which UCI is responsible. Deductibles, for which UCI is responsible, are estimated and recorded as expenses in the period incurred.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. The estimates and assumptions include estimates of collectibility of accounts receivable and the realizability of inventory, goodwill and other intangible assets. They also include estimates of cost accruals, environmental liabilities, warranty and product returns, insurance reserves, income taxes, pensions and other postretirement benefits and other factors. Management has exercised reasonableness in deriving these estimates; however, actual results could differ from these estimates.

Segment Reporting

In accordance with the provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” UCI reports as one segment. UCI is in one business, which is the manufacturing and distribution of vehicle parts. The products and services, customer base, distribution channel, manufacturing process, procurement, and economic characteristics are similar throughout all of UCI’s operations.

Derivative Financial Instruments

UCI recognizes derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value. Changes in the fair value of those instruments will be reported in income or other comprehensive income (loss) depending on the use of the derivative and whether it qualifies for hedge accounting. The accounting for gains and losses associated with changes in the fair value of the derivative, and the effect on the financial statements, will depend on its hedge designation and whether the hedge is highly effective in offsetting changes in the fair value of cash flows of the asset or liability hedged.

Defined Benefit Pension and Other Post Retirement Plans

At December 31, 2006, UCI adopted Statement of Financial Accounting Standard (“SFAS”) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R).” See Note 16 for the effects of adopting SFAS No. 158.

New Accounting Pronouncements

On January 1, 2007, UCI adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 “Accounting for Uncertainty in Income Taxes.” The effect was immaterial to UCI’s financial statements.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 (i) defines fair value, (ii) establishes a framework for measuring fair value in generally accepted accounting principles, and (iii) expands disclosures about fair value measurements. For certain nonfinancial assets and liabilities, adoption of SFAS No. 157 is not required until 2009, and UCI has not adopted it for those certain nonfinancial assets and liabilities. Adoption of SFAS No. 157 in 2009 for those certain nonfinancial assets and liabilities is not expected to have a significant effect on UCI’s financial statements. For assets and liabilities other than those certain nonfinancial assets and liabilities, UCI adopted SFAS No. 157 on January 1, 2008. Adoption of this portion of SFAS No. 157 did not have a material impact on UCI’s financial statements.

55

United Components, Inc.
Notes to Consolidated Financial Statements

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of SFAS No. 115.” SFAS No. 159 permits companies to choose to measure certain financial instruments and other items at fair value. UCI did not choose the fair value measurement options permitted by SFAS No. 159 for any of its assets and liabilities. Therefore, adoption of SFAS No. 159 did not impact UCI’s financial statements.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations.” SFAS No. 141R will replace SFAS No. 141 and provides new rules for accounting for the acquisition of a business. This statement is effective for fiscal years beginning after December 15, 2008. Generally, the effects of SFAS No. 141R will depend on the occurrence of future acquisitions, if any, by UCI.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” an amendment of ARB No. 51, which will be adopted on January 1, 2009. This standard will change the name of “Minority Interest” to “Noncontrolling Interest.” This standard will also change the accounting and reporting related to noncontrolling interests in a consolidated subsidiary. After adoption, noncontrolling interests, ($2.5 million and $3.3 million at December 31, 2008 and 2007, respectively) will be classified as shareholder’s equity, a change from its current classification with long-term liabilities. Losses attributable to minority interests ($0.9 million, $0.1 million, and $0.8 million for 2008, 2007 and 2006, respectively), will be included in net income, although such losses will be deducted to arrive at net income attributable to UCI.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133.” SFAS No. 161 changes disclosure requirements for derivative instruments and hedging activities. Entities will be required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. This statement is effective for fiscal years beginning after November 15, 2008. UCI has not evaluated the potential impact of this statement on its financial statements.

In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, “Determination of the Useful Life of Intangible Assets,” to provide guidance for determining the useful life of recognized intangible assets and to improve consistency between the period of expected cash flows used to measure the fair value of a recognized intangible asset and the useful life of the intangible asset as determined under Statement 142. The FSP requires that an entity consider its own historical experience in renewing or extending similar arrangements. However, the entity must adjust that experience based on entity-specific factors under FASB Statement 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 is effective for fiscal years and interim periods that begin after November 15, 2008. UCI has periodically purchased recognized intangible assets. The adoption of FSP FAS 142-3 is not expected to have a material effect on UCI’s financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” This statement identifies the sources of accounting principles and the framework, or hierarchy, for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. This statement is effective November 15, 2008. SFAS No. 162 is not expected to have a significant effect on UCI’s financial statements.

In December 2008, the FASB issued FASB Staff Position (FSP) FAS 140-4, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities,” to provide additional disclosures about transfers of financial assets. The disclosures required by FSP 140-4 are intended to provide more transparency to financial statement users about a transferor’s continuing interest involvement with transferred financial assets and an enterprise’s involvement with variable interest entities and qualifying special purpose entities. FSP FAS 140-4 is effective for fiscal years and interim periods that begin after December 15, 2008. UCI has agreements to sell undivided interests in certain of its receivables with factoring companies, which in turn have the right to sell an undivided interest to a financial institution or other third party. However, UCI retains no rights or interest, and has no obligations, with respect to the sold receivables. UCI does not service the receivables after the sales. As such, FSP FAS 140-4 is not expected to have a significant effect on UCI’s financial statements.

56

United Components, Inc.
Notes to Consolidated Financial Statements

NOTE 2 — ACQUISITION OF ASC INDUSTRIES, INC.

On May 25, 2006 (the “ASC Acquisition Date”), UCI completed the acquisition of ASC Industries, Inc. and its subsidiaries (“ASC”). This transaction is referred to herein as the “ASC Acquisition.”

The ASC Acquisition is accounted for under the purchase method of accounting and, accordingly, the results of operations of ASC have been included in UCI’s results beginning on the ASC Acquisition Date.

Purchase Price

The ASC Acquisition purchase price, including $4.4 million of fees and expenses directly related to the ASC Acquisition, was $127.4 million. In addition, UCI assumed $12.0 million of ASC debt and certain other ASC obligations related to the acquisition.

Financing for the ASC Acquisition

Financing for the ASC Acquisition was comprised of the following (in millions):

Proceeds from additional UCI debt	$	113.0
UCI’s cash on hand		6.1
Rollover equity		8.3
	$	127.4

Certain ASC stockholders exchanged $8.3 million of ASC stock for the stock of UCI Holdco, and UCI Holdco contributed the ASC stock to UCI. This stock is referred to as “rollover equity” in the above table.

Pursuant to the Stock Purchase Agreement, ASC was required to repay $81.6 million of certain ASC debt and other ASC obligations. These repayments were made from the cash received by ASC stockholders from the sale of the ASC stock to UCI.

Allocation of the ASC Acquisition Purchase Price

The allocation of the ASC Acquisition purchase price was based on the fair value of the assets acquired and liabilities assumed. In 2007, the allocation of the ASC Acquisition purchase price was finalized. The final allocation of the ASC Acquisition purchase price is as follows (in millions):

Cash	$	3.7
Accounts receivable		11.4
Inventory		40.8
Property, plant and equipment		27.3
Acquired intangible assets		18.6
Goodwill		74.9
Other assets		2.2
Accounts payable and accrued liabilities		(25.5	)
Notes payable		(10.0	)
Capital lease obligations		(1.2	)
Other liabilities		(5.0	)
Deferred income taxes		(9.8	)
	$	127.4

Goodwill is not deductible for income tax purposes. Acquired intangible assets are primarily customer relations and trademarks, which are amortized on an accelerated basis commensurate with the expected benefits. The useful lives of these intangibles are estimated to range from 3 to 20 years.

57

United Components, Inc.
Notes to Consolidated Financial Statements

In the fourth quarter of 2007, UCI recorded a $1.8 million pre-tax benefit resulting from the favorable resolution of certain pre-acquisition ASC liabilities. The 2007 income statement includes $1.4 million in “Cost of sales” and $0.4 million in “General and administrative.”

Pro Forma Information

The unaudited pro forma income statement information presented below is based on the historical income statements of UCI and ASC and has been adjusted on a pro forma basis to give effect to the ASC Acquisition and the related financing, as if they had occurred on January 1, 2006. The pro forma adjustments give effect to (i) the allocation of the ASC Acquisition purchase price, (ii) UCI’s ASC Acquisition related financing, and (iii) the repayment by ASC of $81.6 million of ASC debt and other ASC obligations from the proceeds received in connection with the ASC Acquisition, as if they occurred on January 1, 2006.

The unaudited pro forma financial information does not purport to represent what the results of operations would have been had the ASC Acquisition occurred as of the date indicated, or what results will be in future periods.

	(in millions)
	Year ended
	December 31, 2006
Net sales	$	948.0
Operating income		68.0
Net income from continuing operations		14.2
Net loss		(0.7	)

The 2006 pro forma results include the 2006 losses described in Notes 3 and 5.

NOTE 3 — COSTS OF INTEGRATION OF WATER PUMP OPERATIONS AND RESULTING ASSET IMPAIRMENT LOSSES

Before the ASC Acquisition, UCI manufactured and distributed water pumps for all market channels. In 2007, UCI completed integrating its pre ASC-acquisition water pump operations with the water pump operations of ASC. By mid-2007, all domestic water pump manufacturing has been combined at ASC’s manufacturing facilities. UCI’s pre ASC-acquisition water pump facility was closed as of July 2007.

2006 Losses

The water pump integration process began in June of 2006. In 2006, UCI recorded a total of $10.9 million of expenses related to the integration. Of these costs, $7.0 million were recorded in the income statement in “Costs of integration of water pump operations and resulting asset impairment losses,” and $3.9 million were recorded in “Cost of sales.” The combined $10.9 million of 2006 expenses were as follows (in millions):

	Cost of integration
	of
	water pump
	operations
	and resulting asset
	impairment losses		Cost of sales		Combined
Land, building and equipment impairment losses	$	4.3		—	$	4.3
Severance		1.7		—		1.7
Write-off of component parts		—		1.9		1.9
Costs and inefficiencies caused by wind-down		—		2.0		2.0
Other integration costs		1.0		—		1.0
	$	7.0	$	3.9	$	10.9

The combined after-tax effect of these items was a net loss of $7.0 million in 2006.

58

United Components, Inc.
Notes to Consolidated Financial Statements

The non-cash land, building and equipment impairment losses pertain to assets that were not expected to be used when the water pump integration was completed. These assets were written down by $4.3 million to their estimated net realizable value, when sold or scrapped. The estimated realizable values were based on preliminary estimates by management. The $1.0 million of other integration costs include travel expenses, transportation costs and other expenditures incurred solely for the purpose of transferring production and distribution to ASC’s facilities and completing integration of the operations.

The $3.9 million of costs recorded in 2006 “Cost of sales” were directly related to the integration of water pump operations. These costs include (i) $2.0 million of costs and operating inefficiencies caused by the wind-down of our pre-ASC Acquisition water pump factory and (ii) a $1.9 million write-off of component parts that were not expected to be usable when all production was transitioned to the ASC product designs.

Severance expense is discussed below.

2007 Expenses and Gain

In 2007, UCI recorded additional pre-tax expenses and a gain related to the water pump integration. In 2007, $0.7 million of these costs are included in the income statement in “Costs of integration of water pump operations and resulting asset impairment losses,” and $4.7 million of these costs are included in “Cost of sales.” The combined net $5.4 million of 2007 expenses and gain were as follows (in millions):

	Cost of integration
	of
	water pump
	operations
	and resulting asset
	impairment losses			Cost of sales		Combined
Severance	$	1.6		$	—	$	1.6
Pension plan curtailment gain		(0.9	)		—		(0.9	)
Production wind-down costs		—			2.2		2.2
Other integration costs		—			2.5		2.5
	$	0.7		$	4.7	$	5.4

The combined after-tax effect of these items was a net loss of $3.3 million in 2007.

The $2.2 million of production wind-down costs include inefficiencies and unabsorbed overhead resulting from extraordinarily low levels of production during the second quarter wind-down of operations at the pre-acquisition water pump facility. This facility ceased production at the end of the second quarter of 2007.

The $2.5 million of other integration costs include transportation expenses and other costs that were directly related to completing the integration.

2008 Expenses

In 2008, UCI recorded additional pre-tax expense related to the water pump integration. These costs are reported in the income statement in “Costs of integration of water pump operations and resulting asset impairment losses.” These costs were as follows (in millions):

	Cost of integration
	of
	water pump
	operations
Severance	$	0.2
Costs of maintaining the pre-acquisition water pump facility		0.6
Additional asset impairments		1.6
	$	2.4

59

United Components, Inc.
Notes to Consolidated Financial Statements

In the fourth quarter of 2008, in light of current market and economic conditions, UCI wrote down the carrying value of the pre-ASC Acquisition water pump manufacturing facility from $1.3 million to zero. Also in the fourth quarter of 2008, UCI recorded a $0.3 million impairment loss on pre-ASC Acquisition water pump equipment that was no longer useable.

Severance expense

As part of the water pump integration, UCI closed its pre-acquisition water pump manufacturing facility and substantially all of that facility’s employees were terminated. All 311 permanent employees of this facility were eligible for severance benefits, which were earned only if the employee remained employed until a Company-designated termination date. The severance benefit was (i) a three month continuation of medical insurance after termination and (ii) a lump sum payment, which varied based on years of service. The benefits resulted in $3.5 million of severance costs. $1.7 million of these costs were expensed in 2006. $1.6 million of these costs were expensed ratably over the 2007 employment periods of the affected employees and $0.2 million were expensed in 2008.

Of the total $3.5 million of severance costs, $0.3 million was paid in 2006; $2.8 million was paid in 2007; and $0.4 million was paid in 2008.

Balance sheet amounts

The following table presents accrued liabilities balances related to the water pump integration costs as of December 31, 2006, 2007 and 2008 along with the 2007 and 2008 changes (in millions):

	Accrued			Other
	severance			liabilities
December 31, 2006 balance	$	1.4		$	0.2
Additional loss provision		1.6			—
Payments		(2.8	)		(0.2	)
December 31, 2007 balance		0.2			—
Additional loss provision		0.2			—
Payments		(0.4	)		—
December 31, 2008 balance	$	—		$	—

As discussed above, in the fourth quarter of 2008, UCI wrote down the carrying value of the pre-ASC Acquisition water pump land and building to zero. At December 31, 2008, 2007 and 2006, the carrying value of this land and building was $0, $1.3 million and $1.6 million, respectively. This land and building is classified as “Assets held for sale” in the 2007 and 2006 balance sheets. In 2007, UCI realized $0.3 million more than the 2006 estimated realizable value from the disposal of pre-ASC Acquisition equipment that was not used when the water pump integration was completed. This $0.3 million gain was offset by a $0.3 million reduction in the estimated realizable value of the pre-ASC Acquisition water pump land and building.

NOTE 4 — DISCONTINUED OPERATIONS

2006 Sales of Operations

On June 30, 2006, UCI sold its driveline components operation and its specialty distribution operation. These operations were sold to two separate buyers for a combined $33.4 million in cash, net of fees and expenses. In connection with the driveline components transaction, UCI retained $4.9 million of pension liabilities. UCI recorded an $18.5 million after-tax loss on the sale of these discontinued operations.

60

United Components, Inc.
Notes to Consolidated Financial Statements

On November 30, 2006, UCI sold its lighting systems operation for $37.2 million in cash, net of fees and expenses. In 2006, UCI recorded a $1.6 million after-tax gain on this sale. The final sale price was subject to post-closing adjustments related to working capital and possible additional proceeds if a lighting systems building were sold. In the third quarter of 2007, the final working capital amounts were settled favorably and the building was sold. Accordingly, UCI recorded an additional $2.7 million after-tax gain in 2007. A final post-closing adjustment was possible if, by the second quarter of 2008, the lighting system operation made structural changes to its pension plan which resulted in a reduction in the actuarially-determined deficit. In 2008, UCI was informed that such changes were not made.

2006 results of discontinued operations

The operating results of all three of the sold operations are presented as discontinued operations in UCI’s 2006 consolidated income statements. Net sales and income before income taxes for these discontinued operations were $124.4 million and $3.6 million, respectively.

The $3.6 million of pre-tax income includes a deduction for allocated interest expense of $0.3 million for the year ended December 31, 2006. Interest expense is allocated to discontinued operations in accordance with EITF Issue No. 87-24, which requires allocation of interest expense to discontinued operations to the extent UCI is required to repay debt as a result of a disposition transaction.

NOTE 5 — COSTS OF CLOSING FACILITIES AND CONSOLIDATING OPERATIONS AND GAIN FROM SALE OF ASSETS

2006 loss provision

The following table summarizes the 2006 costs of closing facilities (in millions):

	Asset
	write-downs		Severance		Other		Total
Closure of Canadian facility	$	0.4	$	0.4	$	0.1	$	0.9
Closure of Mexican facility		0.8		1.8		2.9		5.5
	$	1.2	$	2.2	$	3.0	$	6.4

Closure of Canadian facility

In 2006, UCI closed its Canadian facility, which manufactured and distributed mechanical fuel pumps. This production and distribution was transferred to UCI’s fuel pump operations in Fairfield, Illinois. Closure activities were completed in 2006. The severance and other costs were paid in 2006. After tax, the losses recorded for the Canadian facility closure totaled $0.6 million.

Closure of Mexican facility

In 2006, UCI closed its Mexican filter manufacturing plant and transferred production to its Albion, Illinois filter manufacturing facility. Closure activities and the transfer of production were completed in 2006.

After tax, the losses recorded for the Mexican facility closure totaled $3.7 million.

All of the $1.8 million of severance costs and $2.9 million of other costs (primarily equipment dismantling and transportation costs and $0.6 million of professional fees) related to the shutdown and consolidation were paid in 2006. In addition, UCI spent $1.4 million for capital expenditures in connection with this consolidation in 2006.

61

United Components, Inc.
Notes to Consolidated Financial Statements

2007 Update

In 2007, UCI sold the land and building and certain building improvements, formerly used by the Mexican manufacturing operation. The sale proceeds were $6.6 million, net of fees and expenses. The $4.5 million net book value of the land and building was classified as “Assets held for sale” in the December 31, 2006 balance sheet. The $0.4 million of building improvements were classified as “Property, plant and equipment, net.” In 2007, UCI recorded a $1.7 million pre-tax gain on the sale. Also, in the first half of 2007, UCI incurred $0.2 million of additional costs associated with the closure of the Mexican facility.

NOTE 6 — TERMINATION OF PAY-ON-SCAN PROGRAM

Until the second quarter of 2007, a portion of the products sold to AutoZone, Inc. (“AutoZone”) were sold under an AutoZone program called Pay-on-Scan. Under this program, UCI retained title to its products at AutoZone locations, and a sale was not recorded until an AutoZone customer purchased the product. In the second quarter of 2007, AutoZone and UCI terminated the Pay-on-Scan program for these UCI products. Accordingly, sales of these products are now recorded when the product is received at an AutoZone location.

As part of the termination of the Pay-on-Scan program, AutoZone purchased all of the products at its locations that were previously under the Pay-on-Scan program. In the second quarter of 2007, UCI recorded $12.1 million of sales for these products.

NOTE 7 — ALLOWANCE FOR DOUBTFUL ACCOUNTS

Changes in UCI’s allowance for doubtful accounts were as follows (in millions):

	December 31,
	2008			2007			2006
Beginning of year	$	2.3		$	2.7		$	2.5
Addition due to ASC Acquisition		—			—			0.1
Provision for doubtful accounts		2.0			(0.2	)		0.3
Accounts written off		(0.3	)		(0.2	)		(0.2	)
	$	4.0		$	2.3		$	2.7

NOTE 8 — SALES OF RECEIVABLES

UCI has agreements to sell undivided interests in certain of its receivables with factoring companies, which in turn have the right to sell an undivided interest to a financial institution or other third party. UCI enters into these agreements at its discretion as part of its overall cash management activities. Pursuant to these agreements, UCI sold $197.9 million and $126.8 million of receivables during 2008 and 2007, respectively.

If receivables had not been factored, $80.1 million and $81.1 million of additional receivables would have been outstanding at December 31, 2008 and 2007, respectively. UCI retained no rights or interest, and has no obligations, with respect to the sold receivables. UCI does not service the receivables after the sales.

The sales of receivables were accounted for as a sale in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” The sold receivables were removed from the balance sheet at the time of the sales. The costs of the sales were discounts deducted by the factoring companies. These costs were $3.5 million, $2.9 million and $1.0 million in 2008, 2007 and 2006, respectively. These costs are recorded in the consolidated income statement in “Miscellaneous, net.”

62

United Components, Inc.
Notes to Consolidated Financial Statements

NOTE 9 — INVENTORIES

The components of inventories were as follows (in millions):

	December 31,
	2008			2007
Raw materials	$	55.3		$	45.8
Work in process		34.6			33.0
Finished products		84.4			79.4
Valuation reserves		(14.9	)		(15.6	)
	$	159.4		$	142.6

NOTE 10 — PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following (in millions):

		December 31,
	Depreciable Life	2008			2007
Land and improvements	5-10 years
	(for improvements)	$	6.1		$	6.3
Buildings and improvements	5-40 years		67.2			64.7
Equipment	3-15 years		222.3			197.2
			295.6			268.2
Less accumulated depreciation			(127.7	)		(100.4	)
		$	167.9		$	167.8

Included in equipment shown above are cumulative additions of approximately $3.6 million at each of December 31, 2008 and 2007, respectively, under capital lease obligations. The related accumulated depreciation was approximately $1.8 million and $1.2 million at December 31, 2008 and 2007, respectively.

Depreciation expense for the years ended December 31, 2008, 2007 and 2006 was $28.0 million, $25.7 million and $26.2 million, respectively.

The fair value of UCI’s asset retirement obligations (“AROs”) are recorded as liabilities with the offsetting associated asset retirement costs capitalized as part of the carrying amount of the related buildings. The asset retirement costs are amortized over the useful life of the building. Changes in the ARO resulting from the passage of time are recognized as an increase in the carrying amount of the liability and as accretion expense. The liabilities for AROs were $1.0 million and $0.8 million at December 31, 2008 and 2007, respectively.

63

United Components, Inc.
Notes to Consolidated Financial Statements

NOTE 11 — OTHER INTANGIBLE ASSETS

The components of other intangible assets were as follows (in millions):

		December 31, 2008							December 31, 2007
				Accumulated							Accumulated
	Amortizable Life	Gross		amortization			Net		Gross		amortization			Net
Acquired intangible assets
Customer relationships	3 – 20 years	$	62.1	$	(27.9	)	$	34.2	$	62.1	$	(23.1	)	$	39.0
Technologies	10 years		8.9		(6.3	)		2.6		8.9		(5.4	)		3.5
Trademarks	10 years		4.3		(1.7	)		2.6		4.3		(1.0	)		3.3
Trademarks	Indefinite		25.5		—			25.5		26.0		—			26.0
Integrated software system	7 years		18.2		(8.5	)		9.7		17.7		(5.9	)		11.8
		$	119.0	$	(44.4	)	$	74.6	$	119.0	$	(35.4	)	$	83.6

In 2007, UCI recognized a trademark impairment loss of $3.6 million. This non-cash loss was due to a customer’s decision to market a significant portion of UCI-supplied products under the customer’s own private label brand, instead of UCI’s brand. The customer’s decision to market using its own private label brand has not affected and is not expected to affect UCI’s sales of these products.

In 2008, UCI recognized an additional impairment loss of $0.5 million on the same trademark that was written down in 2007.

The estimated amortization expense related to acquired intangible assets and the integrated software system for each of the succeeding five years is (in millions):

	Acquired		Integrated
	intangible		software
	assets		system
2009	$	5.7	$	2.5
2010		5.2		2.5
2011		4.7		2.5
2012		4.2		1.7
2013		3.7		—

NOTE 12 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following (in millions):

	December 31,
	2008		2007
Salaries and wages	$	2.7	$	3.5
Bonuses and profit sharing		3.5		8.8
Vacation pay		4.4		4.7
Product returns		32.0		28.1
Rebates, credits and discounts due customers		10.8		10.9
Insurance		11.5		9.8
Taxes payable		4.8		10.4
Interest		2.1		2.6
Other		13.9		16.4
	$	85.7	$	95.2

64

United Components, Inc.
Notes to Consolidated Financial Statements

NOTE 13 — PRODUCT RETURNS LIABILITY

The liability for product returns is included in “Accrued expenses and other current liabilities.” This liability includes accruals for parts returned under warranty and for parts returned because of customer excess quantities. UCI provides warranties for its products’ performance. Warranty periods vary by part, but generally are either one year or indefinite. In addition to returns under warranty, UCI allows its customers to return quantities of parts that the customer determines to be in excess of its current needs. Customer rights to return excess quantities vary by customer and by product category. Generally, these returns are contractually limited to 3% to 5% of the customer’s purchases in the preceding year. In some cases, UCI does not have a contractual obligation to accept excess quantities. However, common practice for UCI and the industry is to accept periodic returns of excess quantities from on-going customers. If a customer elects to cease purchasing from UCI and change to another vendor, it is industry practice for the new vendor, and not UCI, to accept any inventory returns resulting from the vendor change and any subsequent inventory returns.

In 2008, UCI identified an unusually high level of warranty returns related to one category of parts. When these parts are subjected to certain conditions, they experience a higher than normal failure rate. As a result of the higher than normal failure rate, a $6.7 million warranty loss provision was recorded in 2008. This loss provision is included in the line captioned “Additional reductions to sales” in the table below. UCI has modified the design of these parts to eliminate this issue.

UCI routinely monitors returns data and adjusts estimates based on this data.

Changes in UCI’s product returns accrual were (in millions):

	Year ended December 31,
	2008			2007			2006
Beginning of year	$	28.1		$	28.6		$	26.2
Addition due to ASC Acquisition		—			—			1.4
Cost of unsalvageable returned parts		(51.6	)		(46.6	)		(50.2	)
Additional reductions to sales		55.5			46.1			51.2
End of year	$	32.0		$	28.1		$	28.6

NOTE 14 — DEBT

The Company’s debt is summarized as follows (in millions):

	December 31,
	2008			2007
Short-term borrowings	$	5.2		$	10.1
Revolving credit line borrowing		20.0			—
Capital lease obligations		1.2			1.8
Term loan		190.0			200.0
Senior subordinated notes		230.0			230.0
Debt issuance costs		(2.8	)		(3.5	)
		443.6			438.4
Less:
Short-term borrowings		5.2			10.1
Revolving credit line borrowing		20.0			—
Current maturities		0.4			0.5
Long-term debt	$	418.0		$	427.8

UCI’s balance sheet does not include the Holdco Notes. While UCI has no direct obligation under the Holdco Notes, UCI is the sole source of cash generation for UCI Holdco. Interest on Holdco Notes is payable “in kind” through December 2011, therefore UCI Holdco has no cash interest payments until that date.

65

United Components, Inc.
Notes to Consolidated Financial Statements

Senior credit facilities — The senior credit facility includes a term loan and a revolving credit facility.

In connection with the ASC Acquisition, on May 25, 2006, UCI entered into an Amended and Restated Credit Agreement. This Amended and Restated Credit Agreement replaced UCI’s previously existing senior credit facility, and provided for additional borrowing capacity of up to $113 million.

UCI replaced the $217 million term loan that was outstanding at May 25, 2006 under its previously existing senior credit facility with a term loan borrowing under the new credit facility. In addition, $113 million of this term loan was borrowed to finance a portion of the ASC Acquisition purchase price.

Cash fees related to the new Amended and Restated Credit Agreement were $3.6 million. This $3.6 million was recorded as an addition to “Deferred financing costs, net” and is amortized as interest expense over the remaining life of the new debt. In 2006, UCI recorded a $2.6 million loss to write off the unamortized deferred financing costs related to the previously outstanding debt, which was replaced by the borrowing under the new credit facility. This $2.6 million loss is recorded as “Write-off of deferred financing costs” in the 2006 income statement.

     Term loan

The term loan is secured by all tangible and intangible assets of UCI. Interest is payable quarterly or more frequently depending on the Eurodollar interest periods that may be elected by UCI. The interest rate is variable and is determined as described in the second paragraph below.

UCI may select from two options to determine the interest rate on the term loan and revolving credit borrowings. The two options are the Base Rate or Eurodollar Rate plus, in each case, an applicable margin. The applicable margin is subject to adjustment based on a consolidated leverage ratio, as defined. The Base Rate is a fluctuating interest rate equal to the higher of (a) the prime lending rate as set forth on the British Banking Association Telerate page 5 or another comparable page and (b) the Federal funds effective rate plus 0.50%. At December 31, 2008 and 2007, the interest rate was 4.39% and 6.91%, respectively. In addition to interest on outstanding borrowings, UCI is required to pay a commitment fee on any unused revolving credit facility commitments at a per annum rate of 0.50%, subject to adjustment based upon the consolidated leverage ratio, as defined. (See Note 22 for the impact of interest rate swaps.)

In 2008, 2007 and 2006, UCI voluntarily prepaid $10 million, $65 million and $65 million, respectively, of the senior credit facility term loan.

     Revolving credit facility

UCI’s senior credit facility also includes a $75 million revolving credit facility, which is available until June 2009. Revolving credit borrowings are also secured by all tangible and intangible assets of UCI. The interest rate is variable and is determined in the same manner as the term loan discussed above.

Lehman Brothers Commercial Paper Inc. (“Lehman”), the administrative agent under UCI’s senior credit facility and one of the syndication banks that fund senior UCI revolving credit borrowings, filed for protection under Chapter 11 of the U.S. Bankruptcy Code on October 5, 2008. Of our total $75.0 million revolving credit line, Lehman’s commitment is $9.5 million. In September 2008, we borrowed $20.0 million under our revolving credit facility, and Lehman did not fund its pro rata share. Because of the bankruptcy filing, we are evaluating our options as to the administrative agent under our credit facility, and we are conducting our cash management based on the presumption that Lehman will not fund any of Lehman’s $9.5 million commitment under our revolving credit line.

At December 31, 2008, revolving credit borrowings were $20.0 million and $9.4 million of revolving credit borrowing capacity had been used to support outstanding letters of credit. Excluding Lehman’s $9.5 million commitment, we had $36.1 million of unused borrowing capacity at December 31, 2008. We are currently in negotiations to extend or replace our revolving credit facility; however, in the current environment, we cannot be assured that our revolving credit facility will be available for borrowing, or that we will be able to extend or replace the revolving credit facility upon its expiration in June 2009. We are conducting our cash management under the presumption that will be unable to replace the revolving credit facility upon its expiration.

66

United Components, Inc.
Notes to Consolidated Financial Statements

Covenants and other provisions — The senior credit facilities require UCI to maintain certain financial covenants and require mandatory prepayments under certain events as defined in the agreement. Also, the facilities include certain negative covenants restricting or limiting UCI’s ability to, among other things: declare dividends or redeem stock; prepay certain debt; make loans or investments; guarantee or incur additional debt; make capital expenditures; engage in acquisitions or other business combinations; sell assets; and alter UCI’s business. UCI is in compliance with all of these covenants.

In December 2006, UCI entered into an amendment to the senior credit facility for the purpose of paying a $35.3 million dividend to its shareholder.

Senior subordinated notes (the “Notes”) — The Notes bear interest at 9 3/8%. Interest is payable semi-annually, in arrears on June 15 and December 15 of each year. The Notes are unsecured and rank equally in right of payment with any of UCI’s future senior subordinated indebtedness. They are subordinated to indebtedness and other liabilities of UCI’s subsidiaries that are not guarantors of the Notes. They are guaranteed on a full and unconditional and joint and several basis by UCI’s domestic subsidiaries. The Notes mature on June 15, 2013.

The Notes indenture contains covenants that limit UCI’s ability to: incur or guarantee additional debt, pay dividends or redeem stock, make certain investments, and sell assets. UCI is in compliance with all of these covenants.

Short-term borrowings — At December 31, 2008, short-term borrowings included $2.3 million of a Spanish subsidiary’s notes payable and $2.9 million of the Chinese subsidiaries’ notes payable to foreign credit institutions. At December 31, 2007, short-term borrowings included $1.2 million of a Spanish subsidiary’s notes payable and $8.9 million of the Chinese subsidiaries’ notes payable to foreign credit institutions. At December 31, 2008, the interest rate on the Spanish subsidiary’s notes payable and the Chinese subsidiaries’ notes payable was 3.7% and 5.3%, respectively. At December 31, 2007, the interest rate on the Spanish subsidiary’s notes payable and the Chinese subsidiaries’ notes payable was 5.2% and 6.5%, respectively. The Spanish subsidiary’s notes payable are collateralized by certain accounts receivable related to the amounts financed. The Chinese subsidiaries’ notes payable are secured by receivables.

Future payments — The following is a schedule of future payments of debt at December 31, 2008 (in millions):

2009	$	25.5
2010		0.2
2011		45.2
2012		145.2
2013		230.1
Thereafter		0.2
	$	446.4

Interest expense — Net interest expense in 2008 was $34.2 million, including $0.1 million of accelerated write-off of deferred financing costs due to the voluntary prepayment of $10 million of the senior credit facility term loan. Net interest expense in 2007 was $40.7 million, including $0.6 million of accelerated write-off of deferred financing costs due to the voluntary prepayments of $65 million of the senior credit facility term loan. Net interest expense in 2006 was $43.3 million, including a $0.6 million senior credit agreement amendment fee and $0.7 million of accelerated write-off of deferred financing costs due to the voluntary prepayment of $65 million of the senior credit facility term loan. $0.2 million of interest was capitalized in 2007. No interest was capitalized in 2008 and 2006.

Holdco Notes — As of December 31, 2008, UCI Holdco, had $295.1 million of Holdco Notes outstanding. The Holdco Notes bear interest at a rate based upon LIBOR plus a spread. This rate was 10.0% at December 31, 2008. The Holdco Notes do not appear on UCI’s balance sheet and the related interest expense is not included in UCI’s income statement. While UCI has no direct obligation under the Holdco Notes, UCI is the sole source of cash generation for UCI Holdco. The interest is payable “in kind” through December 2011, so that UCI Holdco has no cash interest payable until after that date. Accordingly, the Holdco Notes will not have any material effect on the cash flow of the Company until that date. In addition, the covenants contained in the Holdco Notes indenture are substantially the same as those contained in the Notes indenture, so the Company expects that the covenant of the Holdco Notes will have no effect on the current operations of UCI.

67

United Components, Inc.
Notes to Consolidated Financial Statements

NOTE 15 — INCOME TAXES

The components of income before income taxes were as follows (in millions):

	Year ended December 31,
	2008		2007			2006
Income (loss) before income taxes
United States	$	15.8	$	59.8		$	10.7
Foreign		1.8		(4.5	)		(3.9	)
	$	17.6	$	55.3		$	6.8

Components of income tax expense (benefit) were as follows (in millions):

	Year ended December 31,
	2008			2007			2006
Current
Federal	$	3.8		$	6.0		$	—
State		0.9			1.7			1.5
Foreign		2.5			(1.3	)		1.8
		7.2			6.4			3.3
Deferred
Federal		2.0			12.6			(2.9	)
State		0.4			1.0			0.5
Foreign		(1.9	)		—			(0.2	)
		0.5			13.6			(2.6	)
	$	7.7		$	20.0		$	0.7

A reconciliation of income taxes computed at the United States Federal statutory tax rate to income tax expense follows (in millions):

	Year ended December 31,
	2008			2007			2006
Income tax expense (benefit) at U.S. Federal statutory rate	$	6.1		$	19.4		$	2.4
R&D tax credit		—			(0.2	)		(0.2	)
Federal income taxes related to “check the box” election and insolvency loss of a foreign subsidiary		3.4			(1.4	)		(2.7	)
Foreign income not taxable, foreign income tax losses not benefited and rate differential		(2.0	)		1.8			1.5
State income taxes, net of Federal income tax benefit		0.7			1.8			1.2
Adjust ASC pre-acquisition deferred tax liabilities		—			(1.1	)		—
Other, net		(0.5	)		(0.3	)		(1.5	)
Income tax expense	$	7.7		$	20.0		$	0.7

The adjustment in the above table for “Adjust ASC pre-acquisition deferred tax liabilities” is to reflect the finally determined tax basis of ASC pre-acquisition intangible assets. “Other, net” in the above table is primarily reductions of prior year-end tax liabilities to reflect the actual tax expense reported in subsequently filed tax returns.

68

United Components, Inc.
Notes to Consolidated Financial Statements

Deferred taxes were attributable to the following (in millions):

	December 31,
	2008			2007
Deferred tax assets
Pension and postretirement benefits	$	6.8		$	7.5
Product returns and warranty accruals		12.7			10.7
Inventory valuation		7.1			7.9
Net operating loss carryforwards		4.0			4.1
Vacation accrual		1.2			1.3
Insurance accruals		2.8			3.0
Allowance for doubtful accounts		1.4			0.8
Tax credit carryforwards		0.3			0.3
Pension liability adjustment included in other comprehensive income (loss)		22.7			—
Other accrued liabilities		1.9			1.3
Other		2.1			2.1
		63.0			39.0
Less: valuation allowance for foreign tax credit carryforwards and foreign net operating loss carryforwards		(4.2	)		(4.3	)
Total deferred tax assets		58.8			34.7
Deferred tax liabilities
Depreciation and amortization		(15.6	)		(16.2	)
Goodwill amortization for tax, but not book		(17.8	)		(14.2	)
Acquired Intangible assets		(2.2	)		(2.5	)
Pension liability adjustment included in other comprehensive income (loss)		—			(3.3	)
Prepaid expenses		(1.7	)		(2.1	)
Other		(0.8	)		(0.9	)
Total deferred tax liabilities		(38.1	)		(39.2	)
Net deferred tax assets (liabilities)	$	20.7		$	(4.5	)

The net deferred tax assets were included in the balance sheet as follows (in millions):

	December 31,
	2008			2007
Deferred tax assets	$	24.3		$	22.8
Deferred tax liabilities		(3.6	)		(27.3	)
Net deferred tax assets (liabilities)	$	20.7		$	(4.5	)

In 2007, UCI elected to carryback its 2006 U.S. federal net operating loss to the 2004 tax year. Approximately $8.3 million of the refund was outstanding at December 31, 2007 and is included in “Other current assets” at December 31, 2007. This refund was received in 2008.

At December 31, 2007, UCI had valuation allowances for all of the deferred tax assets associated with foreign net operating loss carryforwards. In 2008, UCI concluded that $0.6 million of these deferred tax assets would be realized and, consequently, in 2008 reduced the valuation allowances by $0.6 million. This reduction resulted in a $0.6 million benefit in 2008 income tax expense.

At December 31, 2008, UCI had $11.0 million of foreign net operating loss carryforwards with no expiration date, $0.4 million of foreign net operating losses which expire in 2013 and $0.3 million of foreign tax credit carryforwards which expire in 2013 and 2014. In assessing the realization of the deferred tax assets related to these carryforwards, UCI has determined that it is more likely than not that $3.7 million of these deferred tax assets will not be realized. Therefore, a valuation allowance has been recorded for these carryforwards.

At December 31, 2008, UCI has various state net operating loss carryforwards totaling $19.4 million which expire at various times. In assessing the realization of the deferred tax asset related to the state carryforwards, UCI determined that it is more likely than not that $0.5 million of the deferred tax assets related to the state carryforwards will not be realized. Therefore, a valuation allowance has been recorded for these carryforwards.

69

United Components, Inc.
Notes to Consolidated Financial Statements

Realization of the remaining net deferred tax assets is dependent on UCI generating sufficient taxable income in future years to utilize the benefits of the reversals of temporary differences. UCI has performed an assessment regarding the realization of the remaining net deferred tax assets, which includes projecting future taxable income, and has determined it is more likely than not that the remaining net deferred tax assets will be realized.

UCI does not provide for U.S. income taxes on undistributed earnings of its foreign subsidiaries that are intended to be permanently reinvested. At December 31, 2008, these undistributed earnings amounted to approximately $5.7 million. Determination of the net amount of unrecognized U.S. income taxes with respect to these earnings is not practicable.

FIN 48

On January 1, 2007, UCI adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” The effect was immaterial to UCI’s financial statements.

A reconciliation of the beginning and ending amount of unrecognized tax benefits follows (in millions):

Balance at January 1, 2007	$	4.3
Additions for tax positions related to the current year		2.1
Reductions based on tax position related to the current year		(0.9	)
Additions for tax position of prior years		0.4
Reductions for tax position of prior years		(0.1	)
Reduction for lapse of applicable statutes of limitations		(0.1	)
Balance at December 31, 2007	$	5.7
Balance at January 1, 2008	$	5.7
Additions for tax positions related to the current year		2.5
Reductions based on tax position related to the current year		(0.3	)
Additions for tax position of prior years		0.3
Reductions for tax position of prior years		(0.1	)
Reduction for lapse of applicable statutes of limitations		(0.4	)
Balance at December 31, 2008	$	7.7

At December 31, 2008, approximately $3.0 million of the unrecognized tax benefits, if recognized, would change the effective tax rate. Also, UCI has recorded, as income tax expense, $0.1 million of interest expense (net of Federal benefit) and $0.1 million of penalties related to the unrecognized tax benefits. At December 31, 2008, the total interest (net of Federal benefit) and penalties accrued related to uncertain tax benefits were $0.5 million and $0.6 million, respectively.

While most of UCI’s business is conducted within the United States, UCI also conducts business in several foreign countries. As a result, UCI and/or one or more of its subsidiaries files income tax returns in the U.S. federal tax jurisdiction and in many state and foreign tax jurisdictions. In the normal course of business, UCI is subject to examination by tax authorities in these tax jurisdictions. With few exceptions, UCI is not subject to examination by federal, state or foreign tax authorities for tax years ending on or before 2004. Other than routine inquiries, UCI and its subsidiaries are not currently under examination by tax authorities.

UCI expects the total unrecognized tax benefits to decline by approximately $0.5 million in 2009. This decline is due to the expiration of applicable statutes of limitations. $0.5 million of this amount will impact the effective tax rate.

Intercompany payable to UCI Holdco

For federal and certain state tax purposes, UCI is included in the consolidated tax returns of UCI Holdco. UCI’s stand-alone financial statements report UCI’s income tax liabilities and refunds receivable as income taxes payable and receivable until they are settled in cash with the taxing jurisdictions. To the extent UCI’s tax on its current taxable income is offset by UCI Holdco’s current taxable losses, UCI records that portion of its tax expense as a payable to UCI Holdco.

70

United Components, Inc.
Notes to Consolidated Financial Statements

In 2008 and 2007, UCI Holdco’s taxable losses partially offset UCI’s current taxable income. Accordingly, UCI has recorded a $19.2 million and $12.4 million payable to UCI Holdco as of December 31, 2008 and 2007, respectively.

NOTE 16 — EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plans

UCI maintains defined benefit retirement plans covering certain U.S. and non-U.S. employees. Retiree benefits, under the defined benefit retirement plans, are generally based on years of service and employee compensation.

The measurement date used to determine pension obligations is December 31. The following table sets forth the plans’ status (in millions):

	December 31,
	2008			2007
Accumulated benefit obligation	$	204.4		$	186.6
Change in projected benefit obligations:
Projected benefit obligations at beginning of year	$	198.6		$	208.3
Service cost		4.4			5.5
Interest cost		12.6			12.0
Actuarial loss (gain)		8.5			(18.1	)
Plan amendments		2.4			0.1
Plan curtailment		—			(0.9	)
Benefits paid		(8.6	)		(8.3	)
Special termination benefits		0.2			—
Currency translation adjustment		(0.6	)		—
Projected benefit obligations at end of year	$	217.5		$	198.6
Change in plan assets:
Fair value of plan assets at beginning of year	$	192.9		$	183.3
Actual return on plan assets		(40.9	)		10.2
Employer contributions		3.4			7.7
Benefits paid		(8.6	)		(8.3	)
Currency translation adjustment		(0.3	)		—
Plan assets at end of year	$	146.5		$	192.9
Funded status, net	$	(71.0	)	$	(5.7	)
Amounts recognized in the balance sheet consist of:
Prepaid pension cost	$	—		$	9.4
Current liabilities		(0.1	)		(0.1	)
Noncurrent liabilities		(70.9	)		(15.0	)
	$	(71.0	)	$	(5.7	)

71

United Components, Inc.
Notes to Consolidated Financial Statements

Some of the above “Funded status, net” has not been recorded in any of UCI’s income statements, but instead has been recorded in “Accumulated other comprehensive income (loss).” Amounts recognized in “Accumulated other comprehensive income (loss)” consisted of (in millions):

				Amortized,
				in 2008
	Dec 31,			pension			2008			Dec 31,
	2007			expense			Additions			2008
Prior service costs	$	(1.0	)	$	0.3		$	(2.4	)	$	(3.1	)
Net actuarial gain (loss)		9.4			—			(64.6	)		(55.2	)
Deferred income tax benefit		(3.2	)		(0.1	)		25.5			22.2
Accumulated other comprehensive income (loss)	$	5.2		$	0.2		$	(41.5	)	$	(36.1	)

				Amortized,
				in 2007
	Dec 31,			pension			2007			Dec 31,
	2006			expense			Additions			2007
Prior service costs	$	(1.0	)	$	0.1		$	(0.1	)	$	(1.0	)
Net actuarial gain (loss)		(4.9	)		0.2			14.1			9.4
Deferred income tax benefit		2.3			(0.1	)		(5.4	)		(3.2	)
Accumulated other comprehensive income (loss)	$	(3.6	)	$	0.2		$	8.6		$	5.2

In 2009, a loss of approximately $0.4 million will be amortized from “Accumulated other comprehensive income (loss).”

The components of net periodic pension expense are as follows (in millions):

	Year ended December 31,
	2008			2007			2006
Service cost	$	4.4		$	5.5		$	6.7
Interest cost		12.6			12.0			11.3
Expected return on plan assets		(15.2	)		(14.1	)		(13.0	)
Amortization of prior service cost		0.3			0.1			0.1
Amortization of unrecognized gain		(0.1	)		0.2			0.2
Special termination benefits and curtailment (gain) loss recognized		0.2			(0.9	)		0.8
	$	2.2		$	2.8		$	6.1

As a result of closing one of UCI’s water pump operations (Note 3), in 2008 UCI recorded $0.2 million of expense for special pension benefits for the terminated employees and in 2007 UCI recorded a $0.9 million curtailment gain. The 2006 $0.8 million curtailment loss relates to the sale of UCI’s driveline components operation (Note 4) and is included in the income statement in “Loss on sale of discontinued operations.”

UCI determines its actuarial assumptions on an annual basis. In determining the present values of UCI’s benefit obligations and net periodic pension expense for all plans as of and for the years ended December 31, 2008, 2007 and 2006, UCI used the following assumptions:

	2008			2007			2006
Weighted average discount rate to determine benefit obligations		6.2	%		6.5	%		5.8	%
Weighted average discount rate to determine net cost		6.5	%		5.8	%		5.5	%
Rate of future compensation increases		4.0	%		4.0	%		4.0	%
Rate of return on plan assets		8.0	%		8.0	%		8.0	%

The assumed rate of return on plan assets was determined based on expected asset allocation and long-term returns for each category of investment. The discount rate was determined considering current yield curves representing high quality, long-term fixed income instruments. The discount rate for our U.S. plans is based on a review of high quality (Aa or better) bonds from the Barclay’s Capital bond database.

72

United Components, Inc.
Notes to Consolidated Financial Statements

UCI has adopted a pension investment policy designed to meet current and future benefit payment needs while maximizing total investment returns with the constraints of a prudent level of portfolio risk and diversification. To achieve this, the pension plans retain professional investment managers that invest plan assets in equity and fixed income securities. In addition, some plans invest in insurance contracts. The Company’s measurement date of its plan assets and obligations is December 31. The Company has a target mix of 65% equity securities and 35% fixed income securities, which are readjusted periodically, when an asset class weighting deviates from the target mix, with the goal of achieving the required return at a prudent level of risk.

The weighted-average pension plan asset allocations for all plans were as follows:

	December 31,
	2008			2007
Equity securities		60	%		62	%
Debt securities		40	%		38	%
Total		100	%		100	%

For pension plans with accumulated benefit obligations (ABO) that exceed plan assets, the projected benefit obligation, ABO and fair value of plan assets of those plans were $217.4 million, $204.4 million and $146.4 million, respectively, as of December 31, 2008 and $148.1 million, $139.7 million and $133.1 million, respectively, as of December 31, 2007.

During 2009, UCI expects to contribute approximately $5.4 million to its plans. Pension benefit payments expected to be paid are as follows: $10.0 million in 2009; $10.5 million in 2010; $11.0 million in 2011; $11.6 million in 2012; $12.3 million in 2013; and $72.0 million in 2014 through 2018. Expected benefit payments are based on the same assumptions used to measure UCI’s benefit obligations at December 31, 2008 and include estimated future employee service.

Profit Sharing and Defined Contribution Pension Plans

Certain UCI subsidiaries sponsor defined contribution plans under section 401(k) of the Internal Revenue Code. Eligible participants may elect to defer from 5% to 50% of eligible compensation, subject to certain limitations imposed by the Internal Revenue Code. Such subsidiaries are required to match employees’ contributions based on formulas which vary by plan.

UCI subsidiaries in China participate in government-sponsored defined contribution plans.

For United States profit sharing and defined contribution pension plans, UCI expensed $2.8 million, $3.5 million and $2.9 million for the years ended December 31, 2008, 2007 and 2006, respectively. For Chinese defined contribution plans, UCI expensed $0.7 million, $0.4 million, and $0.3 million for the years ended December 31, 2008, 2007, and 2006, respectively.

Other Postretirement Benefits

Certain UCI subsidiaries provide health care and life insurance benefits to eligible retired employees. The plans are partially funded by participant contributions and contain cost-sharing features such as deductibles and coinsurance.

73

United Components, Inc.
Notes to Consolidated Financial Statements

The measurement date used to determine postretirement obligations is December 31. The following table presents information for the postretirement plans (in millions):

	December 31,
	2008			2007
Change in benefit obligations
Benefit obligations at beginning of year	$	8.3		$	8.2
Service cost		0.3			0.2
Interest cost		0.5			0.5
Actuarial loss (gain)		1.3			(0.2	)
Benefits paid		(0.7	)		(0.4	)
Benefit obligations accrued at end of year	$	9.7		$	8.3

The accrued obligation was included in the balance sheet as follows (in millions):

	December 31,
	2008			2007
Accrued obligation included in “Accrued expenses and other current liabilities”	$	(0.8	)	$	(0.5	)
Accrued obligation included in “Pension and other postretirement liabilities”		(8.9	)		(7.8	)
	$	(9.7	)	$	(8.3	)

A portion of the cost of the $9.7 million and $8.3 million of accrued liabilities shown above have not been recorded in the income statement, but instead have been recorded in “Accumulated other comprehensive income (loss).” The accumulated amounts in “Accumulated other comprehensive income (loss)” were $(1.0) million (($0.6) million after tax) and $0.3 million ($0.2 million after tax) at December 31, 2008 and 2007, respectively.

The following were the components of net periodic postretirement benefit cost (in millions):

	Year ended December 31,
	2008		2007		2006
Service cost	$	0.3	$	0.2	$	0.3
Interest cost		0.5		0.5		0.4
	$	0.8	$	0.7	$	0.7

UCI determines its actuarial assumptions annually. In determining the present values of UCI’s benefit obligations and net periodic benefit cost, UCI used discount rates of 6.13%, 6.5% and 5.75% for the years ended December 31, 2008, 2007 and 2006, respectively. The annual health care cost trend rate is assumed to decline from 9.0% in 2008 to 7.0% in 2013. Increasing the assumed healthcare cost trend rates by one percentage point would result in additional annual costs of approximately $0.1 million. Decreasing the assumed health care cost trend rates by one percentage point would result in a decrease of approximately $0.1 million in annual costs. The effect on postretirement benefit obligations at December 31, 2008 of a one percentage point increase is $0.4 million. The effect of a one percentage point decrease is $0.4 million.

UCI continues to fund medical and life insurance benefit costs principally on a pay-as-you-go basis. The pay-as-you-go expenditures for postretirement benefits have not been material. During 2009, UCI expects to contribute approximately $0.8 million to its postretirement benefit plans. The benefits expected to be paid in each year from 2010 through 2013 are $0.8 million, $0.7 million, $0.8 million, and $0.8 million, respectively. The aggregate benefits expected to be paid in the five years 2014 through 2018 are $3.6 million.

74

United Components, Inc.
Notes to Consolidated Financial Statements

2006 Adoption of SFAS No. 158

UCI adopted SFAS No. 158 effective December 31, 2006. Adoption of SFAS No. 158 did not effect the 2006 income statement. The incremental effects of adopting SFAS No. 158 at December 31, 2006, on individual line items of the balance sheet were (in millions):

	Before			Adjustments			After
	Adoption of			due to adoption			Adoption of
	SFAS No. 158			of SFAS No. 158			SFAS No. 158
Prepaid pension included in “Pension and other assets”	$	7.7		$	—		$	7.7
Liability for pension benefits included in:
“Accrued expenses and other current liabilities”		0.1			—			0.1
“Pension and other postretirement liabilities”		28.7			3.9			32.6
Deferred tax (assets) related to pension included in:
“Deferred tax liabilities”		(0.8	)		(1.5	)		(2.3	)
Accumulated other comprehensive income (loss)		(1.2	)		(2.4	)		(3.6	)

The adjustment to accumulated other comprehensive income (loss) at adoption, to the extent that it offsets the increase in pension and other post retirement liabilities, represents the net unrecognized actuarial losses and unrecognized prior service costs, which were previously netted against the plans’ funded status in UCI’s financial statements pursuant to the provisions of SFAS No. 87. These amounts are being subsequently recognized as net periodic pension cost pursuant to UCI’s historical accounting policy for amortizing such amounts. Further, additional actuarial gains and losses and additional prior service costs, if any, will be recognized as a component of other comprehensive income (loss) in the period in which they arise. Those additional amounts will be subsequently recognized as a component of net periodic pension cost pursuant to UCI’s historical accounting policy for amortizing such amounts.

Amounts recognized in “Accumulated other comprehensive income (loss)” at December 31, 2006 consist of (in millions):

	Before			Adjustments			After
	Adoption of			Due to adoption			Adoption of
	SFAS No. 158			of SFAS No. 158			SFAS No. 158
Prior service costs	$	(0.2	)	$	(0.8	)	$	(1.0	)
Net actuarial losses		(1.8	)		(3.1	)		(4.9	)
Deferred income tax benefit		0.8			1.5			2.3
Accumulated other comprehensive income (loss)	$	(1.2	)	$	(2.4	)	$	(3.6	)

The provisions of SFAS No. 158 were applied prospectively. Therefore, 2006 income statement amounts presented in these consolidated financial statements are not restated.

NOTE 17 — COMMITMENTS AND CONTINGENCIES

Leases

The following is a schedule of the future minimum payments under operating leases that have non-cancelable lease terms (in millions):

	Minimum
	payments
2009	$	5.5
2010		4.8
2011		4.1
2012		3.8
2013		3.4
2014 and thereafter		10.1
	$	31.7

75

United Components, Inc.
Notes to Consolidated Financial Statements

These lease payments include the payment of certain taxes and other expenses. Rent expense was $5.8 million, $4.8 million and $4.9 million for the years ended December 31, 2008, 2007 and 2006, respectively.

Insurance Reserves

UCI purchases insurance policies for workers’ compensation, automobile and product and general liability. These policies include high deductibles for which UCI is responsible. These deductibles are estimated and recorded as expenses in the period incurred. Estimates of these expenses are updated each quarter, and the expenses are adjusted accordingly. These estimates are subject to substantial uncertainty because of several factors that are difficult to predict, including actual claims experience, regulatory changes, litigation trends and changes in inflation. Estimated unpaid losses for which UCI is responsible are included in the balance sheet in “Accrued expenses and other current liabilities.”

Environmental

UCI is subject to a variety of federal, state, local and foreign environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances or wastes, and the cleanup of contaminated sites. UCI has been identified as a potentially responsible party for contamination at two sites. One of these sites is a former facility in Edison, New Jersey, where a state agency has ordered UCI to continue with the monitoring and investigation of chlorinated solvent contamination. UCI has informed the agency that this contamination was caused by another party at a neighboring facility and has initiated a lawsuit against that party for damages and to compel it to take responsibility for any further investigation or remediation. The lawsuit has proceeded to trial, which is expected to be completed in the first quarter of 2009, although it is uncertain when a decision will be rendered. The second site is a previously owned site in Solano County, California, where UCI, at the request of the regional water board, is investigating and analyzing the nature and extent of the contamination and is conducting some remediation. Based on currently available information, management believes that the cost of the ultimate outcome of these environmental matters will not exceed the $1.9 million accrued at December 31, 2008 by a material amount, if at all. However, because all investigation and analysis has not yet been completed, and because of the inherent uncertainty in such environmental matters and in the outcome of litigation, such as the New Jersey litigation, it is reasonably possible that the ultimate outcome of these matters could have a material adverse effect on results for a single quarter. Expenditures for these environmental matters totaled $0.4 million, $0.4 million, and $0.6 million in 2008, 2007 and 2006, respectively.

In addition to the two matters discussed above, UCI has been named as a potentially responsible party at a site in Calvert City, Kentucky. UCI estimates settlement costs at $0.1 million for this site. Also, UCI is involved in regulated remediation at two of its manufacturing sites. The combined cost of the remediation is $0.6 million. The majority of the $0.7 million will be spent in the next two years. To date, the expenditures related to these three sites have been immaterial.

Antitrust Litigation

As of March 15, 2009, United Components, Inc. and its wholly-owned subsidiary, Champion, were named as two of multiple defendants in 23 complaints originally filed in the District of Connecticut, the District of New Jersey, the Middle District of Tennessee and the Northern District of Illinois alleging conspiracy violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, related to aftermarket oil, air, fuel and transmission filters. Eight of these complaints also named The Carlyle Group as a defendant, but those plaintiffs voluntarily dismissed Carlyle from each of those actions without prejudice. Champion, but not United Components, was also named as a defendant in 13 virtually identical actions originally filed in the Northern and Southern Districts of Illinois, and the District of New Jersey. All of these complaints are styled as putative class actions on behalf of all persons and entities that purchased aftermarket filters in the U.S. directly from the defendants, or any of their predecessors, parents, subsidiaries or affiliates, at any time during the period from January 1, 1999 to the present. Each case seeks damages, including statutory treble damages, an injunction against future violations, costs and attorney’s fees.

76

United Components, Inc.
Notes to Consolidated Financial Statements

United Components and Champion were also named as two of multiple defendants in 17 similar complaints originally filed in the District of Connecticut, the Northern District of California, the Northern District of Illinois and the Southern District of New York by plaintiffs who claim to be indirect purchasers of aftermarket filters. Two of these complaints also named The Carlyle Group as a defendant, but the plaintiffs in both of those actions voluntarily dismissed Carlyle without prejudice. Champion, but not United Components, was also named in 3 similar actions originally filed in the Eastern District of Tennessee, the Northern District of Illinois and the Southern District of California. These complaints allege conspiracy violations of Section 1 of the Sherman Act and/or violations of state antitrust, consumer protection and unfair competition law. They are styled as putative class actions on behalf of all persons or entities who acquired indirectly aftermarket filters manufactured and/or distributed by one or more of the defendants, their agents or entities under their control, at any time between January 1, 1999 and the present; with the exception of three complaints which each allege a class period from January 1, 2002 to the present, and one complaint which alleges a class period from the “earliest legal permissible date” to the present. The complaints seek damages, including statutory treble damages, an injunction against future violations, disgorgement of profits, costs and attorney’s fees.

On August 18, 2008, the Judicial Panel on Multidistrict Litigation (“JPML”) issued an order transferring the U.S. direct and indirect purchaser aftermarket filters cases to the Northern District of Illinois for coordinated and consolidated pretrial proceedings before the Honorable Robert W. Gettleman pursuant to 28 U.S.C. § 1407. On November 26, 2008, all of the direct purchaser plaintiffs filed a Consolidated Amended Complaint. This complaint names Champion as one of multiple defendants, but it does not name United Components. The complaint is styled as a putative class action and alleges conspiracy violations of Section 1 of the Sherman Act. The direct purchaser plaintiffs seek damages, including statutory treble damages, an injunction against future violations, costs and attorney’s fees. On February 2, 2009, Champion filed its answer to the direct purchasers’ Consolidated Amended Complaint.

On December 1, 2008, all of the indirect purchaser plaintiffs, except Gasoline and Automotive Service Dealers of America (“GASDA”), filed a Consolidated Indirect Purchaser Complaint. This complaint names Champion as one of multiple defendants, but it does not name United Components. The complaint is styled as a putative class action and alleges conspiracy violations of Section 1 of the Sherman Act and violations of state antitrust, consumer protection and unfair competition law. The indirect purchaser plaintiffs seek damages, including statutory treble damages, penalties and punitive damages where available, an injunction against future violations, disgorgement of profits, costs and attorney’s fees. On February 2, 2009, Champion and the other defendants jointly filed a motion to dismiss the Consolidated Indirect Purchaser Complaint. On that same date, Champion, United Components and the other defendants jointly filed a motion to dismiss the GASDA complaint.
Pursuant to a stipulated agreement between the parties, all defendants produced limited initial discovery on January 30, 2009. The Court has ordered that all further discovery shall be stayed until after it rules on the motions to dismiss.

On January 12, 2009, Champion, but not United Components, was named as one of ten defendants in a related action filed in the Superior Court of California, for the County of Los Angeles on behalf of a purported class of direct and indirect purchasers of aftermarket filters. On March 5, 2009, one of the defendants filed a notice of removal to the U.S. District Court for the Central District of California, and then subsequently requested that the JPML transfer this case to the Northern District of Illinois for coordinated pre-trial proceedings.

Champion, but not United Components, was also named as one of five defendants in a class action filed in Quebec, Canada. This action alleges conspiracy violations under the Canadian Competition Act and violations of the obligation to act in good faith (contrary to art. 6 of the Civil Code of Quebec) related to the sale of aftermarket filters. The plaintiff seeks joint and several liability against the five defendants in the amount of $5.0 million in compensatory damages and $1.0 million in punitive damages. The plaintiff is seeking authorization to have the matter proceed as a class proceeding, which motion has not yet been ruled on.

Champion, but not United Components, was also named as one of 14 defendants in a class action filed on May 21, 2008, in Ontario, Canada. This action alleges civil conspiracy, intentional interference with economic interests, and conspiracy violations under the Canadian Competition Act related to the sale of aftermarket filters. The plaintiff seeks joint and several liability against the 14 defendants in the amount of $150 million in general damages and $15 million in punitive damages. The plaintiff is also seeking authorization to have the matter proceed as a class proceeding, which motion has not yet been ruled on.

The Antitrust Division of the Department of Justice (DOJ) is also investigating the allegations raised in these suits and certain current and former employees of the defendants, including Champion, have testified pursuant to subpoenas. We are fully cooperating with the DOJ investigation.

77

United Components, Inc.
Notes to Consolidated Financial Statements

On July 30, 2008, the Office of the Attorney General for the State of Florida issued Antitrust Civil Investigative Demands to Champion and UCI requesting documents and information related to the sale of oil, air, fuel and transmission filters. We are cooperating with the Attorney General’s requests.

We intend to vigorously defend against these claims. It is too soon to assess the possible outcome of these proceedings. No amounts, other than ongoing defense costs, have been recorded in the financial statements for these matters.

Value-added Tax Receivable

UCI’s Mexican operation has outstanding receivables denominated in Mexican pesos in the amount of $3.3 million from the Mexican Department of Finance and Public Credit. The receivables relate to refunds of Mexican value-added tax, to which UCI believes it is entitled in the ordinary course of business. The local Mexican tax authorities have rejected UCI’s claims for these refunds, and the company has commenced litigation in the regional federal administrative and tax courts in Monterrey to order the local tax authorities to process these refunds. Due to the weakening Mexican peso against the U.S. dollar, we revalued this outstanding receivable from $4.6 million at December 31, 2007 to $3.3 million at December 31, 2008 resulting in an exchange loss of $1.3 million.

Other Litigation

UCI is subject to various other contingencies, including routine legal proceedings and claims arising out of the normal course of business. These proceedings primarily involve commercial claims, product liability claims, personal injury claims and workers’ compensation claims. The outcome of these lawsuits, legal proceedings and claims cannot be predicted with certainty. Nevertheless, UCI believes that the outcome of any currently existing proceedings, even if determined adversely, would not have a material adverse effect on UCI’s financial condition or results of operations.

NOTE 18 — RELATED PARTY TRANSACTIONS

UCI has employment agreements with certain of its executive officers providing for annual compensation amounting to approximately $0.5 million per annum plus bonuses and severance pay under certain circumstances.

In 2003, UCI entered into a management agreement with TC Group, L.L.C., an affiliate of Carlyle, for management and financial advisory services and oversight to be provided to UCI and its subsidiaries. Pursuant to this agreement, UCI pays an annual management fee of $2.0 million and out-of-pocket expenses, and UCI may pay Carlyle additional fees associated with financial advisory services and other transactions. The management agreement provides for indemnification of Carlyle against liabilities and expenses arising out of Carlyle’s performance of services under this agreement. The agreement terminates either when Carlyle or its affiliates own less than 10% of UCI’s equity interest or when UCI and Carlyle mutually agree to terminate the agreement.

In May 2006, UCI paid $2.5 million to the Carlyle Group for its services in connection with the ASC Acquisition and the related financing.

Sales to The Hertz Corporation were $0.6 million, $0.6 million and $0.0 million for the years ended December 31, 2008, 2007 and 2006, respectively. Affiliates of The Carlyle Group own more than 10% of The Hertz Corporation.

As part of the ASC Acquisition, UCI acquired a 51% interest in a Chinese joint venture. This joint venture purchases aluminum castings from UCI’s 49% joint venture partner, Shandong Yanzhou Liancheng Metal Products Co. Ltd and other materials from the joint venture partner’s affiliates. From the ASC Acquisition Date to December 31, 2006, approximately $7 million of aluminum castings and other materials were purchased from UCI’s joint venture partner and its affiliates. In 2008 and 2007, UCI purchased $12.0 million and $15.4 million, respectively, from its joint venture partner and its affiliates.

ASC rents a building from its former president. The 2008 and 2007 rent payments, which are believed to be at market rate, were $1.5 million and $1.4 million, respectively.

78

United Components, Inc.
Notes to Consolidated Financial Statements

NOTE 19 — GEOGRAPHIC INFORMATION

UCI had the following net sales by country (in millions):

	Year ended December 31,
	2008		2007		2006
United States	$	735.1	$	821.7	$	770.9
Mexico		32.9		34.7		39.2
Canada		30.1		34.0		27.6
United Kingdom		12.3		13.8		12.6
France		9.8		8.5		7.9
Venezuela		4.6		6.4		4.5
Germany		5.0		4.2		3.9
Spain		5.2		4.1		3.6
Other		45.4		42.4		35.9
	$	880.4	$	969.8	$	906.1

Net long-lived assets by country were as follows (in millions):

	December 31,
	2008		2007
United States	$	201.5	$	226.0
Mexico		9.9		12.2
Spain		2.3		2.6
China		33.2		27.0
Goodwill		241.5		241.5
	$	488.4	$	509.3

NOTE 20 — STOCK-BASED COMPENSATION

In 2008, 2007 and 2006, pre-tax expenses of $0.8 million, $3.4 million and $1.6 million, respectively, were recorded for stock option based compensation.

Description of Equity Incentive Plan

UCI Holdco adopted a stock option plan in 2003. In December 2008, the Board of Directors of UCI Holdco approved the adoption of an amended and restated equity incentive plan that represented a complete amendment, restatement and continuation of the previous stock option plan. The amended and restated equity incentive plan permits the granting of options to purchase shares of common stock of UCI Holdco to UCI’s employees, directors, and consultants, as well as the granting of restricted shares of UCI Holdco common stock. Options and restricted shares granted pursuant to the equity incentive plan must be authorized by the Compensation Committee of the Board of Directors of UCI Holdco. The aggregate number of shares of UCI Holdco’s common stock that may be issued under the equity incentive plan may not exceed 450,000.

The terms of the options may vary with each grant and are determined by the Compensation Committee within the guidelines of the equity incentive plan. No option life can be greater than ten years. Options currently vest over an 8 year period, and vesting of a portion of the options could accelerate if UCI achieves certain financial targets, or in the event of certain changes in control. The options have an exercise price equal to the estimated market value of UCI Holdco’s common stock on the date of grant, except for options to purchase 45,750 shares of stock granted in 2007 at an exercise price that was above the estimated market value at the date of grant.

The terms of the restricted stock are determined by the Compensation Committee within the guidelines of the equity incentive plan.
The shares of the restricted stock vest only upon a change in control of UCI Holdco.

79

United Components, Inc.
Notes to Consolidated Financial Statements

Stock Options

Options granted prior to December 2006 originally had an exercise price of $100. In January 2007, as a result of the dividend paid to UCI Holdco stockholders of approximately $96 per share, the exercise price for all options outstanding as of that date was revised to $5 per share. See “Stock Option Modifications” below.

Information related to the number of shares under options follows:

	December 31,
	2008			2007			2006
Number of shares under option:
Outstanding, beginning of year		233,995			321,565			304,040
Granted		2,000			73,750			49,500
Canceled		(38,000	)		(42,654	)		(31,975	)
Exercised		(20,569	)		(118,666	)		—
Outstanding, end of year		177,426			233,995			321,565
Exercisable, end of year		141,520			148,611			108,290

The Black-Scholes option pricing model was used to estimate fair values of the options as of the date of the grant. The fair value of options granted in 2008 was $5.06. The fair value of options granted in 2007 ranged from $4.05 to $12.96. Except for options granted in December 2006, the fair value of options granted in 2006 was $53.51. The fair value of the options to purchase 2,000 shares that were granted in December 2006 was $72.88 per share. Principal weighted average assumptions used in applying the Black-Scholes model were as follows:

Valuation assumptions	2008			2007			2006
Dividend yield		0.00	%		0.00	%		0.00	%
Risk-free interest rate		2.82	%		4.67	%		4.36	%
Volatility		42.15	%		41.83	%		41.37	%
Expected option term in years		8			8			8
Weighted average exercise price per share	$	23.63		$	74.11		$	5.00
Weighted average market value per share	$	13.87		$	23.63		$	100.75

Because of its large outstanding debt balances, UCI does not anticipate paying cash dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero. The expected option term is based on the assumption that options will be outstanding throughout their 8-year vesting period. Volatility is based upon the volatility of comparable publicly traded companies. Because UCI Holdco is not publicly traded, the market value of its stock is estimated based upon the valuation of comparable publicly traded companies, the value of reported acquisitions of comparable companies, and discounted cash flows. The exercise price and market value per share amounts presented above were as of the date the stock options were granted.

80

United Components, Inc.
Notes to Consolidated Financial Statements

A summary of stock option activity in 2008 follows:

						Weighted
						Average
	Number			Weighted		Remaining
	of Shares			Average		Contractual
	Under Option			Exercise Price		Life
Outstanding at December 31, 2007		233,995		$	5.00
Granted		2,000			23.63
Canceled		(38,000	)		98.42
Exercised		(20,569	)		7.26
Outstanding at December 31, 2008		177,426		$	13.66	6.8 years
Exercisable at December 31, 2008		141,520		$	13.15	6.4 years

The intrinsic value of options exercised during 2008 and 2007 was $0.3 million and $2.2 million, respectively. There were no options exercised during 2006. Proceeds from the exercise of options in 2008 and 2007 of $0.1 million and $0.6 million, respectively, were received and retained by UCI Holdco.

A summary of the number of shares under options that are outstanding as of December 31, 2008 follows:

Number	Weighted		Weighted		Number
of Shares	Average		Average		Exercisable at		Weighted Average
Under Option	Remaining Life		Exercise Price		December 31, 2008		Exercise Price
139,676		6.1	$	5.00		118,789	$	5.00
27,500		9.1	$	23.63		13,763	$	23.63
10,250		9.0	$	105.00		8,969	$	105.00

At December 31, 2008, there was $1.9 million of unrecognized compensation cost relating to outstanding unvested stock options. Approximately $0.7 million of this cost will be recognized in 2009. The balance will be recognized in declining amounts through 2015.

The $0.8 million, $3.4 million and $1.6 million of stock option based compensation expense recorded in 2008, 2007 and 2006, respectively, is a non-cash charge.

Stock Option Modifications

In December 2006, UCI Holdco declared a dividend of approximately $96 per share of common stock. In accordance with the terms of the stock option agreement, in January 2007 the exercise price of all outstanding options was lowered to offset the adverse effect the dividend had on the value of the options. This change did not increase the value of the options; consequently, no additional compensation expense was or will be incurred.

In 2007, the Compensation Committee of the Board of Directors accelerated the vesting of approximately 10% of the then outstanding stock options and also lowered the levels of profitability and cash generation required to achieve future accelerated vesting, including those for the 2007 year. This resulted in $1.5 million more expense in 2007 than would have been incurred had the changes not been made. Earlier vesting affects when stock option expense is recognized, but does not affect the ultimate total expense. Consequently, accelerating the vesting results in recording more of the total expense this year and less in later years.

81

United Components, Inc.
Notes to Consolidated Financial Statements

Restricted Stock

In December 2008, the Compensation Committee granted 32,500 shares of restricted stock in exchange for 32,500 of stock options issued in 2007 at an exercise price of $105.00 per share. The stock options surrendered in exchange for the restricted stock are presented as a cancellation of stock options in the stock option activity table above. Also in December 2008, the Compensation Committee granted an additional 21,840 shares of restricted stock to various members of management. The terms of the restricted stock agreement provide that the shares of restricted stock vest only upon a change of control, as defined, of UCI Holdco. Due to the uncertainty surrounding the ultimate vesting of the restricted stock, no stock-based compensation expense has been recorded. When a change in control becomes probable, expense equal to the fair value of the stock at that time will be recorded.

NOTE 21 — FAIR VALUE ACCOUNTING

In 2008, UCI adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of SFAS No. 115.” SFAS No. 159 permits (but does not require) companies to choose to measure certain financial instruments and other items at fair value. UCI did not choose the fair value measurement options permitted by SFAS No. 159 for any of its assets and liabilities. Therefore, adoption of SFAS No. 159 did not impact UCI’s financial statements.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 (i) defines fair value, (ii) establishes a framework for measuring fair value in generally accepted accounting principles, and (iii) expands disclosures about fair value measurements. For certain nonfinancial assets and liabilities, adoption of SFAS No. 157 is not required until 2009, and UCI has not adopted for those certain nonfinancial assets and liabilities. Adoption of SFAS No. 157 in 2009 for those certain nonfinancial assets and liabilities is not expected to have a significant effect on UCI’s financial statements. For assets and liabilities other than those certain nonfinancial assets and liabilities, UCI adopted SFAS No. 157 on January 1, 2008. Adoption of this portion of SFAS No. 157 did not have a material impact on UCI’s financial statements.

Fair value hierarchy

SFAS No. 157 defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. To increase consistency and comparability in fair value measurements, SFAS No. 157 provides a fair value estimating hierarchy. The hierarchy is listed below.

SFAS No. 157 uses the term “inputs” to broadly refer to the assumptions used in estimating fair values. It distinguishes between (i) assumptions based on market data obtained from independent third party sources (“observable inputs”) and (ii) UCI’s assumptions based on the best information available (“unobservable inputs”). SFAS No. 157 requires that fair value valuation techniques maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The fair value hierarchy consists of the three broad levels listed below. The highest priority is given to Level 1, and the lowest is given to Level 3.

Level 1 — Quoted market prices in active markets for identical assets or liabilities

Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable

Level 3 — Unobservable inputs developed using UCI’s estimates and assumptions, which reflect those that market participants would use when valuing an asset or liability

The determination of where an asset or liability falls in the hierarchy requires significant judgment.

82

United Components, Inc.
Notes to Consolidated Financial Statements

Interest rate swap measured at fair value on a recurring basis

The only recurring fair value measurement reflected in UCI’s financial statements was the measurement of interest rate swaps. These interest rate swaps are described in Note 22. The swaps expired in August 2008 and were not replaced.

When the swaps were outstanding, the fair value of the interest rate swaps were estimated at the present value of the difference between (i) interest payable for the duration of the swap at the swap interest rate and (ii) interest that would be payable for the duration of the swap at the relevant current interest rate at the date of measurement. The estimated fair value was based on “Level 2” inputs, as defined above.

Assets measured at fair value on a nonrecurring basis

The following table summarizes the valuation of assets measured at fair value on a nonrecurring basis in the December 31, 2008 balance sheet (in millions):

	Fair Value Measurements using
		Significant
		Unobservable
		Inputs		Gains
Description		(Level 3)		(Losses)
Assets held for sale	(a)	$	—	$	(1.3	)
Trademarks	(b)	$	0.5	$	(0.5	)

(a)	See Note 3 for a description of the impairment write-down of these long-lived assets held for sale. Their carrying amount of $1.3 million was written down to their fair value of zero. This resulted in a loss of $1.3 million, which was included in 2008 earnings.
(b)	See Note 11 for a description of the impairment write-down of this intangible asset. The estimated fair value of this asset is based on discounted cash flows. The cash flows are estimated benefits, which are in the form of avoided costs, because UCI owns this intangible asset. The estimated fair value of this intangible asset is based on “Level 3” inputs as described above.

Fair value of financial instruments

Cash and cash equivalents — The carrying amount of cash equivalents approximates fair value because the original maturity is less than 90 days.

Trade accounts receivable — The carrying amount of trade receivables approximates fair value because of their short outstanding terms.

Trade accounts payable — The carrying amount of trade payables approximates fair value because of their short outstanding terms.

Short-term borrowings — The carrying value of these borrowings equals fair market value because their interest rates reflect current market rates.

Long-term debt — The carrying value of borrowings under the senior credit facility equals fair market value because their variable interest rates reflect market rates.

The fair market value of the $230 million senior subordinated rates at December 31, 2008 and 2007 was $94.9 million and $226 million, respectively. These fair values were estimated based on the bid and ask prices on December 31, which is a “Level 1” input, as defined above.

Interest rate swaps — See Note 22.

83

United Components, Inc.
Notes to Consolidated Financial Statements

NOTE 22 — INTEREST RATE SWAPS

In connection with UCI’s senior credit facilities, UCI was party to interest rate swap agreements that effectively converted $80 million of variable rate debt to fixed rate debt for the two years ended August 2007, and converted $40 million for the 12-month period ended August 2008. The variable component of the interest rate on borrowings under the senior credit facilities is based on LIBOR. Under the swap agreements, UCI paid 4.4%, and received the then current LIBOR on $80 million through August 2007 and UCI paid 4.4% and received the then current LIBOR on $40 million for the 12-month period ending August 2008.

UCI did not replace the interest rate swap that expired in August 2008.

Quarterly, UCI adjusted the carrying value of this interest rate swap derivative to its estimated fair value. The change was recorded as an adjustment to “Other comprehensive income (loss)” in UCI’s stockholder’s equity. At December 31, 2006, UCI recorded an $0.8 million asset to recognize the fair value of its interest rate swaps. UCI also recorded a $0.3 million deferred tax liability associated therewith.

The net offset is recorded in “Accumulated other comprehensive income (loss).” At December 31, 2007, the estimated fair value was seven thousand dollars.

NOTE 23 — OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) was as follows (in millions):

										Total
							Pension			accumulated
				Foreign			and OPEB			other
	Interest rate			currency			liability			comprehensive
	swaps			adjustment			adjustment			income (loss)
Balance at January 1, 2006	$	0.3		$	0.4		$	(1.5	)	$	(0.8	)
2006 change		0.2			0.2			0.3			0.7
Cumulative effect adjustment due to adoption of SFAS No. 158		—			—			(2.4	)		(2.4	)
Balance at December 31, 2006		0.5			0.6			(3.6	)		(2.5	)
2007 change		(0.5	)		0.8			9.0			9.3
Balance at December 31, 2007		—			1.4			5.4			6.8
2008 change		—			(4.3	)		(42.1	)		(46.4	)
Balance at December 31, 2008	$	—		$	(2.9	)	$	(36.7	)	$	(39.6	)

NOTE 24 — OTHER INFORMATION

Cash payments for interest in 2008, 2007 and 2006 were $33.6 million, $40.4 million and $41.6 million, respectively. Cash payments (net of refunds) for income taxes for 2008, 2007 and 2006 were $(3.5) million, $(1.3) million and $(0.4) million, respectively.

At December 31, 2008 and 2007, 1,000 shares of voting common stock were authorized, issued and outstanding. The par value of each share of common stock is $0.01 per share. Income of $0.8 million in 2008, $0.1 million in 2007 and $0.8 million in 2006 related to minority interest is included in “Miscellaneous, net.”

84

United Components, Inc.
Notes to Consolidated Financial Statements

NOTE 25 — CONCENTRATION OF RISK

UCI places its cash investments with a relatively small number of high quality financial institutions. Substantially all of the cash and cash equivalents, including foreign cash balances at December 31, 2008 and 2007, were uninsured. Foreign cash balances at December 31, 2008 and 2007 were $6.7 million and $3.3 million, respectively.

UCI sells vehicle parts to a wide base of customers. Sales are primarily to automotive aftermarket customers. UCI has outstanding receivables owed by these customers and to date has experienced no significant collection problems. Sales to a single customer, AutoZone, approximated 29%, 28% and 24% of total net sales for the years ended December 31, 2008, 2007 and 2006, respectively. No other customer accounted for more than 10% of total net sales for the years ended December 31, 2008, 2007 and 2006.

Our sales to General Motors Corporation’s (GM) automotive original equipment manufacturing and sales operations comprise less than 10% of our consolidated sales. While sales to GM are less than 10% of our sales, we do carry accounts receivable from GM in the range of $6.0 million to $10.0 million at any given time. At December 31, 2008, accounts receivable from GM and its subsidiaries totaled $9.6 million. In the audit report to the GM financial statements included in GM’s 2008 Annual Report on Form 10-K, GM’s independent auditors expressed substantial doubt as to GM’s ability to continue as a going concern. If GM is unable to continue as a going concern, the possibility exists that some or all of accounts receivable from GM might become uncollectible. We have not recorded an allowance for doubtful accounts as of December 31, 2008.

NOTE 26 — QUARTERLY FINANCIAL INFORMATION (unaudited)

The following is a summary of the unaudited quarterly results of operations. UCI believes that all adjustments considered necessary for a fair presentation in accordance with generally accepted accounting principles have been included (in millions).

	Quarter Ended
	March 31		June 30		Sept. 30		Dec. 31
2008
Net sales	$	229.3	$	229.3	$	218.1	$	203.7
Gross profit		51.1		46.7		47.5		32.6
Net income (loss) from continuing operations		6.8		4.0		4.4		(5.3	)
2007
Net sales	$	238.8	$	259.6	$	230.7	$	240.7
Gross profit		49.6		59.4		53.6		58.4
Net income from continuing operations		4.5		10.0		8.4		12.5

UCI’s quarterly results were affected by the gains and (losses) described in Notes 2, 3, 5, 11 and 13. Below is a summary of the gains and (losses). Except for the effect on cost of sales described in Notes 2 and 3 and the reduction in sales described in Note 13, none of these losses affect net sales or gross profit. The amounts below are after-tax amounts:

	2008 Quarter Ended
	March 31			June 30			Sept. 30			Dec. 31
Note 3 — Cost of integration of water pump operations	$	(0.2	)	$	(0.1	)	$	(0.1	)	$	(1.1	)
Note 11 — Trademark impairment loss		—			—			—			(0.3	)
Note 13 — Higher than normal warranty loss provision		—			(3.6	)		—			(0.6	)

	2007 Quarter Ended
	March 31			June 30			Sept. 30			Dec. 31
Note 2 — Favorable resolution of pre-acquisition ASC liabilities	$	—		$	—		$	—		$	1.1
Note 3 — Cost of integration of water pump operations		(1.1	)		(0.9	)		(1.1	)		(0.2	)
Note 5 — Costs of closing facilities and consolidating operations		1.0			(0.1	)		—			—
Note 11 — Trademark impairment loss		—			(2.2	)		—			—

85

United Components, Inc.
Notes to Consolidated Financial Statements

NOTE 27 — GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS

The senior credit facilities are secured by substantially all the assets of UCI. The Notes are unsecured and rank equally in right of payment with any of UCI’s future senior subordinated indebtedness. The Notes are subordinated to indebtedness and other liabilities of UCI’s subsidiaries that are not guarantors of the Notes. The Notes and borrowings under the senior credit facilities are guaranteed on a full and unconditional and joint and several basis by UCI’s domestic subsidiaries.

The condensed financial information that follows includes condensed financial statements for (a) UCI, which is the issuer of the Notes and borrower under the senior credit facilities, (b) the domestic subsidiaries, which guarantee the Notes and borrowings under the senior credit facilities (the “Guarantors”), (c) the foreign subsidiaries (the “Non-Guarantors”), and (d) consolidated UCI. Also included are consolidating entries, which principally consist of eliminations of investments in consolidated subsidiaries and intercompany balances and transactions. All goodwill is included in UCI’s balance sheet.

Separate financial statements of the Guarantor subsidiaries are not presented because their guarantees are full and unconditional and joint and several, and UCI believes separate financial statements and other disclosures regarding the Guarantor subsidiaries are not material to investors.

86

United Components, Inc.
Notes to Consolidated Financial Statements

Note 27 (continued)

Consolidating Condensed Balance Sheet
December 31, 2008
(in thousands)

	UCI											Non-
	Consolidated		Eliminations			UCI			Guarantors			Guarantors
Assets
Current assets
Cash and cash equivalents	$	46,612	$	—		$	39,061		$	860		$	6,691
Accounts receivable, net		261,624		—			—			246,101			15,523
Inventories, net		159,444		—			—			133,900			25,544
Deferred tax assets		24,245		—			255			23,479			511
Other current assets		19,452		—			648			8,602			10,202
Total current assets		511,377					39,964			412,942			58,471
Property, plant and equipment, net		167,906		—			1,006			123,579			43,321
Investment in subsidiaries		—		(253,698	)		225,275			28,423			—
Goodwill		241,461		—			241,461			—			—
Other intangible assets, net		74,606		—			9,025			65,378			203
Deferred financing costs, net		2,649		—			2,649			—			—
Pension and other assets		1,823		—			365			1,292			166
Total assets	$	999,822	$	(253,698	)	$	519,745		$	631,614		$	102,161
Liabilities and shareholder’s equity
Current liabilities
Accounts payable	$	104,416	$	—		$	4,140		$	86,407		$	13,869
Short-term borrowings		25,199		—			20,003			—			5,196
Current maturities of long-term debt		422		—			363			59			—
Accrued expenses and other current liabilities		85,730		—			8,356			73,448			3,926
Total current liabilities		215,767		—			32,862			159,914			22,991
Long-term debt, less current maturities		418,025		—			417,573			452			—
Pension and other postretirement liabilities		79,832		—			10,336			68,276			1,220
Deferred tax liabilities		3,560		—			18,406			(15,500	)		654
Due to UCI Holdco		17,535		—			17,535			—			—
Minority Interest		2,490		—			—			—			2,490
Other long-term liabilities		2,540		—			—			1,732			808
Intercompany payables (receivables)		—		—			(237,040	)		207,173			29,867
Total shareholder’s equity		260,073		(253,698	)		260,073			209,567			44,131
Total liabilities and shareholder’s equity	$	999,822	$	(253,698	)	$	519,745		$	631,614		$	102,161

87

United Components, Inc.
Notes to Consolidated Financial Statements

Note 27 (continued)

Consolidating Condensed Balance Sheet
December 31, 2007
(in thousands)

	UCI										Non-
	Consolidated		Eliminations			UCI			Guarantors		Guarantors
Assets
Current assets
Cash and cash equivalents	$	41,440	$	—		$	36,684		$	1,234	$	3,522
Accounts receivable, net		253,904		—			—			239,888		14,016
Inventories, net		142,621		—			—			119,882		22,739
Deferred tax assets		22,837		—			49			23,329		(541	)
Other current assets		29,306		—			11,532			9,913		7,861
Total current assets		490,108					48,265			394,246		47,597
Property, plant and equipment, net		167,812		—			1,190			124,744		41,878
Investment in subsidiaries		—		(273,387	)		262,871			10,516		—
Goodwill		241,461		—			241,461			—		—
Other intangible assets, net		83,594		—			11,628			71,966		—
Deferred financing costs, net		3,701		—			3,701			—		—
Deferred tax assets		—		—			(186	)		—		186
Pension and other assets		11,478		—			365			9,997		1,116
Assets held for sale		1,300		—			—			1,300		—
Total assets	$	999,454	$	(273,387	)	$	569,295		$	612,769	$	90,777
Liabilities and shareholder’s equity
Current liabilities
Accounts payable	$	102,553	$	—		$	1,072		$	85,181	$	16,300
Short-term borrowings		10,134		—			—			—		10,134
Current maturities of long-term debt		479		—			418			61		—
Accrued expenses and other current liabilities		95,169		—			19,981			71,187		4,001
Total current liabilities		208,335		—			21,471			156,429		30,435
Long-term debt, less current maturities		427,815		—			427,304			511		—
Pension and other postretirement liabilities		22,871		—			—			21,657		1,214
Deferred tax liabilities		27,338		—			15,570			10,230		1,538
Due to UCI Holdco		11,330		—			11,330			—		—
Minority interest		3,308		—			—			—		3,308
Other long-term liabilities		2,638		—			—			1,984		654
Intercompany payables (receivables)		—		—			(202,199	)		187,938		14,261
Total shareholder’s equity		295,819		(273,387	)		295,819			234,020		39,367
Total liabilities and shareholder’s equity	$	999,454	$	(273,387	)	$	569,295		$	612,769	$	90,777

88

United Components, Inc.
Notes to Consolidated Financial Statements

Note 27 (continued)

Consolidating Condensed Income Statement
Year Ended December 31, 2008
(in thousands)

	UCI												Non-
	Consolidated			Eliminations			UCI			Guarantors			Guarantors
Net sales	$	880,441		$	(88,019	)	$	—		$	834,630		$	133,830
Cost of sales		702,522			(88,019	)		—			659,695			130,846
Gross profit		177,919			—			—			174,935			2,984
Operating expenses
Selling and warehousing		(62,906	)		—			(854	)		(56,261	)		(5,791	)
General and administrative		(49,320	)		—			(16,589	)		(26,555	)		(6,176	)
Amortization of acquired intangible assets		(6,349	)		—			(1	)		(6,348	)		—
Costs of integration of water pump operations		(2,380	)		—			—			(2,380	)		—
Trademark impairment loss		(500	)		—			—			(500	)		—
Operating income (loss)		56,464			—			(17,444	)		82,891			(8,983	)
Other income (expense)
Interest expense, net		(34,192	)		—			(34,052	)		(28	)		(112	)
Intercompany interest		—			—			27,574			(26,712	)		(862	)
Management fee expense		(2,000	)		—			(2,000	)		—			—
Miscellaneous, net		(2,689	)		—			—			(14,207	)		11,518
Income (loss) before income taxes		17,583			—			(25,922	)		41,944			1,561
Income tax (expense) benefit		(7,656	)		—			9,789			(16,950	)		(495	)
Increase (decrease) from continuing operations before equity in earnings of subsidiaries		9,927			—			(16,133	)		24,994			1,066
Equity in earnings of subsidiaries		—			(28,001	)		26,060			1,941			—
Net income (loss)	$	9,927		$	(28,001	)	$	9,927		$	26,935		$	1,066

89

United Components, Inc.
Notes to Consolidated Financial Statements

Note 27 (continued)

Consolidating Condensed Income Statement
Year Ended December 31, 2007
(in thousands)

	UCI												Non-
	Consolidated			Eliminations			UCI			Guarantors			Guarantors
Net sales	$	969,782		$	(62,734	)	$	—		$	918,654		$	113,862
Cost of sales		748,822			(62,734	)		—			702,235			109,321
Gross profit		220,960			—			—			216,419			4,541
Operating expenses
Selling and warehousing		(61,146	)		—			(1,120	)		(55,793	)		(4,233	)
General and administrative		(49,239	)		—			(16,006	)		(27,786	)		(5,447	)
Amortization of acquired intangible assets		(7,000	)		—			—			(7,000	)		—
Costs of integration of water pump operations		(696	)		—			—			(696	)		—
Costs of closing facilities and consolidating operations		1,498			—			—			—			1,498
Trademark impairment loss		(3,600	)		—			—			(3,600	)		—
Operating income (loss)		100,777			—			(17,126	)		121,544			(3,641	)
Other income (expense)
Interest expense, net		(40,706	)		—			(40,264	)		(45	)		(397	)
Intercompany interest		—			—			31,381			(30,337	)		(1,044	)
Management fee expense		(2,000	)		—			(2,000	)		—			—
Miscellaneous, net		(2,739	)		—			—			(2,867	)		128
Income (loss) before income taxes		55,332			—			(28,009	)		88,295			(4,954	)
Income tax (expense) benefit		(19,953	)		—			11,540			(33,006	)		1,513
Increase (decrease) from continuing operations before equity in earnings of subsidiaries		35,379			—			(16,469	)		55,289			(3,441	)
Equity in earnings of subsidiaries		—			(46,586	)		51,848			(5,262	)		—
Discontinued operations
Gain on sale of discontinued operations, net of tax		2,707			—			2,707			—			—
Net income (loss)	$	38,086		$	(46,586	)	$	38,086		$	50,027		$	(3,441	)

90

United Components, Inc.
Notes to Consolidated Financial Statements

Note 27 (continued)

Consolidating Condensed Income Statement
Year Ended December 31, 2006
(in thousands)

	UCI												Non-
	Consolidated			Eliminations			UCI			Guarantors			Guarantors
Net sales	$	906,050		$	(44,559	)	$	—		$	855,040		$	95,569
Cost of sales		728,511			(44,559	)		—			684,744			88,326
Gross profit		177,539			—			—			170,296			7,243
Operating expenses
Selling and warehousing		(60,047	)		—			(1,772	)		(53,818	)		(4,457	)
General and administrative		(42,636	)		—			(14,336	)		(22,135	)		(6,165	)
Amortization of acquired intangible assets		(6,651	)		—			—			(6,651	)		—
Costs of integration of water pump operations and resulting asset impairment losses		(6,981	)		—			—			(6,981	)		—
Costs of closing facilities and consolidating operations		(6,364	)		—			—			(6,038	)		(326	)
Operating income (loss)		54,860			—			(16,108	)		74,673			(3,705	)
Other income (expense)
Interest expense, net		(43,262	)		—			(43,249	)		299			(312	)
Intercompany interest		—			—			42,315			(39,900	)		(2,415	)
Write-off of deferred financing costs		(2,625	)		—			(2,625	)		—			—
Management fee expense		(2,000	)		—			(2,000	)		—			—
Miscellaneous, net		(137	)		—			—			(1,045	)		908
Income (loss) before income taxes		6,836			—			(21,667	)		34,027			(5,524	)
Income tax (expense) benefit		(694	)		—			13,281			(12,834	)		(1,141	)
Increase (decrease) from continuing operations before equity in earnings of subsidiaries		6,142			—			(8,386	)		21,193			(6,665	)
Equity in earnings of subsidiaries		—			(11,416	)		16,589			(5,173	)		—
Discontinued operations
Net income from discontinued operations, net of tax		2,061			—			—			1,979			82
Loss on sale of discontinued operations, net of tax		(16,877	)		—			(16,877	)		—			—
Net income (loss)	$	(8,674	)	$	(11,416	)	$	(8,674	)	$	17,999		$	(6,583	)

91

United Components, Inc.
Notes to Consolidated Financial Statements

Note 27 (continued)

Consolidating Condensed Statement of Cash Flows
Year Ended December 31, 2008
(in thousands)

	UCI
	Consolidated			Eliminations		UCI			Guarantors			Non-Guarantors
Net cash provided by (used in) operating activities	$	32,423		$		$	(6,869	)	$	20,503		$	18,789
Cash flows from investing activities of continuing operations
Capital expenditures		(31,940	)		—		(339	)		(20,937	)		(10,664	)
Proceeds from sale of property, plant and equipment		421			—		—			121			300
Net cash used in investing activities of continuing operations		(31,519	)		—		(339	)		(20,816	)		(10,364	)
Cash flows from financing activities of continuing operations
Issuances of debt		27,993			—		20,003			—			7,990
Debt repayments		(23,407	)		—		(10,418	)		(61	)		(12,928	)
Net cash provided by (used in) financing activities of continuing operations		4,586			—		9,585			(61	)		(4,938	)
Effect of exchange rate changes on cash		(318	)		—		—			—			(318	)
Net increase (decrease) in cash and cash equivalents		5,172			—		2,377			(374	)		3,169
Cash and cash equivalents at beginning of year		41,440			—		36,684			1,234			3,522
Cash and cash equivalents at end of period	$	46,612		$	—	$	39,061		$	860		$	6,691

92

United Components, Inc.
Notes to Consolidated Financial Statements

Note 27 (continued)

Consolidating Condensed Statement of Cash Flows
Year Ended December 31, 2007
(in thousands)

	UCI
	Consolidated			Eliminations		UCI			Guarantors			Non-Guarantors
Net cash provided by operating activities	$	93,130		$	—	$	69,613		$	20,008		$	3,509
Cash flows from investing activities of continuing operations
Proceeds from sale of Mexican land and building		6,637			—		—			—			6,637
Proceeds from sale of discontinued operations		2,202			—		2,202			—			—
Capital expenditures		(29,687	)		—		(204	)		(17,719	)		(11,764	)
Proceeds from sale of property, plant and equipment		1,836			—		—			1,174			662
Net cash (used in) provided by investing activities of continuing operations		(19,012	)		—		1,998			(16,545	)		(4,465	)
Cash flows from financing activities of continuing operations
Issuances of debt		20,760			—		—			—			20,760
Debt repayments		(84,884	)		—		(65,139	)		(462	)		(19,283	)
Net cash (used in) provided by financing activities of continuing operations		(64,124	)		—		(65,139	)		(462	)		1,477
Effect of exchange rate changes on cash		(77	)		—		—			—			(77	)
Net increase in cash and cash equivalents		9,917			—		6,472			3,001			444
Cash and cash equivalents at beginning of year		31,523			—		30,212			(1,767	)		3,078
Cash and cash equivalents at end of period	$	41,440		$	—	$	36,684		$	1,234		$	3,522

93

United Components, Inc.
Notes to Consolidated Financial Statements

Note 27 (continued)

Consolidating Condensed Statement of Cash Flows
Year Ended December 31, 2006
(in thousands)

	UCI											Non-
	Consolidated			Eliminations		UCI			Guarantors			Guarantors
Net cash provided by operating activities	$	73,903		$	—	$	50,478		$	14,729		$	8,696
Cash flows from investing activities of continuing operations
Purchase price of the ASC acquisition, net of cash acquired		(123,634	)		—		(123,634	)		—			—
Proceeds from sale of discontinued operations, net of transaction costs and cash sold		65,177			—		65,177			—			—
Capital expenditures		(22,846	)		—		(2,419	)		(18,436	)		(1,991	)
Proceeds from sale of property, plant and equipment		1,611			—		—			1,108			503
Net cash used in investing activities of continuing operations		(79,692	)		—		(60,876	)		(17,328	)		(1,488	)
Cash flows from financing activities of continuing operations
Issuances of debt		113,000			—		113,000			—			—
Financing fees		(3,636	)		—		(3,636	)		—			—
Debt repayments		(66,853	)		—		(65,000	)		—			(1,853	)
Dividends		—			—		3,007			—			(3,007	)
Dividends paid to UCI Holdco, Inc.		(35,305	)		—		(35,305	)		—			—
Shareholder’s equity contributions		8,515			—		8,515			—			—
Net cash provided by (used in) financing activities of continuing operations		15,721			—		20,581			—			(4,860	)
Discontinued operations:
Net cash (used in) provided by operating activities of discontinued operations		(1,472	)		—		—			369			(1,841	)
Net cash used in investing activities of discontinued operations		(2,864	)		—		—			(844	)		(2,020	)
Effect of exchange rates on cash of discontinued operations		(341	)		—		—			—			(341	)
Effect of exchange rate changes on cash		86			—		—			—			86
Net increase (decrease) in cash and cash equivalents		5,341			—		10,183			(3,074	)		(1,768	)
Cash and cash equivalents at beginning of year		26,182			—		20,029			1,307			4,846
Cash and cash equivalents at end of period	$	31,523		$	—	$	30,212		$	(1,767	)	$	3,078

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

ITEM 9A(T). CONTROLS AND PROCEDURES

     Evaluation of Disclosure Controls and Procedures

     The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

     As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Our Chief Executive Officer and Chief Financial Officer have concluded, based on this evaluation, that as of December 31, 2008, the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective.

     Management’s Annual Report on Internal Control Over Financial Reporting

     Under Section 404 of the Sarbanes-Oxley Act of 2002, management is required to assess the effectiveness of the Company’s internal control over financial reporting as of the end of each fiscal year and report, based on that assessment, whether the Company’s internal control over financial reporting is effective.

     Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance as to the reliability of the Company’s financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.

     Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     The Company’s management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, the Company used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework.”

     Based on the Company’s processes and assessment, as described above, management has concluded that, as of December 31, 2008, the Company’s internal control over financial reporting was effective.

     This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

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     Changes in Internal Control Over Financial Reporting.

     Management also carried out an evaluation, as required by Rule 13a-15(d) of the Exchange Act, with the participation of our Chief Executive Officer and our Chief Financial Officer, of changes in the company’s internal control over financial reporting. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that there were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

     None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth information concerning our executive officers and directors as of the date of this report.

Name	Age		Position
David L. Squier		63	Chairman of the Board
Bruce M. Zorich		55	President, Chief Executive Officer, Director
Daniel J. Johnston		51	Chief Financial Officer, Director
Ian I. Fujiyama		36	Director
Paul R. Lederer		69	Director
Gregory S. Ledford		51	Director
Raymond A. Ranelli		61	Director
John C. Ritter		61	Director
Martin Sumner		35	Director

     David L. Squier is the Chairman of our Board of Directors and has been a member of the Board since 2003. Mr. Squier retired from Howmet Corporation in October 2000, where he served as the President and Chief Executive Officer for over eight years. Prior to his tenure as CEO, Mr. Squier served in a number of senior management assignments at Howmet, including Executive Vice President and Chief Operating Officer. Mr. Squier was also a member of the Board of Directors of Howmet from 1987 until his retirement. Mr. Squier currently serves as an adviser to Carlyle. Mr. Squier currently serves on the Boards of Directors of Vought Aircraft Industries, Wesco Aircraft and Sequa Corporation.

     Bruce M. Zorich is our President and Chief Executive Officer and has been a member of the Board since 2003. From January 2002 through May 2003, Mr. Zorich was President and CEO of Magnatrax Corporation. From 1996 to 2001, Mr. Zorich was President of Huck International. In May of 2003, Magnatrax Corporation filed a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code.

     Daniel J. Johnston is our Chief Financial Officer and was elected as a member of the Board in June 2007. Mr. Johnston was the Vice President and Chief Financial Officer of Solae, LLC, a manufacturer of soy-based food ingredients, from 2006 to June 2007. From 1994 to 2005, he was employed by United Industries Corporation, a manufacturer of consumer packaged goods, most recently as Executive Vice President and Chief Financial Officer from 2001 to 2005.

     Ian I. Fujiyama has been a member of the Board since 2003. Mr. Fujiyama is a Managing Director with Carlyle, which he joined in 1997. During his tenure at Carlyle, he spent two years in Hong Kong and Seoul working for Carlyle’s Asia buyout fund, Carlyle Asia Partners. Prior to joining Carlyle, Mr. Fujiyama was an Associate at Donaldson Lufkin and Jenrette Securities Corp. from 1994 to 1997. He is also a director of ARINC, Incorporated and Booz Allen Hamilton, Incorporated.

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     Paul R. Lederer has been a member of the Board since 2003. Mr. Lederer has been retired the past nine years with the exception of serving on the Boards of Directors of several public companies, acting as a consultant to Carlyle and serving on the Advisory Boards of Richco, Inc., RTC Corp. and Group 329, Inc. Mr. Lederer currently sits on the Board of Directors of O’Reilly Automotive, Inc., Dorman Products, Inc., Proliance International and MAXIMUS, Inc. Mr. Lederer’s term as a director of Proliance International ends as of May 7, 2009, and he will not be standing for re-election.

     Gregory S. Ledford has been a member of the Board of Directors since September 2006. Mr. Ledford is a Managing Director with Carlyle. Mr. Ledford joined Carlyle in 1988 and is currently head of the Automotive and Transportation group. Prior to joining Carlyle, Mr. Ledford was Director of Capital Leasing for MCI Telecommunications, where he was responsible for more than $1 billion of leveraged lease financing. From 1991 to 1997, he was Chairman and CEO of The Reilly Corp., a former portfolio company that was successfully sold in September 1997. Mr. Ledford is also a member of the Board of Directors of The Hertz Corporation and AxleTech International.

     Raymond A. Ranelli has been a member of the Board since 2004. Mr. Ranelli retired from PricewaterhouseCoopers, where he was a partner for over 21 years, in 2003. Mr. Ranelli held several positions at PricewaterhouseCoopers, including Vice Chairman and Global Leader of the Financing Advisory Services practice. Mr. Ranelli is also a director of United Surgical Partners International, Inc., Centennial Communications Corp. and Hawaiian Telcom Communications, Inc.

     John C. Ritter has been a member of the Board since 2003. Mr. Ritter served as President and a director of Raser Technologies, Inc. from February 2004 to October 2005. From April 2003 to September 2003, Mr. Ritter was our Chief Financial Officer. From July 2000 to December 2002, Mr. Ritter held the position of Senior Vice President and CFO of Alcoa Industrial Components. Mr. Ritter held the position of Senior Vice President and CFO for Howmet Corporation from 1996 through 2000.

     Martin Sumner has been a member of the Board since December 2006. Mr. Sumner is a Vice President with Carlyle, which he joined in 2003. During his tenure at Carlyle, he served as a Senior Associate from 2003 to 2005. Prior to joining Carlyle, Mr. Sumner worked as an Associate at Thayer Capital Partners from 1999 to 2001 and an Associate at Mercer Management Consulting from 1996 to 1999.

Board Committees

     Our Board directs the management of our business and affairs as provided by Delaware law and conducts its business through meetings of the Board of Directors and four standing committees: the Audit Committee, Executive Committee, the Compensation Committee and Investment Committee. The Audit Committee consists of Messrs. Ranelli (chair), Ritter and Fujiyama. The Board has determined that Messrs. Ranelli and Ritter are the Audit Committee financial experts and that Messrs. Ranelli and Ritter are independent, determined using the NYSE standard, for purposes of the Audit Committee. The Executive Committee consists of Messrs. Squier, Zorich and Fujiyama. The Compensation Committee consists of Messrs. Squier, Lederer and Fujiyama. Mr. Johnston is the sole member of the Investment Committee. In addition, from time to time, other committees may be established under the direction of the Board when necessary to address specific issues.

Code of Ethics

     The Company has adopted a code of ethics that applies to its executive officers. A copy of the code of ethics will be provided to any person without charge. Request should be made in writing to Karl Van Mill at United Components, Inc., 14601 Highway 41 North, Evansville, Indiana 47725.

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ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion & Analysis

Compensation Objectives

     Our named executive officers for 2008, or NEOs, include Bruce M. Zorich, President and Chief Executive Officer, and Daniel J. Johnston, Chief Financial Officer and Executive Vice President. For our NEOs, compensation is intended to be performance-based. The Compensation Committee believes that compensation paid to executive officers should be closely aligned with the performance of the Company on both a short-term and long-term basis, linked to specific, measurable results intended to create value for stockholders, and that such compensation should assist the Company in attracting and retaining key executives critical to its long-term success.

     In establishing compensation for executive officers, the following are the Compensation Committee’s objectives:

• Attract and retain individuals of superior ability and managerial talent;

• Ensure senior officer compensation is aligned with the Company’s corporate strategies, business objectives and the long-term interests of the Company’s stockholders;

• Increase the incentive to achieve key strategic and financial performance measures by linking incentive award opportunities to the achievement of performance goals in these areas; and

• Enhance the officers’ incentive to maximize stockholder value, as well as promote retention of key people, by providing a portion of total compensation opportunities for senior management in the form of direct ownership in the Company through stock options.

     The Company’s overall compensation program is structured to attract, motivate and retain highly qualified executive officers by paying them competitively, consistent with the Company’s success and their contribution to that success. The Company believes compensation should be structured to ensure that a significant portion of compensation opportunity will be directly related to factors that directly and indirectly influence stockholder value. Accordingly, the Company sets goals designed to link each NEO’s compensation to the Company’s performance and the NEO’s own performance within the Company. Consistent with our performance-based philosophy, the Company provides a base salary to our executive officers and includes a significant incentive based component. For the Company’s senior executive management team, comprised of the Chief Executive Officer and Chief Financial Officer, the Company reserves the largest potential cash compensation awards for its performance-based bonus program. This program provides annual cash awards based on the financial performance of the Company.

Determination of Compensation Awards

     The Compensation Committee is provided with the primary authority to determine and recommend the compensation awards available to the Company’s executive officers. The Compensation Committee uses published surveys to evaluate competitive practices and the amounts and nature of compensation paid to executive officers of public companies with approximately $1 billion in annual sales to determine the amount of executive compensation. Although the Compensation Committee reviews and considers the survey data for purposes of developing a baseline understanding of types of compensation, the Compensation Committee does not see the identity of any of the surveyed companies and the data was reviewed only to ensure that the Company’s compensation levels and elements are consistent with market standards. The Company does not benchmark compensation of its NEOs against this data.

     The Company’s executive compensation package for the NEOs generally consists of a fixed base salary and a variable cash incentive award, combined with an equity-based incentive award granted at the commencement of employment. The Company also granted an additional special equity-based incentive award in the form of restricted stock to Mr. Zorich in 2008. The variable annual cash incentive award and the equity-based awards are designed to ensure that total compensation reflects the overall success or failure of the Company and to motivate the NEOs to meet appropriate performance measures, thereby maximizing total return to stockholders.

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     To aid the Compensation Committee in making its determination, the CEO provides recommendations annually to the Compensation Committee regarding the compensation of all officers, excluding himself. The performance of our senior executive management team is reviewed annually by the Compensation Committee. The Compensation Committee, based upon recommendations of the compensation consultant, determines each NEO’s compensation annually.

     Within its performance-based compensation program, the Company aims to compensate the NEOs in a manner that is tax effective for the Company. Section 162(m) of the Code imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the Company’s NEOs listed in the summary compensation table below. The $1 million limitation does not apply to compensation that qualifies as performance-based compensation under Section 162(m) of the Code. The annual performance-based cash compensation and the discretionary long-term equity incentive awards are designed to qualify as performance-based compensation under Section 162(m) of the Code. In practice, all of the annual and long-term compensation delivered by the Company is tax-qualified under Section 162(m) of the Internal Revenue Code, as amended.

     The Company has no policy with respect to requiring officers and directors to own stock of UCI Holdco.

Compensation Benchmarking and Peer Group

     The Company does not benchmark compensation of the NEOs against peer group data. Base salary structures and annual incentive targets are set around the median of a general survey of comparably sized companies. This approach ensures that our cost structures will allow us to remain competitive in our markets.

     For 2008, we targeted the aggregate value of our total compensation to be at or above the median level for this survey group for most executive officer positions. Actual pay for each NEO is determined around this structure, driven by the performance of the executive over time, as well as the annual performance of the Company. Using this methodology, the total cash compensation for our CEO was below the 50th percentile of the survey group, and the total cash compensation for our CFO was at approximately the 50th percentile of the survey group.

     In setting annual cash compensation, the Company reviews salary data from the survey group. Our review indicates that we are providing an annual base salary to our CEO below the median of salaries provided to CEOs of companies in the survey group and an annual base salary to our CFO at approximately the median of salaries provide to CFOs of companies in the survey group. Also, the Company provides annual cash incentive bonuses that allow the NEOs, upon achieving 100% of their targets, to receive bonus payments at or above the median for the survey group. The Company believes the design of base and incentive annual cash compensation appropriately provides market compensation to the Company’s executive officers.

Base Compensation

     In setting base salaries for the Company’s executive officers, the Compensation Committee reviews data from independently conducted compensation surveys using the peer group. While base salaries are not considered by the IRS to constitute performance-based compensation, in addition to market positioning, each year the Company determines base salary increases based upon the performance of the executive officers as assessed by the Compensation Committee, and for executive officers other than the CEO, by the CEO. No formulaic base salary increases are provided to the NEOs. The Company sets base salaries for its NEOs generally at a level it deems necessary to attract and retain individuals with superior talent.

Performance-Based Compensation

     Annual Performance-Based Cash Compensation

     The Company structures its compensation programs to reward executive officers based on the Company’s performance and the individual executive’s contribution to that performance. This allows executive officers to receive bonus compensation in the event certain specified corporate performance measures and individual objectives are achieved. In determining the compensation awarded to each executive officer based on performance, the Company evaluates the Company’s and executive’s performance in a number of areas.

     The annual bonus program consists of an annual cash award based upon the Company’s achievement of adjusted EBITDA and operating cash flow targets and the achievement of individual objectives for each NEO.

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     Under the terms of the annual bonus plan, results of at least 90% of the target performance level for any performance criteria must be achieved in order to earn the portion of the award based on that criteria. Achievement of 90% of the target performance level results in an award of 50% of the targeted award. Achievement of 110% of the target performance level results in an award of 150% of the targeted award. Once the achievement of targets has been determined, the Compensation Committee considers the achievement of personal objectives for each officer, and may adjust the amount of award paid upward or downward based upon the achievement of those objectives. In addition, incentive amounts to be paid under the performance-based programs may be adjusted by the Compensation Committee to account for unusual events such as extraordinary transactions, asset dispositions and purchases, and mergers and acquisitions if, and to the extent, the Compensation Committee does not consider the effect of such events indicative of Company performance. Payments under each of the programs are contingent upon continued employment, though pro rata bonus payments will be paid in the event of death or disability based on actual performance at the date relative to the targeted performance measures for each program.

     The adjusted EBITDA and operating cash flow targets are those contained in the Company’s business plan for the year, and are intended to satisfy overall corporate goals for growth and strategic accomplishment.

     For 2008, the Company achieved less than 90% of each of the adjusted EBITDA performance target (which carried a 75% weighting) and the operating cash flow performance target (which carried a 25% weighting). Accordingly, the executive officers did not achieve a target award. However, the Compensation Committee reviewed the Company’s performance in the context of the difficult economic conditions of 2008, and reviewed the actions taken by the NEOs during the year to mitigate the effects of the economy on the Company’s performance. Based on this review, the Compensation Committee awarded the Chief Executive Officer and Chief Financial Officer discretionary bonuses of $125,000 and $62,700, respectively.

     The Compensation Committee believes that the payment of the annual cash incentive bonus provides incentives necessary to retain executive officers and reward them for short-term company performance.

Discretionary Long-Term Equity Incentive Awards

     The Company’s executive officers, along with other key Company employees, are granted stock options at the commencement of their employment with the Company, and are eligible to receive additional awards of stock options or restricted stock at the discretion of the Compensation Committee.

     Guidelines for the number of equity awards granted to each executive officer are determined using a procedure approved by the Compensation Committee based upon several factors, including the executive officer’s position and salary level and the value of the equity award at the time of grant.

     Equity award grants are tied to vesting requirements and are designed to not only compensate but to also motivate and retain the recipients by providing an opportunity for the recipients to participate in the ownership of the Company. The equity award grants to members of the senior management team also promote the Company’s long-term objectives by aligning the interests of the executives with the interests of the Company’s stockholders.

     Generally, stock options granted under the equity incentive plan have an eight-year vesting schedule in order to provide an incentive for continued employment and expire ten years from the date of the grant. 50% of each option is subject to vesting in five equal installments over the first five years of the officer’s employment. The remaining 50% of each option vests at the end of eight years from the grant date, but may be accelerated upon the achievement of certain targets in EBITDA and free cash flow. The exercise price of options granted under the stock option plan is 100% of the fair market value of the underlying stock on the date of grant.

     In 2007, special options were granted to Messrs. Zorich and Johnston. These options become exercisable only in the event that the optionee remains employed with the Company or its acquirer one year following a change of control of the Company, provided, however, that the option will vest immediately if (following a change of control but prior to one year following the change of control) the optionee is terminated without cause or resigns with good reason. In 2008, the special options granted to Mr. Zorich in 2007 were cancelled and he was granted shares of restricted stock. The restricted stock becomes vested only in the event that Mr. Zorich remains employed with the Company at the time of a change of control of the Company.

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Defined Contribution Plans

     The Company has a Section 401(k) Savings/Retirement Plan (the “401(k) Plan”) to cover eligible employees of the Company. The 401(k) Plan permits eligible employees of the Company to defer up to 50% of their annual compensation, subject to certain limitations imposed by the Internal Revenue Code. The employees’ elective deferrals are immediately vested and non-forfeitable upon contribution to the 401(k) Plan. The Company currently makes matching contributions to the 401(k) Plan in an amount equal to fifty cents for each dollar of participant contributions, up to a maximum of five percent of the participant’s annual salary and subject to certain other limits. Plan participants vest in the amounts contributed by the Company following three years of employment with the Company. Employees of the Company are eligible to participate in the 401(k) Plan immediately upon commencing employment with the Company.

     The 401(k) Plan is offered on a nondiscriminatory basis to all employees of the Company who meet the eligibility requirements. The matching contributions provided by the Company assist the Company in attracting and retaining talented executives. The 401(k) Plan provides an opportunity for participants to save money for retirement on a tax-qualified basis and to achieve financial security, thereby promoting retention.

Defined Benefit Plans

     Our CEO participates in the Champion Laboratories, Inc. Pension Plan. Annual retirement benefits under the plan accrue at a rate of 1.5% of the first $200,000 of gross wages for each year of service up to 30 years of service. Benefits are payable as a life annuity for the participant. If elected, joint & survivor and 10 year guaranteed payment options are available at reduced benefit levels. The full retirement benefit is payable to participants who retire on or after the social security retirement age, and a reduced early retirement benefit is available to participants who retire on or after age 55. No offsets are made for the value of any social security benefits earned.

     Similar to the 401(k) Plan, this defined benefit plan is a nondiscriminatory tax-qualified retirement plan that provides participants with an opportunity to earn retirement benefits and provides for financial security. Offering these benefits is an additional means for the Company to attract and retain well-qualified executives.

Severance Arrangements/Employment Agreements

     The Compensation Committee considers the maintenance of a sound management team to be essential to protecting and enhancing our best interests and the best interests of the Company. To that end, we recognize that the uncertainty that may exist among management with respect to their “at-will” employment with the Company may result in the departure or distraction of management personnel to the detriment of the Company. Accordingly, the Compensation Committee has determined that severance arrangements are appropriate to encourage the continued attention and dedication of members of our management.

     Mr. Zorich and Mr. Johnston each has an agreement which provides for severance benefits upon termination of employment. Mr. Zorich has an employment agreement, amended and restated as of December 23, 2008, which has an original one-year term and is extended automatically for successive one-year periods thereafter unless either party delivers notice within specified notice periods to terminate the agreement. The agreement provides that upon termination of Mr. Zorich’s employment he will be entitled to receive the sum of his unpaid annual base salary through the date of termination, any unpaid expenses, any unpaid accrued vacation pay, and any amount arising from his participation in, or benefits under, any of our employee benefits plans, programs or arrangements. Upon termination of Mr. Zorich’s employment either by us without cause or due to nonextension of the term by us or by Mr. Zorich for good reason, he is entitled to receive his stated annual base salary paid in monthly installments for 12 months (24 months in the case of a termination for any of these reasons following a change of control of the Company), a lump sum payment of the pro rata portion of his target level bonus and, during the severance period (but not with respect to a termination due to nonextension of the term by us), continued coverage under all of our group health benefit plans in which Mr. Zorich and any of his dependents were entitled to participate immediately prior to termination. The agreement also provides that upon termination of Mr. Zorich’s employment due to his death or disability, he or his estate shall be entitled to six months of his annual base salary and the pro rata portion of his annual bonus, to be determined in good faith by the Compensation Committee. During his employment and for 12 months following termination (24 months in the case of a termination following a change of control), Mr. Zorich is prohibited from competing with any material business of the Company, or from soliciting employees, customers or suppliers of the Company to terminate their employment or arrangements with the Company.

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     Mr. Johnston has a severance agreement, dated as of December 23, 2008. The agreement provides that, upon termination of Mr. Johnston’s employment (i) either by us without cause or by Mr. Johnston for good reason or (ii) for any reason after September 30, 2009, he is entitled to receive his stated annual base salary paid in monthly installments for 12 months, a lump sum payment of the pro rata portion of his target level bonus and, during the severance period, direct payment or reimbursement of health and dental insurance premiums. Upon termination of Mr. Johnston’s employment either by us without cause or by Mr. Johnston for good reason following a change of control of the Company, he is entitled to receive his stated annual base salary paid in monthly installments for 24 months and, during the severance period, direct payment or reimbursement of health and dental insurance premiums.

     Any unvested options held by the NEO under the Company’s stock option plan will expire as of the date of the NEO’s termination of employment.

Other Elements of Compensation and Perquisites

     Medical Insurance. The Company provides to each NEO, the NEO’s spouse and children such health, dental and optical insurance as the Company may from time to time make available to its other executives of the same level of employment.

     Life and Disability Insurance. The Company provides each NEO such disability and/or life insurance as the Company in its sole discretion may from time to time make available to its other executive employees of the same level of employment.

Policies with Respect to Equity Compensation Awards `

     The Company grants all equity incentive awards at no less than fair market value as of the date of grant. The fair market value is determined in good faith by the Board of Directors, with analyses prepared by independent valuation experts, as deemed appropriate.

COMPENSATION COMMITTEE REPORT

     The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K (Section 229.402(b)) with management. Based on this review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

Respectfully submitted,

David L. Squier, chairman
Ian I. Fujiyama
Paul R. Lederer  

SUMMARY COMPENSATION TABLE FOR 2008

											Non-Equity
Name and Principal							Stock		Option		Incentive Plan		Change in Pension		All Other
Position	Year		Salary		Bonus		Awards(1)		Awards(2)		Compensation(3)		Value		Compensation(4)		Total
Bruce M. Zorich		2008	$	465,000		$125,000(5)	$	0	$	22,177	$		$	36,856		7,935	$	656,968
President and Chief		2007		441,000						213,830		387,000		19,855		7,141		1,068,826
Executive Officer		2006		420,000						122,967		350,000		17,649		7,752		918,368
Daniel J. Johnston
Chief Financial		2008		380,000		62,700(5)				81,000						7,141		530,841
Officer and		2007		203,558		100,000(7)				46,955		119,000				1,629		471,142
Executive Vice
President(6)

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(1)	Amounts represent the Company’s compensation cost recognized for financial statement reporting purposes for the fiscal year ended December 31, 2008, in accordance with the provisions of Statement of Financial Accounting Standards No. 123R (FAS 123R), but disregarding forfeitures related to service based vesting conditions. For the assumptions used in calculating the value of this award, see Note 21 to our consolidated financial statements included in of this report.
(2)	Amounts represent the Company’s compensation cost recognized for financial statement reporting purposes for the fiscal years ended December 31, 2006, December 31, 2007 and December 31, 2008, in accordance with the provisions of Statement of Financial Accounting Standards No. 123R (FAS 123R), but disregarding forfeitures related to service based vesting conditions. For the assumptions used in calculating the value of this award, see Note 21 to our consolidated financial statements included in of this report.
(3)	Represents bonus amounts earned under the Company’s annual bonus program for fiscal years ended December 31, 2006 and December 31, 2007, and paid in 2007 and 2008. No bonuses were earned under the annual bonus program with respect to performance for the year ended December 31, 2008.
(4)	Includes Company matching funds under the Company’s 401(k) plan and Company-paid life insurance premiums.
(5)	Represent discretionary bonuses paid in 2009 with respect to the year ended December 31, 2008. These bonuses were not paid under the Company’s annual bonus program.
(6)	Mr. Johnston’s employment with the Company commenced on June 11, 2007.
(7)	This $100,000 payment was made to Mr. Johnston in connection with the commencement of his employment with the Company.

GRANTS OF PLAN-BASED AWARDS FOR 2008

	Estimated Future Payouts Under Non-Equity												Grant Date Fair
			Incentive Plan Awards							All Other Stock Awards:			Value of
										Number of Shares of Stock			Stock and Option
Name	Grant Date		Threshold		Target			Maximum		or Units(1)			Awards
Bruce M. Zorich			$	186,000	$	372,000	(1)	$	558,000
		12/23/08									19,300	(2)	$	0	(3)
Daniel J. Johnston				95,000		190,000	(1)		285,000

(1)	No cash bonus was earned under the UCI Annual Incentive Compensation Plan for the 2008 plan year, since the performance targets were not met. See “Annual Performance-Based Cash Compensation” above for a discussion of the calculation of this bonus.
(2)	This restricted stock was granted on December 23, 2008 under the Company’s equity incentive plan. All stock vests following a change of control of the Company. See “Discretionary Long-Term Equity Incentive Awards” for a discussion of the terms of these option grants.
(3)	The value of a stock award is based on the fair value as of the date of grant of the award determined pursuant to FAS 123R. The valuation assumptions used to calculate these amounts are described in Note 21 to our consolidated financial statements included in of this report.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2008

The following table provides information regarding the stock options held by the named executive officers as of December 31, 2007.

Equity Incentive

Plan Awards:

Number of

Number of

Number of

Securities

Securities

Securities

Underlying

Market Value of

Underlying

Underlying

Unexercised

Number of Shares or

Shares or Units of

Unexercised Options —

Unexercised Options —

Unearned

Option Exercise

Option Expiration

Units of Stock That

Stock That Have

Name

Exercisable

Unexercisable

Options

Price

Date

Have Not Vested

Not Vested

Bruce M.

Zorich

6,500

(1)

2,889

(2)

28,889

(3)

$

5.00

11/21/2013

19,300

(4)

$

0

Daniel J.

Johnston

1,250

(5)

8,750

(6)

$

23.63

6/11/2017

4,250

(7)

$

105.00

6/11/2017

(1)	The 6,500 shares underlying the exercisable portion of the option became exercisable on December 31, 2007.
(2)	These 2,889 shares will become exercisable on November 20, 2011.
(3)	These 28,889 shares may become exercisable upon the achievement of certain financial targets.
(4)	These shares of restricted stock become vested only in connection with a change of control of the Company.
(5)	The 1,250 shares underlying the exercisable portion of the option became exercisable on December 31, 2008.
(6)	Of the 8,750 shares underlying the unexercisable portion of the option, 1,250 will become exercisable on December 31 of each of the years 2009, 2010 and 2011, and 5,000 will become exercisable on June 11, 2015 (although the exercisability may be accelerated upon the achievement of certain financial targets).
(7)	These options become exercisable only in connection with a change of control of the Company.

OPTION EXERCISES IN 2008

	OPTION AWARDS
	Number of		Value
	Shares		Realized
	Acquired		on
Name	on Exercise		Exercise
Daniel J. Johnston		2,500	$	0	(1)

(1) The reported dollar value is the difference between the option exercise price and the closing price of the underlying shares on the date of exercise multiplied by the number of shares covered by the option.

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EQUITY COMPENSATION PLAN INFORMATION

					Number of securities
					remaining available for
					future issuance under
	Number of securities to		Weighted-average		equity compensation
	be issued upon exercise		exercise price of		plans (excluding
	of outstanding options,		outstanding options,		securities reflected in
	warrants and rights (1)		warrants and rights		column (a))
Plan category	(a)		(b)		(c)
Equity compensation plans approved by security holders		177,426	$	13.66		74,499
Equity compensation plans not approved by security holders		0		0		0
Total

(1) This includes shares subject to options outstanding under the Amended and Restated Equity Incentive Plan of UCI Holdco, Inc.

PENSION BENEFITS FOR 2008

The following table sets forth information regarding the accrued pension benefits for the named executive officers for 2008 under the Champion Laboratories Inc. Pension Plan, described below.

		Number of		Present Value
		Years		of		Payments
		Credited		Accumulated		During Last
Name	Plan Name	Service		Benefit		Fiscal Year
Bruce M. Zorich	Champion Laboratories Inc. Pension Plan		6	$	115,597	$	0

     Mr. Zorich is the only named executive officer eligible to participate in the Champion Laboratories Inc. Pension Plan offered by us as described below. The following table shows the estimated annual pension benefit under the pension plan for the specified compensation and years of service.

	Years of Service
Remuneration	5		10		15		20		25		30
$125,000		9,375		18,750		28,125		37,500		46,875		56,250
$150,000		11,250		22,500		33,750		45,000		56,250		67,500
$175,000		13,125		26,250		39,375		52,500		65,625		78,750
$200,000 and over		15,000		30,000		45,000		60,000		75,000		90,000

     Annual retirement benefits accrue at a rate of 1.5% of the first $200,000 of gross wages for each year of service up to 30 years of service. Benefits are payable as a life annuity for the participant. If elected, joint & survivor and 10 year guaranteed options are available at reduced benefit levels. The full retirement benefit is payable to participants who retire on or after the social security retirement age, and a reduced early retirement benefit is available to participants who retire on or after age 55. No offsets are made for the value of any social security benefits earned.

     As of December 31, 2008, Mr. Zorich had earned six years of credited service under the pension plan.

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     For information with respect to the valuation methods and material assumptions applied in quantifying the present value of the accrued benefits under the pension plan, see Note 16 to the financial statements of the Company contained in this Form 10-K.

Potential payments upon termination or change-in-control

     Each of our NEOs has an agreement which provides for severance benefits upon termination of employment. See the section titled “Severance Arrangements /Employment Agreements” above for a description of the employment and severance agreements with our NEOs.

     Assuming that Mr. Zorich’s employment had been terminated by us without cause or by Mr. Zorich with good reason effective December 31, 2008, he would have been entitled to the following severance benefits: salary continuation, $465,000 ($930,000 if his employment had been terminated for any of those reasons following a change of control); bonus, $372,000; and group health benefits, $14,471 ($28,942 if his employment had been terminated for any of those reasons following a change of control). The health benefits were calculated using an estimate of the cost to the Company of such health coverage based upon past experience.

     Assuming that Mr. Johnston’s employment had been terminated by us without cause or by Mr. Johnston with good reason effective December 31, 2008, he would have been entitled to the following severance benefits: salary continuation, $380,000; bonus, $190,000; and group health benefits, $13,420. If his employment had been terminated effective December 31, 2008 for any of those reasons following a change of control, he would have been entitled to the following severance benefits: salary continuation, $930,000; and group health benefits, $26,840 The health benefits were calculated using an estimate of the cost to the Company of such health coverage based upon past experience.

     Under the agreement covering certain of each NEO’s stock options, in the event of a change in control of the Company, the exercisability of all shares underlying the option would be accelerated. In addition, under the agreement covering Mr. Zorich’s restricted stock, in the event of a change of control of the Company, all of the restricted stock would vest. Assuming a change in control of the Company occurred effective December 31, 2008, based on the estimated fair market value of $13.87 per share of the Company’s common stock on that date, the value of the acceleration of Mr. Zorich’s unvested outstanding options (determined by multiplying the fair market value on December 31, 2008, minus the exercise price, by the number of shares subject to the option that would receive accelerated vesting), would be $25,625, and the value of the acceleration of Mr. Johnston’s unvested options (based on the same method of calculation), would be $0. In addition, under the agreement covering the special stock options granted to Mr. Johnston on April 21, 2007, the option would become exercisable in connection with a change of control as described in “Discretionary Long-Term Equity Incentive Awards” above. Assuming a change in control of the Company occurred effective December 31, 2008, based on the estimated fair market value of $13.87 per share of the Company’s common stock on that date, at an exercise price of $105 per share, these options would have no value. Assuming a change in control of the Company occurred effective December 31, 2008, based on the estimated fair market value of $13.87 per share of the Company’s common stock on that date, the value of the vesting of Mr. Zorich’s restricted stock would be $267,691.

DIRECTOR COMPENSATION FOR 2008

     Directors who are employees of the Company (Messrs. Zorich and Johnston) or Carlyle (Messrs. Fujiyama, Ledford and Sumner) receive no additional compensation for serving on the board or its committees. Mr. Squier, chairman of the Board, receives a cash retainer of $60,000 per year; Mr. Ranelli, Chairman of our Audit Committee, receives a cash retainer of $55,000 per year; and the other directors not employed by Carlyle or the Company, John Ritter and Paul Lederer, receive a cash retainer of $45,000 per year. Each of Messrs. Squier, Ranelli, Ritter and Lederer is also granted, in December of each year he continues in service as a director, an option to purchase 500 shares of the common stock of UCI Holdco, to become exercisable 20% per year over five years.

106

     In 2008, we provided the following annual compensation to directors who are not employees of the Company or Carlyle:

	Fees Earned if		Option
Name	Paid in Cash		Awards(1)			Total
David L. Squier	$	60,000	$	22,475	(2)	$	82,475
Paul R. Lederer		45,000		22,475	(3)		67,475
Raymond A. Ranelli		55,000		32,322	(4)		87,322
John C. Ritter		45,000		22,475	(5)		67,475

(1)	Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2008, in accordance with the provisions of Statement of Financial Accounting Standards No. 123R (FAS 123R), but disregarding forfeitures related to service based vesting conditions. For the assumptions used in calculating the value of this award, see Note 21 to our consolidated financial statements included in of this report.
(2)	As of December 31, 2008, Mr. Squier held options with respect to 3,500 shares of common stock: 1,000 granted on December 9, 2003 with a grant date fair value of $52,170; 500 granted on August 2, 2004 with a grant date fair value of $27,150; 500 granted on December 14, 2005 with a grant date fair value of $26,755; 500 granted on December 15, 2006 with a grant date fair value of $36,441; 500 granted on December 15, 2007 with a grant date fair value of $6,380; and 500 granted on December 15, 2008 with a grant date fair value of $2,530.
(3)	As of December 31, 2008, Mr. Lederer held options with respect to 3,000 shares of common stock: 500 granted on December 9, 2003 with a grant date fair value of $26,085; 500 granted on August 2, 2004 with a grant date fair value of $27,150; 500 granted on December 14, 2005 with a grant date fair value of $26,755; 500 granted on December 15, 2006 with a grant date fair value of $36,441; 500 granted on December 15, 2007 with a grant date fair value of $6,380; and 500 granted on December 15, 2008 with a grant date fair value of $2,530.
(4)	As of December 31, 2008, Mr. Ranelli held options with respect to 3,000 shares of common stock: 1,000 granted on June 30, 2004 with a grant date fair value of $54,300; 500 granted On December 14, 2005 with a grant date fair value of $26,755; 500 granted on December 15, 2006 with a grant date fair value of $36,441; 500 granted on December 15, 2007 with a grant date fair value of $6,380; and 500 granted on December 15, 2008 with a grant date fair value of $2,530.
(5)	As of December 31, 2008, Mr. Ritter held options with respect to 3,000 shares of common stock: 500 granted on December 9, 2003 with a grant date fair value of $26,085; 500 granted on August 2, 2004 with a grant date fair value of $27,150; 500 granted on December 14, 2005 with a grant date fair value of $26,755; 500 granted on December 15, 2006 with a grant date fair value of $36,441; 500 granted on December 15, 2007 with a grant date fair value of $6,380; and 500 granted on December 15, 2008 with a grant date fair value of $2,530.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     United Components, Inc. has 1,000 shares of common stock outstanding, all of which is owned by our indirect parent, UCI Holdco, Inc. Certain affiliates of Carlyle own approximately 90.9% of UCI Holdco’s common stock while the remainder is owned by members of our Board of Directors, Bruce M. Zorich, our President and Chief Executive Officer, Daniel J. Johnston, our Chief Financial Officer, and other employees of the Company. UCI Holdco has 2,865,060 shares of common stock outstanding.

     The following table sets forth information with respect to the beneficial ownership of UCI Holdco’s common stock as of the date of this report by:

• each person known to own beneficially more than 5% of the capital stock;

• each of our directors;

• each of the executive officers named in the summary compensation table; and

• all of our directors and executive officers as a group.

107

     The amounts and percentages of shares beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a “beneficial” owner of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing any other person’s percentage. Under these rules, more than one person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

     Except as otherwise indicated in these footnotes, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the shares of capital stock.

Beneficial Ownership of UCI Holdco, Inc.

			Percentage of
	Number of		Outstanding
Name of Beneficial Owner	Shares		Capital Stock
TCG Holdings, L.L.C.(1)		2,600,500		90.9	%
Bruce M. Zorich(2)		29,000		*
Daniel J. Johnston(3)		3,750		*
David L. Squier(4)		3,500		*
Ian I. Fujiyama		1,500		*
Paul R. Lederer(5)		2,400		*
Raymond A. Ranelli(6)		3,000		*
John C. Ritter(7)		5,000		*
All executive officers and directors as a group (10 persons)		48,150		1.7	%

*	Denotes less than 1.0% of beneficial ownership.
(1)	Carlyle Partners III, L.P., a Delaware limited partnership, and CP III Coinvestment, L.P., a Delaware limited partnership (the “Investment Partnerships”), both of which are affiliates of Carlyle, own approximately 90.9% of the outstanding common stock of UCI Holdco, Inc. TC Group Investment Holdings, L.P. exercises investment discretion and control over the shares held by the Investment Partnerships indirectly through its subsidiary TC Group III, L.P., which is the sole general partner of the Investment Partnerships. TCG Holdings II, L.P., a Delaware limited partnership, is the sole general partner of TC Group Investment Holdings, L.P. DBD Investors V, L.L.C., a Delaware limited liability company, is the sole general partner of TCG Holdings II, L.P. and its address is c/o The Carlyle Group, 1001 Pennsylvania Ave. N.W., Suite 220S, Washington, D.C. 20004.
(2)	Includes 22,500 shares in UCI Holdco, Inc. beneficially owned by Mr. Zorich and the right to acquire up to 6,500 additional shares.
(3)	Includes 2,500 shares in UCI Holdco, Inc. beneficially owned by Mr. Johnston and the right to acquire up to 1,250 additional shares.
(4)	Includes 1,000 shares in UCI Holdco, Inc. beneficially owned by Mr. Squier and the right to acquire up to 2,500 additional shares.
(5)	Includes 400 shares in UCI Holdco, Inc. beneficially owned by Mr. Lederer and the right to acquire up to 2,000 additional shares.
(6)	Includes 1,000 shares in UCI Holdco, Inc. beneficially owned by Mr. Ranelli and the right to acquire up to 2,000 additional shares.
(7)	Includes 3,000 shares in UCI Holdco, Inc. beneficially owned by Mr. Ritter and the right to acquire up to 2,000 additional shares.

108

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Carlyle Management Agreement

     In connection with the Acquisition, we entered into a management agreement with TC Group, L.L.C., an affiliate of Carlyle, for management and financial advisory services and oversight to be provided to us and our subsidiaries. Pursuant to this agreement, we pay an annual management fee to Carlyle of $2.0 million and annual out-of-pocket expenses, and we may pay Carlyle additional fees associated with financial advisory and other future transactions. Carlyle also received a one-time transaction fee of $10.0 million upon consummation of the Acquisition. In 2006, Carlyle was paid $2.5 million for the ASC Acquisition. The management agreement also provides for indemnification of Carlyle against liabilities and expenses arising out of Carlyle’s performance of services under the agreement. The agreement terminates either when Carlyle or its affiliates own less than ten percent of our equity interests or when we and Carlyle mutually agree to terminate the agreement.

Stockholders Agreement

     On May 25, 2006, we and certain of our executive officers and affiliates of Carlyle who are holders of our common stock entered into a stockholders agreement that:

• imposes restrictions on their transfer of shares;

• requires those stockholders to take certain actions upon the approval by stockholders party to the agreement holding a majority of the shares held by those stockholders in connection with a sale of the company; and

• grants our principal stockholders the right to require other stockholders to participate pro rata in connection with a sale of shares by our principal stockholder.

     The stockholder agreement will terminate upon the sale or disposition of all or substantially all of our assets or upon the execution of a resolution of our board of directors terminating the agreement.

Employment Agreements

     In connection with the Acquisition, we entered into employment agreements with certain of our named executive officers as described in “Item 11. Executive Compensation ¯ Compensation Discussion and Analysis — Severance Arrangement/Employment Agreements.”

Director Independence

     The Company has no securities listed for trading on a national securities exchange or in an automated inter-dealer quotation system of a national securities association, which has requirements that a majority of its board of directors be independent. However, the board has determined that under the New York Stock Exchange’s definition of independence, Messrs. Lederer, Ritter and Ranelli would be independent.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

     Fees billed by Grant Thornton LLP in 2008 and 2007 were:

     Audit Fees — Audit fees billed in 2008 and 2007, were $2,626,128 and $2,225,274, respectively.

Audit-Related Fees — In 2008 and 2007, the Company had audit-related fees of $272,899 and $264,366, respectively. These fees were for audits of Company-sponsored pension plans.

Tax Fees — Billings for tax services were $0 and $15,483 in 2008 and 2007, respectively. The services were primarily for the preparation of a foreign subsidiary tax return in 2007.

109

     All Other Fees — There were no other fees billed in 2008 and 2007.

     Our policy is to require our Audit Committee to pre-approve audit services. In March 2004, the Company established a policy that also requires Audit Committee pre-approval for all audit-related, tax, and other services. Previously, senior management was authorized to approve such services provided that the services were brought to the attention of the Audit Committee and were approved by the Audit Committee prior to the completion of the audit. Management monitors all services provided by our principal accountants and reports periodically to our Audit

Committee on these matters.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a)(1) Financial Statements.

     The Company’s consolidated financial statements included in Item 8 hereof are as of December 31, 2008 and 2007, and for the three years ending December 31, 2008. Such financial statements consist of the following:

          Balance Sheets

          Income Statements

          Statements of Cash Flows

          Statements of Changes in Shareholder’s Equity

          Notes to Financial Statements

     (a)(2) Financial Statement Schedules.

          Schedule II — Valuation and Qualifying Accounts

Certain information required in Schedule II, Valuation and Qualifying Accounts, has been omitted because equivalent information has been included in the financial statements included in this Form 10-K.

Other financial statement schedules have been omitted because they either are not required, are immaterial or are not applicable.

110

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder
of United Components, Inc. and subsidiaries

We have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) the consolidated financial statements of United Components, Inc. and subsidiaries referred to in our report dated March 30, 2009, which is included in Part II on this Form 10-K. Our audits of the basic financial statements included the financial statement schedule listed in the index appearing under Item 15(a)(2), which is the responsibility of the Company’s management. In our opinion, this financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ GRANT THORNTON LLP

Cincinnati, Ohio
March 30, 2009

111

Schedule II — Valuation and Qualifying Accounts

	Balance at		Charged to					Other			Balance at
Description	Beginning of Year		Income		Deductions			(a)			End of Year
	(In millions)
Year ended December 31, 2008
Allowance for excess and obsolete inventory	$	15.6	$	3.7	$	(4.3	)	$	(0.1	)	$	14.9
Valuation allowance for deferred tax assets		4.3		0.9		—			(1.0	)		4.2
Year ended December 31, 2007
Allowance for excess and obsolete inventory		19.7		2.3		(6.4	)		—			15.6
Valuation allowance for deferred tax assets		3.1		1.3		(0.1	)		—			4.3
Year ended December 31, 2006
Allowance for excess and obsolete inventory		17.2		7.6		(6.5	)		1.4			19.7
Valuation allowance for deferred tax assets		2.3		0.8		—			—			3.1

(a) In 2008, other is the effect of foreign currency translation. In 2006, other is the balance acquired in connection with the May 25, 2006 acquisition of ASC Industries.

     (a)(3) Exhibits

EXHIBIT INDEX

Exhibit
No.	Description of Exhibit
2.1	Stock Purchase Agreement by and among United Components, Inc., ACAS Acquisitions (ASC), Inc. and the Sellers named herein, dated as of March 8, 2006 (incorporated by reference to Exhibit 2.1 to United Components’ Report on form 10-K filed March 31, 2006).
2.2	Asset Purchase Agreement by and among United Components, Inc., Neapco Inc. and Neapco, LLC, dated as of June 30, 2006 (incorporated by reference to Exhibit 2.1 to United Components’ Report on Form 8-K filed July 6, 2006).
2.3	Asset Purchase Agreement by and among Pioneer Inc. Automotive Products, United Components, Inc. and Pioneer, Inc., dated as of June 29, 2006 (incorporated by reference to Exhibit 2.2 to United Components’ Report on Form 8-K filed July 6, 2006).
2.4	Stock Purchase Agreement by and among Truck-Lite Co. Limited, Truck-Lite Co., Inc., UIS Industries Limited and United Components, Inc., dated as of November 30, 2006 (incorporated by reference to Exhibit 2.1 to United Components’ Report on Form 8-K filed December 6, 2006).
3.1	Amended and Restated Certificate of Incorporation of United Components, Inc., filed April 29, 2003 (incorporated by reference to Exhibit 3.1 to United Components’ Registration Statement on Form S-4 (No. 333-107219) filed July 21, 2003).
3.2	Bylaws of United Components, Inc. (incorporated by reference to Exhibit 3.14 to United Components’ Registration Statement on Form S-4 (No. 333-107219) filed July 21, 2003).
4.1	Senior Subordinated Note Indenture with respect to the 9 3/8%Senior Subordinated Notes due 2013, between United Components, Inc., Wells Fargo Bank Minnesota, National Association, as trustee, and the Guarantors listed on the signature pages thereto, dated as of June 20, 2003. (incorporated by reference to Exhibit 4.1 to United Components’ Registration Statement on Form S-4 (No. 333-107219) filed July 21, 2003).
4.2	Form of 9 3/8% Senior Subordinated Notes due 2013 (included in Exhibit 4.1).

112

Exhibit
No.	Description of Exhibit
10.1	Credit Agreement, dated as of June 20, 2003, by and among United Components, Inc., the lenders party thereto, Lehman Brothers Inc. and J.P. Morgan Securities Inc. as joint lead arrangers, J.P. Morgan Chase Bank as syndication agent, ABN AMRO Bank N.V., Credit Lyonnais, New York Branch, Fleet National Bank and General Electric Capital Corporation as co-documentation agents and Lehman Commercial Paper Inc. as administrative agent (incorporated by reference to Exhibit 10.1 to United Components’ Registration Statement on Form S-4 (No. 333-107219) filed July 21, 2003).
10.2	Guarantee and Collateral Agreement, dated as of June 20, 2003, among UCI Acquisition Holdings, Inc., United Components, Inc. and certain subsidiaries of United Components, Inc., for the benefit of Lehman Commercial Paper, Inc., as administrative agent (incorporated by reference to Exhibit 10.2 to United Components’ Registration Statement on Form S-4 (No. 333-107219) filed July 21, 2003).
10.3	Management Agreement among United Components, Inc. and TC Group, L.L.C. dated June 20, 2003 (incorporated by reference to Exhibit 10.3 to United Components’ Registration Statement on Form S-4 (No. 333-107219) filed July 21, 2003).
*10.4	Employment Agreement Term Sheet between United Components, Inc. and John Ritter effective as of April 25, 2003, as amended (incorporated by reference to Exhibit 10.4 to United Components’ Registration Statement on Form S-4 (No. 333-107219) filed July 21, 2003).
*10.5	Employment Agreement between United Aftermarket, Inc. and Bruce Zorich dated as of April 18, 2003, as amended (incorporated by reference to Exhibit 10.5 to United Components’ Registration Statement on Form S-4 (No. 333-107219) filed July 21, 2003).
*10.6	Fourth Amended and Restated Champion Laboratories Pension Plan, effective as of January 1, 1997 (incorporated by reference to Exhibit 10.7 to United Components’ Registration Statement on Form S-4 (No. 333-107219) filed July 21, 2003).
*10.7	Employment Agreement among United Components, Inc., Champion Laboratories, Inc. and Charlie Dickson, effective as of September 2, 2003 (incorporated by reference to Exhibit 10.8 to United Components’ Amendment No. 1 to Registration Statement on Form S-4/A (No. 333-107219) filed October 7, 2003).
10.8	First Amendment to Credit Agreement dated as of December 22, 2003, by and among United Components, Inc., the lenders party thereto, Lehman Brothers Inc. and J.P. Morgan Securities Inc. as joint lead arrangers, J.P. Morgan Chase Bank as syndication agent, ABN AMRO Bank N.V., Credit Lyonnais, New York Branch, Fleet National Bank and General Electric Capital Corporation as co-documentation agents and Lehman Commercial Paper Inc. as administrative agent (incorporated by reference to Exhibit 10.9 to United Components’ Report on Form 10-K filed March 30, 2004).
*10.9	Amended and Restated Stock Option Plan of UCI Holdco, Inc., effective as of May 25, 2006 (incorporated by reference to Exhibit 10.10 to United Components’ Report on Form 10-K filed March 30, 2007).
*10.10	UCI Annual Incentive Compensation Plan (incorporated by reference to Exhibit 10.11 to United Components’ Report on Form 10-K filed March 30, 2004).
*10.11	Amended and Restated Credit Agreement, dated May 25, 2006, among United Components, Inc., as borrower, Lehman Brothers Inc. and J.P. Morgan Securities Inc., as joint advisors, joint lead arrangers and joint bookrunners, JPMorgan Chase Bank, N.A., as syndication agent, ABN AMRO Bank N.V., Bank of America, N.A. and General Electric Capital Corporation, as co-documentation agents, and Lehman Commercial Paper Inc., as administrative agent and the several banks and other financial institutions or entities from time to time parties to the agreement (incorporated by reference to Exhibit 10.12 to United Components’ Report on Form 8-K filed May 31, 2006).
*10.12	Amended and Restated Equity Incentive Plan of UCI Holdco, Inc., effective as of December 23, 2008.
*10.13	Restricted Stock Agreement, dated December 23, 2008, between UCI Holdco, Inc. and Bruce M. Zorich.

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Exhibit
No.	Description of Exhibit
*10.14	Amended and Restated Employment Agreement, dated December 23, 2008, between United Components, Inc. and Bruce Zorich.
*10.15	Severance Agreement, dated December 23, 2008, between Daniel Johnston, United Components, Inc., and UCI Holdco, Inc.
21.1	List of Subsidiaries.
31.1	Certification of Periodic Report by the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2	Certification of Periodic Report by the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1**	Certification of Periodic Report by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.

*	Management contract or compensatory plan or arrangement.
**	This certificate is being furnished solely to accompany the report pursuant to 18 U.S.C 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

114

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNITED COMPONENTS, INC.
By:	/s/ DANIEL J. JOHNSTON
	Name:	Daniel J. Johnston
	Title:	Chief Financial Officer

Date: March 30, 2009

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ BRUCE M. ZORICH Bruce M. Zorich	President and Chief Executive Officer (Principal Executive Officer)	March 30, 2009
/s/ DANIEL J. JOHNSTON Daniel J. Johnston	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 30, 2009
/s/ DAVID L. SQUIER David L. Squier	Chairman	March 30, 2009
/s/ IAN I. FUJIYAMA Ian I. Fujiyama	Director	March 30, 2009
/s/ PAUL R. LEDERER Paul R. Lederer	Director	March 30, 2009
/s/ GREGORY S. LEDFORD Gregory S. Ledford	Director	March 30, 2009
/s/ RAYMOND A. RANELLI Raymond A. Ranelli	Director	March 30, 2009
/s/ JOHN C. RITTER John C. Ritter	Director	March 30, 2009
/s/ MARTIN SUMNER Martin Sumner	Director	March 30, 2009

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EX-10.12

Exhibit 10.12

AMENDED AND RESTATED
EQUITY INCENTIVE PLAN
OF
UCI HOLDCO, INC.

     The Stock Option Plan of UCI Acquisition Holdings, Inc. was originally adopted by the Board of Directors of UCI Acquisition Holdings, Inc., a Delaware corporation (“UCI Acquisition”), on June 20, 2003. On May 25, 2006, UCI Acquisition became a wholly-owned subsidiary of UCI Holdco, Inc., a Delaware corporation (the “Company”) and the plan was amended and restated by the Amended and Restated Stock Option Plan of UCI Holdco, Inc. In furtherance of the purposes of the plan, this Amended and Restated Equity Incentive Plan of UCI Holdco, Inc. (the “Plan”) is hereby adopted by the Board of Directors of the Company as of the date hereof. The Plan constitutes a complete amendment, restatement and continuation of the Amended and Restated Stock Option Plan of UCI Holdco, Inc.

The purposes of this Plan are as follows:

(1) To further the growth, development and financial success of the Company and its Subsidiaries (as defined herein), by providing additional incentives to employees, consultants and directors of the Company and its Subsidiaries who have been or will be given responsibility for the management or administration of the Company’s (or one of its Subsidiaries’) business affairs, by assisting them to become owners of Common Stock, thereby benefiting directly from the growth, development and financial success of the Company and its Subsidiaries.

(2) To enable the Company (and its Subsidiaries) to obtain and retain the services of the type of professional, technical and managerial employees, consultants and directors considered essential to the long-range success of the Company (and its Subsidiaries) by providing and offering them an opportunity to become owners of Common Stock under Awards, including, in the case of employees, Options that are intended to qualify as “incentive stock options” under Section 422 of the Code (as defined herein).

ARTICLE I.
DEFINITIONS

     Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The singular pronoun shall include the plural where the context so indicates.

     Section 1.1 Affiliate

     “Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where “control” shall have the meaning given such term under Rule 405 of the Securities Act. For the purpose of this Plan, Affiliates of Carlyle Partners III, L.P., a Delaware limited partnership shall include all Person directly or indirectly controlled by TC Group, LLC, a Delaware limited liability.

     Section 1.2 Award

     “Award” shall mean shall mean an Option or a Restricted Stock award granted to a Participant pursuant to the Plan.

     Section 1.3 Award Agreement

     “Award Agreement” a Stock Option Agreement, Restricted Stock Agreement or any other written agreement, contract, or other instrument or document evidencing an Award, including through electronic medium.

     Section 1.4 Board

     “Board” shall mean the Board of Directors of the Company.

     Section 1.5 CEO

     “CEO” shall mean Chief Executive Officer of the Company.

     Section 1.6 Code

     “Code” shall mean the Internal Revenue Code of 1986, as amended.

      Section 1.7 Committee

     “Committee” shall mean the Committee appointed as provided in Section 7.1.

     Section 1.8 Common Stock

     “Common Stock” shall mean the common stock, par value $0.01 per share, of the Company or any of its Subsidiaries.

     Section 1.9 Company

     “Company” shall mean UCI Holdco, Inc. In addition, “Company” shall mean any corporation assuming, or issuing new employee stock options in substitution for, Incentive Stock Options outstanding under the Plan in a transaction to which Section 424(a) of the Code applies.

     Section 1.10 Consultant

     “Consultant” shall mean any Person who has entered into a consulting agreement with the Company or any of its Subsidiaries.

     Section 1.11 Corporate Event

     “Corporate Event” shall mean, as determined by the Committee (or by the Board, in the case of Options granted to Independent Directors) in its sole discretion, any transaction or event described in Section 8.1(a) or any unusual or nonrecurring transaction or event affecting the Company, any Subsidiary of the Company, or the financial statements of the Company or any Subsidiary, or changes in applicable laws, regulations, or accounting principles.

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     Section 1.12 Director

     “Director” shall mean a member of the Board.

     Section 1.13 Eligible Representative

     “Eligible Representative” for a Participant shall mean such Participant’s personal representative or such other person as is empowered under the deceased Participant’s will or the then applicable laws of descent and distribution to represent the Participant hereunder.

     Section 1.14 Employee

     “Employee” shall mean any employee (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code) of the Company or one of its Subsidiaries, whether such employee is so employed at the time this Plan is adopted or becomes so employed subsequent to the adoption of this Plan.

     Section 1.15 Exchange Act

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

     Section 1.16  Incentive Stock Option

     “Incentive Stock Option” shall mean an Option which qualifies under Section 422 of the Code and is designated as an Incentive Stock Option by the Committee.

     Section 1.17 Independent Director

     “Independent Director” shall mean a member of the Board who is not an Employee of the Company or any of its Subsidiaries.

     Section 1.18 Liquidity Event

     “Liquidity Event” shall mean the consummation of the sale, transfer, conveyance or other disposition in one or a series of related transactions, of the equity securities of the Company or its successor held by the Principal Stockholder(s) such that immediately following such transaction (or transactions), (i) the value (at original cost) of all equity securities held by all of the Principal Stockholder(s) is in the aggregate less than 20% of the equity securities (at original cost) held by the Principal Stockholder(s) as of June 20, 2003 or (ii) any person or group of Persons (other than the Principal Stockholders and their Affiliates) beneficially owing more than 50% of the then outstanding shares of Common Stock.

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     Section 1.19 Non-Qualified Stock Option

     “Non-Qualified Stock Option” shall mean an Option which is not an “incentive stock option” under Section 422 of the Code and shall include an Option which is designated as a Non-Qualified Stock Option by the Committee.

     Section 1.20 Officer

     “Officer” shall mean an officer of the Company or any of its Subsidiaries, as defined in Rule 16a-l(f) under the Exchange Act, as such Rule may be amended in the future.

     Section 1.21 Option

     “Option” shall mean an option granted under the Plan to purchase Common Stock. “Options” includes both Incentive Stock Options and Non-Qualified Stock Options.

     Section 1.22 Optionee

     “Optionee” shall mean a Service Provider to whom an Option is granted under the Plan.

     Section 1.23 Participant

     “Participant” shall mean any Service Provider who has been granted an Award pursuant to the Plan.

     Section 1.24 Person

     “Person” shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

     Section 1.25 Plan

     “Plan” shall mean this Amended and Restated Equity Incentive Plan of UCI Holdco, Inc.

     Section 1.26 Principal Stockholder(s)

     “Principal Stockholder(s)” shall mean Carlyle Partners III, L.P. or any of its Affiliates to which (a) Carlyle Partners III, L.P. or any other Person transfers Common Stock, or (b) the Company issues Common Stock.

     Section 1.27 Restricted Stock

     “Restricted Stock” shall mean shares of Common Stock granted to a Service Provider which are subject to restrictions on transfer or forfeiture, as provided under Article VI.

     Section 1.28 Restricted Stock Agreement

     “Restricted Stock Agreement” shall mean shall mean any written agreement, contract, or other instrument or document evidencing a Restricted Stock award granted to a Participant pursuant to the Plan, including through electronic medium.

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     Section 1.29 Secretary

     “Secretary” shall mean the Secretary of the Company.

     Section 1.30 Securities Act

     “Securities Act” shall mean the Securities Act of 1933, as amended.

     Section 1.31 Service Provider

     “Service Provider” shall mean an Employee, Consultant or Director.

     Section 1.32 Stock Option Agreement

     “Stock Option Agreement” shall mean any written agreement, contract, or other instrument or document evidencing an Option granted to a Participant pursuant to the Plan, including through electronic medium.

     Section 1.33 Stockholders Agreement

     “Stockholders Agreement” shall mean that certain agreement by and between each Participant, the Principal Stockholders, the Company and any other parties thereto which contains certain restrictions and limitations applicable to the shares of Common Stock acquired upon Option exercise or grant of Restricted Stock (and to other shares of Common Stock, if any, held by the Optionee during the term of such agreement). The Board, in its discretion, shall determine the terms of the Stockholders Agreement and may amend the terms thereof from time to time. If the Participant is not a party to a Stockholders Agreement at the time of exercise of an Option (or any portion thereof) or grant of Restricted Stock, the exercise of the Option or grant of Restricted Stock shall be subject to the condition that the Participant enter into the Stockholders Agreement with the Company.

     Section 1.34 Subsidiary

     “Subsidiary” of any entity shall mean any corporation in an unbroken chain of corporations beginning with such entity if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

     Section 1.35 Termination of Consultancy

     “Termination of Consultancy” shall mean the time when the engagement of a Participant as a Consultant is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death or retirement, but excluding a termination where there is a simultaneous commencement by the former Consultant of a relationship with the Company or a Subsidiary as a Service Provider. The Committee shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a Termination of Consultancy resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Termination of Consultancy.

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     Section 1.36 Termination of Directorship

     “Termination of Directorship” shall mean the time when a Participant who is an Independent Director ceases to be a Director for any reason, including but not by way of limitation, a termination by resignation, failure to be elected or appointed, death or retirement. The Board, in its sole discretion, shall determine the effect of all matters and questions relating to Termination of Directorship.

     Section 1.37 Termination of Employment

     “Termination of Employment” shall mean the time when the employee-employer relationship between a Participant and the Company (or one of its Subsidiaries) is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death or retirement, but excluding a termination where there is a simultaneous reemployment by the Company (or one of its Subsidiaries). The Committee shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, with respect to Incentive Stock Options, a leave of absence shall constitute a Termination of Employment if, and to the extent that, such leave of absence interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under Section 442(a)(2) of the Code.

ARTICLE II.
SHARES SUBJECT TO PLAN

     Section 2.1 Shares Subject to Plan

(a)

The shares of stock which shall be issued under this Plan shall be shares of Common Stock. Subject to Section 8.1, the aggregate number of such shares which may be issued under this Plan is 450,000.

(b)

To the extent that an Award terminates, is forfeited, is repurchased, expires, or lapses for any reason, any shares of Common Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan; provided, however, vested             shares of Common Stock that are repurchased or forfeited after being issued from the Plan shall not be available for future issuance under the Plan.

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ARTICLE III.
GRANTING OF OPTIONS AND SALE OF STOCK

     Section 3.1 Eligibility

     Any Service Provider shall be eligible to be granted Options, except as provided in Section 3.2.

     Section 3.2 Qualification of Incentive Stock Options

     No Incentive Stock Option shall be granted to any person who is not an Employee.

     Section 3.3 Granting of Options to Employees or Consultants

(a) The Committee shall from time to time:

(i) Select from among the Employees or Consultants (including those to whom Options have been previously granted under the Plan) such of them as in its opinion should be granted Options;

(ii) Determine the number of shares to be subject to such Options granted to such Employees or Consultants, and determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options; and

(iii) Determine the terms and conditions of such Options, consistent with the Plan.

(b) Upon the selection of an Employee or Consultant to be granted an Option pursuant to Section 3.3(a), the Committee shall instruct the Secretary or another authorized Officer of the Company to issue such Option and may impose such conditions on the grant of such Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Committee may require as a condition to the grant of an Option to an Employee or Consultant that the Employee or Consultant surrender for cancellation some or all of the unexercised Options which have been previously granted to him or her. An Option, the grant of which is conditioned upon such surrender, may have an Option price lower (or higher) than the Option price of the surrendered Option, may cover the same (or a lesser or greater) number of shares as the surrendered Option, may contain such other terms as the Committee deems appropriate and shall be exercisable in accordance with its terms, without regard to the number of shares, price, period of exercisability or any other term or condition of the surrendered Option.

     Section 3.4 Granting of Option to Independent Directors

(a) The Board shall from time to time:

(i) Select from among the Independent Directors (including those to whom Options have previously been granted under the Plan) such of them as in its opinion should be granted Options;

(ii) Determine the number of shares to be subject to such Options granted to such selected Independent Directors; and

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(iii) Determine the terms and conditions of such Options, consistent with the Plan; provided, however, that all Options granted to Independent Directors shall be Non-Qualified Stock Options.

(b) Upon the selection of an Independent Director to be granted an Option pursuant to Section 3.4(a), the Board shall instruct the Secretary or another authorized Officer of the Company to issue such Option and may impose such conditions on the grant of such Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Board may require as a condition to the grant of an Option to an Independent Director that the Independent Director surrender for cancellation some or all of the unexercised Options which have been previously granted to him or her. An Option the grant of which is conditioned upon such surrender may have an Option price lower (or higher) than the Option price of the surrendered Option, may cover the same (or a lesser or greater) number of shares as the surrendered Option, may contain such other terms as the Board deems appropriate and shall be exercisable in accordance with its terms, without regard to the number of shares, price, period of exercisability or any other term or condition of the surrendered Option.

ARTICLE IV.
TERMS OF OPTIONS

     Section 4.1 Stock Option Agreement

     Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by the Optionee and an authorized Officer of the Company and which shall contain such terms and conditions as the Committee (or the Board, in the case of Options granted to Independent Directors) shall determine, consistent with the Plan. Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to qualify such Options as “incentive stock options” under Section 422 of the Code.

     Section 4.2 Exercisability of Options

(a) Each Option shall become exercisable according to the terms of the applicable Stock Option Agreement; provided, however, that by a resolution adopted after an Option is granted the Committee (or the Board, in the case of Options granted to Independent Directors) may, on such terms and conditions as it may determine to be appropriate, accelerate the time at which such Option or any portion thereof may be exercised.

(b) Except as otherwise provided in the applicable Stock Option Agreement, no portion of an Option which is unexercisable at Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, shall thereafter become exercisable.

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(c) To the extent that the aggregate fair market value of stock with respect to which “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by an Optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company or any Subsidiary thereof) exceeds $100,000, such options shall be treated and taxable as Non-Qualified Stock Options. The rule set forth in the preceding sentence shall be applied by taking options into account in the order in which they were granted, and the stock issued upon exercise of options shall designate whether such stock was acquired upon exercise of an Incentive Stock Option. For purposes of these rules, the fair market value of stock shall be determined as of the date of grant of the Option granted with respect to such stock.

     Section 4.3 Option Price

(a) The price of the shares subject to each Option shall be set by the Committee (or the Board, in the case of Options granted to Independent Directors); provided, however, that in the case of an Incentive Stock Option, the price per share shall be not less than 100% of the fair market value of such shares on the date such Option is granted; and that in the case of an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, the price per share shall not be less than 110% of the fair market value of such shares on the date such Incentive Stock Option is granted.

(b) For purposes of the Plan, the fair market value of a share of Common Stock as of a given date shall be:

(i) if the Common Stock is listed on one or more National Securities Exchanges (within the meaning of the Exchange Act), each share of Common Stock shall be valued at the average closing price of a share of such class of Common Stock on the principal exchange on which such shares are then trading, on the twenty trading days immediately preceding such date;

(ii) if the Common Stock is not traded on a National Securities Exchange but is quoted on NASDAQ or a successor quotation system and the Common Stock is listed as a National Market Issue under the NASD National Market System, each share of Common Stock shall be valued at the average of the last sales price on each of the twenty trading days immediately preceding such date as reported by NASDAQ or such successor quotation system; or

(iii) if the class of Common Stock is not publicly traded on a National Securities Exchange and is not quoted on NASDAQ or a successor quotation system, the fair market value of the Common Stock shall be determined in good faith by the Committee.

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     Section 4.4 Expiration of Options

     No Option may be exercised to any extent by anyone after the first to occur of the following events:

(a) The expiration of ten years from the date the Option was granted; or

(b) With respect to an Incentive Stock Option in the case of an Optionee owning (within the meaning of Section 424(d) of the Code), at the time the Incentive Stock Option was granted, more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary corporation, the expiration of five years from the date the Incentive Stock Option was granted.

ARTICLE V.
EXERCISE OF OPTIONS

     Section 5.1 Person Eligible to Exercise

     During the lifetime of the Optionee, only he or she may exercise an Option (or any portion thereof granted to him or her; provided, however, that the Optionee’s Eligible Representative may exercise his or her Option during the period of the Optionee’s disability (as defined in Section 22(e)(3) of the Code) notwithstanding that an Option so exercised may not qualify as an Incentive Stock Option. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement, be exercised by his or her Eligible Representative.

     Section 5.2 Partial Exercise

     At any time and from time to time prior to the time when the Option becomes unexercisable under the Plan or the applicable Stock Option Agreement, the exercisable portion of an Option may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares and the Committee (or the Board, in the case of Options granted to Independent Directors) may, by the terms of the Option, require any partial exercise to exceed a specified minimum number of shares.

     Section 5.3 Manner of Exercise

     An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of all of the following prior to the time when such Option or such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement:

(a) Notice in writing signed by the Optionee or his or her Eligible Representative, stating that such Option or portion is exercised, and specifically stating the number of shares with respect to which the Option is being exercised;

(b) A copy of the Stockholders Agreement signed by the Optionee or Eligible Representative, as applicable;

(c) Full payment (in cash or by personal, certified, or bank cashier check) for the shares with respect to which such Option or portion is thereby exercised; or

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(i) With the consent of the Committee (or the Board, in the case of Options to Independent Directors), (A) shares of Common Stock owned by the Optionee duly endorsed for transfer to the Company; or (B) except with respect to Incentive Stock Options, shares of the Common Stock issuable to the Optionee upon exercise of the Option, with a fair market value (as determined under Section 4.3(b)) on the date of Option exercise equal to the aggregate Option price of the shares with respect to which such Option or portion is thereby exercised; or

(ii) With the consent of the Committee (or the Board, in the case of Options granted to Independent Directors), any combination of the consideration listed in this subsection (c);

(d) The payment to the Company (in cash or by personal, certified or bank cashier or by any other means of payment approved by the Committee) of all amounts necessary to satisfy any and all federal, state and local tax withholding requirements arising in connection with the exercise of the Option;

(e) Such representations and documents as the Committee (or the Board, in the case of Options granted to Independent Directors) deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Committee (or the Board, in the case of Options granted to Independent Directors) may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and

(f) In the event that the Option or portion thereof shall be exercised pursuant to Section 5.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option or portion thereof.

     Section 5.4 Conditions to Issuance of Stock Certificates

     The shares of stock issuable and deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. A certificate of shares will be delivered to the Optionee at the Company’s principal place of business within thirty days of receipt by the Company of the written notice and payment, unless an earlier date is agreed upon. Notwithstanding the above, the Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions:

(a) The admission of such shares to listing on any and all stock exchanges on which such class of stock is then listed;

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(b) The completion of any registration or other qualification of such shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Committee (or the Board, in the case of Options granted to Independent Directors) shall, in its sole discretion, deem necessary or advisable;

(c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee (or the Board, in the case of Options granted to Independent Directors) shall, in its sole discretion, determine to be necessary or advisable; and

(d) The payment to the Company of all amounts which it is required to withhold under federal, state or local law in connection with the exercise of the Option.

     Section 5.5 Rights as Stockholders

     The holder of an Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until such holder has signed a Stockholders Agreement and certificates representing such shares have been issued by the Company to such holder.

     Section 5.6 Transfer Restrictions

     Shares acquired upon exercise of an Option shall be subject to the terms and conditions of a Stockholders Agreement. In addition, the Committee (or the Board, in the case of Options granted to Independent Directors), in its sole discretion, may impose further restrictions on the transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares. The Committee may require the Employee to give the Company prompt notice of any disposition of shares of stock, acquired by exercise of an Incentive Stock Option, within two years from the date of granting such Option or one year after the transfer of such shares to such Employee. The Committee may direct that the certificates evidencing shares acquired by exercise of an Incentive Stock Option refer to such requirement.

ARTICLE VI.
SALE OF STOCK AND RESTRICTED STOCK AWARDS

     Section 6.1 Sale of Common Stock to Employees, Consultants or Independent Directors

     The Committee, acting in its sole discretion, may from time to time designate one or more Employees, Consultants or Independent Directors to whom an offer to sell shares of Common Stock shall be made and the terms and conditions thereof, provided, however, that the price per share of Common Stock to be sold pursuant to this Section 6.1 shall not be less than the fair market value (as determined in accordance with Section 4.3(b) hereof) thereof on the date any such offer is accepted. Each share of Common Stock sold to an Employee, Consultant or Independent Director under this Section 6.1 shall be evidenced by a written stock subscription form approved by an authorized Officer of the Company which shall be consistent with the terms hereof. Any Common Stock sold under this Section 6.1 shall be subject to the same limitations, restrictions and administration hereunder as would apply to any Common Stock issued pursuant to the exercise of an Option under this Plan including but not limited to conditions and restrictions set forth in Sections 5.4 and 5.6 hereunder.

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     Section 6.2 Grant of Restricted Stock

     The Committee is authorized to make Awards of Restricted Stock to any Service Provider selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be evidenced by an Award Agreement.

     Section 6.3 Issuance and Restrictions

     Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.

     Section 6.4 Forfeiture

     Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited; provided, however, that, the Committee may (a) provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

     Section 6.5 Certificates for Restricted Stock

     Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.

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ARTICLE VII.
ADMINISTRATION

     Section 7.1 Committee

     The Committee shall be the Compensation Committee of the Board. Any action required or permitted to be taken by the Committee hereunder or under any Award Agreement may be taken by the Board.

     Section 7.2 Delegation by Committee

     Except as otherwise determined by the Committee, all rights, powers and duties of the Committee under the Plan (except those granted pursuant to Sections 3.3, 4.3, 5.3(c), 5.3(e), 5.6 and Article VIII) shall be exercised by the CEO, subject to the approval of the Committee.

     Section 7.3 Duties and Powers of CEO and the Committee

     It shall be the duty of the CEO, subject to the approval of the Committee, to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Awards and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. Notwithstanding the foregoing, the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Awards granted to Independent Directors. Any such interpretations and rules in regard to Incentive Stock Options shall be consistent with the terms and conditions applicable to “incentive stock options” within the meaning of Section 422 of the Code. All determinations and decisions made by the CEO and approved by the Committee under any provision of the Plan or of any Award granted thereunder shall be final, conclusive and binding on all persons.

     Section 7.4 Compensation, Professional Assistance, Good Faith Actions

     The members of the Committee shall receive such compensation for their services hereunder as may be determined by the Board. All expenses and liabilities incurred by the members of the Committee or the Board in connection with the administration of the Plan shall be borne by the Company. The Committee or the Board may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the CEO, the Committee and the Board, in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No member of the Board or the CEO shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Awards, and all members of the Board shall be fully protected by the Company in respect to any such action, determination or interpretation.

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ARTICLE VIII.
OTHER PROVISIONS

     Section 8.1 Changes in Common Stock; Disposition of Assets and Corporate Events.

(a) Subject to Section 8.1(d), in the event that the Committee (or the Board, in the case of Options granted to Independent Directors) determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the capital stock or assets of the Company (including, but not limited to, a Liquidity Event), exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, the acquisition or disposition of any material assets or business or other similar corporate transaction or event, in the Committee’s sole discretion (or in the case of Awards granted to Independent Directors, the Board’s sole discretion), affects the Common Stock such that an adjustment is determined by the Committee (or the Board, in the case of Options granted to Independent Directors) to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Committee (or the Board, in the case of Awards granted to Independent Directors) shall, in such manner as it may deem equitable, adjust any or all of:

(i) The number and kind of shares of Common Stock (or other securities or property) with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued);

(ii) The number and kind of shares of Common Stock (or other securities or property) subject to outstanding Awards;

(iii) The grant or exercise price per share for any outstanding Awards under the Plan; and

(iv) The financial or other “targets” specified in each Award Agreement.

(b) Subject to Section 8.1(d) and the terms of outstanding Awards, upon the occurrence of a Corporate Event, the Committee (or the Board, in the case of options granted to Independent Directors), in its sole discretion, is hereby authorized to take any one or more of the following actions whenever the Committee (or the Board, in the case of Awards granted to Independent Directors) determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under this Plan, to facilitate such Corporate Event or to give effect to such changes in laws, regulations or principles:

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(i) In its sole discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Awards granted to Independent Directors) may provide, either by the terms of the applicable Award Agreement or by action taken prior to the occurrence of such Corporate Event and either automatically or upon the Participant’s request, for either the purchase of any such Award for an amount of cash, securities, or other property equal to the amount that could have been attained upon the exercise of the vested portion of such Award (and such additional portion of the Award as the Board or Committee may determine) immediately prior to the occurrence of such transaction or event, or the replacement of such vested (and other) portion of such Award with other rights or property selected by the Committee (or the Board, in the case of Awards granted to Independent Directors) in its sole discretion;

(ii) In its sole discretion, the Committee (or the Board, in the case of Awards granted to Independent Directors) may provide, either by the terms of the applicable Award Agreement or by action taken prior to the occurrence of such Corporate Event, that the Award (or any portion thereof) will terminate upon the occurrence of such event and cannot vest, be exercised or become payable after such event;

(iii) In its sole discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Awards granted to Independent Directors) may provide, either by the terms of the applicable Award Agreement or by action taken prior to the occurrence of such Corporate Event, that for a specified period of time prior to such Corporate Event, such Award shall be exercisable as to all shares covered thereby or a specified portion of such shares, notwithstanding anything to the contrary in (A) Section 4.2; or (B) the provisions of the applicable Award Agreement;

(iv) In its sole discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Award granted to Independent Directors) may provide, either by the terms of the applicable Award Agreement or by action taken prior to the occurrence of such Corporate Event, that upon such event, such Award (or any portion thereof) be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; and

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(v) In its sole discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Awards granted to Independent Directors) may make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards (or any portion thereof) and/or in the terms and conditions of (including the exercise price), and the criteria included in, outstanding Awards and Awards which may be granted in the future.

(c) Subject to Section 8.1(d), the Committee (or the Board, in the case of Awards granted to Independent Directors) may, in its sole discretion, include such further provisions and limitations in any Award Agreement as it may deem equitable and in the best interests of the Company and its Subsidiaries.

(d) With respect to Incentive Stock Options, no adjustment or action described in this Section 8.1 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code or any successor provisions thereto, unless the Committee determines that the Plan and/or the Options are not to comply with Section 422(b)(1) of the Code. The number of shares of Common Stock subject to any Option shall always be rounded up to the next higher whole number.

     Section 8.2 Awards Not Transferable

     No Award or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 8.2 shall prevent transfers by will or by the applicable laws of descent and distribution.

     Section 8.3 Amendment, Suspension or Termination of the Plan

     The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee. However, without stockholder approval within 12 months before or after such action no action of the Board or the Committee may, except as provided in Section 8.1, increase any limit imposed in Section 2.1 on the maximum number of shares which may be issued pursuant to this Plan, reduce the minimum Option price requirements of Section 4.3(a), or extend the limit imposed in this Section 8.3 on the period during which options may be granted. Except as provided by Section 8.1, neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Award, alter or impair any rights or obligations under any Award theretofore granted. No Award may be granted during any period of suspension nor after termination of the Plan, and in no event may any Award be granted under this Plan after the expiration of ten years from the date the Plan is adopted by the Board.

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     Section 8.4 Effect of Plan Upon Other Award and Compensation Plans

     The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in this Plan shall be construed to limit the right of the Company or any Subsidiary (a) to establish any other forms of incentives or compensation for directors, consultants or employees of the Company (or any Subsidiary); or (b) to grant or assume options or restricted stock otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association.

     Section 8.5 Titles

     Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.

     Section 8.6 Conformity to Securities Laws

     The Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder to the extent the Company or any Participant is subject to the provisions thereof. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Awards shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and Awards granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

     Section 8.7 Governing Law

     To the extent not preempted by federal law, the Plan shall be construed in accordance with and governed by the laws of the state of Delaware.

     Section 8.8 Severability

     In the event any portion of the Plan or any action taken pursuant thereto shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provisions had not been included, and the illegal or invalid action shall be null and void.

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EX-10.13

Exhibit 10.13

UCI HOLDCO, INC.

RESTRICTED STOCK AGREEMENT

GRANT NOTICE

     Unless otherwise defined herein, the terms defined in the Amended and Restated Equity Incentive Plan of UCI Holdco, Inc., as amended from time to time (the “Plan”), shall have the same defined meanings in this Restricted Stock Agreement, which includes the terms in this Grant Notice (the “Grant Notice”) and Appendix A attached hereto (collectively the “Agreement”).

     On April 21, 2007, you were granted an option to purchase 10,000 shares of Common Stock, pursuant to a Non-Qualified Stock Option Agreement (the “Option Agreement”), at an exercise price of $105.00 per share, subject to the terms of the Option Agreement (the “Option”).

     As described in this Agreement you are being offered the opportunity to exchange the Option for a grant of Restricted Stock, as described herein, subject to the terms and conditions of the Plan and this Agreement.

     The number of shares of Restricted Stock and the vesting provisions applicable thereto that you are being offered in exchange for the Option are as follows:

Participant:	Bruce Zorich
Grant Date:	December 23, 2008
Total Number of Shares of Restricted Stock:	19,300
Type of Restricted Stock	Common Stock
Vesting Schedule:	The shares of Restricted Stock will vest only upon a Change of Control (as defined in Appendix A) of the Company

     Your signature below indicates your agreement and understanding that (i) the Restricted Stock is being offered to you in exchange for the Option and that by accepting this grant of Restricted Stock, you hereby surrender the Option and forgo all rights you have with respect thereto and (ii) the Restricted Stock is subject to all of the terms and conditions contained in this Agreement, including the Grant Notice and Appendix A, the Stockholders Agreement and the Plan. ACCORDINGLY, PLEASE BE SURE TO READ ALL OF APPENDIX A, WHICH CONTAINS THE SPECIFIC TERMS AND CONDITIONS OF THE RESTRICTED STOCK.

UCI HOLDCO, INC. Holder:		PARTICIPANT:
By:	/s/ MG Malady	By:	/s/ Bruce M. Zorich
Print Name:	MG Malady	Print Name:	Bruce M. Zorich
Title:	VP HR

APPENDIX A

TO THE RESTRICTED STOCK AGREEMENT

     Pursuant to this Agreement, the Company has awarded to the Participant the number of shares of Restricted Stock under the Plan, as set forth in the Grant Notice, in exchange and as complete payment for the Option.

ARTICLE I. GENERAL

1.1 Definitions.

          (a) “Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where “control” shall have the meaning given such term under Rule 405 of the Securities Act. For the purpose of the Plan and Agreement, Affiliates of Carlyle Partners III, L.P., a Delaware limited partnership, shall include all Persons directly or indirectly controlled by TC Group, LLC, a Delaware limited liability company.

          (b) “Board” shall mean the Board of Directors of the Company

          (c) “Change in Control” shall mean a change in ownership or control of the Company effected through a transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries, a Principal Stockholder, any Affiliate of a Principal Stockholder or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company or a Principal Stockholder) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company’s securities outstanding immediately after such acquisition.

          (d) “Committee” shall mean the Committee appointed pursuant to Section 7.1 of the Plan.

          (e) “Company” shall mean UCI Holdco, Inc.

          (f) “Grant Date” shall mean the date specified in the Grant Notice.

          (g) “Person” shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

          (h) “Plan” shall mean the Amended and Restated Equity Incentive Plan of UCI Holdco, Inc.

          (i) “Principal Stockholder(s)” shall mean Carlyle Partners III, L.P., a Delaware limited partnership, or any of its Affiliates to which (a) the Carlyle Partners III, L.P. or any other Person transfers Common Stock, or (b) the Company issues Common Stock.

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          (j) “Stockholders Agreement” shall mean that certain agreement by and between the Participant and the Company which contains certain restrictions and limitations applicable to the shares of Restricted Stock (and to other shares of Common Stock, if any, held by the Participant during the term of such agreement). The Board, in its discretion, shall determine the terms of the Stockholders Agreement and may amend the terms thereof from time to time. If the Participant is not party to the Stockholders Agreement as of the Grant Date, the grant of Restricted Stock shall be subject to the condition that the Participant enter into a Stockholders Agreement with the Company.

     1.2 Incorporation of Terms. The Restricted Stock is subject to the terms and conditions of the Plan and the Stockholders Agreement, which are each incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. All capitalized terms used in this Agreement without definition shall have the meanings ascribed in the Plan and the Grant Notice.

ARTICLE II. AWARD OF RESTRICTED STOCK

2.1 Award of Restricted Stock; Surrender of Option.

          (a) Award. As of the Grant Date, the Company issues to the Participant the number of shares of Restricted Stock set forth in the Grant Notice (the “Award”), in consideration of the Participant’s agreement to remain in the service or employ of the Company or one of its Subsidiaries, the surrender of the Option as described herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged. Such shares of Restricted Stock and any Dividends (as defined below) whether vested or unvested shall sometimes be referred to herein as “Shares.”

          (b) Surrender of Option. As of the Grant Date, in consideration of the grant of Restricted Stock pursuant to and subject to the terms of this Agreement, the Participant surrenders the Option.

          (c) Book Entry Form; Certificates. At the sole discretion of the Committee, the Shares will be issued in either (i) uncertificated form, with the Shares recorded in the name of the Participant in the books and records of the Company’s transfer agent with appropriate notations regarding the Restrictions; or (ii) certificate form pursuant to the terms of Section 2.1(c). For purposes of this Agreement, “Restrictions” shall mean the forfeiture provision in Section 2.5.

          (d) Legend. Shares issued pursuant to this Agreement shall bear such legend or legends as shall be determined by the Committee.

          (e) Escrow. The Secretary of the Company or such other escrow holder as the Committee may appoint may retain physical custody of the certificates representing the Shares until all of the Restrictions lapse or shall have been removed.

     2.2 Vesting of Restricted Stock. Except as provided in Sections 2.3 and 2.4 below, none of the Shares of Restricted Stock shall become vested until immediately prior to the effective date of a Change of Control and all such Shares shall become vested at such time.

     2.3 Discretionary Vesting. The Committee in its sole discretion may accelerate the vesting of any portion of the Restricted Stock.

     2.4 Forfeiture of Unvested Shares. Notwithstanding anything to the contrary set forth herein, none of the Shares shall become vested if a Termination of Employment with respect to the Participant occurs prior to the effective date of a Change of Control and all Shares shall be immediately forfeited upon such a Termination of Employment.

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     2.5 Restrictions.

          (a) Tax Withholding; Conditions to Issuance of Certificates. Notwithstanding any other provision of this Agreement:

               (i) The Participant is ultimately liable and responsible for all taxes owed in connection with the Restricted Stock, regardless of any action the Company or any of its Subsidiaries takes with respect to any tax withholding obligations that arise in connection with the Restricted Stock. Neither the Company nor any of its Subsidiaries makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding or vesting of the Restricted Stock or the subsequent sale of shares. The Company and its Subsidiaries do not commit and are under no obligation to structure the Restricted Stock to reduce or eliminate the Participant’s tax liability.

               (ii) Prior to any tax withholding becoming due, the Participant must make arrangements satisfactory to the Committee to satisfy such withholding and must satisfy such tax withholdings when due. The Company (or the employing Subsidiary) may withhold a portion of the shares of Restricted Stock that have an aggregate Fair Market Value sufficient to pay the minimum federal, state and local income, employment and any other applicable taxes required to withheld by the Company or the employing Subsidiary with respect to the shares. Notwithstanding any contrary provision of this Agreement, no vested Shares will be issued unless and until satisfactory arrangements (as determined by the Committee) will have been made by the Participant with respect to the payment of any income and other taxes which the Company determines must be withheld or collected with respect to such Shares. In addition and to the maximum extent permitted by law, the Company (or the employing Subsidiary) has the right to retain without notice from salary or other amounts payable to the Participant, cash having a value sufficient to satisfy any tax withholding obligations that cannot be satisfied by the withholding of otherwise deliverable Shares.

               (iii) The Company shall not be required to issue or deliver any certificate or certificates for any Shares prior to the fulfillment of all of the following conditions: (A) the admission of the Shares to listing on all stock exchanges on which such Shares are then listed, (B) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or other governmental regulatory body, which the Committee shall, in its sole and absolute discretion, deem necessary and advisable, (C) the obtaining of any approval or other clearance from any state or federal governmental agency that the Committee shall, in its absolute discretion, determine to be necessary or advisable and (D) the lapse of any such reasonable period of time following the date the Restrictions lapse or are removed as the Committee may from time to time establish for reasons of administrative convenience.

          (b) Rights as Stockholder. Except as otherwise provided herein, upon the Grant Date the Participant shall have all the rights of a stockholder with respect to the Shares, subject to the Restrictions herein, including the right to receive all dividends or other distributions paid with respect to such Shares; provided, that, dividends and distributions (the “Dividends”) shall be subject to transfer restrictions, with respect to Dividends paid in Shares, and a risk of forfeiture to the same extent as the Shares with respect to which such Dividends have been distributed and the Committee may impose additional resale or other conditions on the Shares as it may determined in its sole discretion. Accordingly, the Participant shall only be entitled to receive such Dividends when the Shares (with respect to which such Dividends have been distributed) vest pursuant to Article II. Such ownership of Shares and Dividends shall be evidenced by book entries on the records of the Company and such Dividends shall be considered Restricted Stock herein. Promptly following the vesting of Shares and the lapse of the transfer restrictions pursuant to this Agreement, Shares and cash and/or stock, as applicable evidencing such Dividends shall be transferred to the Participant (or his/her permitted transferees) by the Company with such legends as shall be determined by the Company.

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ARTICLE III. OTHER PROVISIONS

     3.1 Not a Contract of Employment. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an employee or other Service Provider of the Company or any of its Subsidiaries.

     3.2 Governing Law. The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

     3.3 Conformity to Securities Laws. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Awards are granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

     3.4 Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely effect the Award in any material way without the prior written consent of the Participant.

     3.5 Notices. Notices required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the Participant to his address shown in the Company records, and to the Company at its principal executive office.

     3.6 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon the Participant and his heirs, executors, administrators, successors and assigns.

     3.7 Lockup Provision. The Participant shall agree, if requested by the Company and any underwriter engaged by the Company, not to sell or otherwise transfer or dispose of any securities of the Company (including, without limitation pursuant to Rule 144 under the Securities Act (or any successor or similar exemptive rule hereafter in effect)) held by them for such period following the effective date of any registration statement of the Company filed under the Securities Act as the Company or such underwriter shall specify reasonably and in good faith, not to exceed 180 days in the case of the Company’s initial public offering or 90 days in the case of any other public offering.

     3.8 Participant Representation. The Participant has no plan or intention to acquire any securities of the Company in addition to those Shares received hereunder, provided that acquisitions of the Company’s securities in any transactions on or after the Grant Date that are approved by the Company shall not be a breach of this representation.

* * * * *

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EX-10.14

Exhibit 10.14

Amended and Restated Employment Agreement

     This Amended and Restated Employment Agreement (the “Agreement”) dated as of December 23, 2008 (the “Effective Date”), is made by and between United Components, Inc. (together with any successor thereto, the “Company”) and Bruce Zorich (the “Executive”).

RECITALS

A.	The Executive and United Aftermarket, Inc., a predecessor to the Company, previously entered into that certain Employment Agreement, dated April 18, 2003 (the “Old Agreement”).
B.	The Executive and Company desire to amend certain terms of the Old Agreement by entering into this Agreement.
C.	The Executive desires to provide services to the Company on the terms herein provided.

AGREEMENT

     NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows:

1. Certain Definitions.

(a)	“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where “control” shall have the meaning given such term under Rule 405 of the Securities Act. Affiliates of Carlyle Partners III, L.P., a Delaware limited partnership, shall include all Persons directly or indirectly controlled by TC Group, LLC, a Delaware limited liability company.
(b)	“Annual Base Salary” shall have the meaning set forth in Section 3(a).
(c)	“Board” shall mean the Board of Directors of the Company or Parent.
(d)	The Company shall have “Cause” to terminate the Executive’s employment hereunder upon:

(i)	the Executive’s failure to use his reasonable best efforts to follow a legal written order of the Board, other than any such failure resulting from the Executive’s Disability, and such failure is not remedied within 30 days after receipt of notice;
(ii)	Executive’s gross or willful misconduct with regard to the Company;
(iii)	Executive’s conviction of a felony or crime involving material dishonesty;

(iv)	Executive’s fraud or personal dishonesty involving the Company’s assets (but excluding expense reimbursement disputes as to which Executive had a reasonable good faith belief that his conduct was within the policies of the Company); or
(v)	the Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing the Executive’s duties and responsibilities under this Agreement.

(e)	“Change in Control” shall mean a change in ownership or control of the Company or Parent effected through a transaction or series of transactions (other than an offering of share of common stock of the Company or Parent to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, Parent or any of their respective subsidiaries, an employee benefit plan maintained by the Company, Parent or any of their respective subsidiaries, a Principal Stockholder, any Affiliate of a Principal Stockholder or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company, Parent or a Principal Stockholder) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company or Parent possessing more than fifty percent (50%) of the total combined voting power of the Company’s or Parent’s securities outstanding immediately after such acquisition.
(f)	“Company” shall have the meaning set forth in the preamble hereto.
(g)	“Compensation Committee” means the Compensation Committee of the Board.
(h)	“Date of Termination” shall mean (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated pursuant to Section 4(a)(ii) – (vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier; (iii) if the Executive’s employment is terminated pursuant to Section 4(a)(vii) or Section 4(a)(viii), the expiration of the then-applicable Term.
(i)	“Disability” shall mean the absence of the Executive from the Executive’s duties to the Company on a full-time basis for a total of six months during any 12-month period as a result of incapacity due to mental or physical illness which is determined to be reasonably likely to extend beyond the completion of the Term and which determination is made by a physician selected by the Company and acceptable to the Executive or the Executive’s legal representative (such agreement as to acceptability not to be withheld unreasonably). A Disability shall not be “incurred” hereunder until, at the earliest, the last day of the sixth month of such absence.

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(j)	“Exchange Act” shall mean the Securities and Exchange Act of 1934, as amended.
(k)	“Executive” shall have the meaning set forth in the preamble hereto.
(l)	“Executive Bonus Plan” shall have the meaning set forth in Section 3(b).
(m)	“First Payment Date” shall have the meaning set forth in Section 5(g).
(n)	(i) The Executive shall have “Good Reason” to resign his employment upon the occurrence of any of the following:

     (A) failure of the Company to continue the Executive in the position of Chief Executive Officer;

     (B) a material diminution in the nature of scope of the Executive’s responsibilities, duties or authority;

     (C) failure of the Principal Shareholders to satisfy their requirements under Section 2(c)(ii) of the Agreement

     (D) failure of the Company to make any payment or provide any benefit under this Agreement;

     (E) the Company’s material breach of this Agreement; or

     (F) failure of any successor to the Company to assume the obligations of the Company hereunder.

(ii) The Executive may not resign his employment for Good Reason unless:

     (A) the Executive provided the Company with at least 30 days prior written notice of his intent to resign for Good Reason; and

     (B) the Company has not remedied the alleged violation(s) within the 30-day period.

(o)	“Inventions” shall have the meaning set forth in Section 8.
(p)	“Notice of Termination” shall have the meaning set forth in Section 4(b).
(q)	“Parent” shall mean UCI Holdco, Inc.
(r)	“Person” shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.
(s)	“Principal Stockholders” shall mean Carlyle Partners III, L.P., a Delaware limited partnership, or any of its Affiliates.

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(t)	“Securities Act” shall mean the Securities Act of 1933, as amended.
(u)	“Term” shall have the meaning set forth in Section 2(b).
(v)	“Termination of Employment” shall mean the time when the engagement of the Executive as an employee of the Company terminates, but excluding terminations where there is simultaneous commencement by the Executive of a relationship with the Company or any of its affiliates as an employee. In no event shall a “Termination of Employment” occur under this Agreement until the Executive incurs a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h).

2. Employment.

(a)	The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.
(b)	The initial term of employment under this Agreement (the “Initial Term”) shall be for the period beginning on the Effective Date of this Agreement and ending on the first anniversary thereof, unless earlier terminated as provided in Section 4. The employment term hereunder shall automatically be extended for successive one-year periods (“Extension Terms” and, collectively with the Initial Term, the “Term”) unless either party gives notice of non-extension to the other no later than 90 days prior to the expiration of the then-applicable Term.
(c)	Position and Duties.

(i)

The Executive shall serve as Chief Executive Officer of the Company and shall have the authorities duties and responsibilities customarily commensurate with such position and such additional customary responsibilities, duties and authority as may from time to time be reasonably assigned to the Executive by the Board. The Executive shall report to the Board. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company. The Executive agrees to observe and comply with the Company’s rules and policies as adopted by the Company from time to time. During the Term, it shall not be a violation of this Agreement for the Executive to (i) serve on industry trade, civic or charitable boards or committees; (ii) deliver lectures or fulfill speaking engagements; or (iii) manage personal investments, as long as such activities do not materially interfere with the performance of the Executive’s duties and responsibilities. The Executive shall be permitted to serve on for-profit corporate boards of directors and advisory committees if approved in advance by the Board.

(ii)

The Principal Stockholders shall cause the Executive to be appointed or elected to the Board. During the Term, the Board shall propose the Executive for re-election to the Board and the Principal Stockholders shall vote all of their shares of Common Stock in favor of such re-election.

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3. Compensation and Related Matters.

(a)	Annual Base Salary. During the Term, the Executive shall receive a base salary at a rate of $465,000 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to any increase as determined by the Compensation Committee in its sole discretion (the “Annual Base Salary”). Annual Base Salary may be increased, but not decreased, from time to time by the Board.
(b)	Annual Bonus. During the Term, the Executive will participate in an annual performance-based bonus plan (“Executive Bonus Plan”) established by the Compensation Committee at a target level of 80% of his Annual Base Salary (“Target Level”), and a maximum of 150% of Annual Base Salary. Such bonus shall be payable at such time as bonuses are paid to other senior executive officers who participate therein, provided however, that such bonus shall be paid in the Executive’s taxable year following the Company’s fiscal year to which such bonus applies. Notwithstanding the foregoing, with respect to each of the Company’s fiscal years that ends during the Term, the amount of the Executive’s annual bonus payable pursuant to such plan shall be determined as set forth on Exhibit A.
(c)	Equity Participation. During the Term, the Executive shall be entitled to participate in the Amended and Restated Equity Incentive Plan of Parent (the “Plan”), and shall be granted such awards under the Plan as determined in the discretion of the Board.
(d)	Benefits. The Executive shall be entitled to participate in employee benefit plans, programs and arrangements of the Company which are applicable to the senior officers of the Company at a level commensurate with the Executive’s position.
(e)	Relocation Expenses. If the Company requires the Executive to relocate his place of residence outside of the Greater Atlanta area during the Term, the Company shall reimburse Executive for any of the following expenses to the full extent reasonable: (i) real estate broker commissions and attorney fees associated with the sale of his former residence and purchase of a new residence, (ii) moving expenses (as defined in Section 217(b) of the Internal Revenue Code (the “Code”)), and (iii) to the extent approved by the Board, necessary temporary lodging for the Executive and his family, provided that the Executive shall properly account for such expenses in accordance with the Company’s policies and procedures.

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4. Termination.

     The Executive’s employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:

(a) Circumstances.

(i)	Death. The Executive’s employment hereunder shall terminate upon his death.
(ii)	Disability. If the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive’s employment. In that event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties.
(iii)	Termination for Cause. The Company may terminate the Executive’s employment for Cause.
(iv)	Termination without Cause. The Company may terminate the Executive’s employment without Cause.
(v)	Resignation for Good Reason. The Executive may resign his employment for Good Reason.
(vi)	Resignation without Good Reason. The Executive may resign his employment without Good Reason.
(vii)	Non-extension of Term by the Company. The Company may give notice of non-extension to the Executive pursuant to Section 2(b).
(viii)	Non-extension of Term by the Executive. The Executive may give notice of non-extension to the Company pursuant to Section 2(b).

(b) Notice of Termination. Any termination of the Executive’s employment by the Company or by the Executive under this Section 4 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating the specific termination provision in this Agreement relied upon, setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and specifying a Date of Termination which, if submitted by the Executive, shall be at least 30 days following the date of such notice (a “Notice of Termination”) provided, however, that the Company may, in its sole discretion, change the Date of Termination to any date following the Company’s receipt of the Notice of Termination. A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

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(c) Company obligations upon Termination of Employment. Upon a Termination of Employment, the Executive (or the Executive’s estate) shall be entitled to receive a lump sum equal to the Executive’s Annual Base Salary through the Date of Termination not theretofore paid, any bonus if declared or earned but not yet paid for a completed fiscal year, any expenses owed to the Executive, any accrued vacation pay owed to the Executive, and any amount arising from the Executive’s participation in, or benefits under any employee benefit plans, programs or arrangements, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements.

5. Severance Payments.

     The Executive shall be entitled to severance payments and benefits (collectively, the “Severance”) upon the terms set forth in this Section 5. Notwithstanding any other provision of the Agreement, the Executive’s right to Severance shall be subject to the Executive signing and not revoking the Release as set forth in Section 5(f) and subject to the continued compliance of the Executive with Sections 6, 7, 8 and 9 of this Agreement

(a)

Termination for Cause, Resignation without Good Reason or upon Non-extension by the Executive. If the Executive experiences a Termination of Employment pursuant to Sections 4(a)(iii) for Cause, Section 4(a)(vi) without Good Reason, or pursuant to Sections 4(a)(viii) due to Non-extension of the Agreement by the Executive, the Executive shall not be entitled to any Severance (other than as expressly provided for herein or under any benefit plan).

(b)

Termination of Employment upon death or Disability. If the Executive experiences a Termination of Employment pursuant to Section 4(a)(i) due to the Executive’s death, or pursuant to Section 4(a)(ii) due to the Executive’s Disability, the Company shall pay to the Executive (or the Executive’s estate):

(i)	an amount equal to the Annual Base Salary that the Executive would have been entitled to receive if the Executive’s employment had continued for a period of six months following the Date of Termination, in the manner and at such times as specified in Section 5(g); and
(ii)	a prorated amount of the Executive’s annual bonus based on the Company’s year-to-date performance through the Date of Termination in relation to the performance targets set forth in the Executive Bonus Plan (such amount to be determined in good faith by the Compensation Committee), on the First Payment Date.

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(c) Termination of Employment without Cause or resignation for Good Reason. If the Executive experiences a Termination of Employment due to the Company terminating the Executive’s employment without Cause pursuant to Section 4(a)(iv) or due to the Executive terminating his employment for Good Reason pursuant to Section 4(a)(v), the Company shall:

(i)	pay to the Executive an amount equal to the Annual Base Salary that the Executive would have been entitled to receive if the Executive’s employment had continued for a period of twelve months following the Date of Termination, in the manner and at such times as specified in Section 5(g);
(ii)	a lump sum equal to a pro-rata portion of the Executive’s Target Level annual bonus for the year of termination, based on the number of days the Executive was employed by the Company during the applicable year, on the First Payment Date; and
(iii)	continue coverage for the Executive and any dependents under all Company group health benefit plans in which the Executive and any dependents were entitled to participate immediately prior to the Date of Termination (under the same terms as during employment) for twelve months.

(d) Termination of Employment upon Non-extension by the Company. If the Executive experiences a Termination of Employment pursuant to Section 4(a)(vii) due to Non-extension of the Agreement by the Company, the Company shall:

(i)	pay to the Executive an amount equal to the Annual Base Salary that the Executive would have been entitled to receive if the Executive’s employment had continued for a period of twelve months following the Date of Termination, payable in the manner and at such times as specified in Section 5(g); and
(ii)	pay to the Executive a prorated amount of the Executive’s annual bonus based on the Company’s year-to-date performance through the Date of Termination in relation to the performance targets set forth in the Executive Bonus Plan (such amount to be determined in good faith by the Compensation Committee), on the First Payment Date.

(e) Termination of Employment On or Following a Change in Control.

(i) If on or following the date of a Change in Control the Executive experiences a Termination of Employment as a result of (1) the Company terminating the Executive without Cause pursuant to Section 4(a)(iv), or (2) the Executive terminating his employment for Good Reason pursuant to Section 4(a)(v), then the twelve month periods in Section 5(c)(i) and (iii), Section 5(d)(i) and Sections 6 and 9 shall be twenty-four months; and

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(ii) If on or following the date of a Change of Control, the Executive Experiences a Termination of Employment pursuant to Section 4(a)(vii) due to Non-extension of the Agreement by the Company, the termination shall be deemed a termination by the Company without Cause pursuant to Section 4(a)(iv).

(f)	Release. Notwithstanding any provision to the contrary in this Agreement, except in the case of a termination pursuant to Section 4(a)(i) due to the Executive’s death, no Severance payments shall be made unless (i) on or following the Termination Date and on or prior to the 50th day following the Termination Date the Executive executes a waiver and release of claims agreement in the form attached hereto as Exhibit B (the “Release”), which Release may be amended by the Company to reflect changes in applicable laws and regulations, and (ii) such Release shall not have been revoked by the Executive on or prior to the 8th day following the date of the Release.
(g)	Payment Timing; Separate Payments. Except as otherwise provided in this Section 5, the Severance payments shall be payable in the form of salary continuation and shall be paid at the same time and in the same manner as the Executive’s Annual Base Salary would have been paid if the Executive had remained in active employment with the Company through the end of the applicable Severance period in accordance with the Company’s normal payroll practices as in effect on the Termination Date, except that any payments that would otherwise have been made before the first normal payroll payment date falling on or after the sixtieth (60th) day after the Termination Date (the “First Payment Date”) shall be made on the First Payment Date. Each separate Severance installment payment shall be a separate payment under this Agreement for all purposes.
(h)	Survival. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.
(i)	Mitigation. The Executive shall have no duty to mitigate the amount of any payment provided for hereunder by seeking other employment, and any income earned by the Executive from other employment or self-employment shall not be offset against any obligations of the Company to the Executive hereunder.

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6. Competition.

(a)	The Executive shall not, at any time during the Term or during the 12-month period following the later of the expiration of the Term or the Date of Termination directly or indirectly engage in, have any equity interest in, or manage or operate any person, firm, corporation, partnership or business (whether as director, officer, employee, agent, representative, partner, security holder, consultant or otherwise) that engages in any business which materially competes with any material business of the Company or any entity owned by the Company anywhere in the world provided, however, that the Executive shall be permitted to acquire a passive stock or equity interest in such a business provided the stock or other equity interest acquired is not more than five percent (5%) of the outstanding interest in such business. Nothing herein shall prevent the Executive from engaging in any activity with, or holding a financial interest in, a non-competitive division, subsidiary or affiliate of an entity engaged in a business that materially competes with the Company.
(b)	During the Term and during the term set forth in Section 6(a), the Executive will not, and will not permit any of his affiliates to, directly or indirectly, recruit or otherwise solicit or induce any non-clerical employee, customer, subscriber or supplier of the Company to terminate its employment or arrangement with the Company, otherwise change its relationship with the Company, or establish any relationship with the Executive or any of his affiliates for any business purpose that is prohibited by subjection (a) above. Nothing herein shall prevent the Executive from serving as a reference.
(c)	In the event the terms of this Section 6 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.
(d)	As used in this Section 6, the term “Company” shall include the Company, Parent, and any of their direct or indirect subsidiaries.

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7. Nondisclosure of Proprietary Information.

(a)	Except as required in the faithful performance of the Executive’s duties hereunder or pursuant to Section 7(c), the Executive shall, in perpetuity, maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for his benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information or trade secrets of or relating to the Company, including, without limitation, information with respect to the Company’s operations, processes, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment, or deliver to any person, firm, corporation or other entity any document, record, notebook, computer program or similar repository of or containing any such confidential or proprietary information or trade secrets. The parties hereby stipulate and agree that as between them the foregoing matters are important, material and confidential proprietary information and trade secrets and affect the successful conduct of the businesses of the Company (and any successor or assignee of the Company).
(b)	Upon termination of the Executive’s employment with the Company for any reason, the Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the Company’s customers, business plans, marketing strategies, products or processes. The Executive shall be permitted to retain his rolodex (and similar address and telephone directories).
(c)	The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest reasonably possible notice thereof, shall, as much reasonably in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall reasonably assist such counsel in resisting or otherwise responding to such process. The Executive may disclose information that is public knowledge.
(d)	As used in this Section 7, the term “Company” shall include the Company, Parent and any of their direct or indirect subsidiaries.

8. Inventions.

     All rights to discoveries, inventions, improvements and innovations (including all data and records pertaining thereto) directly related to the Company’s business, whether or not patentable, copyrightable, registrable as a trademark, or reduced to writing, that the Executive may discover, invent or originate during the Term, either alone or with others and whether or not during working hours or by the use of the facilities of the Company (“Inventions”), shall be the exclusive property of the Company. The Executive shall promptly disclose all Inventions to the Company, shall execute at the request of the Company any assignments or other documents the Company may deem necessary to protect or perfect its rights therein, and shall assist the Company, at the Company’s expense, in obtaining, defending and enforcing the Company’s rights therein. The Executive hereby appoints the Company as his attorney-in-fact to execute on his behalf any assignments or other documents deemed necessary by the Company to protect or perfect its rights to any Inventions.

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9. Non-Disparagement.

     At any time during the Term or during the 12-month period following the later of the expiration of the Term or the Date of Termination, each of the parties agrees that it will not disparage or denigrate to any person any aspect of his or its past relationship with the other, nor the character of the other or the other’s agents, representatives, products, or operating methods, whether past, present, or future, and whether or not based on or with reference to their past relationship; provided, however, that this paragraph shall have no application to any evidence or testimony requested of either party hereto by any court or government agency.

10. Injunctive Relief.

     It is recognized and acknowledged by the Executive that a breach of the covenants contained in Sections 6, 7, 8 and 9 will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Sections 6, 7, 8 and 9, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief.

11. Assignment and Successors.

     The Company may assign its rights and obligations under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its affiliates. The Executive may not assign his rights or obligations under this Agreement to any individual or entity, except his estate upon his death. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.

12. Governing Law.

     This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the state of New York, without reference to the principles of conflicts of law of New York or any other jurisdiction, and where applicable, the laws of the United States.

13. Validity.

     The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

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14. Notices.

     Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, as follows:

(a)	If to the Company:
	The Carlyle Group 1001 Pennsylvania Avenue NW
	Suite 220 South Washington, DC 20004 Fax: (202) 347-9250 Attn: Ian Fujiyama
	and a copy to:
	Latham & Watkins 555 Eleventh Street, N.W. 10th Floor Washington, DC 20004 Fax: (202) 637-2201 Attn: Daniel T. Lennon
(b)	If to the Executive:
	Bruce M. Zorich 1185 Lake Shore Overlook Alpharetta, GA 30005 Fax:  (770) 521-9351

     or at any other address as any party shall have specified by notice in writing to the other party.

15. Counterparts.

     This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

16. Entire Agreement.

     The terms of this Agreement and the other agreements and instruments contemplated hereby or referred to herein (collectively the “Related Agreements”) are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement and the Related Agreements shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement and the Related Agreements.

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17. Amendments; Waivers.

     This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of Company. By an instrument in writing similarly executed, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform, provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

18. No Inconsistent Actions.

     The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

19. Construction.

     This Agreement shall be deemed drafted equally by both the parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

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20. Arbitration.

     Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before an arbitrator in Atlanta, Georgia in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitration award in any court having jurisdiction, provided, however, that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Sections 6, 7, 8 or 9 of the Agreement and the Executive hereby consents that such restraining order or injunction may be granted without requiring the Company to post a bond. Only individuals who are (i) lawyers engaged fulltime in the practice of law; and (ii) on the AAA register of arbitrators shall be selected as an arbitrator. Within 20 days of the conclusion of the arbitration hearing, the arbitrator shall prepare written findings of fact and conclusions of law. It is mutually agreed that the written decision of the arbitrator shall be valid, binding, final and non-appealable, provided however, that the parties hereto agree that the arbitrator shall not be empowered to award punitive damages against any party to such arbitration. The arbitrator shall require the non-prevailing party to pay the arbitrator’s full fees and expenses or, if in the arbitrator’s opinion there is no prevailing party, the arbitrator’s fees and expenses will be borne equally by the parties thereto. In the event action is brought to enforce the provisions of this Agreement pursuant to this Section 20, the non-prevailing parties shall be required to pay the reasonable attorney’s fees and expenses of the prevailing parties to the extent determined to be appropriate by the arbitrator, acting in its sole discretion.

21. Enforcement.

     If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

22. Income Tax Gross-Up.

     To the extent that any payments made by the Company to the Executive pursuant Section 3(f) of the Agreement are included in the Executive’s taxable compensation and are not otherwise deductible by the Executive under the Code, Company shall pay the Executive a lump sum amount which shall, after payment of all applicable income taxes thereon, be sufficient to reimburse the Executive for any applicable income taxes imposed on such taxable compensation. Notwithstanding any other provision of this Agreement, (i) no such payment shall be made if the Executive does not submit a timely request for such payment and (ii) such payment must be made on or before the last day of the Executive’s taxable year following the taxable year in which the applicable taxes shall have been paid by the Executive.

23. Withholding.

     The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

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24. In-Kind Benefits and Reimbursements.

     Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of the Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of the Executive, except for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by the Executive and, if timely submitted, reimbursement payments shall be made to the Executive as soon as administratively practicable following such submission, but in no event later than the last day of the Executive’s taxable year following the taxable year in which the expense was incurred. In no event shall the Executive be entitled to any reimbursement payments after the last day of Executive’s taxable year following the taxable year in which the expense was incurred. This paragraph shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to the Executive.

25. Indemnification and Insurance.

     The Company shall indemnify the Executive to the fullest extent permitted by the laws of the State of New York, as in effect at the time of the subject act or omission, and he will be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its directors and senior executive officers against all costs, charges and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a director, officer or employee the Company or any of its subsidiaries or his serving or having served any other enterprise, plan or trust as a director, officer, employee or fiduciary at the request of the Company (other than any dispute, claim or controversy arising under or relating to this Agreement (except for this Section 24)). The provisions of this Section 25 shall survive any termination of Executive’s employment or any termination of this Agreement.

26. Principal Stockholder Obligation.

     The Principal Stockholders shall have no obligations under this Agreement.

27. Employee Acknowledgement.

     The Executive acknowledges that he has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his own judgment.

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     IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

COMPANY
By:	/s/ Keith Zar
	Name:	Keith Zar
	Title:	Vice President
EXECUTIVE
By:	/s/ Bruce M. Zorich
	Name:	Bruce M. Zorich
	Address: 1185 Lake Shore Overlook                Alpharetta, GA 30005

Exhibit A

ANNUAL BONUS SCHEDULE

EBITDA as % of
Budgeted EBITDA:	% of Target Level*:
Less than 90%	0%
90% to 100%	50% to 100%
100% to 110%	100% to 150%
110% to 120%	150% to 200%
120% to 130%	200% to 250%
Over 130%	250%

* Target Level percentages between benchmarks shall be determined by means of linear interpolation.

Exhibit B

General Release and Waiver

     For and in consideration of the payments and other benefits due to Bruce Zorich (the “Executive”) pursuant to the Amended and Restated Employment Agreement, dated as of December 23, 2008 (the “Employment Agreement”), by and between United Components, Inc. (the “Company”) and the Executive, and for other good and valuable consideration, the Executive hereby agrees, for the Executive, the Executive’s spouse and child or children (if any), the Executive’s heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, to forever release, discharge and covenant not to sue the Company, or any of its divisions, affiliates, subsidiaries, parents, branches, predecessors, successors, assigns, and, with respect to such entities, their officers, directors, trustees, employees, agents, shareholders, administrators, general or limited partners, representatives, attorneys, insurers and fiduciaries, past, present and future (the “Released Parties”) from any and all claims of any kind arising out of, or related to, his employment with the Company, its affiliates and subsidiaries (collectively, with the Company, the “Affiliated Entities”), the Executive’s separation from employment with the Affiliated Entities, which the Executive now has or may have against the Released Parties, whether known or unknown to the Executive, by reason of facts which have occurred on or prior to the date that the Executive has signed this Release. Such released claims include, without limitation, any and all claims relating to the foregoing under federal, state or local laws pertaining to employment, including, without limitation, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et. seq., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201 et. seq., the Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et. seq. the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et. seq., the Rehabilitation Act of 1973 , as amended, 29 U.S.C. Section 701 et. seq., the Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et. seq., and any and all state or local laws regarding employment discrimination and/or federal, state or local laws of any type or description regarding employment, including but not limited to any claims arising from or derivative of the Executive’s employment with the Affiliated Entities, as well as any and all such claims under state contract or tort law.

     The Executive has read this Release carefully, acknowledges that the Executive has been given at least twenty-one (21) days to consider all of its terms and has been advised to consult with an attorney and any other advisors of the Executive’s choice prior to executing this Release, and the Executive fully understands that by signing below the Executive is voluntarily giving up any right which the Executive may have to sue or bring any other claims against the Released Parties, including any rights and claims under the Age Discrimination in Employment Act. The Executive also understands that the Executive has a period of seven (7) days after signing this Release within which to revoke his agreement, and that neither the Company nor any other person is obligated to make any payments or provide any other benefits to the Executive pursuant to the Employment Agreement until eight (8) days have passed since the Executive’s signing of this Release without the Executive’s signature having been revoked other than any accrued obligations or other benefits payable pursuant to the terms of the Company’s normal payroll practices or employee benefit plans. Finally, the Executive has not been forced or pressured in any manner whatsoever to sign this Release, and the Executive agrees to all of its terms voluntarily.

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     Notwithstanding anything else herein to the contrary, this Release shall not affect: (i) the Company’s obligations under Sections 4(c) or 5(b), (c), (d) or (e) of the Employment Agreement or under any compensation or employee benefit plan, program or arrangement (including, without limitation, obligations to the Executive under any stock option, stock award or agreements or obligations under any pension, deferred compensation or retention plan) provided by the Affiliated Entities where the Executive’s compensation or benefits are intended to continue or the Executive is to be provided with compensation or benefits, in accordance with the express written terms of such plan, program or arrangement, beyond the date of the Executive’s termination; or (ii) rights to indemnification, contribution or liability insurance coverage the Executive may have under the by-laws of the Company or applicable law.

     This Release is subject to Sections 12 and 20 of the Employment Agreement. This Release is final and binding and may not be changed or modified except in a writing signed by both parties.

Date	BRUCE ZORICH
Date	UNITED COMPONENTS, INC.

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EX-10.15

Exhibit 10.15

UNITED COMPONENTS, INC.

SEVERANCE AGREEMENT

     This Severance Agreement (the “Agreement”) is made and entered into effective as of December 23, 2008 (the “Effective Date”), by and between Daniel Johnston (the “Executive”), United Components, Inc. (the “Company”), and, solely with respect to Section 3(d), UCI Holdco, Inc. (“Holdco”). Certain capitalized terms used in this Agreement are defined in Section 1 below.

AGREEMENT

     In consideration of the mutual covenants herein contained and the continued employment of Executive by the Company (or one of its Affiliates), the parties agree as follows:

     1. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

          (a) Affiliate. “Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where “control” shall have the meaning given such term under Rule 405 of the Securities Act. Affiliates of Carlyle Partners III, L.P., a Delaware limited partnership, shall include all Persons directly or indirectly controlled by TC Group, LLC, a Delaware limited liability company.

          (b) Board. “Board” shall mean the Board of Directors of the Company or its Parent.

          (c) Cause. “Cause” shall mean:

               (i) the Executive’s failure to use his reasonable best efforts to follow a legal written order of the Board or the CEO, other than any such failure resulting from the Executive’s Disability, and such failure is not remedied within 30 days after receipt of notice;

               (ii) Executive’s gross or willful misconduct with regard to the Company;

               (iii) Executive’s conviction of a felony or crime involving material dishonesty;

               (iv) Executive’s fraud or personal dishonesty involving the Company’s assets (but excluding expense reimbursement disputes as to which Executive had a reasonable good faith belief that his conduct was within the policies of the Company) or breach of fiduciary responsibility against the Company or any of its businesses; or

               (v) the Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing the Executive’s duties and responsibilities under this Agreement.

          (d) Change in Control. “Change in Control” shall mean a change in ownership or control of the Company or Parent effected through a transaction or series of transactions (other than an offering of common stock of the Company or Parent to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, Parent or any of their respective subsidiaries, an employee benefit plan maintained by the Company, Parent or any of their respective subsidiaries, a Principal Stockholder, any Affiliate of a Principal Stockholder or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company, Parent or a Principal Stockholder) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company or Parent possessing more than fifty percent (50%) of the total combined voting power of the Company’s or Parent’s securities outstanding immediately after such acquisition.

          (e) CEO. “CEO” shall mean the Chief Executive Officer of the Company.

          (f) Disability. “Disability” shall mean the Executive’s inability to perform, with or without reasonable accommodation, the essential functions of Executive’s duties as an employee of the Company for a total of three months during any six-month period as a result of incapacity due to mental or physical illness as determined by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative, with such agreement as to acceptability not to be unreasonably withheld or delayed.

          (g) Exchange Act. “Exchange Act” shall mean the Securities and Exchange Act of 1934, as amended.

          (h) Good Reason.

               (i) “Good Reason” shall mean:

                    (1) a material diminution in the nature or scope of the Executive’s responsibilities, duties or authority;

                    (2) a material diminution in the Executive’s compensation; or

                    (3) a material breach of this Agreement by the Company.

               (ii) Notwithstanding the foregoing, a Termination of Employment shall not be treated as a Termination of Employment for Good Reason unless the Executive shall have delivered to the Company a notice of termination stating that the Executive intends to terminate employment for Good Reason within ninety (90) days, and such Termination of Employment must occur within one year, of the Executive’s having actual knowledge of the initial occurrence of one or more of such events, provided, in each such event, the Company fails to cure within thirty (30) days of receipt of such notice of termination.

          (i) Parent. “Parent” shall mean UCI Holdco, Inc.

          (j) Person. “Person” shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

          (k) Principal Stockholder. “Principal Stockholder(s)” shall mean Carlyle Partners III, L.P., a Delaware limited partnership, or any of its Affiliates to which (a) the Carlyle Partners III, L.P. or any other Person transfers shares of common stock of Parent, or (b) Parent issues shares of common stock of Parent.

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          (l) Securities Act. “Securities Act” shall mean the Securities Act of 1933, as amended.

          (m) Termination of Employment. “Termination of Employment” shall mean the time when the engagement of the Executive as an employee of the Company is terminated by the Company, but excluding terminations where there is simultaneous commencement by the Executive of a relationship with the Company or any of its Affiliates as an employee. In no event shall a “Termination of Employment” occur under this Agreement until the Executive incurs a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h).

          (n) Termination Date. “Termination Date” shall mean the effective date of the Executive’s Termination of Employment.

     2. Term of Agreement. This Agreement shall terminate upon the date that all obligations of the parties under this Agreement have been satisfied.

     3. Severance; UCI Shares.

          (a) Termination Without Cause. If the Executive experiences a Termination of Employment following the date hereof as a result of the Company terminating the Executive without Cause or the Executive terminating his employment for Good Reason, then, subject to the Executive signing and not revoking the Release as set forth below and subject to the continued compliance of the Executive with Sections 4 and 5 of this Agreement, the Executive shall be entitled to (i) severance equal to twelve (12) months of Executive’s annual base salary as in effect on the Termination Date (provided that such severance shall not be less than the Executive’s base salary in effect as of the date of this Agreement), (ii) a prorated amount of the Executive’s annual bonus for the year in which the termination occurs (based upon a bonus target percentage no less than the percentage applicable to Executive as of the date of this Agreement), paid at the same UCI funding level applicable to other senior executives of the Company, but subject to a maximum funding level of 100%, and (iii) reimbursement for, or direct payment to the carrier for, the premium costs under COBRA for the Executive and, where applicable, his spouse and dependents, until the earlier of (x) twelve (12) months following the Termination Date, and (y) the date Executive is employed by another employer, under the same or comparable Company group medical and dental plans to the group medical and dental plans that Executive was participating in as of the Termination Date; provided that if a same or comparable Company group plan is, at any time during such twelve month period, not available generally to senior officers of the Company, the Executive shall receive reimbursement for, or direct payment to the carrier for, the premium costs under COBRA under a group plan that is available to such senior officers of the Company. For the avoidance of doubt, the Executive shall not be entitled to severance in the event the Executive experiences a Termination of Employment for Cause, or before September 30, 2009 due to death, Disability, or the Executive’s resignation for any reason other than Good Reason.

          (b) Termination on or Following September 30, 2009. If the Executive experiences a Termination of Employment for any reason (other than as a result of the Company terminating the Executive for Cause) on or after September 30, 2009, including the Executive’s voluntary resignation for any reason, then, provided that the Executive continues to perform his job responsibilities in a manner reasonably comparable to his current level of performance as of the date hereof (and continues to commute to the Company’s executive offices in Evansville, IN consistent with his current practice) through September 30, 2009, and subject to (A) the Executive signing and not revoking the Release as set forth below and (B) the continued compliance of the Executive with Sections 4 and 5 of this Agreement, the Executive shall be entitled to (i) severance equal to twelve (12) months of Executive’s annual base salary as in effect on the

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Termination Date (provided that such severance shall not be less than the Executive’s base salary in effect as of the date of this Agreement), (ii) a prorated amount of the Executive’s annual bonus for the year in which the termination occurs (based upon a bonus target percentage no less than the percentage applicable to Executive as of the date of this Agreement), paid at the same UCI funding level applicable to other senior executives of the Company, but subject to a maximum funding level of 100%, and (iii) reimbursement for, or direct payment to the carrier for, the premium costs under COBRA for the Executive and, where applicable, his spouse and dependents, until the earlier of (x) twelve (12) months following the Termination Date, and (y) the date Executive is employed by another employer, under the same or comparable Company group medical and dental plans to the group medical and dental plans that Executive was participating in as of the Termination Date; provided that if a same or comparable Company group plan is, at any time during such twelve month period, not available generally to senior officers of the Company, the Executive shall receive reimbursement for, or direct payment to the carrier for, the premium costs under COBRA under a group plan that is available to such senior officers of the Company. For the avoidance of doubt, if Executive is entitled to severance payments under this Section 3(b), he shall not be entitled to any severance or other payments under Sections 3(a) or 3(c).

          (c) Termination on or Following a Change in Control. If the Executive experiences a Termination of Employment as a result of the Company terminating the Executive without Cause or the Executive terminating his employment for Good Reason on or following the date of a Change in Control, then subject to the Executive signing and not revoking the Release as set forth below and subject to the continued compliance of the Executive with Sections 4 and 5 of this Agreement, the Executive shall be entitled to (i) severance equal to twenty-four (24) months of Executive’s annual base salary as in effect on the Termination Date (provided that such severance shall not be less than the Executive’s base salary in effect as of the date of this Agreement), and (ii) reimbursement for, or direct payment to the carrier for, the premium costs under COBRA for the Executive and, where applicable, his spouse and dependents, until the earlier of (x) twenty-four (24) months following the Termination Date, and (y) the date Executive is employed by another employer, under the same or comparable Company group medical and dental plans to the group medical and dental plans that Executive was participating in as of the Termination Date; provided that if a same or comparable Company group plan is, at any time during such twelve month period, not available generally to senior officers of the Company, the Executive shall receive reimbursement for, or direct payment to the carrier for, the premium costs under COBRA under a group plan that is available to such senior officers of the Company. For the avoidance of doubt, if Executive is entitled to receive payments under this Section 3(c), he shall not be entitled to any severance or other payments under Sections 3(a) or 3(b).

          (d) UCI Shares. Subject to the Executive signing and not revoking the Release as set forth below and subject to the continued compliance of the Executive with Sections 4 and 5 of this Agreement, the Company and Holdco each agree that neither the Company nor Holdco will exercise any right either may have (whether pursuant to the stockholders agreement of Holdco, any stock option agreement, award agreement or stock purchase agreement to which the Executive is a party, or any stock option or equity incentive plan of the the Company or Holdco, or otherwise) to repurchase any of the shares of common stock of Holdco (“UCI Shares”) held by the Executive (or any permitted transferee) as of the Termination Date or which are issued, or are to be issued, to the Executive pursuant to the Executive’s exercise of any option to purchase UCI Shares held by the Executive as of the Termination Date.

          (e) Release; Payment Timing; Separate Payments. Notwithstanding any provision to the contrary in this Agreement, no payments shall be made pursuant to Sections 3(a), (b) or (c) unless (i) on or following the Termination Date and on or prior to the 50^th day following the Termination Date the Executive executes a waiver and release of claims agreement in the form attached hereto as Exhibit A (the “Release”),

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which Release may be amended by the Company to reflect changes in applicable laws and regulations, and (ii) such Release shall not have been revoked by the Executive on or prior to the 8^th day following the date of the Release. The severance payments shall be payable in the form of salary continuation and shall be paid at the same time and in the same manner as the Executive’s annual base salary would have been paid if Executive had remained in active employment with the Company through the end of the applicable severance period in accordance with the Company’s normal payroll practices as in effect on the Termination Date, except that any payments that would otherwise have been made before the first normal payroll payment date falling on or after the sixtieth (60th) day after the date of termination of Executive’s employment (the “First Payment Date”) shall be made on the First Payment Date. Notwithstanding the foregoing, the prorated bonus component of the severance payments provided in Sections 3(a) and (b) shall be paid in the calendar year following the calendar year in which the Termination Date occurs at such time as bonuses are paid to other senior executive officers of the Company. Each separate severance installment payment shall be a separate payment under this Agreement for all purposes.

     4. Non-Competition; Non-Solicitation; Non-Disparagement.

          (a) The Executive shall not, at any time while employed by the Company and for twelve (12) months after the Termination Date with respect to the Executive’s Termination of Employment for any reason, directly or indirectly engage in, have any equity interest in, interview for a potential employment or consulting relationship with or manage or operate any person, firm, corporation, partnership or business (whether as director, officer, employee, agent, representative, partner, security holder, consultant or otherwise) that engages in any business which competes with the Company anywhere in the world; provided, however, that the Executive shall be permitted to acquire and/or hold a passive stock interest in such a business if the stock interest acquired and/or held is publicly traded and constitutes not more than two percent (2%) of the outstanding voting securities of such business.

          (b) The Executive shall not, at any time while employed by the Company and for twelve (12) months after the Termination Date with respect to the Executive’s Termination of Employment for any reason, directly or indirectly, recruit or otherwise solicit or induce any employee, customer, subscriber or supplier of the Company (i) to terminate its employment or arrangement with the Company, or (ii) to otherwise change its relationship with the Company.

          (c) In the event the terms of this Section 4 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.

          (d) As used in this Section 4, (i) the term “Company” shall include the Company and its direct or indirect parents and subsidiaries.

          (e) The Executive agrees, while employed by the Company and following the Termination Date, to refrain from disparaging the Company and its Affiliates, including any of its services, technologies or practices, or any of its directors, officers, agents, representatives or stockholders, either orally or in writing.

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     5. Nondisclosure of Proprietary Information.

          (a) Except in connection with the faithful performance of the Executive’s duties as an employee of the Company or pursuant to Section 5(c) and (e), the Executive shall, in perpetuity, maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for his or her benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information or trade secrets of or relating to the Company (including, without limitation, business plans, business strategies and methods, acquisition targets, intellectual property in the form of patents, trademarks and copyrights and applications therefor, ideas, inventions, works, discoveries, improvements, information, documents, formulae, practices, processes, methods, developments, source code, modifications, technology, techniques, data, programs, other know-how or materials, owned, developed or possessed by the Company, whether in tangible or intangible form, information with respect to the Company’s operations, processes, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, prospects and compensation paid to employees or other terms of employment), or deliver to any person, firm, corporation or other entity any document, record, notebook, computer program or similar repository of or containing any such confidential or proprietary information or trade secrets. The parties hereby stipulate and agree that as between them the foregoing matters are important, material and confidential proprietary information and trade secrets and affect the successful conduct of the businesses of the Company (and any successor or assignee of the Company).

          (b) Upon a Termination of Employment for any reason, the Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the Company’s customers, business plans, marketing strategies, products or processes.

          (c) The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel at Company’s expense in resisting or otherwise responding to such process.

          (d) As used in this Section 5 and Section 6, the term “Company” shall include the Company and its direct or indirect parents and subsidiaries.

          (e) Nothing in this Agreement shall prohibit the Executive from (i) disclosing information and documents when required by law, subpoena or court order (subject to the requirements of Section 5(c) above), (ii) disclosing information and documents to his attorney or tax adviser for the purpose of securing legal or tax advice, (iii) disclosing the Executive’s post-employment restrictions in this Agreement in confidence to any potential new employer, or (iv) retaining, at any time, his personal correspondence, his personal rolodex and documents related to his own personal benefits, entitlements and obligations.

     6. Inventions. All rights to discoveries, inventions, improvements and innovations (including all data and records pertaining thereto) related to the business of the Company, whether or not patentable, copyrightable, registrable as a trademark, or reduced to writing, that the Executive may discover, invent or originate during the time the Executive is employed by the Company, either alone or with others and whether or not during working hours or by the use of the facilities of the Company (“Inventions”), shall be the exclusive property of the Company. The Executive shall promptly disclose all Inventions to the Company, shall execute at the request of the Company any assignments or other documents the Company may deem reasonably necessary to protect or perfect its rights therein, and shall assist the Company, upon reasonable request and at the Company’s expense, in obtaining, defending and enforcing the Company’s rights therein. The Executive hereby appoints the Company as his attorney-in-fact to execute on his behalf any assignments or other documents reasonably deemed necessary by the Company to protect or perfect its rights to any Inventions.

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     7. Injunctive Relief. It is recognized and acknowledged by the Executive that a breach of the covenants contained in Sections 4, 5 and 6 will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Sections 4, 5 and 6, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief without having to prove damages.

     8. Assignment and Successors.

          (a) Company’s Successors. The Company may assign its rights and obligations under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its Affiliates. This Agreement shall be binding upon and inure to the benefit of the Company and its respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.

          (b) Executive’s Successors. Without the written consent of the Company, Executive shall not assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity. Notwithstanding the foregoing, the terms of this Agreement and all rights of Executive hereunder shall be binding upon and inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

     9. Notices.

          (a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Executive, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to the Company’s Chief Executive Officer at its headquarters.

          (b) Notice of Termination. Any termination by the Company for Cause shall be communicated by a notice of termination to the Executive given in accordance with this Section 9. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the Termination Date (which shall be not more than 30 days after the giving of such notice).

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     10. Reimbursements and In-kind Benefits. Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of the Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of the Executive, except for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by the Executive and, if timely submitted, reimbursement payments shall be made to the Executive as soon as administratively practicable following such submission, but in no event later than the last day of the Executive’s taxable year following the taxable year in which the expense was incurred. In no event shall the Executive be entitled to any reimbursement payments after the last day of Executive’s taxable year following the taxable year in which the expense was incurred. This paragraph shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to the Executive.

     11. Miscellaneous Provisions.

          (a) Survival. Provisions of this Agreement which by their terms must survive the termination of this Agreement in order to effectuate the intent of the parties (including, without limitation Sections 3 to 6) will survive any such termination for such periods as may be appropriate under the circumstances.

          (b) No Duty to Mitigate; Effect on Other Arrangements. The Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement; however, the severance payments received by the Executive pursuant to this Agreement shall supersede and replace any cash severance payments and Company-paid healthcare continuation that the Executive may be entitled to receive under the terms of any other employment or severance agreements or arrangements with the Company. Except as otherwise provided in this Agreement, this Agreement shall not affect the rights of the Executive under or the entitlement of the Executive to participate in any employee benefit plans or programs of the Company that are applicable to the Executive, in accordance with the terms and conditions or such plans or programs.

          (c) Entire Agreement. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to any severance payments payable to the Executive in connection with his Termination of Employment and shall supersede all prior understandings and agreements, whether written or oral, including the severance provided under the letter agreement dated May 21, 2007. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

          (d) Waiver. No provision of this Agreement may be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

          (e) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal substantive laws, but not the conflicts of law rules, of the State of Indiana.

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          (f) Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before an arbitrator in Evansville, Indiana in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitration award in any court having jurisdiction, provided, however, that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Sections 4, 5 and 6 of the Agreement and the Executive hereby consents that such restraining order or injunction may be granted without requiring the Company to post a bond. Only individuals who are (i) lawyers engaged fulltime in the practice of law; and (ii) on the AAA register of arbitrators shall be selected as an arbitrator. Within 20 days of the conclusion of the arbitration hearing, the arbitrator shall prepare written findings of fact and conclusions of law. It is mutually agreed that the written decision of the arbitrator shall be valid, binding, final and non-appealable, provided however, that the parties hereto agree that the arbitrator shall not be empowered to award punitive damages against any party to such arbitration. The arbitrator shall require the non-prevailing party to pay the arbitrator’s full fees and expenses or, if in the arbitrator’s opinion there is no prevailing party, the arbitrator’s fees and expenses will be borne equally by the parties thereto. In the event action is brought to enforce the provisions of this Agreement pursuant to this Section 10(f), the non-prevailing parties shall be required to pay the reasonable attorney’s fees and expenses of the prevailing parties to the extent determined to be appropriate by the arbitrator, acting in its sole discretion.

          (g) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

          (h) Employment Taxes. All payments made pursuant to this Agreement shall be subject to withholding of applicable income and employment taxes.

          (i) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

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     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.

COMPANY:	United Components, Inc.
	By:	/s/ Keith Zar
	Title:	Vice President

EXECUTIVE:		/s/ Daniel J. Johnston
	Signature
		Daniel J. Johnston
	Printed Name

     Solely with respect to Section 3(d)

HOLDCO:	UCI Holdco, Inc.
	By:	/s/ Keith Zar
	Title:	Vice President

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EXHIBIT A

General Release and Waiver

     For and in consideration of the payments and other benefits due to Daniel Johnston (the “Executive”) pursuant to the Severance Agreement, dated as of December 23, 2008 (the “Severance Agreement”), by and between United Components, Inc. (the “Company”) and the Executive, and for other good and valuable consideration, the Executive hereby agrees, for the Executive, the Executive’s spouse and child or children (if any), the Executive’s heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, to forever release, discharge and covenant not to sue the Company, or any of its divisions, affiliates, subsidiaries, parents, branches, predecessors, successors, assigns, and, with respect to such entities, their officers, directors, trustees, employees, agents, shareholders, administrators, general or limited partners, representatives, attorneys, insurers and fiduciaries, past, present and future (the “Released Parties”) from any and all claims of any kind arising out of, or related to, his employment with the Company, its affiliates and subsidiaries (collectively, with the Company, the “Affiliated Entities”), the Executive’s separation from employment with the Affiliated Entities, which the Executive now has or may have against the Released Parties, whether known or unknown to the Executive, by reason of facts which have occurred on or prior to the date that the Executive has signed this Release. Such released claims include, without limitation, any and all claims relating to the foregoing under federal, state or local laws pertaining to employment, including, without limitation, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et. seq., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201 et. seq., the Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et. seq. the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et. seq., the Rehabilitation Act of 1973 , as amended, 29 U.S.C. Section 701 et. seq., the Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et. seq., and any and all state or local laws regarding employment discrimination and/or federal, state or local laws of any type or description regarding employment, including but not limited to any claims arising from or derivative of the Executive’s employment with the Affiliated Entities, as well as any and all such claims under state contract or tort law.

     The Executive has read this Release carefully, acknowledges that the Executive has been given at least twenty-one (21) days to consider all of its terms and has been advised to consult with an attorney and any other advisors of the Executive’s choice prior to executing this Release, and the Executive fully understands that by signing below the Executive is voluntarily giving up any right which the Executive may have to sue or bring any other claims against the Released Parties, including any rights and claims under the Age Discrimination in Employment Act. The Executive also understands that the Executive has a period of seven (7) days after signing this Release within which to revoke his agreement, and that neither the Company nor any other person is obligated to make any payments or provide any other benefits to the Executive pursuant to the Severance Agreement until eight (8) days have passed since the Executive’s signing of this Release without the Executive’s signature having been revoked other than any accrued obligations or other benefits payable pursuant to the terms of the Company’s normal payroll practices or employee benefit plans. Finally, the Executive has not been forced or pressured in any manner whatsoever to sign this Release, and the Executive agrees to all of its terms voluntarily.

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     Notwithstanding anything else herein to the contrary, this Release shall not affect: (i) the Company’s obligations under Sections 3(a) or (b) of the Severance Agreement or under any compensation or employee benefit plan, program or arrangement (including, without limitation, obligations to the Executive under any stock option, stock award or agreements or obligations under any pension, deferred compensation or retention plan) provided by the Affiliated Entities where the Executive’s compensation or benefits are intended to continue or the Executive is to be provided with compensation or benefits, in accordance with the express written terms of such plan, program or arrangement, beyond the date of the Executive’s termination; or (ii) rights to indemnification, contribution or liability insurance coverage the Executive may have under the by-laws of the Company or applicable law.

     This Release is subject to Sections 11(e) and (f) of the Severance Agreement. This Release is final and binding and may not be changed or modified except in a writing signed by both parties.

Date	DANIEL JOHNSTON
Date	UNITED COMPONENTS, INC.

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EX-21.1

Exhibit 21.1

List of Subsidiaries

Name	State or Country of Organization
Airtex Industries, LLC	Delaware
Airtex Mfg., Inc. (f/k/a Airtex Products, Inc.)	Illinois
Airtex Products, LP	Delaware
Airtex Products S.A.	Spain
Airtex Tianjin Auto Parts Inc.	People’s Republic of China
Airtex Tianjin Auto Parts Holding Company Limited	Incorporated under the laws of Hong Kong Special Administrative Region of the People’s Republic of China
ASC (Beijing) Consulting Co., Ltd.	People’s Republic of China
ASC (Beijing) Consulting (Holdings) Company Limited	Incorporated under the laws of Hong Kong Special Administrative Region of the People’s Republic of China
ASC Holdco, Inc.	Delaware
ASC Industries, Inc.	Ohio
ASC International, Inc.	Indiana
ASC Liancheng (Holdings) Company Limited	Incorporated under the laws of Hong Kong Special Administrative Region of the People’s Republic of China
ASC (Tianjin) Auto Parts, Inc.	People’s Republic of China
ASC Tianjin (Holdings) Company Limited	Incorporated under the laws of Hong Kong Special Administrative Region of the People’s Republic of China
Automotive Accessory Co. Ltd.	Manitoba, Canada
Brummer Mexicana en Puebla, S.A. de C.V.	Mexico
Brummer Seal de Mexico, S.A. de C.V.	Mexico
Canton Auto Import Sales, Inc.	Ohio
Champion Laboratories, Inc.	Delaware
Champion International Filter (Hong Kong) Holding Co., Limited	Incorporated under the laws of Hong Kong Special Administrative Region of the People’s Republic of China
Champion International Automotive Parts (Suzhou) Co., Ltd.	People’s Republic of China
Chefford Master Manufacturing Co., Inc.	Illinois
Eurofilter (Air Filters) Limited	United Kingdom
Eurofilter ECS Limited	United Kingdom
Eurosofiltra SARL	France
Filtros Champion Laboratories, S. de R.E. de C.V.	Mexico
Filtros Champion Sales de Mexico, S. de R.E. de C.V.	Mexico
Fuel Filter Technologies, Inc.	Michigan
International Development Company, S. de R.E. de C.V.	Mexico
Neapco Inc.	Pennsylvania
Pee Cee Manufacturing Co., Inc.	Illinois
Pioneer, Inc.	Mississippi
POS Sales Corp No. 7, Inc.	Ohio
Shandong Yanzhou ASC Liancheng Industries Co., Ltd.	People’s Republic of China
Talleres Mecanicos Montserrat, S.A. de C.V.	Mexico
UCI-Airtex Holdings, Inc.	Delaware
UCI Auto Parts Trading (Shanghai) Co., Ltd.	People’s Republic of China
UCI (Hong Kong) Holding Company Limited	Incorporated under the laws of Hong Kong Special Administrative Region of the People’s Republic of China
UCI Investments, L.L.C	Delaware
UCI — Wells Holdings, L.L.C.	Delaware
UIS Industries, Ltd.	United Kingdom
Wells Manufacturera de Mexico, S.A. de C.V.	Mexico
Wells Manufacturing Canada Limited	Ontario, Canada
Wells Manufacturing Corp.	Wisconsin
Wells Manufacturing, L.P.	Delaware
Wells Mexico Holdings Corp.	Delaware
Yanzhou ASC Liancheng Industries Co., Ltd.	People’s Republic of China

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Bruce M. Zorich, Chief Executive Officer of United Components, Inc. certify that:

1.	I have reviewed this annual report on Form 10-K of United Components, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 30, 2009

By:	/s/ BRUCE M. ZORICH
	Name:	Bruce M. Zorich
	Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Daniel J. Johnston, Chief Financial Officer of United Components, Inc. certify that:

1.	I have reviewed this annual report on Form 10-K of United Components, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 30, 2009

By:	/s/ DANIEL J. JOHNSTON
	Name:	Daniel J. Johnston
	Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PERIODIC REPORT

The undersigned officers of United Components, Inc. hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to their knowledge,

1.	the annual report on Form 10-K of United Components, Inc. for the period ended December 31, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and
2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of United Components, Inc.

Date: March 30, 2009

By:	/s/ Bruce M. Zorich
	Name:	Bruce M. Zorich
	Title:	Chief Executive Officer

Date: March 30, 2009

By:	/s/ Daniel J. Johnston
	Name:	Daniel J. Johnston
	Title:	Chief Financial Officer

     The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §. 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

     A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.